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TL;DR Over the past 15 years, court decisions have weakened patent protections in the US. While some academics support such weakening, the evidence suggests that it may be having a detrimental effect on innovation.
Over the past 15 years, court decisions have weakened patent protections in the US. While some academics support such weakening, the evidence suggests that it may be having a detrimental effect on innovation.
Some academics argue that patent holders tend to charge excessive license fees to firms that implement their inventions, thereby impeding downstream innovation. The courts have responded by weakening the enforcement of patents in various ways, including by denying patent holders permanent injunctions.
By making it more difficult for patent holders to obtain injunctions, courts have effectively reduced the incentive for firms to invest in primary inventions. This has arguably had a stronger negative effect on overall rates of innovation.
Read the full explainer here.
TL;DR The First Amendment and Section 230 immunity work together to protect free speech on the Internet. Attempts at Section 230 reform based on how online platforms use their editorial discretion will run into Constitutional limitations.
The First Amendment and Section 230 immunity work together to protect free speech on the Internet. Attempts at Section 230 reform based on how online platforms use their editorial discretion will run into Constitutional limitations.
Complaints of anti-conservative bias by major online platforms have led to proposals to modify Section 230 immunity in ways that target the manner in which platforms moderate user-generated content. Proponents contend that absent some sort of liability these dominant digital “gatekeepers” of news and social opinion will skew their content-moderation practices to reflect their own political preferences, dishonestly labeling conservative views as offensive or otherwise in violation of the platform’s terms of use.
Online platforms have a First Amendment right to adopt whatever content standards they choose. With very few exceptions the government may not mandate speech. But a law requiring online platforms to adopt a particular set of content moderation practices — say, to maintain a “balance” of political views — would do just that. Conditioning Section 230 immunity on online platforms giving up their right to editorial discretion would be unlikely to survive the strict standard of review to which such government regulation of speech would be subjected by the courts.
Download the tl;dr explainer PDF here
Scholarship Property rights are an essential economic institution. As the great UCLA economist Harold Demsetz famously argued, property rights spur specialization, investment, and competition, which in turn increase productivity, innovation, and wealth throughout the economy.
Property rights are an essential economic institution. As the great UCLA economist Harold Demsetz famously argued, property rights spur specialization, investment, and competition, which in turn increase productivity, innovation, and wealth throughout the economy.
The same holds true for intellectual property rights, including patents, which are no less important than their traditional counterparts in facilitating innovation and the efficient organization of productive economic activity, particularly in the modern, high-tech economy. A wealth of literature indicates that much, if not most, of the value of innovation is passed on to consumers in the form of lower prices and higher quality goods and services. Indeed, as Nobel Laureate William Nordhaus finds, even in the presence of patents to facilitate the appropriability of the value of innovation by inventors, “only a miniscule fraction of the social returns from technological advances over the 1948-2001 period was captured by producers, indicating that most of the benefits of technological change are passed on to consumers rather than captured by producers.” Thus, although measurement problems plague such research, there is strong evidence that nations with greater levels of patent protection have historically achieved significantly higher innovative output than those with lower levels of patent protection.
TOTM Aboy throws a brick through a bakeshop window. He flees and is never identified. The townspeople gather around the broken glass. “Well,” one of them . . .
Aboy throws a brick through a bakeshop window. He flees and is never identified. The townspeople gather around the broken glass. “Well,” one of them says to the furious baker, “at least this will generate some business for the windowmaker!”
A reasonable statement? Not really. Although it is indeed a good day for the windowmaker, the money for the new window comes from the baker. Perhaps the baker was planning to use that money to buy a new suit. Now, instead of owning a window and a suit, he owns only a window. The windowmaker’s gain, meanwhile, is simply the tailor’s loss.
Read the full piece here.
ICLE White Paper There is a danger that the UK is heading for a significant and potentially damaging overhaul of its competition policy on the basis of thin evidence, rushed analysis, and no attempt to measure the costs, benefits and risks of the approach being undertaken.
There is a danger that the UK is heading for a significant and potentially damaging overhaul of its competition policy on the basis of thin evidence, rushed analysis, and no attempt to measure the costs, benefits and risks of the approach being undertaken. The fact that the Digital Markets Taskforce consultation period was only one month is itself an example of this – one month is an unreasonably short period of time if the consultation was being taken seriously, and suggests that instead it is merely window-dressing to give procedural cover to whatever the government plans on doing anyway.
This would be a mistake. The two main documents that have led to the creation of the Digital Markets Taskforce, the Furman Report and the CMA’s digital advertising market study, do not provide strong justifications for the changes they propose, which are sweeping. Neither of them consider the trade-offs involved with the interventions they propose in any serious detail, let alone attempt to measure them quantitatively, yet these trade-offs and risks – lower investment, reduced competition, less innovation, fewer startups being founded in the UK, and worse productivity growth for the UK over the years ahead – are potentially enormous, and could weaken the UK’s technology sector.
Read the full paper here.
TL;DR Vertical integration allows businesses to innovate more. It may be bad for certain competitors, but it is rarely bad for competition.
Vertical integration allows businesses to innovate more. It may be bad for certain competitors, but it is rarely bad for competition.
Vertical integration refers to businesses performing a number of different and important roles in the supply chain for a particular product — for example, a manufacturer that sells its products directly to the public in its own stores. While all businesses are vertically integrated to some extent, some worry that vertical integration in digital markets prevents smaller businesses from competing.
Empirical research has consistently found vertical integration to be good for consumers through a number of mechanisms that allow for reduced costs and better product quality.
Read the full tl;dr explainer here.
TL;DR Competition is strong in digital markets, but traditional antitrust tools may miss competitive nuances in these markets.
Competition is strong in digital markets, but traditional antitrust tools may miss competitive nuances in these markets.
Critics argue that competition is weak in digital platform markets because each market tends to be dominated by a single player: Google in Search, Amazon in online retail, and so on.
Digital platforms overlap significantly and are constantly expanding into each other’s markets, and new entrants are a constant threat. Retrospective market definition, the tool that antitrust agencies use to determine the boundaries of competition, will frequently miss changes in the nature of the products and markets under review, and as a result miss much of the competition taking place. Features of that competition are discussed below.
TL;DR “Self-preferencing” is a normal part of how platforms operate, both to improve the value of their core product and to make money from it so that they have a reason to keep investing in it.
“Self-preferencing” is a normal part of how platforms operate, both to improve the value of their core product and to make money from it so that they have a reason to keep investing in it.
Digital platforms have been accused of unfairly favoring their own products over those of their competitors, most notably in the EU’s case against Google for displaying Google Shopping results in relevant Search result pages.
Platforms’ incentives are to maximise the value of their whole ecosystem, which includes both the core platform and the services they attach to it. Platforms that preference their own products frequently end up increasing the value of the market overall by growing the total share of users of a particular product, and those that preference inferior products end up hurting the attractiveness to users of their ‘core’ product, weakening themselves to competition from rivals.
TL;DR Being acquired is how many startup founders and investors expect to make money. If you make that harder you’ll get fewer startups.
Being acquired is how many startup founders and investors expect to make money. If you make that harder you’ll get fewer startups.
Some allege that large tech companies acquire nascent competitors to prevent certain startups from competing with them later on, effectively “killing” potential competitors before they can be a serious threat to them.
Founders still have an incentive to hold out and compete against incumbents, yet many startups are also founded and invested in only because of the possibility of being acquired by a bigger firm. Acquisitions additionally allow features to be added to benefit large existing user bases.
Download the full tl;dr explainer here.
