Comments on “An Empirical Assessment of the Employee Free Choice Act: the Economic Implications” by Ann Layne-Farrar

“An Empirical Assessment of the Employee Free Choice Act: The Economic Implications” by Ann Layne-Farrar provides empirical evidence concerning the impact on the U.S. unemployment rate and employment-to-population ratio should the highly controversial Employee Free Choice Act (EFCA) become law. The paper has received widespread public attention and its analysis is being used in the debate surrounding the EFCA. This commentary raises three important questions about the empirical analysis: Are the predictions presented in the study, concerning the effects of the EFCA, realistic? Is the research design likely to identify the effects of the EFCA? Why do the data used in the analysis cover such a short time period? The discussion suggests the empirical results presented in Layne-Farrar (2009) should be viewed with considerable skepticism

Standards, Innovation Incentives, and the Formation of Patent Pools

Technological standards give rise to a complements problem that affects pricing and innovation incentives of technology producers. In this paper I discuss how patent pools can be used to solve these problems and what incentives patent holders have to form a patent pool. I offer some suggestions how competition authorities can foster the formation of welfare increasing patent pools

Licensing Complementary Patents: “Patent Trolls”, Market Structure, and “Excessive” Royalties

The infamous Blackberry case brought new attention to so-called “patent trolls” and began the general association of trolls with “non-practicing” patent holders. This has had important legal consequences: Namely, patent holders have been denied injunctive relief because they did not practice the patents themselves. In this paper we analyze how patent holders –– both non-practicing and vertically integrated –– choose their royalties depending on the structure of the upstream and downstream markets and the types of licensing agreements available. We show that a vertically integrated firm has an incentive to raise its rivals’ costs and to restrict entry on the downstream market; incentives that do not hold for non-integrated patent holders. An automatic presumption that a non-integrated patent holder will charge higher royalties than a vertically integrated company is therefore unfounded. Whether a company charges “excessive” royalties depends on whether there is scope for hold-up, either because of sunk investments on the part of potential licensees or because of “weak” patents held by the licensor. These factors are orthogonal to whether patent holders are practicing or no

Is More Government Regulation Needed to Promote E-commerce?

E-commerce has experienced tremendous growth over the past few years. Nonetheless, senators, privacy watchdog groups, and the Federal Trade Commission have argued that e-commerce is being held back by consumer worries about online privacy and security. Some privacy advocates are calling for additional regulations, specifically new online privacy rules aimed at providing consumers with more information and customer choice. And Congress has tried to answer that call, most recently with a bill introduced by Senator Ernest Hollings. This essay examines the case for more government regulation and argues that the advocates have overstated their case. While some consumers, particularly older Americans and those new to the Internet, are clearly concerned about online privacy and security, these issues do not appear any more urgent for online shopping than offline shopping. Nor do these issues emerge as significant deterrents to e-commerce. Indeed, it is not even clear that any e-commerce has been deterred. Absent evidence of a significant market failure, the case for further government intervention is weak at best.Technology and Industry

Complementary Patents and Market Structure

Many high technology goods are based on standards that require several essential patents owned by different IP holders. This gives rise to a complements and a double mark-up problem. We compare the welfare effects of two different business strategies dealing with these problems. Vertical integration of an IP holder and a downstream producer solves the double mark-up problem between these firms. Nevertheless, it may raise royalty rates and reduce output as compared to non-integration. Horizontal integration of IP holders solves the complements problem but not the double mark-up problem. Vertical integration discourages entry and reduces innovation incentives, while horizontal integration always benefits from entry and innovatio

The Benefits and Costs of Online Privacy Legislation

Many people are concerned that information about their private life is more readily available and more easily captured on the Internet as compared to offline technologies. Specific concerns include unwanted email, credit card fraud, identity theft, and harassment. This paper analyzes key issues surrounding the protection of online privacy. It makes three important contributions: First, it provides the most comprehensive assessment to date of the estimated benefits and costs of regulating online privacy. Second, it provides the most comprehensive evaluation of legislation and legislative proposals in the U.S. aimed at protecting online privacy. Finally, it offers some policy prescriptions for the regulation of online privacy and suggests areas for future research. After analyzing the current debate on online privacy and assessing the potential costs and benefits of proposed regulations, our specific recommendations concerning the government's involvement in protecting online privacy include the following: The government should fund research that evaluates the effectiveness of existing privacy legislation before considering new regulations. The government should not generally regulate matters of privacy differently based on whether an issue arises online or offline. The government should not require a Web site to provide notification of its privacy policy because the vast majority of commercial U.S.-based Web sites already do so. The government should distinguish between how it regulates the use and dissemination of highly sensitive information, such as certain health records or Social Security numbers, versus more general information, such as consumer name and purchasing habits. The government should not require companies to provide consumers broad access to the personal information that is collected online for marketing purposes because the benefits do not appear to be significant and the costs could be quite high. The government should make it easier for the public to obtain information on online privacy and the tools available for consumers to protect their own privacy. The message of this paper is not that online privacy should be unregulated, but rather that policy makers should think through their options carefully, weighing the likely costs and benefits of each proposal.

Federalism in Antitrust

Several scholars have suggested that states should play a much more limited role in antitrust enforcement, especially in matters that are national or global in scope. In this paper, we analyze the states' part in the Microsoft case. A case that illustrates the costs of state intervention in antitrust matters that extend beyond state borders. Here, the states' involvement lengthened the lawsuit, complicated the settlement process, and increased both legal uncertainty and litigation costs. These results followed from the states' focus on parochial interests rather than broader concerns for efficiency and equity. We conclude that a state's antitrust enforcement authority should be restricted in matters that extend beyond its borders. After analyzing the motivations for state behavior in federal antitrust, we consider whether restrictions should apply to federal antitrust authorities in cases with international implications. Though a global competition authority could, in principle, be designed to maximize economic well-being, practical and political obstacles appear to rule this option out, at least in the short term. (Revised for the Harvard Journal of Law & Public Policy ,Summer 2003)

Licensing Complementary Patents: “Patent Trollsâ€, Market Structure, and “Excessive†Royalties

The infamous Blackberry case brought new attention to so-called “patent trolls†and began the general association of trolls with “non-practicing†patent holders. This has had important legal consequences: Namely, patent holders have been denied injunctive relief because they did not practice the patents themselves. In this paper we analyze how patent holders –– both non-practicing and vertically integrated –– choose their royalties depending on the structure of the upstream and downstream markets and the types of licensing agreements available. We show that a vertically integrated firm has an incentive to raise its rivals’ costs and to restrict entry on the downstream market; incentives that do not hold for non-integrated patent holders. An automatic presumption that a non-integrated patent holder will charge higher royalties than a vertically integrated company is therefore unfounded. Whether a company charges “excessive†royalties depends on whether there is scope for hold-up, either because of sunk investments on the part of potential licensees or because of “weak†patents held by the licensor. These factors are orthogonal to whether patent holders are practicing or not

An Economic Assessment of UCITA

The Uniform Computer Information Transactions Act (UCITA) is a model contract law developed by the National Conference of Commissioners on Uniform State Laws (NCCUSL). Once adopted by a state, it would provide a distinct uniform contract law for 'computer information' products including computer software, multimedia products, computer databases, and online information. This paper reviews the potential economic benefits and costs of adopting UCITA, and in particular, its implications for consumer transactions. The likely benefits include lower transaction costs and improved contract interpretation. We consider several sources of benefits linked to the coordination of state laws: reduced costs due to reduced inconsistency in statutes, reduced costs of information collection and analysis, reduced costs associated with contract negotiation under uniform law, and reduced costs associated with litigation. By contrast, the potential burdens associated with adopting UCITA appear to be minimal. While some critics argue that state-level statutes allow for more innovation in lawmaking, on close examination, independent action apparently holds little promise. States have had two decades to develop specialized law for software licensed at retail, but have not done so. And in any event, individual states adopting UCITA do retain some flexibility to modify the statute's provisions. Thus, while there is no practical way to quantify the potential benefits and costs of UCITA, we conclude that economic well-being would almost surely be enhanced by its adoption since the costs are likely to be small. The argument for adoption is also buttressed by the lack of compelling alternatives. If states do nothing, both producers and consumers will be forced to cope with the uncertainties associated with ongoing inconsistencies in state-level commercial contract law. If the states develop their own regulations for computer information contracts, the lack of uniformity will create burdens. Moreover, there is no good reason to expect their design to be superior to UCITA.Health and Safety, Technology and Industry, Regulatory Reform