CBA at the PTO

What are the costs and benefits of patent laws? While Congress and the courts are often able to evade this difficult question, there is one institutional actor that is not only well-advised but also required to consider costs and benefits: the Patent and Trademark Office, which—as an administrative agency—is required by executive order to conduct cost-benefit analysis of all economically significant regulations. Yet the agency’s efforts have been less than satisfactory. In its cost-benefit analysis, the PTO overlooks crucial functional considerations, misunderstands basic precepts of patent economics, and resists quantification when quantification is required. In combination, these shortcomings suggest that the PTO has not correctly measured the social costs and benefits of the rules it creates, in part because it has adopted an overly limited view of the welfare effects of intellectual property and the agency’s own role in promoting or discouraging IP. In other instances, the PTO has promulgated rules that will likely have tremendous economic significance without recognizing their importance or conducting a cost-benefit analysis. These errors cast doubt on whether the PTO’s regulations will increase or diminish social welfare. Before the PTO is granted any additional substantive authority, reform will be necessary

Norming in Administrative Law

How do regulatory agencies decide how strictly to regulate an industry? They sometimes use cost-benefit analysis or claim to, but more often the standards they invoke are so vague as to be meaningless. This raises the question whether the agencies use an implicit standard or instead regulate in an ad hoc fashion. We argue that agencies frequently use an approach that we call “norming.” They survey the practices of firms in a regulated industry and choose a standard somewhere within the distribution of existing practices, often no higher than the median. Such a standard burdens only the firms whose practices lag the industry. We then evaluate this approach. While a case can be made that norming is appropriate when a regulatory agency operates in an environment of extreme uncertainty, we argue that on balance norming is an unwise form of regulation. Its major attraction for agencies is that it minimizes political opposition to regulation. Norming does not serve the public interest as well as a more robust standard like cost-benefit analysis

Process as Purpose: Administrative Procedure, Costly Screens and Examination at the Patent Office

The United States Patent and Trademark Office has acquired a well-deserved reputation for inefficacy and inefficiency. Proposals for reforming the patent office have thus focused on improving the quality of patent review while decreasing its cost. Yet this view overlooks the valuable function performed by the high costs associated with obtaining a patent: these costs serve as an effective screen against low-value patents. Moreover, due to asymmetries in patent values, the costly screen is likely to select against socially harmful patents in disproportionate numbers. Although the patent office is the most prominent forum in which this type of costly screening operates, it is not the only one. In a variety of other contexts, the private costs of navigating an administrative process may complement the process itself in screening out unwanted participants

Judicial Deference and the Credibility of Agency Commitments

Consider the following situation: In late 2004, towards the end of President George W. Bush\u27s first term, the National Highway Transportation Safety Administration ( NHTSA ), pursuant to its congressionally delegated authority, promulgates a rule that would relax inspection and testing regimes for automobile manufacturers- thereby saving those firms substantial amounts of money-if the manufacturers independently deployed cutting-edge vehicle safety technology. The research and development of this technology will require significant up-front expenditures, and automobile manufacturers must decide whether to invest the funds necessary to bring the technology to market. However, the cost-benefit analysis is not so straightforward. The predicament, as the automobile firms understand it, is that this regulatory regime may not last long enough to result in long-term cost savings. Several of the potential Democratic nominees for the 2004 presidential campaign oppose this regulation, and, if President Bush were to lose the election, the incoming administration would possess the unilateral authority to discard this new rule in favor of the previous status quo (or any other reasonable arrangement).1 In light of this uncertainty, automobile manufacturers rationally may decide to decline the offer implicit in NHTSA\u27s new rule and not invest in the costly (but socially productive) new technology, frustrating the agency\u27s regulatory aims

Well-Being Analysis vs. Cost-Benefit Analysis

Cost-benefit analysis (CBA) is the primary tool used by policymakers to inform administrative decisionmaking. Yet its methodology of converting preferences (often hypothetical ones) into dollar figures, then using those dollar figures as proxies for quality of life, creates significant systemic errors. These problems have been lamented by many scholars, and recent calls have gone out from world leaders and prominent economists to find an alternative analytical device that would measure quality of life more directly. This Article proposes well-being analysis (WBA) as that alternative. Relying on data from studies in the field of hedonic psychology that track people\u27s actual experience of life-data that have consistently been found reliable and valid-WBA is able to provide the same policy guidance as CBA without CBA\u27s distortionary reliance upon predictions and dollar figures. We show how WBA can be implemented, and we catalog its advantages over CBA. In light of this comparison, we conclude that WBA should assume CBA\u27s role as the decisionmaking tool of choice for administrative regulation

Promoting Regulatory Prediction

It is essential for environmental protection that private actors be able to anticipate government regulation. If, for instance, the Biden Administration is planning to tighten regulations of greenhouse gas emissions, it is imperative that private companies anticipate this regulatory change now, not a few years from now after they have constructed even more coal- and gas-fired power plants. Those additional power plants will mean more irreversible greenhouse gases, and these plants can be politically challenging to shutter once built. The point is general to private actors making decisions in the shadow of potential government regulation. Better information about future government actions is thus critical for the benefit of both private actors and society at large. In this Article, we consider market-based and non-market-based means by which to generate information about future government action. We find no perfect answer. We consider three market-based solutions—prediction markets, the use of equity markets to hedge against future government action, and machine-learning and predictive technologies—and three government-based solutions—greater transparency, the development of intellectual property rights in predictive information, and prediction-forcing regulation, which is regulation that requires private actors to make public predictions about future government action. None of these is a panacea. The market-based solutions founder on the limitations and thinness of markets. Government-based solutions come with significant structural downsides related to the division of authority among different levels of government (federal versus state versus local) and different branches of government at each level (executive versus legislative). We conclude that prediction-forcing regulation may be the most promising avenue, though it too is likely not a full solution

Chevronizing Around Cost-Benefit Analysis

The Trump administration’s efforts to weaken regulations were in tension with cost-benefit analysis, which in many cases supported those regulations or otherwise failed to support the administration’s deregulatory objectives. Rather than attempting to justify its actions as a matter of policy preferences, the administration responded on multiple occasions by using Chevron to interpret statutes so as to evade cost-benefit analysis. The statutory interpretation route, which we call “Chevronizing” around cost-benefit analysis, created novel challenges for courts, as it pitted traditional Chevron deference against a trend in favor of requiring agencies to regulate based on cost-benefit analysis as a matter of sound public policy. This Article evaluates these efforts and concludes that in many of these cases, the Trump administration’s attempts to leverage Chevron deference as a weapon against cost-benefit analysis—and sensible policymaking—exposed it to significant legal risk. We expect that courts will reject several of these efforts if they are ever adjudicated. In the process, the Trump administration’s machinations may have had the effect of contorting how future courts apply Chevron deference and how future administrations deploy it