Measuring Securities Market Efficiency in the Regulatory Setting

In Nov 1998, the SEC proposed a modification to the federal securities law disclosure requirements to facilitate the process of issuing new securities. Thomas and Cotter discuss how to determine when companies should be able to issue simplified disclosure documents

Unification: An international aerospace information issue

Science and technology projects are becoming more and more international and interdisciplinary. Other parts of the world, notably Europe, are increasingly powerful players in the aerospace business. This change has led to the development of various aerospace information initiatives in other countries. With scarce resources in all areas of government and industry, the NASA STI Program is reviewing its current acquisition and exchange practices and policies to factor in the changing requirements and new opportunities within the international community. Current NASA goals and activities are reviewed with a view toward developing a scenario for establishing an international aerospace data base, maintaining compatibility among national aerospace information systems, eliminating duplication of effort, and sharing resources through international cooperation wherever possible

The Procompetitive Interest in Intellectual Property Law

When government recognizes intellectual property (IP) rights, it is often viewed as sanctioning the existence of private “monopolies,” in contrast to the general antimonopoly thrust of the antitrust laws. And yet, on occasion IP law itself condemns conduct on the part of IP owners-or excuses otherwise infringing activity on the part of IP defendants-expressly for the purpose of promoting competition. It does so even though antitrust law-if one were to apply it at all under analogous circumstances-would not find anticompetitive harm without conducting a more thorough analysis of whether the antitrust defendant possesses power over a well-defined market. Salient examples include the misuse doctrines in patent and copyright law; some applications of merger and fair use in copyright; and trademark law\u27s functionality doctrine. In this Article, Professor Cotter develops a theoretical explanation for that divergence between antitrust and IP. Specifically, he argues that in some limited contexts the expected social costs, including error costs, of ruling for IP defendants may be low in comparison with the expected anticompetitive harm from ruling for IP plaintiffs. As a result, IP *484 courts sometimes may enhance welfare if they are less concerned than antitrust courts about the expected costs of “false positives,” that is, cases wrongly decided against the party defending the allegedly anticompetitive conduct. Put another way, it sometimes may be appropriate for courts to excuse IP defendants from liability, in order to avert relatively speculative threats of anticompetitive harm. Professor Cotter further contends that such cases probably are more common in the copyright than in the patent law context, and that even in copyright contexts courts should be cautious about casually inferring anticompetitive harm; but that his analysis provides a rationale for a relatively expansive definition of trademark functionality

Comparative Law and Economics of Standard-Essential Patents and FRAND Royalties

Standard setting organizations often require their members to declare which of their patents are essential to the practice of a prospective standard, and to agree to license any such standard-essential patents (SEPs) on fair, reasonable, and nondiscriminatory (FRAND) terms. Among the issues that have arisen in recent disputes involving FRAND-encumbered SEPs are (1) whether a FRAND commitment creates a binding contract for the benefit of third parties, obligating the SEP owner to forgo the right to seek injunctive relief for the infringement of the SEP; (2) whether the law of remedies, or other principles of generally applicable civil law such as the doctrine of abuse of right, can limit the prevailing SEP owner’s ability to obtain injunctive relief; (3) the circustances under which competition law (antitrust) may play a role in resolving these matters; (4) whether the patentee is entitled to relief in the form of ongoing damages, if one or more of these bodies of law eliminates the possibility of an injunction; and (5) if so, how should courts calculate those damages. This article provides both an overview of how courts and other entities have begun to address these questions in the United States and elsewhere, and my analysis of the advantages and disadvantages of different possible approaches. I argue, among other things, first that courts generally should not allow SEP owners to obtain injunctions, but rather only ongoing damages; second, that in principle though perhaps not always in practice, it is preferable to use contract and patent law to achieve this result, as opposed to antitrust; and third, that in awarding monetary relief for the infringement of SEPs courts should apply the same methodology the use to calculate reasonable royalties generally, subject to a few modifications

FTC v. Actavis, Inc.: When Is the Rule of Reason Not the Rule of Reason?

The U.S. Supreme Court’s recent decision in FTC v. Actavis, Inc. brings some resolution to the decade-long dispute over the level of antitrust scrutiny that is appropriate for evaluating the legality of reverse-payment or pay-for-delay agreements settling pharmaceutical patent infringement litigation between brand-name and generic drug companies. Writing for a 5-3 majority in Actavis, Justice Breyer rejected both the scope-of-the-patent test and the presumptive illegality approach, and held instead that courts should review reverse-payment settlements under the rule of reason. Or say the opinion states. In reality, the Court appears to have all but in name adopted the presumptive illegality approach it purported to reject. One might speculate about the political or prudential considerations that went into the majority’s characterization of what it was actually doing, but as I read the opinion reverse-payment settlements of the type at issue in Actavis are now subject to a de facto regime of presumptive illegality. In my view, this is a welcome result

Fifty Years of Patent Remedies Case Law: Two Steps Forward, One Step Back

Over the past fifty years, courts have developed a body of case law on patent remedies that is, in many respects, solidly grounded in economic reasoning. Among the high points are the courts’ embrace, in various contexts, of the simple principle that patent damages should restore patent owners to the position they would have occupied, but for the infringement—and of an important corollary to that principle, namely the importance to damages calculations of the “noninfringing alternatives” concept. By contrast, certain other developments—including the confusing standards for determining when it is appropriate to use the “entire market value” of a product as the royalty base; the standards for awarding total profits for design patent infringement; and the intricacies of the patent marking statute—cry out for further judicial or legislative reform. Yet other developments, including the standards for granting injunctive relief (and, relatedly, for awarding ongoing royalties in lieu of injunctive relief); for calculating reasonable royalties; and for awarding enhanced damages, have in some respects been positive but could be further improved

A Burkean Perspective on Patent Eligibility, Part II: Reflections on the (Counter)Revolution in Patent Law

In 2007, I published an essay in the Berkeley Technology Law Journal, titled A Burkean Perspective on Patent Eligibility, in which I discussed how the United States Court of Appeals for the Federal Circuit and the United States Patent and Trademark Office had discarded various doctrines relating to patent eligibility - among them, rules that all patentable inventions must pertain to the technological arts, that they may not read on mental steps, and that patentable processes must effect a physical transformation - in favor of an approach that asked only whether an invention had practical utility and was predictable in its effects. Taking a cue from the (admittedly non-patent related) writings of the Anglo-Irish statesmen and political theorist Edmund Burke, I argued that some aspects of the older approach to patentable subject matter may have embodied an underappreciated wisdom, to the extent these older doctrines prevented patent law from intruding upon both laws of nature and human liberty interests, including freedom of speech and personal autonomy. At the same time, I recognized that, as times change, the law too must change, and I contended that it would be inadvisable to exclude computer and business-related art from the scope of patentable subject matter altogether. I nevertheless argued that, properly reformed and refined, the older doctrines could still play a useful role in preventing patent law from unduly extending its reach into every nook and cranny of human endeavor. Three years later, as we await the United States Supreme Court’s decision in Bilski v. Kappos, the legal landscape appears to have changed substantially. From a time just prior to the publication of my Burkean paper and continuing to the present day, the Court has actively scaled back some of the Federal Circuit’s more expansive readings of patent doctrine in cases such as eBay Inc., MedImmune, KSR, Microsoft, and Quanta. Both the Federal Circuit and the Patent Office have applied more restrictive standards for patent eligibility as well, and the Supreme Court may go farther yet. Perhaps the greater risk now is that courts and other policymakers will settle on a formalistic approach that blindly adheres to the form of traditional doctrines while ignoring those doctrines’ underlying rationales. I will argue that a workable standard for patent eligibility should reflect the wisdom embodied in tradition, while being flexible enough to accommodate advances in relatively new useful arts such as information technology and biotechnology. In particular, I will argue that three screens derived from traditional patent doctrine - a “technological arts” screen, a “minimal physicality” screen, and a “noninvasiveness” screen, as I will define them - should suffice to ensure that patent law continues to encourage technological progress, without precluding access to the public domain building blocks from which such progress arises

Misuse

The misuse defense in copyright and patent law is something of an anomaly. Under the approach favored by many courts that have considered the defense, misuse is defined as the broadening of one\u27s copyright or patent with anticompetitive effect. When a defendant in a copyright or patent infringement suit succeeds in proving that the plaintiff has misused its copyright or patent, the court typically enters judgment that the copyright or patent is unenforceable until the misuse is purged. There is no necessary requirement that the copyright or patent defendant itself has been a victim of the misuse (the standing anomaly); and despite the posited relationship of misuse to competition policy, courts continue to affirm that misuse may exist even when the challenged practice does not amount to a violation of the antitrust laws. As such, misuse can become something of a wild card in copyright and patent litigation. Articulating a distinct role for the doctrine, in relation to both antitrust law and to such copyright doctrines as fair use and merger, has not proven easy. In this essay, I argue for a reformed and narrowed version of the misuse defense in both copyright and patent law. Specifically, I argue that licensing provisions that enable copyright or patent owners to extract concessions from licensees that are likely to cause net social harm to interests such as dynamic efficiency and freedom of speech should be deemed unenforceable under a doctrine of transactional misuse. Courts should be reluctant to find such misuse absent clear evidence of such net harm; at the same time, however, there may be rare cases in which such harm is present despite the fact that antitrust law would probably not intervene under similar circumstances. Finally, the standard remedy for transactional misuse should be limited to the unenforceability of the offending license provision, a reform that would tend to eliminate the standing anomaly. For litigation misuse, on the other hand, tentatively defined as the spurious assertion of copyright or patent rights in litigation for the purpose of inducing defendants to avoid accessing public-domain materials not within the scope of the grant, unenforceability of the intellectual property in its entirety may in some instances be an appropriate remedy

Optimal Fines for False Patent Marking

Since January 1, 2010, plaintiffs have filed over three hundred lawsuits under 35 U.S.C. § 292, the false patent marking statute. Fueled in large part by recent Federal Circuit case law embracing an expansive interpretation of the statute, this uptick has alarmed some observers, who fear that patent owners whose products bear the numbers of expired or inapplicable patents could be liable for, literally, billions of dollars in fines. While Congress and the courts consider various responses, one issue that has failed to attract much notice thus far is the question of how to calculate appropriate fines for marking violations. Although the statute permits courts to assess a fine of “not more than $500” for every falsely marked article, it specifies neither a minimum fine nor any methodology for setting the amount of the fine. This Essay proposes that, in setting fines, courts should attempt to approximate the social harm caused by false marking by taking into account (1) the plaintiff’s loss (if any) and the defendant’s gain (if any) attributable to the marking at issue; (2) the plausibility of substantial but less easily quantifiable harms to third parties; and (3) the risks, on the one hand, of underdeterring statutory violations if the penalty is too small and, on the other, of chilling patentees from lawfully marking their products if the risk of liability is too great. In cases in which the social harm from false marking appears minimal, courts should not be reluctant to impose only nominal fines