The Uneasy Case for Patent Federalism

Nationwide uniformity is often considered an essential feature of the patent system, necessary to fulfill that system’s disclosure and incentive purposes. In the last few years, however, more than half the states have enacted laws that seek to disrupt this uniformity by making it harder for patent holders to enforce their patents. There is an easy case to be made against giving states greater authority over the patent system: doing so would threaten to disrupt the system’s balance between innovation incentives and a robust public domain and would permit rent seeking by states that disproportionately produce or consume innovation. There is, nevertheless, an uneasy case that this particular form of patent federalism may be a good thing. The federal patent system has systemic flaws that lead to low-quality patents, nuisance patent litigation, and patent trolls exploiting asymmetric bargaining power. And efforts to address these flaws have faltered, or have had limited effects, due to public-choice dynamics in the patent system, so the scope of patent protections has expanded over time without regard to the system’s purpose of encouraging innovation. States may help address some of these problems not in spite of, but because of, their own flaws. States have their own public-choice dynamics that happen to offset some of the flaws of the federal system. State anti-patent laws have been driven largely by small businesses and local small-business groups, which, unlike most patent holders, have preexisting influence in state government. And the laws they have crafted using this influence are well-targeted to affect only the most troublesome patent cases: nuisance cases, cases asserting low-quality patents, and cases targeting end users. States pushing back with anti-patent laws, then, may represent an effective second-best solution to the problem of harmful patent assertions. Moreover, recognizing the dynamics that led to these laws may provide helpful insights in designing federal patent reforms

Unilateral Invasions of Privacy

Most people seem to agree that individuals have too little privacy, and most proposals to address that problem focus on ways to give those users more information about, and more control over, how information about them is used. Yet in nearly all cases, information subjects are not the parties who make decisions about how information is collected, used, and disseminated; instead, outsiders make unilateral decisions to collect, use, and disseminate information about others. These potential privacy invaders, acting without input from information subjects, are the parties to whom proposals to protect privacy must be directed. This Article develops a theory of unilateral invasions of privacy rooted in the incentives of potential outside invaders. It first briefly describes the different kinds of information flows that can result in losses of privacy and the private costs and benefits to the participants in these information flows. It argues that in many cases the relevant costs and benefits are those of an outsider deciding whether certain information flows occur. These outside invaders are more likely to act when their own private costs and benefits make particular information flows worthwhile, regardless of the effects on information subjects or on social welfare. And potential privacy invaders are quite sensitive to changes in these costs and benefits, unlike information subjects, for whom transaction costs can overwhelm incentives to make information more or less private. The Article then turns to privacy regulation, arguing that this unilateral-invasion theory sheds light on how effective privacy regulations should be designed. Effective regulations are those that help match the costs and benefits faced by a potential privacy invader with the costs and benefits to society of a given information flow. Law can help do so by raising or lowering the costs or benefits of a privacy invasion, but only after taking account of other costs and benefits faced by the potential privacy invader

The Uneasy Case for Patent Federalism

Nationwide uniformity is often considered an essential feature of the patent system, necessary to fulfill that system’s disclosure and incentive purposes. In the last few years, however, more than half the states have enacted laws that seek to disrupt this uniformity by making it harder for patent holders to enforce their patents. There is an easy case to be made against giving states greater authority over the patent system: doing so would threaten to disrupt the system’s balance between innovation incentives and a robust public domain and would permit rent seeking by states that disproportionately produce or consume innovation. There is, nevertheless, an uneasy case that this particular form of patent federalism may be a good thing. The federal patent system has systemic flaws that lead to low-quality patents, nuisance patent litigation, and patent trolls exploiting asymmetric bargaining power. And efforts to address these flaws have faltered, or have had limited effects, due to public-choice dynamics in the patent system, so the scope of patent protections has expanded over time without regard to the system’s purpose of encouraging innovation. States may help address some of these problems not in spite of, but because of, their own flaws. States have their own public-choice dynamics that happen to offset some of the flaws of the federal system. State anti-patent laws have been driven largely by small businesses and local small-business groups, which, unlike most patent holders, have preexisting influence in state government. And the laws they have crafted using this influence are well-targeted to affect only the most troublesome patent cases: nuisance cases, cases asserting low-quality patents, and cases targeting end users. States pushing back with anti-patent laws, then, may represent an effective second-best solution to the problem of harmful patent assertions. Moreover, recognizing the dynamics that led to these laws may provide helpful insights in designing federal patent reforms

How the Supreme Court Ignored the Lesson of Zeran and Screwed Up Copyright Law on the Internet

This short essay, prepared for a retrospective organized by Eric Goldman and Jeff Kosseff on the twentieth anniversary of the Fourth Circuit’s decision in Zeran v. AOL, argues that the Supreme Court failed to learn the lesson of that foundational case, with adverse consequences for copyright law on the internet

The Patent Spiral

Examination — the process of reviewing a patent application and deciding whether to grant the requested patent — improves patent quality in two ways. It acts as a substantive screen, filtering out meritless applications and improving meritorious ones. It also acts as a costly screen, discouraging applicants from seeking low-value patents. Yet despite these dual roles, the patent system has a substantial quality problem: it is both too easy to get a patent (because examiners grant invalid patents that should be filtered out by a substantive screen) and too cheap to do so (because examiners grant low-value nuisance patents that should be filtered out by a costly screen). This Article argues that these flaws in patent screening are both worse and better than has been recognized. The flaws are worse because they are not static, but dynamic, interacting to reinforce each other. This interaction leads to a vicious cycle of more and more patents that should never have been granted. When patents are too easily obtained, that undermines the costly screen, because even a plainly invalid patent has a nuisance value greater than its cost. And when patents are too cheaply obtained, that undermines the substantive screen, because there will be more patent applications, and the examination system cannot scale indefinitely without sacrificing accuracy. The result is a cycle of more and more applications, being screened less and less accurately, to give more and more low-quality patents. And although it is hard to test directly if the quality of patent examination is falling, there is evidence suggesting that this cycle is affecting the patent system. At the same time, these flaws are not as bad as they seem because this cycle may be surprisingly easy to solve. The cycle gives policymakers substantial flexibility in designing patent reforms, because the effect of a reform on one piece of the cycle will propagate to the rest of the cycle. Reformers can concentrate on the easiest places to make reforms (like the litigation system) instead of trying to do the impossible (like eliminating examination errors). Such reforms would not only have local effects, but could help make the entire patent system work better

Comments to the Federal Trade Commission on the CAN-SPAM Rule Review, 16 C.F.R. Part 316, Project No. R711010

These comments respond to the Federal Trade Commission’s request for public comment on the CAN-SPAM Rule, 16 C.F.R. Part 316. The CAN-SPAM Act set a minimum baseline for consumer protections that senders of unsolicited commercial email must respect. These protections have been largely effective at giving consumers the ability to manage how a large group of companies uses their email addresses for marketing. At the same time, the Act has had little effect on the volume of unsolicited commercial email or on the amount of email sent by scammers and fraudsters. The Act and its implementing Rule, then, have been neither the success they should be nor the failure that critics describe. These comments explain how the Commission should adjust the Rule to maintain its substantial consumer benefits while addressing its shortcomings. By leaving in place the significant consumer protections the Rule provides while updating and tweaking their substance to provide additional protections and account for technological change since the Rule was promulgated, the Commission would best implement the goals and structure of the Act. Moreover, the Commission should look for additional ways, within its authority under the Act and other statutes, to address the problem of scam emails

Privacy and Accountability in Black-Box Medicine

Black-box medicine—the use of big data and sophisticated machine learning techniques for health-care applications—could be the future of personalized medicine. Black-box medicine promises to make it easier to diagnose rare diseases and conditions, identify the most promising treatments, and allocate scarce resources among different patients. But to succeed, it must overcome two separate, but related, problems: patient privacy and algorithmic accountability. Privacy is a problem because researchers need access to huge amounts of patient health information to generate useful medical predictions. And accountability is a problem because black-box algorithms must be verified by outsiders to ensure they are accurate and unbiased, but this means giving outsiders access to this health information. This article examines the tension between the twin goals of privacy and accountability and develops a framework for balancing that tension. It proposes three pillars for an effective system of privacy-preserving accountability: substantive limitations on the collection, use, and disclosure of patient information; independent gatekeepers regulating information sharing between those developing and verifying black-box algorithms; and information-security requirements to prevent unintentional disclosures of patient information. The article examines and draws on a similar debate in the field of clinical trials, where disclosing information from past trials can lead to new treatments but also threatens patient privacy

Unilateral Invasions of Privacy

Most people seem to agree that individuals have too little privacy, and most proposals to address that problem focus on ways to give those users more information about, and more control over, how information about them is used. Yet in nearly all cases, information subjects are not the parties who make decisions about how information is collected, used, and disseminated; instead, outsiders make unilateral decisions to collect, use, and disseminate information about others. These potential privacy invaders, acting without input from information subjects, are the parties to whom proposals to protect privacy must be directed. This Article develops a theory of unilateral invasions of privacy rooted in the incentives of potential outside invaders. It first briefly describes the different kinds of information flows that can result in losses of privacy and the private costs and benefits to the participants in these information flows. It argues that in many cases the relevant costs and benefits are those of an outsider deciding whether certain information flows occur. These outside invaders are more likely to act when their own private costs and benefits make particular information flows worthwhile, regardless of the effects on information subjects or on social welfare. And potential privacy invaders are quite sensitive to changes in these costs and benefits, unlike information subjects, for whom transaction costs can overwhelm incentives to make information more or less private. The Article then turns to privacy regulation, arguing that this unilateral-invasion theory sheds light on how effective privacy regulations should be designed. Effective regulations are those that help match the costs and benefits faced by a potential privacy invader with the costs and benefits to society of a given information flow. Law can help do so by raising or lowering the costs or benefits of a privacy invasion, but only after taking account of other costs and benefits faced by the potential privacy invader

Patent Invalidity versus Noninfringement

Most patent scholars agree that the Patent and Trademark Office grants too many invalid patents and that these patents impose a significant tax upon industry and technological innovation. Although policymakers and scholars have proposed various ways to address this problem, including better ex ante review by patent examiners and various forms of ex post administrative review, district courts invalidating patents in litigation remain a core defense against bad patents. This article analyzes a previously unidentified impediment to the use of district courts to invalidate patents. Nearly every patent lawsuit rises or falls on one of two defenses: invalidity or noninfringement. Invalidity and noninfringement are distinct legal and factual issues that are usually analyzed separately by scholars. Yet as the article explains, the two issues are closely related, creating a series of tradeoffs and asymmetries that lead many patent defendants to focus on noninfringement instead of invalidity. The net effect of these tradeoffs and asymmetries is that patent defendants often have an incentive to argue noninfringement instead of invalidity, leading courts to invalidate fewer patents than they should. This exacerbates the problem of invalid patents, making it harder for individuals and companies to create new products and services. The article concludes by proposing three reforms to help restore the balance between invalidity and noninfringement. First, eliminating the elevated burden of proof for invalidity would remove one significant asymmetry that makes it harder to prevail on invalidity. Second, a bifurcation rule giving defendants the option to defer infringement issues until after validity has been decided would help litigants develop coherent trial narratives while allowing them to focus on validity issues early in a case. And third, a new cause of action for an accounting, brought against industry competitors by a litigant that successfully invalidates a patent, would help eliminate the collective-action problem posed by invalidity’s public-good nature

Data Scams

Targeting platforms like Google and Facebook are usually seen as presenting tradeoffs between utility and privacy. This Article identifies and describes a different, non-privacy cost of targeting platforms: they make it easier for malicious actors to scam others. They do this by making it easier for scammers to reach the most promising victims, hide from law-enforcement authorities and others, and develop better scams. Technology offers potential solutions, since the same data and targeting tools that enable scams could help detect and prevent them, though neither platforms nor law-enforcement officials have both the incentives and expertise needed to develop and deploy those solutions. Moreover, these scams may illustrate a broader class of problems from targeting that go beyond utility versus privacy, suggesting that more aggressive interventions may be needed