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

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

Regulatory Oscillation

In the wake of the Reagan deregulation, America experienced twenty- eight years of regulatory progression, with precious little retrogression. That trend came to a crashing halt during the four years of Donald Trump\u27s presidency. As a candidate, Trump campaigned on a series of pledges to reverse and undo as much of the work done by Barack Obama as possible. The Trump EPA was particularly active in this effort. In addition to reversing the Clean Power Plan, under Trump the EPA repealed or substantially weakened a number of other important Obama-era regulations, including a substantial increase in fuel economy standards and strict curbs on mercury and other emissions from coal-fired power plants. These regulations would have affected air quality and pollution more generally, but they also would have had a substantial effect on greenhouse gas emissions and thus on climate change. President Biden has promised to reinstate or even strengthen most if not all of the Obama-era regulatory initiatives that Trump eliminated. The EPA and other agencies are already at work on these new regulations. But Biden does not represent the end of history. Barring some seismic shift in political tectonics, some day in the future a Republican will again be elected president on a platform of ignoring climate change, protecting the fossil fuel industries, and reversing the regulatory progress of his or her Democratic predecessors. That president will likely undertake a program of deregulation, much as Trump did. Subsequently, a Democrat will again someday be elected president. That president will likely undertake a program of re-regulation, much has Biden has promised to do. From administration to administration, across terms, regulations will blink into and out of existence. They will become more and less stringent on four, eight, or twelve-year cycles. We are now living in an era of regulatory oscillation. At its core, the possibility of regulatory oscillation is driven by deference to agencies under the framework established in Chevron v. NRDC. Chevron deference, as it is known, is canonically viewed as pro-regulatory, in that it provides agencies with interpretive freedom to implement policy as they see fit. Under Trump, however, agencies learned to use Chevron to create deregulatory flexibility. Conversely, the strongest bulwark against regulatory flexibility may well be cost-benefit analysis, a decision procedure most frequently castigated as anti-regulatory. In an era of regulatory oscillation, these roles are reversed: Chevron and its model of deference open the door for regulatory oscillation; cost-benefit analysis and its model of constraint could shut it

Intelligent Design

When designers obtain exclusive intellectual property (IP) rights in the functional aspects of their creations, they can wield these rights to increase both the costs to their competitors and the prices that consumers must pay for their goods. IP rights and the costs they entail are justified when they create incentives for designers to invest in new, socially valuable designs. But the law must be wary of allowing rights to be misused. Accordingly, IP law has employed a series of doctrinal and costly screens to channel designs into the appropriate regime—copyright law, design patent law, or utility patent law—depending upon the type of design. Unfortunately, those screens are no longer working. Designers are able to obtain powerful IP protection over the utilitarian aspects of their creations without demonstrating that they have made socially valuable contributions. They are also able to do so without paying substantial fees that might weed out weaker, socially costly designs. This is bad for competition and bad for consumers. In this Article, we integrate theories of doctrinal and costly screens and explore their roles in channeling IP rights. We explain the inefficiencies that have arisen through the misapplication of these screens in copyright and design patent laws. Finally, we propose a variety of solutions that would move design protection toward a successful channeling regime, balancing the law’s needs for incentives and competition. These proposals include improving doctrinal screens to weed out functionality, making design protection more costly, and preventing designers from obtaining multiple forms of protection for the same design

Costly Intellectual Property

Though they derive from the same constitutional source of law, patents and copyrights vest very differently. Patents arise only after an applicant successfully navigates a cumbersome and expensive examination, while copyrights arise costlessly upon mere fixation of a work in a tangible medium of expression. Each of these vesting systems has drawn much criticism. Some scholars argue that the patent examination system imposes heavy costs while failing to eliminate invalid patents. Each of these claims, though, fails to take into account the social benefits (or costs) associated with the screening mechanism (or lack thereof) required for owners to perfect their rights. The social-welfare implications of process costs have been studied in other settings, but largely ignored in the intellectual property (IP) literature. In this Article, we leverage the insights of this literature to craft a novel theory showing why the much-maligned patent and copyright vesting systems are actually socially beneficial. Our analysis rests on a descriptive account of how patents and copyrights create differential social and private values, and shows that costly screens select differently across the classes of value in each of these cases, so that process costs are warranted in the patent setting but undesirable for copyright. Finally, we abstract the insights of this paper to generate two more general insights about law. First, we illustrate how this analysis of costly screens generates a broader account of how law does and should govern processes for vesting IP rights. In so doing, we offer a novel and unified theory of IP process. Second, we explore how our discussion of process costs in the IP setting illuminates the underappreciated benefits and costs of screens in other areas of law