See also the News feed of working papers as they are released.
Bound print copies of George Mason School of Law’s working paper series on law and economics are available in the Law Library. The bound set often includes initial drafts of papers. Search Mason’s Classic Catalog to locate a working paper.
Recent Working Papers:
By Eric Claeys
In scholarship on intellectual property (‘IP’), philosophical justifications for IP rights seem to suffer from one of two flaws. To some, philosophical justifications are too indeterminate to offer concrete guidance about rights in practice. To others, philosophical justifications seem extreme; they mandate certain conclusions without letting decision makers consider the relevant context or consequences of different IP rights. Both impressions neglect an important dimension of moral reasoning about rights — practical reason. In perfectionist theories of law, ‘practical reason’ describes the principles by which general justifications for moral rights are implemented in specific decisions in law and ethics. This Article introduces practical reason to IP scholarship, and shows how it facilitates reasoning about the context of different IP rights. The Article shows how principles of practical reason might apply to patent’s novelty requirement, copyright’s originality requirement, copyright’s idea-expression distinction, and the duration requirements for various forms of intellectual property.
Methodologies for Calculating FRAND Damages: An Economic and Comparative Analysis of the Case Law from China, the European Union, India, and the United States
By Anne Layne-Farrar, Koren Wong-Ervin
In the last several years, courts around the world, including in China, the European Union, India, and the United States, have ruled on appropriate methodologies for calculating either a reasonable royalty rate or reasonable royalty damages on standard-essential patents (SEPs) upon which a patent holder has made an assurance to license on fair, reasonable and non-discriminatory (FRAND) terms. Included in these decisions are determinations about patent holdup, licensee holdout, the seeking of injunctive relief, royalty stacking, the incremental value rule, reliance on comparable licenses, the appropriate revenue base for royalty calculations, and the use of worldwide portfolio licensing. This article provides an economic and comparative analysis of the case law to date, including the landmark 2013 FRAND-royalty determination issued by the Shenzhen Intermediate People’s Court (and affirmed by the Guangdong Province High People’s Court) in Huawei v. InterDigital; numerous U.S. district court decisions; recent seminal decisions from the United States Court of Appeals for the Federal Circuit in Ericsson v. D-Link and CISCO v. CSIRO; the six recent decisions involving Ericsson issued by the Delhi High Court; the European Court of Justice decision in Huawei v. ZTE; and numerous post-Huawei v. ZTE decisions by European Union member states. While this article focuses on court decisions, discussions of the various agency decisions from around the world are also included throughout.
By Ronald Cass
Due process as a notion of basic fairness has deep roots and broad intuitive appeal. It is a guarantee, stretching back at least to Magna Carta, that government’s most feared impositions on those within its reach — using coercive powers to take away our lives, our liberty, or our property — can only be accomplished through processes that have qualities of regularity and impartiality under rules adopted through mechanisms that historically carried the hallmarks of legitimacy, generality, and neutrality. The same instincts that underlie due process guarantees also inform the structural protections that are the central features of our Constitution. The goal under either label is to protect liberty by regulating the way government goes about setting and applying legal rules.
The intuitive appeal of the notion of “due process,” however, at times has obscured the limited reach of the core concept, which is restricted in both what it applies to and what it requires. Transformation of due process from that core to a looser constraint that can be shaped to fit particular notions of good governance has produced serious failures, both encouraging episodes of judicial adventurism that invade space reserved to electoral-representative processes (the story of “substantive due process”) and weakening protections against inappropriate exercises of official discretion.
Reliance on softer notions of due process may be especially problematic in respect to questions of administrative process, which often lie outside the ambit of appropriate due process constraints. Even where due process does apply, other legal rules strongly influence the degree to which administrative processes work and frequently provide better avenues for constraining them. Addressing directly the problematic nature of many delegations of authority to administrators and of inappropriate judicial deference to administrative determinations by and large will be preferable to due process challenges to administrative action. Due process can be a complement to reinvigorated delegation constraints and reformed deference rules or a partial substitute — used to compensate for failure to properly reform those doctrines — but it is at best a “second best” option.
By Craig Lerner
The Biblical story of the Tower of Babel illuminates contemporary efforts to secure ourselves from global catastrophic threats. Our advancing knowledge has allowed us to specify with greater clarity the Floods that we face (asteroids, supervolcanoes, gamma ray bursts, etc.); and our galloping powers of technology have spawned a new class of human-generated dangers (climate change, nuclear war, artificial intelligence, nanotechnology, etc.). Should any of these existential dangers come to pass, human beings and even all life could be imperiled. The claim that Man, and perhaps the Earth itself, hangs in the balance is said to imply the necessity of a global response. All well-meaning men and women should abandon a provincial attachment to the nation-states they contingently call home. What is needed is more global cooperation, or global governance, so that we can join together in the construction of a tower to the heavens, safe harbor from whatever terrors nature or God visit upon us.
This article questions the conventional narrative. The Biblical account of the Tower of Babel is richly metaphorical in its suggestion that the division of mankind into separate spheres has salutary consequences. The fantasy of a common humanity, joined selflessly in a common enterprise, assumes away the tenacious passions and interests that divide us. The facile claim, based on little more than linguistic parallelism — global catastrophic threats require global governance solutions — breaks down as one reflects, at a more granular level, upon the diversity of those threats. Apart from questions of feasibility, global governance solutions overstate the benefits and understate the costs of collaboration. There are often substantial advantages to maintaining separate and even competing spheres of control. Nation-states, with more rigorous lines of political accountability than amorphous governance structures, are best able to respond to any existential threats. Finally, nation-states and territorially localized sovereigns are less likely to threaten humanity’s future than a global sovereign, empowered by modern technology and emboldened by a crusading faith to save Mankind.
By Craig Lerner
This article analyzes the origins of the “responsible corporate officer” doctrine: the trial of Joseph Dotterweich. That doctrine holds that an officer may be personally liable for the criminal act of a subordinate if the officer was, in some indefinite way, able to prevent the violation. Applying this doctrine, the prosecution of Dotterweich entailed strict liability for a strict liability offense. The underlying offenses — the interstate sale of one misbranded and adulterated drug and one misbranded drug — were said to be strict liability offenses. And then, with respect to Dotterweich as the corporation’s general manager, the government argued that he was strictly liable because he stood in “responsible relation” to the company’s acts. The government never tried to prove that the company, Buffalo Pharmacal, was negligent, nor did it try to prove that Dotterweich was negligent in his supervision of the employees of Buffalo Phamacal. The prosecutor and judge were candid about this theory throughout the trial, although the judge conceded that it seemed bizarre and unfair. The defense lawyer repeatedly sought to inject what became known throughout the trial as “the question of good faith,” but was circumvented at almost every turn. What would thus seem to be the crux of any criminal trial — the personal fault of the defendant — was carefully shorn from the jury’s consideration. The government’s theory was so at odds with intuitive notions of liability and blame that as one probes into the case, and looks at the language used in the government’s appellate briefs, imputations of moral fault inevitably creep in. Yet the government was not entitled to make such accusations, as it had pruned moral considerations from the trial.
The article argues that the “responsible corporate officer” doctrine can never enjoy a secure place in our legal system. First, the doctrine is at a minimum in tension with, and often in direct opposition to, basic principles of the criminal law; and second, the doctrine fails, when followed to its logical conclusions, to accord with basic notions of fair play. The article concludes that the responsible corporate officer doctrine is either unnecessary, in cases in which the evidence establishes personal fault, or unjust, in cases in which it creates liability in the absence of personal fault through the unspecified notion of “responsibility.” The Dotterweich case illustrates what is contemplated by the latter possibility, and why it is problematic in any judicial system that purports, in the words of the Model Penal Code, “to safeguard conduct that is without fault from condemnation as criminal.”
By Murat Mungan
The literature contains ambiguous findings as to whether statistical discrimination, e.g. in the form of racial profiling, causes a reduction in deterrence. These analyses, however, assume that enforcers' incentives are exogenously fixed. This article demonstrates that when the costs and benefits faced by officers in enforcing the law are endogenously determined, statistical discrimination as well as taste-based discrimination lead to an increase in criminal activity. Moreover, the negative effects of statistical discrimination on deterrence are more persistent than similar effects due to taste-based discrimination. This suggests, contrary to the impression created by the existing literature, that statistical discrimination is not only harmful, but, may be even more detrimental than taste-based discrimination. Thus, for purposes of maximizing deterrence, the recent focus in empirical research on identifying taste-based discrimination as opposed to statistical discrimination may be misplaced. A superior approach may be to identify whether any type of racial discrimination takes place in the enforcement of laws, and to provide enforcers with incentives to minimize the impact of their discriminatory behavior.
By Iijoong Kim, Hojun Lee, Ilya Somin
The taking of private property for development projects has caused controversy in many nations, where it has often been used to benefit powerful interests at the expense of the general public. This edited collection is the first to use a common framework to analyze the law and economics of eminent domain around the world. The authors show that seemingly disparate nations face a common set of problems in seeking to regulate the condemnation of private property by the state. They include the tendency to forcibly displace the poor and politically weak for the benefit of those with greater influence, disputes over compensation, and resort to condemnation in cases where it destroys more economic value than it creates. With contributions from leading scholars in the fields of property law and economics, the book offers a comparative perspective and considers a wide range of possible solutions to these problems.
The Introduction summarizes the rest of the book, and describes the common analytical framework used by the contributors.
Comment of the Global Antitrust Institute, Antonin Scalia Law School, George Mason University, on the Proposed Amendments to the Competition Law of the Socialist Republic of Vietnam
This comment is submitted by the Global Antitrust Institute (GAI) at Scalia Law School at George Mason University to the Vietnam Competition Authority on the proposed amendments to the Competition Law of the Socialist Republic of Vietnam. The GAI Competition Advocacy Program provides a wide-range of recommendations to facilitate adoption of economically sound competition policy.
By Ilya Somin
In recent years, many conservatives have come to favor a highly restrictionist approach to immigration policy. But that position is in conflict with their own professed commitment to principles such as free markets, liberty, colorblindness, and enforcing constitutional limits on the power of the federal government. These values ultimately all support a strong presumption in favor of free migration.
Comment of the Global Antitrust Institute, Antonin Scalia Law School, George Mason University, on the Japan Fair Trade Commission’s Draft Guidelines Concerning Distribution Systems and Business Practices Under the Antimonopoly Act
This comment is submitted by The Global Antitrust Institute (GAI) at Scalia Law School at George Mason University in response to the Japan Fair Trade Commission’s consultation on its Draft Guidelines Concerning Distribution Systems and Business Practices Under the Antimonopoly Act. The GAI Competition Advocacy Program provides a wide-range of recommendations to facilitate adoption of economically sound competition policy, including how to analyze antitrust matters involving multi-sided platforms and vertical restraints.
Comment of the Global Antitrust Institute, Antonin Scalia Law School, George Mason University, on the Communication from the Commission on Standard Essential Patents for a European Digitalised Economy
This comment is submitted by the Global Antitrust Institute (GAI) at Scalia Law School at George Mason University in response to the Communication from the Commission on Standard Essential Patents for a European Digitalized Economy. The GAI Competition Advocacy Program provides a wide-range of recommendations to facilitate adoption of economically sound competition policy, including how to analyze antitrust matters involving intellectual property rights and standard-essential patents.
By Koren Wong-Ervin, Ariel Slonim, Evan Hicks
Competition agencies around the world, including in Canada, China, India, Japan, Korea, and the United States (at least prior to the current administration), have taken the unwarranted position that antitrust enforcement involving standard-essential patents (SEPs) upon which a patent holder has made an assurance to license on fair, reasonable, and nondiscriminatory (FRAND) terms should be subject to special rules or unique presumptions and burdens of proof. Recently, this approach has manifested itself in contentions (and in the case of the Korea Fair Trade Commission, an administrative decision) that it is somehow “unfair” (and therefore unlawful) for a SEP holder to license its patents, including both SEPs and non-SEPs, on a portfolio basis. This is because, as the contention goes, the SEP holder is either unfairly forcing implementers to license more than they desire or evading its FRAND assurance through package licensing. This article explains that neither of these are economically sound theories of harm, particularly in jurisdictions like the United States that do not punish the mere extraction of monopoly profits, but instead focus on the unlawful acquisition or maintenance of monopoly power. We set forth the mainstream alternative theories of harm — namely leveraging and monopoly maintenance — and apply them to common portfolio licensing practices of SEP holders, particularly those in the SEP-intensive telecommunications sector. We also address allegations that a vertically-integrated SEP holder’s decision to license at the end-user device level amounts to de facto bundling, relying on a recent paper by Dr. Jorge Padilla and Koren W. Wong-Ervin. In that paper, the authors show through a simple model that a vertically integrated firm’s de facto bundling of a component and its SEP portfolio will not result in foreclosure of the component market if: (i) the vertically integrated SEP holder does not assert its patents at the component level, and (ii) it licenses its SEP portfolio to end-device manufacturers on FRAND terms irrespective of whether they source components from its own subsidiary or from the non-integrated rival.
By Bruce Kobayashi, Jonah Gelbach, Michelle Burtis
The relationship between legal standards of proof and thresholds of statistical significance is a well-known and studied phenomena in the academic literature. Moreover, the distinction between the two has been recognized in law. For example, in Matrix v. Siracusano, the Court unanimously rejected the petitioner’s argument that the issue of materiality in a securities class action can be defined by the presence or absence of a statistically significant effect. However, in other contexts, thresholds based on fixed significance levels imported from academic settings continue to be used as a legal standard of proof. Our positive analysis demonstrates how a choice of either a statistical significance threshold or a legal standard of proof represent alternative and often inconsistent attempts to balance error costs, and that thresholds based on fixed significance levels generally are not consistent with existing or optimal legal standards of proof. We also show how the statistical testing and legal standards of proof can be reconciled by replacing fixed significance level hypothesis testing with likelihood ratio tests.
Comment of the Global Antitrust Institute, Antonin Scalia Law School, George Mason University, on the Anti-Monopoly Commission of the State Council's Anti-Monopoly Guidelines against Abuse of Intellectual Property Rights
This comment is submitted by the Global Antitrust Institute (GAI) at Scalia Law School, George Mason University in response to the Anti-Monopoly Commission of the State Council of the People's Republic of China’s public consultation on its draft Anti-Monopoly Guidelines Against Abuse of Intellectual Property Rights. The GAI Competition Advocacy Program provides a wide-range of recommendations to facilitate adoption of economically sound competition policy, including how to analyze antitrust matters involving intellectual property rights.
By Eric Claeys
This draft chapter was prepared for a conference (hosted at St. Vincent’s College, Pennsylvania) and for a book, both directed toward an educated lay audience, on critiques by leading Progressive theorists and statesmen of American constitutionalism. The chapter explains why the main themes of the book continue to resonate in contemporary politics. Early Progressive arguments in favor of centralized administrative governance contributed to the structure of national regulatory and welfare state programs later associated with the New Deal and Great Society. Separately, although centralized administrative governance is politically quite attractive, it is also coming under criticism by prominent political opponents as a “Progressive” institution. Finally, these criticisms are part of a broader conflict between citizens who identify with the Tea Party movement and those who identify with government by apolitical administration. As viewed in the terms of classical political theory, this opposition is a conflict between two different groups of elites for pre-eminence in the American political regime. The writings of early Progressive theorists make extremely clear the claims of the elites who seek pre-eminence in a system of centralized administrative governance. Throughout, the chapter illustrates with contemporary examples, including the REINS Act, the Schoolhouse Rock episode “I’m Just a Bill,” and references to that episode in recent judicial opinions and popular entertainment addressing administrative policy-making.
A Comparative and Economic Analysis of the U.S. FTC's Complaint and the Korea FTC's Decision Against Qualcomm
By Koren Wong-Ervin, Douglas Ginsburg, Scott Robins, Iijoong Kim, Anne Layne-Farrar
On January 17, 2017, the U.S. Federal Trade Commission (FTC) filed a lawsuit against Qualcomm Incorporated based on a “monopoly broth” or course of conduct theory for alleged monopoly maintenance in certain narrowly defined baseband processor markets. The vote to file the complaint was 2-1 over the dissent of now-Acting Chairman Maureen Ohlhausen, who described it as “an enforcement action based on a flawed legal theory (including a standalone Section 5 count) that lacks economic and evidentiary support, that was brought on the eve of a new presidential administration, and that, by its mere issuance, will undermine U.S. intellectual property rights in Asia and worldwide.”
In a jurisdiction on the other side of the globe, the Korean Fair Trade Commission (KFTC) had issued an administrative decision against Qualcomm on December 28, 2016, concluding that the company employed an “unfair business model” with respect to the licensing of its 2G (CDMA), 3G (WCDMA), and 4G (LTE) standard-essential patents (SEPs) and the sale of its baseband processors, and imposed global portfolio-wide remedies and a fine of KRW 1.03 trillion (approx. US $853 million).
This article provides a legal and economic comparative analysis of the FTC’s complaint and the KFTC’s decision, highlighting the fundamental differences between the two and setting forth some of the main economic and legal problems with each. As an initial matter, it is important to bear in mind that the FTC’s complaint is not a decision, but rather a set of allegations filed in court to initiate the court’s resolution of the issues. Meanwhile, Qualcomm has stated that it will appeal the KFTC’s administrative decision, and has requested a stay from the Seoul Central District Court.
With respect to the substantive allegations, there are some similarities in the two cases but the main theories of harm differ significantly. For example, the KFTC concluded that Qualcomm possesses dominance in 2G, 3G, and 4G technologies: “As SEPs cannot be replaced by other technologies, a SEP holder gains complete monopolistic power by holding even a single SEP,” while the FTC limited its market power allegations to CDMA baseband processors and premium LTE baseband processors. Unlike the KFTC’s decision, the FTC’s complaint contains no allegation that Qualcomm engaged in unlawful tying or bundling by licensing on a portfolio bases, nor does the FTC allege that Qualcomm violated U.S. antitrust laws by allegedly requiring royalty-free cross-licenses.
To the extent that any other competition agency is relying upon the FTC’s complaint to state a theory of harm with respect to SEP licensing practices, it would be well advised to read the complaint carefully. If a foreign agency is seeking FTC endorsement of any particular theory, it would be wise to reserve judgment until at least the appointment of new FTC Commissioners and, if the agency does not then withdraw the complaint, until the court has ruled on the FTC’s ambiguous and highly controversial theories of harm.
Protecting Intellectual Property Rights Abroad: Due Process, Public Interest Factors, and Extra-Jurisdictional Remedies
By Koren Wong-Ervin
Several recent antitrust investigations involving the licensing of intellectual property rights (IPR) have raised concerns about fundamental due process and the alleged use of industrial policy in antitrust investigations to lower royalty rates, particularly for standard-essential patents (SEPs), in favor of local implementers. These concerns raise serious problems for innovation, economic growth, and consumers, and are likely compounded by the use of extra-jurisdictional remedies whereby one agency imposes worldwide portfolio licensing remedies, including on foreign patents, for conduct that may be deemed procompetitive or benign in other jurisdictions, which may facilitate a lowest-common denominator approach.
By Adam Mossoff, Kevin Madigan
Compared to other countries, the United States has long had a “gold standard” patent system. The U.S. has lead the world in securing stable and effective property rights in cutting-edge innovation; most recently, in protecting biotech and computer software inventions. Presenting information from a database of 1,400 patent applications covering the same invention that were recently filed in the U.S., China, and the European Union, this Essay explains how this “gold standard” designation is now in serious doubt. Many of these applications represent pioneering, life-saving inventions, such as treatments for cancer and diabetes. All 1,400 patent applications were granted in both China and the E.U., but the same applications were all rejected in the U.S. as ineligible for patent protection. The cause of these rejections is the U.S. Supreme Court’s recent spat of decisions that upended patent eligibility doctrine, especially as it has been applied to high-tech and biotech innovation. The U.S. patent system is now mired in uncertainty, except for the firm knowledge derived from data on the massive numbers of invalidations of issued patents and of rejections of patent applications. In addition to highlighting some of the inventions from the database of 1,400 applications, this Essay discusses this uncertainty in U.S. patent law, how this is a key change from the innovation-spurring approach of the U.S. patent system in the past, and what this means for the U.S. as other jurisdictions like China and the E.U. become forerunners in securing the new innovation that drives economic growth and flourishing societies.
By Adam Mossoff
Although trademark is a property right, the conventional wisdom among modern commentators and prominent judges is that it is only a regulatory entitlement that promotes consumer welfare. This essay fills a lacuna in modern trademark theory by identifying how and why nineteenth-century courts first defined trademark as a property right, and how this explains the structure of trademark doctrines today. The key conceptual insight is that a trademark is a use-right that is derived from and logically appurtenant to a separate and broader property right owned by a commercial enterprise — goodwill. Trademark thus shares many conceptual and doctrinal similarities to other use-right-based property rights that are appurtenant to larger estates, such as easements and riparian interests. This conceptual thesis is important, because it explains the nature and limits of this property right, such as, among others, why trademarks must be used in the marketplace, why trademarks cannot be separated from a commercial enterprise’s goodwill, and, perhaps most importantly, why trademarks are not full, independent property rights like a fee simple in land or title in a patent. The usufructuary nature of the property interest in a trademark thus clarifies what many scholars and judges view as its doctrinal peculiarities. It is only because they have unmoored trademark rights from their original definition and justification as use-right property interests that they are themselves confused about trademark rights and the nature of the doctrines that define and limit its use in the marketplace.
By Michelle Burtis, Bruce Kobayashi
Economic approaches to determining criminal sanctions focus on harm-based “optimal” penalties. In this note, we examine the extent to which the criminal fines for organizations convicted of price fixing contained in the United States Sentencing Commission Guidelines (USSG) and relied on by the U.S. Department of Justice (“US DOJ”) for criminal price fixing fines are consistent with the economic principles of harm-based “optimal” penalties. We first describe the economic approach to optimal criminal sanctions in price fixing cases and the approach contained in the USSG. We then reconcile the two approaches and illustrate the conditions under which the approaches are consistent. The article uses a simple economic model where the probability of detection is assumed to be one and there are no enforcement costs, and shows the optimal, harm-based penalty coincides with the minimum possible penalty advised by the Sentencing Guidelines. The model then is used to examine the relationship between the probability of detection and the range of penalties prescribed in the Guidelines.