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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:


Error Costs, Legal Standards of Proof and Statistical Significance

By Bruce Kobayashi, Jonah Gelbach, Michelle Burtis

ABSTRACT:

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

By Douglas Ginsburg, Bruce Kobayashi, Koren Wong-Ervin, Joshua Wright

ABSTRACT:

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.

Progressive Political Theory, Contemporary Politics, and the REINS Act

By Eric Claeys

ABSTRACT:

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, Ariel Slonim, Anne Layne-Farrar

ABSTRACT:

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

ABSTRACT:

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.

Turning Gold to Lead: How Patent Eligibility Doctrine is Undermining U.S. Leadership in Innovation

By Adam Mossoff, Kevin Madigan

ABSTRACT:

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.

Trademark as a Property Right

By Adam Mossoff

ABSTRACT:

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.

Regarding the Optimality of Cartel Fines

By Michelle Burtis, Bruce Kobayashi

ABSTRACT:

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.

The Changing of the Guard: The Political Economy of Administrative Bloat in American Higher Education

By Chris Koopman, Todd Zywicki

ABSTRACT:

The cost of higher education in the United States has risen dramatically in recent years. Numerous explanations have been provided to explain this increase. This paper focuses on one contributing factor: The dramatic growth in the size and expense of non-academic administrators and other university bureaucrats, which has outpaced the growth of expenditures on academic programs. Given that university faculty are typically viewed as the constituency that primarily controls universities, this growth of non-academic employees and expenses appears to be anomalous. Some theories are provided to explain this transition.

Statistical (and Racial) Discrimination, 'Banning the Box', and Crime Rates

By Murat Mungan

ABSTRACT:

This article presents law enforcement models where employers engage in statistical discrimination, and the visibility of criminal records can be adjusted through policies (such as ban the box campaigns). I show that statistical discrimination leads to an increase in crime rates under plausible conditions. This suggests that societies in which membership to disadvantaged groups is salient (e.g. through greater racial or religious heterogeneity) are, ceteris paribus, likely to have higher crime rates. Attempting to fix the negative impacts of statistical discrimination through policies that reduce the visibility of criminal records increases crime rates further. Moreover, such policies cause a greater negative effect for law abiding members of the disadvantaged group than members of the statistically favored group.

Comment of the Global Antitrust Institute, Antonin Scalia Law School, George Mason University, on the Proposed Revisions to the People’s Republic of China Anti-Unfair Competition Law

By Douglas Ginsburg, Bruce Kobayashi, Koren Wong-Ervin, Joshua Wright

ABSTRACT:

This comment is submitted by the Global Antitrust Institute (GAI) at Scalia Law School, George Mason University in response to the Legislative Affairs Commission of the Standing Committee of the National People’s Congress of the People’s Republic of China’s public consultation on the February 26, 2017 draft revisions to China’s Anti-Unfair Competition Law. The GAI Competition Advocacy Program provides a wide-range of recommendations to facilitate adoption of economically sound competition policy, including how to analyze vertical restraints such as bundling.

Understanding the Runaway Tuition Phenomenon: Credence Goods in an Age of Skepticism

By Daniel Polsby

ABSTRACT:

Wandering in search of an explanation for why college tuitions are so rapidly increasing, and finding nothing compelling in the usually-offered explanations, the author stumbles upon the answer in plain sight. Because of the kind of product higher education is (a credence good) sellers must go to heroic lengths to keep up the semblance that the product is worth all that is charged for it. Money and resources of other kinds must be directed to this end to the limit of their availability, which can never be satiated no matter how much is spent. The economist Howard Bowen seems to have had the basic insight in 1980.

A Chip Off the Old Block or a New Direction for Payment Cards Security? The Chip & PIN Debate, Apple Pay, and the Law & Economics of Preventing Payment Card Fraud

By James Cooper, Todd Zywicki

ABSTRACT:

The issue of consumer payments and data security has reached a high level of public and regulatory interest as a result of a number of recent high-profile data breaches that compromised consumer payment card numbers, such as at Target, Home Depot, and Michael’s. In addition, the ecosystem of consumer payments security has changed dramatically in recent years as a result of the introduction and rapid spread of contactless payment technologies, such as ApplePay. In response to growing concerns about payments fraud, payment card networks in the United States have moved toward the rapid replacement of traditional magnetic stripe payment card technology to new EMV computer chip-based technology, which creates a unique encrypted identifier for each transaction, thereby making it more difficult for thieves to steal card numbers and create counterfeit cards. Notably, however, American card issuers and networks have chosen not to adopt the PIN method of verification that has been standard in the United Kingdom and much of Europe for the past decade or so, but instead have adopted signature as the preferred method of customer verification. Many large retail chains and retail trade associations have nevertheless lobbied for regulatory or statutory action to impose a PIN-verification requirement in addition to the addition of EMV chips. This article conducts an economic analysis of the regulation of consumer payment cards and payment cards fraud. We examine the marginal benefits from heightened levels of payment cards security (such as requiring PIN verification for purchases) and marginal costs as well, such as the impact on speed, convenience, and functionality for consumers and merchants, especially uptake of electronic payments by smaller merchants. We examine the dynamic evolution of payment cards anti-fraud technology over time and suggest that there is little evidence of market failure in the provision of payments security by card networks and issuers and little reason to believe that mandating one exclusive, decades old, static verification technology (namely Chip & PIN) would be likely to improve overall consumer welfare and economic efficiency today. We conclude that rather than blindly adopting the particular verification technology Europe put into place many years ago, U.S. regulators should be alert to the evolving and contemporary nature of consumer payments and fluid nature of threats to data privacy and not freeze or hamper the adaptability of the payments system.

A Return to Antitrust Populism?

By James Cooper

ABSTRACT:

The trend of modern antitrust policy is consumer protection based on economic analysis. This trend has enabled meaningful protections and coherent policy. It should continue despite recent, successful populist political campaigning.

Hohfeld and the Theory of in Rem Rights: An Attempted Mediation

By Christopher Newman

ABSTRACT:

Wesley Hohfeld’s contributions to analytical jurisprudence are often viewed — approvingly or otherwise — as having contributed to the disintegration of traditional concepts defining our understanding of property. Most strikingly, his 1917 treatment of rights in rem appears to insist that any description of property in terms of a relationship between an owner and an owned thing is analytically fallacious. In this essay, I seek to explain why Hohfeld’s approach fails to appreciate and account for the cognitive and normative utility of the in rem/in personam distinction, and suggest a way of reconciling the traditional understanding of those terms with Hohfeld’s analytical vocabulary.

Vested Use-Privileges in Property and Copyright

By Christopher Newman

ABSTRACT:

The notion that, “If it’s mine, I can do whatever I want with it” continues to have strong popular appeal as describing one of the implications of property ownership.  Indeed, this notion is coming to be pressed into service as a source of normative objection to the scope of certain intellectual property laws which have the effect of limiting what consumers can do with chattels they otherwise own.  Yet in property theory the status of use-privileges has long been dubious, with the right to exclude instead taking center stage.  This essay considers the nature of a “vested use-privilege” from both analytical and positive law perspectives, offering both a formal account of what it would mean for such an entitlement to exist or be infringed and a discussion of both the extent to which such an entitlement actually exists in extant property law and the extent to which copyright law should be regarded as conflicting with it.

Market-Reinforcing Versus Market-Replacing Consumer Finance Regulation

By Todd Zywicki

ABSTRACT:

The aftermath of the financial crisis has seen the formation of several new banking regulators and an onslaught of new financial regulation. In the area of consumer financial protection bureau these regulations have resuscitated the regulatory approach of prior eras, namely substantive regulation of the prices, terms, and products offered to consumers. But these regulations have also resulted in predictable unintended consequences — higher prices, reduced innovation, and exclusion of many consumers from mainstream financial products. This chapter drawn from the book Reframing Financial Regulation: Enhancing Stability and Protecting Consumers, distinguishes between two types of regulatory approaches, “market-reinforcing” and “market-replacing” consumer finance regulation, and argues that consumer welfare would be improved by a regulatory strategy that makes markets work better instead of displacing them with command-and-control regulation.

Anonymity, Autonomy, and the Collection of Personal Data: Measuring the Privacy Impact of Google's 2012 Privacy Policy Change

By James Cooper

ABSTRACT:

One of the most vexing problems in privacy policy is identifying consumer harm from unwanted observation; because it is highly subjective and is likely to vary greatly throughout the population, it doesn’t lend itself to easy measurement. Yet, these types of situations increasingly are the focal point of privacy policy discussions. The primary approach to attempt to quantify subjective harms has been to measure consumers’ willingness to exchange personal data for money in an experimental setting. This study takes a different tack, using field data to measure actual consumer response to a real-world reduction in the anonymity of online search. In March 2012, Google began to combine user information across platforms. To the extent that Google’s policy change reduced the anonymity associated with Google search, it may have reduced incentives to search sensitive or topics. Using a difference-in-difference estimator with top non-sensitive search terms as the control group, the results suggest that there was a small and short-term reduction in the Google Trends scores for sensitive search. There is no measured difference in reaction between high- and low-privacy demand states. Overall, the results indicate that any consumer welfare loss from Google’s policy change was small, and likely swamped by the demand-increasing impact of customization made possible from the cross-platform data sharing. That there is no measurable long-term substitution out of sensitive search may reflect the privacy advantages of searching for sensitive information on Google versus seeking the same information in an interpersonal setting. These findings suggest that privacy policy changes that are publicized should be treated like ordinary price changes — causing marginal consumers to exit and reducing consumer surplus for those who remain — not opportunities for regulatory intervention.

The History Of 'Substantive' Due Process: It's Complicated

By David Bernstein

ABSTRACT:

The history of what has come to be known as substantive due process is fraught with political implications, even more so now that same-sex marriage has joined abortion as a right protected by the Court under the rubric of due process. It’s tempting to create a simplified version of the past that explains how we got from point A to point B, and that implicitly or explicitly teaches some profound lesson about the present. History, rarely truly lends itself to such convenience. It’s complicated. 

With that in mind, this essay discusses a recent Texas Law Review article by Joshua Hawley. Hawley seeks to demonstrate that modern substantive due process jurisprudence was a novel invention of the Warren and Burger Courts, having no significant antecedents in the due process jurisprudence of the so-called Lochner era. Hawley makes some eminently reasonable points, especially with regard to how the Court replaced its historic natural-rights-based constitutionalism with a positivist understanding of the law that invites Justices to read their own philosophical views into the Due Process Clauses. Nevertheless, not all of Hawley’s claims are persuasive. In this essay, I complicate the story Hawley tells, by discussing alternative and additional explanations for the developments he discusses.

Our Illiberal Administrative Law

By Douglas Ginsburg, Steven Menashi

ABSTRACT:

In adopting the Administrative Procedure Act, the Congress intended to extend the liberal tradition - of limited government, checks and balances, and the protection of individual rights - to governance of the administrative state: The APA would give the public a way to get relief from administrative excess. Yet in the 70 years since it was enacted, evasive practices by the agencies and an increasingly deferential posture from the courts have combined to frustrate that purpose. The result is a legal regime that insulates agencies from correction and denies citizens redress. The illiberal aspects of this regime - presumptions that favor the government, unbounded delegations of authority, judicial deference on questions of law, the evasion of notice?and?comment rulemaking - do not arise from the APA itself but from the failure of courts and agencies to fulfill their obligations under the APA.