C-K Faculty Blog

Buccafusco and Schwartz on Challenging IP's Fundamental Assumptions

Monday was World Intellectual Property Day, and Professor David Schwartz and I just published on op-ed piece in the Chicago Daily Law Bulletin on the impact of empirical research on IP.  See the article below.

 April 26, 2010 Volume: 156 Issue: 81

Challenging IP's fundamental assumptions

By Christopher J. Buccafusco and David L. Schwartz

For centuries, intellectual property law has attempted to encourage people to create new inventions and works of authorship. It does this by granting inventors and authors exclusive rights to their creations for certain time periods.  Yet, patent and copyright must strike a balance between incentivizing new works and protecting others' opportunities to use and build upon those works.  In doing so, IP law has long relied on a variety of untested assumptions about the way people — and especially creators and judges — behave. Some of these assumptions are based on the principles of classical economics, while others are simply common-sense intuitions.  Recently, however, legal scholars have started putting these assumptions to the test. By combing through massive datasets and running laboratory experiments, scholars can apply social science methods to legal issues. Much of the empirical evidence suggests that some of IP's most fundamental assumptions may require radical revision.

Richard Wright Named IIT Distinguished Professor of Law

The Illinois Institute of Technology Board of Trustees has approved the appointment of Richard W. Wright as a Distinguished Professor of Law at Chicago-Kent College of Law. Distinguished professor is the highest faculty rank at the university, and is reserved for a small number of senior faculty members, nominated by their own faculties and deans and approved by a university-wide committee of existing distinguished professors and chairs.

A member of the Chicago-Kent faculty since 1985, Professor Wright’s teaching and research focus on domestic and comparative tort law, jurisprudence, law and economics, and law and artificial intelligence. Prior to joining the Chicago-Kent faculty, he was a member of the faculty of the Benjamin N. Cardozo School of Law at Yeshiva University, where he received the Monrad G. Paulsen Award for outstanding contributions to legal education.

The Dissent in SEC v. Goldman

The classic news cycle of a political story – from substance to process – appears to be taking hold of the biggest financial story of the day.  Commentators are redirecting their intense scrutiny of the SEC’s announcement of charges against Goldman Sachs toward the SEC’s decision to charge Goldman Sachs.  The turning point from text to metatext in this story occurred with Bloomberg’s report that the Commission split 3-2, when the two Republican appointees – Kathleen Casey and Troy Paredes – dissented from the Commission’s decision to bring an enforcement action against Goldman.

Anecdotally, the phenomenon of dissents from SEC decisions appears to be growing, given the number of high-profile instances in recent years.  This particular quintet of Commissioners divided along the same partisan lines (or roughly partisan lines, since Chair Mary Schapiro is technically an independent) just a few months ago on the promulgation of new rules restricting short selling and requiring climate change disclosure.  On the enactment of new rules for money market funds earlier this year, Casey dissented alone.  And, just a few years ago, Commissioners Cynthia Glassman and Paul Atkins dissented very publicly from new hedge fund regulations. 

To conclude that the SEC is becoming more political might seem attractive but somewhat odd, inasmuch as its very composition has long been explicitly divided along partisan lines.  So perhaps the SEC is simply one more political body that, like so many of our political bodies today, appears to be growing less content to disguise or cabin its political nature.

Perhaps rather than (or as well as) becoming more political, the SEC is becoming more adjudicative and operating more akin to a judicial entity.  While the split decision in this Goldman case was not publicized, previous dissents have come with lengthy minority reports setting forth analyses and arguments critiquing the Commission’s decision.  And that sort of analysis may not be a bad development, as it may contribute to a more sophisticated and nuanced corpus of rulings.  When one considers that huge numbers of public comments on SEC rulings are often homogeneous, dissents by Commissioners could add greater richness to the public debate over SEC regulations.

With that said, it seems badly done for the SEC not to have responded in the first instance to the enormities of the financial crisis with a single voice.  To the extent that any violations of securities regulations occurred during the late unpleasantness – not a terribly controversial supposition – surely the SEC could have roused itself to start enforcing the law again with a unanimous prosecution.

Three New Papers by Professor Atuahene

Professor Bernadette Atuahene has just posted three exciting papers on property law and justice to ssrn.  Click on the titles to download the papers.

Property Rights and the Demands of Transformation

The conception of property that a transitional state adopts is critically important because it affects the state’s ability to transform society. The classic conception of property gives property rights a certain sanctity that allows owners to have near absolute control of their property. But, the sanctity given to property rights has made land reform difficult and can serve as a sanctuary for enduring inequality. This is particularly true in countries where ownership is contested and land reform is essential due to pervasive past property theft. Oddly, the classical conception is flourishing in transitional states, like South Africa and Namibia, where transformation of the property status quo is essential. The specific question this Article addresses is: for states where past property dispossession threatens to destabilize the current state, is the classical conception appropriate or do these states require an alternative conception of real property? In this Article, I develop the transformative conception of real property to explore how the exigent need for societal transformation should inspire us to rethink property rights.

Property and Transitional Justice

Transitional justice is the study of those mechanisms employed by communities, states and the international community to deal with a legacy of systematic human rights abuses and authoritarianism in order to promote social reconstruction. There is a well developed transitional justice literature on how states can deal with past violations of civil and political rights, which discusses the value of truth commissions, and international and domestic prosecutions. The transitional justice literature on how to deal with past violations of property rights, however, is significantly less developed. The goal of this essay is to begin an important conversation about how transitional states can deal with multiple layers of past land dispossession in order to promote social reconstruction. I discuss the strengths and weakness of a state’s three main options: Maintaining the present property status quo, fully or partially returning to a prior status quo, or creating a new property status quo altogether. I argue that a state should decide which option it will choose in the context of a well-informed, inclusive public dialogue rather than through a less time consuming process involving only elites.

Things Fall Apart: The Illegitimacy of Property Rights In the Context of Past Property Theft

Past property theft is a volatile political issue that has threatened to destabilize many nascent democracies. How does a state avoid present-day property-related disobedience when past property theft causes a significant number of people to believe that the current property distribution is illegitimate? To explore this question, I first define legitimacy and past property theft relying on empirical understandings of the concepts. Second, I establish the relationship between a highly unequal property distribution that the general population views as illegitimate, and property-related disobedience. Third, I describe the three ways a state can achieve stability when faced with an illegitimate property distribution: by using its coercive powers, by attempting to change people's beliefs about the legitimacy of the property distribution, or by enacting a Legitimacy Enhancing Compensation Program (LECP), which strengthens the average citizen's belief that she ought to comply with the law. Fourth, I develop the legitimacy deficit model, which is a rational choice model that suggests when a state should enact a LECP to avoid property-related disobedience, which can devolve into broader instability. To best promote long-term stability, I argue that states should, at the very least, enact a LECP as the cost of illegitimacy begins to outweigh the cost of compensation. Lastly, since many of the model's relevant costs are subjective, I suggest a process states should use to determine and weigh the costs. In sum, the Article is intended to spark a debate about how compensation for past property theft can keep things from falling apart.

New Book on Global Competition by Professor David Gerber

Distinguished Professor David Gerber has recently published a new book with Oxford University Press.  The book is titled Global Competition: Law, Markets, and Globalization.    Here's the description from OUP:

Global competition now shapes economies and societies in ways unimaginable only a few years ago, and competition (or 'antitrust') law is a key component of the legal framework for global competition. These laws are intended to protect competition from distortion and restraint, and on the national level they reflect the relationships between markets, their participants, and those affected by them. The current legal framework for the global economy is provided, however, by national laws and institutions. This means that those few governments that have sufficient 'power' to apply their laws to conduct outside their own territory provide the norms of global competition. This has long meant that the US (and, more recently, the EU) structure global competition, but China and other countries are increasingly using their economic and political leverage to apply their own competition laws to global markets. The result is increasing uncertainty, costs, and conflicts that burden global economic development.

This book examines competition law on the global level and reveals its often complex and little-understood dynamics. It focuses on the interactions between national and international legal regimes that are central to these dynamics and a key to understanding them. 

Part I examines the evolution of the current global system, the factors that have shaped it, how it operates today, and recent efforts to alter that system-e.g., by including competition law in the WTO. Part II focuses on national competition law systems, revealing how national laws and experiences shape global competition law dynamics and how global factors, in turn, shape national laws and experiences. It examines the central roles of US and European law and experience, and it also pays close attention to countries such as China that are playing increasingly important roles in the global competition law arena. Part III analyzes current strategies for improving the legal framework for global competition and identifies the factors that may contribute to a system that more effectively supports global economic and political development. This analysis also suggests a pathway for moving toward that goal.

Click here to purchase the book at a 20% discount.  Download Gerber Flyer

Supreme Court Law Clerks and Ideology

I argued in a prior post that it would be refreshing and valuable for a Supreme Court nominee to speak frankly about the role that ideology, or political judgments, must inevitably play in some judicial decision making, especially on the Supreme Court.  In a recent review essay, The Law Clerk Proxy Wars: Secrecy, Accountability, and Ideology in the Supreme Court, appearing in the Florida State University Law Review, I argue that public anxiety over whether the justices are allowing ideology to inappropriately affect their judgments is reflected in frequently-expressed concerns about whether law clerks have undue influence on their justices.  The abstract for the piece is below:

This piece provides an in-depth review and analysis of two recent books about Supreme Court law clerks, Courtiers of the Marble Palace: The Rise and Influence of the Supreme Court Law Clerk, by Todd C. Peppers, and Sorcerers’ Apprentices: 100 Years of Law Clerks at the United States Supreme Court, by Artemus Ward and David L. Weiden. In addition, however, the essay addresses a question so obvious that it is rarely asked – why is there so much curiosity about Supreme Court law clerks in the first place? In the essay, I analyze a widespread concern – and one discussed in both books – that law clerks have "too much" influence or even that they are the real decisionmakers on the Court. I argue that in fact this concern is a proxy for two important questions: how does the Court decide what cases to take and what role does (and should) ideology play in the work of the Supreme Court.

With respect to the process of selecting cases to review on the merits – the certiorari (cert) process – I argue that a careful analysis of the process reveals that the likelihood is quite low that the Court denies cert petitions the justices would grant if they reviewed the petitions themselves instead of relying largely on their law clerks. I also argue that with respect to the cert process, the Court’s extreme secrecy does not serve it well. More information about how the process works and why the Court denies or grants cert in particular cases or types of cases would benefit the not only the bar and the public, but also the Court itself.

Second, I argue that concern about undue ideological influence by law clerks is really a displaced anxiety about the much thornier question of the appropriate role of ideology in Supreme Court judging. This anxiety arises in part from mixed messages about whether the Court is a political entity making important decisions about subjects on which there may not be social consensus or whether it is, as Chief Justice Roberts put it at his confirmation hearings, a neutral umpire calling balls and strikes. People seek to alleviate their anxiety by trying to figure out how the justices do their work – leading to the intense curiosity about what law clerks do. More candor about the inherently political nature of at least some of the Court’s work might not entirely eliminate the anxiety, but it would refocus it from the largely tangential question of law clerk influence onto difficult but crucial questions about the relationship between Supreme Court jurisprudence and ideology and about the proper role of the Court in our democracy.

Shock Therapy No More: Disasters, Workers' Rights and Democracy

By: César F. Rosado Marzán, PhD JD*

The earthquake that struck Chile on February 27 destroyed Maria’s home completely, leaving the young, single mother homeless.  Fortunately, both Maria and her daughter survived the calamity.  Unfortunately, they now had to figure out how to survive in their devastated city of Concepción.  During the week immediately after the earthquake Concepcion’s economy collapsed and food and water were hard to find.  Many in the city resorted to looting and rummaging through what was left in the destroyed stores to feed their children and themselves.  At one point, Chile’s quasi-military police, the carabineros, reasoned that they could not stop the looting, so they simply gave orders for an “orderly” hunt: women with children first, young males last, and no taking of non-necessaries, such as LCD TVs.  

Eventually, Maria found a place to shield her daughter and herself from the elements, a tent that the Red Cross and other charities built. However, the tent was not enough to protect Maria’s daughter form catching a pulmonary infection as a result of the cold and damp living conditions. 

About ten days after the earthquake, when public transit was partially restored in Concepción, Maria ventured into the downtown to show up at the small clothing store where she worked. She found rubble everywhere on the street and sidewalk leading to the mall where the clothing store was located.  A sign that read something on the lines of, “Enter at your own risk” stood in front of the mall.  The mall owners would not make themselves responsible for any injuries suffered by anyone in the premises including employees, and requested that any and all entrants sign a form acknowledging their assumption of the risk. 

Moreover, as she approached the mall, a carabinero questioned Maria on her motives for entering the mall and told her that she had no business being in there.  Concepción was under a curfew as a result of the looting and carabineros and military personnel had swarmed the once bustling commercial city center to enforce it.  Seeing the, “Enter at your own risk” sign and the wrecked conditions of the city, in addition to the harassing tone of the carabinero, Maria desisted from entering the mall and went back to her tent in the outskirts of the city to tend her sick child.

A few days later, about two weeks after the earthquake, Maria went back to the mall and found the city center in a bit better condition.  However, when she got to the clothing store, her boss fired her for, allegedly, “job abandonment,” or for not showing up earlier to work.  The boss told Maria that Maria abandoned her during the looting. “I had to put all my merchandise in my car, by myself, and drive it home to save it from looters.  Perhaps I could not have opened the store [right after the earthquake], but at least Maria could have helped me save my merchandise and business, which provides Maria with a job to sustain her family.” 

Maria was now not only homeless but also unemployed and with a sick child in a disaster zone.

Declaring v. Determining Victory at the Supreme Court

In the fortnight since the Supreme Court announced its decision in Jones v. Harris on March 30, 2010, the parties and the media have loudly declared victory for both sides in the dispute.  In this lawsuit alleging that an investment advisor charged excessive fees for managing investors’ mutual funds, the advisory industry has claimed victory because the Supreme Court generally endorsed a legal test – the Gartenberg standard – that led to almost total success for defendants over the past twenty-five years.  Investors, on the other hand, have pointed out that the Court tweaked the Gartenberg standard to give it a far more plaintiff-friendly twist.  So, how do we tell who actually won?

A traditional approach would be to wait for the case to be remanded, most likely all the way back to the Northern District of Illinois, and then await a subsequent verdict.  Deploying the Supreme Court’s new formula, the lower court will eventually compute a new (or old) winner.  Of course, we can reasonably predict that whichever side loses at trial might argue that a single verdict does not encompass the entirety of a new doctrine – other trials could yield other verdicts.  In this area, as it happens, the Supreme Court also just granted, vacated, and remanded a case with very similar facts to Jones – Gallus v. Ameriprise – which emerged from the Eighth Circuit.  So we have at least a very modest experimental population of two cases to watch on remand.  (And while the Seventh Circuit has been somewhat unsympathetic to plaintiffs in these and related ERISA cases involving mutual funds, the Eighth Circuit has been notably hospitable to them.)

But, again, monitoring subsequent litigation is time-consuming and of little reliability until a decent population of verdicts accumulates over several years.  So how else might we evaluate the impact of the recent Supreme Court ruling in the meantime?  Here are a few suggestions:

1. Measure any variation in the number of lawsuits filed.

   To the extent that plaintiffs – and their attorneys – feel emboldened by the Court’s ruling, we should expect to see an uptick in filings of lawsuits alleging excessive fees in mutual funds.  Of course, attorneys might attempt to manipulate this datum solely in an effort to create the appearance of an investor-friendly interpretation of Jones v. Harris and thereby to increase pressure upon the advisory industry.

2. Measure any variation in the number of lawsuits settled.

   A more reliable measure of relative success would involve actual settlements negotiated between plaintiffs and defendants since the new ruling.  These data, unfortunately, are very hard to find because of standard confidentiality agreements.

3. Conduct an event study.

   Perhaps a more illuminating measurement might come from monitoring the spread between retail and institutional fees in mutual funds.  The Supreme Court’s new modification of the Gartenberg standard highlighted the discrepancy between fees that advisors charge their retail investors (to whom they owe a fiduciary duty) and their institutional clients (to whom they may not) – heretofore, the industry on average has charged retail investors fees twice as high as those they charge institutions.  If the Court’s ruling was a victory for the industry, we should expect to see the spread stay constant or to increase; if, on the other hand, the ruling was a victory for plaintiffs, we should expect to see the spread in fees narrow.

   One might conduct an event study focusing on important moments in the course of this litigation to see whether and when any variation in those fees occurred, including the dates of the Easterbrook opinion for the Seventh Circuit, the Posner dissent from the denial of rehearing en banc, the grant of certiorari, the briefing deadlines at the Supreme Court, the oral argument, and the eventual decision.  Advisors might reasonably have assessed their prospects of victory on any or all of those dates and reacted by adjusting their fees accordingly, though the process of changing compensation might well lag somewhat.

   To the extent advisors are uncomfortable with monitors evaluating the spread in their fees, they might very well attempt to confound comparisons by making their retail and institutional investments less comparable.  Of course, that behavior would in itself be a very reliable indication of whether the Supreme Court gave them a victory or a loss.

The Coming Confirmation Hearings

With Justice Stevens signaling that he is likely to step down at the end of this current Supreme Court Term, speculation about who President Obama might appoint to replace him is legion.  Rather than join in that speculation, however, I want to raise the question of the role of ideology in judging, particularly on the Supreme Court, and the disingenuous way that ideology is discussed – or rather, disavowed – during confirmation hearings.  Chief Justice Roberts’ invocations of “neutral umpires” notwithstanding, judging is not a science.  There is often no “right” answer to a question – especially to the types of questions confronted by the Supreme Court – in the sense that there is no answer that can be arrived at through the use of pure logic.  Such questions might involve the meaning of the Due Process Clause, the scope of the Equal Protection Clause, or the application of a precedent like Brown v. Board of Education to contemporary efforts by school districts to voluntarily integrate.  The key legal texts – the Constitution and Brown itself – do not inherently provide an answer.  A justice must apply some kind of understanding of the broader meaning of those texts.  Doing so is not illegitimately activist.  It is inevitable.  This does not mean that justices should simply impose their policy preferences without regard to legal sources and arguments, but it does mean that the justice’s priors – her beliefs, experiences, and views – may play a role in the analysis of those sources and arguments.

I am hardly the first to point this out.  (Judge Posner’s recent book, How Judges Think, addresses this question in some depth.)  But in light of the (likely) upcoming confirmation hearings, the point bears emphasizing.  What we are likely to see is that whoever Obama nominates will be attacked as too ideological by at least some Republicans. And if the last several confirmation hearings are any guide, the nominee will disavow any role for political judgments in the judicial role.  It is my hope, however, that we will see something else. I believe that it would better serve the country and the Court for a nominee to discuss the way in which such judgments do sometimes come into play, to explain that that such judgments are at times both inevitable and legitimate, and to show that they are often part and parcel of legal analysis.  Perhaps most importantly, I would like to hear a nominee describe how he or she would acknowledge the presence of such political judgments without acting as an ideologue or allowing ideology to trump law.

What we have now is, in my view, the worst of all possible worlds.  There is a reality – often acknowledged during presidential elections – that a president is likely to appoint justices whose views are generally consistent with his own.  And we have the reality – clear to anyone who is paying attention – that the Supreme Court often (although certainly not always) splits along predictable ideological lines.  But during the confirmation process, we have a widespread pretense that judging is a purely neutral intellectual exercise.  I certainly understand how we have come to this point, but I believe that it is bad for our democracy and bad for the Court’s legitimacy.  It may be fruitless to hope for a more candid discussion in today’s hyper-partisan environment, with routine Republican filibusters of even low-level presidential nominees.  But it is nonetheless the discussion that I would like to see.

Professor Warner on Privacy and Information Norms

Professor Richard Warner has posted a new paper on ssrn.  The paper is called Undermined Norms: The Corrosive Effect of Information Processing Technology on Informational Privacy.  Here is the abstract:

Informational privacy is a matter of control; it consists in the ability to control when one’s personal information is collected, how it is used, and to whom it is distributed. The degree of control we once enjoyed has vanished. Advances in information processing technology now give others considerable power to determine when personal information is collected, how it is used, and to it is whom distributed. Privacy advocates sound the alarm in regard to both the governmental and private sectors. I focus exclusively on the later. Relying on the extensive privacy advocate literature, I assume we should try to regain control over private sector information process. The question is how. I reject the claim that we can do so by requiring businesses to obtain consent – or more accurately to go through the motions of obtaining consent – prior to collecting personal information. I contend that adequate informational privacy requires a rich background of informational norms.

Informational norms are social norms that constrain the collection, use, and distribution of personal information. Under ideal conditions, norm-governed exchanges not only implement acceptable tradeoffs between informational privacy and competing goals, they also ensure consumers give free and informed consent to those tradeoffs. The restriction to ideal conditions does not deprive the point of interest; rather, it shows that the interest is normative, not empirical. The ideal conditions are a goal we should strive to approximate in practice. Unfortunately current practice fails to adequately approximate this ideal in significant cases. Lack of norms is one important reason. The rapid advance in information processing technology has outstripped the relatively slow evolution of social norms in a wide range of important cases.

Download the paper here.