Category: Law

Amazon One-Click Patent Struck Down

The US patent office has ruled that enough prior art anticipated the one-click patent to rule a number of the major claims invalid.  Perhaps we should chalk up another win to Eric Maskin!

I’m pleased that the Amazon patent was ruled invalid but insufficient attention to prior art is not the main problem with current patent law.  Patent law needs to change so that patents would be ruled invalid or given much shorter lengths if they do not involve large, sunk costs.

Markets in everything: driver’s license points

It is the latest ruse on the roads of France: drivers are avoiding
disqualification by trading licence points on the internet.  Complete strangers are taking the rap for speeding offences in return for up
to €1,500 (£1,000), and police admit they are powerless to intervene. Even
pensioners who have not driven for many years are getting in on the act.

The market is growing:

French officials were unable to estimate the scale of points fiddling.  Across
the border in Spain, the
online motoring site, estimates the black market in points there is worth
€30 million a month.

One seller explains he does abide by ethical standards:

“I don’t have a bad conscience,” he [the seller] told le Parisien. “I only offer my
services to people with small excesses of speed.  And I always ask to see a
copy of the ticket.  I would never sell my points to a road hog.”

Here is the full explanation.  The pointer is from Kurt Muehmel.

Money can’t buy you love but in Illinois it can compensate

Arthur Friedman asked his wife to have sex with other men.  She said yes and fell in love with the third wheel.  Art then sued the invitee and won $4,802 under Illinois’s alienation of affection doctrine.

Aside from voyeurism the case raises some interesting issues.  Friedman surely does not have a right to his wife’s affection – he can’t sue her if she doesn’t love him – so if another man steals what Friedman does not own how can Friedman have a claim against the other man?  It’s cases like this that push me towards Murray Rothbard’s position that you don’t have a right to other people’s thoughts.  As a result, there can be no just laws against alienation of affection but also since you do not have a right to your reputation (it is in other people’s heads) there can be no just laws against libel.

Thanks to Monique van Hoek for the pointer.

Immigration enforcement ideas

My preferred immigration plan would be to massively increase the number of visas, set a very minimal bar to meet–not a terrorist, not a criminal, not carrying a hideous contagious disease–and then auction off various tranches of visas, classed not by type but by length of stay.  Let the visas be transferrable.  Then let immigrant communities do enforcement for you, as illegal immigrants suddenly threaten to erode the price of their valuable asset: the right to stay in-country.

That is from Jane Galt

The implicit model is that once people have spent money for an asset they value that asset more than they would value their prospective income stream from living in the United States.  Jane postulates a kind of endowment effect for immigrants.  Moving away from family-based immigration also limits potential trustable allies for law-breaking. 

I suspect that auction-based proposals will result in too few legal unskilled immigrants, and also more illegal immigration of the unskilled, but I would not rule out this idea just yet.  I’m still waiting for someone to write down an impossibility theorem for a good immigration policy, noting that much of the domestic demand is for immigrant traits (e.g., cheapness and immediate readiness to work) which are strongly correlated with illegality.  That is some employers want (explicitly or implicitly) to deny some of their workers the benefits of integrating with the U.S. capital stock.  Has anyone analyzed immigration policy in terms of finding optimal price discrimination on the side of a country-sized monopsonistic buyer…?

Defeat the modernity

Sadly the Dutch are turning back:

In cities across the Netherlands,
mayors and town councils are closing down shops where marijuana is
sold, rolled and smoked.  Municipalities are shuttering the brothels
where prostitutes have been allowed to ply their trade legally. 
Parliament is considering a ban on the sale of hallucinogenic "magic
mushrooms."  Orthodox Christian members of parliament have introduced a
bill that would allow civil officials with moral objections to refuse
to perform gay marriages.  And Dutch authorities are trying to curtail
the activities of an abortion rights group that assists women in
neighboring countries where abortions are illegal.

The very interesting article ascribes these tendencies to growing unease about globalization and immigration.  Here is another shift of opinion:

"In the past, we looked at legal prostitution as a women’s liberation
issue; now it’s looked at as exploitation of women and should be
stopped," said de Wolf, sitting in the offices of the medical complex
where he works as an HIV-AIDS researcher.

This article can be read as illustrating many different points of view.  I’ll start with two points.  First, people [voters] need to feel they are in control, even if they indulge this preference irrationally.  Second, Europe will sooner become like the United States than vice versa.

Can this work? High state-level fines for driving offenses

Say you are driving 78 mph on the Capital Beltway and a state trooper
tickets you for "reckless driving — speeding 20 mph over."  You will
probably be fined $200 by the judge.  But then you will receive a new,
additional $1,050 fine from the Old Dominion, payable in three
convenient installments.  So convenient that you must pay the first one
immediately, at the courthouse.

Coming to Virginia, July 1.  Imagine all the people braking as they cross the Potomac coming from Maryland.  The argument against, of course, is simply that traffic cannot work at 55 mph and this puts too much discretion into the hands of police.  Or will some poor offenders simply flee and set off a police chase?  (If you can’t pay the fine you lose your license.)  The goal of the fines is to fund state-level public works and perhaps the precedent is not ideal either.

Addendum: Larry Ribstien piles on.

How Should the FDA Incentivize?

The FDA often wants manufacturers to provide additional studies such as for pediatric uses or for testing of off-label uses of already approved drugs.  How should the FDA incentivize these studies?  Long-time reader Steve (who has good reason to know and thus shall otherwise remain anonymous) writes:

I was reading an article about pediatric drug testing and the BPCA, and I had an epiphany–the people at the 
table don’t have the incentives necessary to solve the problem.

…possible solutions to the problem of limited pediatric testing appear to boil down to: 1) Modify the reward (primarily through exclusivity); 2) 
Give out grants; and 3) Force studies through a government mandate. 
These solutions reflect the interests of the three groups sitting at 
the bargaining table, i.e., 1) Big pharma, 2) Academics, and 3) 
Bureaucrats. What is totally missing is the idea that incentives can be created on both the risk and reward side of the equation. … For example, if the FDA fast-
tracked NDAs with pediatric data, and guaranteed a decision in 90 days, they could, with minimal cost, cause a major shift in incentives. 

    …Any thoughts on how the situation can be improved?

The FDA significantly raises the costs of creating new drugs – there are some benefits in better safety and efficacy but I think the current system results in too much drug lag and drug loss.  I would cut back on FDA regulation considerably but I am not against more government-financed studies of safety and efficacy.  Once a drug is on the market and especially when it is off-patent, knowledge about the drug is a public good and thus often underprovided.  I would thus reduce the FDA’s control over drug choice but increase the budget for drug information e.g. through NIH financed studies like the Women’s Health Initiative which shockingly showed that then widely used homorone replacement therapy increased not decreased coronary disease.


Libertarian paternalism

There is a new Econoblog, Mario Rizzo vs. Richard Thaler.  Here is Mario in closing:

Richard wants to use the word "libertarian" to differentiate his
paternalism from the traditional variants.  Yet he uses the word in a
fuzzy way.  He wants to define libertarian along a continuous variable
— the cost of exercising the exit option.  However, libertarianism, as
every libertarian understands it, uses a bright-line test — who
imposes the cost?

The phrase "libertarian paternalism" is misleading.  It isn’t libertarian, but I don’t mean this point in the usual "rage against governmental coercion" sort of way.  A more consistent Thaler would simply emphasize that both paternalism and coercion are often ill-defined concepts or perhaps matters of degree.  Thaler wants to shock us by rejecting non-paternalism but when pressed he denies the underlying distinctions behind his big claim in the first place.  In other words, the whole debate should be focused on specific proposals, there is less to the philosophy than meets the eye. 

Protection Racket

Who is protecting borrowers from "predatory lending"?  The trial lawyers!  Feel better?  I didn’t think so.  Ted Frank, writing in the Wall Street Journal has the story.  Yours truly makes an appearance.

The trial lawyers’ entrepreneurial solution is to go
after the deep pocket. And so we have lawsuits alleging that the
investment banks providing financing to the mortgage banks are "aiding
and abetting" the alleged fraud through securitization.

What would be the upshot? If an investment bank is
potentially liable for every conversation and every phone call involved
in the underlying mortgages, the costs of due diligence becomes
prohibitive, far outstripping the fees it can bring in for packaging
the loans…The securitization
simply will not take place….

To make matters worse, the House Financial Services Committee held
hearings last week on writing this judicial mistake — and more — into
federal statutory law. Committee Chair Barney Frank (D., Mass.), wants
to hold not only the packagers of mortgages liable but also the purchasers in
the secondary market. "Anybody, including the original borrower, can
make a claim, and the liability would go up the chain," Mr. Frank told
the press….

It is not speculation to say that the results will be disastrous if
such a bill becomes law….the 2002 Georgia Fair Lending Act created unlimited liability
to purchasers of mortgages for any legal violations by the loan
originator…all three of the major credit ratings agencies (S&P, Moody’s, and
Fitch) announced they could not rate any securitization containing any
loans subject to Georgia law for fear that the entire security would be
tainted by unquantifiable liability. Liquidity for the state’s mortgage
market disappeared and the Georgia legislature quickly repealed the
worst parts of the law to restore access to credit.