issue: Judiciary

Unleashing Innovation and Growth: A Progressive Alternative to Populism

Posted on by The Progressive Policy Institute

As Americans choose a new president in 2016, populist anger dominates the campaign. To hear Donald Trump or Senator Bernie Sanders tell it, America is either a global doormat or a sham democracy controlled by the “one percent.” These dark narratives are caricatures, but they do stem from a real dilemma: America is stuck in a slow- growth trap that holds down wages and living standards. How to break this long spell of economic stagnation is the central question in this election.

Today’s populists peddle nostalgia for our country’s past industrial glory but offer few practical ideas for building a new American prosperity in today’s global knowledge economy. Progressives owe U.S. voters a hopeful alternative to populist outrage and the false panaceas of nativism, protectionism, and democratic socialism. What America needs is a forward-looking plan to unleash innovation, stimulate productive investment, groom the world’s most talented workers, and put our economy back on a high-growth path. It’s time to banish fear and pessimism and trust instead in the liberal and individualist values and enterprising culture that have always made America great.

Download Unleashing Innovation and Growth: A Progressive Alternative to Populism

PPI WEEKLY WRAP-UP: PPI in Europe, State AGs Abusing Power, & U.S. App Economy Capitol Hill Briefing

Posted on by The Progressive Policy Institute

PPI IN EUROPE: PPI Chief Economic Strategist Dr. Michael Mandel was in Brussels this week, where he was invited to speak at an event on small and medium-sized enterprises (SMEs) and the Digital Single Market. The event was sponsored by the Swedish, Finnish, Irish and Estonian Permanent Missions to the European Union. While there, he and PPI Executive Director Lindsay Lewis held several meetings with the European Commission.

STATE AGs ABUSING POWER: In an op-ed for RealClearPolicy, Phil Goldberg, Director of the Civil Justice Center at PPI, details the evolution of the role of state attorney general over the last 20 years from mere law enforcer to general policymaker:

“Today, both Democratic and Republican AGs use litigation and the powers of the office to regulate. But with this new responsibility comes new opportunities to breach the public trust.

“A particularly alarming development is AGs’ increasing use of private law firms to sue companies under no-bid contracts where the firms get percentages of the settlements or awards. These arrangements were born out of tobacco litigation in the 1990s and have spread to all sorts of actions, leading to several scandals over the connections between AGs and the firms they hire.

“An aggressive way to address the politicization of the state AG is to have the AG selected by the governor, rather than through a popular election where he or she must raise campaign funds. The states that select their chief law enforcement officers this way have seen fewer scandals. For now, though, states should adopt legislation such as [the Transparency in Private Attorney Contract Act] to ensure that law-enforcement actions brought on behalf of the state put the public good above private profits.”

U.S. APP ECONOMY CAPITOL HILL BRIEFING: Please join PPI and TechNet next Thursdayfor a Capitol Hill breakfast briefing on “App Economy Jobs in the United States.” The event will feature remarks by Congressman Mike Bishop (R-MI), followed by a panel discussion featuring:

  • Dr. Michael Mandel, Chief Economic Strategist, PPI
  • Terry Howerton, CEO, TechNexus Venture Collaborative
  • Ron Klain, Executive Vice President & General Counsel, Revolution, LLC
  • Linda Moore, President & CEO, TechNet
  • Brendan Peter, Vice President, Global Government Relations, CA Technologies
  • Karl Rectanus, CEO, Lea(R)n
Thursday, March 3, 2016
10AM to 11:30AM
2226 Rayburn House Office Building
 
RSVP to rsvp@technet.org

Real Clear Policy: When State AGs Abuse Their Power

Posted on by The Progressive Policy Institute

In recent years, several states have seen their attorneys general mired in some kind of scandal. Pennsylvania is the most recent example. This trend, while disturbing, is not surprising: The role of the state attorney general has evolved over the past 20 years from mere law enforcer to general policymaker. Today, both Democratic and Republican AGs use litigation and the powers of the office to regulate. But with this new responsibility comes new opportunities to breach the public trust.

A particularly alarming development is AGs’ increasing use of private law firms to sue companies under no-bid contracts where the firms get percentages of the settlements or awards. These arrangements were born out of tobacco litigation in the 1990s and have spread to all sorts of actions, leading to several scandals over the connections between AGs and the firms they hire.

A key reform states can enact is the Transparency in Private Attorney Contract (TiPAC) Act. More than a third of the states, often with broad bipartisan support, have enacted TiPAC or similar bills. These laws do not outright ban contracts with private law firms, but they subject the contracts to commonsense regulations. For example, they mandate public bidding, require the posting of contracts on websites, limit attorney’s fees, demand that firms keep appropriate records, and mandate complete control of the litigation by the government.

To continue reading the entire article, visit Real Clear Policy.

PRESS RELEASE — PPI President: Law Enforcement Has Not Met Burden of Proof on Encryption

Posted on by The Progressive Policy Institute

WASHINGTON—PPI President Will Marshall today released the following statement after a U.S. federal magistrate ordered Apple to help the Federal Bureau of Investigation unlock the encrypted iPhone of one of the San Bernardino shooters:

“The Progressive Policy Institute has long advocated a forceful U.S. response to the threat of jihadist terrorism. With the rise and spread of the so-called Islamic State, that threat has grown more acute than ever. That’s why we are usually inclined to give U.S. intelligence, military and law enforcement agencies the benefit of the doubt when they seek new tools to keep us safe.

“However, a federal court’s demand that Apple weaken encryption for its iPhones gives us pause. For many Americans, it may seem intuitively obvious that law enforcement should be able to ‘unlock’ a dead terrorists’ cellphone. But weaker encryption wouldn’t just apply to terrorists and criminals; it would jeopardize the privacy of any American with a smart phone.

“What’s more, other governments would doubtless follow Washington’s lead in demanding that phone makers develop software to help them get around encryption. We don’t want to endanger human rights and democracy activists around the world by giving dictators and authoritarian regimes new tools for surveillance and repression.

“We recognize that there is always a trade-off between privacy and security. To justify exposing the private communications of citizens to government scrutiny, U.S. security agencies would have to offer compelling evidence that gathering data from smart phones is essential to defusing the terrorist threat.  In our view, they have yet to meet this burden of proof.”

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Student Rights, Judicial Precedent and Why 2016 Could See a Profound Shift in Education Law

Posted on by The Progressive Policy Institute

A feature for the Center for Civil Justice.

Can America’s courts deliver better schools for disadvantaged students?

Some students and teachers seem to think so. In Massachusetts, five student plaintiffs who were unable to secure seats in charter school lotteries intend to file a lawsuit challenging the state’s cap on charter schools. In California, veteran teacher Rebecca Friedrichs objected to her annual union dues being used to protect ineffective colleagues; the Supreme Court is hearing arguments in Ms. Friedrichs’ case this week. If Ms. Friedrichs prevails, teachers’ unions will be compelled to better represent the many teachers who want significant changes to the profession.

Do these disparate cases amount to a trend? Some judicial scholars scoff at the idea. After all, judges preserve their authority by deferring to precedent, not by transforming bureaucracies. Education decisions tend to side with school systems, not individual students or teachers. Bureaucratic lawsuits against reform continue to be filed in numerous states.

The optimists, however, may finally be right that the judicial tide is turning. Judges have dealt setbacks to union-backed lawsuits against school reform in Florida, Louisiana, and New York City. Pro-student lawsuits have won surprising victories; for example, nine California students recently won a trial court ruling that public schools unconstitutionally denied them a decent education by assigning them ineffective teachers. After nearly 150 years of anti-student rulings, students have a real shot at legal relief that will not merely defend a few individuals, but improve equity, access and choice to the entire public education system.
Continue reading “Student Rights, Judicial Precedent and Why 2016 Could See a Profound Shift in Education Law” →

Showdown in Alabama: Litigators vs. Innovators

Posted on by The Progressive Policy Institute

Every once in a while, personal injury lawyers come up with new ways to sue that can be real head scratchers. Courts usually weed out these theories, but they get through on occasion. This happened last year in Alabama, where the Alabama Supreme Court held that a company can be subject to liability, not for its own products, but for products entirely made and sold by its competitors. This theory for liability has been dubbed “innovator liability” because it is used primarily against companies that invent new products even though the plaintiffs in the cases are alleging that they have been harmed only by similar or “knock-off” products of other companies.

In May, the Alabama Legislature and Governor, in a swift bipartisan manner, overturned their state Supreme Court’s innovator liability ruling. Alabama’s policymakers appreciated that it makes no legal or economic sense for innovators to own the liability for an entire product line. In addition to being legally unprincipled, this liability theory punishes innovation, which could have devastating long-term impacts on consumers and businesses alike. The downsides of such liability are too great.

Download “2015.09-Goldberg_Showdown-in-Alabama-Litigators-vs-Innovators”

The Hill: No injury. No lawsuit. No service.

Posted on by The Progressive Policy Institute

The Supreme Court this month received the first round of briefing in a case that could cure one of the newest, most significant abuses in our civil justice system: massive class actions that lawyers file on behalf of people who are not injured. In these cases, the class action plaintiffs’ lawyers use novel legal theories and damage models to get their classes certified and then count on companies to settle the claims and pay them attorney fees – sometimes for more than the class members will end up collecting from the settlement.

The whole point of civil litigation is to make people whole for their losses. Any person who is not injured and has no loss to be corrected should have his or her claim dismissed. The person has no substantive legal basis for the claim, and Article III of the U.S. Constitution gives federal courts jurisdiction only over cases where people allege actual injury traceable to the defendant. But, what happens when uninjured people are nonetheless swept into federal class actions?

This is the issue before the Supreme Court in Tyson Foods, Inc. v. Bouaphakeo. The plaintiffs’ counsel used a controversial damages model to turn discrete wage-and-hour claims for some Tyson employees into a much larger class action. They created an “average employee,” claiming that this “average employee” would be due overtime pay if the time taken to put on and take off protective gear was included in the work week. They then sought to have every class member – some 3,300 people – paid the same overtime as the “average employee,” regardless of how much the real employees actually worked, spent putting on and taking off gear, or were paid.

The problem is that hundreds of class members had no injury at all. It was clear under the plaintiffs’ own statistical sampling model that these employees were fully paid, even accounting for the time to put on and take off gear. Yet, the district court certified the case as a class action with these uninjured people. At trial, the jury found that the modeling majorly overstated the damages and about half of the class had no or only a de minimis injury. Yet, the court allowed all class members, including the uninjured, to get the same pro rata share of the award.

Continue reading at The Hill.

PPI Returns from 2015 Digital Trade Mission to Europe

Posted on by The Progressive Policy Institute

Dear Friend,

We’re just back from Europe, where last week PPI led a bipartisan delegation of Congressional staff on a four-day swing through three capitals: London, Brussels and Berlin. Our goal was twofold: 1) to learn more about the European Union’s ambitious plan to create a “digital single market” and, 2) to press PPI’s case for moving digital trade from the periphery to the center of the transatlantic agenda.

Why is this so important? Consider these facts:

  • The free movement of data raises the productivity of businesses and reduces trade costs, creating jobs and growth on both sides of the Atlantic.
  • US/EU cross-border data flows are by far the highest in the world, 50 percent more than between the United States and Asia.
  • America runs a large trade surplus in services, of which 61 percent are delivered digitally.
  • The Internet is becoming a powerful export platform for small enterprises, connecting them to global customers at low cost.

As PPI has documented in a series of groundbreaking reports, digital innovation and commerce are increasingly driving economic investment and growth in America and Europe. We believe the transatlantic partners share a common interest in ensuring that digital trade enjoys the same legal protections as trade in physical goods and services. Instead of joining forces to extend free trade principles to digital commerce, however, Europe and America are embroiled in a raft of disputes that threaten to erect barriers to cross-border data flows.   

Such disputes, for example, involve calls for data localization, for national or European clouds, for taxing data flows and for imposing stringent privacy or data protection rules on businesses. Right now, the European Court of Justice is considering a challenge to the “safe harbor” rules that have allowed US tech companies to operate in Europe. In addition, new tensions have arisen around issues of copyright protection, “platform competition,” tax avoidance and many core provisions of the proposed Transatlantic Trade and Investment Partnership (T-TIP).

As you probably know, PPI has long been a catalyst for transatlantic dialogue, going back to the Clinton-Blair “Third Way” conversations we helped to launch in the 1990s. Over the last four years, our work in Europe  has focused on reviving transatlantic economic cooperation, with a particular emphasis on the rise of data-driven innovation and growth. At a time when authoritarian countries seek to limit the free flow of information, we think it’s crucial that the Western democracies work together to prevent the balkanization of the Internet and defend free digital trade.

That’s why we organized this second “Digital Trade Study Group”—a bipartisan group of 12 senior House and Senate staffers, whose bosses have oversight of issues related to trade, digital commerce, copyright, intellectual property, privacy, cyber security, and communications and technology. (We took the first such group to Europe in April 2014). Last week’s trip featured a productive round of high-level talks with prominent political, business, policy and media leaders.

Here are the highlights: 

  • In London, our traveling party met with Daniel Korski, Special Advisor to Prime Minister David Cameron, and Guy Levin, formerly special advisor to Chancellor of the Exchequer George Osborne, to discuss UK technology policy. As Michael Mandel, PPI’s chief economic strategist, has documented, London has emerged as one of the world’s premier centers for tech entrepreneurship.
  • Vanessa Houlder, who covers economics for the Financial Times, briefed our group on the Cameron government’s controversial new “diverted profits tax.” Aimed ostensibly at discouraging tax avoidance, it slaps a 25 percent tax on the local profits of U.S. and other foreign companies operating in the UK, and has been dubbed the “Google tax” by detractors. 
  • Also in London, PPI released a new policy brief by Mandel, Taxing Intangibles: The Law of Unintended Consequences. It notes that digitized information differs from physical goods and services in that it can be duplicated at negligible cost and used by different consumers at once. As such, Mandel argues, it makes little sense to tax this intangible knowledge as one would a car or the provision of a unique service. In fact, new proposals for taxing intangibles will undermine global growth and thus be self-defeating, the report argues.
  • In Brussels, two officials of the European Commission’s DG Connect unit, Eric Peters, Deputy Head of the Single Market Unit and Tamas Kenessey, Legal Officer, briefed the group. The Digital Single Market, they stressed, is the EU’s top priority. It would enable tech companies that start in one of the Union’s 28 countries to grow to continental scale, and speed the onset of what we call the “Internet of Things.”
  • Over dinner, the Digital Trade Study Group heard from Ken Propp, Legal Counsel with the US Mission to the EU, and Paul Hofheinz, President of the Lisbon Council, PPI’s think tank partner in Brussels. The discussion centered on the headwinds T-TIP has encountered and political differences within the EU on digital policy.
  • Then it was on to Berlin, for lunch with two leading Green Party officials, Konstantin von Notz, a Member of the German Bundestag, and Dieter Janacek, the party’s spokesman on economic issues. The Greens are strong backers of Europe’s Data Protection Regulation, which our speakers noted reflects Germany’s unhappy experience with secret police agencies of the past. Joining us for dinner was Torsten Riecke, an international correspondent for Handelsblatt, who gave our group an insider’s perspective of German domestic politics, as well as its increasingly central role in European politics. The next morning, we drilled deeper into German concerns about data protection and privacy with Marcus Loning of the Stiftung Neue Verantwortung and former Free Democratic Party Member of the German Bundestag.
  • Our group received an insightful briefing on Industrie 4.0—Germany’s equivalent of the “Internet of Things.” As explained by Boris Petschulat, Deputy Director General at the German Federal Ministry for Economic Affairs & Energy, Industrie 4.0 seeks to digitize production without disrupting its finely honed industrial export machine. 
  • We paid a visit to the Federal Association of German Newspaper and Magazine Publishers, which has been battling tech companies, especially Google, over copyrightand content issues. A lively debate ensued with Managing Director Christoph Fiedler and Christoph Keese, Vice President of the Axel Springer publishing empire. For more on this important subject, check out another just-released policy brief by Mandel, Copyright in the Digital Age: Key Economic Issues.
  • Thomas Jarzombek, a member of the German Bundestag, who sits on the committee responsible for the digital agenda, elaborated on the German government’s efforts to build a digital infrastructure and nurture a more entrepreneurial, start-up culture.
  • We finished our mission at the US Embassy in Berlin, where Ambassador John Emerson, a longtime PPI friend, offered a wide-ranging and insightful perspective on US-German relations.

PPI’s Digital Trade Study Group excursions to Europe serve two important purposes. First, they enable key Congressional staff from both parties to get a better understanding of European views on innovation policy, T-TIP, digital trade, privacy, copyright and other interests of mutual concern and transmit that knowledge to Members of Congress.  Second, they underscore to our European friends the importance Congress attaches to transatlantic commerce in general and to data trade specifically.

This year’s mission advanced both of these goals. And it added important new dimensions to the extensive network of European political leaders, industry professionals, and policy analysts that PPI has built over the years. As always, I welcome any feedback you may have. 

Sincerely,

Will Marshall
PPI President

Reclaiming the most powerful tool of reform: Constitutional amendments

Posted on by The Progressive Policy Institute

At a time when observers across the political spectrum agree that the machinery of American government is broken, the single most powerful mechanism for repair appears to be effectively off the table: the passage of new amendments to the U.S. Constitution. Yet this might be the only solution that could bring about sustained change and reform.

Indeed, the amending process could be used to authoritatively address a range of persistent institutional challenges. Amendments could clarify ambiguities in presidential war powers and the use of recess appointments. They could reform or abolish the electoral college, allow naturalized citizens to run for president, enhance voting rights, and create a framework for campaign finance reform. They might enact congressional term limits, or curb lifetime tenure for Supreme Court justices at a time of ever-lengthening lifespans. The amending process could also be used to address thorny subjects such as the scope of social and economic rights and the nature of separation of church and state.

Of course, the immediate objection to the idea of amending the Constitution is that it is simply too hard to achieve in times of political division. And it’s true that the Framers did insulate their handiwork from quick or easy change. The most commonly used formula for amendment requires the support of two-thirds of each House of Congress and then ratification by three-quarters of the states. This high hurdle demands consensus that is both broad and deep, including bipartisan supermajorities in both Houses as well as the agreement at least 38 states. Continue reading “Reclaiming the most powerful tool of reform: Constitutional amendments” →

Senate’s Failure to Move Patent Reform Stifles Innovation

Posted on by The Progressive Policy Institute

In this year of partisan gridlock, there have been precious few issues that enjoyed broad bi-partisan support. Patent troll reform has been one of them – until now. With word out today that the Senate has set aside their effort on patent troll reform, gridlock has succumbed another victim. This time, the victims are businesses across the country who are being extorted by patent trolls.

As the President has explained in calling for reform, patent trolling is a litigation abuse play. “Trolls” are shell companies that buy dormant patents, wait for others to independently develop new technology, and then accuse them of infringing on their patents. They strategically price settlement demands below the cost of defending the claim, knowing many companies will pay them to go away, rather than defend the rights to their own inventions. The Progressive Policy Institute published a paper titled, Stumping Patent Trolls on the Bridge to Innovation in October 2013 making the case for why these reforms are needed.

When the President called for targeted litigation reforms and the House obliged with a bi-partisan bill that passed 325 to 91 at the end of last year, hopes were high that the Senate could get something done. We commend Senators on the Judiciary Committee and their staffs for spending so much time and energy on this issue. We urge them not to give up or be distracted by issues irrelevant to patent litigation. The stakes are too high for too many people.

Marketplace Business: Ghetty Images and IP Rights

Posted on by The Progressive Policy Institute

Michael Mandel, PPI’s Chief Economist, was interviewed by Dan Weissmann of Marketplace Business to help unwrap Ghetty’s decision to offer 35 million of its protected images to the public for free. Mandel explained why the status quo wasn’t working:

If you have content that gets used by somebody else, and it gets used for free, then your only option is to sue them, and that’s a really terrible option.”

You can listen to the interview on Marketplace’s website here.

Congress Should Heed the President’s Call and Pass Patent Troll Reform

Posted on by The Progressive Policy Institute

In his State of the Union address, President Obama promised to go it alone on many issues, but there is one issue where he will find Congress to be a willing partner: ending patent trolling.

Over the past year, Democrats and Republicans have quickly coming together to try to solve this growing area of litigation abuse that has been vexing America’s high-tech economy. In these lawsuits, shell businesses called Patent Assertion Entities (PAEs) – or derogatorily “patent trolls” – game the patent litigation system. They purchase dormant patents, wait for others to independently develop comparable technology, and then file patent infringement suits which is a strict liability tort. As the President explained last year, PAEs “don’t actually produce anything themselves.” They ‘see if they can extort some money’ by claiming they own technology others developed.

The President has made good on his promise to step up his efforts to stop patent litigation abuse. In his State of the Union address, he made a short, but important call for reform, saying “let’s pass a patent reform bill that allows our businesses to stay focused on innovation, not costly and needless litigation.”

At the end of last year, the House passed Judiciary Chairman Goodlatte’s bill to reform the patent and litigation systems by a 325 to 91 vote – a rare, large bipartisan margin. Around the same time, Senate Judiciary Chairman Leahy introduced his own bill with some, but not all of these measures. It is time for everyone to come together and get something done.

The American people want their government to work again, and patent troll reform has a strong chance to succeed even in today’s bitter political climate. Democrats and Republicans both understand that patent trolling is pure litigation prospecting. It does not serve justice or inventors. Leaders of both parties should heed the President’s renewed call to pass patent troll reforms that support innovation, both as an American ideal and as a way to create jobs for the American people.

PPI Economic Experts Weigh In On ‘Net Neutrality’ Court Decision

Posted on by The Progressive Policy Institute

WASHINGTON, D.C. — Progressive Policy Institute senior fellows Hal J. Singer and Ev Ehrlich today released the following statements after a U.S. Court of Appeals struck down rules by the Federal Communications Commission (FCC) prohibiting Internet service providers from restricting user access to legal Web content:

Hal J. Singer is a senior fellow at PPI:

In its decision to vacate the anti-discrimination and anti-blocking rules of the Open Internet Order, the D.C. Circuit correctly recognized that the FCC used a heavy-handed, ‘common carrier’ approach to regulating Internet access providers in their dealings with websites—despite the Commission’s classification of Internet access providers in a manner that exempts them from treatment as common carriers.

“By effectively proscribing pay-for-priority deals and thereby compelling Internet service providers to provide enhanced services to websites at no cost, the FCC veered backwards into a 20th century, common-carrier approach to regulating a 21st century service.

“The Court appears to have left open alternative regulatory approaches that would permit ‘individualized bargaining’ between Internet access providers and websites while protecting against discrimination in favor of affiliated or preferred websites, including case-by-case adjudication of disputes if and when they arise.

“Hopefully the Commission can now focus its attention on designing such rules in a way that is more consistent with its proper, light-handed approach to all things Internet.”

Ev Ehrlich is a senior fellow at the Progressive Policy Institute and president of ESC Company, a Washington, DC based economics consulting firm:

Today’s Court decision is not a clear-cut victory for any one side in the Internet policy debate, but it is a victory for that debate.

“On one hand, Verizon, which sued the FCC, challenging their authority to regulate them, got what they wanted. The Court agreed that the 1996 Telecommunications Act protects them from being regulated as a common carrier, meaning that the FCC can’t tell them how to manage their networks. That’s a big win—the decision essentially means that if the FCC lacks the authority to mandate specific network practices such as ‘net neutrality.’

“But on the other hand, the Court agreed that the FCC, under its mandate to promote and extend the Internet (which is found in the same 1996 law), can do just about anything that the law doesn’t explicitly prohibit. So the broad authority the Court found in the FCC’s mandate may limit the FCC from taking a few specific actions (like imposing net neutrality), but doesn’t take away their seat at the table.

“What happens next?  Presuming this decision stands, one possibility is that the FCC decides to wade into the crux of the matter and classify the broadband Internet as really just another ‘telecommunications service.’ That is, the 1996 law divided communications into a heavily-regulated ‘telecommunications’ component based on the legacy phone system, and an essentially unregulated ‘information services’ component, within which the Internet burgeoned.  The FCC, urged on by neutrality advocates, could announce that the Internet was really ‘just another phone service’ and impose new regulations on it. But this risks being laughed out of court using the Frank Zappa test, as enunciated in his classic You Are What You Is—a cow don’t make ham.

“There are plenty of real issues surrounding the Internet—such as extending it to the unserved, protecting our privacy, and using it to improve our schools, health care system, local governments.  If the Court gets us past a sterile, theoretical argument over ‘neutrality’ and on to this more pressing agenda, it will have turned out to be a very positive one, and a victory for the debate itself.“

– END –

Stumping Patent Trolls Is The Path To Innovation

Posted on by The Progressive Policy Institute

At a time when gridlock in Washington has been at an all-time high, there is one high-profile issue where Democrats and Republicans are quickly coming together: defeating “patent trolling,” which is a growing area of litigation abuse vexing America’s high-tech economy. In these lawsuits, shell businesses called Patent Assertion Entities (PAEs) game the patent litigation system. They purchase dormant patents, wait for others to independently develop comparable technology, and assert patent infringement suits which is a strict liability tort. As the President explained earlier this year, PAEs “don’t actually produce anything themselves.” They “see if they can extort some money” by claiming they own technology that others developed.

The software, consumer electronics, retail and other companies on the receiving end of these lawsuits have nicknamed many PAEs “patent trolls.” They are reminiscent of the mythical trolls that hid under bridges they did not build, but required people to pay them a toll to cross. Patent trolling is highly lucrative. An oft-cited economic study pegged the impact of PAEs in terms of “lost wealth” at $83 billion per year, with legal costs alone amounting in 2011 to $29 billion, up from $7 billion in 2005.

The recent success in patent trolling is due to what I call the “Three P’s of Patent Trolling”: (1) “Plenty of Opportunity” created by the explosion of new, complex and overlapping patented technologies in the past two decades; (2) growing “Patent Uncertainty” over the scope, strength and validity of many new patents, meaning that many inventors cannot know if their technology infringes on someone else’s patent until the dispute is resolved in litigation; and (3) the “Plaintiffs’ Litigation Advantage” that allows PAEs to manipulate the costs of litigation, which are high and disproportionately borne by defendants.

Continue reading at RealClearMarkets.

Stumping Patent Trolls On The Bridge To Innovation

Posted on by The Progressive Policy Institute

President Obama brought much needed attention this June to “patent trolling,” a growing area of litigation abuse vexing America’s high-tech industries. In these lawsuits, shell businesses called Patent Assertion Entities (PAEs) or Non-Practicing Entities (NPEs)—some of which have been nicknamed “patent trolls”—game the patent and litigation systems. They purchase dormant patents, wait for others to independently develop comparable technology, and assert patent infringement suits. As the President explained, PAEs “don’t actually produce anything themselves.” Their quest is to “see if they can extort some money” by claiming they own the technology upon which the other companies’ products are built.

An attorney who used to defend these claims, Peter Detkin, is generally credited with popularizing the “patent troll” moniker. For software, consumer electronics, retail and the many other companies on the receiving end of these lawsuits, PAEs are reminiscent of the mythical trolls that hide under bridges they did not build, but nevertheless require people to pay them a toll to cross. Patent trolling, it turns out, is a better path to the holy grail than hiding under bridges. An oft-cited economic study pegged the overall impact of PAEs in terms of “lost wealth” at $83 billion per year, with legal costs alone amounting in 2011 to $29 billion, up from $7 billion in 2005. At least fifteen PAEs are now publicly traded companies.

This policy brief seeks to address three questions: what caused this recent and rapid rise in PAE litigation, what can be done to stop it, and what is the role for progressives? First, it identifies the confluence of factors that have come together in the past two decades to create the patent equivalent of a 100-year flood, focusing mostly on the explosion of new, widely used technologies, increasing ambiguity in the boundaries of today’s patents, and a litigation system incentivizing “ransom” settlements for even questionable infringement claims.

The brief then examines the adverse impact PAE litigation is having on the development and use of innovation, as well as on traditional patent cases brought by inventors the patent system was created to protect. It discusses the rich history of progressives in leading efforts to stop litigation prospecting, concluding that progressives should be at the forefront of this reform too. It then explores specific proposals the President, Senators Schumer and Leahy, and others have offered to safeguard the patent system from trolling abuse.

Download the memo.

SCOTUS on Voting Rights: It had to happen sometime

Posted on by The Progressive Policy Institute

Many liberals are outraged over this week’s Supreme Court decision striking down parts of the Voting Rights Act. They’re accusing the Court’s conservative majority of dissing Martin Luther King, who 50 years ago this summer led the epochal March on Washington; burying the Great Society’s noble quest for racial justice; and, resurrecting the noxious old doctrine of “states’ rights.”

Of course, it’s galling to hear conservatives—who didn’t object much to the systematic violation of black citizens’ Constitutional rights in the bad old days—extol the ruling as a victory for “Constitutionalism” over federal meddling. And Republicans’ undiminished enthusiasm for “Voter ID” and other blatant voter suppression ploys shows that the battle to guarantee full and equal access to the ballot is far from over.

The ruling also makes a mockery of conservatives’ professed reverence for “judicial restraint.” In striking down Section 4 of the Voting Rights Act, the Roberts majority showed exactly zero deference to Congress, which in 2006 renewed the law for another quarter century by a 98-0 vote in the Senate and a 390-33 vote in the House.

Nonetheless, I confess to being torn by the ruling and finding the left’s indignation somewhat hyberbolic. Having grown up in the Jim Crow South, I know that the states covered by the 1965 Act richly deserved to have Washington supervise their voting procedures. Otherwise, they would have continued to use every scurvy trick in the book to prevent black citizens from exercising their right to vote. Continue reading “SCOTUS on Voting Rights: It had to happen sometime” →