29 September 2004

Consistency, Eh?

One of the many, many problems with the mainstream economists who opine on the "costs" and "responsibilites" imposed by the legal system is that they seldom—if ever—consider the noneconomic values and impediments built into the system. That's not to say that economics is not a useful tool in the policymaker's toolbox—just that it's not the only one.

One good example of this appears under the surface of a books review in the NYT. The PTO is far from a perfect entity. The same goes for the US Court of Appeals for the Federal Circuit. They're a helluva lot better than the alternatives proposed, though. I have not read the book, so perhaps the following problems reflect the reviewer's misunderstandings (although, having read a couple of articles by one of the book's authors, I suspect that the reviewer's summary is pretty accurate).

The most obvious problem is that these economists decry the increase in jury trials on patent questions. Sure, there is some attractiveness to the proposition that economic efficiency would best be served by having disputed facts tried before "experts." There's at least one tiny little problem, though: That would be unconstitutional. Under the Seventh Amendment, the right to a "jury trial" cannot be denied if there is more than $10 at stake. The only argument, then, is whether the Federal Circuit (and Supreme Court) are accurately characterizing specific kinds of issues as "factual" or "legal" in nature; and, although I would quibble at the edges, on the whole they've done a pretty accurate job as to patents. Further, there's an alternative to the "direct" jury trial, or at least to the full-blown jury trial, that the parties can choose to engage in: Requesting appointment of a special master to thin out the factual dispute(s) in a given matter. It is actually extraordinarily rare for patent litigants to make such a request.

Then, too, there's the question of "what's your superior alternative?" that is the downfall of so much economically based analysis. The problem here is that in a procedural sense, the "alternatives" that appear to be proposed in the book in question are both subject to evasion and fail to meet the actual problem. The problem is far less that patent examiners don't have enough time to spend on applications than it is that even if they did, they don't have the resources and expertise for that time to make much of a difference. If one throws a mass of technical information on, say, the replication of long-chain bioorganic compounds through use of a closed-cycle enzymatically directed process at someone who does not have substantial expertise in in vitro chemical synthesis, the best that can be hoped for is that the "most persuasive" material will also prove to be the most accurate and relevant—and given the standard of writing in the scientific community, that's not going to happen all that often.

Finally, the review implies that the book ignores nontechnical patents as a significant issue. I refer, of course, to the notorious "business method" patent. From what I have seen, the most-egregious misconduct surrounding and misuse of the patent system comes outside the laboratory and in the "business method." That's not to say that there are no "good" business-method patents, or "bad" technological patents—it's an anecdotal view of proportions. A simple statutory change could fix this one, instead of attacking the courts and administrative agencies as if the problem is the process, not the substance.

Lefthandedly along the same line—the neglect of noneconomic values in economic analysis—one comes to the ADA. Professor Ribstein (whose knee is hopefully healing quickly) observes that having been put in the "victim's shoes," or in this case "crutches," he has more sympathy for those whose daily function depends on enforcement of the ADA. He then takes a brave leap and wonders if his analysis of securities fraud might be different if he had ever been a victim thereof. This is an important insight, but there's another step to be taken: Under the current system, how does a victim know if he/she has been defrauded through securities? Consider Enron/Adelphia/Worldcom for a moment. Most of the "worst" behavior in those matters that has thus far come to light has concerned not the substantive fraud itself, but the efforts to hide it. This seems to imply that there's some kind of optimal balance between the need for information access and the responsibility for information provision… but that where one strikes the balance depends upon highly specific abstract definitions of what is relevant by uninvolved third parties. From the victim's perspective, this isn't exactly a satisfactory acknowledgement that the problem even exists. There's an old saying that "a conservative is a liberal who's been mugged." The real question here is who has been mugged: The investors, or the business community?