C. Scott Hemphill

Network Neutrality and the False Promise of Zero-Price Regulation

This Article examines zero-price regulation, the major distinguishing feature of many modern network neutrality proposals. A zero-price rule prohibits a broadband Internet access provider from charging an application or content provider (collectively, content provider) to send information to consumers. The Article differentiates two access provider strategies thought to justify a zero-price rule. Exclusion is anticompetitive behavior that harms a content provider to favor its rival. Extraction is a toll imposed upon content providers to raise revenue. Neither strategy raises policy concerns that justify implementation of a broad zero-price rule. First, there is no economic exclusion argument that justifies the zero-price rule as a general matter, given existing legal protections against exclusion. A stronger but narrow argument for regulation exists in certain cases in which the output of social producers, such as Wikipedia, competes with ordinary market-produced content. Second, prohibiting direct extraction is undesirable and counterproductive, in part because it induces costly and unregulated indirect extraction. I conclude, therefore, that recent calls for broad-based zero-price regulation are mistaken.

Actavis and Error Costs: A Reply to Critics

The Supreme Court’s opinion in Federal Trade Commission v. Actavis, Inc. provided fundamental guidance about how courts should handle antitrust challenges to reverse payment patent settlements. In our previous article, Activating Actavis, we identified and operationalized the essential features of the Court’s analysis. Our analysis has been challenged by four economists, who argue that our approach might condemn procompetitive settlements. As we explain in this reply, such settlements are feasible, however, only under special circumstances. Moreover, even where feasible, the parties would not actually choose such a settlement in equilibrium. These considerations, and others discussed in the reply, serve to confirm the wisdom of the Actavis inference, in which the observation of a large reverse payment serves as a “surrogate” for patent-case weakness and therefore for lost competition.

The Fashion Originators’ Guild of America: Self-Help at the Edge of IP and Antitrust

The question of intellectual property for original fashion design has attracted enormous public attention in recent years. As we show in this chapter, the question has a storied past. In the 1930s, as American fashion was coming into its own as a cultural force, designers worried about knockoffs. Then, as now, they lacked intellectual property protection for original fashion designs, and sought legislative protection. But they also pursued a regulatory solution, as part of New Deal responses to the Great Depression. They ultimately settled on an effective but controversial solution: a set of self-help measures targeting both copyists and retailers willing to merchandise knockoffs.The resulting boycott, devised by the Fashion Originators’ Guild of America (“Guild”), was a massive private IP scheme. At its height, a staggering 4000 new designs were protected each month. The designers’ organized efforts at self-help to create design protection eventually gave rise to antitrust lawsuits in federal and state courts, culminating in a pair of 1941 Supreme Court cases.This chapter tells the story of the Depression-era fashion designers, and the solutions they pursued to remedy the lack of intellectual property protection for their work. It describes the Guild’s formation and activities within the social, economic, and legal context of the Depression, and the fatal government scrutiny that eventually led to the Guild’s demise. Finally, it suggests some lessons as to both means and ends drawn from this story about fashion design protection: about self-help as a private solution to a public lack on the one hand, and about intellectual property protection for design on the other.

Intellectual Property and Competition Law

This chapter, prepared for the Oxford Handbook of Intellectual Property Law, surveys the intersection of competition law — or antitrust law, as it is known in the United States — with intellectual property (IP). It examines whether and how IP rights alter the substantive scope of antitrust law, either by operation of statute or as a matter of economic policy. It discusses a wide variety of antitrust claims, alleging collusion, exclusion, or both, that have been raised against IP rights holders. The examples are drawn mainly from the United States, although European developments are also included where relevant. The analysis supports the conclusion that, beyond a rights holder’s core ability to assert a valid, infringed right against a rival, IP restricts antitrust law less than one might expect. Moreover, the restrictions that do exist are often subtle.