Digital Commons Network^™

Opinion: How Software Stifles Competition And Innovation, James Bessen

Faculty Scholarship

Innovation is not what it used to be, and software is part of the reason. In many industries—industries well beyond Big Tech—dominant firms have built large software-based platforms delivering important consumer benefits, but these platforms also slow the rise of innovative rivals, including productive startups.5 Because access to these platforms is limited, competition has been constrained, creating a troubling market dynamic that slows economic growth.

Racism Pays: How Racial Exploitation Gets Innovation Off The Ground, Daria Roithmayr

Michigan Journal of Race and Law

Recent work on the history of capitalism documents the key role that racial exploitation played in the launch of the global cotton economy and the construction of the transcontinental railroad. But racial exploitation is not a thing of the past. Drawing on three case studies, this Paper argues that some of our most celebrated innovations in the digital economy have gotten off the ground by racially exploiting workers of color, paying them less than the marginal revenue product of their labor for their essential contributions. Innovators like Apple and Uber have been able to racially exploit workers of color because …

The Futures Of Law, Lawyers, And Law Schools: A Dialogue, Sameer M. Ashar, Benjamin H. Barton, Michael J. Madison, Rachel F. Moran

Articles

On April 19 and 20, 2023, Professors Bernard Hibbitts and Richard Weisberg convened a conference at the University of Pittsburgh School of Law titled “Disarmed, Distracted, Disconnected, and Distressed: Modern Legal Education and the Unmaking of American Lawyers.” Four speakers concluded the event with a spirited conversation about themes expressed during the proceedings. Distilling a lively two days, they asked: what are the most critical challenges now facing US legal education and, by extension, lawyers and the communities they serve? Their agreements and disagreements were striking, so much so that Professors Hibbitts and Weisberg invited those four to extend their …

Dynamic Pricing Algorithms, Consumer Harm, And Regulatory Response, Alexander Mackay, Samuel Weinstein

Articles

Pricing algorithms are rapidly transforming markets, from ride-sharing, to air travel, to online retail. Regulators and scholars have watched this development with a wary eye. Their focus so far has been on the potential for pricing algorithms to facilitate explicit and tacit collusion. This Article argues that the policy challenges pricing algorithms pose are far broader than collusive conduct. It demonstrates that algorithmic pricing can lead to higher prices for consumers in competitive markets and even in the absence of collusion. This consumer harm can be initiated by a single firm employing a superior pricing algorithm. Higher prices arise from …

Draft State Legislation: Agricultural Energy Net Metering & Power Purchasing, Samuel C. Kessler, Austin Gabhart

Commonwealth Policy Papers

This draft legislation was first authored by Commonwealth Policy Coalition Associates Samuel Kessler and Austin Gabhart in 2018, and is now published in 2022 to provide a method of creating improved Agricultural Net Metering and Power Purchase Agreements for agriculture-based energy developments. Shortly after this time, the Commonwealth of Virginia passed similar legislation directly dealing with renewable Net Metering and eventually Power Purchase Agreements in an agricultural context. Those especially in states which do not have Renewable Energy Portfolios which may or may not entail concerns with those portfolios and stakeholders in the nonrenewable industry are urged to consider implementation …

Leases As Forms, David A. Hoffman, Anton Strezhnev

All Faculty Scholarship

We offer the first large scale descriptive study of residential leases, based on a dataset of ~170,000 residential leases filed in support of over ~200,000 Philadelphia eviction proceedings from 2005 through 2019. These leases are highly likely to contain unenforceable terms, and their pro-landlord tilt has increased sharply over time. Matching leases with individual tenant characteristics, we show that unlawful terms are surprisingly likely to be associated with more expensive leaseholds in richer, whiter parts of the city. This result is linked to landlords' growing adoption of shared forms, originally created by non-profit landlord associations, and more recently available online …

Diversifying Nuclear Technology: A Technical Analysis On Small Modular Reactors And Its Impact On Nuclear Energy Policy, Carolina Lugo Mejia, Marcos Lugo

Helm's School of Government Conference - American Revival: Citizenship & Virtue

The energy policy debate in the United States has revolved around the diversification of energy sources while promoting advantageous economic profits. One drive for this has been the discussion of anthropogenic, environmental endangerment concerns (Vlassopoulous 2011, 104). However, despite the environmental concerns, the U.S. has for some time only relied on one type of energy source—fossil fuels. Fossil fuels are categorized as natural gas, coal, petroleum, and other gases responsible (U.S. Energy Administration 2019). Natural gas is responsible for 38.4%, coal for 23.4%, petroleum for 0.4%, and other gases for 0.3% of the U.S.’s electrical generation (U.S. Energy Administration 2019). …

Investigating The Contract Production Process, Stephen J. Choi, Robert E. Scott, G. Mitu Gulati

Faculty Scholarship

Contract law and theory have traditionally paid little attention to the processes by which contracts are made. Instead, contracts among sophisticated parties are assumed to be full articulations of the desires of the parties; whatever the process, the outcome is the same. This article compares sovereign debt contracts from US and UK firms, with different production processes, that are trying to do the same thing under very similar legal regimes. We find that that the production process likely matters quite a bit to the final form that contracts take.

Is The Digital Economy Too Concentrated?, Jonathan Klick

All Faculty Scholarship

Concentration in the digital economy in the United States has sparked loud criticism and spurred calls for wide-ranging reforms. These reforms include everything from increased enforcement of existing antitrust laws, such as challenging more mergers and breaking up firms, to an abandonment of the consumer welfare standard. Critics cite corruption and more systemic public choice problems, while others invoke the populist origins of antitrust to slay the digital Goliaths. On the other side, there is skepticism regarding these arguments. This chapter continues much of that skepticism.

The Replicability Crisis In Patent Law, Janet Freilich

Indiana Law Journal

There is a “replicability crisis” in the scientific literature. Scientists attempting to redo experiments in reputable, peer-reviewed journals have found that staggering numbers of these experiments—up to 90%—do not work. Patents, like scientific articles, contain experiments. These experiments often form the backbone of the patent and provide crucial support for patentability. Patent examiners use these experiments to evaluate whether the invention works, and thus whether the patent should be granted. The replicability crisis in the scientific literature is therefore of utmost importance to the patent system. Transferring the insights of the replicability crisis to patents begs the question of whether …

Declining Industrial Disruption, James Bessen

Faculty Scholarship

Recent research finds that markups are rising, suggesting declining competition. But does less price competition mean less Schumpeterian “creative destruction”/industry dynamism? This paper reports the first recent estimates of trends in the displacement of industry-leading firms. Displacement hazards rose for several decades since 1970 but have declined sharply since 2000. Using a production function-based model to explore the role of investments, acquisitions, and lobbying, we find that investments by dominant firms in intangibles, especially software, are distinctly associated with greater persistence and reduced leapfrogging. Software investments by top firms soared around 2000, contributing substantially to the decline. Also, higher markups …

Humans Vs. Robots: Rethinking Tax Policy For A More Sustainable Future, Kathryn Kisska-Schulze, Karie Davis-Nozemack

Maryland Law Review

No abstract provided.

Innovation Versus Encrustation: Agency Costs In Contract Reproduction, Stephen J. Choi, Mitu Gulati, Robert E. Scott

Faculty Scholarship

This article studies the impact of exogenous legal change on whether and how lawyers across four different deal types revise their contracts’ governing law clauses in order to solve the problem that the legal change created. The governing law clause is present in practically every contract across a wide range of industries and, in particular, it appears in deals as disparate as private equity M&A transactions and sovereign bond issuances. Properly drafted, the clause increases the ex ante economic value of the contract to both parties by reducing uncertainty and litigation risk. We posit that different levels of agency costs …

Enhancing Efficiency At Nonprofits With Analysis And Disclosure, David M. Schizer

Faculty Scholarship

The U.S. nonprofit sector spends $2.54 trillion each year. If the sector were a country, it would have the eighth largest economy in the world, ahead of Brazil, Italy, Canada, and Russia. The government provides nonprofits with billions in tax subsidies, but instead of evaluating the quality of their work, it leaves this responsibility to nonprofit managers, boards, and donors. The best nonprofits are laboratories of innovation, but unfortunately some are stagnant backwaters, which waste money on out-of-date missions and inefficient programs. To promote more innovation and less stagnation, this Article makes two contributions to the literature.

First, this Article …

Investment In Latin America Will Limit Migration North, Ryan J. O'Riordan, Stanley P. Kowalski

Law Faculty Scholarship

The refugee crisis at the US Southern Border is due to multiple compounding factors: Latin America’s over-reliance on commodities, failure to economically diversify to innovation, and a lack of coherent US strategic engagement with the region. The situation is hemispheric; imploding states and a serious humanitarian calamity loom ever larger on the southern horizon. Since this represents a long-term problem requiring strategic and sustainable development initiatives, a new Alliance for Progress for the 21st Century is proposed which will build partnerships to advance innovation-driven development across the region.

The Idea Of Property: A Comparative Review Of Recent Empirical Research Methods, Paul T. Babie, Peter D. Burdon Mr, Francesca Da Rimini, Cherie M. Metcalf Prof., Geir Stenseth

Indiana Journal of Global Legal Studies

While theory offers important insights into property's normative content, it sometimes fails to tell us about what people understand property to mean and how they interact with those things said to be owned by them. This has significant implications for some of the challenges facing humanity, including climate change, unequal distributions of wealth and resources, biodiversity loss, and innovation. In response, a growing body of literature is emerging that looks at property through a different lens; rather than theorizing property in an abstract way or attempting to craft a normative account of and justification for the institution, this new scholarship …

The Cost Of Novelty, W. Nicholson Price Ii

Law & Economics Working Papers

Patent law tries to spur the development of new, better, innovative technology. But it focuses much more on “new” than “better” — and it turns out that “new” carries real social costs. I argue that patent law promotes innovation that diverges from existing technology, either a little (what I call “differentiating innovation”) or a lot (“exploring innovation”), at the expense of innovation that tells us more about existing technology (“deepening innovation”). Patent law’s focus on newness is unsurprising, and fits within a well-told narrative of innovative diversity accompanied by market selection of the best technologies. Unfortunately, innovative diversity brings not …

Berle And Corporation Finance: Everything Old Is New Again, Frank Partnoy

Seattle University Law Review

In this essay, I want to illustrate how Adolf A. Berle Jr.’s Studies in the Law of Corporation Finance1 was prescient about the kinds of financial innovation that are central to today’s markets. For scholars who are not familiar with this publication, Corporation Finance is a compilation of edited versions of several of Berle’s articles, along with some new material, most of which is focused on 1920s corporate practice. My primary goal here is simply to shine a light on this work and to memorialize for scholars the key passages that echo many of today’s challenges. The punch line of …

Intellectual Property And The Economics Of Product Differentiation, Christopher S. Yoo

All Faculty Scholarship

The literature applying the economics of product differentiation to intellectual property has been called the most important development in the economic analysis of IP in years. Relaxing the assumption that products are homogeneous yields new insights by explaining persistent features of IP markets that the traditional approaches cannot, challenging the extent to which IP allows rightsholders to earn monopoly profits, allowing for sources of welfare outside of price-quantity space, which in turn opens up new dimensions along which intellectual property can compete. It also allows for equilibria with different welfare characteristics, making the tendency towards systematic underproduction more contingent and …

Startup Governance, Elizabeth Pollman

All Faculty Scholarship

Although previously considered rare, over three hundred startups have reached valuations over a billion dollars. Thousands of smaller startups aim to follow in their paths. Despite the enormous social and economic impact of venture-backed startups, their internal governance receives scant scholarly attention. Longstanding theories of corporate ownership and governance do not capture the special features of startups. They can grow large with ownership shared by diverse participants, and they face issues that do not fit the dominant principal-agent paradigm of public corporations or the classic narrative of controlling shareholders in closely held corporations.

This Article offers an original, comprehensive framework …

Tech, Regulatory Arbitrage, And Limits, Elizabeth Pollman

All Faculty Scholarship

Regulatory arbitrage refers to structuring activity to take advantage of gaps or differences in regulations or laws. Examples include Facebook modifying its terms and conditions to reduce the exposure of its user data to strict European privacy laws, and Uber and other platform companies organizing their affairs to categorize workers as non-employees. This essay explores the constraints and limits on regulatory arbitrage through the lens of the technology industry, known for its adaptiveness and access to strategic resources. Specifically, the essay explores social license and the bundling of laws and resources as constraining forces on regulatory arbitrage, and the legal …

Corporate Disobedience, Elizabeth Pollman

All Faculty Scholarship

Corporate law has long taken a dim view of corporate lawbreaking. Corporations can be chartered only for lawful activity. Contemporary case law characterizes intentional violations of law as a breach of the fiduciary duties of good faith and loyalty. While recognizing that rule breaking raises significant social and moral concerns, this Article suggests that corporate law and academic debate have overlooked important aspects of corporate disobedience. This Article provides an overview of corporate disobedience and illuminates the role that it has played in entrepreneurship and legal change. Corporations violate laws for a variety of reasons, including as part of efforts …

Economic Liberty "In A World Of Pure Imagination”: A Theoretical Analysis Of Willy Wonka, Natural Rights, And The New Age Of Innovation, Tammy M. Eick

Nova Law Review

No abstract provided.

Antitrust And The Design Of Production, Herbert J. Hovenkamp

All Faculty Scholarship

Both economics and antitrust policy have traditionally distinguished “production” from “distribution.” The former is concerned with how products are designed and built, the latter with how they are placed into the hands of consumers. Nothing in the language of the antitrust laws suggests much concern with production as such. Although courts do not view it that way, even per se unlawful naked price fixing among rivals is a restraint on distribution rather than production. Naked price fixing assumes a product that has already been designed and built, and the important cartel decision is what should be each firm’s output, or …

Innovation Diffusion In The Legal Industry, William D. Henderson

Dickinson Law Review (2017-Present)

This article is adapted from a series of blog posts originally found in my recently-started blog entitled Legal Evolution. The foundational material set forth in this article (and in those blog posts) applies to the legal services market insights gained from disciplines other than law. This article begins by setting forth the well-established theory of an “innovation diffusion curve” and the research that has identified the factors that affect the rate of adoption of innovations. This article identifies why innovation in the legal services market is desirable and applies to the legal services field insights drawn from this research …

The Evolution Of Entrepreneurial Finance: A New Typology, J. Brad Bernthal

Publications

There has been an explosion in new types of startup finance instruments. Whereas twenty years ago preferred stock dominated the field, startup companies and investors now use at least eight different instruments—six of which have only become widely used in the last decade. Legal scholars have yet to reflect upon the proliferation of instrument types in the aggregate. Notably missing is a way to organize instruments into a common framework that highlights their similarities and differences.

This Article makes four contributions. First, it catalogues the variety of startup investment forms. I describe novel instruments, such as revenue-based financing, which remain …

Corporate Governance As Privately-Ordered Public Policy: A Proposal, Lynn A. Stout, Sergio Alberto Gramitto Ricci

Faculty Works

In this Article, we show how our society can use corporate governance shifts to address, if not entirely resolve, a number of currently pressing social and economic problems. These problems include: rising income inequality; demographic disparities in wealth and equity ownership; increasing poverty and income insecurity; a need for greater innovation and investment in solving problems like disease and climate change; the “externalization” of many costs of corporate activity onto third parties such as customers, employees, creditors, and the broader society; the corrosive influence of corporate money in politics; and discontent and loss of trust in the capitalist system among …

Reasonable Patent Exhaustion, Herbert J. Hovenkamp

All Faculty Scholarship

A lengthy tug of war between the Supreme Court and the Federal Circuit Court of Appeals may have ended when the Supreme Court held that the sale of a patented article exhausts the patentee seller’s rights to enforce restrictions on that article through patent infringement suits. Further, reversing the Federal Circuit, the parties cannot bargain around this rule through the seller’s specification of conditions stated at the time of sale, no matter how clear. No inquiry need be made into the patentee’s market power, anticompetitive effects, or other types of harms, whether enforcement of the condition is socially costly or …

Teva And The Process Of Claim Construction, Lee Petherbridge Ph.D., R. Polk Wagner

All Faculty Scholarship

In Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc., the Supreme Court addressed an oft-discussed jurisprudential disconnect between itself and the U.S. Court of Appeals for the Federal Circuit: whether patent claim construction was “legal” or “factual” in nature, and how much deference is due to district court decisionmaking in this area. In this Article, we closely examine the Teva opinion and situate it within modern claim construction jurisprudence. Our thesis is that the Teva holding is likely to have only very modest effects on the incidence of deference to district court claim construction but that for unexpected reasons the …

Patent Pools And Related Technology Sharing, Erik Hovenkamp, Herbert J. Hovenkamp

All Faculty Scholarship

A patent "pool" is an arrangement under which patent holders in a common technology commit their patents to a single holder, who then licenses them out to the original patentees and perhaps also to outsiders. The payoffs include both revenue earned as a licensor, and technology acquired by pool members as licensees. Public effects can also be significant. For example, technology sharing of complementary patents can improve product quality and variety. In some information technology markets pools can prevent patents from becoming a costly obstacle to innovation by clearing channels of technology transfer. By contrast, a pool's aggregate output reduction …