The University of Chicago Law School Faculty Blog

Google Book Search and the Transaction Costs of Consent

Larry Lessig posted this week a synchronized set of slides and audio addressing Google Book Search as fair use. The talk runs for 30 minutes but ultimately the core point is simple and I think relatively conventional: transactions costs matter for the scope of allowed fair use. The suggestion here is a transaction-cost based opt-out model: for low-cost of consent holders, GBS has to ask permission, but for high-cost of consent holders, GBS need not ask permission, but instead those holders have to opt out.

 

Patent Reform: Gold-Plating?

In the current issue of Regulation Magazine, Mark Lemley, Bhaven Sampat and I write about patent reform. Our launching point is the simple fact that, at the time patent applications are reviewed, the Patent Office has no way to identify the small number of applications that are likely to end up having real economic consequence. Thus patent applications are for the most part treated alike, with every application getting the same -- and by necessity sparse -- review. We then urge in response three basic reforms.

Freezing pension plans and then health care?

The big business news of the week is IBM's abandonment of its conventional pension plan so that, going forward, its employees will bear the investment risk previously assumed by the employer-promisor of what had been a defined benefit plan. Viewed over the long term, we have seen a shift from no employer-provided pensions to defined benefit plans (promising retirement income, often in a manner based on final employment income and years of service) and now, apparently, to defined contribution plans (employer promises certain matching payments, perhaps, but employee bears risk of performance). Some of this evolution can be attributed to tax law (or perhaps itself caused changes in tax law); employment places with no pension plans sacrificed an obvious tax benefit, defined benefit plans allowed employers to benefit from appreciated investments and their favored tax treatment, and (now) defined contribution plans make use of 401(k) and other vehicles. But it is not entirely clear why employees would rather bear the risk of poor investment returns. In principle, the more attractive a pension plan is to employees, the lower the wage they need to be paid, so that employers ought simply to provide the best or the most tax-favored plan as viewed by a majority of, or in some industries perhaps marginal, employees. Some easy answers to the question of why we see some changes in the absence of legal change are that wages are sticky or that employees (especially young ones) underestimate the value of pension contributions or that they do not expect pension plans to be solvent when their retirement dates arrive or that they do not expect to stick around at their current jobs.

Why the NSA Surveillance Program is Unlawful

For those readers interested in a serious analysis of the legality of the President's authorization of NSA surveillance on American citizens, I recommend the following, which was written and signed by fourteen constitutional scholars and former government officials (including Richard Epstein and me) in response to a memorandum submitted to Congress by the Department of Justice:

Dear Members of Congress:

We are scholars of constitutional law and former government officials. We write in our individual capacities as citizens concerned by the Bush Administration's National Security Agency domestic spying program, as reported in the New York Times, and in particular to respond to the Justice Department's December 22, 2005 letter to the majority and minority leaders of the House and Senate Intelligence Committees setting forth the administration's defense of the program. Although the program's secrecy prevents us from being privy to all of its details, the Justice Department's defense of what it concedes was secret and warrantless electronic surveillance of persons within the United States fails to identify any plausible legal authority for such surveillance. Accordingly the program appears on its face to violate existing law.

Bush's Spy Program and FISA

In an earlier post (“Bush’s Spy Program and the Fourth Amendment”), I argued that Bush’s recently disclosed spy program almost certainly violates the Fourth Amendment. Now, I will take up the FISA issue. In 1978, after a broad range of abusive and unlawful investigative practices by the Nixon administration came to light, Congress enacted the Foreign Intelligence Surveillance Act (FISA). This legislation was designed to strike a careful balance between protecting civil liberties and enabling the government to protect the nation against foreign enemies. FISA established special rules dealing with foreign intelligence surveillance, and set up a special “secret” court, the Foreign Intelligence Surveillance Court, to handle these matters, but it retained the probable cause and warrant requirements of the Fourth Amendment. FISA criminalizes any electronic surveillance not authorized by statute, and it made clear that it set forth the exclusive means by which foreign intelligence surveillance may be conducted.

Working with Google Book Search (and Making it Better)

I have blogged twice before on Google Book Search (Nov. 18: “Hypos for My Copyright Class” and Nov. 11: “Fair Use and Inefficient Bundling”), but having started a new quarter of antitrust today, I am now starting to use GBS more systematically. That use has quickly raised a number of questions regarding how we will work with public domain works and with government works.

 

Tomorrow I am teaching excerpts from the Supreme Court’s 1911 opinion in the Standard Oil case. That case resulted in the break-up of Standard and killed off the literal reading of Section 1 of the Sherman Act announced by the Court in Trans-Missouri in 1897.

 

The Standard Oil opinion describes the development of the English monopoly law of forestalling, regrating and engrossing. Don’t know what those are? Me either, really, but that’s where GBS comes in.

 

Bush's Spy Program and the Fourth Amendment

In an earlier post (“King George’s Constitution”), I asserted that the recently disclosed Bush spy program is both unconstitutional and unlawful. Since then, defenders of the program have attacked its critics as “hysterical” and “irresponsible,” and have offered a mélange of arguments for the program's legality, or at least its possible legality. I want to address those arguments. In this post, I will focus on the Fourth Amendment. In a later post, I will address the statutory issue.

It is settled law that the Executive may not engage in wiretapping or other forms of electronic surveillance of the contents of private communications without probable cause and a warrant. This is the unambiguous and long-standing understanding of the Fourth Amendment. The question posed by the Bush spy program is whether those requirements are inapplicable, and the Executive is therefore free to engage in electronic surveillance of American citizens on American soil without a warrant or probable cause or, indeed, without any review by the Congress or the judiciary, if it asserts that it is protecting the nation from terrorists.

Minimum Wage, Public Choice, and other Federal-State Standards

The minimum wage is on the front page again and the topic comes with curiosities worth thinking about.  Eighteen jurisdictions have minimum wages above the current federal wage of $5.15 per hour.  In some states, the minimum wage applies to small employers or to employees otherwise exempt from the federal wage law.  The federal minimum has not been raised in some time, and yet in some states the matter continues to generate active political interest and support.  Most interesting, in 2004 two states (Nevada and Florida) raised the minimum wage through ballot initiatives.  Only about half the employees directly affected by minimum wage legislation are under the age of 25, and half of those are teenagers, though it is likely that when the floor rises (apart from any job losses) there is upward pressure on wages of those above the floor.  Who votes for these increases and why?