As announced today, Attenex and FTI Consulting have entered entered into a definitive agreement under which FTI will acquire Attenex. Those who do antitrust litigation, second requests, or other large document review tasks will be familiar with FTI and Attenex as providers of e-discovery services and document-review and production software. Attenex’s flagship Patterns software is my personal favorite for document reviews; according to FTI (pdf), it will continue to be licensed to other e-discovery providers.

I will be at the CC Technology Summit next week (6/18/08). Send me an email if you plan on attending too. Here’s the program announcement:

On June 18 Creative Commons holds its first technology summit in Silicon Valley (generously hosted by Google), bringing together many parties interested in making sure “Copyright 2.0″ facilitates rather than hinders innovation and the open web. The summit will include an update and overview of Creative Commons technologies, panels featuring other leaders in open digital rights technologies, and a look at the future, including the role of digital copyright registries (and similar animals).

Here is the FTC’s petition for rehearing en banc. The brief is all about the critical issue of causation.

• The FTC argues that the panel decision conflicts with Microsoft’s holding on causation in monopolization cases, i.e., whether the conduct “reasonably appears capable of making a significant contribution to … monopoly power.” The panel decision, in contrast, imposes a strict but for requirement, i.e., the plaintiff has to show that, after full disclosure, the SSO would not have adopted the defendant’s technologies. Proof of a hypothetical is indeed a tough standard to meet.
• The FTC then takes issue with the panel’s expansion of NYNEX v. Discon. In a previous post, I explained why the reliance on Discon is indeed somewhat strange. Discon is a “market power first, deception second” case. Here, the FTC argues predictably that Rambus is a “deception first, market power second” case, or, more specifically, a case in which pre-existing market power was increased as a result of the deception.

  Absent Rambus’s deception, the competition to become part of the standard would have limited the price Rambus could have charged for its technologies and subjected it to the opportunity for ex ante negotiations. Rambus’s avoidance of these constrains was not the ex post exercise of market power by a lawful monopolist; it was the mechanism by which Rambus secured its monopoly. (My emphasis).

  “Increased” might have been clearer than “secured,” to emphasize the incremental, additive effect of the alleged deception.

In industries governed by standards, it is not always easy to identify the goal of antitrust intervention. Neelie Kroes defined it as follows:

When a market develops in such a way that a particular proprietary technology becomes a de facto standard, then the owner of that technology may have such power over the market that it can lock-in its customers and exclude its competitors’. Where a technology owner exploits that power, then a competition authority or a regulator may need to intervene. In essence, the competition authority has to recreate the conditions of competition that would have emerged from a properly carried out standardisation process.

This definition makes a collaborative standard setting process the normative benchmark even for de facto standards that evolve as a result of the operation of the marketplace.

Blawg Review #163 is now available at More Partner Income.

Arguments about the merits of increased copyright protection usually proceed in three stages.

1. Pro: “IP is like any other form of property.” Con: “No, it is not, because information is non-rivalrous. The main justification for exclusive property rights, allocating scarce resources, is therefore lacking.”
   
2. Pro: “We need to drive up the price for accessing today’s information in order to create incentives for people to get involved in the production of tomorrow’s information.” Con: “The incentive effect today is likely outweighed by higher input prices tomorrow. Moreover, as culture is a collaborative enterprise, propertization increases the transaction costs. Lastly, a linear increase in fuzzy boundaries results in an exponential increase in litigation costs. The net welfare effect from increased protection is in all likelihood negative.”
   
3. Pro: Be that as it may. The fact remains that in the real world cultural production is IP protected. Books and songs are copyrighted, inventions are patented, etc.
   

I am always a bit puzzled by the “real world” argument, because while undeniably most cultural production is copyrighted, it is not at all clear that the copyright protection is a significant reason for the production. This may well be an endemic case of post hoc ergo propter hoc. For example, most organic search results on Google or Yahoo seem to come from either non-profit actors (Wikipedia, blogs, forums, universities, SSRN, etc.) or from for-profit actors whose core business model does not depend on IP protection (newspapers, consultants, universities, blogs, etc.). The online advertising revolution is certainly a major contributor to that trend, because the advertising-supported business model is the excact opposite of the IP-based paradigm in that it relies on increasing distribution, not limiting it. Not even the software industry is predominantly IP reliant, with almost two times the revenues from services than from software sales. (See, e.g., Software and Information: Driving the Global Knowledge Economy).

Of course, this is not to deny that some business models stand to profit from increased IP protection, they most certainly do, as Herbert Hovenkamp and others have described in detail. The point is rather to question the assumption that most creative production is in fact driven by IP-based business models. The more actual cultural production takes place outside the IP incentives model, the less credible — and justifiable as a matter of constitutional law — the call for increased protection.

This personalized Google search widget crawls the path www.ftc.gov/bc/earlyterm/*. Theoretically, it should be search engine for all grants of early termination.

Here is the NYT article:

The Federal Trade Commission has opened a formal antitrust investigation of Intel, the world’s largest maker of computer microprocessors, for anticompetitive conduct, government officials and lawyers involved in the proceeding said Friday. The officials and lawyers said that in recent days Intel, its smaller rival Advanced Micro Devices, and several of the world’s largest personal computer makers that buy semiconductors from the two companies have begun to receive subpoenas from the commission. The investigation into accusations that Intel’s pricing policies have been designed to maintain a near-monopoly on the microprocessor market was authorized by William E. Kovacic, the new chairman of the trade commission, and has the support of the agency’s other commissioners. It reversed a decision by his predecessor, Deborah P. Majoras, who had been blocking the formal inquiry for many months, frustrating other senior commission officials and some lawmakers on Capitol Hill. Ms. Majoras is a former senior official in the antitrust division at the Justice Department who was an architect of the Bush administration’s antitrust settlement with Microsoft in 2001. She stepped down two months ago to become the general counsel at Procter and Gamble.

The case, Babyage.com, Inc. v. Toys “R” Us, Inc., gives an interesting roadmap for what must be alleged in order to survive a motion to dismiss in a post-Twombly world. The case concerns retail-price maintenance after Leegin; the allegations were that a dominant retailer (Babys “R” Us) strong-armed high-end baby-goods manufacturers to adopt and enforce RPM in an effort to exclude price-cutting internet retailers from the market. Here is a taste:

Therefore, Plaintiffs have stated enough facts to suggest the existence of several relevant markets in which competition has been harmed. Plaintiffs’ allegations are not only consistent with the existence of “high-end baby and juvenile strollers,” “high-end high chairs,” “high-end breast pumps,” “high-end baby bedding,” “high-end car seats,” and “high-end infant carriers” markets, but they suggest the existence of those markets. They do this by asserting facts about interchangeability and cross-elasticity of demand that explain why the proffered markets are not larger than Plaintiffs allege them to be. Put another way, their allegation that, for each market, a hypothetical monopolist could profitably raise prices on all in-product markets for a short time, constitute enough heft to raise the satisfaction of the relevant-market element beyond a speculative level.

Here is a pdf of the decision in the Eastern District of Pennsylvania. An article with background on the case is here. HT to Maria Dimoscato.

The EU Commission on Monday announced that it is investigating the French drug maker Sanofi-Aventis for obstruction of justice. As part of its crack-down on the pharmaceutical industry, the EU conducted a dawn raid at Sanofi-Aventis, but was refused access to documents without a French search warrant:

The commission’s allegation centers on Sanofi-Aventis’ refusal to let inspectors examine and copy relevant documents until the French authorities produced a national search warrant, the commission says. The European antitrust regulator was raiding the pharmaceutical company’s headquarters in France, as part of a wider inquiry into the sector. Under European antitrust laws, companies have an obligation to cooperate with the commission’s inspectors, including full access to important documents.

A press report is here.

Trying to schedule a conference with folks from Brussels, D.C., Chicago, San Francisco, and Shanghai? Confused by GMT -7, GMT +8, GMT ^(2n-1) daylight savings time, etc> Then time and date.com is for you.

Although not an antitrust issue, I thought this news (via the Washington Post) might generate a few comments (my emphasis):

Redskins owner Dan Snyder reached a deal yesterday to buy three local AM radio stations from Clear Channel Communications, including the area’s leading sports-talk station, WTEM. The purchase gives Snyder control of sports talk radio in Washington.  It thus gives the owner of the most popular and closely followed sports franchise in the region ownership of the bigget broadcast outlets for commentary about his team.

Snyder’s purchase of WTEM (980), WTNT (570) and WWRC (1260) for an undisclosed price means his Red Zebra Broadcasting arm will own six stations in the area. Red Zebra’s current stations, known as Triple X ESPN Radio, also carry sports-talk programs.

Before my fellow Washingtonians get too worked up:

Team owners have made similar moves for decades. Tribune Co. of Chicago owns baseball’s Cubs, the Chicago Tribune and WGN, the TV station that broadcasts the team’s games.  Ted Turner’s Turner Broadcasting System owned the Atlanta Braves and their main broadcast outlet, WTBS.  More recently, the NFL and the New York Yankees both started cable networks and moved games onto their channels.

In other sports and competition news, Justice Alito recently spoke about baseball and antitrust (The BLT via the Sports Law Blog):

On the subject of baseball and antitrust, Alito said the 1922 decision has been widely misinterpreted as granting baseball an antitrust exemption, which is “not exactly correct.” Alito took the audience through the history of the case and of baseball, concluding that the Supreme Court had affirmed the view of the U.S. Court of Appeals for the D.C. Circuit that baseball games were not examples of interstate commerce. Even though players cross state lines to play, the games themselves are “state affairs” from beginning to end and as such are not covered by the Sherman Act. Alito’s point apparently was that the Court had not specifically exempted baseball from antitrust laws, but that it had defined the sport in such a way that it, like other intrastate events, was not covered.

Alito said the Supreme Court’s decision has been pilloried by scholars and judges alike in the decades since it was issued. More recently, he said, some commentators have been “less harsh,” fitting it into a more modest view of the scope of the Constitution’s commerce clause. Alito indicated that he is in the camp that views the case more kindly.

When we’re not dealing with the antitrust implications of models in swimsuits (still our most linked post), we’re closely following the fashion industry. David, because he’s a style maven. I, because it is an interesting example for rapid innovation in a low-IP environment. Pamoyo, a Berlin-based fashion label, has adapted to its environment.

All Pamoyo clothing and accessoire designs are open-source, free for you to make your own thing with it, to build upon and create new versions. Our designs are released under a Creative Commons license, for non-commercial use. We are at this moment preparing patterns for publication here on the website, which will be available for download.

Very cool. (HT: CC).

The permit is one of the oldest business models. First, the government issues some prohibition. Then, for a fee, the prohibition is partially lifted. Usually, the government collects the fee. But in the days of public-private partnership in security matters, some private entity does. CLEAR is one of those business models. After 9/11, the government encumbered the freedom of movement for air travelers, inconveniencing millions in the name of heightened security at airports. Now, a CLEAR pass for $128/year, lets you cut in front of the security line. CLEAR thus monetizes the loss of civil liberties. The beauty of the business model is that it is entirely independent of whether it contributes to security or not. Its sine qua non is the existence of a government restraint on certain freedoms, not whether the restraint serves any useful purpose. CLEAR is admittedly a somewhat extreme example, because it makes no bones about its implicit assumption that everyone who doesn’t have a pass is a potential security risk. It is a harbinger of a world in which we live by permission, not by right, a world in which the default is control, not freedom, a world in which prosecutorial discretion, not the rule of law, protects liberties.

There are other business models that in more subtle ways require legislative restraints on freedoms. For example, prior to the enactment of the DMCA, reverse engineering, the “freedom to tinker,” was part of the set of civil liberties that everyone enjoyed and took for granted. In such a world, every technology is open in the long run. Users are free to break open black boxes and put them to uses that their designers did not intend and could not foresee. Discovering the unintended uses and thus the secret lives of artifacts is a creative act, and the history of art has long recognized it as such. Where the freedom to tinker is unrestrained, businesses spring up to support user demand for unlocking their technological environment. The issue is that in such a high-civil liberties environment, certain business models won’t work, or at least, they won’t work particularly well. Suppose a firm is selling a piece of computer hardware below cost to increase penetration and adoption, in the hope of making money by selling the rights to develop software for the platform to third party developers. This is a now common multi-sided business model, as described in detail by Schmalensee and Evans. The model is based on the premise that developers can’t access the platform without some form of an access payment to the maker of the box. That, of course, is perfectly fine. If a developer wants to use my copyrighted API, then they have to pay me for the privilege. However, another condition with much more significant impliactions is that users won’t hack their equipment, thus opening it up (en masse) for third party development, e.g., by installing a free OS on the device, for which developers could then code applications without access payments to the maker of the box. That second condition requires government intervention in the form of restraints on the rights of the users to unbox technology. It is the need for that particular enabling restraint, which brings us to the civil liberties v. consumer welfare trade-off. Note that the trade-off is, as always, marginal. That is, are we willing to give up some measure of liberties in order to make the environment more hospitable for certain welfare enhancing business models? Choosing between totals is easy, choosing between marginals is hard. Note, moreover, that I am perfectly willing to concede (at least arguendo) that a multi-sided business model as described above may increase consumer welfare by putting more hardware into the hands of people who could not otherwise afford it.

In the end, we are left with the realization that certain business models, crude ones such as CLEAR and more sophisticated ones such as some multi-sided platforms, are based on government restraints on civil liberties. Any complete economic or policy analysis of a practice should take its impact on civil liberties into account. Some trade-offs in favor of consumer welfare may well be worth making. Others are most certainly not. This is a discussion that we should be having — and it is one to which lawyers can make a genuine contribution.

UPDATE: Here’s a related post on TLF.

Here is the short version:

[B]e brief, be clear, be simple, be vivid, be commonsensical, avoid legalisms, and do not be afraid to spoon-feed us—we will not bite your hand.

The longer version is here.