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Posts by Yevgeny Shrago

May 3

Laws in Space

Posted 18 days ago by Yevgeny Shrago

The revelation last week that startup Planetary Resources had secured substantial funding to mine an asteroid was met with equal parts amusement and excitement.  In many ways, this development provides a lot of hope of new innovations for a global economy that increasingly appears to be stagnating.  As the planet begins to seriously consider the potential of substantial resource shortages over the next century, the seemingly unlimited abundance of minerals in space promises to help us maintain inexpensive inputs and remove a potential source of pressure on human well-being.  At the same time, this private foray into space raises new questions about the changes the global legal system will undergo as government actors cede space exploration to the market.

The United Nations, which is supposed to deal with these things, has promulgated various treaties and principles over the last fifty years meant to deal with how nations explore and use outer space.  Unfortunately, these principles are laughably underdeveloped and pie in the sky.  Article 11 of the Agreement Governing the Activities of States on the Moon and Other Celestial Bodies contains high sounding rhetoric denying that states or parties under their jurisdiction can appropriate any portion of the moon or other celestial bodies simply by placing structures or other equipment there.  That’s probably fine when the concern is a space race between the United States and China, but it makes a lot less sense when it comes to private mining companies and the various other space industries that are going to spring up as the cost of getting into orbit drops and mineral shortages on Earth make space exploration a cost-effective proposition.

Imagine that space mining operations actually begin in earnest.  There will presumably be asteroids that are more desirable to mine than others.  Under the current regime, no one can appropriate the asteroid or even the patch of the asteroid that’s been mined.  Every time a mining robot leaves, another company can swoop in and take advantage of all the work that has already been done.  Without some sort of property rights system in place, the natural outcome will be less exploitation of space resources than is probably optimal for humanity, as miners are worried about free riders appropriating their work.

There are serious issues to be considered regarding which laws of property should apply in space and how they should be applied.  The UN should work on setting up both a legal regime that better reflects the exigencies of commercial use of space and institutions that can support and nurture such a regime.

Apr 18

Tax Cheats Deserve Due Process Too

Posted 33 days ago by Yevgeny Shrago

The federal highway and transportation reauthorization bill passed by the Senate (which carries the delightfully meaningless title “Moving Ahead for Progress in the 21st Century”) and currently waiting for consideration by the House contains a provision that has a little more to do with due process and taxes than with roads.  According to Section 40304, people with a serious delinquency (currently defined as more than $50,000) would have their passport rights revoked.  This is similar to a previous provision that prevents anyone with more than $2,500 in unpaid child support from using their US passport for international travel.  Although tax cheats and deadbeat parents are among the most unsympathetic groups around, it may be worth thinking twice before affirming the government’s right to ban someone from travelling internationally.

Passport revocation or denial are paradigmatic due process cases, yet this statute provides not even a whiff of a hearing before a delinquent taxpayers rights are suspended.  Although Timothy Meyer, a former State Department attorney and University of Georgia law professor suggested in an The Atlantic Monthly article discussing this issue seems to think that this law will pass scrutiny, the vast majority of his reasoning discusses denying tax refunds to fulfill other policy goals and largely ignores the due process implications or a constitutional right to foreign travel.

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Apr 11

Patent Rents

Posted 40 days ago by Yevgeny Shrago

In a move that would have made sense even to someone who was frozen in the late 1990′s and is waking up today, former dial-up giant America Online earned a billion dollars from a sale of its assets to Microsoft last week. No, they didn’t finally monetize all those free hours of AOL service. Rather, AOL sold its massive patent portfolio in a dynamic auction that also attracted interest from today’s internet giants: Amazon, Facebook, Google and eBay.  The list of technologies will bring a smile to the eyes of any child of the 90′s and early 2000′s: Netscape and ICQ are on the list.  The portfolio sold for over a million dollars a patent.  The question is why anyone would pay so much money for a bunch of technologies that no one uses anymore.

The simple answer is protection.  Particularly in tech, several companies often hold interlocking patents and each of them is infringing on the other’s intellectual property.  When one of them sues another for infringement, the defendant in that action can file a counterclaim for infringement on the patent that it holds.  This counter suit provides leverage for licensing agreements.  AOL’s patents may seem obsolete, but the ICQ patents are probably infringed on by every other instant messenger software.  The value of this protection is exceptionally high: Google bought Motorola Mobility last year for $12.5 billion, largely for the patent portfolio that related to Google’s growing presence in the smartphone market.

The problems with this patent regime occur when one of the parties in the dispute doesn’t do anything other than hold patents; a so-called patent troll.  In that case, there’s no settlement leverage.  The infringing party needs to either settle or go through expensive litigation, usually in the IP plaintiff friendly Eastern District of Texas.  Although some patent trolls have actually developed the patent and simply chosen not to use it, others acquire the patents with an eye toward litigation.  A new paper by MIT’s Catherine Tucker shows just how dire the consequences of such a patent troll’s involvement can be.  Tucker’s paper shows how the acquisition of a medical imaging patent by patent troll Acacia, and subsequent litigation, lead to a one-third decrease in sales of medical imaging equipment affected by the litigation.  Tucker shows that there was no industry-wide decrease in demand, but rather a dropoff in innovation by affected firms.

If patent trolls are a problem, companies like AOL that have been outcompeted in their patent’s field can be a problem too.  The nature of tech is that the first person with a good idea is hardly guaranteed to be the big winner. No one uses Friendster, Netscape or ICQ anymore, despite their early success. Yet AOL can act as a patent troll too, and defendants may not have a patent to countersue with.  This outcome would make AOL no better than patent trolls.  On top of limited terms, perhaps patents should have a “use it or lose it” requirement, such that holders must show they are actively engaged in the business their patent covers in order to be able to enforce their rights in court.

Mar 27

The Wages of Obstruction

Posted 55 days ago by Yevgeny Shrago

The Environmental Protection Agency proposed a rule today that would effectively end the construction of coal-fired power plants in the United States.  The rule, known as a new sources performance standard, will limit the carbon dioxide emissions per megawatt of electricity produced to 1000 pounds of carbon dioxide, nearly half the the coal plant average of 1,768, rendering it basically impossible to build a coal power plant without extremely advanced (and probably federally subsidized) scrubbing technology.  Nuclear power, natural gas and renewables easily fall below these limits.  Although some pundits are skeptical, if the screaming from industry is any indication, this rule will have some teeth, though it will have no effect on current plants or those slated to be finished this year.  There are at least three things relating to Congressional obstruction to take away from such an aggressive rule.

First, elections matter.  Anyone that sees the Obama Presidency’s first term as a disappointment full of compromises, surrenders to the Republicans, and general betrayal of the President’s election message overestimates the President’s influence over even a friendly Congress and underestimates the true source of presidential power: regulation.  An EPA headed by a Democratic appointee can pass such aggressive rules, while an EPA headed by a Republican appointee may try to deny that carbon dioxide can be regulated under the Clean Air Act at all.  Such decisions are recapitulated in every policy area and give the President tremendous power in guiding national policy. Read more

Mar 21

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Anything Zoning Can Do, Covenants Can Do Too

Posted 61 days ago by Yevgeny Shrago

Slate economics blogger Matthew Yglesias recently released a new eBook single, titled The Rent is Too Damn High.  Yglesias’s book blames high rents on inefficient land use, caused largely by various governmental anti-density restrictions.  I’m highly sympathetic to Yglesias’s position.  Ideally, desirable land would be used as densely as the market would bear, lowering rents on each unit to make housing more affordable while increasing the effectiveness of government services and raising overall land values.  However, Yglesias’s focus on zoning and other governmental restrictions ignores the important private bars on density caused by restrictive covenants.

Although many communities enact zoning restrictions in order to maintain their neighborhood character, either in terms of architecture or income composition, communities subdivided from a larger plot of land have had the opportunity to restrict density without government intervention since the British case of Tulk v. Moxhay. By subdividing the land pursuant to a master plan, developers can and often do set restrictions similar to those that would be created politically. Private ordering can create minimum lot sizes, setback requirements and bans on guesthouses, all enemies of density that Yglesias correctly identifies.  Such covenants are not a small-scale phenomenon that collapses outside the subdivision scale. Houston’s famed (at least in urban planning circles) lack of zoning is largely a mirage, as deed restrictions and other mechanisms, like parking lot requirements, impose identical requirements.  Zoning requirements might be viewed as an agreement by property owners to avoid the hassles that come with trying to create a covenant, as well as the potential pitfalls of eliminating it if circumstances change, while reaping similar benefits. Read more

Mar 7

NRDC Lawsuit May End Factory Farming As We Know It

Posted 75 days ago by Yevgeny Shrago

One of the major ethical issues of the twenty-first century already is and will almost certainly continue to be what rights to accord to animals.  The debate has already been joined by well-respected philosophers and critically acclaimed writers and will continue to move from the caricature of a Birkenstock-wearing, dreadlocked punchline into the mainstream. But at the moment, the strength of the agribusiness industry allows it to influence state legislatures to pass exemptions from animal cruelty laws for farm animals and to enact ag-gag rules preventing photography of factory farms on national security grounds.  Today’s successes in promoting animal rights will come from the principle that what’s good for animals is frequently good for people too.

Enter the Natural Resources Defense Council, whose Litigation Director, Mitch Bernard, was kind enough to come speak to Harvard Law students on Tuesday.  NRDC has filed suit in the Southern District of New York, asking the court to compel the Food and Drug Administration to complete a rule it proposed over thirty years ago that would withdraw approval for the use of subtherapeutic doses of antibiotics in animals unless the FDA finds such use to be safe.  Given the overwhelming evidence in studies conducted both by the FDA and by other regulators internationally, as well as actual statements by FDA and Health and Human Services administrators noted in the complaint, these subtherapeutic doses almost certainly cause increased drug resistance in bacteria.  These bacteria can then be transferred to humans in several ways, including ingestion after insufficient cooking, contact with the live animals, and runoff of animal waste and byproducts into waterways (which is another enormous problem). Read more

Mar 1

A Pressure Point for the NCAA?

Posted 81 days ago by Yevgeny Shrago

When the National Collegiate Athletic Association’s proposal to permit multi-year athletic scholarships survived an override vote earlier this month, some of the legal implications were obvious. The Department of Justice had already conducted a preliminary inquiry into the antitrust status of the NCAA’s old scholarship rules, which permitted scholarships to be granted for only one year at a time. Various powerful political figures, including the President, have expressed their displeasure with the way the NCAA handles its football national championship and conference realignment and the DoJ has hinted that there may be antitrust violations to be found in those parts of the sport as well.  It’s hard not to see the DoJ investigation as a message to the NCAA that it can no longer hide behind protestations of amateurism and higher education and that it must acknowledge that it has become a billion dollar business and act accordingly.

With the passage of this new proposal, the NCAA may have staved off one line of inquiry, but college sports are a dirty business on many levels and federal intervention will continue.  One criticism raised by flacks for the college sports industry is that DoJ must have better things to do.  They’re right: using the DoJ to make changes in college sports is not the most effective use of federal resources.  The US government may have a far more powerful weapon against the NCAA, one that the recent change has made even more available.  This weapon is the tax code. Read more

Feb 1

3 Comments

Federal employment stagnant over 30 years

Posted 110 days ago by Yevgeny Shrago

A recent CBO report shows some interesting data about employment statistics for federal civilian workers. While most of the talk around the Internet has been about whether government employees are overpaid, less of the analysis has focused on the raw employment numbers, which tell some interesting stories of their own, specifically that in relative terms, federal government employment has been falling.

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Jan 25

Reexamining Licensing Regimes

Posted 117 days ago by Yevgeny Shrago

This is my second dispatch from New Orleans focusing on municipal licensing. Last time, I discussed why I thought progressives should care about seemingly silly regulations. This time, I ask whether the licensing regime we have, one that is hardly limited to New Orleans, is a good idea for progressive policy, and what a potential alternative might look like.

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Jan 20

Congress is master of the public domain

Posted 122 days ago by Yevgeny Shrago

While the Internet came together on Wednesday to protest Congressional consideration of the Stop Online Piracy Act in a recognition by citizens that intellectual property infrastructure matters, the Supreme Court struck a quieter, if still devastating blow against an open, vibrant public discourse in its latest IP opinion, Golan v. Holder.

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