Category: Trade

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On Information Justice

Like the other commenters on From Goods to a Good Life, I also enjoyed the book and applaud Professor Sunder’s initiative in engaging more explicitly in the values conversation than has been conventionally done in IP scholarship. I also agree with most of what the other commenters have said.  I want to offer plaudits, a few challenges, and some suggestions about future directions for this conversation.

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What is a treaty? Is that the right question?

(Thanks to Danielle and the Co-Op crowed for letting me stick around a bit longer.)

I am interested in how we should think about treaties.  More specifically, I am interested in different ways we might think about treaties, and why different ways might be appropriate in different circumstances.  At one extreme we might think of treaties as establishing sacred duties, as being based on oaths with deep religious implications.  (Jeremy Waldon has a very interesting discussion of the history of this idea in his recent Charles E. Test lectures, “A Religious View of the Foundations of International Law”.)  I think that there’s a case to be made that supposed principle of international law (or of natural law, depending on one’s account), pacta sunt servanda, depends on this understanding, though I won’t try to make that case here.  (If so, this would be interesting in light of fact that Hans Kelsen at one point held, I believe, pacta sunt servanda to be the “basic norm” of international law, though he later abandoned this.) Read More

Neo-Feudalism: Shaxson on Tax Havens

Parag Khanna has frequently discussed the rise of a neo-feudal age, with power devolving from nation-states to cities. Why are nation-states losing relevance?

One important reason is that tax havens are diverting ever more revenue away from social needs. Powerless to confront the wealthy or powerful corporations which take advantage of them, states must tax their middle classes more or cut services. Many authors have noted the proliferation of tax havens in recent years. But one rarely sees the literal trappings of feudalism re-emerge, as Nicholas Shaxson describes in his provocative account of the “City of London Corporation:”

The term “tax haven” is a bit of a misnomer, because such places aren’t just about tax. What they sell is escape: from the laws, rules and taxes of jurisdictions elsewhere, usually with secrecy as their prime offering. The notion of elsewhere (hence the term “offshore”) is central. The Cayman Islands’ tax and secrecy laws are not designed for the benefit of the 50,000-odd Caymanians, but help wealthy people and corporations, mostly in the US and Europe, get around the rules of their own democratic societies. The outcome is one set of rules for a rich elite and another for the rest of us.

The City’s “elsewhere” status in Britain stems from a simple formula: over centuries, sovereigns and governments have sought City loans, and in exchange the City has extracted privileges and freedoms from rules and laws to which the rest of Britain must submit. The City does have a noble tradition of standing up for citizens’ freedoms against despotic sovereigns, but this has morphed into freedom for money.

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“Ten Times More Productive”

I respect Tom Friedman’s Cassandran efforts to curb American dependence on foreign oil. One can occasionally snicker at his exuberant style, but not the environmentalist substance. America needs more green hawks like him.

But I was taken aback by his casual comment on a radio show that American workers need to be “ten times as productive” as Indian or Chinese workers to maintain current earning levels. Over the past fifty years, we’ve seen CEO salaries go from about 50 times employee average pay to a 500-fold multiple. If anyone needs to become “ten times more productive,” it’s those at the top of the “value chain.”

But the myth of the coddled everyman persists, spreading to a “new global elite,” as Chrystia Freedland reports:

The U.S.-based CEO of one of the world’s largest hedge funds told me that his firm’s investment committee often discusses the question of who wins and who loses in today’s economy. In a recent internal debate, he said, one of his senior colleagues had argued that the hollowing-out of the American middle class didn’t really matter. . . . (emphasis added)

I heard a similar sentiment from the Taiwanese-born, 30-something CFO of a U.S. Internet company. A gentle, unpretentious man who went from public school to Harvard, he’s nonetheless not terribly sympathetic to the complaints of the American middle class. “We demand a higher paycheck than the rest of the world,” he told me. “So if you’re going to demand 10 times the paycheck, you need to deliver 10 times the value. It sounds harsh, but maybe people in the middle class need to decide to take a pay cut.”

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HP v. Hurd as Complex, Despite NYT Nocera’s Op-Piece

Conventional talk says it’s impossible for HP to enjoin Mark Hurd, its ousted CEO, from misappropriating trade secrets, threatened by his employment with arch-competitor Oracle. People like Joe Nocera of the New York Times take the suit as further evidence of incompetence at HP’s board. The conventional talk is wrong—it’s a closer case than reported, contributes nothing to evaluating HP’s competence, and makes one wonder why a reporter at the New York Times offers opinions in the paper’s news pages.

Nocera writes that California law “frowns on” covenants not to compete, noting how “over the years,” its law has become settled that they are invalid.  Nocera doesn’t note that the statute driving this policy dates to at least 1872 and California is unusual among states in its hostility to the clauses.  But HP and Hurd didn’t sign any covenant not to compete, so that’s not an issue in the case.

What HP is asserting is a right under the confidentiality agreement it and Hurd did sign, and another California statute, of more modern vintage, that prohibits misappropriating trade secrets. The two statutes can be in tension, banning both non-competes and misappropriation, but not inevitably. A covenant is void per se, even when signed by someone incapable of misappropriation; misappropriation can be committed, even by a person signing no agreement at all—whether an invalid non-compete or a confidentiality agreement.

The tension is stark when competing work and appropriating trade secrets go hand-in-hand—as they may for Hurd working at Oracle while possessing HP trade secrets. When the statutory policies are in tension, the result is parsing facts. The per se bans on non-competes and misappropriation yield to analysis, akin to the rule-of-reason in antitrust law and balancing of contending equities when evaluating extraordinary remedies like injunctions.

The easiest case to resolve despite these tensions is where an employee hasn’t signed any agreement—no covenant not to compete and no commitment to confidentiality. Absent such a confounding agreement, under California law, the balancing may weigh against an injunction.  Skeptical judges may readily see a misappropriation cliam as an attempt to generate a de facto covenant not to compete or confidentiality agreement, when no actual commitment of either sort exists.

The harder case—which is the Hurd-HP case—arises when (a) the parties didn’t enter into a per se invalid non-compete, (b) the parties did enter into a valid confidentiality agreement, and (c) credible grounds appear that the former employee is poised to misappropriate trade secrets unless enjoined.

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Self-Sufficiency and Decoupling

I was recently reviewing some of David Singh Grewal’s work, including this excellent essay on Keynes and globalization. Grewal’s book on Network Power was very insightful, and his examination of Keynes promises to advance economic debates long stalled in stale orthodoxies. Grewal describes Keynes’s intellectual evolution from ardent free trader to skeptic, giving this explanation for the shift:

[W]hile Keynes cited many reasons for limiting economic globalization, including for the sake of what we now call the ‘policy space’ available to governments to intervene in the economy, it was international peace that was his foremost concern. Because globalization allows economic relations to form above and outside the state, there is no obvious route to a solution if things go awry (as might be expected) in complex chains of production and investment that cross national borders.

Grewal argues that current global imbalances are underwritten by the “novel combination of globalized finance and a world reserve currency that can be inflated at will.” His diagnosis reminds me of Manuel Castells’s prophetic dissection of dangerous uses of American financial power in the book The Economic Crisis and American Society—a work that, sadly, is as relevant today as it was when it was published in 1980.
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Are T.V. Programs Killer Apps?

Networks. In my youth, the term was most familiar to me as the word for large, national television stations. NBC was at the bottom of a small heap in the late 1970s. If I recall correctly, Johnny Carson and the Tonight Show supported most of the network in general. Now remember, there were only three networks and some local stations, yet NBC was unable to do well. Then NBC tried a show that I believe many thought would not work or have little success, The Cosby Show. Who knew? That show took off and NBC parlayed The Cosby Show into 20 years of dominance. Family Ties was OK but nothing brilliant. Nonetheless, with Cosby as the anchor, NBC tested and launched series such as Cheers, Friends, and ER with Wings and other decent fillers in between. In a sense NBC seemed to have cross-subsidized its programming on Thursday and even other nights (by launching and then moving series). In addition, that lead allowed NBC to promote all its other programming. Then came CBS which was in the doldrums and it tried a little thing called Survivor. Boom! CBS took off. Many OK, and some not so good shows have done well on CBS. FOX arguably uses American Idol to achieve similar results. NBC struggles so much that some rather good shows are lost and like the proverbial tree they fall but no one hears them.

The analogy is far from perfect (for one I am not certain that T.V. shows require large numbers to be useful then again they seem to do well in part because one likes to be able to talk about shows around the so-called water cooler), but I wonder if Yahoo!, AOL, Google, MSN, Facebook, and Twitter are in some ways similar to the T.V. networks. One killer app and the site grabs a ton of people who stick and may use other products from the network. Users can click away and can use the services in a simultaneous way in that one can work with one service at time or have multiple services running but not miss programming as was the case before the VCR. There are many open questions in this arena. For one, how easily can one switch from one service to another? In addition, are there similar problems regarding limited access (i.e., T.V. and cable can carry only so many channels but the Internet has greater capacity (though depending on the status of the network not as unlimited as some might argue)? A key issue in my mind is the problem of knowing that a good service or program exists. The Internet appears better than T.V. at letting users quickly decide what they like, and the information seems to spread rather well. Still, I am sure there are great services that I am missing (a recent one that someone mentioned to me was Dropbox). One often doesn’t know what is good until those pesky advertisers and marketers push information. My recent research has been looking into the way trademarks as brands have functioned on several levels, but one thing that jumps out is that brands are two-way information devices. Advertising is a major piece of that puzzle in one direction; the Internet and commentary is a major piece of the puzzle in the other direction (trademark law handles this idea poorly). Ironically, just as T.V. and print cry out because ads are being skipped, the Internet steps in and seems to deliver better returns on ads. The new difference is that in some cases those who pay for and create the content that was subsidized by ads are not seeing that money. In other words, as Paul Duguid has shown in his work and I have found in my research, early brands can be understood as having a big role in supply chains; we may need to think of modern networks in much the same way. There are many details and differences to address in the Internet arena, but I think these ideas will be part of how we sort out some of the online competition issues in play today.