After Partial Settlement, Oil Spill Case on a Slow Boil

The BP Oil Spill case settled! Well, part of it. The smaller part. But, still, we must count this a victory for U.S. District Judge Carl Barbier, whose reported 72 million pages of assigned reading will inevitably be shaved down. (Does this man have an iPad?) On Friday evening the court announced that BP had reached a settlement with the steering committee that represents thousands of private plaintiffs in the case. Judge Barbier postponed the trial indefinitely while the remaining parties, including the federal government,regroup. According to news reports, the settlement would cover claims for economic loss and medical harm. BP estimated that the settlement,which has no firm cap, might total $7.8 billion; the actual number would dependon how many plaintiffs accept the deal and how much they’re ultimately paid.Plaintiffs displeased with the offer could opt out and stay in the litigation.And all private claims against Transocean and other defendant companies remain.

On balance, the settlement appears to be a good thing. But this plate is just the appetizer. The main course—a pepper pot of federal civil claims and criminal charges—has yet to come. And that’s a dish that could really bust a gut.

Before I get to the federal claims,here’s why I like the settlement. The private claims—brought by shrimpers, restaurant owners, injured responders, the families of fallen rig operators and more—were incredibly diverse in factual elements and dogged by the uncertain standard that controls large punitive awards. That not only made their claims hard to value, but insured that any generous verdict would be sent into the deep-space of federal appeals, delayingfor years the compensation that many families and small businesses need now.

For those, like me, who hope theoil industry will be driven to reduce catastrophic risk offshore, the morepowerful lever has always been in the grip of government lawyers. As I explained in my last post, the current litigation also includes federal claims seeking civil finesunder the Clean Water Act. If Judge Barbier finds that the spill resulted from gross negligence, the maximum fine for the release could total $21.5 billion($4,300 assessed for each of 5 million barrels the government estimates was spilled). In addition, U.S. Attorney General Eric Holder suggested last week that “within months” his office could announce plans to prosecute. (These actions would not be a part of the current litigation.) Provisions under the Clean Water Act allow for criminal penalties up to twice the total amount of the economic loss resulting from the accident. No one yet knows the extent of economic loss (which would include loss to private claimants, natural resource damages claimed by states and federal agencies, and more), but it doesn’t take much imagination to conceive of criminal penalties in the $30-50 billion range. (Take $6 billion in compensation fund pay-outs; add $8 billion for the settlement; add another $10 billion for estimated resource damage; double.) Did I mention fines and jail time for individual employees?

To be sure, I am talking about thehigh end of federal fines and penalties, but even the possibility of such liability must leave BP executives staring at the clouds. Could BP settle with the government? Perhaps, but to contain all liability, the company would almost certainly seek to settle the civil and criminal actions together. That makes Eric Holder the head chef. And for now he’s got these cases on a slow but steady boil.

Black swans

No, not that Black Swan. More like this one. Read about it and make your opportunity count at MoneyLaw.

Mardi Gras is over. Time for the "Trial of the Century."

Well, another magnificent Mardi Gras has ended, and at this point,I’d normally be slouched on the sofa sipping a tomato juice (neat) and sorting beads.But not this year.  That’s because next week, squadrons of lawyers, journalists, petroleum engineers,and fisher folk are scheduled to descend on New Orleans, squeeze into a federalcourtroom, and begin on Monday what the media have modestly called, “The Trial of the Century,” otherwise known as the BP Oil Spilllitigation.

Whatever the rest of the century holds, it seems fair to say thatthis legal dispute, if it does not settle, will be themost complicated environmental trial anyone has ever seen.  With a thousand plaintiffs, a galaxy ofwitnesses, and 20,000 exhibits, this spectacular has more moving parts than a Madonna half-time show. As the trial unfolds, I’ll provide you with some occasionalshrimp-boots-on-the-ground legal blogging.

First, though, I’ll start with the background of the case (you mayalso be interested in these white papers from the Center of Progressive Reform: Regulatory Blowout: How RegulatoryFailures Made the BP Disaster Possible, and How the System Can Be Fixed toAvoid a Recurrence (Oct2010) and The BP Catastrophe: When Hobbled Law andHollow Regulation Leave Americans Unprotected (Jan 2011)). Here are some answers to commonquestions.

Q: Can you remind me whatthe BP Oil Spill was all about?  Iremember “Top Kill” and “I’d like my life back,” but the rest of it is a littlehazy.

A: On April 20, 2010 BP and its contractors were in the last stagesof drilling a three-mile long hole in the seabed fifty miles off the Louisianashore. They were in the process of plugging the hole, with plans to later extractoil from the massive reservoir that lay below. The oil rig was called “Deepwater Horizon.”  The well was called “Macondo” (yes, the samename as the fictional village in Gabriel Garcia Marquez’s OneHundred Years of Solitude—thevillage that was eventually blown apart by an apocalyptic storm and erased fromhistory.  This is what lit teachers call“foreshadowing”).

The project had not gone smoothly, and already operations were amonth late and $40 million overdue. At 9:30 that night, the well started burpingmethane gas. The gas shot up through the pipes, caught fire, and engulfed therig in flames. Eleven of the 126 people aboard died and many more were injured.Two days later the rig sank and oil began spewing from the wellhead, roughly amile below the surface. BP applied thousands of gallons of toxicdispersants on and below the surface in an effort to prevent the oil fromcoming ashore. Even so, the oil severely damaged beaches, estuaries, andmarshes, from Texas to Florida. Large swaths of the Gulf were closed tofishing.

As President Obama saidtwo months after the blowout: “Already this oil spill is the worstenvironmental disaster America has ever faced.” Earlier, BP’s then-chiefexecutive Tony Hayward invited public vilification when, in an inexplicable burstof self-pity, he whined, “I’dlike my life back.” Despite efforts to cap the well (including the so-called “Top Kill” method) oil continued to spew until July 15, 2010, when BP successfully capped the well and later sealed it with cement. According to some estimates, nearly five million barrels of oil had billowed into the Gulf before it was capped.

Q: What did later investigations show?

A: We’ve learned quite abit from media reports, industryincident reports, a presidentialcommission, an examinationby the Coast Guard and the Department of Interior, and a report fromthe National Academy of Engineering.

Basically, we know thatbefore the blowout BP used cheaper and quicker methods for building the well’swalls, misread important diagnostic tests, and removed the most importantprotective barrier to methane bursts before it should have. We also know therewere problems with a cement mixture that Halliburton had supplied and that employeesof Transocean made some bad decisions when they realized the rig was going toblow.

Q: So that explains the lawsuit.Who’s suing?

A: The trial in NewOrleans—officially called “Multi-District Litigation-2179”(MDL)—consolidates 535 lawsuits originally filed all over the country. Morethan 110,000 individuals and businesses have filed notice to take part in theMDL. Plaintiffs include fishers, seafood processors, restaurants, coastal landowners,individuals who were harmed by dispersants or oil, and many others.  The litigation also includes claims by thefederal government, Gulf Coast states, and a few municipalities. Several statesin Mexico have also filed claims. The federal and state (?) government claimsgenerally seek compensation for natural resource damage, response costs, ordamage to their economies.

Many of these plaintiffs are at the same time trying to resolvetheir grievances through BP’s Gulf Coast Claims Facility (GCCF), a $20 billion compensation fund administered by KennethFeinberg. Plaintiffs who reach a final settlement with the GCCF waive theirclaims and must withdraw from the MDL.

This trialdoes not address shareholder suits (which will be handled in Houston) orcriminal charges.

Q: Who are the defendants?

A: The most prominentdefendants are BP,which held the lease on the Macondo well; Transocean,which owned Deepwater Horizon; Halliburton,which poured the cement lining into the well; Cameron, which manufacturedthe blowout-preventer that malfunctioned during the crisis; and Nalco, which manufactured the dispersants thatare alleged to have made people sick and to have harmed the environment. Inlater stages of the litigation, the federal government and some states may berequired to defend their actions in overseeing containment of the oil andclean-up operations.

Q: What issues will the court decide?

A: For allits complexity, the goal of the trial is pretty simple: to determine theproportion of fault among the defendant companies and to determine the extentof penalties and damages. These questions will be decided in a bench trial(without a jury) by federal district court judge Carl Barbier.  In reaching his decision, he will rely onfederal maritime law, the Clean Water Act, the Oil Pollution Act, and the OuterContinental Shelf Lands Act. (The state law claims have all been dismissed aspreempted by federal law.)

Theallocation of fault, will, of course, affect the share that each defendant mustpay. But that amount also depends on the degree of carelessness the courtattributes to the parties. For instance, a finding of gross negligence orwillful misconduct could result in punitive damages, driving the verdict from afew billion to more than $20 billion. An award on the higher side could go farin helping a state like Louisiana (which suffered the most damage) to restoreits tattered coast and repair its economy. But such an award would almost certainly be appealed.

Q: Tell me more about Judge Barbier.

A:  Judge Carl Barbier has served on the U.S.District Court for the Eastern District of Louisiana since 1998.  He is a Clinton appointee. Judge Barbier wasborn in New Orleans and holds a law degree from LoyolaUniversity New Orleans.He is known for his expertise in maritime law and complex litigation. Over thelast year, he has impressed observers with his efficiency and endurance,wrestling hundreds of cases to the ground and consolidating them into thislitigation.

Q: How long will this trial take?

A: If it does not settle,it will take more than a year. Judge Barbier has planned the trial to unfold inthree phases. The first phase, beginning on Monday, will deal with everythingleading up to the explosion and the start of the oil leak. The second phase, scheduledto begin in mid-July, will focus on attempts to stem the flow of oil, inquiringinto the crucial question of how much oil was ultimately discharged into theGulf (a fact that affects the amount of penalties under the Clean Water Act). Thethird phase, which is not yet scheduled, will deal with the efforts to containand clean up the oil.

Q: You’ve mentioned settlement twice. Will this case settle soon?

A: Honestly, nobody knows.Many of the traditional experts (experienced trial lawyers and legal scholars)say it should. With such uncertainty about the punitive damages, the argumentgoes, both sides have strong incentives to find middle ground. Plus, BP cannotbe looking forward to seeing its dirty laundry aired out in court. But somelocal attorneys I’ve spoken to emphasize that individual personalities matter alot in settlement negotiations and that with so many people involved, negotiationscan easily derail.

Q: I missed Mardi Gras this year, should I make plans to visit NewOrleans to see the trial instead?

A: No. The courtroom will be completely packed with lawyers andjournalists.  There is only a smallamount of seating available to the public on a first-come, first-served basis.  Everyone else will have to watch the trial onvideo from “overflow rooms.” My crack research assistant Stephen Wussow willoccasionally visit the proceedings and report back. I’ve already warned him tobring lots of water and protein bars.

Q: Did Tony Hayward everget his life back?

A: Sort of. The former geologist and yachting-enthusiast left BP inOctober 2010 and now works for Glencore International, a commodities company involved inhardrock mining.  Mr. Hayward oversees policyrelated to environment and safety.

Rob Verchick is a lawprofessor at Loyola University New Orleans and a research scholar at the Centerfor Progressive Reform. This entry is cross-posted at CPRBlog.

EPA Releases Inventory of Legal Authorities to Advance Environmental Justice

Hi everyone.  I'm happy to join Jurisdynamics as an occasional contributor.  I'm a law professor at Loyola University New Orleans.  I recently served in the Obama administration as Deputy Associate Administrator for Policy at the U.S. Environmental Protection Agency.  My areas of interest include disaster law and policy, adaptation to climate change, and, as you'll see below, environmental justice.

Last fall, in a speech I gave at an environmental justice event in Los Angeles, I ruffled some feathers with an impromptu line that went something like this:  “Believe it or not, federal environmental statutes say nothing directly about environmental justice.” During the “Q & A” I was challenged by an environmental activist and lawyer who listed various ways that advocates had successfully used federal environmental statutes to address inequalities in many of California’s minority and low-income communities.

I saw immediately that I had not been clear.  For what I meant was that although environmental statutes could be used to further the interests of social justice, the terrain was not landscaped for that purpose. It took activists with imagination and grit to climb the peaks my questioner was talking about.  It took lawyers who could scan the glaciers of the federal code and find a foothold—a place where you could jam your steel-toothed boot, stabilize your momentum, and launch yourself forward. (EPA policy analyst Abby Hall and I expand on our theory of regulatory “footholds”—and also regulatory “rope lines”—here.)

Like community lawyers, policy makers need footholds too. EPA Administrator Lisa Jackson has made environmental justice a pillar of her tenure. But many of our environmental statutes, because they pre-date the modern environmental justice movement, were not developed with this priority in mind.  So Administrator Jackson asked her lawyers to survey the landscape of environmental authorities for legal standards and directives that would provide the positioning and leverage to promote “the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income.” EPA’s lawyers then catalogued those footholds and put them in a guide intended for use across the agency.

In an admirable display of integrity and transparency, EPA has now publicly released that guide for all lawyers, activists, and citizens to see – and perhaps use.

The document, titled Plan EJ 2014:  Legal Tools, offers “key legal authorities for EPA policy makers to consider in advancing environmental justice.”  (Disclosure: as an EPA official in 2009 and 2010, I contributed to the development of environmental justice policy and reviewed legal strategies related to environmental justice.) More than a hundred pages in length, “Legal Tools” reviews enabling provisions along the full armada of environmental acts.  There are sections on air programs, water programs, and programs in Indian country.  There are discussions of environmental impact statements, government procurement programs, the grant-making process, and more. 

Scott Fulton, EPA’s general counsel, emphasizes in a foreword to the report that “Legal Tools” is a “living document” meant to adapt and grow.  By necessity, it focuses on “those authorities that appear to be most relevant to the environmental justice challenge as we currently understand it.”

Some of those authorities have already been deployed. When EPA recently required better monitoring of nitrogen dioxide emissions near highways (where low-income and minority populations are more likely to live), it grounded its decision in the Clean Air Act’s injunction to protect public health with an adequate margin of safety, including the duty to consider the vulnerability of “sensitive populations.” (EPA’s recent Interim Guidance on considering environmental justice in rulemaking tells the story nicely.)

 Similarly, in proposing new controls on hazardous-material recycling, EPA relied on an express concern for public health stated in the Resources Conservation and Recovery Act (40 C.F.R §§ 260, 261, 266) to support a full examination of demographic analysis and a specially tailored community engagement plan.

Given the scope of the “Legal Tools” inventory, there are bound to be spots in need of expansion and improvement.  That’s why “Legal Tools” should be circulated widely among scholars, lawyers, and other interested readers. Let’s start talking about the next pinnacle EPA should confront. Few mountains have handrails.  But the footholds are there.

cross-posted on CPRBlog.

Soft law and the global financial system

Jim Chen, Book Review, Soft Law and the Global Financial System: Rule-Making in the Twenty-First Century, 26 Emory Int'l L. Rev. (forthcoming 2012) (available at http://ssrn.com/abstract=1944294):

In Soft Law and the Global Financial System: Rule-Making in the Twenty-First Century (2011), Christopher J. Brummer provides a detailed and informative analysis of the international regulatory response to the global financial crisis of 2008. This accomplishment alone warrants a close look at this book. But Professor Brummer goes further in this pivotal work on the law of international finance. He provides a persuasive theoretical account of international financial law. Soft Law and the Global Financial System not only describes the mechanisms of lawmaking and standard-setting for global financial markets, but also delivers a workable framework for prescribing and perhaps even perfecting the regulation of the world’s most vital and volatile economic institutions.

A summer teaching clearinghouse

Editor's note:: Reposted from Health Law Blog.

Although many law schools, both in the United States and to a lesser extent abroad, hire faculty members other than their own to teach summer school, this has always been a haphazard process. Establishing a general clearinghouse for law school summer teaching positions is likely to provide a great benefit for both law faculty and law schools across the country and the world. The Health Law Prof Blog has agreed to host the clearinghouse by posting all of the notices of teaching opportunities for the Summer of 2012.

Please share the following information in your announcement and send it for posting on the Health Law Profs Blog to either Jennifer Bard at jennifer.bard@ttu.edu or Katharine Van Tassel at kvantassel@stu.edu:

(a) the name of your school; (b) the name of the chair of your summer hiring committee and that person's contact information; (c) any particular subject areas in which your school is looking to hire; (d) the dates that the summer class(es) will be taught; and, (e) any other information you think might be relevant.

Progressive Taxation: An Aesthetic and Moral Defense

Jim Chen, Progressive Taxation: an Aesthetic and Moral Defense, 50 U. Louisville L. Rev. (forthcoming 2012) (available at http://ssrn.com/abstract=1980731:

The power to tax is at once the power to create and the power to destroy. If the United States government hopes to discharge its primary duty as creator and protector of its citizens’ wealth, it must be willing to destroy wealth, from time to time, by redistributing it. More than any other tool, the means by which government finances and depletes its treasury affects the societal distribution of wealth. Differential taxation and targeted spending are the most significant and most effective means by which government can “gradually and continually . . . correct the distribution of wealth to prevent concentrations of power detrimental to the fair value of political liberty and fair equality of opportunity.” Redistribution and the attendant destruction of entrenched wealth serve as society’s ultimate weapons of “creative destruction.” Of the many forces that have propelled the United States to the economic, political, social, and military pinnacle of the modern world, its willingness to countenance radical technological and organizational upheaval probably ranks first. American prosperity depends on the federal government’s commitment to an economic environment in which citizens are able not only to amass large amounts of new wealth, but also to lose it in rapid and remorseless fashion.

Update: I am grateful to Paul Caron for featuring this article on Tax LawProf Blog.

Innovation Incentives Part 3: Combining Innovation Index and Product Cluster Models

Understanding the Consequences of Linking Market and Regulatory Incentives for Drug Development: Part 3

Editor's note: This is the third installment of a three-part series.

In Parts 1 and 2, we learned that it is both possible and valuable to import empirical scientific methods typically used in the hard sciences to the study of law. In fact, in our analysis of patent law and policy we can move beyond patent valuation to assess how and indeed whether a given piece of law or policy is working in conjunction to its so-called original policy intent. This includes the assessment of innovation within the context of the patent bargain, and whether governments that have accepted linkage laws are being rewarded in their twin policy goals of producing more new and innovative drugs and facilitating timely generic entry. Put another way, can we assess using the new tools of empirical legal research whether, as Senator Hatch put it at the time the U.S. linkage legislation came into force, the public is in fact “receiving the best of both worlds - cheaper drugs today and better drugs tomorrow.”

We can attempt to address this possibility using the innovation index discussed in Part 2 in combination with 3-D spatiotemporal models such as those used in the medical sciences. Over the last few decades, these models have been used increasingly for studying protein, DNA, RNA, and other structure-function relationships, including using x-ray and other crystallography techniques. Consistent with their use in medicine, 3-D legal models can be used to construct data for both descriptive (structural) and prescriptive (functional) law-making and law-reform purposes.

Read the rest of this post . . . .For example, in our Northwestern study, we developed a 2-D model of identifying patents in relation to “new and innovative” drugs and “follow-on” drugs that tracked the functional and temporal evolution of drug forms and associated patents over time. The example below is for the combination of Salmeterol and Fluticasone into one of several available forms of Advair®. We referred to this technique as a “patent tree” method and used it specifically to identify legally-related drug forms, associated patents, and patent types.

Fig. 1. Example of Convergent Patent Tree Analysis for Forth Generation Product Advair Diskus.®Patents were identified using the specific and general search strings described in our Berkeley study. In addition to quantifying patents per drug, the patent tree method allows assessment of how specific drugs evolve into related drug forms or (in this case) drug products representing combinations of known drugs. In addition, the patent tree analysis allows for identification of relevant patent types based on the classification nomenclature described in the Northwestern study. Finally, the patent tree analysis provides data relating to drug development, but also on the type of patents selected by pharmaceutical companies for listing on the patent register in order to prevent generic entry.

This method can be extended, as shown below, to identify “product clusters.” In particular, the patent tree method can easily be expanded to include patents listed on the patent register under linkage law, and a diagonally increasing axis of cumulative spatiotemporal growth. The resulting model represents a constellation of legally and functionally related new and follow-on drug forms and regulatory approvals, patents associated with these drug forms, the fraction of total patents listed on the patent register in order to slow down generic entry under linkage laws, and how each of the data classes relate to one another over time.

Fig. 2 Product Cluster-Based Model of Drug Development.Product clusters begin at some point in time with the first new and innovative drug (●; NCE) and associated originating patent (●). With time, and vetting by the market and regulators, further follow-on drug approvals (●) and patents (●) are granted within the cluster, and an increasing number of these patents are listed on the patent register (●). Listed patents can be used increasingly over time to prohibit generic entry not only on the originating new and innovative drug, but also on all drugs in the cluster that are deemed under law to be relevant to the originating drug.

We are now in a position to take our 2-D product cluster model above, first reported in 2011, and combine it with the innovation index depicted in Part 2 of this series, reproduced below for convenience.

Fig. 3. Innovation Index Data for Total Approval Cohort. Bar graphs showing the number of total approvals expressed as a function of the level of innovation (LOI) before (a) and after (b) of generic approval data. c Brand approvals expressed as a function of LOI. Solid line is a fit of the data to a single exponential function. d Cumulative normalized brand approvals expressed as a function of LOI. Solid line is fit using a sigmoidal function.

The combination of the drug nomenclature, product cluster and innovation index described in Fig. 4 yields a potentially new way of looking at the impact of regulatory and market incentives on drug development by multinational firms, As shown clearly by the data in the Boston study, this clearly includes both brand-name firms and generic firms, as both are pursuing cluster-based models of drug development. The resulting analytical model focuses on drug development driven by purposeful policy, and cumulative vetting of serial products by regulators and the market.

Described in detail in a forthcoming book, drug clusters denoted ‘on deck’, ‘at bat’, and ‘home run’ represent a theoretical mock-up of how drug clusters grow in time from a spatiotemporal perspective. In this model, product-patent clusters begin their life as single-drug products or small groupings at the most innovative end of the index and, with increased vetting of products in the cluster over time by regulators and the market grow in scope to encompass an increasing number of products and patents. As this occurs, the cluster may be anticipated to ‘swing up and to the left’ of the innovation index, moving from a high level of innovation with a low number of patents and listed patents to first a moderate and then a much lower level of innovation but with greater spatiotemporal characteristics. The model shown here is for 2,087 drug approvals over an eight year study period; similar results have been obtained using patents and chemical components.

Fig. 4. Combining Innovation Index and Product Cluster Models to Study Portfolio-Based Drug Development and Hedging.Product clusters are hypothesized to begin life at the most innovative end of the spectrum, with few patents and a small or negligible number of listed patents. Over time, and increased vetting by regulators and the market, the cluster expands to include more products, patents and listed patents but, as a whole becomes less and less innovative. The desired end point (the “home run”) is a substantial but low level cluster with numerous products, patents and listed patents, and the widest scope of market exclusivity and cumulative patent protection. Prior to this point, clusters are “at bat”, as they reach a critical state prior to moving into an expanded spatiotemporal state or merely “on deck” as firms await critical regulator and market vetting.

An important observation with regard to product-patent drug clusters is that as a given cluster grows spatiotemporally over time, it grows not only in scope but also in the scale of the interrelatedness of its functional components over time.

As noted in 2001 by Kingston and later by Polk & Parchomovsky and, notably, the EC Pharmaceutical Sector Inquiry, the strength of patent portfolios and related product clusters from an intellectual property law perspective is “greater than the sum of its parts”. This “more is different” element, originally described in 1972 by PW Anderson, is characteristic of complex systems, including complex legal systems such as those described by JB Ruhl and many others in the mid-1990s. As noted in Part 1, we have referred to the complex multidirectional interrelationships and interdependencies between drug development, drug regulation and intellectual property law in our previous McGill and Berkeley studies as a regulated Therapeutic Product Lifecycle, or rTPL.

Of interest, our data show that the profit of a given molecule is strongly related to the number of patents, regulatory approvals, the number of patents listed on the register, and the range of drugs and regulatory approvals that are legally related but separated by only very minimal changes to existing uses and chemistry. This is true even for drugs thought be innovative such as those with First in Class and New Active Substance (New Chemical Entities), owing to regulatory loopholes.

Somewhat surprisingly, in light of global innovation policy over the last 50 years, the greater the number and scope of these metrics the lower is the calculated level of innovation of a basket of drugs in a product cluster. As market and regulator vetting increases with time, one sees generally (1) more patents, regulatory approvals, fractional patent listing, patent classifications per marketed drug, (2) a greater follow-on-to-new drug ratio in the cohorts studied, and (3) greater profitability for less innovative drugs.

Indeed, drug clusters driven by line extension, or follow-on, drugs are proving to be very profitable. For example, we found that the vast majority of approval, patenting and chemical development activity associated with brand pharmaceutical products is directed to the development of Me Too drugs, in particular follow-on Me Too drugs. Of the top 25 most profitable drugs in 2006, 48% (12) were line extension Me Too drugs. The combined sales of these drugs were US $45.7 billion dollars. Follow-on First in Class drugs represented 28% of the top 25 selling drugs, and 7 of the top 15 selling drugs. Profit on this group of drugs was US $39.7 billion dollars in 2006.

Combined, follow-on Me Too and First in Class drugs accounted for 19 of 25 of the most profitable drugs, with total sales of US $85.5 billion in a single year.

From a "science of law" perspective, a major advantage of the rTPL and product cluster models is that there is, in fact, considerable empirical evidence available for study for all interested parties. This includes the various types of new and follow-on drugs, patents, patent classifications, listed patents, related litigation, as well as the relation of these metrics to one another over time. This wide array of empirically observable metrics and the observation that they change over time sets up the possibility that, akin to protein folding and X-ray crystallography models, the data can be expressed in 3-D spatiotemporal form.

Indeed, the goal of our empirical work over the last four years involving new and follow-on drugs, patent trees, patent types, WHO Anatomical Therapeutic Classification (ATC) data, litigation data, the innovation index, and product cluster model is to convert the cumulative data into 3-D formats used in the medical sciences. For example, the protein-RNA model presented below underscores the utility of 3-D “rotational” models to both identify and quantify the complex structural and functional characteristics in a given network of biological components, here those between an RNA strand and protein components in the context of Multiple Sclerosis.

Fig. 5. Medical Sciences Template for Rotational 3-D Spatiotemporal Models of Cluster-Based Drug Development. From: Joint Evolutionary Tree Method for Study of MS.

As discussed previously, rotational 3-D drug product-drug patent cluster models would be particularly useful to policy-makers and law-makers in order to enable visual and numerical quantification of the impact of intellectual property law on drug development, generic entry, and access to essential medications in the same manner that one might look at a car from behind (highlighting the ‘gas tank,’ or original drug product and associated patent tandems) as well as from the side (from the rear to the front of the vehicle, underscoring how and when approvals, patents, and listed patents increase over time with market and regulator vetting).

In this manner, extrapolating the empirical techniques conventionally used in the hard sciences to the study of law, including patent law and innovation policy, offers an important opportunity to not only quantify the effect of a given piece of law or policy, but also to help determine the vires of such laws after they have been put in motion and to guide law reform efforts in light of objective arm’s length evidence.

It is hoped this series of articles has shed some light on the utility of traditional scientific methods for quantitative and qualitative assessment of patent value, and whether laws made decades ago to enhance innovation in the pharmaceutical sector and to facilitate timely generic entry are producing intended effects, unintended effects, or some combination of both. A second consideration is whether empirical legal research can be a valuable tool to assess the convergence of public health law and industrial law such as that which has evolved in most developed nations over the last three decades.

In any event, it will be interesting to see whether, as in other fields such as medicine and engineering that are accustomed to taking an “evidence-based” approach to problem identification and problem solving, whether we in the legal field may also include empirical evidence in our expanding toolkit of legal assessment and interpretation methods.

Innovation Incentives Part 2: Patent Valuation

Understanding the Consequences of Linking Market and Regulatory Incentives for Drug Development: Part 2

Editor's note: This is the second installment of a three-part series.

In new work by our group, we have outlined a tandem of new methodological tools to identify and quantify new and follow-on drugs and patent valuation. The first is a harmonized method to quantify drug approvals, patents and associated chemical components that summarizes and extends our previous work on topic. The second provides a new “innovation index” that incrementally grades the value, not only for patents in the life sciences and other technology-intensive sectors, but also for associated regulatory approvals, chemical components, patent characteristics, etc. The innovation index values are based on evidentiary hurdles and prioritizations for several classes of “new” and “follow-on” drugs disclosed by drug regulators. As indicated by the titles of the articles, one focuses on the quantitative side while the other focuses on the qualitative side of the analysis.

The Boston Article presents a harmonized method to collect, compare, and quantify regulatory approval data from multiple cohorts of new and follow-on drugs. We looked in some detail at about 2,000 regulatory approvals, 5,000 patents, and 130 chemical components. The analysis encompasses all drug classes enumerated, described and prioritized by domestic drug regulators. The drug classes were gleaned from the usual literature reviews, supplemented by several hours of consultation with Health Canada regulators and review of Health Canada Guidance Documents on topic. A second purpose of this work was to go beyond simplified descriptors of new and follow-on drugs found in the literature, to categorize classes of new, line extension and generic approvals according to the nomenclature used by regulators themselves. This latter point is relevant is relevant, as we found different scholars use different approaches and nomenclatures, sometimes very different, and that these approaches were not always the same as those used by regulators themselves.

Read the rest of this post . . . .The innovation index work described in the companion Santa Clara Article was driven by the fact that almost all published patent assessment methods measure innovation using primarily quantitative methods, otherwise referred to as ‘counting methods.’ For reasons discussed in work on topic by Kingston at Trinity, Lemley at Stanford and Polk and Parchomovsky at Penn, and the sources cited therein, while quantitative models are widely considered to be problematic, a model that assesses patent value using qualitative methods that track, or are at least designed to track social benefits, has not yet emerged. A second reason for developing the two methods is that is that even when many scholars and commentators do look at the “innovative” aspect of the data, they simply accept data provided by regulators in their respective annual reports in a per se manner.

While developing a novel scientific method for either obtaining or analyzing legal data is fraught with its own problems, this step nevertheless forms a necessary component of the “trial and error” heuristic typical in the hard sciences. As more individuals with prior experience in medical science enter law and legal scholarship, we will undoubtedly see more and more scientific studies of law, including importing of fundamental mathematical, statistical, curve fitting, modeling, and graphing methods. In the Santa Clara paper, a qualitative innovation index is reported that we hope may fill some of the gaps in patent valuation. One of the figures from this work, relating to regulatory approvals, is shown below.

Fig. 1. Innovation Index Data for Total Approval Cohort. Bar graphs showing the number of total approvals expressed as a function of the level of innovation (LOI) before (a) and after (b) of generic approval data. c Brand approvals expressed as a function of LOI. Solid line is a fit of the data to a single exponential function. d Cumulative normalized brand approvals expressed as a function of LOI. Solid line is fit using a sigmoidal function.

The figure presents data for many classes of new and follow-on drugs and categorizes these classes using a linear scheme. Raw data values are given in the Y axis of Fig. 1a and 1b, the difference being generic data were subtracted in Fig. 1b to isolate data only from ‘innovator’ firms. The X axis in both panels represents the innovation index data. The innovation index data are referred to as transformed data, because the raw data pertaining to drug approvals, drug patents, and chemical components are transformed into qualitative values on a linear scale (0-15) using the methods outlined in the Santa Clara paper.

The strengths and weaknesses of the hybrid “subjective-objective” nature of data transformation, and the similarities to subjective-objective hybrid models that are already widely accepted for use in the fields of drug approval, patent grant, and the adjudication of patent claims by the courts are discussed more fully there.

Data can, of course, be fit to many types of numerical functions, linear or non-linear; increasing or decreasing. Fig. 1c above shows that the data in the bar graph of Fig. 1b fit to a declining exponential function. As can be seen by the close fit of the data to the function, the choice of an exponential relationship was well founded. The data are interesting as they demonstrate an exponential decline in the numbers of drugs in classes with relatively high innovation index values. In other words, the vast majority of drugs approved in Canada have a very low index value, and indeed are primarily follow-on Me Too drugs.

Fig. 1d represents the normalized cumulative data fit to a sigmoid (S-shaped log) function, which is a numerical approximation of “how fast” the innovation index data rise to their maximal peak. A fast rise, as we see here, suggests that most of the drugs approved over nearly a decade are in the low index bins and that the data in the low index bins accumulate much more rapidly than do the data in the higher index bins. Similar, though not identical, results were obtained with several indicator Cohorts studied, including a wide Cohort of 2,087 drugs, a narrower Cohort of 95 of the most profitable drugs, and a similar Cohort of associated patents and chemical components.

The innovation index provides a means of weighing legitimate patent protection against perceived societal benefit. As such, it affords a qualitative measure of the innovative nature of drug patents that, when compared to counting methods, may more adequately reveal the outcome of development incentives for firms and regulating bodies insofar as these parties have conflicting interests.

The results from our analysis indicate that it is not the most innovative or even strongly innovative drugs that are attracting the greatest firm patenting effort. Rather, when gauged against development priorities publicly disclosed by regulators and governments, including specifically in the United States and Canada where linkage first came into force, it is the least innovative drugs of all classes investigated that display the strongest regulatory approval and patenting efforts. This issue is touched on in more detail in Part 3 of the series.

In this manner, our data are contrary to the established dogma that the strength of patent protection is proportional to the "strength" of innovation of a given product. As discussed more fully in Part 3, the data obtained also support the conclusion that cluster-based, or portfolio-based, drug development has become the dominant innovation strategy for both brand and generic firms. Indeed, data from our Boston study demonstrates conclusively that generic firms are accruing more patents than their brand counter-parts, especially in the new drug approval category.

Finally, the data suggest that the perception on the part of governments and the public to the effect that societal benefit comes as a kind of “natural consequence” of patenting may need to be reconsidered.

Innovation Incentives Part 1: Regulated Therapeutic Product Lifecycle

Understanding the Consequences of Linking Market and Regulatory Incentives for Drug Development: Part 1

This is a three-part series by guest blogger Ron A. Bouchard.

Dr Ron A. Bouchard is an intellectual property lawyer and scholar, specializing in biomedical products. He began his career as a medical scientist, completing a PhD and Postdoctoral Fellowship in the field of ion channel biophysics and Ca2+ imaging. He shifted focus to obtain a law degree specializing in pharmaceutical and biotechnology law and has been involved in the prosecution, acquisition, financing, distribution, and litigation of intellectual property rights. Dr Bouchard has appeared before the Federal Court of Canada and the Supreme Court of Canada. He is a Professor of Law and Medicine, and is the recipient of a Canadian Institutes for Health Research (CIHR) New Investigator Award. He is currently on sabbatical.

Patent valuation has become a hot button issue of late, particularly in the area of pharmaceuticals. In the effort to win the global innovation race, substantial policy and economic efforts are being made by developed and developing nations alike in support of innovation, both in terms of understanding it and making more of it when innovation does occur.

The issue of patent valuation presents to an increasingly educated lay audience as a kind of titanic contest of wills between those who prefer big incentives for innovation and those who focus of the social benefits, or outcomes, of innovation.

Many studies of innovation and patent valuation use economic models to assess the business value associated with patents at a given point in time, as well as ways of maximizing value from those patents. Although there are certainly many skeptics, innovation and patenting have nevertheless become synonymous in economic discussions of national productivity and prosperity in a wide variety of debates, including scholarly, political, civil service, and in the media.

Read the rest of this post . . . .In the world of life sciences products, a distinction can be made between an economic analysis - even one cast in a law and economics light - and a patent law analysis. This is because one is primarily (though not exclusively) in service of utilitarian benefit and the other is primarily (though not exclusively) in service of equity, equality and the terms of the traditional patent bargain. As instructed by the courts when pharmaceutical patents are at issue, the patent bargain is itself to be interpreted through the public health mandate as it is bound by the unique trifecta of patent law, food and drug law and linkage law.

This places patent valuation front and center of any discussion of law reform focused on pharmaceutical innovation, as well as discussions and law reform aimed at reducing drug costs and expenditures. The fact that, unlike in many other industries, follow-on products may offer little benefit compared to existing products raises the bar on this discussion, as does the fact that patents associated with these products can be used as more of a sword than a shield to evergreen older product lines and keep drug prices high.

Because the availability, costs and expenditures of drugs are regulated by such a complex array of legal, policy and political vehicles, their analysis is quite amenable to “complexity”-based frameworks, which by design place significant emphasis on feedback loops between multiple interrelated nodes.

In this case the nodes, or spheres to use the nomenclature of Walzer, are industrial, economic, public health, and political in nature but also play out in numerous intersecting ways in statutory, regulatory, policy, and judicial terms. In our Berkeley study, we presented the model below for the development, consumption and regulation of drug products, referring to it as a regulated Therapeutic Product Lifecycle (rTPL).

Fig. 1. rTPL Innovation Ecology Model for Drug Development.

Innovation is represented as an iterative process over time involving several functional groupings, including national science and technology (S&T) policy, clinical research, university and firm commercialization, innovation by private firms, drug regulation by national governments, and intellectual property and regulatory (IPR) rights covering both drug submissions and marketed products. Large red nodes represent functional groupings, and include sub-functions enumerated in the figure. Red lines are multi-directional between nodes and sub-functions and are independent of time (acknowledging that the process generally moves clockwise).

Through diagrams such as these, one can see that patent rights and incentives permeate all stages of the rTPL. As we have noted elsewhere, even assuming a relatively linear innovation process, because of regulatory incentives that allow the public to gain access to therapeutic products prior to conventional Phase 3 trials, and because linkage laws allow for the development of clusters of interrelated new and follow-on drugs and associated patents, the regulatory lifecycle for drugs has become at once increasingly complex, intertwined, and collapsed. Linkage laws in particular complicate the picture as they are intended to both facilitate industrial development in the form of new drugs and to satisfy the public health mandate by yielding cost savings on generic entry.

One might argue that the convergence of public health and industrial policy of this nature calls for a clear and concise set of policy levers governing the complex innovation ecology for therapeutic products, particularly in jurisdictions where the availability of both brand and generic drugs are regulated by linkage laws.

Yet, as noted in the recent decision of the High Court of Delhi in India, where (like the E.U.) linkage was rejected, the court held that worldwide there is a "raging debate on whether patent linkage should be permitted," concluding there is "no uniformity in the policy of different countries."

In North America, the birthplace of linkage, the Supreme Court of Canada held in its seminal decisions in Biolyse and AstraZeneca that linkage regulations tying generic entry to brand-name patents must be made in a patent-specific manner. The court's pronouncement highlights the importance of the qualitative and quantitative nature of the balance inherent to the patent bargain, especially when read in light of the so-called “special provisions” of linkage laws when parsing pharmaceutical patents.

As pointed out by the Global Consortium on Pharmaceutical Linkage in a recent article, patent law is also antecedent to linkage in the United States, which was the first jurisdiction globally to promulgate linkage laws. This was made clear by the seminal reports of the Committee on the Judiciary (COJ) and the Committee on Energy and Commerce (CEC) prior to the coming into force of Hatch Waxman. Both the COJ and CEC made it clear that the twin policy goals of linkage laws were to encourage the development of “new and innovative” drugs and to facilitate the “timely” entry of generic drugs.

Both of these competing policy goals depend on patents, and so again we arrive at a pivotal role for patent valuation in determining outcomes related to the twin policy goals at issue.

So, what evidence is there to assess whether these two policy goals have been met by patent, food and drug, and linkage laws? What evidence is there to determine the role of “strong” and “weak” patents in producing outcomes, including unintended consequences that may have been completely unanticipated by law-makers at the time pharmaceutical law and policy came to the fore in the early 1980s and 1990s?

This will be the subject of Part 2 and Part 3 of the series.

The Waffle House index

A string of bizarre Waffle House robberies has put the South's most familiar chain of 24-hour diners in the spotlight. Alongside grits, toast, and (yes) waffles, Waffle House does serve up a serious point about disaster law and disaster management.

With total seriousness, FEMA has coined the concept of a Waffle House index for measuring the impact of a disaster on a community:

If a Waffle House store is open and offering a full menu, the index is green. If it is open but serving from a limited menu, it’s yellow. When the location has been forced to close, the index is red. Because Waffle House is well-prepared for disasters … it’s rare for the index to hit red.

Waffle House therefore serves as an informal but readily assessed gauge of social susceptibility and resilience. Waffle House tends to be well-prepared for disaster. By extension, communities that host a Waffle House have at least one prominent actor taking account of catastrophic risk. And the presence of full service as usual at Waffle House signals the resilience with which that community has responded to disaster when it strikes. These are themes that permeate Disaster Law and Policy (2d ed.) and derivative works such as Law Among the Ruins.

Merger to Monopsony: AT&T, T-Mobile, and the Clayton Act

In a pivotal antitrust decision, Judge Ellen Huvelle of the US District Court for the District of Columbia has allowed Sprint and Cellular South to pursue their suits to enjoin AT&T's proposed acquisition of T-Mobile. These suits pose a significant barrier to the merger of AT&T and T-Mobile. The ability of Sprint and Cellular South to pursue their claims represents a modest but important victory against the domination of the American wireless industry by an emerging AT&T/Verizon duopoly.

Sprint and Cellular South's lawsuits complement the United States government's suit to block the AT&T/T-Mobile merger. The Department of Justice's complaint emphasizes the traditional elements of a claim arising under section 7 of the Clayton Act. The government's case against the proposed union of the second and fourth largest wireless carriers in the United States draws heavily from the familiar arsenal of antitrust weapons against anticompetitive mergers. According to the Herfindahl-Hirschman index, the standard measure of industrial concentration, AT&T and T-Mobile would command the single largest share of the United States wireless market and an overwhelming share in many metropolitan markets. AT&T's acquisition of T-Mobile would eliminate potential competition and foreclose future entry by one of the country's peskiest and most creative wireless carriers.

Read the rest of this post . . . .In many merger cases, the contribution of antitrust law begins and ends in the United States Department of Justice. No matter how substantially a proposed merger may lessen competition or tend to create a monopoly, competitors of the combining firms face formidable barriers that often prevent them from suing under section 4 or section 16 of the Clayton Act. The antitrust injury doctrine requires competitors to prove that they have not merely sustained some economic loss, but have suffered injury of the sort that the antitrust laws were intended to prevent. The need to show antitrust injury sometimes forces competitors to allege that the merged firm would engage in predatory pricing, a theory of antitrust liability that can be difficult to prove.

Two recent Supreme Court decisions, Bell Atlantic v. Twombly (2007) and Verizon Communications v. Trinko (2004), raise additional obstacles to antitrust plaintiffs, especially in suits alleging anticompetitive conduct in the telecommunications industry. Twombly requires plaintiffs to plead facts with sufficient particularity so that a court can find it plausible, and not merely imaginable, that defendants violated the antitrust laws. Trinko holds that violations of the Telecommunications Act of 1996, strictly of their own force, do not constitute antitrust violations. Plaintiffs must prove conduct that offends the antitrust laws, independent of their lawfulness under the Telecommunications Act or the implementing regulations of the Federal Communications Commission (FCC).

The magnitude of these barriers to suit heightens the importance of Judge Huvelle's decision to allow Sprint and Cellular South to pursue their suits against AT&T's proposed acquisition of T-Mobile. Any antitrust suit in which competitor-plaintiffs successfully deflect a rule 12(b)(6) motion to dismiss represents a legally noteworthy development. An antitrust plaintiff that clears the Rule 12(b)(6) hurdle has shown antitrust injury and has satisfied both Twombly and Trinko. That plaintiff has pleaded facts that give rise to a plausible theory of antitrust liability beyond the violation of any applicable FCC regulations. That is exactly what happened in Sprint Nextel Corp v. AT&T Inc. and Cellular South, Inc. v. AT&T Inc. To fully appreciate Judge Huvelle's decision in these cases, we must first understand the economic and technological terms by which American wireless carriers compete.

Sprint and Cellular South's involvement in the AT&T/T-Mobile merger is important precisely because this controversy is no ordinary story of industrial concentration. The proposed creation of America's largest wireless carrier has economic significance transcending its $39 billion price tag. The private suits against AT&T's bid for T-Mobile mark a significant step in the development of antitrust law, especially as applied to an industry as technologically intense as wireless communications. In three decades, the American wireless industry has come a very long way from its origins in first-generation (1G) wireless technology and the breakup of the Bell system. 2G wireless technology enabled the first wave of data transmission. Even more significantly, the expansion of the 2G spectrum gave American consumers something they had not enjoyed in either wireline or wireless communications: meaningful choice from a broader spectrum of carriers competing on price and on service. The third generation of wireless technology brought mixed blessings. What consumers gained through faster speeds and enhanced services, they lost to creeping concentration as the country's leading carriers, Verizon and AT&T, increased their shares of the market. Technological incompatibility between the leading 3G protocols has allowed Verizon and AT&T as duopolists to operate their own wireless ecosystems, insulated from fiercer levels of competition that could and should prevail in this industry.

Many American consumers now treat their wireless devices as their primary or even exclusive vehicle for voice communications. It is no longer enough to speak of phones or even of "smartphones" that bridge the conventional gap between voice and data. Americans transmit an astonishing volume of information over wireless networks. The most sophisticated wireless devices and applications designed for those devices give consumers all sorts of intelligent ways to enjoy, create, transform and share content. Wireless devices and networks have liberated consumers from the geographic constraints inherent in legacy wireline technology. Consumers expect — and deserve — the ability to travel with complete confidence that they can call and be called, that they can navigate the World Wide Web and manipulate applications and content, with no perceptible reduction in the level of service they enjoy at home.

Against this backdrop, we can understand the true significance of Sprint and Cellular South's suits against the AT&T/T-Mobile merger. Increased concentration in any industry tends to amplify the power of the largest firms — especially a firm that would be created by a merger that has come under antitrust scrutiny — to gouge consumers by raising prices and lowering the quality of the product or service provided. But a conventional application of antitrust injury doctrine holds that the ordinarily expected increase in price inflicts no anticompetitive harm on competitors, as distinct from consumers. For this reason, the concentration and market share data so central to the government's case would not be enough, standing alone, to enable Sprint and Cellular South to block the AT&T/T-Mobile merger.

Sprint and Cellular South successfully alleged that AT&T's acquisition of T-Mobile would impair competing wireless carriers' access to critical inputs. By far the most important input in the American wireless market, today and for the foreseeable future, is access to the best wireless devices. Postpaid wireless subscribers — customers who subscribe to service for longer terms, as distinguished from pay-as-you-go prepaid customers — are less sensitive to price than they are to the availability of the best, most technologically sophisticated devices. Unlike their counterparts in many other developed countries, American wireless subscribers almost invariably buy their devices from wireless carriers. American carriers regularly subsidize device purchases by their postpaid subscribers, in exchange for a long-term service commitment. Even when consumers buy devices at department stores or electronics boutiques, those vendors usually operate in cooperation with a wireless carrier and bundle the devices with service contracts by that carrier. Empowered by the bundling of devices with service subscriptions, the largest carriers in the US have progressively tightened their grip over the market for wireless devices. Apple's iconic iPhone and iPad epitomize the problem. For years, AT&T held an exclusive on the iPhone; no other carriers' customers could buy this sleekest and smartest of handheld devices. You can buy an iPad at an Apple store, but the market for data service plans to feed that iPad offers exactly two choices: AT&T or Verizon.

In allowing Sprint and Cellular South to pursue their Clayton Act claim against the AT&T/T-Mobile merger, Judge Huvelle astutely recognized the oligopsonistic potential of the merged firm to further constrict an already tight market for cutting-edge wireless devices. AT&T and Verizon, the country's largest wireless carriers, use their buying power to command exclusive access to devices such as the iPhone. At the very least, these large carriers demand (and receive) long periods of exclusivity at the beginning of the economically and technologically significant life of new devices. The addition of T-Mobile to AT&T would exacerbate a serious and legally objectionable constraint on the ability of Cellular South, other small carriers, and even a carrier as large as Sprint (the country's third largest) to offer devices on par with AT&T and Verizon. Permitting this merger would compound these competitors' most pressing problem: being consigned to an unappetizing selection of older phones at higher prices. Judge Huvelle correctly characterized the problem as one of "merger-to-monopsony." Creating the country's largest wireless carrier would cement AT&T's unlawful grip over the devices that are driving and will continue to drive competition among wireless companies.

A second input also played a significant role in these competitor suits. Roaming is the only way that a smaller carrier such as Cellular South, especially one with a geographically circumscribed network, can assure its customers of coast-to-coast coverage. Without commercially reasonable roaming agreements, a smaller carrier cannot serve subscribers who travel outside their home service areas. Judge Huvelle recognized the potential of a combined AT&T and T-Mobile to inflict anticompetitive injury on Corr Wireless, a Cellular South subsidiary that has met stiff resistance in its efforts to forge roaming agreements on commercially reasonable terms with these larger carriers. This conclusion, in many respects, flows more naturally than the merger-to-monopsony theory by which Judge Huvelle recognized Sprint and Cellular South's allegations of injury in the device market. Antitrust cases more routinely involve anticompetitive conduct by defendants as sellers. Roaming agreements involve precisely that: would-be roaming partners sell access to each other's networks.

Judge Huvelle's decision did fall short in certain respects. She appears to have misunderstood the scope of competing carriers' need for roaming. 3G wireless technology is balkanized between Global System for Mobile Communications (GSM) and Code Division Multiple Access (CDMA) protocols. The incompatibility of GSM and CDMA technologies has forced carriers to choose between 3G protocols and to fashion their 3G roaming arrangements according to that choice. Sprint and Cellular South have operated 3G networks on the CDMA protocol. That choice has presumably led both of these carriers to seek 3G roaming agreements with Verizon, the country's leading CDMA carrier, as opposed to AT&T and T-Mobile, both of which have developed their 3G networks along the competing path of GSM technologies. Incompatibility in 3G networks, however, is of no moment when wireless carriers seek roaming on the Long-Term Evolution (LTE) protocol that represents the fourth generation of wireless technology. The proposed merger of AT&T and T-Mobile will enable this combined firm, to say nothing of Verizon, to obstruct 4G roaming in ways exceeding their existing refusal to cooperate with requests for roaming access to their legacy 3G networks.

On balance, however, Judge Huvelle's decision represents a very significant legal victory for competition in the American wireless industry. Preventing further concentration among wireless carriers preserves a competitive foothold by which Sprint, Cellular South, and other carriers can continue to offer consumers viable options beyond AT&T and Verizon. Nevertheless, domination of wireless communications by these two large carriers continues to pose serious economic threats. Notwithstanding their modest size, smaller carriers such as Cellular South have captured meaningful slices of the 700 megahertz "beachfront" spectrum that provides the best technological platform for deploying fully functional 4G/LTE networks. Properly managed, the transition between third- and fourth-generation wireless technologies promises to liberate American wireless communications, at long last, from the balkanization that has robbed 3G wireless of its full technological potential. The division between GSM and CDMA protocols has enabled AT&T and Verizon to keep cultivating a cozy duopoly in which two and exactly two dominant wireless carriers can lock their respective subscribers inside insulated wireless ecosystems. A wireless duopoly means that carriers outside the AT&T and Verizon ecosystems will have no access to cutting-edge devices, to say nothing of roaming, and will consequently be marginalized to the point of commercial extinction. The impact on all layers of the wireless industry, from radio access network equipment, chips and consumer devices to operating systems, applications and content, would be nothing short of devastating. Competition and consumer choice in wireless communications depend on full interoperability at all layers and evenhanded access to crucial inputs such as devices and roaming. Judge Huvelle's decision, though by no means the final battle in a war that has only begun, represents a significant victory for competition and consumer welfare in the broader market for wireless equipment, services and content.

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Editor's note: This article first appeared on November 22, 2011, on Jurist Forum as Jim Chen, Merger to Monopsony: AT&T, T-Mobile, and the Clayton Act.

The author has provided advice to Cellular South in connection with its lawsuit to enjoin AT&T's proposed acquisition of T-Mobile. After filing suit against AT&T, Cellular South changed its name to C Spire Wireless. For the sake of clarity and consistency, the author has referred to this company throughout this article as Cellular South, the name under which it originally sued.

The Unexamined Life of the American Law School

David Segal recently published an article in the New York Times entitled: "What They Don't Teach Law Students: Lawyering." It's a dreadful piece of journalism, but it raises an issue that law schools really should be thinking about much more seriously.

It would be tempting to entitle this comment, "What They Don't Teach Journalists: Reporting." The Segal article is really a shoddy piece of work. It has a couple of obvious factual errors (incorrectly stating the coverage of criminal procedure courses; referring to a paper by a philosopher in a philosophy journal as an example of a law review article.) It also engages in obvious cherry-picking -- finding articles with ridiculous-sounding titles in obscure law reviews rather than talking about recent issues of major law reviews, which probably would sounds more interesting and relevant to readers. Articles about topics such as originalism or Guantanamo may not be relevant to most practitioners, but newspaper readers might think they were a worthwhile use of time. And the ratio of editorializing to facts in the Siegel article is very high.

The article's view of legal practice also seems rather unintelligent. It assumes corporate law courses should be teaching students how to file paperwork, rather than trying to understand the economics of how transactions work and why corporate law imposes the requirements that it does on boards of directors or how courts review merger tactics. Segal complains that students aren't taught what papers to file for a merger. Why teach that in law school? It took me less than a minute to get the answer by googling "Delaware merger formalities."

As I say, it would be tempting to dismiss the article as an example of the decline of American journalism. But the article is right about one really important thing: law schools are extremely unreflective about what they are doing and about the needs of their students. We make little or no systematic effort to find out about what lawyers need to know to do their jobs or to think about how that may change over the next few decades. In fact, we don't do nearly as well in thinking about these things as the military -- for example, the Army commissioned a really interesting study by RAND about how to train officers for combat when future wars are likely to involve situations and tactics that we can't foresee today (such as the use of IEDs in Iraq).

Law schools could certainly benefit from a little self-evaluation. Our first-year curriculum focuses on common law subjects, even though we live in a statutory world. We teach criminal law courses that largely ignore both the drug crimes that are central to criminal practice and the biggest policy issues relating to criminal justice (racial disparties and sentencing). We make every student take civil procedure even though a minority will become civil litigators, and in any event the course teaches little about the two biggest tasks for civil litigators (managing discovery and negotiating settlements). And by the way, it's hard to get people to teach these courses because most faculty members find them profoundly uninteresting. Thus, we've managed to create a first-year curriculum that combines dubious practical utility, lack of policy salience, and theoretical banality. The main reason we do these things is that we have always done them, and it would be a lot of trouble to change.

I fully understand why no one wants to really think about these issues. It's a major struggle to add or subtract a single hour of credit from a first year course. No one -- certainly not me -- wants to devote endless hours to a quixotic effort in radical curriculum change. Ed Rubin's efforts at Vanderbilt are a salutary lesson in what happens when someone is brave enough to challenge the status quo. But it would be nice if we could at least start a serious discussion of these issues among ourselves.