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The Economy, the Courts, and Bad Laws

12:00 AM, Jun 30, 2012 • By IRWIN M. STELZER
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Then there is the high-tech sector, on which the economy depends for its long-term growth. A steady flow of innovations is needed if productivity in the manufacturing and other sectors of the economy is to advance. And a steady flow of new consumer products is needed if consumers are to be persuaded to part with their increasingly hard-earned and scarce dollars—doubt that and look at the pictures of consumers queuing in pouring rain so as to be the first to cross the thresholds of Apple stores around the world when a new product is announced.

That sector has been the scene of patent wars, with all of the players suing each other for violating patent rights in an attempt to gain advantage, not by innovating, but by preventing rivals from bringing competing products to market. All of the participants in these legal battles profess distaste for that other guy’s decision to move rivalry from the market place to the court room, and profess disgust at the fees they have to pay the lawyers for whom patent litigation is providing a substitute for the decline in fees from big merger deals.

Along comes one of America’s most distinguished and brilliant jurists and scholars (also a senior lecturer at the prestigious University of Chicago Law School and author of some 40 books and countless articles), Judge Richard Posner, sitting as a trial court judge in a patent infringement suit between Apple and Motorola Mobility, the latter owned by Google. The competition between those companies has heated up: sales of smart phones using Google’s Android operating system overwhelm sales of iPhones around the world, and Apple plans to kick Google Maps off its iPhones in favor of its own product.

Instead of allowing the case to proceed to a jury trial, Posner called halt. Even if Apple’s patents were infringed, said Posner, it is “wild conjecture” that Motorola can damage Apple, and be declined to allow Apple’s lawyers to “turn the case into an Apple versus Motorola popularity contest.” So why bother having a long trial to determine whether there is infringement, when no money will change hands if there is?

There are other cases making their way through the courts, so Judge Posner’s decision might not end the patent wars. But because of the esteem in which Posner is held, this decision might, only might, persuade other courts to follow, and the combatants to settle their differences and transfer funds from their lawyers to their labs.

These are only some of the examples of the way in which the courts play an important part in shaping the American economy. These courts, of course, deal with the laws handed to them for interpretation. But because laws are often vague—designedly so in order to forge a compromise in a fractious legislature—courts have considerable discretion. In past weeks alone they have transferred billions of dollars of income from younger, healthier people to older, less healthy people. They have transferred income from owners of small businesses to executives in larger ones by forcing entrepreneurs to increase payments to large insurers, and saddling small competitors with costs and regulations that larger companies can more easily accommodate. They have pushed the coal industry closer to extinction, transferring income from hard-working coal miners to more affluent environmentalists and their friends. And they might have hastened the end of the patent wars, for which income transfer—lawyers to entrepreneurs and inventors—we can be provisionally thankful.

But don’t put all of the blame on the judges. It is not their fault if the law they are asked to apply is bad. The bucks in their billions stop with the legislators. 

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