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January 25th, 2016 at 3:39 pm
Yes to Spectrum Auction, No to Double-Dipping
Posted by Timothy Lee Print

CFIF has long advocated auction of over-the-air television stations’ airwaves – or spectrum – by the Federal Communications Commission (FCC), which offers a critical free-market opportunity for the wireless telecommunications industry to avoid looming network congestion issues.  It’s one of those rare potential win/win opportunities as Americans increasingly rely on mobile devices, and it constitutes the core mission of what the FCC should rightfully be doing with its resources.

While strongly favoring spectrum auction, however, we’ve also consistently opposed crony capitalist efforts to game the system and corrupt this promising opportunity.  Just last week, for example, we highlighted our distaste for Dish Network’s scheme to exploit “small business” discounts for its own benefit.

Unfortunately, we may be witnessing another attempt at exploitation of the spectrum auction process.  Namely, television broadcasters offering spectrum in the upcoming incentive auction may possess the ability to sell it twice, as reported by Broadcasting & Cable’s Washington Bureau Chief John Eggerton:

According to a source familiar with their thinking, some ‘major’ broadcasters are looking at putting spectrum in the pot and, if they win, taking advantage of tax laws to keep that money in escrow and use more cash, or a loan, to bid on some of that reclaimed broadcast spectrum in the forward auction – they would need to use other money since reverse payments won’t be available until both sides of the auction close.  They could then sell or lease the spectrum to wireless carriers hungry for it.”

What would make such attempts particularly galling is that the broadcasters originally received that spectrum free of charge, so they’d be selling twice something they didn’t pay for even once.

FCC auction of spectrum for more productive use is to be applauded, and was a long time in coming.  But please, let’s keep it free of attempts at unjust enrichment via exploitation of byzantine regulatory mechanisms.

January 25th, 2016 at 2:15 pm
This Week’s “Your Turn” Radio Lineup
Posted by Timothy Lee Print

Join CFIF Corporate Counsel and Senior Vice President Renee Giachino today from 4:00 p.m. CST to 6:00 p.m. CST (that’s 5:00 p.m. to 7:00 p.m. EST) on Northwest Florida’s 1330 AM WEBY, as she hosts her radio show, “Your Turn: Meeting Nonsense with Commonsense.”  Today’s guest lineup includes:

4:00 CST/5:00 pm EST: Derek Scissors:  Resident Scholar at the American Enterprise Institute – The Real Reason Behind the Dramatic Fall in China’s Stock Prices;

4:20 CST/5:20 pm EST: William Yeatman:  Competitive Enterprise Institute’s Senior Fellow in Environmental Policy and Energy Markets – EPA’s Clean Power Plan;

4:30 CST/5:30 pm EST:  David Barnes, Policy Director of Generation Opportunity – Millennials and the American Dream;

5:00 CST/6:00 pm EST:  Sarah Westwood, Watchdog Reporter for the Washington Examiner – Recent Stories from the Campaign Trail; and

5:30 CST/6:30 pm EST:  Timothy Lee, CFIF’s Senior Vice President for Legal and Public Affairs – IP Rights and Patent Litigation Reform and Internet Access Taxes.

Listen live on the Internet here.   Call in to share your comments or ask questions of today’s guests at (850) 623-1330

January 15th, 2016 at 4:54 pm
IP Rights and Patent Litigation Reform Are Complementary, Not Contradictory
Posted by Timothy Lee Print

In a recent Daily Caller piece entitled “Patents Are Private Property, Too,” Eagle Forum adviser James Edwards throughout most of his column marshals a strong defense of America’s intellectual property (IP) rights system.

Unfortunately, in his final two paragraphs he needlessly and erroneously detours into alleging that patent litigation reform efforts before Congress somehow undermine IP protections.  The truth is precisely the opposite.  Patent litigation reform and IP rights are complementary, not contradictory.

CFIF takes a backseat to no organization in defending IP rights, and Edwards rightly highlights how America’s strong IP system provides the foundation upon which we became and remain the most innovative and prosperous nation in human history.  He correctly notes that our Founding Fathers considered IP a natural right no different than physical property, and how they accordingly specifically protected them in the text of the Constitution.  As Abraham Lincoln later observed, “The patent system added the fuel of interest to the fire of genius.”

And as we have noted repeatedly, it is not by coincidence that America maintains the world’s strongest IP protections while also standing unrivaled as the most inventive, powerful, prosperous and influential nation in history.  That relationship is causal.

Unfortunately, in his final two paragraphs Edwards veers regrettably astray.  Specifically, he claims that patent litigation reform legislation currently under Congressional consideration would somehow undermine patent rights and “make it much more difficult and riskier to defend one’s patent against infringers.”

Respectfully, that is flatly false.

Patent litigation reform legislation, which passed the House two years ago with an overwhelming 325-to-91 majority, addresses how patent disputes are litigated, not patent rights themselves.

Under current law,  as most people know, overly litigious actors can file frivolous lawsuits or baselessly defend against valid claims because it’s highly unlikely under our current system that they’ll be forced to pay the other side’s attorney fees and litigation costs when they ultimately lose.  That’s because American law generally requires each side to pay its own costs and fees, even if the other side’s claim was weak.  As a litigating attorney who defended against innumerable frivolous claims in my legal career, I can confirm firsthand that winning an award of costs and fees from even the most egregious litigants is exceedingly and unfortunately rare.  Accordingly, bad actors often use our court system to extract improper settlements or frighten legitimate patent holders from defending their rights due to the prospective time and costs of litigation.

That’s where patent litigation reform comes in.

The Innovation Act, the bill that CFIF most strongly supports, targets abuse of our court system by:  (1) Holding losing parties accountable for prevailing parties’ attorney fees and costs unless they can demonstrate that their “position and conduct … were reasonably justified in law and fact, or that special circumstances (such as severe economic hardship to a named inventor) make an award unjust”;  (2) Reforming pleading standards to require greater clarity and justification for their case, rather than relying on vague and unintelligible boilerplate allegations;  (3)  Increasing transparency regarding the true owners of disputed patents;  and (4) Streamlining the burdensome discovery process, which too often imposes oppressive burdens and delays resolution of cases.

Those are manifestly common-sense litigation reforms that all Americans, particularly conservatives and libertarians who broadly favor reform of America’s flawed system of litigation, should support.

CFIF simply would not support any bill that undermined America’s patent or other IP protections.  The simple fact is that patent litigation reform would protect legitimate patent holders, and the only people with anything to fear are those who cannot demonstrate that their claims are based upon good faith and valid law – which is not difficult for legitimate litigants to show.  We therefore encourage all of our supporters and activists across the country to contact their elected representatives in Congress to voice their support for badly-needed patent litigation reform legislation.

January 7th, 2016 at 1:00 pm
Patent Litigation Reform: A Conservative No-Brainer for 2016
Posted by Timothy Lee Print

As we enter 2016 and the presidential race accelerates, it can be tempting and even entertaining for conservatives and libertarians to find themselves divided on an array of issues, from foreign policy to immigration reform to how to improve our tax code.  Respectful debate and disagreement on such matters is both healthy and necessary.

On another issue, however, there should be little disagreement:  the desperate need for litigation reform in America.  That includes patent litigation reform, particularly in light of the fact that , as Wall Street Journal legal reporter Ashby Jones reports, 2015 just witnessed a 25% increase in patent suits in a single year:

Patent litigation brought by so-called ‘non-practicing entities’ continued to flourish in 2015, according to a new study, despite repeated attempts to curtail it.  According to the report, released Monday by RPX Corp., NPEs filed over 3,600 patent cases in 2015.  NPEs, also referred to derisively as ‘patent trolls,’ buy up patents and seek to make money from them through licensing and litigation.  NPEs filed 3,604 cases last year, a sharp increase over 2014, in which NPEs filed 2,891.

Fortunately, a large and bipartisan majority in Congress has recognized the need for patent litigation reform, which CFIF has strongly and consistently supported:

To address those widespread problems in our current patent litigation system, while also protecting legitimate patent claimants, Congressman Robert Goodlatte (R – Virginia) has reintroduced the Innovation Act.   Identical legislation passed the House approximately one year ago by a lopsided 325 to 91 vote, and nothing has changed since that date to justify a reversal.

The bill narrowly targets patent litigation abuses, primarily by introducing several key reforms to the patent litigation process.  Those reforms include:  (1) Greater ability to shift costs and fees to improper litigants than the current system provides;  (2) Heightened pleading standards that require greater clarity and justification for the lawsuit itself;  (3) Greater transparency regarding true owners of disputed patents;  and (4) Much-needed streamlining of the discovery process during litigation, which often imposes oppressive burdens in time and resources upon respondents.

Unfortunately, some opponents of reform have resorted to claiming that patent litigation reform would somehow undermine patent rights or intellectual property rights more broadly.  That is simply not the case, as we have explained exhaustively.  We at CFIF stand among the strongest proponents of IP protections, and we would not support any cause that undermined them.  The reality is that the bills we support target patent litigation abuse, not substantive patent rights themselves.  The Innovation Act, for instance, simply requires that losing parties in a patent lawsuit demonstrate “that the position and conduct of the nonprevailing party or parties were reasonably justified in law and fact or that special circumstances (such as severe economic hardship to a named inventor) make an award unjust.”

That is not a difficult hurdle to clear.

Accordingly, opponents of patent litigation reform must answer why requiring parties who resort to costly and protracted litigation to show that their claim is “reasonably justified in law and fact” is somehow unfair or excessively burdensome.   They cannot, and there is simply no reason for further delay in achieving patent litigation reform legislation in 2016.

December 23rd, 2015 at 9:31 am
Entering 2016, Americans Say Big Government Is Greatest Threat
Posted by Timothy Lee Print

As 2015 draws to a close and the presidential election year of 2016 arrives, a new Gallup survey offers an overarching theme and context for the campaign.  Namely, after seven years of Barack Obama, who made it his goal to reverse Ronald Reagan’s legacy and rehabilitate Americans’ faith in big government, the public continues to identify it as the nation’s greatest threat:

Americans overwhelmingly name big government as the biggest threat to the country in the future.  The 69% choosing big government is down slightly from a high of 72% in 2013, the last time Gallup asked the question, but it is still one of the highest percentages choosing big government in Gallup’s 50-year trend.”

Notably, the percentage of Americans identifying big government as the nation’s biggest threat was just 35% in 1965, when the “Great Society” onslaught of spending and regulation and administrative state growth commenced.  Just as conspicuously, that percentage stood at 53% when Obama assumed office in 2009, but quickly shot upward to a record high of 72% as his own big-government agenda kicked into gear.

In addition to once again confirming Obama’s reverse-Midas touch, it demonstrates that the more that Americans get to know big government, the less we like it.  That provides an important lesson to frame the upcoming 2016 race.

December 22nd, 2015 at 10:01 am
Internet Service Tax and Internet Sales Tax: Two Separate but Equally Destructive Proposals
Posted by Timothy Lee Print

Economist Stephen Moore offers an instructive and important commentary today on two separate but oftentimes conflated taxes.  A tax on Internet service is a self-evidently destructive idea, as it would inhibit both consumer access to the Internet as well as the billions of dollars that Internet service companies invest in constant expansion and modernization.

Liberals love to talk piously about the right to universal Internet access and reducing the ‘digital divide’ in America between rich and poor.  This has been their excuse for pushing so-called ‘net neutrality’ regulations on Internet providers.  Yet taxing Internet subscriptions could make web access connection service, much like cable TV, too expensive for millions of Americans to afford…  Today 75 percent of Americans have Internet service.  But almost 1 in 4 still don’t, and the danger of a new tax is that with families financially strapped, a new tax could mean millions might drop service.”

As Moore points out, some in Congress like Dick Durbin (D – Illinois) and Lamar Alexander (R – Tennessee) continue to hold a permanent ban on Internet service taxes hostage:

So what is Durbin’s game here?  He and Lamar Alexander of Tennessee will only allow the Internet Access Tax Freedom Act to pass if Congress votes to allow states to tax online sales – which is an even worse idea than taxing Internet access, with far more money at stake.  This year, goods and services purchased on the Internet are expected to hit $300 billion, according to the Department of Commerce, and account for a record 7.4 percent of total retail sales.  So state and local politicians and left-wing interest groups have long lustily viewed e-commerce as the next giant pot of money to get their paws on…  They want to require Internet companies to collect state/local sales tax even if that company has no connection (or ‘nexus’) to the state where the tax is paid.  An Internet company in New Hampshire would have to be a tax collector for Illinois and California, even though the company uses no services in those states.  That’s terrible tax policy that will erode tax competition.”

The case against both forms of Internet taxes is obvious.  We therefore encourage our supporters across the country to contact their elected officials (you can quickly and easily locate their contact information through CFIF by clicking here) to demand opposition to both types of taxes through a permanent ban.

December 21st, 2015 at 9:48 am
Before You Complain About Drug Costs…
Posted by Timothy Lee Print

Maligning pharmaceutical enterprises is a curious perennial dance, one that becomes even more active during presidential campaign seasons.  That always struck me as odd, since it seems a sign of societal advance that we can complain about the price of something that saves lives and improves living conditions rather than lamenting its nonexistence.

Regardless, the U.S. Chamber of Commerce’s Global Intellectual Property Center (GIPC) offers an instructive corrective entitled “4 Charts Explain the Economics of Drug Development.”  It is worth the brief examination and passing on to others, because it helps rebut many of the politicized myths that threaten the goose that lays the golden eggs:

“It’s not just the science that goes in to developing medicines that’s complicated.  The economics that drive the industry, allowing resources to be available so people can have access to beneficial new medicines is complicated, too.”

Each chart is worth 1,000 words, but the four broad takeaways are:  (1)  It takes ten years and $2.6 billion to bring a single drug to market;  (2)  In 2014, pharmaceutical companies spent $51.2 billion on research & development;  (3)  Only a few drugs, however, become commercial successes;  and (4)  The end result is that pharmaceuticals’ enormous investments result in people living longer and better lives.

Something to keep in mind as sometimes silly presidential campaigns get even sillier, at least in terms of maligning the innovative pharmaceutical industry.

December 18th, 2015 at 10:05 am
Legal Reform: Supreme Court Delivers Welcome Victory for Private Arbitration
Posted by Timothy Lee Print

Private arbitration and other forms of alternative dispute resolution provide important alternatives to traditional court litigation, and this week the U.S. Supreme Court delivered an important and welcome victory against trial lawyers and liberals who seek to undermine them.  The ruling is particularly notable for the fact that even liberal justices Breyer and Kagan joined in the 6-3 majority.

The case originated from an agreement between DirecTV and customers under which the parties agreed to a class action waiver and to resolve any disputes through private arbitration.  Although pro-trial lawyer California state law made class action waivers unenforceable, the Supreme Court had rightfully ruled in 2011 that the Federal Arbitration Act preempts such such state laws.  In the instant case, the California courts nevertheless attempted to circumvent that 2011 ruling, but the Supreme Court was having none of it.

For their part, liberal justices Ginsburg and Sotomayor did their best Bernie Sanders and Occupy Wall Street impression.  Their dissent is worth citing simply because of its self-evident reliance upon class warfare and leftist economic policy over objective, sober legal analysis:

It has become routine, in large part due to this Court’s decisions, for powerful economic enterprises to write into their form contracts with consumers and employees no-class-action arbitration clauses…  I would read it, as the California court did, to give the consumer, not the drafter, the benefit of the doubt.  Acknowledging the precedent so far set by the Court, I would take no further step to disarm consumers, leaving them without effective access to justice.”

First and foremost, Justice Ginsburg’s claim is incorrect as a matter of fact.  Arbitration and alternative dispute resolution don’t deprive anyone of justice.  They simply move the parties away from more expensive and tedious traditional litigation in overcrowded court system, and toward fair, speedier and less-burdensome resolution by an arbiter (usually an experienced judge) selected by both parties.  Second, Justice Ginsburg’s argument rests on sentiment and her own policy preference rather than law.

Accordingly, the Court’s ruling constitutes a critical loss for the powerful trial lawyers’ lobby, which essentially by definition makes it a critical victory for Americans more broadly.

December 16th, 2015 at 3:45 pm
Arizona Tribe’s Violation of Trust Demands Congressional Remedy
Posted by Timothy Lee Print

In both contract negotiation and public policy, the duty of good faith and fair dealing remains a fundamental one.

In Arizona, unfortunately, the Tohono O’odham tribe has repeatedly violated that duty, which now requires Congressional action to remedy the situation.

By way of background, this regrettable and wholly unnecessary dispute arises from a $400 million casino in the western Phoenix metro area set for completion later this month.

Back in 2001, the Tohono O’odham continued seeking casino properties even while participating in compact negotiations with a coalition of 16 other Arizona tribes.  The coalition collectively promised Arizona voters and elected officials in 2002 that there would be no additional casinos within the Phoenix metropolitan area until the agreed-upon compact expired in 2027.  Arizona voters subsequently approved the agreement and granted it the force of law.

Just one year later, however, the Tohono O’odham tribe violated that pledge by purchasing a casino site through a shell corporation to conceal its ownership.

Then, in 2009, the tribe launched the current battle by declaring that a “legal loophole” in the state’s existing gaming compact gave it the right to build a casino in Phoenix on a plot of land situated across the street from a high school and close to a number of residential areas.  Beyond the tawdry behind-the-scenes scheming and legal trickery, that constitutes a deep violation of the trust Arizona voters and their elected and appointed officials had placed in the tribe.  The Tohono O’odham tribe, however, flouts the law under color of a legal defense of tribal sovereign immunity.

Accordingly, the tribe refuses to be held accountable by the compact itself, as well as the state and tribes with which it negotiated.

The outrage among state officials is palpable.  Governor Doug Ducey, Arizona Attorney General Mark Brnovich and Department of Gaming Director Daniel Bergin all have alleged that the tribe committed fraud in not disclosing its West Valley casino plans while negotiating its state compact.

Consequently, the battle now shifts to the U.S. Congress as the last line of defense.  More specifically, the power to maintain the Arizona gaming compact sits with Congress and the Keep the Promise Act.

It would have been preferable for this Arizona problem to be settled by its own state institutions, but that is no longer possible.  Congressional action is required.

The Keep the Promise Act would prevent a rapid and chaotic expansion of gaming in the state until the end of the current compacts in 2027.  It would also force the Tohono O’odham to live up to its promises.  The bill is fair, and respects the long-established sovereign rights of the tribes and the state of Arizona.  It’s also supported by key members of Arizona’s Washington delegation, along with tribes in the metro Phoenix area, the Navajo Nation and several rural tribes.

Enough is enough.  We at CFIF support Keep the Promise Act to preserve the agreements voters made – or at least thought they made – concerning Arizona gaming.  We also need to send a message that agreeing parties can’t subvert the very system of laws it once agreed to support.

December 14th, 2015 at 11:14 am
This Week’s “Your Turn” Radio Lineup
Posted by Timothy Lee Print

Join CFIF Corporate Counsel and Senior Vice President Renee Giachino today from 4:00 p.m. CST to 6:00 p.m. CST (that’s 5:00 p.m. to 7:00 p.m. EST) on Northwest Florida’s 1330 AM WEBY, as she hosts her radio show, “Your Turn: Meeting Nonsense with Commonsense.”  Today’s guest lineup includes:

4:00 CST/5:00 pm EST:  Matt Mayer, Visiting Fellow at the American Enterprise Institute – Terrorism and the Visa Waiver Program;

4:15 CST/5:15 pm EST:  Bradley A. Smith, Chairman and Founder of Center for Competitive Politics – Fights Over Campaign Finance Laws;

4:30 CST/5:30 pm EST:  Robert Pondiscio, Senior Fellow and Vice President for External Affairs – Common Core;

5:00 CST/6:00 pm EST:  Jenny Beth Martin: President and Co-Founder of Tea Party Patriots – IRS Proposed Regulation Regarding Social Security Numbers and Charitable Donors;

5:15 CST/6:15 pm EST:  Gail Heriot, Law Professor and Member of the US Commission on Civil Rights - Fisher v. University of Texas; and

5:30 CST/6:30 pm EST:  Timothy Lee, CFIF’s Senior Vice President for Legal and Public Affairs – Net Neutrality, Justice Reform and the Second Amendment.

Listen live on the Internet here.   Call in to share your comments or ask questions of today’s guests at (850) 623-1330.


December 14th, 2015 at 9:48 am
Good News: By Over 3-to-1, Americans Blame Terrorism for San Bernardino Attack, Not Guns
Posted by Timothy Lee Print

Barack Obama, the mainstream media and the political left immediately sought to scapegoat firearms and exploit last week’s San Bernadino attacks on behalf of their endless campaign to limit Second Amendment rights.  In an encouraging bit of news, however, a new Rasmussen survey shows that by more than a 3-to-1 margin, the overwhelming majority of Americans aren’t buying it:

A new Rasmussen Reports national telephone survey finds that 69% of likely U.S. voters believe that the shooting incident in California last week is primarily a terrorism issue.  Just 20% think the massacre is primarily a gun issue, while seven percent (7%) think it’s about something else.”

That confirms William F. Buckley’s adage of the wisdom of the governed more than those who seek to lord over them, it also demonstrates that we remain steadfast in our support of the timeless individual right to keep and bear arms.

December 11th, 2015 at 3:36 pm
Beware of Misinformation and Deceptive Tactics by Free Trade and Intellectual Property Opponents
Posted by Timothy Lee Print

CFIF steadfastly supports both free trade and strong intellectual property (IP) protections.  Each has played an invaluable role in making America the most innovative and prosperous nation in human history, and each is important if we hope to maintain that primacy through the 21st century.

In that spirit, we hope to ultimately support the Trans Pacific Partnership (TPP) after our own reasoned analysis.

Even the cleanest trade agreements tend to be complex,  and the TPP is no exception.  Along with so many other conservative and libertarian organizations, we are therefore carefully examining the TPP’s provisions in determining whether to ultimately support the agreement.

Making that determination in an intelligent and good faith manner, however, requires that the debate remain grounded in accurate, reliable and pertinent information.  But opponents of free trade and strong IP protections have undertaken a campaign to confuse and frighten the electorate through distortion.

An organization named IP Watch offers a perfect example of such tactics, with a recent piece about the TPP’s dispute resolution provisions known as the Investor State Dispute Settlement (ISDS) process.  IP Watch contends that, by virtue of the ISDS, “foreign corporations [will have] a huge advantage in IP disputes – private arbitrations that can override courts and statutes, effectively rewriting a nation’s IP laws,” but the simple reality is that ISDS provisions are common to international agreements and unremarkable.

Simply put, an ISDS process allows companies doing business abroad to protect themselves against unfair treatment such as discrimination and government seizure of their property, known as “expropriation.”  Over 3,000 international agreements include a process to resolve these problems, but many stubborn opponents of free trade and IP rights oppose these dispute resolution mechanisms, which are designed to give American companies similar protections to those enjoyed by foreign companies doing business in the U.S.

For its part, the TPP includes countries around the Pacific Rim, collectively  accounting for about 40% of all global trade, and like the 3,000 other international agreements referenced above, it includes an ISDS process to level the playing field for American companies doing business overseas.   Additionally, like so many other previous trade agreements, the TPP broadly exempts IP from the ISDS process unless the IP was expropriated and the expropriation violates the IP provisions of either the TPP or the World Trade Organization (WTO).

Those opposed to free trade or strong IP rights, however, don’t like the idea that companies possess that option to protect themselves, particularly companies that rely on IP protections.   Their attack on the ISDS process as it applies to IP is an opportunistic and cynical attempt to achieve their larger aim, the erosion of IP protections for creators and innovators.

Further, in practice it’s not easy to win an ISDS case.  First, an investor must prove that there was either direct expropriation (the government forcibly comes in and seizes the property, claiming now to be the legal owner of it), or indirect expropriation (the same effect as direct expropriation but without the outright seizure).  That is drawn from U.S. law, and the U.S. Constitution itself,  per the Fifth Amendment provision that, “nor shall private property be taken for public use, without just compensation.”  Moreover, the particular standards in the TPP for proving whether there has been an “expropriation” (e.g., “taking”) are drawn directly from a Supreme Court ruling on the Fifth Amendment in Penn Central Transportation Co. v. New York City (1978).

Accordingly, it should alarm readers of IP Watch that the anti-trade, anti-IP crowd has thus gone so far as to malign concepts contained in the Bill of Rights itself.

In addition to demonstrating an expropriation of IP rights, the TPP requires a company to prove that the government action violated the IP provisions of either the TPP or the WTO.  And those rules are the product of agreement by the governments of nations of all perspectives from across the globe, and constitute the basic levels of protection for IP.

That’s why companies bring so few cases.  Tellingly, only 13 cases have ever been brought to conclusion against the United States, and we won all of them.

There’s another factor that must be considered as well.  Namely, if you are an American company doing business abroad, where you rely on the local authorities for police protection and hope for fair treatment by the government and judges, how eager would you be to start a lawsuit against the whole country?  You, your board of directors and your shareholders would think long and hard about that one.

The ISDS process is a fair and appropriate one, but realistically, companies are only going to resort to it when their backs are truly against the wall.

Anti-trade and anti-IP interest groups and advocates will likely continue to publish misinformation about the TPP and its IP chapter in an attempt to scuttle the deal.  Indeed, activists are openly advertising that they will try to incite people, even though the TPP’s IP provisions are all drawn from U.S. law and have been in other trade agreements for years.

Hopefully, however, the preceding points help cut through the click-bait and hyperventilation that characterizes their rhetoric, so reasonable people can draw their own conclusions about the TPP based on fact and principle.

December 8th, 2015 at 9:57 am
Iran: Obama’s Other Legacy “Achievement” Continues to Unravel
Posted by Timothy Lee Print

Last week we highlighted the latest manifestation of ObamaCare’s ongoing failure, and noted how the emerging question is whether that law or Obama’s similarly disastrous Iran nuclear deal will prove the worse of his two signature “achievements” as president.  Well, don’t look now, but the Iran deal just staked its latest claim to that title:

Iran tested a new medium-range ballistic missile last month in a breach of two U.N. Security Council resolutions, two U.S. officials said on Monday…  All ballistic missile tests by Iran are banned under a 2010 Security Council resolution that remains valid until a nuclear deal between Iran and six world powers is implemented.  Under that deal, reached on July 14, most sanctions on Iran will be lifted in exchange for curbs on its nuclear program.  According to a July 20 resolution endorsing that deal, Iran is still ‘called upon’ to refrain from work on ballistic missiles designed to deliver nuclear weapons for up to eight years.”

But not to worry – we can rely upon the U.N. to discipline Iran and steer it back into better behavior as a member of the “international community,” right?  Oh, wait:

In October, the United States, Britain, France and Germany called for the Security Council’s Iran sanctions committee to take action over a missile test by Tehran that month that they said violated U.N. sanctions.  So far, no action has been taken by the committee.”

Your move, ObamaCare.

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December 4th, 2015 at 5:10 pm
ObamaNet in Court Again: Positive Early Signs from Today’s Oral Argument
Posted by Timothy Lee Print

Today, the D.C. Circuit Court of Appeals, commonly known as the nation’s second-highest court, heard oral argument on the latest attempt by the Obama Administration to regulate Internet service.  On two previous occasions, the same court rejected the administration’s efforts, so now we’re at Round Three.  Lawrence Spiwak of the Phoenix Center offers a helpful summary of today’s hearing, and while it’s impossible to predict the ultimate outcome, early signs are encouraging:

While it is difficult to make accurate prognostications about how a court will ultimately rule based on the questions raised at oral argument, several key points dominated the discussion:

As an initial matter, Judge Tatel clearly took umbrage with the FCC’s rejection of the roadmap under Section 706 the DC Circuit set forth in Verizon v FCC (and initially adopted by the Commission in its May 2014 Notice of Proposed Rulemaking) as the result of direct pressure from the White House. As Judge Tatel observed, given such a short time frame, the Commission’s radical departure ‘could not have been changed facts.’

Notwithstanding this displeasure, the panel generally agreed that they are governed by the Supreme Court’s holding in Brand X which emphasizes a focus on how customers perceive the offer of service provided. However, as the court also recognized that the FCC has great latitude the interpret this offer for purposes of regulatory classification, predicting whether or not the court overturns the FCC on wireline reclassification is a close call.

That said, the court appeared skeptical of the FCC’s reclassification of wireless broadband as a Title II common carrier service due to FCC’s gerrymandering of the definition of the term ‘public switched telephone network.’ Moreover, the court seemed concerned over the lack of public notice of the legal theory the Commission used to reclassify mobile broadband. As such, there is a better chance of the court overturning FCC on this issue.

Finally, as assuming the court upholds the FCC’s decision to reclassify broadband as a Title II common carrier service, the court did not appear convinced that the FCC’s application of Title II was entirely legitimate. In particular, a good part of the oral argument focused heavily on the fact that the FCC — in apparent response to last minute lobbying by edge providers to counter the analysis made in our law law review Tariffing Internet Termination: Pricing Implications of Classifying Broadband as a Title II Telecommunications Service — included ‘terminating access’ (i.e., the relationship between edge providers and BSPs) into ‘broadband Internet access service’ (’BIAS’), even though they are distinctly different products serving entirely different markets.”

Hopefully, the judicial branch will once again reject this administration’s lawless and destructive overreach, and the light-touch federal regulatory approach to Internet service that existed through both the Clinton and Bush administrations will continue.

December 4th, 2015 at 9:44 am
ObamaCare Meltdown, Cont’d: Health Spending Rises Most Since 2007
Posted by Timothy Lee Print

When even The New York Times issues lamentations as the consequences of ObamaCare become more clear, it’s obvious that things aren’t going well:

Health spending grew faster than the economy in 2014, and the federal share of health spending grew even faster, as major provisions of the Affordable Care Act took effect.  Total spending on health care increased 5.3 percent last year, the biggest jump since 2007, and accounted for 17.5 percent of the nation’s economic output, up from 17.3 percent in 2013, the Department of Health and Human Services said in its annual report on spending trends.”

But not to worry.  The Obama Administration assures us that things are fine:

The spending report comes as the Obama administration is already on the defensive over rising premiums and deductibles on insurance policies sold through the health law’s exchanges.  Last month, United Health Group, one of the nation’s largest health insurance companies, significantly lowered its profit estimates and blamed the federal health care law.  Obama Administration officials said Wednesday that the rise in health spending last year did not undermine their conviction that the Affordable Care Act had been a boon for the nation.”

Of course, this is the same administration that assured us just hours before the Paris terrorist attacks that ISIS is contained, not to mention that “if you like your doctor, you can keep your doctor, period.”  Per Nancy Pelosi’s claim, we’re finding out what’s in ObamaCare, and the only question is whether this or the Iran nuclear accord – which we’re now told Iran didn’t even sign – will prove the worse of Obama’s two signature “achievements” as time progresses.

December 1st, 2015 at 1:44 pm
Puerto Rico Should Work With Stakeholders to Reach Consensual Solution to Debt Crisis
Posted by Timothy Lee Print

At today’s hearing, Richard Carrion testified that as a professional banker, he was “extremely reluctant” to testify in favor of debt restructuring.  Yet Carrion has given no weight to promising proposals put forth by the private sector, preferring instead to trumpet the agenda of his friend Governor Garcia Padilla.  As demonstrated by today’s bond payment, the Puerto Rican government has the means to meet its obligations, and should work with stakeholders to reach a consensual solution.

December 1st, 2015 at 10:43 am
Puerto Rico Debt Crisis: Richard Carrion Is a Problematic Witness Sitting Alongside Governor Garcia Padilla
Posted by Timothy Lee Print

At today’s Senate Judiciary Committee hearing on Puerto Rico’s fiscal situation, Governor Alejandro Garcia Padilla will likely face tough questioning from Senators displeased with his handling of the island’s economy.  Sitting alongside Gov. Garcia Padilla to face those questions will be a close friend from the Commonwealth’s financial sector:  Banco Popular Chairman and CEO Richard Carrion.

Carrion, whose bank is no stranger to asking for federal assistance – it received almost $1 billion in TARP funding from the Treasury (which it did not repay until July 2014) – is a longtime Garcia Padilla supporter who continues to maintain a close relationship with the Puerto Rican government.  Additionally, Banco Popular’s General Counsel Javier Ferrer is the former GDB President under Gov. Garcia Padilla, and longer-tenured lawmakers will also be familiar with the bank’s previously cozy relationship with Representative Luis Gutierrez, who lobbied for that TARP funding for the bank in 2008.

The island’s largest lender holds unmatched influence over the Island’s financial sector, controlling over 40% of the Commonwealth’s credit market.  It has also benefited from Puerto Rico’s debt crisis by collecting underwriting fees on large swaths of the public debt and acting in a fiduciary capacity for many debt issuers.

At today’s hearing, we therefore urge Senators to consider the motivations behind Carrion’s testimony.

Over the years, Banco Popular stands as the biggest beneficiary of Puerto Rico’s debt crisis, collecting fees to underwrite huge swaths of Puerto Rican debt.  Since 2008, Banco Popular’s subsidiary, Popular Securities, has been involved in the underwriting of over $56 billion in Puerto Rican bond offerings, mostly for the Puerto Rican government.  In that capacity, Popular has had a direct hand in the issuance of billions of dollars of debt to investors on the island and mainland, including to small investors, pensions, and mutual funds.  As underwriter, Popular has performed due diligence on every bond offering in which it has been involved.  Yet in advocating for a complete restructuring of Puerto Rico’s debts, Popular is now asking to restructure the very same bonds it recommended to regular investors saving for retirement after having passed judgment on their suitability for such investors.

In addition to fees collected as underwriter, Popular also acts in a fiduciary capacity for several bond issuers, serving as paying agent, escrow agent, and trustee.  These issuers include institutions with deep ties to Gov. Garcia Padilla’s administration, including the Government Development Bank, COFINA, the University of Puerto Rico, and the recently defaulted Public Finance Corporation among others.

Despite having already profited handsomely on the debt crisis that it has helped to create, Popular is now advocating for a complete restructuring of the government’s public debts.  At first glance, it seems strange that a large lending institution like Popular would take such an anti-lender stance on Puerto Rico’s debt, especially given that it helped to issue so much of it.  Through an agreement with JP Morgan, and previously Morgan Stanley, however, Popular is only exposed to a small fraction of the underwriting exposure for any offering made to mainland US investors.  Further, most of Popular’s outstanding exposure to Puerto Rico debt is to several of the Island’s 78 municipalities, which has never been part of a restructuring proposal.  Their direct exposure to debt that would be subject to a restructuring is minimal.

Even after a total debt restructuring, Popular would no doubt choose to continue its practice of selling  loans made to struggling, regular Puerto Ricans to mainland institutional investors and hedge funds at steep discounts, who in turn seek 100% repayment from the borrowers.  To be clear, Popular has long engaged in these dealings with Wall Street, having already unloaded over $1.75 billion in loans to institutional investors which are in varying states of foreclosure.

All of this suggests a self-serving agenda.  While it carries minimal direct exposure to the debts that it seeks to restructure, Popular stands to profit handsomely on the backs of regular Puerto Ricans by continuing to sell their loans to Wall Street firms when they cannot pay their debts.

It triggers the question, then, that if Popular truly seeks to restructure these debts for the good of Puerto Rico, will it support the same type of unilateral restructuring for other types of loans taken out by regular Puerto Ricans who are Popular customers?  Will Popular allow its own clients to restructure their mortgages and car loans and cease and desist from any and all foreclosure processes against these borrowers?  Or will it reap the financial benefits of the crisis that it is creating for Puerto Rican borrowers?

In addition to those questions, here are some others that Senators would be wise to ask of Carrion:

  • What is your relationship, personally and professionally, with Gov. Garcia Padilla, his administration and his family?
  • How is it that your bank, the largest in Puerto Rico, has avoided the exposure to public securities experienced by other banks?
  • As a recipient of a large federal bailout resulting from poor lending practices, what qualifies you to advise on the best path forward for Puerto Rico’s recovery?
  • As a private sector leader, why are you not working with other members of the private sector to reach a consensual solution?
  • If you are willing to advocate for massive debt forgiveness to the Puerto Rican government, are you willing to provide similar debt forgiveness to regular Puerto Ricans that struggle to make loan payments to your bank?

Considering that the biggest beneficiary of the Puerto Rico debt crisis now calls for “Super Chapter 9″ bankruptcy and broad restructuring powers, those are all reasonable questions.

November 30th, 2015 at 3:56 pm
“Contained?” ISIS Captures First City Beyond Iraq or Syria
Posted by Timothy Lee Print

Just hours prior to the terrorist massacre in Paris, Barack Obama foolishly claimed that ISIS was “contained.”  This morning, we awoke to more bad news, and additional refutation of Obama’s assertion.  Namely, ISIS has now captured Sirte, Libya, meaning that it now controls its first city beyond Syria or Iraq:

Even as foreign powers step up pressure against Islamic State in Syria and Iraq, the militant group has expanded in Libya and established a new base close to Europe where it can generate oil revenue and plot terror attacks.  Since announcing its presence in February in Sirte, the city on Libya’s Mediterranean coast has become the first that the militant group governs outside of Syria and Iraq.”

So much for “containment.” What has become undeniably clear is that Obama’s foreign policy generally, and anti-terrorism leadership specifically, are failures.  Fortunately, there will be a new Commander in Chief in just a few months.  But unfortunately, there’s a lot more damage that he can do before then.  The key for the American electorate is to choose a replacement who will bring improvement.

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November 20th, 2015 at 9:55 am
In Other News, ObamaCare Is Now a Slow-Motion Disaster
Posted by Timothy Lee Print

As ObamaCare enters the real world and departs Barack Obama’s “If you like your doctor, you can keep your doctor” fantasy world, it is already proving a slow-motion disaster for Americans.  This week, The Wall Street Journal featured a front-page article entitled “Rising Rates Pose Challenge for Health Law,” and the news is grim:

Insurers have raised premiums steeply for the most popular plans at the same time they have boosted out-of-pocket costs such as deductibles, copays and coinsurance in many of their offerings.  The companies attribute the moves in part to the high cost of some customers they are gaining under the law, which doesn’t allow them to bar clients with existing health conditions.  The result is that many people can’t avoid paying more for insurance in 2016 simply by shopping around – and those who try risk landing in a plan with fewer doctors and skimpier coverage.”

The report proceeds to describe the magnitude with greater specificity, and it is astonishing:

Premiums for individual plans offered by the dominant local insurers are rising almost everywhere for 2016, typically by double-digit percentage increases, according to a Wall Street Journal analysis of plan data in 34 states where the Healthcare.gov site sells insurance.  More than half of the midrange ’silver’ plans are boosting the out-of-pocket costs enrollees must pay, while more than 80% of the less-expensive ‘bronze’ plans are doing so.”

Meanwhile, a new Gallup survey released this week shows that the percentage of Americans rating their healthcare quality as excellent or good has plummeted from 62% in 2010 when ObamaCare was enacted to 53% now.  The survey also reveals that the percentage who are satisfied with healthcare costs has actually declined from 26% in 2009 to 21% today.

As experience with ObamaCare increases with implementation, the situation promises to get worse by the day.  Obama, Harry Reid and Nancy Pelosi passed, now we’re staring at the reality of what was in it.

November 17th, 2015 at 9:47 am
Poll: Just 15% of Military Personnel Hold Favorable Opinion of Hillary Clinton
Posted by Timothy Lee Print

Year after year, the public rates the U.S. military the most trusted and popular institution in American life.  Now, at a moment in which the military may play an increasingly vital role in protecting us against growing terrorist threats and and increasingly restive antagonists like Russia and China, a new poll reveals that Hillary Clinton’s standing among military personnel can only be described as atrocious:

Hillary Clinton is still in line to win the Democratic Party’s nomination to be the next commander in chief, but few Americans in the military have a good impression of her.  A new Rally Point/Rasmussen Reports national survey of active and retired military personnel finds that only 15% have a favorable impression of Clinton, with just three percent (3%) who view the former Secretary of State very favorably. Clinton is seen unfavorably by 81%, including 69% who share a very unfavorable impression of her.”

For someone applying for the job of Commander in Chief, that is an ominous sign, and one that may receive increasing attention as the 2016 election approaches.