PRAGMATISM, PERSPECTIVES, AND TRADE: AD/CVD, PATENTS, AND ANTITRUST AS MOSTLY PRIVATE LAW.

Author:Kieff, F. Scott
Position:Antidumping and countervailing duties - Symposium: Intellectual Property and the New Private Law
 
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TABLE OF CONTENTS I. INTRODUCTION 97 II. INTERNATIONAL TRADE AND THE AD/CVD SYSTEMS 100 III. THE SUBSTANCE OF THE PATENT-ANTITRUST INTERFACE 106 A. Patents 109 B. Antitrust 112 IV. CONTRASTING AGENCIES IN THE U.S. PATENT AND ANTITRUST SYSTEMS 117 V. CONCLUSION 122 I. INTRODUCTION

This Article explores some common themes across three fields within the broader domain of trade law: international trade's antidumping and countervailing duty ("AD/CVD"), intellectual property ("IP"), and antitrust. It uses some concrete examples to show how these fields' essential attributes allow them to be appropriately designated as a type of private law, rather than public law. It also explores some ways in which those private law attributes make vital contributions to the overall success of these fields. The Article highlights three main pragmatic payoffs likely to flow from following a mostly private law approach to these fields: (1) helping each field constructively engage legal mechanisms that are premised upon both rules and standards; (1) while at the same time (2) mitigating the efficiency-eroding and fairness-eroding effects studied by the public choice school of thought; (2) and (3) strengthening the opportunity for democratic review.

While the distinction between private law and public law is itself open to debate, one well accepted set of definitions is illustrative:

Private law defines the rights and duties of individuals and private entities as they relate to one another. It stands in contrast to public law, which establishes the powers and responsibilities of governments, defines the rights and duties of individuals in relation to governments, and governs relations between and among nations. (3) Trade law's numerous fields meet both definitions to some extent because each field depends to a large degree on its ability to modulate interactions among private actors as well as interactions between private actors and state actors. While trade law encompasses many distinct fields, (4) this Article focuses on the following subset as representative: AD/CVD, patents, and antitrust. (5) Within each of these fields, there are countless echoes of the familiar debates between contrasting perspectives, such as between private law and public law, between legal realists and legal positivists, between rules and standards, and between efficiency and fairness, including perspectives that question whether such conceptual distinctions are actually without practical difference. (6) This Article borrows from the many helpful contributions from all sides of these debates by using explicit labels when embracing particular goals or insights.

This Article explores some concrete examples across these three representative fields to sketch a pragmatic approach to integrating diverse perspectives, including those outlined above. It develops some modest recommendations about how to conceptualize trade law and its implementation. It shows how trade law works well when it operates mostly as private law within the positivist tradition, with the aim of increasing efficiency, while remaining open to public law goals such as fairness. The basic intuition is that this approach explicitly employs the skepticism of the realist tradition to further three distinct goals: (1) enabling the constructive use of legal frameworks of both rules and standards; while (2) mitigating the efficiency-eroding and fairness-eroding effects of public choice; and (3) strengthening the opportunity for democratic review. (7) The Article explores a rules-based, (8) good government approach to trade law that takes seriously the familiar toolkit of procedural safeguards for openly engaging diverse perspectives. Chief among these safeguards is basing decisions on a detailed factual record, while explicitly setting forth the details of any analytical reasoning grounded in that record. Although each of the legal regimes explored here includes as a primary goal the protection of a level economic playing field on which to foster economic efficiency, economic growth, and dynamic competition, each also has long been understood to embrace considerations of broader public interest. (9) Following the familiar procedural safeguards may seem either overly legalist or proceduralist, but it furthers the private law goals of fostering efficiency-enhancing private ordering and the public law goals of transparent democratic review by showing when broader public law goals such as an increased sense of fairness to a particular group or interest are in play.

This Article begins in Part II with analysis of an example from the field of international trade's AD/CVD law. This example focuses on a seemingly simple question--what counts as material injury caused by imports--that could leave room for immense flexibility and discretion, ripe for a public law approach. The discussion below then shows how the case-law has evolved crucial restraints on this otherwise immense zone of flexibility that foster the core private law features of the AD/CVD regimes while permitting some room for public law values. Part III provides additional examples of a private law approach from the fields of patent and antitrust law. Lastly, Part IV explores some under-appreciated structural features of the different tribunals that adjudicate around the patent-antitrust interface to elucidate how they may play a key role in facilitating a private law approach. Part V concludes.

  1. INTERNATIONAL TRADE AND THE AD/CVD SYSTEMS

    The basic structure of current AD/CVD law in Title VII (10) remains anchored in the smoot-Hawley Tariff Act of 1930, (11) which is often viewed as having imposed the highest protective tariff rates in U.S. history. (12) This body of law is notoriously but understandably subject to concern for being implemented in ways that make it ill suited for the label of private law by inhibiting private parties from efficiency-enhancing private ordering. Some commentators see AD/CVD law as amenable to an unduly broad range of approaches. (13) Some see it as inherently incoherent, perhaps by design. (14) Some see it as especially likely to cause significant reduction in domestic and international economic efficiency. (15) Some see it as biased against particular countries, such as China. (16)

    Before addressing these understandable concerns, a brief review of the AD/CVD framework provides background. The basic concept behind AD/CVD law is to protect domestic markets from harm caused by foreign producers who are selling into the domestic market at less than fair value. The intuition on which these regimes are premised is that a foreign producer only rationally pursues such underselling if it is otherwise able to unfairly recoup through some improper means any losses it suffers by selling at such a low price. In the case of the AD regime, the basic idea is to defend against a foreigner's reliance on short-term predatory pricing in furtherance of a long-term strategy in which profits are recouped later as a winning monopolist who has driven all competitors, including domestics, out of the market. (17) In the case of the CVD regime, the short-term tactic is an inappropriate subsidy by the foreign producer's own government. Of course, both AD and CVD regimes, as well as their underlying intuitive premise, are subject to debate.

    Both AD and CVD investigations begin with the simultaneous filing of petitions at the U.S. Department of Commerce ("Commerce") and at the U.S. International Trade Commission ("ITC"). (18) These petitions may be filed by interested domestic parties such as individual producers or growers, trade associations, or labor organizations. (19) Responsibilities in the AD/CVD investigations are divided between Commerce and the ITC. (20) Commerce determines whether the imports subject to investigation are dumped (21) or subsidized (22) and at what margins, with the size of the margins later used as the size of the corresponding tariff if an ultimate affirmative determination is made by the ITC. (23) That ITC determination is whether a domestic industry is materially injured, or threatened with material injury, by reason of the subject imports. (24) Thus, AD or CVD duties, or tariffs, will be imposed only if both Commerce and the ITC make affirmative determinations. (25)

    Most nations' AD/CVD regimes, including ours in the U.S., are premised on a basic public tradeoff. On the one hand, affirmative determinations lead to tariffs being imposed on the imports, which protect particular domestic producers and members of their production team (26) by allowing them to earn more from the higher price they can charge than if the prices on imports did not include the tariffs. On the other hand, all members of the U.S. market who purchase these same goods pay a higher price. In some cases, the domestic purchasers are different people than those who are involved in producing the domestic good. In some cases, the individuals are the same, as is the case when an individual is both an employee (or investor) in a domestic producing firm and also a customer of the products produced.

    Turning back to the ITC, its central determination is whether the imports caused (or threaten) material injury to the domestic industry. (27) That ITC determination is based upon a very detailed factual record developed through months of extensive investigation about the relevant industry by ITC staff, as well as what is typically a day-long evidentiary hearing involving witness testimony and advocacy by lawyers, business representatives, and economists, and on many occasions by Members of Congress and by ambassadors and other officials from foreign embassies to the U.S. (28) Underlying the ITC's process is its statutorily mandated inquiry about whether there has been or would be "material injury," which is broadly defined in the statute as "harm which is not inconsequential, immaterial, or unimportant." (29) The statute provides minimal...

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