Archive for the ‘Law’ Category

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Honeywell International Inc. claims Nest thermostat infringes on patents in federal court lawsuit

February 6, 2012

Michael Giberson

Economist Alex Tabarrok, author of Launching the Innovation Renaissance and Marginal Revolution blogger, worries that the proliferation of patents is stifling innovation, particularly patents for business processes. In an interview with Russ Roberts for EconTalk, Tabarrok remarked that large companies like Apple, Microsoft and Google building up massive numbers of patents mostly to insulate themselves from costly patent battles. One side effect of this defensive effort is that smaller innovators can themselves end up in costly patent battles when trying to innovate in the same product space.

Maybe Tabarrok has another example on his hands.

This morning Honeywell International, Inc. (market capitalization of more than $46 billion) filed a patent infringement lawsuit against little Nest Labs, Inc. (unknown capitalization, but backed by a number of venture capital firms). Honeywell is also suing retailer Best Buy which has a marketing arrangement with Nest Lab. (Prior link goes to the lawsuit. More: news release, reports by GigaOm, Mashable Tech, GreenWire, Dow Jones Newswires, and CNet.)

Honeywell asserts Nest infringed several patents: one for methods that use natural language to decrease the time and complexity of programming a thermostat, another for thermostats that indicate how long it will take to reach a desired temperature, another for a thermostat that relies on remotely stored data to manage energy costs, another three patents related to having a rotating portion of the thermostat set one or more parameters of the device, and finally, a patent for powering a thermostat by drawing power from one or more of the circuits controlled by the thermostat. All of the patents have been issued since 2005.

I have no insights into the workings of the intellectual property system, and I’ll spare you my unrefined attitudes on the matter. My only interest is in encouraging innovation that supports energy users.

RELATED, from Quora: What is it like to own a Nest thermostat?

BELOW, image of a Honeywell thermostat app running on a tablet computer.

Honeywell Total Connect Comfort Systems.

With a Honeywell Total Connect Comfort System you can sit in your dining room and adjust the room temperature settings for the master bedroom!

ALSO: Previously on KP, “Nest’s elegant learning thermostat — but is it transactive?“

Posted in Electricity, Energy markets, Law, Technology | Tagged , | 6 Comments »

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Praise for a New York Times article on natural gas fracking (Or, How property rights help mitigate potential environmental harms)

October 21, 2011

Michael Giberson

I’m writing in praise of a New York Times article on natural gas fracking. Yes, really! Even more surprising, I’m writing in praise of a New York Times on fracking written by Ian Urbina. Yes, really!

What is this marvel, you ask? I answer, ”Rush to Drill for Natural Gas Creates Conflicts With Mortgages.”

What is so marvelous about this article? I answer, the way it highlights how property and contract laws can serve to regulate potential environmental harms from gas drilling and hydraulic fracturing.

Of course, as the headline suggests, the focus of the article concerns mortgage restrictions which may be violated if a property owner leases part or all of the property for oil or gas development. Mortgage lenders usually include such limiting provisions in loan contracts to help ensure protection of the property, which typically serves as collateral for the loan. Obviously mortgage contracts differ and the article notes that only sometimes will leasing violate a mortgage. The article further notes that lenders who don’t secure such restrictions in their mortgages, or who fail to closely police compliance with such restrictions, may find it difficult to resell their mortgages in the secondary market.

But here is the deal: almost all of the well-documented environmental harms from natural gas drilling and hydraulic fracturing happen within a few hundred feet of an active well: cases of methane in groundwater, spills from holding ponds filled with produced water from fracking, and so on. If the landowner owns the surface and mineral rights free and clear, and owns a large enough piece of property that effects on neighbors are unlikely, then most of the potential hazards from drilling and fracking are faced by the property owner who can weigh the trade-offs between the costs and benefits and negotiate reasonable protections within the lease with a developer. Actions taken by the developer in response to such a contract to mitigate the likely harm to the property-owner will also almost inherently serve to mitigate any possible harm to neighboring properties. If methane doesn’t migrate from the well into the groundwater immediately around the well, it can’t subsequently migrate across a property line some tens or hundreds of feet distant.

When a landowner borrows against the land, the lender naturally gains an interest in protecting the land’s valueas a tool to help ensure the loan’s repayment. In may be the case, as the article mentions, that the a lease enhances the value of a property and the resulting income makes loan repayment more likely. On the other hand, gas drilling and fracking may reduce the value of the surface property. The point is that – working in the context of contracts and property law –  landowners, lenders, and gas development companies have a natural interest in trying to work out these issues in an way that should naturally reflect most of the potential costs and benefits from exploitation of the shale resource.

Not every potential hazard will be well contained within a mortgage contract and a mineral lease. For example, the landowner may not care too much what the developer does with produced water from fracking operations so long as it is safely removed from her property. Other issues may depend on rights to surface water crossing a property or the contribution to any local air pollution hazards. In such cases liability rules and potential litigation by neighbors might be the efficient regulator, but government-provided regulation is also sometimes the efficient response.

I praise the New York Times article for highlighting (even if only indirectly) the way that decentralized decision making in the context of the rights and responsibilities attendant to property and contract law can serve to regulate environmental harm. The next step, from the view of government policy, is to refocus the efforts of government regulators on just those harms that are not well addressed within the scope of voluntary decentralized decisions.

[NOTE: For additional commentary on Urbina's NYT reporting on natural gas fracking, none of it laudatory, see this search of the KP archives.]

Posted in Energy markets, Environmental policy, Law, Regulation | Tagged , , , | Comments Off

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A Coasian look at pesticide and genetic drift

September 30, 2011

Michael Giberson

A few weeks back Lynne drew attention to an interesting property dispute between neighboring farmers in Minnesota, currently the subject of legal action (see news summary here, related court decision here). In brief, the issue is pesticide drift from conventionally farmed crops onto a neighboring organic farm, and whether the organic farm can sue the conventional farm for pesticide-drift trespassing. Appeals court says yes.

David Conner wrote about a very similar hypothetical case a few years back in “Pesticides and Genetic Drift: Alternative Property Rights Scenarios,” when considering a Coasian approach to resolving such issues:

Imagine the following hypothetical dispute between Cameron Conventional and Olivia Organic, two farmers with adjacent fields. Cam­eron is a cutting-edge, high-tech farmer, an early adopter of new technologies, making him a low­ cost producer of grains and legumes. “Back to the land” Olivia grows organic specialty orops for sale at a local farmers’ marker.

Someone tests an ear of Olivia’s sweet corn and determines that it is contaminated by pesticides and pollen from GE corn. Her upset consumers begin to boycott her. The belief that she is an organic producer is stripped away. She must now sell her produce conventionally at a much lower price. What are her options?

Conner then explores the case in “Coasian” fashion, considering various scenarios depending upon who would be the least-cost avoider of the conflict and who held what rights.

Posted in Economics, Environmental policy, Law, Regulation | Tagged , , | 2 Comments »

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On the obligations of income-earners and property-owners to pay taxes

September 29, 2011

Michael Giberson

Perhaps you’ve seen the video of Elizabeth Warren, hoping to be elected to the U.S. Senate from Massachusetts, in which she declaims that since roads and police and fire protection are funded through taxes, people have no real claim to their income or wealth against a government that wants to take it. After all, she says, without use of the roads or protection by the policy, people couldn’t earn income or hold onto their wealth. (By the way, I’m looking forward to part two where she explains the consequences for religious freedom entailed by the fact that church-goers drive to church on tax-funded roads.)

Some people like her way of thinking (see the comments here). But obviously her presentation will grate on the nerves of folks that believe governments are instituted to secure and protect rights rather than the wellspring of those rights in the first place.

There are a number of thoughtful (and probably many more less thoughtful) criticisms of Warren’s little speech. Perhaps the best considered response I’ve seen so far comes from Will Wilkinson at The Moral Sciences Club, “Tax and Justice: It is your money.”

Posted in Law, Liberty, Politics | Tagged , | 2 Comments »

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Passage of Wisconsin’s anti-price gouging bill boosted by President Bush’s public remarks

August 22, 2011

Michael Giberson

Wisconsin didn’t have an anti-price gouging law in 2001, so the state government’s response to post-9/11 reports of gasoline price gouging was pretty limited. While the Wisconsin governor called for an investigation of gasoline retailers, for all practical purposes the investigation was limited to fighting collusion in price setting and instances in which stations may have changed prices more than once in a 24-hour period. (See the previous post for a related discussion. The state also had a law which prescribed a minimum 9.18 cent per gallon retailer margin, to prevent prices from becoming ‘too low,’ but that law was not an issue at the time.)

In early 2002, Wisconsin State Rep. Marlin Schneider introduced an anti-price gouging bill limited to petroleum-based fuels and providing for fines up to $10,000 and prison terms as long at 15 years, but the Wisconsin legislature did not pass it. Wisconsin did eventually pass an anti-price gouging law in 2006, largely in response to gasoline price increases after Hurricanes Katrina and Rita (see regulation here).

One of Wisconsin State Rep. Josh Zepnick’s talking points in favor of the bill was President George Bush’s public call in April 26, 2006 for an investigation into “illegal manipulation or cheating related to the current gasoline prices,” which was followed up by a letter from Attorney General Alberto Gonzales to state Attorneys General asking them to “enforce vigorously the laws of your State against any anticompetitive, anticonsumer conduct in the petroleum industry.”

Zepnick observed that Wisconsin lacked a law that would enable the state to support the President. More:

“Wisconsin consumers are worried about price gouging,” concluded Zepnick. “President Bush and Attorney General Gonzales are worried about price gouging. Legislative Democrats are worried about price gouging. Everyone is worried about price gouging except for Wisconsin’s Legislative Republicans. It’s time they get with the picture.

The law was enacted within a month.

ADDENDUM: Seven states did pass anti-price gouging laws in 2001 or 2002, primarily in response to post-9/11 reports of price gouging on gasoline and other goods and services: NJ, ID, IN, KS, SC, TN, WV. A few states passed anti-price gouging laws in 2003, 2004 and 2005, responding to both post-9/11 reports and hurricane-related price gouging: NC, KY, VA, UT. The other three states passing an anti-price gouging law in 2006 were ME, PA, and VT. Oregon followed with an anti-price gouging law in 2007.

Posted in Economics, Energy markets, Law, Politics | Tagged , | 2 Comments »

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Horwitz reminds us that Classical Liberalism insists governments treat citizens as equal before the law

June 30, 2011

Michael Giberson

Steve Horwitz argues that Classical Liberals have become so focused on the size and reach of government that they have lost touch with another important Classical Liberal project: promoting equality before the law.

Part of the problem today is that an increasing number of libertarians lean toward the anarchist position.  When one’s whole political perspective begins with the proposition that anything and everything the State does is evil and/or unnecessary, it’s easy to ignore questions about about how the State — given its existence – should properly conduct its business.  These questions involve matters of justice and liberty, and if we libertarians ignore them, we risk not only irrelevance in important conversations but also risk consigning our fellow citizens to continued injustice and denials of liberty.

The legalization of same-sex marriage in New York last week has brought these tensions to the surface.  Libertarians seem split over whether to celebrate this action.  On one side is a group arguing that the real problem is State involvement in marriage in the first place and that this decision just makes it more involved.  Therefore, this group seems to be arguing, we should oppose the action (or at least be indifferent about it) and work to separate marriage and State.

Equality under the Law

On the other side are those like me who — while agreeing that the long-term goal is separation of marriage and State — argue that, given the slim chance of separation happening any time soon, classical-liberal principles require the State to treat all citizens as equal before the law.

For most of human history political leaders acted with near total discretion, distributing benefits and impositions among their subjects however they like.  One of the most important accomplishments of the liberal movement was to subject those with political power to rules.  Starting with the Magna Carta and up through the democratic revolutions and constitutions of the eighteenth century, liberalism worked to create a society ruled by law not by men.  Since the eighteenth century the liberal movement has also worked to ensure that all citizens, by virtue of their being adult humans, have their rights fully respected.  The liberalism of the nineteenth century was antislavery, antiracist, and part of the earliest movements for women’s rights.  It powerfully combined a commitment to liberty with a commitment to equality to make the case for the liberal order.

Posted in Law, Liberty | Tagged | 21 Comments »

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Science, law, and regulation of fracking for natural gas in the Marcellus Shale

June 18, 2011

Michael Giberson

The current issue of the Energy Law Journal includes an article examining the public policy history surrounding the use of hydraulic fracturing to develop natural gas in Pennsylvania and New York. The article, “Science and the Reasonable Development of Marcellus Shale Natural Gas Resources in Pennsylvania and New York,” is by attorneys Lynn Kerr McKay, Ralph H. Johnson and Laurie Alberts Salita.

SYNOPSIS: A fair amount of controversy concerning the development of natural gas resources in the Marcellus Shale formation has accompanied the return of significant oil and gas exploration and production to Pennsylvania. One need only look at the news headlines and legislative and regulatory dockets to appreciate the diversity of issues and positions on those issues related to the Marcellus Shale region. A growing number of lawsuits and media reports give the impression that Marcellus Shale drilling and production operations – especially the process known as hydraulic fracturing – are indisputably harmful to both the environment and to those who live in the vicinity of the wells. Lawmakers and regulators have introduced myriad measures imposing additional oversight and operational requirements on Marcellus Shale producers. The economic, environmental, and human impact of such measures will be significant – which is exactly why unbiased and informed scientific evaluation of the potential link between Marcellus Shale production activities and environmental and health concerns is essential to appropriate judicial and regulatory decisions. The success of efforts to explore and develop Marcellus Shale natural gas resources requires continued critical and scientific evaluation of information concerning all aspects of the enterprise.

Also in the current ELJ, “Shale Gas in Poland – The Legal Framework for Granting Concessions for Prospecting and Exploration of Hydrocarbons, by Wojciech Bagiński.

Posted in Energy markets, Environmental policy, Law, Regulation | Tagged , | 1 Comment »

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Art Carden on price gouging

June 17, 2011

Michael Giberson

Art Carden, in his Economic Imagination blog at Forbes.com, explains “Price Gouging Laws Hurt Storm Victims.”

How many people see natural disasters like the tornadoes in Tuscaloosa, Alabama, and Joplin, Missouri and say “we should be working to impede the recovery and make life harder for storm victims?” Probably no one. How many people see prices rise after natural disasters like the tornadoes in Tuscaloosa, Alabama and Joplin Missouri and say “we should prosecute ‘price gougers!’”? Probably a lot. And yet prosecuting price gougers makes life harder for storm victims.

I like Carden’s article not because he quotes my Regulation article on price gouging and gives me another reason to link to it (well, I like Carden’s article not only because…), but because he states the main problem with price gouging laws so clearly: “prosecuting price gougers makes life harder for storm victims.”

Posted in Economics, Law, Regulation | Tagged | 1 Comment »

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Sure, Congress can regulate light bulbs that travel in interstate commerce, but a “made in Texas, stayed in Texas” bulb…?

June 8, 2011

Michael Giberson

The Texas state legislature has passed a bill that affirms that a light bulb manufactured in Texas of materials predominantly from within Texas and sold for use within Texas would not be subject to federal law or regulation under the authority of the U.S. Congress to regulate interstate commerce. The bill further would commit the state Attorney General to defend any citizen of the state of Texas making a “Made in Texas” bulb who is prosecuted by the federal government for violating the Energy Independence and Security Act of 2007.

The bill has passed both the state House and Senate, but not yet signed by the governor. The Natural Resources Defense Council is advocating against efforts to repeal or amend the EISA of 2007 (for example) and is opposing the Texas bill.

In part the bill reads:

AN ACT
relating to exempting the intrastate manufacture of certain incandescent light bulbs from federal regulation.
…
(c) In 2007, the United States Congress passed the Energy Independence and Security Act (Pub. L. No. 110-140). Section 321 of that act bans the sale of certain incandescent light bulbs in the United States beginning in 2012.
(d) The regulation of intrastate commerce is vested in the states under the Ninth and Tenth Amendments to the United States Constitution if not expressly preempted by federal law. The United States Congress has not expressly preempted state regulation of intrastate commerce relating to the manufacture on an intrastate
basis of incandescent light bulbs.
(e) The Legislature of the State of Texas declares that an incandescent light bulb manufactured in Texas, as described by Chapter 2004, Business & Commerce Code, as added by this Act, that remains within the borders of Texas:
(1) has not traveled in interstate commerce; and
(2) is not subject to federal law or federal regulation, under the authority of the United States Congress to regulate interstate commerce.

Full legislative information on HB 2510 available at the Texas Legislature Online website.

Posted in Electricity, Law, Regulation | Tagged , | Comments Off

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Do anti-price gouging laws help the victims of natural disaster?

June 2, 2011

Michael Giberson

At the LegalMatch Law Blog, Sonya Ziaja editorializes in favor of laws against price gouging:

Natural forces are blind to what they destroy. People aren’t. In the past month, tornadoes and flooding in the South and Midwest left behind crippled lives, destroyed homes, and eviscerated infrastructure.

Now as the victims of the tornadoes try to rebuild, they are left vulnerable to another foe—people who use the disaster for economic gain by price-gouging.

…

Thankfully, there are legal protections against price-gouging in many states…. [The] price-gouging statutes allows the attorney’s general to investigate and prosecute instances of price-gouging once a state of emergency is declared.

After some discussion of the difficulty of defining price gouging precisely and the resulting differences in state laws, Ziaja asks a very good question: “How does any of this help the victims of natural disaster?”

Her answer sticks to the simple intended effect of the laws: “In theory, the threat of these consequences will deter potential price-gougers from profiting excessively from the misfortune of others.”

That line is a fine beginning to an answer, but unfortunately, is this case, it is also the end of the answer. The editorial moves on to other issues. What should come next is any evidence on whether the deterrence theory actually keeps people from profiting excessively, however that is defined. After all, first we should assess whether the law actual does the main thing it attempts to do. Following that one should look at whether the law has any unintended consequences, positive or negative, for victims of natural disasters.

On the issue of unintended consequences it seems clear that price gouging laws has negative effects for victims. The laws discourage efforts by merchants to bring useful goods into disaster-affected areas. Stores have been fined by the state after going to extraordinary efforts to bring electric generators into areas where an ice storm left millions of people without power. Gasoline retailers sometimes refuse to resupply at higher wholesale prices during declared emergencies, afraid they’ll be accused of price gouging. Victims of disasters are worse off if the laws reduce the resources available to them for recovery.

I’ll provide a few more details and analysis in a subsequent post on the consequences of price gouging laws. (The interested reader should also check out my price gouging article in Regulation magazine.)

Posted in Economics, Law | Tagged , , | 5 Comments »

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