VOLUME 164, ISSUE 4 March 2016

Articles

The Patent Spiral

Roger Allan Ford

Examination—the process of reviewing a patent application and deciding whether to grant the requested patent—improves patent quality in two ways. It acts as a substantive screen, filtering out meritless applications and improving meritorious ones. It also acts as a costly screen, discouraging applicants from seeking low‐value patents. Yet despite these dual roles, the patent system has a substantial quality problem: it is both too easy to get a patent (because examiners grant invalid patents that should be filtered out by a substantive screen) and too cheap to do so (because examiners grant low‐value nuisance patents that should be filtered out by a costly screen).

This Article argues that these flaws in patent screening are both worse and better than has been recognized. The flaws are worse because they are not static, but dynamic, interacting to reinforce each other. This interaction leads to a vicious cycle of more and more patents that should never have been granted. When patents are too easily obtained, that undermines the costly screen, because even a plainly invalid patent has a nuisance value greater than its cost. And when patents are too cheaply obtained, that undermines the substantive screen, because there will be more patent applications, and the examination system cannot scale indefinitely without sacrificing accuracy. The result is a cycle of more and more applications, being screened less and less accurately, to give more and more low‐quality patents. And although it is hard to test directly if the quality of patent examination is falling, there is evidence suggesting that this cycle is affecting the patent system.

At the same time, these flaws are not as bad as they seem because this cycle may be surprisingly easy to solve. The cycle gives policymakers substantial flexibility in designing patent reforms, because the effect of a reform on one piece of the cycle will propagate to the rest of the cycle. Reformers can concentrate on the easiest places to make reforms (like the litigation system) instead of trying to do the impossible (like eliminating examination errors). Such reforms would not only have local effects, but could help make the entire patent system work better.

Machine Learning, Automated Suspicion Algorithms, and the Fourth Amendment

Michael L. Rich

At the conceptual intersection of machine learning and government data collection lie Automated Suspicion Algorithms, or ASAs, which are created by applying machine learning methods to collections of government data with the purpose of identifying individuals likely to be engaged in criminal activity. The novel promise of ASAs is that they can identify data‐supported correlations between innocent conduct and criminal activity and help police prevent crime. ASAs present a novel doctrinal challenge as well, as they intrude on a step of the Fourth Amendment’s individualized suspicion analysis, previously the sole province of human actors: the determination of when reasonable suspicion or probable cause can be inferred from established facts. This Article analyzes ASAs under existing Fourth Amendment doctrine for the benefit of courts that will soon be asked to deal with ASAs. In the process, this Article reveals the inadequacies of existing doctrine for handling these new technologies and proposes extrajudicial means for ensuring that ASAs are accurate and effective.

The Hidden Costs of Cliff Effects in the Internal Revenue Code

Manoj Viswanathan

Cliff effects in the Internal Revenue Code trigger a sudden increase of federal tax liability when some attribute of a taxpayer—most commonly income—exceeds a particular threshold value. As a result, two taxpayers in nearly identical economic situations can face considerably different tax liabilities depending on which side of the triggering criterion they fall. The magnitude of the equity and efficiency costs associated with cliff effects is significant: cliff effects are attached to tax provisions amounting to hundreds of billions of dollars, the majority of which are targeted at low‐ and moderate‐income taxpayers.

Cliff effects have received little attention in legal academia. Prior scholarship has primarily discussed the relevant tax provisions in isolation, focusing on financial consequences on a single taxpayer or limiting analysis to taxpayers in one geographic area. This Article addresses the void in legal scholarship by first recognizing potential rationales for cliff effects and identifying situations where their definitional clarity might compensate for any equity and efficiency losses. Next, the individual and aggregate costs of cliff effects are quantified and plausible statutory alternatives are identified.

This Article argues that a cliff effect based on income is necessarily problematic on both equity and efficiency grounds because it improperly penalizes taxpayers and disincentivizes the economic empowerment the associated tax provision is intended to promote. A methodology is then provided by which these costs can be compared to the potential savings provided by the bright‐line rule of the cliff effect. This empirical analysis is performed on the two cliff effects of the health premium subsidy of the Affordable Care Act and finds that the cliff effects will, if unchecked, represent a misallocation of over $8.5 billion by 2025.

This Article presents several options for replacing problematic cliff effects, including those in the health care subsidy. The most novel of these strategies awards a credit based on the severity of the cliff effect and ensures that no taxpayer is made worse off post‐tax by virtue of earning more pre‐tax income. The Article concludes by extending the analysis to cliff effects associated with state and local tax regimes and direct transfer programs.

Comments

Devising an Artful Tax: An Appraisal of Payment‐in‐Kind Income Taxes in Mexico and the United Kingdom

Julia L.M. Bogdanovich

Now in effect for almost sixty years, Pago en Especie allows Mexican artists to satisfy their annual income taxes by giving the government a certain number of their paintings, sculptures, drawings, photographs, or other visual works each year. Although no cash payment occurs, the government sees tremendous value in these acquisitions. Endowed each year with more artwork, the government now boasts the world’s premier collection of Mexican contemporary art, with close to 7000 works. Artists also view the scheme favorably. Relieved of paperwork, audits, and counting pesos, an artist can devote himself completely to his creativity and take pride in knowing that the work he submits on tax day will become part of a national repository.

While no other country has gone as far as Mexico in adopting a payment‐in‐kind tax program for art, in 2012 the United Kingdom passed legislation authorizing the Cultural Gifts Scheme (CGS), which allows all taxpayers—not just artists—to donate a preeminent object to a qualifying institution in the United Kingdom. As in Mexico, individual taxpayers and the government both reap significant benefits from this program. For a taxpayer, the tax reduction earned for donating a preeminent object may significantly decrease the income taxes owed. For the United Kingdom, CGS ensures that important cultural and artistic works remain in the country and continue to enrich the nation’s cultural landscape.

As Pago en Especie and CGS have gained more attention, there have been rumblings that the United States should consider implementing a similar payment‐in‐kind income tax program for contemporary artwork and other forms of cultural property. Simplifying tax payments, accommodating artists’ needs, accumulating a national collection, and promoting tourism are common justifications for adopting such programs. However, while Pago en Especie and CGS initially appear attractive to artists and art lovers alike, an in‐depth examination of each reveals numerous administrative, fiscal, and precedential shortcomings that could undermine—rather than enhance—a larger income tax system.

When Is a Tweet Not an Admissible Tweet? Closing the Authentication Gap in the Federal Rules of Evidence

Siri Carlson

The proliferation of social media has naturally led to the increased use of information found on social media to resolve legal disputes. In criminal and civil cases, evidence obtained from social media helps the parties tell their stories and provides proof of disputed facts. As with all evidence, concerns over relevance, authenticity, prejudice, and reliability arise. However, evidence from social media and other digital communications create distinct admissibility concerns. Debates over authenticity of digital evidence fall into two distinct yet overlapping categories of inquiry: normative and procedural.

On a normative level, the debate centers on whether the threshold inquiry for authentication should be more than the minimal showing currently required under the Federal Rules of Evidence (Rules) 901 and 104. Even if one accepts the current, minimal threshold for authentication, a procedural question still exists under the current Rules: Can the suggested modes of authentication provided in Rule 901 adequately guide courts in admitting these new forms of evidence, or do concerns over digital evidence authenticity require specific guidance?

While the Rules provide multiple, nonexhaustive illustrations for authenticating evidence, application of these examples has divided both state and federal courts over the appropriate authentication method and the sufficient threshold authenticity requirement for social media and other digital communications. The inconsistencies in application and outcome suggest that modifications specifically addressing these new forms of communication would better promote uniform and consistent admissibility rulings to a greater degree than continued, albeit creative, application of the current authentication examples under Rule 901.

Social media communication is only part of the larger field of digital communications, including email and text messaging, and the even broader field of electronically stored information such as computer files. However, the growing use of social media—combined with courts’ differing approaches to authentication—provides a good lens for viewing the shortcomings of applying the current Rules to newer communication formats. The Rules’ authentication requirements have not changed since the inception of now‐widely utilized advances in communication technology. Yet many scholars and even courts do not advocate for revising authentication requirements. They point to the current Rules’ nonexhaustive nature, the ability to combine examples to authenticate digital evidence, the challenge of creating an effective Rule, and the inevitability of a cohesive approach once courts apply the current Rules in a similar fashion. However, the increasing need for and the continued inconsistencies in admitting social media and other digital communications support modifying the Rules to contain explicit procedures for authenticating these types of evidence.