Property Rights In Information Research Articles

European Insider Trading Theory Revisited: The Limits of the Parity-of-Information Theory and the Application of the Property Rights in Information Theory to Activist Investment Strategies

AbstractParity-of-information is purported to be the single overarching policy rationale for the European Union (EU) regulation on insider trading. This is because securities trading on the basis of informational advantages is generally prohibited under EU rules, as is tipping (and issuers’ selective disclosure) of material, non-public information. Yet, EU regulations allow market actors, including investment professionals and analysts, that have discovered valuable information -and thereby, have an informational advantage vis-à-vis their trading counterparties- to trade on this information. Relatedly, issuers of financial instruments, takeover bidders and merging parties can share information with a selected group of investors prior to public announcement of the transaction (market sounding), whereas firms can delay public disclosure of inside information and prevent all other market participants from trading on this information. I argue that these exceptions from the parity-of-information theory are -from a doctrinal standpoint- best explained as property rights in information of market actors that have developed new proprietary information with respect to European listed securities. This article, therefore, aims at providing a property rights account of the exceptions to the parity-of-information theory and it illustrates the trade-offs between the parity-of-information and the property rights in information theories underlying European insider trading rules. By extension, I analyze the specific case of activist campaigns as inside information and argue that it would be consistent with the property rights approach to allow activist investors to share their investment and trading strategies with other market participants that further their activist agenda.

The Lost History of Insider Trading

Common conceptions about the history of insider trading norms in the United States are inaccurate and incomplete. In his landmark 1966 book Insider Trading and the Stock Market, Dean Henry Manne depicted a world in which insider trading was both widespread and universally accepted. It was SEC enforcement efforts in the early 1960s, he contended, that swayed public opinion to condemn what had previously been considered a natural and unobjectionable market feature. For five decades, the legal academy has largely accepted Manne’s historical description and the vigorous debates over whether the federal government should prosecute insider trading have assumed, either explicitly or implicitly, the accuracy of those views. This paper challenges that conventional wisdom and shows that the shift in insider trading norms began earlier than has previously been supposed and substantially preceded governmental enforcement efforts. Insider trading, while generally believed to be ubiquitous in turn-of-the-century stock markets, was not universally condoned. In fact, the propriety of the practice at publicly traded companies was highly contested. Those debates coincided with the growth of public companies and an ongoing shift in views about how the stock market functioned. The early twentieth century debate over insider trading thus featured both modern arguments about property rights in information and the effect that insider trading has on stock market participation and older ideas about manipulation and market inefficiency that would generally not be accepted today.

Protecting Consumers in Privacy and Data Security: A Perspective of Information Economics

This note provides an economic approach to consumer privacy and data security based on the extensive economic literature on how information flows, and is used, in the marketplace. We apply that approach to consumer protection in privacy and data security, as a step toward the ultimate goal of facilitating well-grounded cost-benefit analysis of future policy and law enforcement action in this area. Over the past two decades, the FTC has led the governmental effort to protect the integrity of consumer privacy choices in the market. This note attempts to describe the economic basis for that work in one coherent piece. Given the scope of the topic, this note is only a first step in providing clarity on the economic perspective on consumer protection in this area. We hope the note will improve future actions in privacy and data security. As a matter of scope, we do not discuss the potential implications of privacy and data security for antitrust or competition. Nor do we discuss data access and data use beyond domestic commerce. We also do not claim to provide the economics of privacy and data security. Other authors have provided the basic research and surveys that this work builds on. Other perspectives might usefully focus on how property rights in information influence the creation and flow of information through the market, or how structuring privacy as a human right would change markets and influence social welfare. Such other perspectives might also facilitate cost-benefit analyses of privacy and data security policy and enforcement. In comparison, we articulate privacy and data security issues primarily in information economic terms. In particular, we highlight the distinction between process and outcome: while an individual’s privacy outcome is the realized restriction on the flow and use of information, the process that leads to that outcome depends on many parties. The decisions that each of those parties make about how that information flows, and the control that each party exercises over the flow of the individual’s information, all contribute to the privacy outcome. The distinction between process and outcome is important. This is in part because while consumers may prefer more or less privacy – the outcome – given a particular situation, they all want themselves, and by extension the sellers they interact with, to have a certain amount of control over the flow. In line with other areas of market intervention, a focus on the process ensures that consumers and sellers have the tools to exercise appropriate control on the process. In turn, this should help bolster a healthy market to facilitate and honor their choice of privacy. This approach is in contrast to a more paternalistic approach that attempts to determine consumer preferences on privacy outcomes and directly impose that determination on the market. Next, we articulate how consumer-to-seller information flows are more complicated in practice than the typical seller-to-consumer information flows that typically concern the FTC in other areas, such as advertising enforcement. In particular, information flows generated by a transaction can persist over time and create effects outside of that initial transaction. These persistent effects often complicate market incentives. Because the persistence of information can cause commitment problems, and tends to exacerbate information asymmetry and externality, it is more starkly important for policy makers to foster a healthy information environment about privacy outcomes and processes, to encourage industry to develop standards and mechanisms that support a healthy information market, and to police that market if necessary. In this document, we identify some market mechanisms that have arisen to address potential market failures, and when interventions in consumer protection are most likely justified. In light of these potential market failures, we then list potential policy tools and discuss their pros and cons.

Информационные посредники в российском праве

Three years ago was adopted Federal Law No. 187 from 02.07.2013 “Amending of certain legislative acts regarding protection of intellectual property rights in information and telecommunications networks”. The article analyzes the concept of information intermediary and its coherence with other participants of the information relationships in the Internet taking into account that the term is not defined in legislation. The article researches three groups of subjects (distinguished depending on their activities) taking into account already existing in this sphere subjects. The author takes an attempt to answer a question: who can be an information intermediary and whether the same information intermediary could belong to all these three groups.

Institutions and Democratic Invention in 19th-Century America: Evidence from “Great Inventors,” 1790–1930

concern with the impact of patent institutions on the rate and direction of inventive activity, and of technological change more generally. Much of the analysis has focused on what seem to be the most direct effects of granting an exclusive property right in technological knowledge: the enhanced returns that inventors can extract by enjoying a state-mandated monopoly on discoveries they make, and the higher costs that those who might choose to employ the new technologies have to bear as a result of a society recognizing property rights in information. In this paper, however, we highlight another feature whose significance has received little attention. We argue that defining and enforcing a tradable asset in new technological knowledge is also important because it encourages the evolution of a market in technology, and because it extends and increases incentives for investment in inventive activity to segments of the population that would otherwise find it difficult to directly extract returns from their technological creativity. The framers of the U.S. patent institutions

Copyright Class War

Developments in digital technology are dramatically reordering the content distribution business. The industry's traditional business model, based on controlling the channels of distribution for tangible copies, is threatened by digital distribution, with its low barriers to entry, low marginal costs and worldwide reach. An industry preoccupied with marketing, distributing and selling containers for content-books, CD's, DVD's, and so on - is discovering that the ability to control distribution channels for such containers is increasingly irrelevant in a world where the content formerly anchored to physical containers now flows freely through fiber-optic cable. The threat to the content industry has resulted in a kind of class war. The combatants' positions, and the changes in position that occur over time, can be understood in terms of a struggle between those that claim to possess a valuable resource and those that cannot, or cannot yet, make such a claim. Today, the Copyright Act, which was drafted by special-interest groups and is essentially incomprehensible to the uninitiated, is being used against the public. It has become critical for the public to engage with copyright law, and re-assert the primacy of the public interest. The author maintains that a nation gets the copyright law it deserves. A public that is passive in the face of expanding property rights in information will pay a heavy price in the form of homogenized culture and loss of intellectual liberty.

On Insider Trading, Markets, and "Negative" Property Rights in Information

On Insider Trading, Markets, and "Negative" Property Rights in Information

On Insider Trading, Markets, and 'Negative' Property Rights in Information

In this Essay, we present a brand new efficiency-based justification for the ban on insider trading. Adopting a broad-market approach to the problem enables us to transform conventional theorizing - which suggests that property rights in inside information must be allocated within the firm, either to shareholders or to managers - and present a third, superior option: allocating the property right to market analysts. This new conceptualization of the problem enables one to see that the crucial issue underlying insider trading policy is: which group-insiders or market analysts can best provide efficiency and liquidity to financial markets?We argue, contrary to the accepted lore, that market analysts are superior to insiders in providing efficiency and liquidity to financial markets. Although insiders have ready access to inside information, they are isolated from external competition, and thus, if allowed to exploit this information through trade, they would seek to preserve and exploit their market power over inside information. Analysts, on the other hand, operate in a fiercely competitive environment, and, thus, process new information to the market as expeditiously as possible. Furthermore, because analysts possess greater financial resources, are able to diversify their investments, and frequently diverge in assessing stock prices, they also provide superior liquidity to financial markets.Moreover, we show, for the first time, that competition among analysts generates a myriad of positive externalities for the economy. Competition among analysts is responsible for the burgeoning market for financial information, and the welter of financial media to which we are exposed. In addition, the analysts' market creates economies of scale for the investment banking industry as a result of continuous monitoring and pricing of stocks, attracting many foreign companies to list their shares on U.S. capital markets. None of this would occur if insiders were allowed to trade. Because of their ready access to inside information, insiders would consistently beat analysts when competing against them, eventually driving analysts out of the market. Given the substantial benefits derived from competition among analysts, we submit that insiders should be banned from appropriating inside information; or as we suggest, they should be assigned, what we call, a negative property right in inside information to allow a competitive information market to develop. We believe that the novel theorizing we develop presents a compelling economic case for retaining the prohibition on insider trading.Finally, our broad market analysis provides a comprehensive analytic framework for analyzing the efficiency tradeoffs implicated by two unresolved aspects of insider trading: selective disclosure and warehousing.

Free As the Air to Common Use: First Amendment Constraints on Enclosure of the Public Domain

We are in the midst of an enclosure movement in our information environment. Property rights in information are increasing everywhere, and the prevailing baseline assumption is that this expansion is both efficient and just. In this article I rely on the first amendment to uncover the normative cost of embracing enclosure instead of the once dominant baseline conception that information ought to be free as the air to common and subject to exclusive rights only under special circumstances. First, the article explains why, analytically, recognizing property rights in information imposes on users the same kind of constraint that media regulation laws impose on the owners of media. I suggest that just as media regulation is permissible subject to careful first amendment scrutiny, so too enforcing property rights in information is permissible, but only if the government can persuade the courts that it has very good reasons to impose the restrictions on access to and use of information necessary to effectuate these property rights. Next, I offer a modification of the standard economic explanation of the effects of intellectual property that sheds light on the effects of enforcing intellectual property rules on the way in which information production is organized. I conclude that increases in the scope of property rights increase production by large-scale commercial organizations that integrate new production with ownership of large existing-information inventories. This increase comes at the expense of smaller producers -- commercial or noncommercial -- and of noncommercial producers generally. Normatively, these effects parallel the effects generally discussed in the critique of media concentration, and pose the same threats to the values of robust political discourse and personal autonomy central to our commitment to the first amendment. Finally, I evaluate the Digital Millennium Copyright Act, the enforcement of mass-market shrinkwrap licenses and database protection legislation in light of the normative framework developed in the article.

Economic Analysis and Copyright Law: Are New Models Needed in the Digital Age?

Summary Economic analysis has played a central role in the development of intellectual property policy. Since information exhibits characteristics of a public good, both non-rival consumption and non-exclusivity, information markets are prone to market failure. This requires a policy response in the form of a subsidy or direct government provision. The monopoly rights granted to owners of intellectual property can be viewed as a form of subsidy intended to avert market failure. But in the digital environment, the tendency to market failure increases as information is more susceptible to copying and distribution with neither significant additional cost nor loss of quality. While a wide range of policy tools are available to meet the challenges of the new digital environment, the range of current legislative proposals shows that the expansion of property rights in information is the only approach being given serious consideration. This paper reviews these proposals as well as the wide variety of other approaches that could be considered including an increased role for the public provision of information. It is concluded that the traditional model of positive economic analysis is unable to explain the current policy environment and that a broader approach rooted in political economy would be appropriate.

Insider Trading: An Overview

Insider trading is one of the most controversial aspects of securities regulation, even among the law and economics community. One set of scholars favors deregulation of insider trading, allowing corporations to set their own insider trading policies by contract. Another set of law and economics scholars, in contrast, contends that the property right to inside information should be assigned to the corporation and not subject to contractual reassignment. Deregulatory arguments are typically premised on the claims that insider trading promotes market efficiency or that assigning the property right to inside information to managers is an efficient compensation scheme. Public choice analysis is also a staple of the deregulatory literature, arguing that the insider trading prohibition benefits market professionals and managers rather than investors. The argument in favor of regulating insider trading traditionally was based on fairness issues, which predictably have had little traction in the law and economics community. Instead, the economic argument in favor of mandatory insider trading prohibitions has typically rested on some variant of the economics of property rights in information. A comprehensive bibliography is included.

Federalism and Insider Trading

In United States v O'Hagan, the Supreme Court that a lawyer's misappropriation of client information was fraud connected with his subsequent securities transactions and therefore actionable under Section 10(b) of the Securities Exchange Act of 1934. This article argues that the decision makes sense only if federal law should protect property rights in information. State law, however, offers better-developed legal rules regarding property rights. Because of state law's greater potential to benefit from jurisdictional competition and legal evolution, state courts and legislators are more likely than federal lawmakers to devise efficient legal rules for protecting private information.

GLOBAL PROPERTY RIGHTS IN INFORMATION: The story of TRIPS at the GATT

The paper tells the story of how the US managed to secure an agreement, which heavily favoured it, on intellectual property at the GATT. This agreement has important implications for global information flows. Understanding this event, the paper argues, will help us to understand some of the mechanisms which operate to bring about global regulatory institutions. Coercion of some kind will be fundamental to the constitution of global regulatory orders.

Toward a political economy of personal information

The evolving market for personal information is seen to be troubled by the inherent difficulties involved in assigning value to intangible goods and services, of which information is one of the more nettlesome. Classical political economy and neoclassical economic theory provide incomplete and contradictory cues as to the source of comparable measures of worth. Additional problems are recognized in the negotiation of claims to ownership or alienable property rights in information that is the product of interactions between individuals and bureaucratic organizations. The concept of negative value, or consequentiality represents a promising point of entry.

Secured Financing and Information Property Rights

Secured Financing and Information Property Rights

Law and culture in the information society

Abstract The paper attempts to reconcile the conflicting concerns about information as a public resource and information as an economic commodity within an information society. The free and uncompensated distribution of information can be rationalized within the context of an agricultural or manufacturing society as a means for furthering the economic interests of the group; however, an information society requires a global economy which is interdependent, for information societies cannot survive without outside support for basic goods and needs. Such a society requires a legal system which recognizes the value of the contribution of those who engage in the creative process. The paper discusses various property rights in information, including rights of access, rights of confidentiality, and rights of reply. The paper also discusses jurisdictional questions concerning the structure of information transport systems, as well as the applicability of the GATT to telecommunications services and information pro...