Category: Intellectual Property

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Aereo and the Spirit of Technology Neutrality

aereo_logoAereo is a broadcast re-transmitter. It leases to subscribers access to an antenna that captures over-the-air television, copies and digitizes the signal, and then sends it into the subscriber’s home, on a one-to-one basis, in real time or at the subscriber’s later desire. Aereo was poised to revolutionize the cable business—or hasten its collapse.

At least, it was.

Wednesday the Supreme Court unequivocally held that Aereo infringes copyright law, per Section 106(4) (the Transmit Clause). Aereo’s main backer, Barry Diller, quickly waved the white flag. Aereo is done—and it’s unclear what exactly Justice Breyer’s majority opinion portends for other technologies, despite the majority’s “believ[ing]” that the decision will not harm non-cable-like systems.

As James Grimmelmann succinctly noted amid a flurry of thoughtful tweets, “aereo resolves but it does not clarify.” And that might be an understatement. Eric Goldman notes four unanswered questions. (Amazingly, the majority opinion does not even engage Cablevision.) I’d add to that list the still incredibly vague line demarcating a public performance and the broader issue of technology neutrality in copyright law. (More on technology neutrality in a moment.)

The Court’s opinion relied heavily upon legislative history and, in particular, Congress’s abrogation of two earlier Supreme Court decisions on cable re-transmitters, Fortnightly Corp. v. United Artists Television and Teleprompter Corp. v. CBS. The Aereo Court limited discussion entirely to “cable-like” systems, punted on technologically similar non-cable-like systems, and left a big question about the dividing line.

Overall, the Court came off sounding blind to the technological realities of 2014—in stark contrast to its relatively technology-savvy decision in Riley v. California. (Dan’s take on Riley.)

Margot Kaminski has an excellent post for The New Republic addressing the varying treatment of cloud computing in Aereo and Riley, noting how cloud concerns were waved off in Aereo but factored into the Court ruling that the government normally must get a warrant to search an arrestee’s cell phone. The question, Margot asks, is why the different treatment?

The simplest answer would be that the Court was dealing with two different legal regimes: Constitutional privacy law versus statutory copyright. But at the heart of both decisions, the Court was asked to decide whether an old rule applied to a new technology. In one case, the Court was hesitant, tentative, and deferential to the past legal model. And in the other, the Court was unafraid to adjust the legal system for the disruptive technology of the future.

I’m a fan of simplicity, and I think it is particularly helpful in answering this question.

The Fourth Amendment is dynamic. As Orin Kerr has explained: “When new tools and new practices threaten to expand or contract police power in a significant way, courts adjust the level of Fourth Amendment protection to try to restore the prior equilibrium.” The 1976 Copyright Act is not. And by design.

With the 1976 Copyright Act, Congress adopted the principle of “technology neutrality” for copyrightable subject matter and exclusive rights—to “avoid the artificial and largely unjustifiable distinctions” that previously led to unlicensed exploitation of copyrighted works in an uncovered technological medium.  Rather, the 1976 Act was written to apply to known and unknown technologies.

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Alice Corp. v. CLS Bank

The cries and lamentations you hear are coming from patent attorneys and the Federal Circuit as they try to figure out what to with the Supreme Court’s latest pronouncement on the definition of an “abstract idea” in patent law.  Today the Court ruled unanimously that the patent claim at issue was too abstract to be patented, but the opinion offers little help on figuring out when that is the case.  Take a look at page 10:

In any event, we need not labor to delimit the precise contours of the “abstract ideas” category in this case.  It is enough to recognize that there is no meaningful distinction between the concept of risk hedging in Bilski and the concept of intermediated settlement at issue here.  Both are squarely within the realm of “abstract ideas” as we have used that term.

While it is true that the Court did not need to do more to decide this case, they did need to  “labor” to clarify the law, which is the actual problem.  “Totality-of-the-circumstances” is not a great test for this area, and sadly there are now only three votes to say that business method patents are ineligible (down from four in Bilski).  Expect a lot more litigation on software patents, more divided opinions from the Federal Circuit, and another grant of certiorari in four or five years.

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Tesla encourages free use of its patents—but will that protect users from liability?

Tesla Motors made big news yesterday with an open letter titled, “All Our Patent Are Belong to You.”

The gist of the letter was that Tesla Motors had decided that, in the interest of growing the market for electric vehicles and in the spirit of open source, it would not enforce its patents against “good faith” users. The key language was at the end of the second paragraph:

Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.

Tesla made clear it was not abandoning its patents, nor did it intend to stop acquiring new patents. Rather, it just wanted clear “intellectual property landmines” that it decided were endangering the “path to the creation of compelling electric vehicles.”

The announcement, made on the company’s website, immediately attracted laudatory media attention. (International Business Times, Los Angeles Times, San Jose Mercury News, Wall Street Journal, etc.) As one commentator for Forbes wrote:

[H]anding out patents to the world is smarter still when you think how resource-sapping the process is. Engineers want to build not fill out paperwork for nit-picking lawyers. Why bog them down with endless red tape form-filling only to end up having to build an expensive legal department to have to defend patents that would likely be got around anyway?

Patents are meant to slow competition but they also slow innovation. In an era when you can invent faster than you can patent, why not keep ahead by inventing?

That’s a pretty concise summary of the general response: Patents are bad, Tesla is good, and all friction in technological innovation would be solved if others followed Tesla’s lead.

Setting aside a pretty loaded normative debate, I had a practical concern. Just how legally enforceable would Tesla’s declaration be? That is, if a technologist practiced one of Tesla’s patents, would they really be free from liability?

The answer isn’t clear. (At least, it wasn’t to a number of us on Twitter yesterday.) Certainly, Tesla could enter into a gratis licensing arrangement with every interested party; a prudent GC should demand that Tesla do so, but it’s unlikely Tesla would want to invest the time and money. In a nod to the vagueness of Telsa’s announcement, CEO Elon Musk also told Wired that “the company is open to making simple agreements with companies that are worried about what using patents in ‘good faith’ really means.”

But assuming Tesla offers nothing more than a public promise not to sue “good faith” users, this announcement may be of little social benefit. Worse, it seems to me that such public promises could provide a new vehicle for trolling.

Sure, Tesla may be estopped from enforcing its patents—though estoppel requires reasonable reliance and this announcement is so vague that it’s difficult to imagine the reliance that would be reasonable—and Tesla isn’t in the patent trolling business anyway. (Sorry, patent-assertion-entity business). But what if Tesla sold its patents or went bankrupt. Could a third party not enforce the patents? If it could, patents promised to be open source would seem a rich market for PAEs.

Tesla is not to first to pledge its patents as open source. In fact, as Clark Asay pointed out, IBM has already been accused of reneging the promise. (See: “IBM now appears to be claiming the right to nullify the 2005 pledge at its sole discretion, rendering it a meaningless confidence trick.”) The questions raised by the Tesla announcement are, thus, not new. And, given enough time, courts will have to answer them.

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Computable Contracts Explained – Part 1

Computable Contracts Explained – Part 1

I had the occasion to teach “Computable Contracts” to the Stanford Class on Legal Informatics recently.  Although I have written about computable contracts here, I thought I’d explain the concept in a more accessible form.

I. Overview: What is a Computable Contract?

What is a Computable Contract?   In brief, a computable contract is a contract that a computer can “understand.” In some instances, computable contracting enables a computer to automatically assess whether the terms of a contract have been met.

How can computers understand contracts?  Here is the short answer (a more in-depth explanation appears below).  First, the concept of a computer “understanding” a contract is largely a metaphor.   The computer is not understanding the contract at the same deep conceptual or symbolic level as a literate person, but in a more limited sense.  Contracting parties express their contract in the language of computers – data – which allows the computer to reliably identify the contract components and subjects.  The parties also provide the computer with a series of rules that allow the computer to react in a sensible way that is consistent with the underlying meaning of the contractual promises.

Aren’t contracts complex, abstract, and executed in environments of legal and factual uncertainty?  Some are, but some aren’t. The short answer here is that the contracts that are made computable don’t involve the abstract, difficult or relatively uncertain legal topics that tend to occupy lawyers.  Rather (for the moment at least), computers are typically given contract terms and conditions with relatively well-defined subjects and determinable criteria that tend not to involve significant legal or factual uncertainty in the average case.

For this reason, there are limits to computable contracts: only small subsets of contracting scenarios can be made computable.  However, it turns out that these contexts are economically significant. Not all contracts can be made computable, but importantly, some can.

Importance of Computable Contracts 

There are a few reasons to pay attention to computable contracts.   For one, they have been quietly appearing in many industries, from finance to e-commerce.  Over the past 10 years, for instance, many modern contracts to purchase financial instruments (e.g. equities or derivatives) have transformed from traditional contracts, to electronic, “data-oriented” computable contracts.   Were you to examine a typical contract to purchase a standardized financial instrument these days, you would find that it looked more like a computer database record (i.e. computer data), and less like lawyerly writing in a Microsoft Word document.

Computable contracts also have new properties that traditional, English-language, paper contracts do not have.  I will describe this in more depth in the next post, but in short, computable contracts can serve as inputs to other computer systems.  These other systems can take computable contracts and do useful analysis not readily done with traditional contracts. For instance, a risk management system at a financial firm can take computable contracts as direct inputs for analysis, because, unlike traditional English contracts, computable contracts are data objects themselves.

II. Computable Contracts in More Detail

Having had a brief overview of computable contracts, the next few parts will discuss computable contracts in more detail.

A. What is a Computable Contract?

To understand computable contracts, it is helpful to start with a simple definition of a contract generally. 

A contract (roughly speaking) is a promise to do something in the future, usually according to some specified terms or conditions, with legal consequences if the promise is not performed.   For example, “I promise to sell you 100 shares of Apple stock for $400 per share on January 10, 2015.”

computable contract is a contract that has been deliberately expressed by the contracting parties in such a way that a computer can:

1) understand what the contract is about;

2) determine whether or not the contract’s promises have been complied with (in some cases).

How can a computer “understand” a contract, and how can compliance with legal obligations be “computed” electronically?

To comprehend this, it is crucial to first appreciate the particular problems that computable contracts were developed to address.

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Blair-Stanek on Intellectual Property Law Solutions to Tax Avoidance

My colleague Andrew Blair-Stanek has a creative and interesting new article Intellectual Property Law Solutions to Tax Avoidance, forthcoming UCLA Law Review. Check out the abstract:

Multinational corporations use intellectual property (IP) to avoid taxes on a massive scale, by transferring their IP offshore for artificially low prices. Economists estimate that this abuse costs the U.S. Treasury as much as $90 billion each year. Yet tax policymakers and scholars have been unable to devise feasible tax-law solutions to this problem. This Article introduces an entirely new solution: change IP law rather than tax law. Multinationals’ tax-avoidance strategies rely on undervaluing their IP. This Article proposes extending existing IP law so that these low valuations make it harder for multinationals subsequently to litigate or to license the IP. For example, transferring a patent for a low price to a tax-haven subsidiary should make it harder for the multinational to demonstrate the patent’s validity, a competitor’s infringement, or entitlement to any injunctions. The low transfer price should also weigh toward lower patent damages and potentially even a finding of patent misuse. Extending IP law in such ways would deter multinationals from using IP to avoid taxes. Both case law and IP’s theoretical justifications support this approach, which also has the counterintuitive benefit of encouraging the flourishing of creative professionals such as inventors and authors.

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Supreme Court Gives Patent Law New Bite (Definiteness)

I want to thank Danielle Citron and the other folks at Concurring Opinions for inviting me to blog.  As Danielle mentioned in her introduction, I am a law professor at the University of Colorado Law School focused on technology and law.  (More info about me is here: http://harrysurden.com; Twitter: @Harry Surden).

Patent Law’s Definiteness Requirement Has New Bite

The Supreme Court may have shaken up patent law quite a bit with its recent opinion in the Nautilus v. Biosig case (June 2, 2014).

At issue was patent law’s “definiteness” requirement, which is related to patent boundaries. As I (and others) have argued, uncertainty about patent boundaries (due to vague, broad and ambiguous claim language), and lack of notice as to the bounds of patent rights, is a major problem in patent law.

I will briefly explain patent law’s definiteness requirement, and then how the Supreme Court’s new definiteness standard may prove to be a significant change in patent law. In short – many patent claims – particularly those with vague or ambiguous language – may now be vulnerable to invalidity attacks following the Supreme Court’s new standard.

Patent Claims: Words Describing Inventions

In order to understand “definiteness”, it’s important to start with some patent law basics.  Patent law gives the patent holder exclusive rights over inventions – the right to prevent others from making, selling, or using a patented invention.  How do we know what inventions are covered by a particular patent?  They are described in the patent claims. 

Notably, patent claims describe the inventions that they cover using (primarily) words.

For instance, in the Supreme Court case at issue, the patent holder – Biosig – patented an invention – a heart-rate monitor.  Their patent used the following claim language to delineate their invention :

I claim a heart rate monitor for use in association with exercise apparatus comprising…

live electrode

and a first common electrode mounted on said first half

 In spaced relationship with each other…”

Screen Shot 2014-06-06 at 9.32.30 AM

So basically, the invention claimed was the kind of heart rate monitor that you might find on a treadmill.   The portion of the claim above described one part of the overall invention – two electrodes separated by some amount of space.  Presumably the exercising person holds on to these electrodes as she exercises, and the device reads the heart rate.

( Note: only a small part of the patent claim is shown – the actual claim is much longer)

Patent Infringement: Comparing Words to Physical Products

So what is the relationship between the words of a patent claim and patent infringement?

In a typical patent infringement lawsuit, the patent holder alleges that the defendant is making or selling some product or process (here a product) that is covered by the language of a patent claim (the “accused product”).  To determine literal patent infringement, we compare the words of the patent claim to the defendant’s product, to see if the defendant’s product corresponds to what is delineated in the plaintiff’s patent claims.

For instance, in this case, Biosig alleged that Nautilus was selling a competing, infringing heart-rate monitor.  Literal patent infringement would be determined by comparing the words of Biosig’s patent claim (e.g. “a heart rate monitor with a live electrode…”) to a physical object –  the competing heart-rate monitor product that Nautilus was selling (e.g. does Nautilus’ heart rate monitor have a part that can be considered a “live electrode”)?

Literal patent infringement is determined by systematically marching through each element (or described part) in Biosig’s patent claim, and comparing it to Nautilus’s competing product. If Nautilus’ competing product has every one of the “elements” (or parts) listed in Biosig’s patent claim, then Nautilus’s product would literally infringe Biosig’s patent claim.

If patent infringement is found, a patent holder can receive damages or in some cases, use the power of the court  to prevent the competitor from selling the product through an injunction.

Patent Claims – A Delicate Balance with Words

Writing patent claims involves a delicate balance.  On the one hand, a patent claim must be written in broad enough language that such a patent claim will cover competitors’ future products.

Why?  Well, imagine that Biosig had written their patent claim narrowly.  This would mean that in place of the broad language actually used (e.g. “electrodes in a spaced relationship”), Biosig had instead described the particular characteristics of the heart-rate monitor product that Biosig sold.  For instance, if Biosig’s heart-rate monitor product had two electrodes that were located exactly 4 inches apart, Biosig could have written their patent claim with language saying, “We claim a heart rate monitor with two electrodes exactly 4 inches apart” rather than the general language they actually used, the two electrodes separated by a “spaced relationship”

However, had Biosig written such a narrow patent, it might not be commercially valuable.  Competing makers of heart rate monitors such as Nautilus could easily change their products to “invent around” the claim so as not to infringe. A competitor might be able to avoid literally infringing by creating a heart-rate monitor with electrodes that were 8 inches apart.  For literal infringement purposes, a device with electrodes 8 inches apart would not literally infringe a patent that claims electrodes “exactly 4 inches apart.”

From a patent holder’s perspective, it is not ideal to write a patent claim too narrowly, because for a patent to be valuable, it has to be broad enough to cover the future products of your competitors in such a way that they can’t easily “invent around” and avoid infringement.  A patent claim is only as valuable (trolls aside) as the products or processes that fall under the patent claim words.  If you have a patent, but its claims do not cover any actual products or processes in the world because it is written too narrowly, it will not be commercially valuable.

Thus, general or abstract words (like “spaced relationship”) are often beneficial for patent holders, because they are often linguistically flexible enough to cover more variations of competitors’ future products.

Patent Uncertainty – Bad for Competitors (and the Public)

By contrast, general, broad, or abstract claim words are often not good for competitors (or the public generally).  Patent claims delineate the boundaries or “metes-and-bounds” of patent legal rights  Other firms would like to know where their competitors’ patent rights begin and end.  This is so that they can estimate their risk of patent liability, know when to license, and in some cases, make products that avoid infringing their competitors’ patents.

However, when patent claim words are abstract, or highly uncertain, or have multiple plausible interpretations, firms cannot easily determine where their competitor’s patent rights end, and where they have the freedom to operate.  This can create a zone of uncertainty around research and development generally in certain areas of invention, perhaps reducing overall inventive activity for the public.

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Hitting Back When Hit By Google

Tuesday’s European Court of Justice decision requires internet search engines to omit listing irrelevant or inadequate items in response to searches for individuals by name. The ruling is simultaneously hailed and condemned, depending on whether one stresses individual control over reputation or anti-censorship (e.g.. Henry Farrell in WaPo; Jonathan Zittrain in NYT; the ubiquitous Brian Leiter).  Two aspects of the incentive effects of the recurring problem seem overlooked, as illustrated by a true story (with minor fact changes in the name of privacy).

A few years ago, a colleague got a blistering review of his teaching from a student blog.  There may have been some underlying basis for the criticism, but the post blew it all out of proportion and offered no context for the specific objection and no counterbalancing assessment of the teacher’s considerable strengths. It was both authoritative and damning as well as inadequate and of dubious relevance.

My friend’s distress intensified when this url appeared first in all searches for his name using Ask, Bing, Google, Yahoo! and other search tools.  It came up ahead of the professor’s SSRN page, school biography, library bibliography, and laudatory references in numerous other urls on the web. The result magnified the post’s significance and caused my colleague anguish.

The blog publisher refused his request to take down the post, citing forum policies on open-access, autonomy, and self-regulation.  At that time, at least, the search engines could not be bothered. Day after day, we’d do a search of his name and the inflammatory post kept coming up number one, threatening the professor’s reputation.

Finally overcoming his frustration, the professor chose to fight fire with fire.  He created a new blog and began posting entries at a regular clip.  Gradually, these posts and responses or references to them rose up the lists of hits for his name.  Eventually, the objectionable link sank down the list into a more proportionate presence, there as part of a more complete portrait, not the salient bruise it started out as.

The episode also emboldened my friend to redouble his investment in teaching.  Accepting the old adage that “where there’s smoke, there’s fire”, he vowed to minimize the chances that such postings, however acontextual or lopsided, would reappear.  His teaching evaluations, in fact, rose from just above average to well above average.

There are obviously many more significant complex issues associated with the hierarchy or presence of misleading or irrelevant information on the internet.  For example, norms in Europe may differ from those in the U.S., and a ruling like that of the ECJ seems unlikely in America.  And there are probably better forums to solve the problem than courthouses, including legislators, markets, and think tanks.

But in struggling with associated trade-offs and conflicting values, the incentive effects should be noted.   I don’t want negative urls polluting my public persona.  But that produces two positive results: I try to avoid doing anything that would feed them and to engage enough to neutralize their effects on my profile.  It worked for my old friend.

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Are You Missing the Market, Aspen?

Professors are in an uproar over Aspen Publisher’s new rules for textbooks. In short, if you thought you could buy a book and do what you wanted after that (i.e. sell it used), Aspen wants to change that system. Instead of a true, unbundled digital option, it has a system where students buy both a physical textbook and a “lifetime” digital book. Too bad as there is a market opportunity that they might be missing. On the legal doctrine front, Josh Blackman called it out. James Grimmelmann jumped on the bashing. Rebecca Tushnet has poked at the offer too. But where is the market here? Is there a way Aspen could make this shift work well? If so, would authors (i.e., professors with deals with Aspen) like it? And why not use dollars to tell Aspen what to do? Assign a different casebook from a competitor (FYI there is a free one out there, see below). There are some specific issues that illustrate sme of the problems in this space.

First, what about time and artificial editions? Rebecca nails this point by calling out that some areas of law (e.g., IP) change so fast that new editions and coverage issues make staying up with casebooks a problem. In those areas, does first sale do much work? Maybe it does much work in the few years between editions. But after that, the text is somewhat obsolete. Dusting of an IP text in digital or hardcopy from the 1990s would be dangerous except for fundamentals (and maybe even for those). Still, there are now seven editions for the Dukeminier casebook. Are the updates every four or so years needed? Even in other areas, are authors updating to add value or to create a new text that undercuts the used market? Do publishers lean on authors to issue new editions when there is not much to say as a market window or version control? If so, the publisher is setting up the demand for secondary or alternate markets that cut out the publisher.

So is this system functioning? As I noted before, the OpenStax system offers high quality texts for free and in a modular way. That means sections are updated for free and folks can assemble material as they wish. Law does not have that yet. The folks at Semaphore Press are close however. That press happens to publish a property text by Steve Semeraro (disclosure I am friends with the folks at Semaphore and introduced them to Steve). It is not quite OpenStax, but it is an interesting model with a shareware feel.

Second, what about the cost to write and update a text? I know it takes tons of time. Whether RA’s do some work or it is all by the professors, the time to write a good casebook is real. I am grateful for the good books. A great teacher’s manual is also a huge help. For new teachers and even experienced, a rich manual provides insights about how the author(s) teach the material and where they see the comments to be headed. One can then choose to follow that lead or modify. But is the price point for texts (as many noted often close to $200) sustainable? Would the market collapse if the cost dropped to low or no charge? OpenStax indicates that the system could shift, and a small crowd of experts would be able to offer an excellent, up-to-date text. And as Pam Samuelson and many others have noted, scholarly works pay off in reputation. So having the most assigned text (or specific chapter on a subject) may stimulate just enough competition for reputation to get great texts (or chapters) but not a glut of roughly the same material from many high-priced publishers.

Third, what about that market opportunity? Would a publisher that offered A) a true digital copy for $40, $50, or even a $100 take share from others? B) What if the publisher said rent the hard copy for a reduced price (again it should be low)? Some might hate that idea as a matter of doctrine but that market is emerging on Amazon and at least lets the student know what is going on (though I think a rental model poses some issues for libraries in that no one should say that libraries should just be rental depots that is another debate for another time).

So Apsen, if you’d like to survive I am betting your authors would like that too. But I am also betting they want to work with you to offer much better solutions than the ones you have right now. The life time digital edition and the high price insult the authors and the marketplace. I think others will find ways to route around you. But you could take your current position and parlay it for the future. If not, I think you may have pushed the law text market to Semaphore or OpenStax. Hmm, maybe Aspen should stay with its model after all.

Now you can insist on control of your material. You can insist on veto power over everything; down to casting and choice of directors and script approval, you can insist on all those things. J.K. Rowling insisted on all those things. And J.K. Rowling got all those things because there were enough people interested in that. Now if you’re not J.K. Rowling, and you insist on all those things, the studios are not going to be very interested or less studios will be interested in it so you’ll get less money or none at all. Or alternatively, you can not insist on everything and you can just sell them the book and what they do with it is what they do with it and you have to live with it. You no longer have approval over anything, you no longer have…you know what I mean? And those are the two extremes. In between of course there’s a vast area of shades of gray.

— George R. R Martin

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George R. R. Martin on Copyright, Inheritance, and Creative Control

He cares much more about French dynastic history than you do.

He cares much more about French dynastic history than you do.

This is Part 3 of the interview I did with George R. R. Martin in  2007.  For background and part 1, click here.  For Part 2, click here. For the audio file, click here.

HOFFMAN: Yeah, but you just generally right. The trope something that really speaks to folks. I guess maybe that raises a question about your fans generally. You’ve obviously got a huge fan base and I’ve been reading a little bit about them. One question that comes up a bunch of different times is fan fiction and what do you think about fan fiction?

MARTIN: I’m opposed to fan fiction.

HOFFMAN: Why?

MARTIN: Well number one, its copyright infringement and it can potentially endanger my copyrights and my trademarks if I were to allow it. Also, yes maybe it’s a gesture of love that they love your characters and they love your world and all that but it’s not the kind of gesture of love that I really want. And for aspiring writers and some of these people, sure it’s a wide range of fan fiction writers, some who are terrible. Some of them are actually talented writers. I think for the talented writers it’s particularly tragic because they should be doing their own material.

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