Category: Intellectual Property

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Process Matters: How, Corporate Reputation, and the Trademark Game

The New York Times reported about the fight over trademark rights around the word “How” and there was the usual chatter about how (yes very punny we law professors are) such a thing could be. But for me the more interesting point was that the issue of how something is made continues to rise as a market question. The dispute is between Chobani, which is pitching us ““A cup of yogurt won’t change the world, but how we make it might,” and that “How Matters,” and Dov Seidman whose company “is in the business of helping companies create more ethical cultures” and whose book is “How: Why How We Do Anything Means Everything.” As I argue in Speech, Citizenry, and the Market: A Corporate Public Figure Doctrine:

Corporations no longer exist in a purely commercial world. Corporate policies intersect with and shape a host of political issues, from fair trade to gay rights to organic farming to children’s development to gender bias to labor and more. Thus Google urges countries to embrace gay rights; Mattel launches a girl power campaign; activists question Nike’s labor practices, McDonald’s food processing, and Shell Oil’s business practices; and bloggers police the Body Shop’s claims about its manufacturing practices. The social, political, and commercial have converged, and corporate reputations rest on social and political matters as much as, if not more than, commercial matters.

The How of Seidman and Chobani is not limited to those companies. McDonald’s is now trying to engage with its customers about, yes, how, they make their food. I suppose using social media and the former Myth Buster Grant Imahara to reach young ‘uns is wise (then again if the goal is to reach Millenials as reported, they might see this tactic as a ploy). Regardless of success or failure, McDonald’s is another sign that Douglas Kysar’s Preferences for Processes: The Process/Product Distinction and the Regulation of Consumer Choice insight that process matters to the marketplace have force. As he put it “Because process preferences provide an outlet for the expression of public values through a market medium that is being endorsed simultaneously as a primary locus of choice, opportunity, and responsibility, individuals may well come to view such preferences as their most appropriate mechanism for influencing the policies and conditions of a globalized world.”

To date, activism over how has not seemed to gain major traction, if one looks to things such as labor and clothing or environmental issues in energy. Price still matters. Giving up our easier way of life (yes first world ACH! such a condescending term, high quality problem) to improve lives all over the world and for future generations is easier said than done. Try to buy clothing and food that is truly perfect (whatever that metric is, let’s assume fair labor and environmentally sound). Some sort of quasi-subsistence/commune hybrid life would be required and is not viable across society. Yet, as people speak up, and companies engage, make claims about their roles in addressing social matters, and adjust offerings (e.g. offering fruit in kids’ meals or refusing to sell cigarettes in a pharmacy), it may be that long term, incremental changes will emerge. When folks indicate preferences, options to buy something a little bit healthier or fairer could come on to the market. We might buy fewer things but buy better things. And another signal is sent so that the cycle might persist.

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The Future, Heaven, and Limbo Have Been and Will Always Be Apple Stores

If you saw Sleeper, Heaven Can Wait, or the last of the Harry Potter films, you might notice that they all have scenes that look quite like an Apple Store. White, seemingly floating desks, some robots, a sense of what it is all about. The likely reason is the design gurus of the 1970s like the stark white, sharp lines look. Steve Jobs was a student of that era and it informed Apple, The Sequel from iPods to the stores (the first Apple movie was design tools, the second was “we design, you buy”). As for Harry Potter, why fight the future and the masters? Tap into that vibe and viewers will be happy to know that even limbo, afterlife (whatever that was) is much as it has always been. White, simple, soothing, yet confusing too.

I wonder whether the Chinese group that copied the Apple Store perfectly could argue that the trade dress was generic?

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There She Is, Your Homemade AR-15

I cannot give a talk about 3D printing without addressing the question of homemade guns. As Gerard and I pointed out in Patents, Meet Napster: 3D Printing and the Digitization of Things, this is America and making guns at home is legal. The issues many faced was whether the gun would work well, fail, or possibly misfire and harm the user. These issues are important as we look at the shifts in manufacturing. Many of us may prefer authorized, branded files and materials for home made goods or prefer to order from a third party that certifies the goods. That said, some gun folks and hobbyists are different. They want to make things at home, because they can. And now, Defense Distributed has made the “Ghost Gunner” “a small CNC milling machine that costs a mere $1200 and is capable of spitting out an aluminum lower receiver for an AR-15 rifle.” That lower is the part the the Federal government regulates.

Accoridng to Extreme Tech, Defense Distributed’s founder Cody Wilson, thinks that “Allowing everyone to create an assault rifle with a few clicks is his way of showing that technology can always evade regulation and render the state obsolete. If a few people are shot by ghost guns, that’s just the price we have to pay for freedom, according to Wilson.” This position is what most folks want to debate. But Gerard and I think something else is revealed here. As ExtremeTech puts it, “This is an entirely new era in the manufacturing of real world objects, in both plastic and metal. It used to be that you needed training as a gunsmith to make your own firearm, but that’s no longer the case.” That point is what motivated me to write about 3D printing and look deeper at digitization and disruption.

The first, short, follow-up on these ideas is in an essay called The New Steam: On Digitization, Decentralization, and Disruption that appeared in Hastings Law Journal this past summer.

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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.