WIPIP Concurrent 2

Nancy Kim, The License v. Sale Puzzle after Impressions v.
Sales exhaust the patentee’s rights to any item regardless
of what the contract says. But restrictions on licensees are different because a
license doesn’t implicate the same concerns about restraints on alienation as a
sale.  Even if the contract is
enforceable, that doesn’t mean that the parties can’t contract about everything.
They can’t recharacterize the world—you can call a contract w/a worker an
independent contract, but if the facts establish an employment relationship you
have an employee.  Same with
license/sale.  “Authorized” sale is also
Contract can give rise for breach and infringement claims,
but not for the same provision; not every breach exceeds the scope of the license
and constitutes infringement. Principles: if the first transaction by the
patentee is a sale, all subsequent transactions are sales. License agreement
may or many not be followed by sale. If license allows licensee to sell patent
items w/o restrictions, then the subsequent transactions to customers are sale.  If license imposes restrictive conditions on
licensees’ ability to sell, they’re sales only if the licensee required with
those conditions—e.g., limited to sales in North America, and then sales in
France are unauthorized.  If licensee has
obligation to impose restrictions on customers, then subsequent transactions
are sales.  If mfgr didn’t have customer
sign contract restricting use, mfgr might be in breach of contract, but it’s
still a sale. 
With a standard form contract/adhesion contract if the patentee/©
owner retains rights to reposess or control item, it should be considered a
license, but otherwise a sale.  If
negotiated or individual contract, distinction should depend on whether
contract limits one of the patentee/© owner’s exclusive rights (that is, does
it affect the scope of the license?).
Whether the purchaser/licensee infringed depends on whether
the contractual provision was a covenant or condition, which means did it limit
the scope of the license/implicate one of the exclusive rights of patentee/©
owner, but the ©/patent cases differ. 
Sale of © item may be treated as still having a license.  Example: a nonexclusive, nontransferable
license to make 2 copies. This is not conditional language; transferability is not
one of licensor’s exclusive rights as a © owner.  Also: Licensee agrees not to transfer, assign
or sell—that’s still drafted as a covenant not a condition.  “provided that licensee may not transfer,
assign, or sell … license is expressly conditioned upon compliance w/this
provision”: if result would be forfeiture, courts in contract law generally are
disinclined to find a condition.  How
about: if licensee attempts to transfer, assign or sell this software, the
license immediately terminates and is void: clearly a condition, and that’s
what it should take.
Lemley: How confident are we that 9th Circuit’s
condition/covenant distinction survives Lexmark?  Lexmark suggests © and patent are kin. 
A: she’s concerned about that.  Ct doesn’t directly address license v. sale
b/c they say it’s a sale. Also different exclusive rights: with ©, you can sell
the product and still not exhaust all the rights (e.g. public performance).
David Olson, Why Increasing IP Exhaustion Leads to
Decreasing Ownership of Goods
Information costs for servitudes on chattel property are
high; recording burden is high; may restrict resale/reuse of goods forcing
inefficient manufacture of new goods instead. 
With information goods/internet age cost of checking restrictions can be
very low relative to value of item.  IOT
goods that phone home/alert you as to any restrictions.  Cost of knowing them is just lower [depending
on what you mean by “knowledge” given human practices & functional capacities].  Digital copy of book can also be created more
cheaply; not much waste in idling/deleting my copy.  Allows for price discrimination, as does
monitoring via IOT/collection of $ for downstream uses.

Still, most goods are sold free/unconstrained. 
It’s often more profitable to simply make a first sale w/o monitoring or
transaction costs.  E.g., cars.  Other times it can help buyers who can’t
afford the total cost to give them only a partial right & have owner retain
residual value—rental cars, tuxedos, etc. 
For the IOT, your refrigerator can be shut down if you
violate a term.  HP is also licensing/renting
printers on this basis—rent charged based on amount of use, and they send you
the toner as you need it.  The
relationship no longer looks like a sale; it is ongoing and involves patches,
etc.  If your credit card expires, the
printer stops working.  Pretty effective
lockup through contract, and enforcement w/o any privity of contract necessary.  [Pretty good opportunities for fraud?]
Is this good/bad and how if at all should the law
respond?  B/c price discrimination can be
quite valuable to society, especially for cheap goods, the next move to
preserve ownership would have to be inroads into contract law to stop these
characterizations/prevent these restrictions being enforced via self-help.
Reasons to be cautious about making that move: now that exhaustion
is so strong, we’ll see the same attempts through contract law; we’d be better
off to allow experimentation and see how the market reacts. We’ve never seen
mfgr limit all use/control all aspects; it’s not profitable and there’s bad PR
from people not liking price discrim. Instead we’ll see monitoring and price
discrim w/customization for users’ needs. 
Consumer will not be able to see she’s being charged differently b/c the
good will not be exactly the same for each one. 
Like cars with different packages [this is a really disturbing example—we
know that the poor/women/minorities pay more]. 
Can charge people willing to pay more, more, and charge low prices to
those who can’t afford more b/c arbitrage will be impossible.  [When has this ever happened, compared to
poor paying more?]
Better to use antitrust law than sale/license law to deal
w/abuses such as market foreclosure.
RT: questions above. 
Tell me why you’re hopeful.
A: discrimination law would still apply, but he was talking
about standard packages; discrimination comes in at the overall price of the
car.  People could still create data
[unless contractually prohibited]; they might find that women are willing to
pay more, which could be a problem.  Women
sometimes are never offered a low enough price and they walk away; the
transaction fails.  AI, which has the
potential to lessen discrimination [do we know that?], means that if your goal
is profit maximization you will try to figure out what people will pay and get
past proxies like age and race.  [That does
not seem to me to describe how the current algorithms work—they absolutely use
your categories to be predictive about your characteristics, including WTP. Plus
your other non-race and gender characteristics are tightly correlated w/them,
so “non proxies” (e.g., where you live, whether you’ve gone to jail, how much
money you make) are also proxies.  And
then your reaction to the offers you get—which people in other groups won’t get—determines
what happens next, so the discrimination just gets baked further in.]
Rosenblatt: rich could be allowed to make remix, poor not.  If what people want to do is on-label, then
your logic makes sense. But if they want to do off-label stuff like remix,
reverse engineering, follow-on innovation, doesn’t this bar that?
A: if we restrict producers to one price, the Q is do poorer
consumers get to buy anything, or nothing?
Michael Burstein, Indiscrete Property
Information is often incompatible with the notion of
thingness in ways that go beyond the mere costs of defining the thing: it is
indiscrete and continuous, as opposed to discrete and separable as most
tangible goods are. While a stock tip is relatively discrete, more often info
conveys different value to different actors; info is more of a platform on
which transactions occur.  Thus value
depends less on definition than the structure of the underlying institution.  Should focus on rules that allow people to
structure info flows for best use.
Case for info as discrete property, from two parallel
movements suggesting strong IP to economize on use of info.  First, incentive/reward theory is
unsatisfying; market failure resulting in underproduction doesn’t dictate IP as
solution and other solutions could produce incentive w/less cost.  As empirical matter, it’s well understood
that in many situations the IP incentive, or any incentive, may not be
necessary for production of intellectual goods. 
Next move: commercialization theory, where IP is about the subsequent
use of creation/invention by giving incentive to solve market failure
structurally similar to the earlier market failure theory, or by serving as
beacon/signal/contracting device for people to come together and exchange info.
New private law is aimed at reclaiming centrality of tort/contract/property in
US law. Scholars offer info cost theory about economizing the cost of info
specifying use rights.  Thingness of property
matters b/c by defining a thing and marking it w/rough exclusion signals we
create relatively clear signals about what you can and can’t do with it. Use rights
in a car; you need no info about underlying owner of car to know not to steal
it.  You just need to know it’s not your
Nonrivalrous info: inputs to info use are rivalrous, so we
want to manage them. New public law theorists like Henry Smith argue here’s a
benefit from reducing complexity of coordination, if the thing can be defined
easily and the uses cannot.  In such
cases, exclusion strategy is more economically justified than governance. Smith
argues that patent is more thing-y than ©. This is not uncontroversial or unproblematic.
Clarisa Long has made the exact opposite argument.
Problem: relies on thin concept of info such that all you
need to worry about in defining a good is the cost of delineating the good. But other characteristics make it
almost incoherent to talk about definition. Info is additive, communicative,
and layered.  Additive: info bits build
on one another so value is different depending on type or info.  “Data information knowledge wisdom”
framework: data is info asset that’s product of observation, relatively
discrete and objective; info is relevant or usable or significant—info uses
data to answer a Q; knowledge is usually knowhow, turning info into instructions/decisionmaking
aids, synthesizes across types of info.  Literature
usually ignores wisdom and so will I.  As
you move up, increasing correlation w/social meaning and value.  Info has value, but it exists in different
forms w/different sources of meaning and value.
Communicative: JP Barlow: information is a verb, not a
noun.  To have an effect in the world it
must be transmitted & create meaning for recipient.  Does this not through ethereal transmission,
but is contained in artifacts—physical manifestations that are vessels for the
info. Some artifacts are more self-revealing of the info than others.  Sometimes info can be sticky/tacit (Eric von
Hippel) and needs more than writing down. Info can be modulated
self-consciously, as w/software modularity so you can hide certain elements of
code & reveal others.
Layered: Heterogeneity—small molecule pharma—most direct way
to communicate info is to show its structure, but you could also talk about the
molecule/generate info about that.  You could
talk about chemical characteristics, biological effects, efficacy &
toxicity, all w/o revealing its structure.
Info exists in continuous indiscrete state in many cases.
In land, things are rough signals of value. But if info is
continuous then thingness may send wrong signals.  Lose out on ability to communicate across
users.  May be over and
underinclusive.  Answer to Smith’s
question about how you specify rights & duties up front may be “you don’t
have to.”  Spectrum of discreteness may also
help rationalize our intuitions, e.g. about patentable subject matter. If
abstract idea is relatively indiscrete, and open platform approach is most
efficient, that may help explain why IP doesn’t protect them. Likewise for
doctrines about timing of patentability such as utility/reduction to practice—when
the info becomes more discrete.
Rebecca Kai-Fang Lin, Artist’s Resale Right: Past, Present
and Future
What makes art so special? 
Work of art can be one of a kind; reproduction doesn’t create the same
thing.  Low price when first sold.  Resale right was exception to exhaustion
introduced in France.  Visual artists
usually earn less than average income; this allows recognition and fair
treatment and also helps them stay connected to the works.  Also can support cost of storage,
conservation and restoration.  No
evidence that resale right harms the art market.
Berne Convention introduced resale right in 1971 as reciprocal
right based on country of artists. 
Rightholder is author/authorized person. 
Covers original works of art/original manuscripts of writers and composers.  Nature: inalienable right; applies in any
resale.  Collecting societies should be
able to collect the royalty and should have a right to gain information.  US, China, France and UK are the main fine
art markets now, representing about ½ of global sales.
EU has harmonized: rightholder/authorized person though
member states can limit who those can be; liable person is generally the seller
but member states can diverge; the covered works are original works of graphic
or plastic art; must be physical but copies can be included.  Nonassignable and inalienable right; applies
in resales unless b/t private people or acting for nonprofit museum.  Sliding rate by sales price. Its share of the
art market grew over the past years. 
France: liable person is acquirer & law officials
jointly; applicable sales are those via a public auction or dealer.  Uniform 3% rate, and artists must publish in
Official Journal if they want the right. 
UK: seller and relevant person jointly & severally liable; copy of
work is generally excluded; collecting society and right to information exists;
sliding rate based on sale price. 55% of dealers not affected; average
processing time of 10 min. 81% of artists use the income to pay for living
In US, only California—royalties of 5% of sale price, held
to violate dormant commerce clause.  Japan
lacks resale right.  Potential artist
benefit would be big on market of EUR 2.19 billion; 280,000 visual artists
could be covered; manga should also be included.  China has no resale right—proposal to cover
limited to auction sales and limited to increase in value.  Int’l treaty may be a good idea.
RT: Collecting societies have a bad reputation for not distributing
money fairly especially where the uses are varying and the market is thin (i.e.
especially outside music).  If you
require registration, what’s the point of a collecting society?
A: Tracking use is a big problem with other collecting
societies but discrete sales of physical objects are more identifiable, and
collecting societies can handle the administrative costs more easily than
individual artists.
Q: Why would we want to benefit successful artists and not
unsuccessful ones, when resale rights are only valuable to a very few?
A: mitigating inequality.
Chiang: What is the problem you’re trying to solve? It’s not
free riding.
A: musicians can make lots of money from sales of copies,
but visual artists can’t, especially for works sold early in their
lifetimes.  Sellers benefit from the
subsequent creations of the artists so artists should also benefit.  Unfair.

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