Private Law & IP, Standards

Posted on March 12, 2016 by rtushnet
Session 6: Standards
Moderator: Kirti Gupta
 
Jorge L. Contreras, “Private Ordering or Public Law? The
Legal Character of Technical Standard Setting”: Private ordering structure
arises when public enforcement mechanisms are unavailable (crime syndicates,
rural settings) or less efficient/logical (credit rating, accounting
standards). Standard setting: collaboration among competitors; technical focus,
not legal; ideally the priority is on optimizing solutions—wi-fi, USB (my
favorite USB joke). Most standard-setting bodies have formal policies about
due process, and also about patents (disclosure requirement, FRAND licensing
requirement—some bodies have one, some the other, some have both).  Informal norms and practices also: tribal
culture.
 
What did courts do when disclosure obligations were
allegedly violated? Looked to informal norms of community.  Rambus: written policy was quite vague and
treated badly by Fed. Cir. (shockingly vague and imprecise) but still an
affirmative obligation to disclose arising from practice; so too with Broadcom
v. Qualcomm, where the written policy simply said parties are “encouraged” to
disclose.  FRAND: vague standard, but
where challenged in litigation, looked at comparable licenses and patent pools
to find reasonable range based on norms and practices in the industry.  Private practice finds its way into private law
disputes.  That’s not unusual.
 
Federal recognition of standardization’s public character:
DOJ/FTC report on IP from 2007 calls it one of the engines of th emodern
economy.  DOJ/PTO statement in 2013:
voluntary consensus standards serve the public interest, fuel innovation.  Debates over whether that should affect
injunction against violator?  There is a
tendency to talk about the availability of injunctions in terms of public characteristics
of standard-setting prices—harm to competition from allowing injunctions or
exclusion orders on standard-essential patents in Apple v. Samsung (ITC).  USTR says the same thing.  That is public law.
 
But is that appropriate to regulate standard-setting under
public law/antitrust framework?  EU/US
agencies seem to believe so, but dissenting voices say private law/contract enough,
and overdeterrence of patent enforcement may chill innovation/SDO
participation. Tentantive conclusion: public law frameworks should be applied
w/caution after private ordering is permitted to address potential problems.
 
Commentator: Joseph P. Liu: Private ordering can mean
different things to different people.  More
expansive understanding of private law might provide a way to respond.
 
Private ordering: at least 3 definitions.  (1) Contracting around existing legal rules;
ordering that results from private transactions.  (2) The kinds of private dispute resolution
systems identified by Ellickson (ranchers), diamond merchants, etc. With their
own rules & customs, typically enforced through self-help. (3) Private
promulgation of rules to govern internal organizations.  Homeowners’ associations; sports league
rules. Like (2) in that content is privately created, but unlike in that it’s
more top down than bottom up and more reliant on enforcement from courts. 
 
Paper places technical standard setting within (2) when it
might be more like (3).  Rules tend to be
more top down.  This might be important
b/c if you put it in category (2), order w/o law, you get presumptive benefits
of that category—superiority to judicial proceedings in some cases—when they
aren’t warranted. 
 
What turns on private ordering v. public law
characterization? Paper sometimes suggests that if standard setting is private
ordering it should be left to internal rules, whereas if it’s public then it
should be subject to regulation via antitrust etc. Hard for me to see why
degree of regulation should depend on characterization; private agreements are
pervasively subject to public regulation. Real q: whether regulation is
required to achieve the substantive policy goals we have—e.g., solving holdup
problems—is antitrust or other regulation required to solve them?
 
Paper identifies issues arising from particular type of
private behavior, coordinated activity by industry participants: ostensibly
private/technical, but has a public character. 
Paper expresses doubt over whether antitrust/criminal law are the
appropriate mechanisms.  Consider third
option, between private ordering and public law. Tools available in private law
understood more broadly as the substantive doctrines of patent law.  Paper discusses tort, contract and not
property claims.  Other private law
doctrines like promissory estoppel might be relevant as well.  Avoids the bind of choosing between “pure”
private ordering or public law. Richer set of public interests into the
considerations.
 
Janet Freilich & Jay P. Kesan, “Towards Patent
Standardization”: We don’t have a good theory of what standardization would
mean, if it’s desirable.  What is
standardization of patent content?  We
mean the most general sense: something that is agreed upon, whether it’s
standard nomenclature or sections in the patent description. Beneficial for
purposes of notice and disclosure, reducing search costs and fuzziness of
patent boundaries; easier to read and identify information.  Can improve databases, also helpful for
disclosure.
 
How to make it happen? Congress could maybe try, but not
going to happen in the real world. PTO can make rules but there are practical
and political problems.  Standardization
could arise through voluntary measures—soft standardization could get us part
of the way to the goal.  WIPO standard
for disclosure of nucleotide and amino acid sequences: PTO adopted it, using
the rationales of quality and efficiency of examination—easier to compare
w/prior art; conformity for scientific community, using language they’re used
to; improved dissemination of information in electronic format.  But most standardization in life sciences
doesn’t come from regulations. 
Taxonomies, controlled vocabularies created by public/private
institutions—new vocabularies are created for new technologies. Often fairly
well-defined; FDA won’t let you use a drug name for something it doesn’t think
the name encompasses. 
 
In patent, you don’t have to use these standards; the
patentee is her own lexicographer and can define a term differently from any
standard. But outside the patent world, these standards usually do have to be
used.  Journals, for example, require
authors to use standards.  Thus patents
can diverge from conversation in rest of life/science. So it would be easier to
use the nomenclature in patents too.  Case
study: percent of granted patents that use celsius or fahrenheit—number using
celsius is going up as a percentage of those who use either, simultaneous
w/increase of use in celsius in the scientific community generally.  1988: Congress again said we should use
metric, but we don’t have to; metric required in patent in 1995, but the trend
in using celsius in patents started before that: a result of general scientific
community convergence.
 
Possibilities for software: Representational languages:
pseudocode; object-oriented languages; modeling languages—better comprehend the
new/inventive features for which patent protection is sought in software. More
useful and technically discernible software patent repository compared to the
current problems in figuring out what prior art is.  SSOs can encourage the detailed
specifications needed.  They discover the
best technology/certification of the process. Use IPR policies that are fairly
detailed, taking disclosure into account and penalties for noncompliance. They’re
uniquely positioned to provide standardization guidance, especially since they’re
dealing with patents that will be very valuable if the standard is accepted.
 
Templates: universities’ tech transfer offices could have
templates, as Stanford and MIT do, as starting points.  Possible problems: powerful interest groups
dominate/exclude others; allow hidden patents that resurface at some
point.  Criticisms of standards: often
that they are in fact reducing the scope of protection; we don’t think that’s
the case.  Standardized patents can be
drafted broadly, and vague patents can be drafted narrowly. 
 
Next: empirical studies to see if patents with standardized
disclosures are likely to be more valuable.
 
Commentator: Michael J. Meurer: Like the data on the metric
system, but it’s not clear it provides benefit in more disclosure or more
notice/clarity. We need examples of success in disclosure/notice.  Mendeleev: periodic table facilitated
codification and spread of knowledge—Mokyr, von Hippel, Winter; Moser
identified jump in patenting of chemicals after Mendeleev: codification,
reverse engineering became easier and trade secret, which had been used, became
less attractive.  W/semiconductors, a de
facto standard crept into the industry based on the TTL Data Book—might be a
helpful examples.
 
Incentives of applicants to embrace standard language:
Teaching/reduce transaction costs in licensing or assignment.  Clarity of property rights/notice (borrowing
ideas from literature on standard contract terms): good language might come
from collective wisdom on the breadth I want/what design around opportunities
are available; I might like the fact that courts have already interpreted what “anodize”
means, but since courts interpret “a” differently in different patents that’s
not such a successful enterprise. Network effects are associated w/standard
terms of contracts and might arise here.
 
Reasons they won’t embrace standard language: if I want to
practice exclusively and keep tech as secret as possible, I’d like the
advantage in the race to generate follow-on innovation; we know many inventors
get the benefit of both patent and trade secret. Notice: lots of patent
applicants are looking for opportunistic profit, and they want to hide/obscure
for ex post bargaining advantage. In re Kubin case: protein in a patent;
examiner found prior art identifying the protein under another name; applicant
will lose novelty once the link is found.
 
Private associations generating public goods, like
standards: there is reason to be optimistic that private parties can do
this.  Caution: setup costs of codifying
tacit knowledge—depends on market conditions and pace of technological change
(if too fast, don’t bother codifying).
 
PTO maintains the acceptable ID of goods and services manual
to classify trademarks, and the US Patent Classification to classify patents.
Improving due to global cooperation; agents are capable of standardizing. 
 
Why not private/public cooperation, as b/t PTO and Google;
PTO could subsidize development of IP registry search tools.  Probably the right result is a mix.
 
Kappos: Nautilus
case provides impetus for standardization, because functional claiming is now a
quick and dirty way to get an invalid patent.

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Private Law & IP, Institutions II

Posted on March 12, 2016 by rtushnet
Session 5: Institutions II
Moderator: Alfred C. Yen
 
F. Scott Kieff, “Pragmatism, Perspectives, and Trade:
Intellectual Property, Antitrust, and International Trade as Mostly Private
Law”: These fields are inherently blends of private and public law, so let’s
try pragmatically enbracing diverse perspective.  Private law features do and should dominate.
Explicit goals: improving dynamic efficiency through increased
commercialization and competition: shared, achievable goals. Welcome other
perspectives, goals, mechanisms, as long as they’re explicit.  Mitigating the efficiency and fairness
eroding effects of public choice and strengthen the opportunity for democratic
review.
 
By design, executive branch agencies are supposed to be
responsive to politics—PTO, DOJ; courts are designed to be less
responsive.  FTC is more responsive than
ITC, which is more like courts.  Patent
validity, infringement, remedy, antitrust are the issues; there’s an inherent
tension that causes each side to engage in aggressive self-discipline when
presenting arguments when all four buckets are on the table at the same time—at
the infringement stage, plaintiff claims everything but then at the validity
stage that makes it cover prior art; also might give it market power.  That means that ITC gets massive benefit in
decisionmaking ability coming from aggressive self-discipline parties have when
they argue before us—they have a tiger by the tail.
 
Where only validity or antitrust is on the table, you get
massive overclaiming; there’s no tension which is necessary to create limits. ITC
is a lot cheaper to run than DOJ, FTC.  The
amount of money you have to invest in getting decisionmaking right is less if
the private actors have self-discipline.  
 
Commentator: Michael B. Abramowicz: Patents as a way to
encourage private coordination around inventive products; Kieff argues that b/c
these areas of law encourage contracting, they should be and mostly are private
law. To the extent we move toward public law end, that can threaten the
coordination function of law and thus threaten commercialization. There’s lots
of ways to think about what public/private law means. Kieff thinks of private
law as mostly involving interpretations of documents written by private
parties; public law is more interpretations of statutes.  He sees patent law as primarily private.  Tend to think of them as more public than he
does. 
 
What would patent law look like if it were more
private?  Sichelman’s commercialization
system w/relatively little discretion? Maybe patent should be more of a
registration system, where we rely on litigation rather than examination.  Fee-shifting to reduce abuse.  Now: private parties draft patents, but that’s
heavily constrained by the law. In the end, there’s a fair degree of gov’t
discretion at PTO and in courts.
 
Mosseff: Samsung v. Apple: parties went through the process,
relied on the experts; then they went up to the President and got a different
result through lobbying. 
 
Kieff: Yes, sensitive to that; that was explicitly not
appellate review, but political.
 
R. Polk Wagner, “The Private Design of the Patent Law”:
Patent law can be understood as private law in its commitment to fostering
private interactions. We want to promote certain kinds of activity/generation
of certain information. The value of calling that a patent is that it allows
private actors to build on that/transact around it/understand it in a useful
way. If all we wanted was incentives/information, you could do that a lot of
different ways—prizes, direct gov’t regulation—and we do, but we have this
thing called a patent, whose very idea is classically private. 
 
Other thing that’s important is how much the patent system
seems to be designed to generate information that is intended to be shared. The
patent prosecution process is structured to have you record who you worked
with, what you consulted, etc.  A lot of
what goes on in prosecution directly affects scope and validity of patent as
well as its future uses, so it’s a private process as well.  Inventorship/ownership rules are also
interesting from a private law perspective though they seem regulatory/have
clear policy goals.  Contribute to an
invention = inventor; seems non-malleable, except that the definition of the
invention is very malleable.  What is and
what isn’t defined as prior art is a set of rules clearly designed to foster
the way people interact around innovation. 
Determines whether you research or create your own; how much you have to
search and where.  Determines what
researchers will publish or not, where you publish, who you talk to—private behaviors
shaped, though not directed, by patent rules.
 
Finally, invalidity as a defense.  Raises the stakes of litigation; entire
prosecution process can be redone, which interacts w/ forcing people to behave
themselves in the prosecution process & take consistent positions in the
later infringement proceeding. Operates independently of defendant culpability,
which is an interesting feature.  You can
infringe w/o liability!
 
These features might not seem private in nature but they can
be seen as such. Big question: now what? We don’t know what we’re optimizing so
we have the same debates over & again. Can we use the lens of private law
to get us out of some of these debates that just go straight to policy?
 
Commentator: Kali Murray: Patent as having the ability to
disrupt, undermine various social relationships, just as property law can
disrupt in real/personal property—disruption of the commons and use rights
there.  19th C.: Populists
hated patents, not b/c they disrupted market relationships but b/c they disrupted
social relationships in specific communities. Use rights over farming implements,
for example.  Private law was used to
structure a critique of patents too.  Now,
state AGs are once again getting involved in patent laws b/c patent laws are
again disrupting social relationships we think are important.  Not necessarily about inventor’s relationship
to employment contract or licensing, but about how patent itself can disrupt a
social world. This helps us see how private law is/can be about public debates
linked to governance.
 
Standing for third parties’ declaratory judgments: if
patents harm parties’ relationships, such as researchers who are hampered in
their research, she wants to provide standing to them.  If patent has in its goals and aims an
attention to private relationships, then the argument for standing is stronger.
 
Sichelman: Lots of public law, like securities, functions to
encourage private interactions.  So the
definition of private law needs to be different. Compare: You petition the
state for the invention; you could treat that like criminal law, where the DA
brings an action on behalf of the victim. 
Torts is private parties; criminal law is public law.  So there needs to be more specificity in what
constitutes private law.
 
Wagner: I am conceiving the design of the patent system as
involving private enforcement. If state were enforcing, it’d be different, and
the doctrines wouldn’t necessarily be the same. The prosecution process as
information-forcing mechanism: if it was just a version of criminal law, you
wouldn’t have that set of rules, or they wouldn’t have the teeth that they do
b/c people would not enforce themselves. Private parties now have to use that
info to make critical decisions on a day to day basis.  As long as it’s private enforcement and not
state, all of these doctrines are linked to private relationships, different
than pure public law. But part of this is that we don’t exactly know the scope
of private law or even if that definition ultimately matters much.

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Private Law & IP, Licensing II

Posted on March 11, 2016 by rtushnet
Session 4: Licensing II
Moderator: David J. Kappos
 
Karen Sandrik, “Empowering Inventors”: Reformers must
understand the law they are planning to reform before trying to reform it.
Stephen Smith, Contract Theory. 
Shiffrin, Divergence of Contract & Promise: two sets of norms—legal and
moral. Shiffrin says you are the author of your own story and the law should
accommodate this. Kar: broad range of human needs can work together:
efficiency, fairness, trust, reliance, harmony, etc. R&D collaboration
partnerships—innovation in the shadow of the law.
 
Normal pharma contract: Eli Lilly v. Emisphere Tech: Eli
Lilly wants to help them develop it; very complex agreement. Very clear that
the tech now and after collaboration would belong to Emisphere, even after
commercialization, and that Eli Lilly shouldn’t work in their own lab on
it.  Other aspects of the agreement were
loose/informal, but the court looked at this and saw Eli Lilly as having cut
out Emisphere in commercializing it. 
Emisphere learns after the fact after both walked away, as the contract
allowed, that Eli Lilly had a patent in the area Emisphere had spent years
developing. Emisphere sues for breach of contract/return of patent.
 
A gap in morality and law may be corrosive to our
institutions.  Kimble v. Marvel: a patent
attorney who comes up w/shooting web toy. 
Court didn’t enforce clear intention of the parties for licensee to pay
for its continued use of the invention post-patent expiration.  We should treat promises the same or we get
conflicting results.  Court isn’t
transparent about why there’s no enforcement. 
Although it’s an outdated rule, that’s not the key reason—contract law
would have handled it differently. 
Promise should be enforced unless there’s clear harm to the public.  Promissory obligation should have more
weight; otherwise there’s corrosive effect on R&D, which often starts out
w/ simple agreement & grows into multilayered license.
 
Where not to enforce: Harry Steenbock comes up w/
groundbreaking tech that will eradicate rickets. Doesn’t want to take out
patents; he’s a researcher, but he’s persuaded to apply & gets several
patents covering his inventions. He wanted to get patents in order to avoid
patent pirates that would use patents to restrict access.  He also wanted to control the quality of the
product, including down to the taste of the food.  You had to come to his lab to learn his
technique.  At first it worked.  Empowered by contract law to let others use
his tech with a promise to maintain quality. 
Over time: Access to his tech was blocked; prices got too high (even
with high quality, he wouldn’t release it); other licensing practices looked
bad.  Patents were eventually invalidated
on antitrust grounds. We can learn from contract: contract handles this well,
and patent doesn’t. Public policy defense would be a way for licensees to say
they have a right not to uphold their promises.
 
Commentator: Oren Bracha: Kimble was a case of refusing to
overrule prior precedent even if it doesn’t make any sense.  We can keep the rule saying certain promises
won’t be enforced b/c it’s easily evaded. 
That’s a bit unfair, but it’s sort of what the Court says.  Sandrik says that’s a terrible reason.  What does that have to do with the
relationship of contract law to the norms of promise-keeping?  It makes the rationale nontransparent/incoherent,
so a moral person who wants to assess this particular norm is left helpless.  Beyond that, there’s a more fundamental problem:
the parties agreed/promised.  Strong
separation between public policy, whether efficiency or something else, and
contract law, which is the realm of keeping promises.
 
As to the first argument: it’s limited to those specific circumstances
of Kimble: Court bases decision on stare decisis, not relevant elsewhere.  But exactly under the Shiffrin framework,
there might be good justification for divergence b/t norms of promise keeping
and contract: Shiffrin says divergence is ok where there are distinctively
legal normative arguments for the divergence. 
And stare decisis is distinctively legal.
 
Assume that Kimble has
some justification in patent policy (though that’s not the majority).  Still conflicts w/ keeping promises norm.
What exactly is wrong with a general structure that says, even within contract law,
this norm of keeping promises is overridden by other considerations, including public policy.  Rather than building contract law on promise
keeping; it’s saying that promise-keeping is a consideration w/in contract law,
as well as others.
 
Kappos: Example of other cases where contract would work
well?
 
Sandrik: other patent licensing cases where there are
agreements to assign, involving universities. 
If you don’t say “I grant you” and say “I will grant” we don’t enforce
the promise.  We create this weird rigid
formal structure that doesn’t work, and contract law would handle it if you
clearly anticipated an assignment.  Four
corners/intent are contract principles that would be useful.  IP licensing has weird doctrines, leads to
wordsmithing/routes around special rules. Contract = if the parties agree,
absent public policy issues, then that’s enough.  Exceptions include public health; enforcing a
statute (antitrust); etc.
 
Bracha: Contract law has formalities, with well-known
purposes. We can debate what formalities ought to be required, and innovation
policy can bear on which they should be.
 
Scott Kieff: Kimble/Brulotte/Quickpoint: the language of the
SCt speaks about speaking clearly: if you’re straightforward, and you’re
contracting over the option—patent may exist, may be valid, may never be
issued, may expire—if you price each state differently, at least the majority
in Aronson seems to say such a commercial contract between sophisticated
parties would be complete and enforceable. Maybe it’s about protecting smaller
entities (even though Marvel wins in Kimble) and clear contracting.
 
Sandrik:  Kimble seems
to be more about Roe v. Wade. Contract in Kimble seems to be more about trade
secret/something else than the patent, which they sold.  She’s ok with formalities; Quanta was just a poorly drafted
contract, and Intel tried to get what it didn’t get with contract law. 
 
Jacques de Werra, “Two Challenges of Global Intellectual
Property Licensing at the Interface between Contract and Property”: Non-US
focus.  Atomization/fragmentation due to
different rules.  Paper explores how to
minimize fragmentation.  Freedom of
contract may create tensions with local public policies.  Issue of standing is beyond the power of
contracting parties in US.  But still
worth exploring role of freedom of contract.
 
Who can sue for patent infringement? Exclusive licensee?
Parties should select rather than local courts. 
Is the right to sublicense relevant? 
Yes, but should be decided under local law.  Can we have a uniform solution?  Current rules split between China, Japan,
Europe.  IP asset purchases: allow
licensor termination because licensor sold to another?  One way would be to invoke the concept of a
third-party beneficiary, including implied obligation of licensor to tolerate
former licensee.  Difficulty may arise
b/c of confidentiality clauses.  Content
can’t be disclosed to third parties, who might still be told they’re
bound.  Local registries for licenses:
notice to third parties? In many cases the license itself isn’t recorded, just
a one page document—doesn’t really make sense, because third party is formally
notified about existence of license but has no idea of the content.
 
Commentator: Bruce Boyden: Even if countries agree that
exclusive licensees have standing to sue, there are still issues with who
counts as an exclusive licensee.  How far
down the line can we realistically go and get int’l agreement?  On persistence of license post-sale—significant
policy differences exist.  May be unfair
to licensee who reasonably expected a longer agreement if new owner can
terminate; may also be unfair to new owner if it didn’t know what the terms of
the license were before it bought.  So
this is not an easy question.
 
Single transaction can mutate into different forms depending
on where executed—arises from analogy to real property; IP tries to make
intangible rights more thing-like by giving rights to exclude that in the real
world might be subject to physical exclusion. 
Here, might be able to make them more thing-like by giving more legal
force to equally intangible agreements: IP rights as the wavicles of law, with
property and contract like elements. There’s no transfer of possession that
occurs as a result of an exclusive license—the buyer starts doing something and
the seller stops.  With physical
property, you’re only subject to one state’s law at any given time, but IP
object seems to be present simultaneously everywhere the IP owner has
rights.  Weird to say that those
dimensions can vary from place to place simultaneously.  Contract law handles that particular problem
better than standard property law, at least to the parties’ expectations ex
ante. Maybe there’s not one IP right but a set of national IP rights under each
nation’s law, in a way that physical objects don’t divide.
 
Kappos: China, India, Korea putting into place requirements for
how you can license your US patents if you want to do business there. Gov’ts
reaching into contract regime and not allowing you to contract around the
baseline they set.
 
A: this is a matter of state resistance; not easy to
overcome. We sometimes focus too much on hard law int’l agreements. Soft law
may be helpful.  WIPO recommendations on
TM licenses, where you can see definitions of exclusive license etc.  IP law will have to be treated locally,
subject to conflict of laws; one way to avoid that would be to try to find a
unanimously recognized ability to pick one set of laws. 

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Private Law and IP: Licensing I

Posted on March 11, 2016 by rtushnet
Session 3: Licensing I
Moderator: Yonathan Arbel
Jonathan M. Barnett, “Why is Everyone Afraid of IP
Licensing?”: Conventional view—be wary of encroachment on public domain from
licensing transactions.  Medley of
limitations lay minefield for construction of transactions w/minimum legal
risk.  Preemption, misuse, naked
licensing/assignments in gross in TM; first sale, exhaustions. Legal
scholarship thinks these limits are good and courts should be more vigorous
about enforcing them. IP markets haven’t agreed, nor have lower courts until
recently—attenuated or abolished by courts. 
1976 Copyright Act abolished the doctrine of indivisibility. 1988:
Congress amended Patent Act to say that some misuse claims needed a showing of
market power.  Exhaustion/first sale
commonly detoured around by recharacterizing sale as a license.  Antitrust has treated non-price-vertical restraints
under rule of reason, including IP licenses; now includes price
restraints.  Freely divisible and
tradable: a core element of every robust content and tech market.  Lawyers have mostly figured out ways to
detour around these limits.
 
But out of 6 license-related decisions since 2006, 1 was
split, Monsanto favored patentee, but
4 decisions strengthened these limits, even specifically rejecting suggestion
to reconcile IP law with antitrust’s rule of reason.  Thesis: both recent decisions and dominant legal
scholarship misappreciate/underappreciate critical role played by licensing in
content and tech markets and that function is predominantly efficient. Licensing
is critical as an enabler of commercial transactions that would otherwise be
infeasible, given risks of expropriation from unrelated third parties.  IP scholarship in general focuses on
incentives to upstream innovator, but real world markets only generate value by
embedding that innovation in a product or service for the end user, and that
requires a multitude of costly commercialization steps that require expertise,
almost always carried out by actors who care only about delivering value to
shareholders, not the things that matter to artists and scientists.
 
Three main categories of efficiency gains through licensing.
Thesis of the paper: secure IP rights + secure licensing deliver these sources
of value.  Efficient supply chains;
efficient risk diversification; efficient fractionalization.  Most important: supply chains.  Traditional story of using license to
encroach on public domain always assumes that the licensor has market power,
dictating prices and nonprice terms to market, but that’s the exceptional case,
not the typical case. Most patents and © don’t have value.  Even a powerful standard-holder is often
subject to competition that exists or could be introduced; the history of IT
markets shows that dominant standard-holder often gives away at zero or below
market royalties in order to grow the market/sell related services.  Antitrust would require market power to even
begin thinking about liability.  Can’t
presume market power in a patent claim; IP should do the same.
 
Next step: revisit these limitations and ask the added value
of an IP-law specific limit on this practice given that antitrust law already
regulates it?
 
Licensing transactions can be evaluated: (1) is it one-way
or reciprocal exchange of knowledge? (2) Is it horizontal or vertical?  Anticompetitive risks are higher in
horizontal.  Any tech/content market, to
extract value from innovation, has to go through different levels of the supply
chain.  Classic decision: make or
buy.  You will choose the cheaper
one.  But when you choose buy, you have
expropriation risks identified by Arrow’s information paradox. License + IP
right is modularization, but must be combined with contract that allows you,
not necessarily to expand the grant you got, but to fine-tune the relationship
in customized way to regulate info flow between third parties who otherwise
lack reliable instrument to do that. Combination of secure IP + secure
licensing is good because it maximizes the total universe of transactions
because a priori we have no idea what the efficient supply structure is in any
given market.  Licensor has that info and
will adjust that structure as long as it’s subject to competition (or even not;
it will do so to pocket more gains for itself).
 
Semiconductor industry: 25 years ago they’d always make;
25-30% of manufacturers today are fabless. 
How did they enter?  Didn’t get $1
billion to set up new fab, but stayed in design market and monetized by
licensing—dependent on the licensing structure, not encroaching on the public
domain. Licensing obliterates an entry barrier.
 
Risk diversification: tech markets & content markets
have extreme skew problems. Most movies are losers; hits cover the losers.  How can you spread that risk? Create a
portfolio, whether internal (studio system) or external.  Biotech market now looks like Hollywood: risk
spread by external portfolio; innovators shoulder the risk and contract w/large
incumbents who have scale to carry out the rest of the supply chain.
 
Fractionalization: Combine divisibility with full
alienability: you can slice and dice among multiple users; field of use
restrictions; time delay.  Lower entry
barriers into industry by allowing IP owner to sell off among universe of
licensees who can fund distribution costs up front (movies).  Field of use restrictions/windows: this is
just price discrimination, whose effects are ambiguous in theory but are
efficient here, eliminating deadweight loss.
 
Commentator: Brett Frischmann: There’s some description
here; factual claims may be in need of empirical support.  How are you defining innovation?  Hard to evaluate assertions; also doesn’t
think that traditional scholarship ignores claims about the benefits of
licensing.  Us/them, black/white framing
may not be helpful in discourse, even as to private law/public law.
 
What’s the theory?  Is
it refutable?  Can it be evaluated/tested
and does it have boundaries?  Is it a
normative claim?  Yes—suggests that we should
adopt a new view supportive of IP licensing. But most scholars understand that
IP enables licensing in various segments of the supply chain. As a result of
framing, the if/then statements in the paper collapse.  If we understood the facts, then we won’t
necessarily adopt this new view of licensing: I need more proof.  Different baselines might give different
answers. IP isn’t fundamentally about transactional efficiency or market-based
metrics of efficiency—that’s important, but other things are important too.
Even understanding the facts Barnett offers, judges might disagree w/the
baseline.
 
Even w/the same baseline, we might disagree—not clear that
these examples generalize.  Hollywood,
big pharma—but does that reach a wide variety of other industries, markets, and
nonmarkets that shape/rely on IP?  Not
clear that examples prove the point about efficiency—do we believe that
Hollywood and big pharma are efficient structures w/which to produce movies.
Laughed when I read “the market evidently prefers hub & spoke.”  Did you interview the market?  The idea that the market speaks about what it
prefers as if it’s not shaped by the law is confusing to him.
 
No discussion of spillovers: how can you talk about supply
chains w/o spillovers?  Even w/efficiency—depends
on free flow of spillovers; there’s lots of empirical/theoretical work on
this.  IP is a little bit about
internalizing externalities, but also about promoting participation in
activities. Some of the limits on licensing freedom might be welfare-enhancing
and even efficient if they promote spillovers.
 
Barnett: I think the literature does focus on the expansion
of the monopoly by licensors—SCt decisions do that—I want to shift the focus.  Distributive effects: price discrimination;
semiconductors—when you don’t allow free licensing choice you limit transaction
structures, forcing them to take place in house which can raise capital
costs/favor incumbents.  On the market’s
preference: we’re agnostic about market structures, and as long as there’s free
entry, whatever structures we observe are efficient, so I don’t need to
interview Sony or “the market.”
 
Arbel: Market power (lack thereof) is key to your analysis.
Circularity: if you allow that, won’t market power increase/the empirical world
may change.  Comparative
institutionalism: compare other jurisdictions, where there are different
licensing rules; could show inefficiencies in those industries perhaps.  Do you see a problem of the anticommons,
fragmentation? 
 
RT: In Barnett’s model, what are TMs for? What do they incentivize the creation of, because the model of
efficiency offered in the paper depends on incentive structures and not on
consumer understanding? More generally, why class patent, TM, and © together
here with antitrust law (and notable that most papers here don’t cover TM,
which suggests some uncertainty about the overlap between private and public
law here—larger question for the group, is TM already private law so we aren’t
worrying about it here (I have thoughts about why that shouldn’t be true)?),
and what about trade secret, misappropriation, or advertising law? Relatedly: Different
kinds of wrongs to consumers and competitors exist—antitrust law doesn’t
recognize most false advertising as actionable, or most product liability (I
think), but that doesn’t mean those torts shouldn’t exist.
 
John Golden: You argue we shouldn’t do more than antitrust,
but do antitrust scholars disagree? Herbert Hovenkamp wants to shift the
problems of regulation from antitrust to IP b/c he thinks antitrust isn’t
designed well to deal with the problems of IP.
 
Van Houweling: paper sets up troubling mismatch b/t
critiques of licensing and benefits of licensing.  That’s a problem if there’s a complete
overlap. But we aren’t skeptical of all these
licensing practices; the skepticism isn’t that thoroughgoing, but covers
overreaching rather than all licensing. Would be more convincing with some
examples of beneficial licenses that the critics undermine.
 
Barnett: Mismatch is worth addressing, yes.  Division of labor b/t antitrust and IP—do they
have the same normative objectives, maybe we shouldn’t have overlap, but
otherwise it might be ok. Major antitrust case of the last 3 decades is Microsoft,
all about IP.  Market power is always
important b/c you’re taking terms from the market rather than dictating terms.
 
Greg R. Vetter, “Opportunistic FOSS Development Pathways”: Modular,
in H. Smith’s sense, not technical sense. 
Software licenses deploy permissions against a set of rights—©, trade
secret, patent, but mostly ©.  Whatever
license you have targets some type of opportunism. License might work with or
against the rights basis.  FOSS/GPL works
against the rights of © in that it uses © to enable copying and to defeat trade
secrecy in the source code.  One person’s
opportunism is another person’s business model. Some modes of opportunism are
illegal. Licenses operate as quasi public instruments.
 
Forking is allowed; GPL is hard to get out of—locks usable
value of software to the license b/c there are so many contributors and it
would be hard to get them all to agree to a different licensing scheme.  Property as a shortcut over many contracts
that would otherwise have to take place. 
Small startup can shift to permissive license, but hard to shift back;
could start a permissive fork.
 
Commentator: Christina Mulligan: Are incompatible licenses a
problem of property at all?  Potentially
separate issue—could be a problem of modularity or a problem of anticommons.
The worry is that public licenses create a bad interface b/t pieces of property
blocking us from bringing 2 pieces of software together.  The public license didn’t cause the problem;
companies can license a work under a public license such as the GPL, and then
if there’s some other reason they might want another deal, can license it to
specific people in a proprietary/specific way. 
Conceivably, you could imagine a license that tried to be an exclusive
GPL/public license, but she doesn’t think any license purports to do this.  Would create the same problem as the fee
tail, where no combination of people could make a separate deal; our
commitments make us not want have attempts to control property like that
work.  The software: can conceptualize it
as the software as it currently exists and as its possible derivatives, but she
thinks that’s wrong.  The property right
can include the work and the right to make derivative works, but not the
derivative works that don’t yet exist. 
Breeding racehorses: you want to blend them together—we wouldn’t about
whether it’s A or B; we can see it’s a third thing and the owners can agree
about how to share rights in the new thing. 
Pre-commiting to waiving your right to exclude in a certain
circumstances doesn’t redraw the boundaries of property; it’s not a problem of
defining the property interest correctly b/c you can always make side deals to
license, which means that the fundamental problem is one of the anticommons.
 
Vetter: one point to remember is that GPL uses © to defeat
trade secrecy—this makes me think there’s more instability here than there
otherwise might be.
 
Smith: One way of reconciling this idea of anticommons v.
modularity: maybe here your identification of the difficulty of modularity
arises not up front but after the fact. 
You have an intersection b/t the running covenants problem w/confusion
(you have grain, I have grain, they intermingle) or conceivably accession (if
you don’t have a deal and there’s a new calf, it belongs to the owner of the
mother)—the reason we don’t worry about that in property is that even ex post
we can modularize really easily—to the mother; divide pro rata; punish the
person who caused the problem. Not as difficult as intertwined software with
conflicting licenses.  There is an
anticommons aspect but it’s a lack of modularity, b/c even after the fact we
can’t draw lines about contributions very easily.
 
Michael Abramowicz: Biggest concern justifying viral license
was risk of proprietary fork that would add so much it would be hard to avoid;
GPL is attempt to deal with that risk.
 
Vetter: thought that forking was usually a result of
disagreement, not a purposeful deviation.

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Private Law & IP: Institutions

Posted on March 11, 2016 by rtushnet
Session 2: Institutions I
Moderator: Patrick R. Goold
Wendy J. Gordon, “Proximate Cause in Torts becomes Proximate
Use in Copyright”: Common law has useful intuitions—tort for copyright—though I
don’t pretend to know whether tort is optimal.
Both tort and © are about internalizing externalities; creating
incentives for people who are similarly situated; correspond to intuitively
common-sense moral intuitions about desert and merit—negligent actor deserves
to pay, meritorious author deserves to be paid.
Tort law focuses on defendants and internalizing negative externalities;
© focuses on plaintiffs and internalizing positive externalities—make © owners work
harder by giving them more $ and make negligent drivers drive better by
requiring them to pay.
Definition of employer/employee—SCt seems to follow my lead
by looking at the Restatement of Agency for vicarious liability. But that’s
crazy b/c they forgot the reversal. Vicarious liability is about spreading—making
the person with least incentive/low marginal utility of money pay.  Copyright is all about credit/control—we want
them to have the right if they’re sensitive
to incentives, but that’s most likely the actual person—concentration/control
is more beneficial than decentralized control.
Proximate cause in tort is mostly about whether the
defendant could have foreseen. Proximate use in © is about what the plaintiff
could have foreseen at the time of creation.
Shyam Balganesh and Christina Bohannon have written on this, but the
concept goes beyond the scope of foreseeability, which alone isn’t as useful as
it is in tort, b/c © isn’t just a post-accident deal but an ex ante creation of
rights.  Larger project: How we figure
out more easily delineated lines than vague foreseeability.
© and tort use causation.
Patent law doesn’t require cause in fact; neither does TM law.  If interaction w/P’s © work made a difference
to what D did, that’s cause in fact.
Restatement of Torts: no proximate cause where liability wouldn’t make a
difference in creation of risk/harm. Proximate cause is a question of fit: does
liability serve the purposes of the imposition of the duty?  Negligence: you negligently place a bookbag
in the hall.  Mr. Smith trips but is
unharmed; however he is delayed by the stumble and therefore steps outside just
as a gargoyle detaches from the building and falls on him.  No proximate cause despite negligence.
Analogies: transformative fair use and functionality.  It’s fair use to make copies for judicial
use, for example, b/c of the lack of connection b/t the facts at hand (why
there was copying) and the purpose of the law.
Functionality/interoperability: if someone is copying only to make two
things fit together, the only need is for them to be the same; they’re not
copying for the expression—like getting a key made for a guest staying at your
house.
Commentator: Shyamkrishna Balganesh: Fit: © would benefit
from developing a structure to see if the goals of © are being furthered by any
particular instance—Ziporsky/Goldberg in tort; antitrust (substantive
standing/antitrust injury)—whether the harm is of the type we want to impose
liability for given the underyling purposes of the institution.  Needs more determinative logic to be a real
constraint.  Gordon assumes normative
logic comes from incentives. But given the way incentives have become
understood/handwaving in jurisprudence, this isn’t a real constraint.  Rule v. act utilitarianism: for rule
utilitarianism, we wouldn’t use an individual instance but systemically. We all
know the effect of that: everything in some ways contributes to incentives;
merge with expectations; retroactive extensions come to be seen as
incentivizing. But for act utilitarianism, we need better specification of the
nature of the incentive—who is to calibrate it? Is it market based?  One of the enduring problems of fit in ©.
Proximate cause: one of the big debates over whether
proximate cause needs to continue in the Restatement and needs to go into the
scope of risk/the “duty wars” is how we think about specific v. general
deterrence. Is © a general incentive structure for future authors, or this
particular case?  Proximate cause has its
own set of problems/debates that should be addressed squarely if incorporated
into ©.
Gordon appears to allow both instrumental and deontological
considerations into the question of fit.
If one has this plural accommodating conception, does it operate as a
constraint at all? Drassinower says incentive-based system can’t explain why
originality is important; need autonomy-based conception. But what gets
excluded if we use autonomy? Doesn’t it destabilize the very conception of fit?
Bigger question: What is the overarching justification for
introducing a fit requirement?  It’s
clear that © is instrumental, meant to serve a particular purpose.  But where does that come from? Is it prior to
©, Constitution specifying a purpose, or is it to be deductively derived from ©
itself? Analogy to common law: if we identify purposive nature of common law,
we derive it from the workings of the institution, not a priori.  Given that © is statutory, we have a slightly
different approach: but where then is the basis for the fit criterion?
Liability for benefit: We might fruitfully analogize © to
liability for unjust enrichment.  His
question: what exactly is the benefit?
Is it the trigger of liability or the basis of recovery?  Analytic distinction: bifurcation b/t unjust
and wrongful enrichment. Unjust enrichment doesn’t require a wrong to trigger
recovery: recovery of a mistaken payment to the wrong person.  Wrongful enrichment recognizes a wrong caused
by a harm, and the profits accompanying the harm ought to be disgorged—the basis
of the disgorgement is not distributive, as in unjust enrichment; it’s
triggered by the wrong.
In ©: you can’t altogether assume away the problem.  © affirmatively recognizes the wrongness to
trigger recovery. It’s not just “was there copying?” but “is the copying there
was normatively wrongful?” (whether that means market-based justification or
not).  A positive externality acquired
through a wrongful act.  Gordon
recognizes that volitional conduct is required.
Gordon: [Edited to improve match with what Gordon said/correct my misunderstanding] In the distinction between restitution arising out of ‘non-wrongful’ versus wrongful’ enrichment, the ‘wrongfulness’ cases don’t much concern me.   Those cases are easy: if someone trespasses, even 100 feet underground, it’s pretty easy to see why a court might give the landowner a share of any profit the trespasser earned.*  And the benefit is not the basis for liability.  Instead, I’m interested in exploring circumstances under which a ‘non-wrongful’ reaping of benefit is urged to provide the basis for liability. Copying in itself isn’t wrongful.  Among the ‘non-wrongful’ restitution cases, there’s a subset that pose a particular challenge to me, namely, the ‘volunteer’ cases where someone, for instance, paints or repairs the wrong house because of a mistake, and sues on the basis that the recipient got a benefit without paying.

The volunteer cases are interesting because they seem to challenge my argument that the common law is concerned with internalizing benefits — the challenge arises because the common law rule tells the house painter she is not entitled to sue for the benefits she has conferred. This seems to contrast with the treatment copyright gives authors.  An author is a kind of volunteer, yet authors are empowered to sue copiers regardless of whether or not the copiers have agreed to a contract.


  I argue that the contrast between the rules doesn’t show that the common law rejects the internalization of benefits.  Rather the same consideration operates in both rules:   a common-law preference for achieving internalization through contracting, in markets, as opposed to requiring internalization after the fact by judicial fiat.


Courts generally adopt rules that encourage markets to form.  For ordinary services, markets will be discouraged if service-providers can routinely get paid without contracts, while markets will be encouraged by an opposite rule that routinely makes contracts essential.  So the latter is the baseline rule adopted: Volunteers need contracts if they wish payment. That rule works well for services because as a practical matter, service-providers have natural leverage to obtain contractual agreements.  Most customers can’t get their houses painted without promising payment.  Authors don’t have this leverage.  It’s physically quite easy for a publisher or a customer to make copies of most authorial works without consulting anyone.


Copyright law provides a substitute for physical leverage; without it, potential publishers or customers might withhold payment from potential authors in the hope of free-riding on an authorial work which (they hope) won’t need their contribution in order to be created and circulated.  A fear of such scenarios leads to a concern that, in a world without copyright, strategic behavior by potential beneficiaries might make it quite difficult for authors to find sufficient promises of payment, and that as a result the public might have fewer works created than it would in fact prefer.  The copyright rule requiring payment for copying allows the potential beneficiaries and potential benefactors to coordinate (through contract) what is wanted and what can be supplied, avoiding the frustration of demand unfulfilled because unexpressed.


The no-payment rule applied to volunteers who provide services is interesting not because it’s a perfect analogy to copyright. To the contrary, it’s interesting as ‘the exception that tests the rule.’ Comparing authors with ordinary volunteers reveals — I think unsurprisingly — -that the operative common-law rule isn’t “internalize by whatever means possible,” but rather, “internalize by market if you can, and turn to lawsuits only to the extent that unassisted markets aren’t likely to do the job.”  For non-excludable goods like works of authorship, internalization via contracts and markets might not occur unless the law gives authors (a particular subset of volunteer benefactors) a right to sue for benefits conferred.


Originality:  My concepts of authorship or originality aren’t mystical; I don’t think you need autonomy justifications for copyright law that go beyond the ordinary.  Rather, original authorship marks out an area where imposing liability for certain non-consensual uses of ‘privately-produced public goods’ turned out, at least arguably, to be socially tolerable and limit-able – an area where prohibiting a particular form of free-riding seemed (at least sometimes) to be capable of resisting a slide into a general rule against free-riding.


A general rule against free-riding would, of course, dangerously impair community.  Originality functions as a concept useful to mark the territory where a historical experiment in ‘internalizing positive externalities’ by non-market methods arguably had some success.

Van Houweling: Why not trespass, with its lack of fit
requirement (though there are issues with accidental trespass)?
Christopher M. Newman, “Vested Use-Privileges in Property
and Copyright”: How do I know what a servitude is?  You can’t use your property to do X because
of my right.  That could be called tort
law—some one else asserts that you harm me w/r/t my other property interests,
even though you’re using your own property.
Servitude seems different; a right to control what is in other respects
your property w/o having to justify it w/r/t some other harm.  Servitude instead requires some preexisting
link b/t me and that thing that gives me the right to assert arbitrary control.
Public regulation doesn’t require the tort law fit, but it’s contested—to what
extent should we regard public regulation of what house I can build on my
property as appropriate? Does that protect others from injury? Does it further
collective good?  Takings issues?
So, does it make sense to regard copyright as servitude on
the physical chattel?  Or is it a
protected interest in the copyright that is protected by tort-like
considerations, which brings in issues of fit?
Commentator: Timothy R. Holbrook: The book is mixed
property, both rights at once—hard to apply the real property matrix to
that.  Maybe what the book owner has is
an easement against the © owner: a right to use for certain reasons, but the
uses are limited—a more compelling story for exhaustion doctrine.  Public domain: not re-appropriable.
Balganesh: debates over quasi-property have this same
character of relationship v. object.  The
right of sepulchre is another variety: what rights over unauthorized
interference w/corpse do relatives have?  Recognizing emotional harm w/o property
rights.
Van Houweling: We can see touch and concern as requiring
some connection to the common good for servitudes; there might be a similar
kind of fit requirement there. And further there might be more justification
for a fit requirement in ©–we’re not as agnostic about the purposes property
serves in ©; we have a constitutional purpose, and that means we can and should
have a fit requirement.  Also there are
difficulties of asset definition that help justify a fit requirement.
Cohen: the fact that you get very different results when you
analogize to servitudes v. public trust v. something else is suggestive of
Cohen’s family relationship argument: these are useful concepts for finding
relationships between types of property and doctrines, but very little follows
from the family resemblance as such. When none of the analogies are on all
fours, you can cycle madly or you can broaden out.
Newman: or you can use it to navigate/extrapolate—what are
likely to be useful answers/policies to keep in mind when answering a question.

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Private Law and Intellectual Property conference at Harvard

Posted on March 11, 2016 by rtushnet
Opening Remarks: Henry Smith—exploring the connections
between private law and IP.
 
Session 1: Entitlement Design
Moderator: Rebecca L. Tushnet
Speakers and Papers/Commentators:
Tun-Jen Chiang, “The Paradox of IP”: A paper looking for a
theory.  Why do we have an IP system as opposed
to a prize system?  His understanding has
always been that IP systems harness private information and that gov’ts in a
prize system wouldn’t be able to value the underlying value of the right
properly, most commonly b/c judges lack adequate information to do so or judges
are too easily politicized in awarding cash prizes, while IP rights determine
value of underlying thing automatically through market calibration.  If that’s the reason we have an IP system,
then one thing in tension with that is that judges in fact calibrate the value
of the work/invention in multiple doctrinal contexts, most particularly when
they determine the scope of IP rights. 
Idea/expression dichotomy: Nichols/Learned Hand abstraction test.  How to apply? Judges have a feel for what’s
about right in scope, and work backwards to find that if a certain level of
abstraction gives too much, that’s the wrong level.
 
Patents essentially have the same problem and resolution:
patent scope doctrines of claim construction—a big mess, open-ended, which ends
up being used in a way that construes claims according to what judges feel is
about right.  But what’s about
right?  We don’t have a better answer
than intuitive judgments about the economic value of the right at stake.
 
That account makes the reason for an IP system rather than a
prize system more puzzling.  Intuitive
differences: IP system, we don’t have to get to the bottom dollar, we just take
a stab at it.  Both prize and IP systems
can be imperfect.  If you note that
judges calibrate at the edges all the time through doctrines of claim
construction or tweaking remedies or fair use, then it opens up the question of
whether they should do more. Claim construction: why be bound by whatever the
patentee writes, instead of reaching good outcomes within the parameters of the
system/incentives?  Claim construction
could be judges figuring out what the claimed invention ought to be and then
construing it by bending it the doctrine to reach that outcome.
 
Injunctions: why have a rule presuming injunctive relief
when infringement is found?  There are at
least a few cases where injunctions would overcompensate through holdup.  If you think judges are ok at tailoring, then
they should be able to deny injunctions in those situations. Much of the
traditional structure of IP is only explicable if you subscribe to the founding
premise that the IP system is designed not to have judges calibrate b/c they’re
bad at it, so we need second-order rules that say there is a thing called the
work or the invention, determined in value according to market forces.  In that view, the idea that judges should
just grant injunctions instead of ongoing royalties and that judges should
construe claims linguistically make sense to avoid fine-grained inquiry. But
judges seem to be doing all sorts of calibration under the hood, and by and large
they seem ok at it.  Fundamental dilemma.
 
Commentator: Gideon Parchomovsky: (1) IP paradox (existence
or not); (2) proper role of courts in IP space; (3) implications—should we be
worried? 
 
Chiang is right on a certain view of IP.  Basic dilemma: we are fine with courts
defining the asset in IP, where intangible assets w/unclear boundaries are at
issue.  Idea/expression, invention scope.
But many of us feel uncomfortable when courts decide how much money in dollars
should be awarded.  But defining the
scope of the asset of course indirectly determines value.  And that’s fine.  Is there a paradox?

There is a paradox only if one believes that courts shouldn’t have any say about the rewards for authors
and inventors.  A lot of people do seem
to subscribe to this view.  Either this
view is wrong or they didn’t think it through. 
Law is always prior to the market; even Coase says that.  Courts should define the asset, and only
after that can market transactions take place. 
This isn’t an IP paradox but a much more general paradox.  With Blackacre too, we need courts to
determine what interferences are reasonable or not.  Drones: is that trespass or not?  My rights are influenced by zoning laws.  Value of stock is also determined by law.
 
If you believe scope determinations are inevitable, the
question becomes much more difficult. How much leeway do we want to give
courts?  Legal Realists.  The determinations that are inevitable lie
within the competence realm of courts. 
Claim construction as an example. 
As long as judicial decisions are reasonably predictable, that
works.  Judges are better at scope than
evaluating assets overall.
 
Does it matter? 
Matters for pricing function. 
W/in a certain range, there’s enough determinacy to function.  Insurance cos. have a very hard time
calculating the value of patents; it’s not just scope but novelty, obviousness,
survival through litigation.  We also
need to worry about adequate incentives to create.  Chiang leaves room for optimism—there are
still incentives to produce.
 
Oskar Liivak, “Private Law and the Future of Patents”: Problem
of excessive system costs. The costs of engaging with the system is too much to
produce gains.  Odd if we’re trying to
provide a reward for inventors.  Dickens,
1850: A Poor Man’s Take of a Patent; shows up in Steinbeck’s East of Eden as
well.  Private law is attractive:
property, contract, and tort—accepted and stable; low administrative costs;
cheap to operate—something that patent is not (accepted and stable).  Generally speaking, people abide by their
duties, but litigation is on the margins. 
Patents: everything is in the shadow of litigation. 
 
Are patents private law? 
No: empirically. They’re just not accepted and stable like these other
institutions of property, contract, and tort. Does the public feel an
obligation to obey? No.  Could patent be
private law?
 
Patent theory is incompatible with becoming private
law.  Sichelman said the same thing about
remedies.  His solution is to rid us of
private law concepts to become consistent. 
Worried that we won’t get efficiencies w/o private law, so suggests
getting rid of dominant patent theory and build something compatible with
private law.
 
What makes private law special?  Purpose: enable socially beneficial activity;
allow coordination of activity.  Structure: duties to avoid harming
others.  System of rules.  Criteria for efficient operation: we can
comprehend our duties (H. Smith on information costs and modularity); we feel
an obligation to obey.  HLA Hart’s
discussion of the internal viewpoint on an institution; less worry about
litigation and more about what one ought to do. Systems become cheap to operate
under those conditions.
 
Dominant patent theory: purpose, promote progress in useful
arts. Structure: provide incentives to induce activity. Patents are a reward to
patentees subsidized by those that infringe. 
Once you set up the world this way we’re in trouble from a private law
perspective. 
 
Duties: pay patentee whenever infringing; no real sense of
harm to patentee.  Criteria for smooth
operation: can we comprehend when to pay? No. Do we feel an obligation to pay?
No. Only obliged by litigation (risk).
 
What to do? Think about getting away from incentives. Private
law does incentivize through property, but it’s generally not by telling people
to produce/telling us it’s there for ensuring property owners they’ll make
money. Get away from the idea of subsidy. 
Ask what we want to have in the world: what interactions, coordination
behavior?  Once we think that way—what could
third parties do to harm a business model—we start moving towards something
better.  Don’t do things to harm people
trying to supply their tech to other users. 
We could comprehend what to avoid (people who are
commercializing/transferring tech) and what causes harm (copying).  Could even tell a story about what’s wrong
with a complete defense for independent inventions.  Could feel an obligation—a regular business
interaction, not just misappropriation. 
 
Purpose of judiciary: What do judges think they’re
doing?  Learned Hand: We don’t see how
our decisions ultimately affect the end result, levels of innovation. No
internal viewpoint, just reward system that no one has a good feel for.  Missing essential characteristics to make it
easy/efficient to operate.  Not
necessarily morality but acceptance of what harms to avoid; if the tech
community could understand it, so could judges.
 
Commentator: Adam Mossoff: Failure of fit between a lot of
the way we theorize the patent system as a public regulatory system that
pursues economic goals by subsidizing innovation versus what we see in
operation, a private law type structure. 
Two points: 19th century; empirical claims.
 
Shifting to a focus on market transactions as a proposal: in
talking to people who work in the innovation industries, this is their
perspective, but also doctrinally on to something, b/c many courts
conceptualized patents in the 19th c. this way, which led to patent
licensing market.  Common to hear in
American/British system discussion of monopolies; this is true in the same
sense that American political system came from Britain: came from it, but also
broke from it.  So too w/patents.  British patent system was economic regulatory
system, first to file; not viewed as property rights in England. A patent was a
personal monopoly privilege; couldn’t be transferred.  James Watt was an academic researcher, but he
had to find a business person to work with when he got a patent; he couldn’t
just sell it.
 
US broke w/that approach; first to invent, but more
importantly recognized patent as property, bringing a normative structure to
thinking about patent. History has a lot of policy dispute; you can find judges
who say otherwise in the 19th c., but the majority rule is courts
citing to property doctrines in patent cases. They did this when they dealt
w/commercialization in the marketplace: they say “we are not like England.”  This wasn’t a matter of remedies (not
primarily); about the ability to frame conceptually w/ability to use normative
principles—the right to use, the right to dispose of the right. A private
ordering presumption.  Adopted common law
concepts of assignments and licensing. 
As a result, economic historians say, there’s an explosion in economic
activity involving patents.  Apple
licenses its patents actively.
 
Too much myopic focus on litigation; we do this b/c we are
lawyers, most of us w/litigation backgrounds rather than transactional;
litigation is also public, not behind the scenes.  But there’s a huge amount of transaction/licensing.  Talking about breakdown of patent system w/o
considering existing market transactions is armchair empiricism; benefits to
patent owners exist under the current system. 
Patents contribute $6 trillion to the US economy through transactions,
licensing.  That’s the denominator
against which to measure the costs.  Get
into empirical side.  Lots of empirical
work: patents double your chances of getting startup funding.
 
Molly S. Van Houweling, “Disciplining the Dead Hand of
Copyright: Durational Limits on Remote Control Property”: Connections b/t
tangible property law and copyrights. 
Blackacre and Black Beauty. 
Controversial endeavor: Lemley argues against propertization of IP;
Mossof argues for.  Peter Menell has
expressed skepticism; Liivak has said that it too often corresponds w/patent
absolutism.  Michael Carrier: property
has lots of limits, edge cases, complications as compared to the monolithic
version often presented as “property” when it comes to IP; we can learn from
property’s limits.
 
Conventional wisdom differentiates Blackacre and Black
Beauty in time b/c tangible property rights can be infinite while constitution
requires IP rights to be limited.  Why
might that be?  The special nature of ©
as a prohibition of conduct remote from the persons or tangibles of the party
having the right. May be infringed a thousand miles from the owner w/o his
awareness, ever. This right couldn’t be recognized or endured for more than a
limited time: from White-Smith v. Apollo. 
Remote control property over time makes us particularly nervous.
 
Why?  Special notice
problems.  Don’t have notice helpers as
we do w/traditional tangibles—owner on the land; fence in front of the owner;
limits don’t have to do w/boundary crossings but w/use limits, more confusing
than conventional non-remote control property rights. Interferes w/ basic
intuitions about what we can do as owners of tangible things.  Problems can get worse over time as we lose
track of the owner/the way they wanted to limit use.
 
Special obsolescence problems. Non-possessory rights are
especially likely to become out of date. 
Difficulty of finding absent owner to renegotiate. Non-possessory rights
can be fragmented and overlapping.
 
And yet: expanding duration of copyright makes it
not-so-limited.  Perpetual copyright on
the installment plan; some copyright enthusiasts want it to be infinite—unfair disadvantage
v. other property owners.  What skeptics
and enthusiasts share is idea that there is a fundamental difference between
permanent property rights and “limited times.” But problems of remote control
property plague tangible property as well, and therefore we see duration limits
in the tangible realm.  Rule against
perpetuities; ex ante durational limits for servitudes and future interests;
periodic recording requirements for servitudes and future interests; ex post
termination/modification of servitudes and future interests; adverse
possession; statutes of limitations.  Note
the ones that operate on nonpossessory interests like servitudes and future
interests especially.  Prohibition remote
from the persons or tangibles of the party having the right, as in
White-Smith.  Recognition in tangible
property that this can become problematic—Md. legislature notes change of conditions
in restricted tract or neighborhood surrounding it—the usefulness of many
reversionary interests vanishes.  Not
practical to obtain releases b/c owners are numerous and scattered—similar to orphan
works and other duration problems.  “Dead
hand”—owners do exist, but they are unfindable/too many—they might as well be
dead.
 
So some states have ex ante duration limits on restrictive
future interests: 30 years in Md. 
Another solution is periodic recording requirements for nonpossessory
interests in order to make them trackable/provide adequate notice. Cal.
approach.  Ex post termination of
obsolete restrictions—Mass. approach, must provide substantial benefit to a
person claiming rights of enforcement at the time rights are asserted.  Obsolescence can also lead to remedial
adjustment—remedy is damages and not injunction.
 
Bringing this home to ©: think about how we might use some
of those tools from tangible property to address the problems in © with
increasing duration/obsolescence/changed conditions.  Google Book Search: a © that seemed valuable
initially now just threatens to lock up works that could be put to beneficial
uses.  Paul Heald’s
work showing the power of © to keep books out of print, likely against the
wishes of the authors themselves. 
Reinforces other suggestions such as recording requirements (Sprigman
etc.) and scope adjustments (fair use over time) and remedial adjustments
(Copyright Office orphan works proposals). 
© is problematic private law, but a lot of the heartland of private law
is also problematic—servitudes. 
Copyright reform in the private law tradition.
 
Commentator: Julie Cohen: Private law skeptic.  Framework bleeds through, intentionally or
not.  VH’s project is to find firm
analogical footing for temporal limits on ©, and is persuaded that time
is/could be relevant lever for tailoring. But not sure analogy proves very much
about how relation b/t © and time should work. Some of the rules VH examines,
including Rule Against Perpetuities—it’s pretty clear that the real property
system worries about dead hand control, but not clear how that cuts. Both in
original formulation and various modern formulations, rule is supposed to
provide balance by allowing 2 generations of control but not much more. That’s
exactly why Congress lengthened the term—the same accommodation.
 
Servitudes: problem is more fundamental/revealing limits of
private law project.  Remote control of
chattels embodying © works and uses. But servitudes aren’t nearly as disfavored
as the paper presents them. They aren’t just vehicles for remote control by
atomistic isolated owners; they’re powerful, flexible vehicles for communal
ordering—create residential neighborhoods, commercial development (anchor
tenants), and for exactly those reasons the thrust of the Restatement is
greater liberalization for CCRs, noncompete covenants for shopping centers; get
increasingly favorable treatment over time. Offer tools for ordering that cut
across atomism of traditional real property: collective benefits, collective
externalities. So why is the paper taking an atomistic view of servitudes?  Is it the private law methodology/toolkit
inherently atomistic, emphasizing clear boundaries and transactions rather than
communal ordering. That atomistic orientation is particularly problematic for
understanding servitudes and for understanding IP.
 
IP is the subject of pervasive intermediation:
intermediaries manage all the fractional and cumulative uses; also the
production of tangibles & intangibles related to IP involves lots of
intermediaries—publishers, movie studios, tech employers—they are production
intermediaries. Layers of intermediation embedded in systems of IP production
and dissemination. From an institutional POV that means that legal institutions
need to be able to manage problems of access for cumulative/fractional use and
they need to constrain the intermediaries in some way.
 
Time could be important in designing such institutions,
particularly for orphan works.  Even so
worries about remote control/dead hand don’t get us far into the institutional
design questions.  Study IP directly w/o
a filter needing analogies. 
 
RT: The theme I extracted from these three: Anything that
can’t go on forever, won’t.
Liivak says; For the most part these institutions are
self-enforcing. The stake-holders participating in these institutions know
their rights and duties and they largely abide by them.
[How do we know that? Counterexamples. Property: mortgages.
Contract: consumer contracts. Do you know if your cable provider is complying
with its contract with you?  Tort:
medical mistakes that cause harm)
 
Van Houweling: consider servitudes—they don’t work as well
as other parts of property law, but we don’t reject them.  Question raised is whether it’s worth the
candle in patent law. Our current system fars fall short of dealing
w/pathologies in the way servitude law has evolved, by requiring proper notice
for example as well as durational limits.
 
Henry Smith: Is this all about the difficulty of asset
definition?  Calibration: trespass is a
first cut, nuisance is a refinement. 
All-nuisance, all-use all the time world would be pretty difficult (but
is the world we have in IP?).  Maybe the
reason it seems like a paradox is that we aren’t clear on what the resource is
in the first place.  Servitudes: we have
remote control, but also incomplete separation too. We don’t allow many
servitudes on personal property, but at least we know what the property
is.  More like water law—can’t go as far
in defining.
 
Chiang: In every area of property we have a problem of asset
definition—always has implications for value. We don’t have a well-theorized
second-order rule or methodology to do asset definition, whereas in tangible
property law we might not have a complete,
gapless, ambiguity free rule, but it’s more tethered to first-order intuitions
about the underlying asset value. Trespass isn’t defined by the worth of the
property, though nuisance has more of that flavor, but still less than © or
patent.  To the extent that asset
definition falls back on first order intuitions that’s about asset value, that’s
a circular definition.
 
Van Houweling: yes, we’re all getting at a problem of asset
definition.  Chiang’s paper prompted
recognition of tangible property cases w/ such problems—mistaken boundary
claims, Manilo v. Gorski; no injunction to make encroaching building be torn
down, but calculate damages instead. Upsets the idea that there’s a paradox b/t
clear rules and private ordering v. judges having to do valuation on occasion.
Q is whether it’s rare or endemic in a way that makes it a paradox.
 
Ted Sichelman: I try to show that if we adhere to a private
law framework we don’t promote innovation optimally.  Multicomponent products, independent
inventions—we care differently about notice costs, clear boundaries.  If we try to move from regulatory system
(theory and goal) to private property focus we’ll have a mismatch.  Other situations, private property works
quite well; just b/c you have a regulatory goal doesn’t mean you can’t use
private property and private law to promote that goal. Don’t think it’s all or
nothing.  Wanting everything to look neat
and tidy = mismatch.
 
Liivak: we might well agree on doctrinal details.  Worry that framing affects analysis.  Independent invention might be a good test—if
a private law view has the flexibility you’re interested in, maybe I can
convince you.
 
David Kappos: You’re looking for a system to help people
understand patent boundaries better. ECJ & German courts have been working
on this in standard-essential patents, setting forth a rubric requiring the
patentee to make a clear offer of a reasonable royalty license.  The erstwhile licensee must respond clearly;
if there’s not agreement, the potential licensee is required to post a bond and
there’s a resolution path.  Does that
shine a light to further clarify property rights?
 
Liivak: sounds very interesting.  Maybe it was implied, but I think there’s an
important distinction b/t ex ante and ex post licensing—when you have tech you
haven’t independently invented, I’m all for such negotiations. If it’s instead
allowing or preferring ex post licensing where the patentee looks around at the
world to find payors, I’m less sympathetic—don’t see social benefits.  Any distinction b/t ex ante and ex post,
putting thumb on scale for real tech transfer, would be good.

Rachel Sachs: In terms of needing a reason to get rid of the dominant theory in
patent law—why do we want this to look more like private law? Is there a
fundamental flaw in the theory?  Is it
just expense? Can private law do it better for some reason?  Is there an overlapping consensus, and is it
clearly cheaper to do that under private law? 
Maybe we don’t feel obligation to IP b/c it makes lawbreakers of us all,
but if IP is an essential human right, that might matter.
 
Liivak: I start out talking about system costs, but we need
more reason than that.  Before we get to
tailoring, we have the bigger Q: how much innovation do we need compared to
other activities; dominant theory is premised on knowing a certain number that’s
unknowable v. shoe stores or Thai restaurants. We don’t need to know if we go
to the private law model and set up a neutral platform for those who
innovate.  (If the rest of the economy is
efficient.)  Rather than IP
exceptionalism where we distort markets, think of it as neutral platform and
don’t try to maximize innovation v. other things.
 
If you take reward theory seriously, your first go round has
to be ok with trolls. They’re just collecting the promised rewards, including
from independent inventors.  That theory
has come up short on the ground.
 
Van Houweling: linked to Cohen’s point: why look at system
costs adjustment and why not challenge the system if we’re not getting the
benefits of community from real property servitudes.  Likewise, remote control rights do assist in
coordination/long term planning v. author only owns rights in manuscript. Doesn’t
prove system is worth its costs; what we certainly shouldn’t have is the
pathological system without any of the
tools used to moderate the problems.
 
Brett Frischmann: For Chiang: Demand manifestation in systems
driving allocation of resources—ex ante investment decisions are the core of
patent; we can tolerate some ex post errors if ex ante is driving most
decisions.  For Liivak: duty to obey in
private law—empirically needs verification. 
Dave Hoffman on how different generations approach contract differently;
if the premise is wrong, that pulls the rug out from the project.  If you’re going to do private v. public law
or the hybrids, you have to do comparative institutional analysis.  Why do you want the alternative model you
advocate?  Just saying the end is “innovation”—what
does that mean?  What the normative
objective is and the means.
 
Chiang: Literature on patents v. prizes begins w/ the valuation
issue—not the whole story but the first cut. 
As for systematic point, yes but I’m not sure it provides an answer in
that both patents and prizes are about systematic overall incentives rather
than individual fine tailoring.  Doesn’t
matter if courts get it wrong in one particular prize or patent as long as
there’s no systematic error.
 
Jonathan Barnett: You’ll never find a Delaware or NY or English
judge deciding what the damages are unilaterally; typically they’re what the
parties said in the contract, or expectations with a market benchmark.  If we take that back to patent, it seems like
something similar is happening there. Hard to get a market benchmark for claim
construction, but for damages, we want to look at how the market is valuing
that right b/c a patent is simply a way to allocate intellectual resources into
IP modules, so damages try to replicate the transaction that would have
occurred—either through reasonable royalty or injunction. With contract, judges
choose specific performance when there is no benchmark and they want the
parties to negotiate/reveal value through that exercise. 
 
What happens when you go to monetary damages in patent—your market
benchmark becomes less accurate b/c there isn’t a rich market any more for
those patent assets.  That’s why
injunctions are valuable.
 
Chiang: that’s one side. One wrinkle: it only works in
contract b/c you have a second order methodology for asset definition that
doesn’t depend on valuation.  We think it’s
improper for the court to say the plaintiff made a huge contribution so I will
construe the contract in a way that expands defendant’s obligations to the
plaintiff.
 
Liivak: for Frischmann: trying to focus on tech transfer—that’s
the basic definition of innovation. Wants to build that theory around
micro-transactions. 
 
Patrick Goold: Idea that private law is cheaper—we had the
same debate in 1980s torts about private litigation or regulation. The idea was
that regulation would be cheaper b/c litigation was so expensive—Sugarman said “do
away with tort system.”  Main critique is
that when self-enforcement does break down, litigation costs were massive.  Would amplify that in patent where the costs
are already great.
 
Greg Vetter: How open would Liivak be to technological
tailoring/less uniformity if the resource at issue will never work very well as
a property right.  E.g., software only
for ©, not patentable.
 
Oren Bracha: Theme in the papers: “property is a neutral
platform”—for Bracha that’s like saying the earth is flat.  Property is not neutral; it is a high-stakes
system for allocating resources, power, and power backed with the coercive
power of the state behind it.  Requires
substantive justification, which might be different across us—natural rights,
efficiency, something else. You can’t just take a characteristic of property
and call it neutral.
 
Michael Meurer: For Liivak: put some discussion of citation
practice by scientists in this paper. Seems we have a private legal system
there that works reasonably well; scholars rely on scientists citing people
they should cite; the comparison has been drawn.
 
Van Houweling: property isn’t a neutral platform and it can’t
just be wound up and left to run; property system intervenes to correct
pathologies.
 
Liivak: He’s not saying property is neutral, just better
than what we have, and he should be more careful about his distinctions.

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Alleged Amazon shenanigans constitute use in commerce and commercial advertising/promotion

Posted on March 9, 2016 by rtushnet
Jae Enterprises, Inc. v. OxGord Inc., 2016 WL 865328, No. 15-CV-228
(W.D. Ky. Mar. 2, 2016)
 
Jae sells aftermarket automobile accessories under the mark Eagle
Flight and designs. Jae entered into a distribution agreement with defendants,
who resold the products through internet retailers such as Amazon, co-listed alongside
Jae on Amazon under Eagle Flight product listings.  Jae alleged that each product sold on Amazon
has a product detail page, and “[t]he first seller to offer a product for sale
creates the product detail page … and is said to ‘own’ that page.” Then other
sellers offering the same product list their product “against” the original
product detail page, and customers “can view all potential sellers of a product
from the same page.”
 
The parties’ relationship deteriorated; while they agree
that defendants could sell any remaining Eagle Flight products they had
purchased, Jae alleged that defendants filled orders for Eagle Flight products
with generic parts.  
 
False advertising: Jae also alleged that the Defendants
“purposefully delayed shipments to customers,” and when customers complained
about the shipping delay, the Defendants responded that the delay was due to
“quality issues” with the manufacturer, i.e. Jae. Moreover, Jae alleged that defendants
“gained administrative access” to its product listings on Amazon and changed
the listings to state incorrect information, such as that “a particular product
only fits a certain style of truck, that a listing is only for a single product
as opposed to an entire set, and changed the model year with which a particular
product is compatible.” Jae subsequently requested that Amazon remove the defendants
from its product listings, and Amazon complied. 
Further, Jae alleged that defendants called customers who’d bought Eagle
Flight products from them and provided a positive review of the products on
Amazon, offering them customers a full refund for the Eagle Flight product they
purchased if they agreed to change their positive review to a negative one.
 
I won’t go through all the issues, but a couple worth
noting: defendants argued that they didn’t “use” the Eagle Flight mark in
commerce because Jae created the product detail page on Amazon, and the
products they sold didn’t bear the Eagle Flight mark. The court agreed that, by
alleging that defendants listed themselves as registered sellers on the Eagle
Flight product detail pages, Jae alleged use in commerce.  “The Defendants’ argument is flawed as it
relies on a technicality that ignores the practical effect of their decision to
allegedly list themselves as a seller on an Eagle Flight product detail page
and, consequently, to advertise and sell products using the Eagle Flight mark
to consumers.”
 
False advertising: Defendants argued that the alleged phone
calls offering incentives to customers to change their positive reviews to
negative ones and reporting to customers that shipping delays were due to
quality issues with Jae, weren’t “commercial advertising or promotion.”  The Sixth Circuit Court of Appeals recently
defined “commercial advertising or promotion” as “(1) commercial speech; (2)
for the purpose of influencing customers to buy the defendant’s goods or
services; (3) that is disseminated either widely enough to the relevant
purchasing public to constitute advertising or promotion within that industry
or to a substantial portion of the plaintiff’s or defendant’s existing customer
or client base.” Grubbs v. Sheakley Grp., Inc., 807 F.3d 785, 801 (6th Cir.
2015). Jae sufficiently pled commercial advertising or promotion, though it
might not be able to sustain the claim after discovery.  (I would think that defendants would be at
least secondarily liable for the allegedly fake reviews themselves, which clearly
would be advertising or promotion.)

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My forthcoming article on 2(a) and the First Amendment

Posted on March 9, 2016 by rtushnet

Rebecca Tushnet, The First
Amendment Walks into a Bar: Trademark Registration and Free Speech, Notre
Dame Law Review (forthcoming)

 This Essay analyzes the First Amendment arguments against
§2(a)’s disparagement bar with reference to the consequences of any
invalidation on the rest of the trademark statute.  Ultimately, given the differences—or lack
thereof—between disparagement and other bars in the statute, I conclude that
§2(a) is generally constitutional as a government determination about what
speech it is willing to approve, if not endorse.  If the Supreme Court disagrees, it will face
a difficult job distinguishing other aspects of trademark law.  And these difficulties signal a greater
problem: the Court has lost touch with the reasons that some content-based
distinctions might deserve special scrutiny. 
Often, perfectly sensible and by no means censorious regulations that
depend on identifying the semantic content of speech would fall afoul of a real
application of heightened scrutiny, to no good end. 

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Buddy, can you spare a TRO? No injunction for overlapping use of “big” and “hunting”

Posted on March 8, 2016 by rtushnet
Enerco Group, Inc. v. Deutsch, No. 16CV213, 2016 WL 852572
(N.D. Ohio Mar. 3, 2016)
 
Enerco sued Deutsch for false advertising and trademark
infringement.  Enerco makes portable
propane heaters called “Buddy Heaters,” used by outdoorsmen and fishermen in
enclosures like tents, cabins and ice huts.  Enerco’s registered marks include Portable
Buddy, Hunting Buddy, and Big Buddy.  Buddy
Heaters contain a safety feature, called an oxygen depletion sensor (ODS),
which d shuts down the heater before dangerous levels of carbon monoxide can
build up within an enclosed space. Buddy Heaters are certified by the Canadian
Standards Association (CSA) for gas-fired portable heaters, not for use as
cookers.  Enerco developed a warming tray
for heaters, but abandoned the idea because it was foreseeable that consumers
would use the tray to cook food, which could interfere with the heating element
and the functionality of the ODS, or tip over and harm the consumer or cause a
grease fire.
 
Deutch sells a “Grill Attachment for Portable Heaters,” the
Hotrack, and has applied for a patent.  Enerco
(implausibly) alleged that Deutch’s use of an image of Enerco’s heater in his
patent wrongfully conveyed endorsement, sponsorship and affiliation, and also
challenged Deutch’s use of Enerco’s heater in his ads.  Enerco alleged that the Hotrack posed a
safety hazard to consumers.  Deutsch’s
website states that Hotracks “are available in 3 different sizes to fit popular
models of portable propane heaters;” “create a stable heating surface;” “can
hold up to five pounds of weight when attached to a portable heater;” can be
used to “[c]ook hot dogs, brats, frozen pizza, grilled sandwiches, and much
more on Hotrack’s food safe surface;” and can be “the perfect ice fishing
companion. Pour heated water down the hole to keep it free of ice.” 
 
Enerco alleged that these statements falsely implied that the
Hotrack grill attachment was safe for cooking various foods and for consumer
use in conjunction with the Buddy Heaters, despite the safety risks caused by
cooking greasy foods near an exposed propane flame, and the tipping hazard when
the rack is not level or when the weight on it exceeds 5 ½ pounds, and the
possibility of burns and of melting the heater’s handle. Enerco argued that
Deutch failed to disclose the potential danger of interfering with the
functioning of the ODS, when, according to the ODS manufacturer, “Even the
smallest amount of grease or debris could damage the functionality of the ODS.”
 
Further, Enerco alleged that the names “Big Hotrack” and
“Hunting Hotrack” associated Deutch’s product with Enerco’s, threatening its business
reputation and goodwill.
 
Deutch responded that he used a disclaimer on the Hotracks
website: “Hotracks has no affiliation with Enerco and its affiliates and …
Enerco will not be liable for any issues with Hotracks.” He also responded that
Hotracks did fit most popular portable propane heaters; that they did create a
stable heating surface; that they could hold more than five pounds; and that he
conducted tests on all three Hotrack models with a seventeen-pound weight and
none tipped over.  Further, Deutch’s
directions gave adequate safety warnings according to him, including: to ensure
that the rack was level; not to allow grease spatter to come in contact with
the heating element; to use no more than 5 pounds; etc.  Deutch averred that he had received no
complaints, and that customers’ favorable internet postings encourage others to
Google “HotRack LLC,” and not “Enerco” or “Buddy Heater.”  Finally, “[a]ll Hotracks have a grease shield
(referred to on the specifications as a ‘deflector plate’) that covers the area
directly above the heating element and oxygen depletion sensor (ODS) for the
heaters they latch on to,” which should protect the functionality of that
safety feature.
 
Given the factual disputes, Enerco didn’t show a strong
likelihood of success on the merits of its false advertising claim.
 
As for trademark infringement, though Enerco had
registrations for Hunting Buddy and Big Buddy, Deutch argued that his use of
“Hunting” and “Big” to describe the size of his Hotracks was fine.  The parties offer related goods to the same
customers through similar purchasing channels, but there was no evidence of
actual confusion.  The parties both
pointed to a post on an online ice fishing forum:  “I made only 1 purchase this year. I bought
the hot rack that is custom made for buddy heaters. Nice and sturdy, nice
welds, food grade metal. $25 for clean safe food. Google hot rack llc if
interested.”  What this post showed was
that the customer understood the truthful fact that Deutch’s racks were made
for use with Enerco’s heaters, not that the customer was confused.  As for the use of “Hunting” and “Big,” the
court noted that Enerco’s registration for Hunting Buddy disclaimed “Hunting,”
which made its claim to control “Hunting Hotrack” weak; likewise, “Big” was a
generic adjective and a descriptive term which is unlikely, standing alone, to
support a Lanham Act violation.  Deutch
never used the term “Buddy” in his ad.
 
The disclaimer, along with a post from Deutch in response to
an internet inquiry, “I am not affiliated with Mr. Heater/Enerco nor are they
liable for my product,” also mattered. 
Enerco argued that a website disclaimer didn’t reduce confusion as a
matter of law, but the court reasoned that this was an issue to be resolved
later, not at the TRO stage.
 
The court didn’t even mention the patent-related claim, which
is about all the attention it deserved.

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Nook shuts down in UK; another reason to hate DRM

Posted on March 7, 2016 by rtushnet

But UK customers might get to keep access to certain books they “bought,” if all goes well.  As usual, xkcd had it right years ago.

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