FTC can presume consumer reliance in contempt proceedings

Posted on August 13, 2014 by rtushnet
FTC v. BlueHippo Funding, LLC, No. 11-374-cv (2d Cir. Aug. 12, 2014) (random side note: decided two and a half years after oral argument!)
The FTC appealed the damages portion of a 2010 SDNY order granting in part the FTC’s motion for contempt against BlueHippo’s violation of a consent order.  The consent order had enjoined the defendants from making any express or implied misrepresentations of material fact with respect to, inter alia, their store credit and refund policy.  The FTC sought damages for alleged violations of the consent order from failing to disclose, at the time of purchase, material details concerning BlueHippo’s store credit policy. 
BlueHippo’s sales model was to offer consumers an installment contract; if they made 13 straight payments, BlueHippo promised to send them a computer and finance the rest. If they skipped a payment, they could continue with a layaway plan but no financing or buy something else for store credit.  BlueHippo failed to disclose when consumers entered into contracts that store credits couldn’t be applied to shipping and handling or tax, and that only one online store order could be placed at a time.  After the 2008 consent order initially resolved FTC charges, the FTC moved in late 2009 for contempt.  The district court found that BlueHippo violated the consent order by (1) failing to provide computers for 1348 orders within the promised three week time frame; (2) failing to provide either a computer or store credit merchandise for 677 orders; (3) failing to disclose details of the store credit policy to consumers; and (4) conditioning the extension of credit on mandatory preauthorized transfers.  
The FTC sought over $14 million in damages—an amount equal to defendants’ gross receipts—on the theory that it was entitled to a presumption of consumer reliance on these omissions and misrepresentations.  The district court awarded damages only relating to consumers who complied with BlueHippo’s payment requirements and qualified for but never received a promised computer—a bit over $600,000.
The court of appeals reversed. “[T]he FTC is entitled, when the proper showing has been made, to a presumption of consumer reliance.”  The district court was instructed to consider, in the first instance, whether the requirements for such a presumption had been met.  Moreover, the appropriate baseline for contempt damages was defendants’ gross receipts, though the baseline was rebuttable.
First, the court of appeals clarified that the FTC had authority to seek redress on behalf of injured consumers under §13 of the FTCA (15 USC §53), which included the ability to seek contempt damages on behalf of consumers.  A court can exercise broad discretion in setting the amount of coercive damages, but isn’t free to withhold a civil contempt damage award to the extent damages are established.  “[A] court should craft sanctions aimed at least in part on making whole the victims of the contumacious conduct.”
“The injury to a consumer occurs at the instant of a seller’s misrepresentations, which taint the consumer’s subsequent purchasing decisions.”  The fraud entitles consumers to full refunds.  “To require proof of each individual consumer’s reliance on a defendant’s misrepresentations would be an onerous task with the potential to frustrate the purpose of the FTC’s statutory mandate.”  Thus, presuming reliance in contempt cases would further the statutory purpose, as four other circuits have already recognized.  The FTC is therefore entitled to a presumption of consumer reliance upon showing that “(1) the defendant made material misrepresentations or omissions that ‘were of a kind usually relied upon by reasonable prudent persons;’ (2) the misrepresentations or omissions were widely disseminated; and (3) consumers actually purchased the defendants’ products.”
Once that presumption is triggered, damages must be calculated to ensure that all consumers who presumptively relied on the misrepresentations receive full compensation, and total gross receipts from all consumers provide the baseline.  It’s the full amount because the misrepresentations tainted the whole purchasing decisions.  Then defendants can provide evidence to justify offsets.
FTC v. Verity International, Ltd., 443 F.3d 48 (2d Cir. 2006), was not on point.  That case was a direct action against content providers who wrongly billed telephone line subscribers for internet access regardless of whether those subscribers had actually accessed the providers’ websites.  There, the Second Circuit held that disgorgement/equitable restitution was the proper measure of damages, requiring the FTC to show that its calculations reasonably approximated the defendant’s unjust gains and then shifting the burden to the defendant to show inaccuracies.
This case did not disrupt that framework.  In that case, restitution had to be calculated based on money the defendants actually received, since the payments had passed through a middleman who’d taken a bite.  But this was still disgorgement.  BlueHippo had been enjoined from making material misrepresentations about its store credit policy and enjoined to affirmatively disclose all material conditions before receiving any money from consumers.  This it did not do. 
During the violation period, 62,673 customers made purchases and 55,892 customers had not been compensated in any form.  At the time of those purchases, BlueHippo told consumers that they could cancel orders even more than seven days after ordering and receive store credit, but “conveniently omitted several material caveats accompanying their store credit policy ….   Unfortunate customers learned of these restrictions only after trying to use their credit.” This was information that likely would have influenced purchase decisions.  Nonetheless, the district court didn’t appear to have applied a presumption of damages.  This was error.

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Reading list: copyright history

Posted on August 13, 2014 by rtushnet
Reading list: Derek Miller, Performative Performances: A History and Theory of the “Copyright Performance,” 64 Theatre Journal 161 (2012).  Miller offers an account of an episode in 19th century British copyright law when, it was generally accepted, some sort of public performance in England was required before public performance in America (often the larger and more attractive market) in order to preserve English public performance rights.  Among other things, this story confirmed that people have been misunderstanding copyright law’s requirements for as long as there have been any—the “mail it to yourself” strategy is one in a long line, not a weird outlier.  Some playwrights used “copyright performances” to signal that they were worthy—after all, if they needed to engage in this formality, then their works must be valuable. 
Legally, playwrights were actually in a better position than novelists in terms of securing foreign rights—but they felt very ill treated.  Miller suggests that the physicality of theatre, and the reality that many productions are tweaked right until they open, made the requirement to perform in England, then hurry across the ocean to perform the “real” version in America particularly onerous.  “Copyright performances,” he explains, were often travesties from a standard perspective—missing rehearsal, scenery, dialogue, or even whole acts. The “legally performative” works that secured copyright protection were not “theatrical” performances in the conventional sense—they worked to secure status, not to entertain audiences.  More speculatively, Miller posits that the minimalism and anti-theatricality of copyright performances provided one input into the development of new forms of performance that challenged or rejected conventional norms about production values, acceptable acting, etc.

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court borrows limitations period from consumer protection law for Lanham Act claim

Posted on August 11, 2014 by rtushnet
Cannella v. Brennan, No. 2:12-CV-1247 (E.D. Pa. Aug. 5, 2014)
Plaintiffs First Senior Financial Group, Phillip Cannella, and Joann Small sued “Watchdog,” an anonymous blogger, and Doe defendants, ultimately identifying Krista Brennan as Watchdog and the Doe defendants as Granite Financial Solutions (a competitor of First Senior) and its employee Harry McWilliams.  First Senior is an insurance agency, and Cannella and Small are its employees.  Plaintiffs alleged that Brennan created TruthaboutCannella.com and TruthaboutCannella.net to disseminate false and misleading statements about plaintiffs and their services.  They sued for false advertising under the Lanham Act, tortious interference, civil conspiracy, and unfair competition.
The court rejected defendants’ arguments that the Lanham Act claims were barred by the applicable statute of limitations.  The Lanham Act has no limitations period itself, but subjects claims to principles of equity.  For limitations purposes, this means looking to the analogous state law.  Here, the court rejected the argument that the one-year limitations period for defamation applied. Rather, the six-year “catch all” statute of limitations under the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL), was most analogous to Lanham Act violations.  The UTPCPL governs unfair competition and deceptive business practices, including disparaging another’s goods and services.  Given that the parties were competitors, that the harm alleged was not just reputational but economic, and that the defamation allegedly occurred in commercial speech, this was the appropriate analogy.
On the merits, plaintiffs sufficiently pled the elements of a false advertising claim.  They identified four specific statements:
(a)        “They take every shortcut in financial planning they can certainly, why wouldn’t they take shortcuts for cosmetic vain purposes too? Speaks to character … or lack thereof.”
(b)        “These are the days Cannella is most dangerous. His game is fear peddling. He motivates people to buy from him through creating and fostering fear.”
(c)        “999am [sic] is willingly embracing a known criminal as an advertiser who continues to abuse elderly victims.”
(d)       “I wouldn’t put it past old Slippery Phil, Captain Crash Proof if he showed the agents one app and filed another to get them off of the application and so he KNOWS he doesn’t to pay them.”
Defendants alleged that these statements were opinion, not factual claims.  The court found that at least some were explicitly factual and verifiable, such as the claims that plaintiffs took “shortcuts” in the financial planning business and that Cannella was a “known criminal” who “abuse[s] elderly victims.”  (That statement didn’t specifically use Cannella’s name, but since it was posted on a website with the URL TruthaboutCannella.com, context made it plausible that this was a reference to him.)  Comment: I wonder whether there really are industry standards against which one could identify “shortcuts.”  Also, sometimes statements about criminality are taken to be mere hyperbole, especially online/anonymous statements—but that may be better left for a jury, or at least summary judgment.
The court then said that even assuming these statements were ambiguous and not literally false, plaintiffs met their burden by pleading consumer deception.  They pled that prospective customers cancelled appointments and existing clients terminated contracts as a result of defendants’ statements.  That was enough to plead misleadingness.  (This goes to an issue not often discussed—sometimes the fact/opinion line may be a factual question rather than one of law.  If reasonable consumers could take away a specific factual claim or a general opinion from a statement, then showing that they took away a specific (false) factual claim should justify liability.  But what if they took away a general negative opinion and nonetheless relied on it, because consumers do not behave completely like rational automatons?  Is harm enough to show falsifiability, or does harm sometimes just mean nonredressable, opinion-based harm?)
Turning to “commercial advertising or promotion”: the test for commercial speech looks to whether the speech is an ad, whether it refers to a specific product or service, and whether the speaker has an economic motivation for the speech.  Content is the most significant factor, and statements “related solely to the economic interests of the speaker and its audience” are indications of “commercial speech.”  Plaintiffs sufficiently pled that the defendants, their commercial competitors, used the website to damage plaintiffs’ reputation and in turn attract clients.  That sufficed. 
Nor was the website too sporadic or isolated to count as advertising or promotion; it allegedly contained over one hundred statements about plaintiffs.  The court also noted allegations that “[t]he website was accessible world-wide and was the first result to appear in a Google search for ‘Phil Cannella,’ ‘Joann Small,’ or ‘First Senior.’” Comment: Not that I think this should make a difference, but note the misunderstanding of how Google search results are varyingly presented to individuals—we don’t know that it’s the first result to appear when other people search.  If plaintiffs had been investigating the site before, it would probably come up higher for them than for people newly curious about plaintiffs. FWIW, it’s not the first result for “Phil Cannella” when I search, but Ripoff Report is; it’s not on the first page for “Joann Small,” nor “First Senior,” which for me brings up mostly entirely unrelated entities.
Plaintiffs alleged that at least 30-50 customers cited the website as a reason to cancel their business relationships with Plaintiffs. Defendants argued that there was no allegation that the four identified statements were the cause of that loss, but the court found it to be a reasonable inference at this stage that they were at least a partial cause.
Tortious interference: defendants argued that plaintiffs shouldn’t be able to circumvent the one-year defamation limitations period by recharacterizing their allegations as stating a claim for tortious interference when it was essentially defamation.  But when the gravamen of a claim was injury to economic interests or when the alleged non-defamation-related facts sufficiently supported a tortious interference claim, that reasoning didn’t apply.  The former rationale applied here and justified using the two-year limitations period for tortious interference.
However, plaintiffs failed to plead sufficient facts to support tortious interference with existing contractual relationships: they didn’t identify the people with whom they had contractual relations. While they did identify two insurance carriers allegedly contacted by defendants, they didn’t allege that the carriers did in fact terminate their business relationships.  References to “existing clients” or “various vendors” were insufficient to identify specific contracts.
By contrast, plaintiffs did sufficiently plead tortious interference with prospective contractual relations, which by definition are more difficult to identify precisely and thus require less specificity.  More than a “mere hope” of a future contract is required—instead, a plaintiff needs an objectively reasonable probability that a contract would come into existence, based on the parties’ then-current dealings.  Pleading that 30-50 potential customers cancelled follow-up appointments or decided not to do business with plaintiffs based on the website was sufficient to be more than a mere hope. These pleadings indicated that “potential customers were interested in Plaintiffs’ products or services, scheduled second appointments, and then cancelled these appointments in view of the contents that Defendants had posted on their website.”  (Given my personal experience with insurance pitches, I hope that factfinding includes inquiry into what plaintiffs counted as a showing of interest by a consumer.)
As a result of the holdings above, civil conspiracy and unfair competition claims also survived.

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Lexmark’s effect on "commercial advertising or promotion"

Posted on August 11, 2014 by rtushnet
Syngenta Seeds, Inc. v. Bunge North America, Inc., 2014 WL 3882886, No. 13-1391 (8th Cir. Aug. 8, 2014)
District court opinion discussed here.  This opinion is more Lexmark fallout.  Syngenta, a biotech company that makes genetically modified corn seed (Viptera), sued Bunge, a grain storage and transport company, for, among other things, violating the Lanham Act.  Syngenta had regulatory approval to sell Viptera in the US and numerous foreign countries, but not China. China barred corn grown from GMO seed, and could bar an entire shipment of corn from the Chinese market if it contained traces of GMO corn.  Bunge had purchase contracts with farmers who bought Viptera seed from Syngenta; the contracts authorized Bunge to refuse to accept products containing genetic modifications for which import approval has not been obtained in foreign export markets.
When China significantly increased corn imports, Bunge started treating China as a major export market for domestically-grown corn, and therefore began refusing to accept corn grown from Viptera seed. Bunge placed signs in its regional facilities and on its website stating that it was unable to accept delivery of Viptera (and another product) because “[t]hese seed products have not received necessary international approval from major export destinations for the U.S.”  It continued, “Bunge facilities are integrated into the export market, which is why the terms of Bunge’s purchase contract states that Bunge will not accept grains and oil seeds containing transgenic events not approved for U.S. export markets. Bunge will accept a listed product once the seeds receive approval from major export markets.”
Syngenta alleged that Bunge’s refusal caused additional expenses to farmers who had purchase contracts with Bunge and had planted Viptera. Many of those farmers allegedly  expressed dissatisfaction with Syngenta and, as a result, Syngenta allegedly lost profits, market share, and goodwill.  The district court granted summary judgment on Syngenta’s Lanham Act claim, concluding Syngenta lacked standing/had failed to show that Bunge’s signs were commercial speech.  (Discussion of other claims omitted.)
Pre-Lexmark, the district court had reasoned that Syngenta didn’t have standing because it wasn’t a Bunge competitor and that Bunge’s signs weren’t commercial speech.  Lexmarkestablished “the zone-of-interests test and proximate causality requirement as the proper analysis for analyzing standing.”  (Sorry, Justice Scalia. No one is listening to you when you say this isn’t about standing.  And they’re really serious about it, as you’ll see below.)  The Court expressly rejected the requirement that the challenged commercial speech has to come from a competitor.
The court of appeals declined to affirm the district court on the alternate ground that Bunge’s statements didn’t qualify as commercial speech, because “[l]ooking past the threshold standing determination to affirm on the basis of the merits of a contested point of law …would be assuming ‘hypothetical jurisdiction.’”  Thus, the district court needed to apply the zone of interests/proximate cause test in the first instance.  (And the district court will also have to grapple with the fact that Lexmark, though it doesn’t address the issue expressly, casts into doubt the standard “commercial advertising or promotion” test that requires the targeted speech to be speech by a competitor; it seems very unlikely that Congress did with those words what the Court said it did not do otherwise.  However, if the speech was still not “commercial speech” in a First Amendment sense, that might not matter.)

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Dodged a virus and copyright liability: Court rules unused copy isn’t infringing

Posted on August 11, 2014 by rtushnet
Design Data Corp. v. Unigate Enterprise, Inc., 2014 WL 3868076, No. 12–cv–04131 (N.D. Cal. Aug. 6, 2014)
The court found that defendants couldn’t be liable for copyright infringement when the only copying they ever did consisted of downloading, but not installing, a copy of the relevant software onto an external hard drive.  The plaintiff was given extra time and extensive discovery to show that further copying occurred, but could not do so.  Given this, the copying was de minimis as a matter of law.
Design Data owns structural steel detailing software called SDS/2, which is CAD software that can produce 2D and 3D drawings and models of structural steel components.  These drawings and models can only be viewed with the SDS/2 software, the “SDS/2 Viewer” software, and electronic images (and printed versions) exported from SDS/2 (e.g., .pdf or .tiff files).  Using SDS/2 to design a component generates a directory of folders that contain all the information and files related to a project, including text files detailing errors and instructions to correct errors.
Defendants (grouped as Unigate) provides steel detailing CAD files to customers.  It doesn’t do the detailing itself, but acts as a middleman between Chinese contractors and clients in the United States.  Defendants admittedly told clients that they “could do” steel detailing using SDS/2 and represented that they had offices in China, but in reality they outsourced the work to others in China.  (This opinion does not resolve Design Data’s attempts to bring false advertising claims.)
Unigate didn’t dispute that SDS/2 appeared to have been used to create drawings and images for five of its projects, it contended that the work was actually done in China.  Unigate also admitted that it forwarded files containing 2D and 3D drawings and models created with SDS/2 to clients and prospective clients.  And it admitted that one principal, Helen Zhang, downloaded a copy of SDS/2 to an external hard drive—the parties disputed whether this was a “cracked” copy that Zhang was unable to make work, or instead a free demonstration copy she believed to be legitimate.  Design Data found a folder containing installation files for SDS/2 and three patch files which enable a user to circumvent SDS/2’s licensing requirement on Unigate’s computers.
Forensic imaging by Unigate found a single reference to SDS/2 on a computer and a copy of SDS/2 on an external hard drive; the reference was an antivirus log showing that the copy was on the external hard drive.  The forensic analysis found no evidence that the SDS/2 software ever existed or was installed on the computer.  Design Data’s expert also created forensic images and reviewed Unigate’s expert’s copies; he was unable to locate or recover a copy of the circumvention file initially found by Design Data, but did find a reference to that file as being located on Zhang’s external drive and “quarantined” by the antivirus software.  (I’d say, given the outcome, that the antivirus software did them a huge favor even if the supposed crack was actually legitimate, for relevant values of legitimate.)  Design Data’s expert suggested that the file had been purposefully and permanently removed from the G drive, though he located a file suggesting that a file called sds2.exe could be found on Zhang’s G drive. He was also unable to locate any evidence suggesting the SDS Viewer program was ever saved or located on any of Unigate’s devices.
On Design Data’s contributory infringement claim, case law established that a US company can’t be found liable for contributory copyright infringement for authorizing or collaborating with someone that infringes a copyrighted work in a foreign country.  Subafilms, Ltd. v. MGM–Pathe Communications Co., 24 F.3d 1088 (9th Cir.1994). Design Data provided no evidence that any drawings and images were created in the US, so Unigate won summary judgment.
Direct infringement: Design Data first contended that Unigate imported files and images generated by SDS/2 in China, in violation of 17 U.S.C. § 602.  It argued that “job files” and images created in China constituted a copy of SDS/2.  Unigate did possess images containing drawings and models generated with SDS/2; text files generated by the operation of SDS/2 that were error logs containing user error reports and Design Data instructions regarding those errors; and entire directories of folders generated by SDS/2 (“job files”) containing all information related to the design of two projects with SDS/2.  Design Data argued that there was a material issue of fact whether these outputs contained expression protected by the SDS/2 copyright registration.
The court found that the copyright registration on the software was not broad enough to protect these outputted files and drawings.  Other cases about audiovisual display and “look and feel” were inapposite.  A computer program is a set of statements or instructions to be used to bring about a certain result; that result is program data, and not covered by the copyright in the computer program.  Drawings produced from SDS/2 might be copyrightable, but aren’t automatically entitled to protection as the output of SDS/2.  (Indeed, I suspect that Direct Data’s clients would be very, very surprised to hear that Direct Data claimed a copyright interest in specific drawings, or even in error logs.  Would they be joint authors?  How would intentionality work there?)  Thus, Direct Data failed to raise a material issue of whether the files and images created by SDS/2 were protected by the program copyright.
Infringement by downloading: For use to be actionable, it must be significant enough to count as infringement.  Where no reasonable juror could find that downloading but not opening or using the program was significant, summary judgment was appropriate.  Direct Data argued that copying the entire code couldn’t be de minimis as a matter of law. But the cases focus on the substantial or insubstantial “use” of the copyrighted material.  Ringgold, for example, speaks of de minimis copying as precluding a “claim based on a photograph of [the copyright holder’s] product in an office copy of a display card of a competitor’s product where the display card was never used.”  Cases that ask whether an audience would “recognize” a protected work in another work were inapposite, because their focus was on whether the audience listening to the new work would recognize the original.  (Here, there’s not an audience.  If you make a copy in the forest, is it a copy?  Abraham Drassinower has some interesting work on this.)
Direct Data tried to create an issue of fact about whether Unigate did actually use SDS/2 by pointing to a number of statements to prospective clients that it “used” or could “produce” drawings in SDS/2. But given the undisputed facts about its actual business model, its marketing pitches weren’t evidence of actual use. “[D]ownloading of a copy of SDS/2—without any evidence that the copy was installed or used—amounts at most to a de minimis ‘technical’ violation that is not actionable as a matter of law.”  (P2P users who create huge libraries to satisfy some acquisitive urge may take some comfort, though I suspect they’d be liable for crushing statutory damages anyway.  Just maybe not billions.)
Direct Data argued that Unigate was untrustworthy, e.g., refusing to turn over relevant information, buying and downloading a cracked copy of SDS/2, and falsely advertising that they used SDS/2.  But this wasn’t enough to defeat Unigate’s motion for summary judgment, given Direct Data’s ample opportunities to find evidence of actual infringement.

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Product disparagement as trademark dilution?

Posted on August 11, 2014 by rtushnet
Ferring Pharmaceuticals Inc. v. Braintree Laboratories, Inc., 2014 WL 3850072, No. 13–12553 (D. Mass. Aug. 4, 2014)
This is mostly a false advertising case, but stick around for the weird dilution ruling.  The parties compete in the market for bowel preparation drugs that are administered prior to colonoscopies.  Ferring sells Prepopik, and Braintree sells Suprep.  They sued/countersued each other for false advertising under the Lanham Act and unfair business practices under MGL ch. 93A.  Ferring also alleged that Braintree diluted the Prepopik mark by suggesting that Prepopik (the product) poses the same risks as a chemically identical product sold in Canada, Pico-Salax.  Braintree also sued for trade secret misappropriation.
The court here resolved Ferring’s motion to dismiss Braintree’s counterclaims and Ferring’s motion for summary judgment.
Ferring’s motion, trade secrets: Ferring’s VP and GC contacted Braintree to express concerns about certain Braintree training materials that he’d come to possess, supposedly “sent in from the field” by an unknown source.  Ferring returned six pages, but Braintree believed Ferring had the whole set of materials because it didn’t disseminated only those six pages. 
The court found that Braintree failed to state a claim; it didn’t adequately specify any trade secrets, and the six pages Ferring admitted possessing didn’t contain any protectable trade secrets.  They included publicly available information about Prepopik and information about Ferring’s marketing strategy.  “Braintree cannot plausibly claim that information it has obtained about the marketing strategy of a competitor is a protectable trade secret.” 
The materials did recommend strategies for Suprep in light of Prepopik’s marketing strategy: claims that Suprep was more effective, less expensive, and safer for patients with low renal function; encouragement to sales representatives to emphasize the link between Prepopik and Pico-Salax (“Don’t hide from the fact that Pico is out there and discuss this with accounts”); and suggestions to leverage existing relationships (“BLI has been servicing these accounts for over 3 decades, don’t be fooled by a foreigner!”).  Though one court suggested that marketing strategies could be protectable trade secrets under Massachusetts law, there was no evidence that the information about price, efficacy and safety differences was proprietary to Braintree. “Furthermore, it is implausible that platitudes such as ‘Cash in on relationships!’ are the product of significant effort or investment or are valuable to Braintree’s competitors.”
Lanham Act false advertising: Braintree alleges that Ferring made four false or misleading claims about Prepopik: “superior cleansing efficacy”, “lowest volume”, “flexible dosing” and “helps achieve success.”  Because literal falsity is a question of fact, it’s rarely susceptible to a motion to dismiss.  The court also declined to apply Rule 9(b) heightened pleading to false advertising claims.
The “superior cleansing efficacy” claim was, according to the relevant ad, backed up by study results; it was a statement of fact, not puffery.  In fine print, the relevant ad explained that the claim was based on “demonstrated non-inferiority” during randomized trials. The claim was allegedly falsified by evidence from a head-to-head study, and allegedly overstated Prepopik’s efficacy. That was enough to plead literal falsity.
Ferring repeatedly advertised Prepopik as  the “lowest volume of active prep solution/ingredient,” but Braintree alleged that this was false and misleading because there are tablet-only prep products requiring no solution.  Ferring argued that a reasonable doctor would be aware of the different kinds of prep regimens and would understand that the ads only compared Prepopik to other products that required some amount of liquid.  The court doubted that any reasonable doctor would find the claim misleading, but evaluating audience reaction wasn’t its job at the motion to dismiss stage.
Braintree alleged that Ferring’s “flexible dosing” claim was false and misleading as patients must take certain identified doses, must drink certain requisite quantities of other liquids, and must finish drinking all requisite liquids at least two hours before their colonoscopy. The relevant ad claimed “FLEXIBLE DOSING using either a split dose or day-before regimen.” Ferring argued that the ad didn’t claim that there were no restrictions on use.  Unlike the two previous comparative claims, this one didn’t draw any implicit comparisons or assert a specific and measureable benefit that could be proven true or false.  At most, “flexible” was ambiguous, and no reasonable person reading the advertisement as a whole would fail to understand that, as used in context, “flexible dosing” refers to “either a split dose or day-before regimen.”
As for “helps achieve success … with the lowest volume of active prep solution,” Braintree didn’t identify a specific ad that made the “helps achieve success” claim, so it was gone and would’ve been puffery anyway.
The court did apply a heightened pleading standard to related New Jersey Consumer Fraud Act claims, and found that Braintree hadn’t pled enough facts to establish that Ferring actually distributed a different set of claims—information and belief was enough.  Also, the court held that unfair competition under New Jersey common law doesn’t cover false advertising, only palming off.
As to Braintree’s motion for summary judgment, Ferring alleged that Braintree engaged in a nationwide campaign to disparage Prepopik, and that Braintree’s false and misleading statements about Prepopik’s risks “diluted Ferring’s trademark in Prepopik.”
Allegedly false claims that Prepopik was “dangerous” or “deadly”: Ferring’s press release announcing Preopik’s FDA approval stated that “Ferring has a long history in the international gastroenterology market, where PREPOPIK is available in Canada (marketed under the name PICO–SALAX), U.K., and other countries ….”  Pico-Salax and Prepopik are chemically identical, but Prepopik is approved in the US for only one indication, while Pico-Salax is approved in Canada for the additional uses of preparing for x-ray examinations and surgeries and is also approved for pediatric use.  The dosing instructions also differ; the Prepopik dose is smaller, which can change risks associated with fluid and electrolyte imbalances. Pico-Salax is available over the counter while Prepopik is prescription only.
A Canadian agency published information about Pico-Salax in Canadian Adverse Reaction Newsletter, stating that “[t]he diarrhea produced by [Pico–Salax] can lead to dehydration and loss of electrolytes, particularly sodium which may result in hyponatremia and convulsions…. As of June 30, 2012, Health Canada received 11 reports of convulsions suspected of being associated with Pico–Salax.”  Ferring alleged that Braintree was using the newsletter and related statements to claim that Prepopik was unsafe.  One rep allegedly wrote “Pico-Salax = Prepopik” on a copy of the newsletter given to a doctor.
Braintree argued that it was true that Pico-Salax was dangerous and that Pico-Salax was Prepopik give their chemical equivalency. The court found genuine issues of material fact, including what conclusions should be drawn from the newsletter and whether the different dosages eliminated the risk of convulsion.
Allegedly false or misleading claims about Suprep’s efficacy and superiority:  Braintree’s marketing materials say Suprep is 98% effective whereas Prepopik is only 74% effective, but Ferring alleged that there were no head-to-head studies and its own clinical trials showed greater effectiveness.  A Braintree ad claimed superiority in bowel cleansing based on investigator grading compared to a control group treated with polyethelene glycol, but Ferring argued that the prescribing information and FDA approval documents for Suprep indicated that no statistically or clinically significant differences between groups treated with the two preparations.
Ferring argued that the ad made an establishment claim, and Braintree disagreed, but it was wrong. “While the claims do not expressly reference a study or test, claims of 98% effectiveness and superior results ‘based on investigator grading’ are not ‘general claims of superiority.’” Thus Ferring’s burden would be to show that the tests weren’t sufficiently reliable to permit a conclusion that Suprep was superior.  There were genuine factual disputes about this; a study abstract alone couldn’t establish reliability, and Ferring hadn’t been provided the full results.
As a result, the ch. 93A claim, which in a competitor action requires “rascality,” also survived past summary judgment.
State trademark dilution: here we take a turn into the completely wrong.  Ferring alleged that Braintree’s negative comparisons were likely to dilute Prepopik’s distinctive quality as a mark—and the court bought it, at least for summary judgment purposes.  Ok, deep breaths.  Of course, even dilution proponents should immediately see the fatal problems.  (1) The mark is not the product.  Dilution protects marks, not products.  Braintree disparaged (truthfully or not) the product.  False advertising can be a legitimate cause of action in such cases, along with commercial disparagement/trade libel.  (Which, not at all incidentally, are subject to important First Amendment limitations, like “falsity.”)  Dilution cannot be implicated here.  Braintree didn’t suggest that the product had a stupid name.  (2)  Relatedly, comparative advertising does not have any effect on the “distinctive” quality of the mark, other than to reinforce it as being connected to its producer and distinguish it from the advertiser’s own product.  Using a mark to describe the mark owner’s product can’t be dilutive.  Not even Deere v. MTD would go that far.
What went wrong?  Braintree may have put too much emphasis on another logical, but much less powerful, argument, which was that it’s impossible to dilute a mark by comparing it to another mark owned by the same entity, Ferring.  But “[w]hile Braintree is correct that no Massachusetts case has expressly held that Ferring may assert a trademark dilution claim based upon confusion between two of its own marks, it is also the case that no court applying Massachusetts law has foreclosed that theory.”  (And note the incidental slippage between confusion and dilution.  But I’m not even mad about that.)  The court found that a federal court’s previous statement that dilution arises from an association with “products or services marketed by others” was “clearly dicta,” which again, argh—that is the classic definition of dilution used even by its profoundest believers.  Kodak pianos, anyone?

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IPSC part 10: hodgepodge

Posted on August 8, 2014 by rtushnet

Sixth Breakout Session
The Patented Design
Sarah Burstein
What should the patented design cover?  Require the design to be applied to a particular product, and signal that in the name/title.  That better respects First Amendment concerns, notice function of patents, better fit with presumption of validity.  Better allocation of search costs generally.  There’s a new search service for searching designs, but there are still issues of search costs to figure out if things are infringed/valid/invalid.  Abstract protection puts the risk all on competitors in an inappropriate way.
Nominative uses of design: stories about iPhones should be able to depict the product.  Also “transformative” uses.  If someone takes the iPhone size and shape and creates a sketchpad allowing designers to sketch (allowing them to plan apps), that shouldn’t infringe the design patent on the actual phone—Apple doesn’t need to control that market for incentives.  Other creative adaptations: various designs can be adapted from other products; that should be encouraged rather than discouraged.
Scope of prior art would be immediately affected if she’s right. Case about batter dividers for cupcakes.  D came up with purported prior art, like a cookie cutter; a muffin on a stick; a cupcake shaped cupcake holder; a toy figure shaped like a cupcake with a six-pack, arms and legs; a cupcake. If she’s right none of these should be novelty destroying—cookie cutters couldn’t cover cupcake dividers, and vice versa.
What regime if any should protect product designs?  If she’s right, other regimes look less attractive, at least in this one respect.
McKenna: how do you assess nonobviousness? Understands novelty argument, but why doesn’t that destroy nonobviousness?
A: Argued about that in other work. There’s not a clear motivation, to the extent that survives, to move from cupcake container to cupcake divider.  Not close enough.
McK: what does close enough mean? What’s the conceptual space b/t prior art and claim design?
A: her first paper.  If it’s not so close that it’d be perceived as the same thing—primary reference.
Q: how do you distinguish trade dress from design patent?
A: you do get visual representations and the things she wants to leave out in the trade dress arena; however her proposal might undermine attempts to get trade dress protection insofar as someone could make a note pad or a chandelier in the shape of an iPhone, which she thinks would be fine.
Sheff: help explain why this is so challenging. If we think design, like utility, is progressive, that explains some problems; if we think it’s aesthetic, we may find other features difficult; if it’s about distinctiveness it’s just TM and doesn’t make any sense to think about doctrinal problems in this way.  Why is it so important that design patents not be ported out of the products for which they’re granted?
NPE II
Policing the Cease-and-Desist Letter
Leah Grinvald
Larger project on abusive enforcement. Thesis: there is a problem, and current regulations are ineffective.  Need multifaceted approach.  Antiabuse cause of action; look at bar involvement; more aggressive enforcement of consumer protection laws by state AGs.
Vast majority of disputes typically settle through C&Ds, but there are incentives to send abusive ones. Not saying C&Ds are per se bad, but some are. What’s abusive?  Threat of litigation and unnecessary legalese/unsubstantiated legal citations; demand for settlement in short time frame; demand for upfront payment of money including licensing fees/attorneys’ fees (I just saw this recently with an unbelievable—I wish I could say sanctionable—demand for attorney’s fees as if they were ordinary relief in a Lanham Act case); weak legal claims. 
They’re effective because of asymmetrical disputants: well resourced rights holder v. low resourced small business or individual. Low resourced entities have inability to gather information; vulnerable to emotional response/inducement in the abusive letter.  Finally, they are unable to follow through with litigation. Say they have business insurance that will cover trial—they might not be able to deal with an appeal, which forces them to settle.
Model Rules of Professional Conduct are not helpful.  State anti-patent troll laws?  She argues they don’t go far enough.  State AG actions are limited so far, but should be expanded.  Bar associations should issue formal opinions on ethical rules against abusive C&Ds.  “Civility campaign” by San Diego bar ass’n.
Gaia Bernstein: is there any evidence that abusive C&Ds are more effective than nonabusive ones?
A: hard to study. Some attys say nastygram is scarier and more effective.  (Why should we want the rates of effectiveness to be the same?)
Mary LaFrance: how do you decide what’s abusive, given TM owner’s burden of policing/avoiding being deemed to be weak mark?
A: hard at edges, but there are core cases.  Louis Vuitton v. Penn: it’s a famous mark, but it did not need to threaten.  (I think we overstate the burden of policing to excuse TM owners; courts are very forgiving especially when the uses are small or outside the TM owner’s products/services as with many expressive uses.)
Lisa Ramsey: qs about definition.
A: various issues, like timeframe: give a reasonable one to a small entity, which among other things might need to find an att’y. Demand to halt at once is a problem.  3 days to respond—even an IP clinic takes time.
Q: are there constitutional limits on laws against abusive letters?
A: Yes, but laws can be written. Anti patent trolls are drafted similarly.
Rosenblatt: Cal. Lawyer article from this month: Demand Letters as Extortion—about the Cal. Penal Code.
Gallagher: like multifacted approach, but why do you think anything will work?  Will AGs be effective?
A: AGs could work—did affect scanner patent troll, even with investigation alone. Helps w/small  entity’s inability to follow through w/litigation.
RT’s thoughts: I think AGs can be very effective!  People are very interested in complying w/the gov’t, and counsel start giving advice/practice seminars on how to comply when the AGs get involved.  Sort of random thought: I think the preemption questions about anti-troll laws are super interesting. Since the Lanham Act doesn’t displace state laws, what effect should that have on possible preemption analysis?
IP Theory II
The IP Constitution: Private Power and State Power in IP Law
Ariel Katz
[missed intro]  Older cases: Extending the monopoly in IP is illegitimate—but what counts as extension?  Chicago school criticized this approach in the 1960s. IP rights don’t necessarily create market power.  Even if they do so, not clear what extension would occur or mean. Many challenged practices, they argued, were efficient and should be subject to rule of reason.
Chicago critique barked up the wrong monopoly tree. Monopoly has an economic meaning of controlling a market, but it also has an overlapping but distinct legal/political meaning.  Courts concerned about IP monopolies are speaking in the legal/political sense.  Motion Picture Patents v. Universal Film (1917)—patents on projectors for film; conditions of patent license was you were only allowed to exhibit movies sold by the patentee.  Court says you can’t do that, despite argument that this was efficient b/c it allowed the sale of the machine at a low price.  Court isn’t ignorant of the Chicago argument, but Court views that as clearest possible condemnation, b/c it proves that the patentee tries to get its profit not from the thing patented, but from things wholly outside of the patent monopoly.  Extending the patent to fix the price of unpatented supplies. That’s not why we grant patents.
Monopoly = private regulatory power.  Remote control—control people without privity. That’s the legal meaning of monopoly (cf. monopoly on legitimate violence).  The struggle of regulatory power over the centuries—Statute of Monopolies, 1623 declaring crown monopolies ineffective; only Parliament can grant monopolies.  Exception for letters patent to true inventor. Also, Parliament’s use of the power is fine—democratic deliberative process would be our analogy today.
Statute of Monopolies is political-constitutional, not an economic regulation. Antidelegation principle: if police regulatory power can only be exercised/granted by state, it can’t be assumed by individual nonstate actors. Nondelegation doctrine, due process, and antitrust implement this.
Camilla Hrdy: today, patents don’t necessarily confer monopoly. How would this apply where patent holder doesn’t have much market power?  Statute of Monopolies: Parliament reserved the right to itself; isn’t it different in the US because the Constitution granted Congress the power and Congress decided to implement via a patent statute?
A: Problem begins when lawful monopolies begin to exert regulatory powers over what’s not their writings and discoveries and asks the court to enforce it.
RT: Isn’t your argument somewhat circular? Why not read the patent statute as Congress saying: We grant you whatever regulatory power comes from owning your particular patent? 
A: Holmes dissent says that patentee doesn’t have to license at all, and can set conditions.  Court majority says the Constitution isn’t about getting control beyond the scope of your patent.  May be a question of property v. regulation.  The basic distinction is still valid.
Q: Congress amended the Act to say explicitly that certain things don’t count as patent misuse, if you don’t have market power.  How does that tie into the constitutional issues?
A: The other cases are still good law.
Data Pools
Michael Mattioli
Looking at data pools, mostly in medicine/agriculture, e.g., CancerLinQ, Open Ag Data Alliance, Biomarker Consortium, etc. Trying to aggregate data to find research questions, etc.
Proposals for sui generis data protection—no law yet, but perennial topic for debate (10 bills considered since 1996).  Traditional IP gives only thin/no protection.  Big data is becoming more important.  Can data pools reveal new insights?  Do these groups privately craft incentives similar to those that sui generis data protection would offer? What challenges do they face/new opportunities for policymaking? Merges argued that patent pools amount to private rejiggering of patent law—could there be something similar here?
Q: antitrust is an important issue.  (Some discussion of that; I’m not an antitrust expert.)  Exclusivity may be the start of the problem.
Q: what about tying this to health law issues?  Purse strings: gov’t can use them to get data disgorged. 
A: was considering charitable tax deduction; interesting idea.
Q: there might be not so laudable uses of data—touches on privacy, but underlying this work seems to be normative view that big data is good.  But that’s not always true.
A: tends to be an optimist, but that’s an important consideration.

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IPSC part 9: copyright plenary session

Posted on August 8, 2014 by rtushnet

Plenary Session
Making Copyright Work for Creative Upstarts
Sean Pager
Imagine you’re a singer in a rock band, and hear your song used unauthorized for a car commercial. You call and they brush you off.  You can’t afford a lawyer, and costs of litigating in federal court could dwarf any license fee you might recover. If you never registered you have no eligibility for statutory damages and attorneys’ fees. You quit and go to law school.
Our standard theory of copyright is that we give rights to incentivize creation, but rights aren’t self executing. Without capacity to use them, they’re not useful. Copyright might not be doing the work it’s supposed to.  Our system assumes sophistication—simple Qs often have convoluted answers, and that’s just the formal law, not the institutions that implement them and have complexities of their own.  Registration alone; signing up for ASCAP/BMI; SoundExchange; Google’s Content ID—a lot of registries to keep track of. 
Broader Q: who is our © system for?  19th c. might have been reasonable to assume that © users were capital-intensive endeavors.  What to do now that creation doesn’t look like that?  Mobile app designers, indie filmmakers, graphic artists—how are they doing in the © system?
What would an upstart-friendly system look like?  Increasing legal certainty—more safe harbors and bright line rules.  Small claims process—better if mandatory.  Enhanced damages tied to registration should be reconsidered.  $35-55 to register is a lot for a graphic artist.  Tech can be used—interoperability, common-sense standards to allow one-stop registration; streamlined online licensing, as w/UK’s Copyright Hub targeted at low-value works to be licensed efficiently using automated mechanisms.  Or expert systems automated to give advice—compare increased ease of tax now that we have TurboTax—similar system for copyright users. (Note that TurboTax has engaged in a lot of funky behavior to prevent tax simplification—a Copyright Hub might do the same, especially if it were a private, profit-seeking organization.)
Menell: Creative upstarts should be able to find works/use Content ID to quickly ID ownership, and on backend streamlining system would be good, but more worried about front end of enabling people to find and navigate.  If they’re not willing to pay $35 to register, should we give them such strong protections for how their works float in the ether.
A: maybe find way to register high volume of works at once.
Lemley: useful points about small creators. Q is what are we to make of the fact that we are nonetheless seeing an unprecedented wave of such creators. We have more video, music, books than ever before, most coming from people outside the © industries. What does that mean? They don’t seem to be quitting and going to law school, whether they should or not.
A: Commercialization—amateurs may create a lot, but don’t invest as much. Making a full length feature film takes resources, while you can write a book on your own.  iPhone filmmakers are limited in what they can do, so we need to find a way to make film pay.
Lemley: sounds like there’s sorting between upstarts and more commercially oriented folks, but those may be more attuned to © system as already exists.
(I agree w/Lemley.  W/r/t the opening story: If most commercializers behave most of the time, though, is that so much worse than other elements of starting your own business?  There is plagiarism of works on Amazon’s self-publishing, but there’s also persistence.  Overconfidence about success is often important in incentivizing creation/starting a business/etc. Is © any different than the other rules that aren’t necessarily enforced (e.g., wage theft)?)
A: there’s a spectrum. Better access to © system may enable you to negotiate better terms.
Q: valid points about accessibility. Is enforcement necessarily the issue? Even in perfect enforcement world, would their captured revenue stream allow people to avoid going to law school?  It could just be that people are flocking to fewer and fewer items—how big is the pie?
A: demand is partly influenced by supply.  Change the system to make it easier for independents to have access—not just ©–people might embrace more products, not just blockbusters.
Q: so the issue is that people aren’t entering the market who otherwise would? Or that they’re entering without being able to recoup value?
A: Soundexchange has $100 million unclaimed royalties—there is money to be had.
Rosenblatt: are creative upstarts any different from other kinds of upstarts? We expect people starting out to do their homework to make a living—get a professional license if they need it, pay taxes. TurboTax is a solution to what we expect from people. 
A: does think tax code should be simplified; does get to whether it’s the gov’ts role to act.  Gov’t may help make TurboTax available to poor people (or better, pre-fill the return like they do in other countries).
Copyright’s Private Ordering: Lessons For Congress
Jennifer Rothman
Congress should largely leave room for private ordering, but sometimes codify uniformly accepted norms and support private ordering/avoid calcification.
Different attempts to address uncertainty in law/uncertainty about fair use: arguments that it’s more predictable than some say, but in individual cases it’s still uncertain so risk-averse people will still license. Campbell is an object lesson in why you should license—district court reversed by court of appeals reversed by Supreme Court, which remanded; ultimately settled with licensing fee—in practice this was a total loss for 2 Live Crew.  She worries about courts interpreting risk aversion as customary licensing practice worth respecting: her favorite example is Ringgold, where a poster was on screen for less than 30 seconds, but court found unfair in part because it bucked an industry custom of licensing set dressing.
We could revise §107 to limit on reliance on customary licensing, use guidelines and alternative licensing.  Not saying that licensing shouldn’t be relevant—availability, feasibility and reasonableness of licensing is relevant. But that’s different from whether people usually license or usually don’t license in an industry.
Use guidelines trying to address uncertainty: the Classroom Guidelines developed after Congress threw up its hands. This didn’t turn out well.  Negotiated by authors and publishers mostly; didn’t include educators, students, or universities; courts have often incorporated them despite their unrepresentativeness and have used them as a ceiling on fair use. We might want to codify some changes: don’t use their violation to determine whether something is fair use; maybe try again with representative group. 
Best Practices largely coming out of AU: valiant effort to push back against clearance culture. Done some important work, but concerned about codifying them as standard in particular industries. Again, they’re not representative of large content owners whose content is most likely to be used. Documentary guidelines can be more limiting than necessary, like not allowing cutting to the beat in incidentally captured music or creating a work around a copyrighted work.
Alternative regimes on top of copyright: Creative Commons—also a reaction to fair use uncertainty.  Allows authors to express what uses they think are appropriate. Maybe we just want Congress to leave this alone—w/exceptions: codify favoring attribution for fair use analysis (maybe even safe harbors); clarify that violation of private contract doesn’t alter analysis of infringement v. fair use. Documentary filmmakers often can’t comply with CC; they shouldn’t be hesitant to make fair use anyway.
Technology/contracts altering ©’s boundaries, technology and DRM—private agreements like Content ID.  We should restrict the ability of tech and private party agreements to eliminate fair use.  © can leave breathing room for private ordering and experimentation, but adopt good ideas.
Other good ideas: faculty ownership of scholarship and course materials, a universally accepted norm that nonetheless seems to run afoul of WFH; maybe attribution should be a requirement; a la carte copyright where you can register and choose to allow, say, educational use.  © can protect against lock-in effect; protect fair use from obsolescence; support fair use.  Clarify whether transformativeness requires content change or just purpose.  Additional safe harbors; limit scope of statutory damages in certain circumstances, esp. where people erroneously predict that use will be fair.
Q: what about webcasting v. streaming in §114?  Private streaming services’ deals—a lot of the terms end up mimicking the terms in webcasting, even the weird performance complement rules; public/private distinction gets blurred.
A: in general there’s a lot of interplay, and there’s not a bright line—operates in the shadow of the law. Warps in response to law; we need what Kozinski was talking about, interplay with courts and legislature.
Gordon: do you have in mind a sort of anti-DMCA: if you use tech improperly we can stop you?
A: Does interplay w/DMCA in gov’t authority.
Q: PTO roundtable suggestion—require tech to leave breathing room for some use of works—e.g., let’s have at least 5 seconds of a work up, not auto takedown even if tech permits.
Secondary Copyright Remedies
Felix Wu
Proposal: Remedies for secondary © infringement should be more limited than remedies for direct infringement, whatever they are.  Statute doesn’t codify secondary liability at any point, leaving no room for judges who expound on secondary liability to provide for different remedies.
Relation to tech innovation.  Why not borrow from patent law?  Patent specifically defines secondary infringement, but the relation between infringement and innovation is different in © and patent. Courts borrowing from patent face a very different context—misborrowing.  In patent, the statute speaks of articles w/ no substantially noninfringing use. It’s not possible for tech to relate to the underlying ©ed work in the same way. What would it mean for something to be specifically adapted to infringe a specific work, as the patent statute requires?  The tech is always capable of processing public domain/authorized works. Taken seriously, there’d be no contributory infringement at all.
That’s not where we’ve gone.  This concept is not a nullity in patent because tech innovation is wrapped up in the primary monopoly we grant to patentee, and orthogonal to primary monopoly we grant to copyright owner.  Thus secondarily liable actor is differently positioned than primarily liable actor.
Second concern: free expression. Protect tech/platforms because of externalities they create. That by itself can’t be enough to protect secondary actors more than primary actors, who also often exercise some kind of speech right.  But the primary actors get benefits that are difficult to transfer to secondary actors—primary actor is willing to take on more risk than secondary actor, since primary actor receives sense of belonging/creativity/community that they can’t monetize and transfer.  Thus externalities will be greater for platform.
Why not an immunity? Might be right in certain circumstances, but not all.  Free expression is at the fore w/r/t §230.  But in © we might be concerned about uncompensated harm/mass infringement.  Platforms could be least-cost avoiders in screening out infringement.  Potential for moral hazard: immunity means incentive to make money off of interest in infringing works. 
What can we do to avoid overdeterrence?  (1) Reduce/eliminate statutory damages for secondary liability. (2) Give restitution/disgorgement but limit their ultimate exposure.  (3) Shift burden of proof from defendants in calculation of damages/profits to avoid overcompensating Ps. May not be possible to show effects of one particular copy, but secondary liability cases are generally large in scope.
Lemley: run away from restitution.  Damages would be worse. You mean disgorgement w/causation.  Too easy in remedies for disgorgement to be all your profits.
May not need statutory change. Statute is silent on remedies for secondary infringement.
A: courts don’t think they’re creating secondary liability out of whole cloth—meaning of what counts as an exclusive right/triggering full panoply of damages. But sees potential. He wants to use profits as a ceiling and shift the burden of proof to avoid that problem with disgorgement.
Q: curious about moving away from patents. If you’re saying anything that could be used to infringe © could be used for public domain works, you’re begging the Q of whether that use is substantial. Is that really different from patent?
A: substantiality is really small in patent—you could use this item as a doorstop = that’s not substantial. Value of use for that purpose is what courts look at. In ©, using it for public domain would have value. 
RT: In terms of why not an immunity: You give three reasons, but none of them seems to differ from §230 to me.  Even w/respect to “mass infringement,” many of the actors that people hate in the §230 context do aggregate gossipy/defamatory content or revenge porn, and most of the visitors are happy to consume lots of different humiliations, which is the business model of those sites.
A: interest in speech is different as between those types of content—© is less speechy.  I know you disagree.

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IPSC part 8: second plenary: copyright reform/innovation policy

Posted on August 8, 2014 by rtushnet

Copyright Reform and the Academy
Shira Perlmutter Chief Policy Officer & Director for International Affairs
US Patent and Trademark Office (USPTO)
We seem to be poised at the brink of very significant change.  Matching tech change, but policy evolution has not been smooth or consistent recently, and stalled in the US for about 10 years after flurry of initial responses to digital tech (Digital Performance Rights Act, WIPO Treaties, DMCA, Digital Distance Education amendment; EU E-commerce and InfoSoc directive).  Why stall for 10 years?
Factors that converged to gum up the works: Increasingly central/visible role of © in society. Increased focus on metrics for measuring that—Dep’t of Commerce says 4.4% US GDP in 2010 was from © intensive industries. Part of daily life as it never was before—every consumer is user, creator, transformer, publisher. Resulting public visibility/press attention. Increased lobbying from all sides, parts of industries formerly with no presence in Washington are now there; cacophony of voices. Greater grassroots consumer involvement, using internet to inundate members of Congress with messages. Greater range of actors/more complex distribution chains. Finally, more overlap with other areas of law—telecom policy, privacy, cybersecurity.
That had a major impact on SOPA/Protect IP act in 2012.  After that happened, everyone who works on these issues in DC was in shock; a year of quiet reflection and wound-licking. A lot of activity last year.  2010: Dep’t of Commerce formed Internet Policy Task Force—NTIA, telecom, PTO.  Listening sessions, public comments—then interrupted by SOPA.  March 2013, Register spoke on Next Great Copyright Act, and Chairman Goodlatte’s announcement of a review of the © Act.  July, Dep’t of Commerce released green paper on copyright policy, creativity and innovation in the digital economy. Legis. and executive branches getting very involved.  Stakeholders sometimes complain it’s too much to submit all the comments, but we’re trying hard to be collaborative and respectful of time, but there’s a lot on the agenda.
Cellphone unlocking: one bit of progress. We welcome that but it’s not new or controversial; restoring previous exemption from last rulemaking. Relatively easy lift as policymaking matter.  It’s still important that we not underestimate difficulty of legislating in today’s environment.  Her view: legislation that’s narrow and incremental; things in packages of related issues where there can be tradeoffs. Public legitimacy is also vital.
Also, don’t assume legislation is the best/only answer. Be pragmatic in approach: what can work in reasonable amount of time.  Any solution that takes 10 years to get through Congress isn’t a solution.  Rulemaking is a possibility: 1201.  Private sector best practices. Guidelines from gov’t or private sector—set up ongoing forums to bring people together. Tech solutions.
What’s going on in Copyright Office/Hill.  © reform has become a loaded word, and now it’s being called “review.”  Throwing out the whole thing and starting from scratch is in some ways appealing, but that’s a difficult political lift w/major int’l implications. [RT: of course we’re happy to tell other countries to make huge changes, but American exceptionalism.]  14 House hearings so far; Senate is starting to think about it. General topics rather than specific proposals.  There’s been 1 hearing or less on each issue, except for 2 on music licensing. Only a few witnesses on each; some are academics, but there’s not really time for discussion. A quick tour through basic issues. Hearings are expected to continue all year, culminating in drafts for comment early next year.
Copyright Office is also active right now, issued 2 reports last year on resale royalties where it recanted its prior rejection of legislation and were now more open to it and on establishing a small claims court for individuals and small entities that find going to federal court too expensive/difficult.  Public roundtables/studies, planning to issue legis. recommendations on, e.g., making available right—whether it should be made more explicit in §106.  Music licensing study; orphan works; mass digitization (complicated by Google Books) [RT: or simplified?]; Section 108/libraries; a lot of work on recordation and registration; summarizing fair use case law as an element of the IP Enforcement Coordinator’s last strategic plan to help people understand what they can and can’t do in reusing existing works.
On our side, green paper was supposed to be objective and calm overview of issues and framework for analyzing them. Given recent levels of controversy, we tried to lay groundwork for moving forward more productively.  CO is Congress’s chief advisor, but PTO is President’s chief advisor on all IP including © and has always had lead in int’l negotiations but green paper is first time in 20 years that PTO has been involved in domestic policy discussions (NII White Paper from Clinton administration).
Relation of green paper to congressional review: narrower and broader. Looking only at internet issues, but goes beyond © Act and focuses on legislation and enforcement. 
Summary of recommendations: (1) maintaining balance of rights and exceptions; (2) enforcement of rights in internet environment; (3) helping to ensure functioning/streamlining online licensing marketplace.
Balance: a lot of descriptive work about what’s changed in 20 years.  New attention now warranted in public performance right for sound recordings.  Revision of licensing.  CO’s work on orphan works, mass digitization and libraries.  Need for more clarity in fair use.  Two areas for NTIA/PTO work: (1) remix—is the current combination of some licensing options like Content ID and reliance on fair use leading to adequate results, or is greater clarity advisable and if so how should it be done—microlicensing, specific exception, etc.; (2) scope and relevance of first sale doctrine in digital environment, updating CO’s 2001 study.
Enforcement: Called for providing same range of penalties for criminal acts of streaming that exist for criminal reproduction/distribution. Voluntary initiatives to increase online enforcements—support initiatives for advertisers and payment networks, as well as graduated response through Copyright Alert system.  PTO has taken on itself to assess effectiveness of these initiatives to see how they’re working and has solicited public comments on the methodology for doing so, which is difficult b/c the initiatives are new.  Supported CO’s work on considering small claims system.  Encouraged enhanced public education and outreach—critical to legitimacy of any proposed enforcement approach. 
Further work: (1) statutory damages in individual filesharing cases and online services that make many works available to the public and secondary liability could be billions (trillions); (2) stakeholder dialogue on improving operation of DMCA notice and takedown system.  We heard from many that the system is working well, but there are various difficulties experienced by users on all sides, including rightsholders, ISPs, and consumers.  Difficulties related to (1) sheer volume of notices; (2) content that had been taken down being immediately reposted; (3) abuse of the system; (4) feasibility of using system for individuals and small players.  Significant fears about reopening carefully struck balance of §512, but voluntary cooperation could alleviate some burdens.
Online marketplace: State of play—many positive achievements in making content available in multiple diverse formats, but there are still some gaps/barriers to licensing. Mainly: comprehensiveness of ownership/licensing info, and connections across sectors and geographical boundaries, as well as interoperability. (1) Licensing of musical works—compulsory licensing is anachronistic; problems with divided rights for the same use; old consent decrees—support congressional efforts to simplify and update the licensing system. CO and Congress are also working on this, and we expect some action; DoJ is engaged in public examination of consent decrees. (2) Importance of access to ownership info as foundation of licensing; ways to improve CO records and give incentives to use them short of formalities.  CO has resource constraints but is working.  (3) Potential for streamlined online licensing transactions, which so far are limited to CCC, Creative Commons, and some individuals publishers.  Private sector should do most of the work, but gov’t might have role in improving the licensing environment.
We’ve had written comments and public roundtables.  Now we are looking at policy issues—potential legis. solutions w/r/t first sale, remix, calibration of statutory damages.  Also multistakeholder forum on improving DMCA notice and takedown. And finally gov’t role in facilitating online marketplace.
Where are we?  First sale and remix: Four public roundtables around the country: Nashville, Boston (publishing/library/tech), Los Angeles, Silicon Valley/Berkeley.  Plan: issue white paper with conclusions on those issues in next 6-9 months.  Multistakeholder DMCA meeting: four public meetings; will continue about every 6 weeks at least through end of year.  Smaller working group is looking at standardizing DMCA notices and their processing. Reporting back to full group on Sept. 10.  Goal: outcome by the end of the year w/some sort of best practices. Success is defined as establishing a constructive process and making at least some improvements in system’s operation.  Congressional pressure as backdrop: several members of Congress expressed interest in voluntary improvements before considering legislative change.  Avoid legis. change by agreeing on some ways to make process work.
Online marketplace: we’re a bit further behind. In comments, considerable caution expressed on scope of gov’t role.  We’ve been brainstorming. CO and NIST (Nat’l Inst. for Standards & Tech.) has also gotten involved.  Another conference in the fall coming.  Likely to focus on standard identifiers in different sectors and how they can be interoperable/relate to CO database; desirability of Copyright Hub as under construction in UK—gov’t could bring private sector together to encourage them to make something.
Is optimist about incrementalism, not needing to wait for legis. change that may take some time.
Role of academy: participation by academic contributors can make a huge difference. Academics increasingly integrated into policy development in this administration. Many opportunities to give testimony, comments, public participation.  You can sign up at the PTO website for copyright alerts. Help navigate polarized stakeholder views, which gov’t can’t always do, and offer innovative ways to break logjams.
Q: what about the interface b/t USTR and bilateral/multilateral agreements w/IP enforcement or other issues in them (term, safe harbors) that limit the extent to which US can consider domestic reforms?  Hamstringing our own ability to reform internally.
A: Her office works closely with USTR. Necessary for negotiators to work from some level of certainty about what US law is.  But tension is what you’ve articulated—don’t want agreements to be straitjackets.  Personally, would have been better if earlier trade agreements had gone into less detail and been more statements of principle. This is work in progress/needs to be kept in mind. TPP negotiations: USTR has announced built in goal for countries to put balance in with exceptions as well as rights, which is consistent w/US law.  We want to see US law reflected in these agreements but leave room for change/adaptation.
Gordon: right now there’s supposedly a big difference between copyright and patent in the status of works that infringe in part—improvement patents. Copyright has the odd §103A where you don’t get copyright in the part that is used unlawfully. Patent approach is better.  A number of cases drastically broaden the ineligibility for © of a partially infringing work, like Pickett v. Prince.  Green paper talked about freedom of mashups from infringement—but don’t they deserve © in the rest of what the musician has made?
A: We focused on issues raised to us, but agrees it’s worth looking at.
White House Innovation Strategy
Colleen V. Chien Senior Advisor to the Chief Technology Officer, Intellectual Property and Innovation White House Office of Science and Technology Policy (OSTP)
Strategy for American innovation.  Looking for “gettable” and good ideas.  Submit your ideas for update of our strategy—responses are due on Sept. 23.  Look for fit between your ideas and the questions we asked in the RFI (link at beginning of paragraph). What idea should you pitch?  How should you pitch to a nonacademic audience?
Read the question, as we tell our students!  Two Qs mention IP: (1) What new challenges for IP/competition policy are posed by increased variety of innovation (e.g. user innovation, computational, internet-enabled)?  (2) “Beyond current Federal efforts to promote open data and open application programming interfaces (APIs), what other opportunities exist to open up access to Federal assets (such as data, tools, equipment, facilities, and intellectual property from Federally-funded research) in order to spark private sector innovation?”  How do we allow public access to what public has already paid for?  Need not answer the other 20 questions, but consider them—e.g., regional innovation ecosystems. Also: “What are specific areas where a greater capacity for experimentation in law, policy, and regulation at the Federal level is likely to have large benefits?”
Writing with your audience in mind: Think broadly about which projects make most sense—10-year timeline for Congress; 900 days for this administration. What’s desirable and gettable.  What’s within the control of the decisionmaker; don’t exclude bigger lifts. Specific proposals for actual policy changes are more useful than general observations and recommendations.  Best practices guidelines, executive actions, data release.

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IPSC part 7: copyright limitations

Posted on August 8, 2014 by rtushnet
Fifth Breakout Session
Copyright Limitations
Inventing Around Copyright
Dan Burk
Recurring pattern in ©: Napster/Grokster, where Napster was held liable for having centralized architecture/ability to know what’s on the system and thus being contributorily/vicariously liable. Not surprisingly, next generation P2P got rid of centralized architecture.  Initially successful in that, but the SCt invented a new kind of liability and held them responsible for that instead.  Similar result in Aereo. Judge Chin saw Aereo as Rube Goldberg contrivance to get around Copyright Act, and SCt basically agreed.  When a company tries to design something that would be legal, that’s usually not culpable, and we try to encourage it in the patent area.  Long tradition of inventing around in patent, and Federal Circuit has often said this is a positive feature of the patent system: trying to avoid infringement encourages innovation.  Innovators become more muscular/innovative.
Why is this supposedly good in patent but bad in copyright?  You can look at inventing around in patent as a kind of bargaining breakdown—will invent around if licensing isn’t cheaper—patentee has incentive to license if the alternative is a competitor who’s invented around.  Failure to agree = mismatch in valuation between parties.
But in patent law, this isn’t avoidance/evasion—not a loophole, but engaging in socially beneficial activity.  Also, Aereo/Napster/Grokster are not trying to create substitute for copyrighted work.  Trying to develop an alternative delivery system.  So the copyright owner and innovator aren’t racing in the same space. 
Might justify more generous view of inventing around, because in inventing I’m up against a range of rightsholders and not just a single rightsholder (breakdown in bargaining). 
Is Judge Chin correct that this is just socially wasteful redesign?  Netflix is looking at Grokster style distribution to deliver films; might be worthwhile.
Q: aren’t there successful examples of inventing around in copyright?  They don’t call it designing around.
A: yes; it’s common but that makes it interesting that we haven’t talked about it much.  Some of the examples will be more in Fishman’s area of creating around, as opposed to inventing around.
Gibson: Is Grokster really an example? The SCt decision wasn’t really about the architecture (indeed Bittorrent remains extant) which is ok if you don’t say the magic words.
A: was about the architecture in a negative sense, in the sense that it was avoiding Napster liability. SCt would’ve loved to have found justification in existing doctrine for finding control, but had to borrow anew from patent.
Q: is there a constitutional argument against giving copyright owners veto power over non-Writing innovations?
A: Sympathetic to the notion, but surprised if there were a constitutional problem because both in patent and copyright the secondary liability doctrines extend outside the scope of the right granted.  Something that’s specially adapted to infringe that’s outside the patent still is subject to the patentee’s control. 
Q: copyright owner doesn’t have much influence over text once created, while patent owner has control over scope of claims, so it’s not just encouraging production but about shaping what incentives different people have to make claims in the first place.
A: doctrine of equivalents forces you to invent way around—so patentee has some control, but not all.
Beyond the Readymade: Michael Asher’s Skulptur Projekte Münster Caravan and the Challenges for Copyright Law
Shane Burke
This is a trailer placed around town as an art project.  Is it an artwork?  Lucasfilmstandard in the UK—definition of sculpture.  Having another use doesn’t disqualify something from being a sculpture; purpose is important and artistic purpose can be discerned by looking to communities/reception.  A pile of bricks temporarily on display in a museum is different—it can be a sculpture—whereas a pile of bricks dumped on a driveway in preparation for repairs isn’t.
Traditional definitions wouldn’t call Asher’s trailer a sculpture, but harmonization may force UK standard to be more flexible.  US standard: industrial product v. creative product.  Blanch v. Koons demonstrated more progressive attitude towards appropriation; Cariou adopted reasonable observer and deferred to institutional status of Prince as recognized artist—which may also matter in UK.  Conceptual separability: problematic on a number of levels.
Possibility of protection in the UK exists under an institutional theory.  Probably not in the US.
Gilden: Why is it important to protect this work under copyright?  What would infringement be, if it’s selection, coordination and arrangement?
A: infringement is a different issue—he is separating it out.  (Wouldn’t photos of the work at least if it were in a gallery infringe if there’s copyright? Or recreating a readymade?)
Q: different forms of art may be eligible for different types of IP protection.  Fluxus—a movement intended to be ephemeral. Would artists even want copyright protection?  Property rights—land on which the jetty sits for a famous conceptual artwork.  Problems of attribution: under American moral rights, the idea that attribution/integrity are important is hard to reconcile with some of these works.
A: yes, different solutions for different works.  Ascher was a Marxist into institutional critique of art world, so he might be turning in his grave.
Ochoa: should this be copyrightable?
A: moved from institutionalism away from it—he thinks © would be against the nature of the work.  Respect the artist’s own perspective.
Ochoa: if he wanted copyright you’d feel differently?
A: yes.
RT: What about the other part of authorship, attributing the thing to the author?  He’s definitely the author of an idea I’m willing to call art, but he’s not an author of the trailer.
A: comes from context, and the fabrication requirement has been relaxed.
RT: but there’s relaxation and then there’s not having a requirement at all.  I can’t understand a regime in which the maker of the trailer, or of toilets, could become an infringer if it continued to make trailers/toilets after Ascher/Duchamp.
Lemley: but only in museum context.
RT: makes no sense to me. We have a reproduction right for a reason.  That’d be a reproduction, unless the artistry is the idea, which isn’t protectable/isn’t copied by manufacturing.
Creating Around Copyright
Joseph Fishman
Constraint is getting a bad rap in copyright discourse.  We want the copyright system to promote creativity, and the usual view is that © affects upstream creative output incentivized minus downstream creative output suppressed.  Sum of that equation is argued to be a negative number.  (RT: I don’t think the people he cites, including me, argue that in the form presented.  We are arguing about marginal effects of increased protection on the curve, which we think we’re already too far down.)
Constraint is in fact often good for creativity, adding a third variable: downstream creative output stimulated by having to work around copyright restrictions. Our goal shouldn’t be to minimize or maximize constraint, but to optimize it.  Project: Preliminary steps to that.
Creativity to him means what psychologists have converged around: generation of products/ideas that are original and appropriate to whatever the task happens to be, defined according to consensus of particular community/audience.  This tracks real world assessments of creativity. Constraint ends up fueling creativity—your own recent scholarship may have involved coming up with a new idea/improving an idea by having to distinguish your claims from those before. Inability to license protected content leads to generation of some other creative output.
Star Wars began when George Lucas wanted to remake Flash Gordon, but couldn’t get the rights and set out to translate what he likes about the world of Flash Gordon into a new creative setting. Similar stories about birth of Mario, b/c Nintendo wanted to make a Popeye game but couldn’t.  DJs who, to get around restrictions on sampling, pushing sampling methods to more intricate territory.
Experimental evidence: more constraint can be better than less.  Appropriate exemplars become harder and harder to find—problem solving under constraint becomes more abstract and exploratory. People use analogies to build a new solution from the ground up. We tend to get a more diverse set of original products.  Removing constraints means that some other creations are never going to be made, and there’s no reason to assume that creations born of more choice will be better than creations born of less. That doesn’t mean we should ramp up constraints indiscriminately, b/c not all constraints have the same effect on creativity. We ask who is imposing the constraints, how broadly, when during the creative process it’s imposed. These are levers that can be pushed and pulled. 
Paper develops taxonomy and argue that © does better on some than others.  Where it’s on the right track: the target of the constraint.  The object that’s restricted.  Budget = target is money; deadline = target is time. ©’s constraint is different—constraint is helpful when it makes familiar exemplars harder to access. 
Still, copying can be used creatively too. Fair use emphasis on transformativeness sends a signal to downstream creators that they can copy if they transform.  Fair use functions as a constraint on downstream creators by telling them to stay on the right side.  Having to comply w/constraints of fair use ended up improving one poet’s poetry in the long run. 
His argument is currently theoretical, and can’t tell us whether current law helps or hurts on net, and even if we knew that it would be hard to parse out which aspects of constraint were helpful because there are so many different moving parts. Now designing controlled experiments, looking to see whether/how creative production fares under similar constraints to ©.
Dan Burk: Fuzziness of constraints—if you get too close that’s infringement—ensures greater distance?  Your theory assumes that the follow on creator has a number of choices. Interesting questions for merger doctrine.  Would support your argument.
A: substantial similarity/central claiming does tend to force outcomes with less reinvention of the wheel.  Does want cake/eat it too in that substantial similarity is unclear and clarity for downstream creators is valuable.  Headway is being made in fair use/becoming more predictable, not so much in substantial similarity. Clearer rule would help.
RT: [This theory is about how second-comers react, not about how pure copiers react.  You therefore have to have a theory by which Rosencrantz & Guildenstern are Dead is “less creative” than Star Wars.  I don’t think that theory can consistently be fit into copyright as we know it.]
“Constraint is good when it makes exemplars harder to access” equivocates on the meaning of “access.”  Copyright law can’t stop people from being familiar with existing designs, which is what happens in the experiments on which you rely. Instead an example given to them and they’re instructed by the law not to copy too closely—which is, incidentally, similar to the instruction that failed in at least some experiments.  Related to the problem that unlike the subjects in the experiments cited in the paper, the lazy creator actually has a whole menu of possible existing works both in the public domain (Clueless) and not (Outlander) that it can use or license if Game of Thrones is unavailable.  The make or buy decision, in other words, is quite different than the make or copy decision at least subconsciously faced in the creativity studies.  (I think this is related to the differences between patent and copyright and the fact that, as Barton Beebe has so persuasively argued, we don’t have an idea of what it would mean to have “Progress” in copyright, whereas we have a much better idea of what progress in the cellphone market means.)  Someone will license a sword and sorcery fantasy to you at a price that at least matches the cost of creating around Game of Thrones—other optioned properties, for example, include Marion Zimmer Bradley’s Darkover.  (Conclusion: someone who prefers to make a derivative work can do so if they are merely profit-maximizing and don’t care so much which work they ultimately make; copyright’s constraints don’t have the same punch for inventing around as they do for controlling pure reproduction.)
A: There are conflicting results on how much you get out of making something available for participants to look at in these experiments; other experiments find that you can give an exemplar and then tell people not to copy and they obey. [This is a standard problem of reproducibility, which also shows up in the work on verbal overshadowing I love so much; the studies used identical instructions.]  This is one thing we plan to look at in the experiment we’re running—a trade secret like condition in which participants never see the works they could copy from and another where they see it but are instructed not to copy and see what that leads to. Doesn’t have a great answer.  [I don’t see how that’s relevant to the copyright environment.  Wouldn’t you want a condition in which both groups saw the exemplar, but for one the instructions were that you could do anything but copy exactly versus a condition in which you couldn’t create something substantially similar to the exemplar?]
Wendy Gordon: good to look at areas where there may never be a full doctrinal/empirical payoff.  Bloom’s creative misprision may be of use.  Quote: “creative people are prisoners. That is to say they get captured and the only way out is to beat a path out …”  These constraints are “as functional as any jail cell ever constructed.” 
Forgotten and Abandoned: Section 113’s Limitations on Copyright in Works Depicting Useful Articles
Tyler Ochoa
Reproducing a useful article is not infringement even if it’s depicted in a copyrightable drawing or even a model.  We don’t want you circumventing prohibition on protecting useful articles by creating drawings of those useful articles.  Drawing of a useful article—e.g., traffic approach to bridge—doesn’t give you exclusive right to make the bridge.
Case law has gone off the rails.  Former employee of plaintiff copied blueprints of tire designs for underground mining vehicles and produced a range of tires based on the designs: Tire Eng’g & Dist v. Shandong Linglong Rubber (4th Cir. 2012). Jury awards $26 million in damages based on sale of tires.  Jury has no business awarding damages for the manufacture of tires at all–§113 precludes this, but it isn’t recognized or even raised. That is just bad lawyering in one sense, but §113 isn’t about protecting Ps or Ds—it’s intended to protect the public interest in useful articles, and should’ve been raised sua sponte.
Kohus v. Mariol (6th Cir. 2003): the work is a protable children’s playyard inclduing drawings for a latch locking the upper rails in place. P’s drawing allegedly infrined by patent drawings submitted by D.  Court says the latch is unlike others b/c it has different features—throughout opinion equate copying latch w/copying drawings of latch.  Case endorses abstraction/filtration/comparison, but their abstraction isn’t the drawing, it is the latch—elements dictated by the function of the latch, standard industry practices for constructing latches. Wrong! You need to filter out the latch!
Most recently, the Batmobile: DC Comics v. Towle (S.D. Cal. 2013): © owner doesn’t own © in movie, but in original comic series—claim Batmobile is derivative work.  But a 3D useful article is covered by §113, and merely depicted in the comics, though the logo might be different.
Q: these cases all seem to be “really” other kinds of IP cases—trade secret, patent, TM. Would these problems be solved if courts used the proper IP regime?
A: Yeah, that’s the whole point of §113—separating industrial design from copyright. But we never enacted separate protection for industrial design, other than design patent, people try to get that protection some other way.
Lemley: what does it mean to reproduce the copyrightable portions of the drawing in a useful article? There are a bunch of useful features in a Batmobile, but he takes it that those aren’t the copyrightable elements in the drawing of the Batmobile anyway—the wheels/chassis weren’t what made it creative.  Don’t we have a separability problem?  I couldn’t be liable for making a car, but why couldn’t I be liable for adding to the car the elements that aren’t useful or functional?
A: separability inquiry is necessary.  But there are several problems w/that in Batmobile case, b/c Batmobiles built for TV series didn’t look anything like the Batmobile in the comics.  Some features like the logo may be separable, but many of these features aren’t.
Lemley: if so, what is §113 doing for us that isn’t done by Brandir etc.?
A: even in a case w/no separability, like the mining tire case, we see courts awarded damages for making the tires.
Lemley: but wouldn’t that be true w/o §113?
A: codifies that you don’t get protection for useful articles just b/c you designed or drew them.
Gordon: separability isn’t a criterion for infringement.  You need §113 to do extra work. 
Toward Principled Justifications for Copyright Limitations and Exceptions
Pamela Samuelson
Comparative: Netherlands has 75 specific exceptions but no general fair use. Interested in taxonomy of exceptions for quite some time.  We didn’t have them for a long time, but then we had very limited rights conditioned on formalities for a very long time.  Exhaustion came up first. Fair use didn’t become meaningful until 20th century; instead it was first sale, compulsory license for musical works, and outright exemption for coin operated music players.  Even under 1909 Act the exclusive rights were sufficiently cabined that we didn’t need that many.  Now, you can’t read the Copyright Act all the way through—exceptions almost half of the statute, and way too long.
Bernt Hugenholtz has a taxonomy of exemptions.  Her project: working through the US exemptions and figuring out what and why.  Berne Convention’s mandatory right of quotation—promoting the next generation of authorship.  Other countries have fair quotation, parody, other things that here are mostly done through fair use to promote ongoing authorship.  Fostering public interest in free expression/access to information is another goal, and many countries have exceptions for news reporting, current political events and the like—again fair use does most of that.  A cluster of exceptions: those that protect privacy, autonomy, and ownership of consumers—fair use does some work, exhaustion does more, and §120 allows you to remodel your house even under architectural works protection. 
Most exceptions in national copyright laws are aimed to fulfill social policy goals—libraries, access for disabled.  Often have a remuneration obligation from the user community, present here in AHRA.  We have a number of exemptions that enable public institutions to functions—police investigation, etc.  Many countries have specific exceptions to allow that. There are an astonishing number of litigation fair use cases here.  Other countries have exceptions for things like reverse engineering.
Incidental use: fair use; ephemeral copies for broadcasters in §112 also found in other countries’ laws.  Euro. InfoSoc Directive has mandatory exemption for incidental uses with no independent economic significance.  Most interesting exemptions: those designed to cure market failures—compulsory licenses in §115 etc.  Starting to think about whether we have exemptions in US law because we don’t have collecting societies.  We exempt certain things and leave everything else to fair use instead, which is why educational use is still so controversial.
Many politically expedient exemptions—agricultural fairs, Shriners’ conventions, etc.  What about flexibility for adaptation in times of rapid change?  Some exemptions have more than one justification: §§110-111 is partly for innovation/software, but also partly for people who watch movies in the way they want to watch them.  Her categorizations seem to work for other countries too.  But: Dutch exemption for funerals—for the little people?
Core interest: what exemptions should exist in Next Great Copyright Act?
Mike Carroll: Doesn’t think the burden is that high for limitations and exemptions, because Act is designed to be overbroad and uniform across all forms of creativity, knowing that in fact our policies should not be that undifferentiated. Different means of tailoring exist—legislative as well as judicial (Altai).  Interesting problem is to do a policy audit, of which this is a version.  When you’re overbroad, you get a signal when people start to feel the pinch. When you say all of this is inefficient rentseeking, that’s not true, but some of it clearly is. Which is the right response v. people who just don’t want to pay.
A: yes, you see examples where there’s outrage over enforcement—WSJ’s anger about ASCAP’s efforts to get Girl Scouts to pay royalties for singing at camp.  Girl Scouts weren’t represented at the revision of the Copyright Act and couldn’t conceive that it would apply to them.
Q: exceptions for public institutions—isn’t that part of sovereign immunity?
A: not how other countries have conceptualized it.
Madison: you have a hodgepodge of categories.  Can you distill a smaller number?  Some are specifically designed to advance ©’s policy goals w/r/t creativity, and others designed to avoid spillover harms to adjacent regimes/public practices (privacy, avoiding conflict w/patent).
A: one of the risks of a project like this: looking at what we had from the bottom up. Unsurprisingly the overarching themes are evolving.
Josh Sarnoff: if existing subsidies of © are so excessive, how do we figure out where it’s really too much and cut back.
A: 1909 Act did try to figure out what works were protected and what was normal exploitation, and design rights to protect normal exploitation. 1976 Act: effort to Europeanize, grant broad rights w/exceptions, and they weren’t very systematic.
My unasked Q: Do other countries (than the Netherlands) have these weird politically expedient exemptions for the equivalent of the Shriners?

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