Yearly Archives: 2010

Bill Patry’s War on Copyright Rhetoric

May 28, 2010 Dotan Oliar3 comments

Bill Patry’s “Moral Panics and the Copyright Wars” is the latest word on the way in which copyright law has responded to technological change. In eclectic and humorous prose, drawing on history, linguistics, philosophy, behavioral economics and the Bible, among other sources, Patry provides harsh criticism of the ways in which Congress and the copyright system have responded to disruptive technologies such as the VCR and file-sharing networks – and by “responded”, Party means did whatever the content industries demanded.

The book sets out the well-formed perspective of an important figure within the copyright cognoscenti. For almost three decades now, Patry has engaged with the copyright system in various roles, including a practitioner in private practice, full-time academic, author of a multi-volume copyright law treatise, copyright law blogger, copyright advisor to the House of Representatives and policy advisor to the Copyright Office. His intimate familiarity with the copyright system makes the pessimistic tone of his book especially notable.

Patry sees a pattern: technology companies generate innovation, and in response copyright industries generate litigation. According to Patry, “This cycle of copyright owners shaking down innovators is a central trope in the business of the Copyright Wars and has been repeated over and over again with almost every new innovation.” Importantly, “Copyright has become the mechanism to eliminate consumer choice, innovation, and the creation of culture. Copyright is now a serious impediment to technological and social progress.”

Patry’s book focuses on the role rhetoric and metaphor have played in legislative and public debates relating to copyright lawmaking, and how they were instrumental in the continuous expansion of copyrights in both duration and scope. In particular, Patry explores the function metaphors like “property” and “piracy” have played in the lawmaking process. Because abstract concepts such as copyright law are difficult to grasp, people tend to rely upon and fall prey to imperfect metaphors, especially when they are used repeatedly by industry lobbyists.

Patry is no fan of a common stock of well-worn copyright metaphors, and he attacks one after another: expressive works as bearing a personal relation to their author (the “copyright as giving birth” and “orphan works” metaphors), ownership of copyrighted works as an absolute, unlimited title (the “property” metaphor), copyrighted works as the singular product of genius (the “creation on a clean slate” metaphor), and the money to be earned from copyrighted works as the rightful reaping of what an author has sown (the “agrarian” metaphor).

In Patry’s view, these inapt metaphors serve only to distract us from the real issue, which is how to structure copyright law – a form of economic regulation – to best promote authorship, learning, innovation and progress. And while Patry documents various rhetorical tricks played on Congress’s floor, he also laments what has been missing from the debate: “in my 27 years of practicing copyright law, I have never seen a study presented to Congress that even makes a stab at demonstrating that if the proposed legislation is passed, X number of works that would not have been created will be.”

Central to Patry’s argument is the structural role that “moral panics” have played in this process, namely the furtherance of a public state of hysteria respecting illusory threats emanating from “folk devils”. Such panics often concern youth behavior and new technologies, both of which are not well understood and portrayed as a danger to core social values. Such panics are manufactured in order to capitalize on public (over)reaction to such (imaginary) threats in order to advance economic and social regulation that entrenches incumbent interests. Moral panics contain the following elements: the suggestion that a dire state of emergency is being brought about by a new threat to social order; the suggestion that swift action must be taken in order to prevent imminent social harm; the presentation of false and misleading data to lawmakers regarding the magnitude of that harm; and the suggestion that preemptive action – in this case action protecting copyright industries – serves the national interest. As one would suspect, Jack Valenti makes guest appearances throughout the book.

Those familiar with Patry’s writing and public speaking have probably noted his penchant for linguistic playfulness, and the book further speaks to his fascination with the potency of language. It is thus probably a testament to Patry’s engagement with and immersion in the subject matter of his research that the reader is at times left wondering whether his interest in rhetorical hype is merely deconstructive. Strung throughout the book are such statements as: “Corporatism was previously thought to have reached its zenith during Mussolini’s Fascist Italy, but [now] it is enjoying a healthy resurgence.”  Or, “Amazon.com’s Kindle ebook reader has more digital locks than CIA headquarters”.  Or, topping it all perhaps, that “The DMCA is the twenty-first century equivalent of letting copyright owners put a chastity belt on someone else’s wife.”

These ornamental bits aside — and perhaps partly because of them — “Moral Panics and the Copyright Wars” is not only a worthy and substantive read, but also a fluent and enjoyable one. The at-times amusing tone certainly serves, whether deliberately or not, as comic relief that softens Patry’s harsh and pessimistic underlying message. The book is likely to attract public notice and controversy not only for its content, but also because of who’s written it, and – most importantly – because its conclusion comes close to saying that the system is beyond repair, the last sentence hinting (although in a somewhat obscure way) that we might be better off abolishing it.

Patent Utility Reduxit

May 5, 2010 John F. Duffy1 comment

In academic scholarship, it sometimes happens that an entire field of inquiry becomes neglected year after year—to the point that nearly everyone believes the area incapable of yielding anything much of intellectual interest.   Such beliefs are almost always wrong, for it is the fallow fields of thought that are prime to be fruitful again.  An excellent example is patent utility doctrine, and specifically the issue whether inventions must be proven commercially useful as a prerequisite to patentability.  The conventional wisdom is that the law resolved this question against imposing such a requirement  more than a century and a half ago.  The issue is long dead; forgotten; abandoned.  Until now.

In his new article Reinventing Usefulness, Michael Risch reexamines patent utility doctrine and advances creative and insightful arguments for requiring that all inventions demonstrate “commercial utility” prior to patenting.  The highest compliment I can pay this article is not that I agree with it—I’m still somewhat doubtful—but that the article has forced me to think hard about an area I foolishly thought to be largely barren.  The article is memorable precisely because its thesis is unsettling; it demands rethinking of utility doctrine and other aspects of the patent law.

The standard, nutshell version of current utility doctrine begins by recognizing utility as one of three great requirements of patentability.  To be patentable, inventions must be “new, useful and nonobvious.”  Those three requirements are a familiar mantra to any modern patent attorney, but “useful” is typically viewed as the poor cousin of the other two.   Novelty analysis is the ubiquitous first step in every single patent examination, and it is a fruitful area yielding both interesting cases and scholarship.  (Recent cases include, for example, the controversial inherent anticipation case of Schering Corp. v. Geneva Pharmaceuticals, Inc., 348 F.3d 992 (Fed. Cir. 2003), as well as cases such as In re Klopfenstein, 380 F.3d 1345 (Fed. Cir. 2004), which involved an especially close question about whether certain materials qualified as novelty-defeating prior art.)  Nonobviousness is the “ultimate gatekeeper” of the patent system.  It is nearly always contested in patent prosecutions and litigations; it accounts for numerous Supreme Court decisions on patent law, most recently KSR v. Teleflex; and it has generated rich veins of scholarship (see, for example, the collection of articles from the post-KSR conference in 12 Lewis & Clark L. Rev. 323 et seq. (2008)).

By contrast to ubiquitous issues of novelty and nonobviousness, utility is rarely even contested.  The doctrine is conventionally divided into three strands, “operability,” “beneficial utility,” and “specific and substantial utility,” with each strand relevant only in unusual circumstances.  Of course, a patented invention must be operable, but few seek patents on the unworkable and fewer still seek to infringe such patents.   Thus, operability doctrine typically bars patents only to the trickle of loony inventors who continue to pursue perpetual motion machines and the like.  The “beneficial utility” requirement, even at its historical zenith, barred patents only in limited fields viewed to be deceptive or immoral, such as gambling devices.  Recent case law now emphasizes that this doctrine “has not been applied broadly in recent years” and that institutions other than the Patent Office and the courts are best positioned to regulate matters of personal or business morality.   Similarly, the leading scholar in the area, Margo Bagley, argues that Congress, not the courts, “is the only actor competent to clarify … the extent to which moral issues should be considered in patentability determinations, if at all.”  Margo A. Bagley, Patent First, Ask Questions Later: Morality and Biotechnology in Patent Law, 45 Wm. and Mary L. Rev. 469 (2003).

The requirement of a specific and substantial utility has been the most important part of utility doctrine, but it wins that title only because competition is so weak.  Though the requirement of a “substantial utility” may sound demanding, the courts have repeatedly held that the doctrine does not require developing the invention to the point where it would be “presently commercially salable in the marketplace.”  In re Langer, 503 F.2d 1380, 1393 (CCPA 1974).  The Patent Office has expressly endorsed that view (see 66 Fed. Reg. 1092, 1094 (Jan. 5, 2001)) and emphasized that the “utility threshold is not high.”  In re Fisher,  421 F.3d 1365, 1370 (Fed. Cir. 2005) (summarizing the position of the Patent Office).

Against this background of nearly moribund utility doctrine comes Michael Risch’s new article, which argues that patents should not issue except on proof of “commercial utility,” which he defines as requiring “that a) there is a market for the invention, and that b) the invention can be manufactured at a cost sufficient to fulfill market demand.” (P. 38)  Risch doesn’t hide that he is attempting to resurrect a position very similar to that argued by Daniel Webster, and firmly rejected by Justice Story, in a case decided nearly two centuries ago (see Lowell v. Lewis, 15 Fed. Cas. 1018 (C.C D. Mass. 1817)).  Risch also candidly acknowledges that the courts have never required a commercial utility of the sort he envisions.  Still, there many excellent reasons that even skeptics (like myself) should consider Risch’s article carefully.  I will focus on only three of them.

First, Risch unearths some fascinating history to support his view.  The central piece of legislative history associated with the 1836 Patent Act—a Senate Report written by Senator John Ruggles, the primary author of the legislation—seems to be quite critical of Justice Story’s lax utility requirement.  (P. 35)  Moreover, the relevant passages in the Report are not merely unenacted comments in a legislative report, for the 1836 Act did restore a requirement, which had been repealed in 1793, that patents should only be granted on “sufficiently useful” inventions.  Patent Act of 1836, § 7, 5 Stat. 117, 120 (July 4, 1836).  Risch concludes, however, that the courts “quickly gutted” this restored statutory requirement.   (P. 36)

The implication of this history is that modern utility doctrine may be based on a radical form of judicial activism—willful disregard of a congressional attempt to overturn prior judicial precedent.  The history is not, it should be noted, unambiguous.   In one crucial passage, the Senate Report describes Justice Story’s take on utility as “settled” doctrine, and the overarching focus of the Report is on the evils of the then-existing patent registration system (which included no administrative examination of patent applications), not on the evils of a lax utility doctrine.  Still, the passages identified by Risch raise serious historical questions about the legitimacy of modern utility doctrine.  Defenders of the status quo will have to respond.

A second reason to pay attention to Risch’s article is that it may turn out to be both prescient and practical.  When I first read an early draft of this paper, I had thought it interesting but completely divorced from the realities of legal doctrine.  Soon thereafter, however, a split panel of the Federal Circuit decided Janssen Pharmaceutica v. Teva, 583 F.3d 1317 (Fed. Cir. 2009), which was an extremely rare decision holding a patent invalid for lack of utility in infringement litigation. The patent in Janssen disclosed a method of using a particular drug as a treatment for Alzheimer’s disease.  It turns out that the disclosed method was highly useful and valuable, but the court nonetheless invalidated the patent because, at the time of filing, the inventor did not have sufficient proof that the method would be useful—i.e., that it would work.   Janssen seems to signal a new judicial willingness to enforce the utility requirement more stringently than in the past, and to cut back on the availability of what has been known as “prophetic patents”—patents that make accurate prophesies about technology that the inventor has not yet reduced to practice and thus not yet fully proven.

More recently, in Ariad Pharmaceuticals v. Eli Lilly, the en banc Federal Circuit articulated a view of the patent system that might very well, the court acknowledged, bar patents on “[m]uch university research.”  598 F.3d 1336, 1353 (Fed. Cir. 2010) (en banc).  The result, the court believed, was consistent with the “intention” of the patent system because “[p]atents are not awarded for academic theories .”   Id. To prove that point, the court referred to the only modern Supreme Court case on the utility requirement, Brenner v. Manson, 383 U.S. 519, 536 (1966), which famously stated that “a patent is not a hunting license.”   While certainly neither Janssen nor Ariad imposes a commercial utility requirement of the sort Risch endorses, both cases push patenting away from more fundamental research work and toward the practical and commercial, and both cases rely in part on utility precedents to justify the shift.

A third reason to pay attention to Risch is that his article is theoretically complex and nuanced.  The article is part of a growing body of theoretical literature that focuses on the timing of innovation and the importance of commercialization.  The roots of this literature trace back to Ed Kitch and his famous prospect theory.  Recently a new generation of scholars, including Scott Kieff, Ted Sichelman, Benjamin Roin, Michael Abramowicz and myself, have devoted increased attention to the problems of patent timing and commercialization. ((Professor Kitch’s prospect theory was first outlined in Edmund W. Kitch, The Nature and Function of the Patent System, 20 J. Law & Econ. 265. (1977).  Recent patent scholarship focusing on timing and commercialization considerations includes F. Scott Kieff, Property Rights and Property Rules for Commercializing Inventions, 85 Minn. L. Rev. 697 (2000); Ted Sichelman, Commercializing Patents, 62 Stan. L. Rev. 341 (2010); Benjamin Roin, Unpatentable Drugs and the Standards of Patentability, 87 Tex. L. Rev. 503 (2009); Michael Abramowicz, The Danger of Underdeveloped Patent Prospects, 92 Cornell L. Rev. 1065 (2007); Michael Abramowicz & John F. Duffy, Intellectual Property for Market Experimentation, 83 N.Y.U.L. Rev. 337 (2008); and John F. Duffy, Rethinking the Prospect Theory of Patents, 71 U. Chi. L. Rev. 439 (2004).))  Michael Risch joins this group but brings an original perspective in arguing that patent law should begin imposing a much different utility doctrine than has ever been applied in the U.S. courts.

Risch’s proposal, it should be noted, is not merely imposing more burdens on patent applicants.  A commercial utility standard would mean that inventions would not be complete until they were market-tested and commercialized.  Thus, the “experimental use” exception to patent law’s one-year statutory bar would have to be expanded to encompass such market experimentation—a distinct change from current law which would afford innovators more leeway in market testing their innovations prior to seeking patents.  (P. 41)  Also, because innovators could file later, the patent term would end later, and thus the early years of the patent would not be eaten away by efforts to begin commercialization  (P. 43) That change might be especially helpful to pharmaceutical firms, for the early years of their patents are often lost as they try to develop a safe, effective and commercially feasible versions of their patented drugs.   In sum, Risch’s proposal has a theoretically interesting basis and cannot be dismissed as merely reflexively anti-patent.

The renewed academic focus on commercialization has been spurred by an intensely practical, indeed even populist, industrial revulsion to what are known as “patent trolls,” entities that have obtained patents but that do not attempt to commercialize or otherwise to practice their patented technologies.  The backlash against patent trolls presents a deep challenge to the dominant theory of the patent system that the courts embraced in the twentieth century.  If, as the Supreme Court has said, “[t]he disclosure required by the Patent Act is ‘the quid pro quo for the right to exclude,’” J.E.M. Ag Supply, Inc. v. Pioneer Hi-Bred International, Inc., 534 U.S. 124, 142 (2001) (quoting Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 484 (1974)), then the hostility to patent trolls is inexplicable, for their disclosures must pass the same legal standards applied to patentees who have commercialized their innovations.  Yet the industrial reaction to patent trolls suggests that the judicial theory of the patent system may be incomplete, and that perhaps commercialization efforts should be given more importance in interpreting and applying the general provisions of the Patent Act.  Michael Risch has shown one way to accomplish that end as his article returns to, and provides new intellectual support for, a long abandoned doctrinal argument.  Even those skeptical of his ultimate conclusions can appreciate that his work is fresh, original and theoretically provocative.  Under the most demanding of standards, it is “useful” scholarship.

“This Milk Doesn’t Taste Hormone-free”: Creating Trademark Liability when Companies Alter Credence Qualities

Mar 13, 2010 Christopher J. Buccafusco1 comment

What if you learned that those Niman Ranch steaks you’ve been purchasing for $40 per pound were no longer pasture-raised?  What if Aveda, without notifying you, decided to begin testing its products on animals?  Or if your Bridgestone tires were no longer union-made?  In each of these cases, it would be nearly impossible to detect the change merely by using the product.  For an increasing number and variety of products, consumers choose a particular brand or pay premium prices based on imputed qualities that they never experience.  Trademark and false advertising law exist to protect consumers from deceptive branding practices, but the situations described above are currently immune from liability.  Or at least they will be until more people read Shahar Dillbary’s new paper.

Since its origin in the tort of deceit, trademark law’s goal has been the prevention of passing-off, or as Dillbary refers to it, inter-brand fraud.  The typical case is one where the consumer, intending to purchase A’s goods is fraudulently induced to purchase B’s.  Trademark law exists to protect both producers and consumers and to minimize the substantial deadweight losses that would otherwise exist if consumers were forced to undertake extensive searches to obtain the appropriate products.  As Dillbary notes, however, trademark law is substantially less concerned with situations of intra-brand fraud where “the trademark owner uses its own mark to misrepresent its own goods.”  Dillbary, at 334.  According to Dillbary the unequal treatment of trademark misuse stems from the widely accepted premise that “the only legally relevant function of a trademark is to impart information as to the source or sponsorship of the product.” Id. at 332, quoting Smith v. Chanel, 402 F.2d 562 (9^th Cir. 1968).  This premise ignores the substantial role that a mark play in providing information about the product itself, and it enables a particularly insidious class of consumer fraud.

Because trademark jurisprudence is concerned only with false or misleading attributions of product source, its application to fraudulent uses of marks by the mark owners themselves is considerably limited.  Section 43 of the Lanham Act establishes a hierarchy of marks based on their distinctiveness, that is, their ability to distinguish the seller’s goods from others’.  At the top of the hierarchy are fanciful marks–those that have no apparent relationship to the product (e.g., Kodak cameras).  At the bottom are descriptive marks–those that seem to describe some feature of the product (e.g., Stevia sweetener which is derived from the stevia plant).  A number of legal issues follow from a mark’s classification in the hierarchy, but one is of particular importance to Dillbary’s point.  According to the current interpretation of the Lanham Act, descriptive marks but not fanciful marks may not be registered or may be cancelled if they are or become misleading.  Thus, if consumers incorrectly believed and purchased it because they so believed that Stevia was made from the stevia plant, then the mark would be “deceptive” and unregisterable.

At first blush, this distinction seems to make sense.  How could a fanciful mark, which is definitionally not descriptive of the product, ever be misdescriptive of it?  How could a Kodak camera not be sufficiently kodak-y?  It can occur, Dillbary argues, when a fanciful, arbitrary, or suggestive mark develops what he calls “secondary descriptive meaning.”  Id., at 330.  Marks that, when introduced, were fanciful or arbitrary may, over time, become associated with a variety of qualities.  Kodak, for example, may come to symbolize in consumers’ minds high quality paper, easy to focus lenses, or “green” manufacturing, and consumers purchase Kodaks or pay premiums because of these associations.  If, overnight, Kodak executives switched to cheap paper or complicated lens or environmentally-unfriendly production, purchasers who relied on the secondary descriptive meaning attached to the brand would be defrauded.  Dillbary’s recognition and elaboration of this concept alone would make the paper worth reading.

But Dillbary is too much the economist to be carried away by his new idea.  He realizes that just because he has a hammer, everything isn’t a nail, and like Holmes he recognizes that the “cumbrous and expensive machinery [of the state] ought not to be set in motion unless some clear benefit is to be derived from disturbing the status quo.”  Holmes, The Common Law, p. 96.   Accordingly, not all product changes should be treated identically.  Obviously, if the changed characteristic isn’t material to consumers’ decisions, it shouldn’t matter.  Similarly, if Kodak began using poor quality paper or lens, consumers would rapidly detect the change.  They could return their purchases and take their complaints to the Internet, seriously damaging Kodak’s reputation and goodwill.  The threat of consumer backlash is a sufficient deterrent.

Switching away from green manufacturing, however, presents a different situation.  The camera might work identically, and consumers would have no way of knowing about the shift.  They happily pay more because they want to protect the environment, and they end up defrauded while the manufacturer pockets the premium.  For so-called credence qualities like green manufacturing the consumer is not in a position to distinguish products experientially, and she is prevented by prohibitive search costs from detecting noncompliance.  Without the threat of consumer backlash associated with experience qualities (those like paper quality that are more or less immediately detectable), producers are not deterred from fraudulently misrepresenting the credence qualities of their products.

The incentive to misrepresent credence qualities is surely growing.  As painfully ironic as it must seem to a certain class of Crits, consumers are increasingly turning to the market as a medium for social and political communication.  Consumers routinely spend millions of dollars on sweatshop-free clothes, humane food and cosmetics, hormone-free milk, and products that are made in the USA, or by unions, or sustainably for reasons entirely irrelevant to their experiential quality.  (Not to mention the considerable boost in perceived experiential quality derived from the placebo effect of knowing that the product has some valued credence quality.)  While this kind of social policy driven purchasing might not be maximally efficient, it would certainly be disastrously inefficient to allow companies to bilk consumers by surreptitiously altering purchased credence qualities.

Dillbary’s solution to the problem is straightforward and politically feasible:  convince courts to follow the plain meaning of the Lanham Act to establish a private right of action in competitors to sue for intra-brand fraud.  According to Dillbary, the text of 1988 amendment to the Lanham Act clearly provides for such an action, but through tortuous misinterpretation, the action has been read out of the statute.  A proper reading of the Act would establish all classes of trademarks on the same footing for purposes of deceptiveness.  Mark owners would be liable when they changed without notice a materially important credence quality of their product, that is, one that substantially motivated consumer purchases.

Dillbary leaves until a future paper the task of establishing the precise contours of the cause of action.  While we wait, a number of questions present themselves for consideration:  Are competitors rather than consumers the appropriate plaintiffs in such actions?  How should the law treat hybrids of experience and credence qualities where the credence quality acts as a proxy for an experience quality (e.g., the belief that organic foods taste better)?  How should damages be calculated, and should defendant culpability (e.g., by inducing belief in the credence quality through advertising) affect damages?  And would liability create perverse incentives by discouraging producers from adopting certain valuable techniques if they are subject to liability when they switch away from them?