Yearly Archives: 2013

Knowing a New Business Model When You See It: Adult Entertainment Innovations And Adaptations in a Post-Napster Era

Jul 3, 2013 Jason Schultz

Throughout media history, purveyors of illicit content have always had to think on their feet when faced with economic or legal dilemmas. Never the darling of regulators, law enforcement, or public representatives, adult entertainment companies have pretty much been left to their own devices for dealing with new challenges. It comes as no surprise, then, that in a post-Napster era of expansive networks, easy copying, and free content, porn producers must rethink how they approach their products and profitability.

In her excellent article, What Drives IP without IP? A Study of the Online Adult Entertainment Industry, MIT Research Specialist Kate Darling investigates the current state of the American sexual expression industry to sort out the various perspectives and approaches its players are taking to the shifting ground they currently tread. What she finds is both an affirmation of numerous common sense intuitions (e.g., that porn producers rely less on copyright enforcement and more on lower costs, higher video quality, content curation, and targeted marketing to maintain market share), as well as some surprising discoveries (e.g., that “experience goods” such as live interaction, gaming, and 3D are becoming a staple for building solid online brands).

More fundamentally, though, Darling’s article brings home a classic post-Napster lesson that all content industries have had to learn at some point: consumer expectations have changed. No matter what you think about copyright, “content theft,” BitTorrent, or digital rights management, the majority of consumers will no longer tolerate significant friction between them and what they want online. Darling presents several credible testimonials of this realization within the adult entertainment industry, each bringing a different emotion to the narrative as if they were part of the Kübler-Ross model: shock, disbelief, anger, tolerance, and, finally, acceptance. In terms of intellectual property in particular, Darling shows that this shift has, in fact, led to some reduction in productivity. Yet she makes a convincing case that it has also forced the industry to adapt in new ways, building new and better distribution platforms, and fulfilling new markets with niche products and services.

Darling’s article also fits nicely into a growing body of empirical research on industries and individuals and their relationship to intellectual property. Through her interviews, she provides yet another narrative where content producers (the group one might assume is most in favor of IP) are deeply uncomfortable with copyright. On the one hand, they do want people to pay for what they produce. On the other hand, they seem less concerned about both exclusivity and enforcement. As long as they can make some money, leaky copyrights aren’t a big problem. Part of this attitude may derive from some characteristics of adult entertainment producers—for example, the quantity (large) and quality (varied) of their products—but more likely, it is further evidence of how difficult and expensive the current copyright system is to use. Given the dramatic shifts in production timelines, distribution modes, and consumption rates, the practical costs to register one’s copyright and hire a lawyer to enforce it probably seems somewhat antiquated and obsolete, especially compared to spending the money on producing a new line of content.

Darling’s article also highlights the way in which adult entertainment producers have capitalized on the market on private viewing. Unlike office workers who may want to share funny YouTube videos or emails for comic relief, pornography consumers often want sanctuary and security for their viewings. Darling’s interviews show that the adult industry is using their understanding of this preference to construct products and services that explicitly cater to those conditions—something the movie, music, and newspaper industries continue to struggle to provide, even though their customers also often desire privacy to consume their products.

As the Copyright Office and members of Congress reimagine “The Next Great Copyright Act” in the coming months and years, one hopes that studies such as this one will help form the foundation for a set of policies that are evidence-based and appropriate for a networked society.

Out of the Mouths of Babes: Studying Children’s Judgments about Creativity, Ideas, and Ownership

May 29, 2013 Christopher J. Buccafusco2 comments

Legal scholars who study intellectual property rarely think about children.  Children are almost never inventors of patented technologies, and, although children’s drawings technically receive copyright protection the moment they are created, children rarely appear as litigants in disputes.

But recent research coming from psychologist Kristina Olson’s lab suggests that we should be thinking more about children.  In their new paper, Olson and her graduate students Alex Shaw and Vivian Li, report the results of experiments testing children’s intuitions about the ownership of ideas.  This paper provides an interesting insight into the development of our ideas about intellectual property and creativity, and it should be widely read by IP scholars.

Olson is interested in learning how and when children’s judgments about creativity, ideas, and ownership emerge.  Research by other developmental psychologists had shown that very young children (2+ years old) apply concepts of ownership to physical objects. In earlier work, Olson showed that 6-year-old, but not 4-year-old, children respond negatively to those who plagiarize others’ ideas.  That research suggested the possibility that children of a certain age think about ideas as things that can be owned.

In this project , Olson and her colleagues set out to test whether children apply principles of physical ownership to ideas.  In a series of studies, 6- to 8-year-old children were presented with vignettes that were intended to test whether they applied fundamental principles of ownership—first possession, non-transfer of ownership via theft, and control of permission—to ideas.  For example, children were given the following stimulus:

Steven has been trying to come up with a song about a dragon but has not come up with a song. Zack sees this and comes up with a song about a dragon. Who owns the song about the dragon?

The authors found that children apply the first possession heuristic—that the first possessor of a thing, not the first pursuer, is its owner—to intangible ideas in much the same way that adults do.  In addition, when told of a situation in which one person steals an idea from the person who initially had the idea, children declare that the original thinker and not the thief is the idea’s owner.  Children also seem to pay attention to whether an individual controls access to an idea in determining its owner – a finding that is striking considering the important role that control and exclusion play in theories of ownership of property and intellectual property.  Importantly, however, the authors show that children do not apply ownership indiscriminately.  For example, children tend not to say that someone is the owner of a mere word rather than a complete idea.

Olson and colleagues speculate on the origins of children’s sense that ideas can be owned. They suggest that children develop concepts of ownership applied to physical objects early in life, and, as they develop, children learn to apply those same concepts to ideas.  This learning may come from explicit socialization about rules or through implicit cues related to the value that is placed on idea creation.  Interestingly, they suggest that these effects may be weakened in non-Western cultures that are less individualist and more prone to see ideas as public goods. William Alford’s work on Chinese IP law is certainly relevant here.

This research raises a number of interesting issues for IP scholars.  Most interesting to me is what they tell us about the emergence and strength of IP metaphors and the moral psychology of creativity and copying.  Much recent IP scholarship has focused on (and often critiqued) the use of real property metaphors in IP debates.  Concepts like “property rights” and “theft,” it is argued, are inappropriate to copyrights and patents.  Bill Patry, for example, has noted how property and birth metaphors are often used in IP debates to promote stronger rights and tougher enforcement, and he has suggested that we should instead understand copyright law as establishing “social relations” between people.

But the work of Olson and her colleagues suggests that getting people to think differently about IP may be incredibly difficult.  Although their research does not suggest that treating ideas like other physical property that can be owned is evolutionarily hard-wired into our brains, it does suggest how easily our minds seem to take to these concepts.  Even without explicit socialization, it seems, 6-8 year old children begin to think of ideas the way they do physical property.  In combination with Olson’s work on children’s plagiarism judgments, this implies that, at a very early age, children are developing moral judgments about the kinds of issues—creativity, copying, and ownership—that are at the heart of IP law.

In other recent and forthcoming research, Olson’s lab is investigating the extent to which children value the contribution of ideas vs. labor in artistic creation and children’s ideas about reputation and attribution.  IP scholars should keep a close eye on all of this work.

Of Trademarks and Brands

Apr 24, 2013 Timothy Greene

As Stacey Dogan noted in her recent review of Bob Bone’s Taking the Confusion Out of “Likelihood of Confusion”: Toward a More Sensible Approach to Trademark Infringement, trademark law is at a bit of a crossroads. Scholars increasingly question basic tenets of trademark law and seek explanations for our blinkered theories of trademarks. Among recent attempts at comprehensive trademark law frameworks, some are good, some great, some … not.

The most insightful and satisfying of these is Deven Desai’s From Trademarks to Brands, which continues a line of research Desai started with Spencer Waller several years ago. From Trademarks to Brands mines the “brand theory” marketing literature for wisdom about the continuous expansion of trademark law. He struck a vein. Desai begins by disaggregating three views of brand value in the literature: (1) the corporate view, in which the firm owns and controls the brand, with consumers passively receiving brand information; (2) the noncorporate view, in which consumers and communities construct brand value; and (3) a synthesized view, in which all these stakeholders co-create brand value by using the brand as an information resource.

Desai argues that trademark law implements brand theory by blurring the focus on source identification. In this traditional focus, a trademark referred to product source. This typically meant that producers limited a mark’s use for a flagship product: Coca-Cola and Pepsi are carbonated drinks and Vaseline is a petroleum jelly.

Trademark law no longer subscribes to that view. Rather, as Desai shows, trademark law has increasingly come to protect (and mark owners increasingly manage) other parts of the brand—namely trade dress and expressive meanings attached to the brand. Sometimes this management is benign; often it’s not.

Consider trade dress protection, which over time has moved from focusing on labeling to product design (and the mysterious tertium quid of Taco Cabana v. Two Pesos). For Desai, “[p]ackaging provided product information and simultaneously served a company’s larger brand project. . . . allow[ing] for greater control over price and distribution, but . . . also creat[ing] a sense of nationhood and belonging.” Desai argues persuasively that the Supreme Court’s trade dress cases aren’t about how to protect particular types of trade dress, but, from a brand perspective, are about how within markets for the same products, “the lack of obvious differences between products [makes] good appearance a ‘necessity.’” The insight is compelling, but should firms be able to use trademark law to protect their interests in differentiation? If so, to what extent?

Desai highlights how trademark law doctrines have moved away from the traditional view. First, the “anonymous source doctrine” holds that when consumers recognize a mark represents a single source, they need not know the specific origin of the good at issue. The doctrine understands the mark to be the thing consumers care about, not the source. It doesn’t matter who’s building the product so long as it bears the appropriate mark, which carries with it information about the consumer’s tastes and the producer’s reputation.

Second, goodwill doctrine holds that trademarks have no intrinsic value, but are reservoirs of consumers’ feelings about a product or producer. Desai contends this doctrine and the expansion of the merchandising and licensing rights are based on a brand view of trademarks. The mark reflects reputation, not a specific product. Thus, consumers value Nike shirts not only because the brand suggests the shirt is high quality, but because consumers like the brand and the message it expresses about their wearing it. That insight applies to house marks and family marks—for example, Apple’s iPod and iPad.

Finally, consider the doctrines of initial-interest confusion, post-sale confusion, and dilution. Desai considers these as close to purely protectionist. Initial-interest confusion doctrine protects brand reputation by preventing others from diverting potential consumers’ attention—even if no actual sales are diverted. Post-sale confusion doctrine seeks to avoid uninterested third-parties’ confusion from knock-off goods; it allows firms to protect brand prestige. Dilution doctrine protects “the substantial investment the owner has made in the mark and the commercial value and aura of the mark itself” notwithstanding a lack of consumer confusion. These doctrines are unmitigated brand protection premised on the “corporate” view of brands, which endows the mark’s owner with most or all of the power to dictate mark usage and meaning.

Desai’s descriptions of trademark law and brand theory are quite convincing. He gives readers several key insights: (1) producers use trademark law to protect more than just source identification, with courts’ acquiescence; (2) this protection is generally exercised to the detriment of competitive and communicative values; and (3) we can fix it.

Desai’s explanation of how to fix the doctrine is incomplete, however. He proposes that all stakeholders shift from the corporate view to the synthesized view, which, for Desai, would lead to brands being used as two-way information resources, thereby increasing trademark’s social value. That’s fine in theory, but not in practice. The corporate view wasn’t adopted arbitrarily. Firms are unlikely to relinquish control over their marks, even nominally. (Consider this Salon article about the lengths to which brand managers go in protecting their brands.) The brand view is what leads firms like Chipotle to sue Jack in the Box and Kroger’s for use of the term “chipotle” on food that includes chipotle peppers. That kind of monopoly is bad for all of us. However well-intentioned Desai is, if the brand view were fully adopted, it would injure social welfare even more than the status quo: under the brand view’s logic, if firms compete by differentiating simply through the allure of their brands rather than the quality of their products, then we risk deterring vigorous competition in the marketplace of goods and impoverishment in the marketplace of ideas. Mark owners would assert their marks against legitimate descriptive uses of previously freely-usable terms. (See the Chipotle cases above for a current example.) But for that implication, there’s much to chew on in Desai’s article, which is a model of clarity in discussing the marketing literature.

Marks on Markets and Competition

Mar 22, 2013 Shubha Ghosh

Lemley and McKenna’s recent collaboration is an article I like (lots) because it highlights a provocative anomaly.   Antitrust law offers special treatment to markets for products protected by intellectual property.  But as Lemley & McKenna point out, if you apply antitrust market definition principles to such markets, there are doubts as to their competitiveness.    There is no price at which some loyalists will switch from Pepsi to Coke, the Beatles to the Rolling Stones, Dan Brown novels to Stephen King ones, or Apples to PCs.  Because of this lack of consumer response to a price change, the authors conclude, antitrust law should scrutinize more closely markets defined by the existence of intellectual property rights.

Lemley & McKenna take their cue from Professor Louis Kaplow’s examination of market definition in antitrust law.¹  Building on Kaplow,  the Lemley and McKenna article offers alternative approaches to address intellectual property cases that make reference to market effects without the use of market definition.  I think this is correct.  At the same time, there is another lesson to be gleaned from antitrust law that I think can be developed.  Antitrust law is a branch of competition policy; the normative foundations of desirable competition inform antitrust law.  My point is that intellectual property doctrines should be based on a deeper appreciation of the norms of competition.

But, what are these norms? Lemley & McKenna state in their article: “Competition doesn’t occur in a vacuum; a company must compete with others in some market.”  (p. 2077.)  Of course, competition has to occur in some space, physical or conceptual, but competition occurs in arenas outside of a market.  Lobbyists compete for legislative attention.  Bloggers, advertisers, and commentators compete for the attention of consumers.  Artists and inventors compete with each other for reputation and professional achievement.   What can we say about competition norms?

Some guidance can be found in trade secret law, an area that is surprisingly absent from the article, perhaps because of its focus on federal intellectual property policy.  But trade secret law provides a model for IP competition, with its focus on rules of disclosure and improper means as instruments for regulating the competitive process in information creation and dissemination. ²  Competition norms also arise from alternative mechanisms and informal rules for creating and disseminating creative works, such as in areas like gourmet cooking, stand-up comedy, fashion, and databases. ³   What I like about the Lemley & McKenna article is how it sets the stage for more discussion of competition norms in intellectual property (and  in antitrust law).

One bigger lesson from the article is the relationship between formalism and realism in law.  Market definition was intended to provide structure to the inquiry of market power by basing it in empirical measures of markets and elasticities.  The good intentions of realism, however, eventually lead to a stale formalism unmoored from the goals of addressing antitrust policies.  Articles like Lemley and McKenna’s guide us back to the policies and goals of intellectual property, to the ideas of competition presented in this essay as well as to many other salient ones.  Future research can incorporate the work of thinkers like George Stigler and Albert Hirschman on the dynamics of competition.  Hirschman’s work on exit, voice, and loyalty provides some innovative and unfathomed ideas for looking at intellectual property law.  Given the research paths paved by Lemley and McKenna, there is truly a lot to like and be thankful for.

Our Lyin’ Eyes: Design Patents and the Perils of an “Eyes Alone” Approach to Novelty and Infringement

Mar 8, 2013 Christopher J. Sprigman

Thanks in large measure to the ongoing worldwide smartphone patent brawl between Apple and Samsung, patents are in the news a lot these days. And that is especially true of design patents – i.e., the branch of the patent law that grants rights in novel, non-obvious and ornamental designs. Apple pressed design patent claims against Samsung that included broad claims of ownership over rectangularly-shaped electronic devices. To many observers, these seemed . . . well . . . crazy. Take Apple’s patents on the shape of the iPhone. Here’s a design drawing from the Apple D677 patent.

The patent claims the shaded portion of the iPhone’s shape – the rectangular shape of the face, the edge-to-edge screen, the shape and placement of the mic. But is this a good patent? The overall shape claimed doesn’t seem novel. Today’s smartphones are increasingly just pocket-sized screens, and screens have been rectangular for a long time. Some have responded that this patent is novel to the extent it claims a rectangle with rounded corners, but the rounded corners are functional – just try carrying a smartphone with sharp corners.  And unlike utility patents, which, as their name suggests, protect useful things, functionality is a disqualifier for a design patent, which is concerned only with a design’s ornamental quality. What about the shape and placement of the mic? Well, if this is the ground of novelty, it’s a trifling one. But for the moment, give the benefit of the doubt to Apple, and say that they are entitled to a monopoly on their claimed shape and placement of a smartphone mic. We still have a problem. How do we get a jury to focus on whether Samsung copied the mic, and only the mic, and not the other features included in the patent drawing – features that, if what’s said above is right, cannot properly be owned by Apple?

This is a problem that recurs constantly in design patent disputes, and one which brings us to Rebecca Tushnet’s new piece in the Intellectual Property Law Journal, The Eye Alone is the Judge: Images and Design Patents.¹ Tushnet’s piece is short and characteristically lucid, and I would recommend it to anyone interested in grappling with how best to understand the breadth of design patent claims and the test for design patent infringement – both key inquiries in a field that seems to be growing in importance to IP scholars and the public debate about innovation and copying.

As Tushnet notes, most designs involve a mix of novel and non-novel or functional features.  These designs are protectable only to the extent of their novelty, or to the extent they offer a novel combination of otherwise familiar features. But how to separate the novel wheat from the non-novel chaff? Relying on the design drawing pushes us toward a gestalt evaluation of overall appearance, and away from the dissection into novel and non-novel elements that is required to ensure that a patentee monopolizes only those design elements that are truly new. If the overall impression of the design, as conveyed by the design drawing, is the measure of infringement, how are factfinders to avoid expanding the scope of the design patent past its proper limits when an accused design looks like a patented design because of similarities in unprotectable features?

The same problem comes up in copyright, and that branch of the law doesn’t deal with it very well. The “substantial similarity” test invites comparisons that include non-copyrightable elements, despite some courts’ attempts to “filter” such elements out of the analysis.

So should we have a written description requirement for design patents, as we have for utility patents? That is, should we require would-be patentees to describe in words the novel features of their design, and separate those features from other parts of the design that cannot properly be claimed in the patent?

The Federal Circuit, in a case called Egyptian Goddess, Inc. v. Swisa, Inc.,² rejected a general written description requirement for design patents and held that, in most cases, design patent images should be left to speak for themselves. And the Supreme Court has held that the standard for infringement in design patent disputes is also purely visual. In Gorham Co. v. White,³ the Supreme Court stated that “if, in the eye of an ordinary observer, giving such attention as a purchaser usually gives, two designs are substantially the same, if the resemblance is such as to deceive such an observer, inducing him to purchase one supposing it to be the other, the first one patented is infringed by the other.” In sum, the Court held that “the eye alone is the judge of the identity of the two things.”⁴

So in most design patent cases we rely on “the eye alone.”  Is this a good idea?

At least three arguments have been assayed against a written description requirement for design patents. The first is that proper infringement analysis shouldn’t involve any dissection, because ordinary observers view designs as a whole and don’t decompose them into their constituent elements or filter out functional or unprotectable parts. That argument is probably an accurate description of how consumers view designs. But it is nonetheless a weak justification for an “eye alone” approach to design patent. Taking it seriously would require us to abandon the novelty screen for design patent, and this we cannot do without violating the constitutional command that patents be granted only for “inventions.”

The second argument against written description focuses on the difficulty of describing complex designs in words. There is certainly truth in this. Tushnet gives the example of a star-shaped ceiling fan. The written description for the design requires more than 400 words, and proves difficult to digest, even for someone practiced in the art of understanding patent claims. But even if words are difficult, they often prove necessary, not least because design patent images often fail to speak for themselves.  Tushnet points out that courts dutifully recite the Egyptian Goddess injunction against the need for written description in design patent cases, but then engage in lengthy written analysis comparing the design drawing at issue to the prior art. Obviously, in the view of these courts, it is far from clear that any fair-minded person, viewing the patentee’s image and comparing it with the prior art, would reach the same result the court reaches in a particular case.

The third argument against written description is harder to dismiss. Written description is undesirable, this argument holds, because once you introduce a textual description of the claimed design, it inevitably alters the way we see that design – to wit, written description makes us see the design less well.

Read Tushnet’s article to see her careful response to this argument in full.  If you do, you may be left, as I was, with the following thought. The primary function of a written description requirement would be to push back against the tendency of the “eye alone” approach to grant rights in features that are not novel and properly belong in the public domain.  The effect of this would be to narrow design patents overall, and, as a consequence, to dull the incentives of firms to obtain them. But would that potential disincentive to patent designs, in turn, reduce the incentives of firms in a variety of markets to invest in new designs? That depends on whether competitive forces – including the ways in which design contributes to function – are sufficient to provoke substantial investment in improving product aesthetics. And on that overriding question, we know very little.