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How Do You Like your Books?

Sep 27, 2024 Jessica Silbey1 comment

Do you ever wonder how it is that libraries can lend books repeatedly, while copyright owners (e.g., book authors) are granted the exclusive right to distribute their copyrighted works? Or how publishers make money selling books at retail prices when a person can resell books (or buy used books) for much less (hello Amazon Used Books for under a dollar!)? The reason is because of copyright’s “first sale” doctrine, 17 U.S.C. § 109, codifying the common law’s exhaustion principle, which says owners of lawfully made copies are allowed to dispose of those copies without regard to copyright law. In other words: the right to distribute is “exhausted” with the first sale. This means we can resell, lend, or give away our books. What we can’t do is make copies of them.

And that is where the concept of “digital lending” runs headlong into copyright law. When libraries buy books, they can lend them without restrictions. When libraries lend e-books, those e-books come with contractual provisions limiting their lending in substantial ways because reading an e-book requires making a copy, which is not exhausted by the first sale doctrine. As the Supreme Court has said (in the patent context, which has a similar first sale principle): “exhaustion applies only to the particular item sold, and not to reproductions.”¹

But libraries, which Professor Rub aptly describes as “among the most cherished institutions in our society,” are increasingly engaging in e-book collection and e-lending to accommodate patron preferences and needs. E-lending enhances libraries’ core mission providing access to books and information and is especially effective when in-person patronage is challenging, such as in rural areas and in cases of disability or a pandemic. But e-book lending is substantially more expensive for libraries and license restrictions allow publishers to retain much more control over uses, disrupting the first sale balance that has kept libraries flourishing for so long. Professor Rub’s article describes this imbalance, the legal puzzles it raises, and then proposes some novel solutions.

In the background and haunting the article’s discussion is the case of Hachette et. al. v. Internet Archive, currently pending before the U.S. Court of Appeals for the Second Circuit. That case concerns a multi-publisher lawsuit against a different kind of library: the Internet Archive, a non-profit digital-only library, which describes itself this way: “Like a paper library, we provide free access to researchers, historians, scholars, people with print disabilities, and the general public. Our mission is to provide Universal Access to All Knowledge.” The Internet Archive engages in what it calls “controlled digital lending,” (CDL) whereby instead of an in-person library patron borrowing a print book (thus making that book unavailable to all other patrons), the Internet Archive patron receives a digital copy of the book (which the Archive scanned for this ). While the Internet Archive patron has access to the digital scan, no other patron does. CDL aims to mimic the scarcity model that is the basis of print lending.

The problem, of course, is that CDL does not precisely mimic the model of print lending, as Professor Rub explains. First, book scans are copies, and making a copy is an exclusive right of the copyright holder that is not exhausted upon purchase of a lawful copy of the book. (Whether it is fair use under certain conditions is a good question that the article addresses at some length, as does this White Paper by David Hansen and Kyle Courtney.)

Second, CDL scans do not degrade the way print books do, and so libraries do not have to replenish their stock of digital collections as they do for print books, which are often replaced after significant use. Publishers claim to rely on library replacements to turn profits. Without such repurchases, publishers assert that their revenues fall as does their support for authors. (For whether publishes complaints about their continued viability in the digital age can be fully credited, I urge readers to consider The Publisher’s Play Book: A Brief History of Publishing Industry’s Obstruction of the Library Mission.)

Third, CDL is instantaneous, whereas print lending has significant friction that slows access. Friction means libraries lend print copies less frequently than e-books (or scans), and thus to serve demand, libraries will buy more print copies when they don’t have to license more e-books. These differences lead to conclusions drawn by Professor Rub and the many others he cites that digital first sale does not exist. It also means that the Internet Archive’s CDL practice is at substantial risk of being held unlawful.

That doesn’t leave libraries without options, however. Professor Rub’s article is largely devoted to saving (if not empowering) libraries and CDL practices, because as he explains, libraries all over the country face a serious financial crisis. Public libraries – the model created by Benjamin Franklin in 1790 in my neck of the woods (Franklin, Massachusetts) – are unusual around the world because they are free and open to anyone. They serve many functions beyond lending books, including anchoring communities as places to convene and learn. But their budgets are threatened by diminishing tax revenue and exploitative pricing of e-book licenses (which Professor Rub describes in detail). Moreover, state laws, such as the Maryland Library Ebook Fairness Law, which would have required book publishers to offer public libraries reasonable licenses to ebooks, have been successfully challenged as unconstitutional.

So what are some of the solutions? Professor Rub provides many possible avenues. One suggestion is to “replicat[e] the physical world” by creating friction in digital lending so that CDL resembles print borrowing. Although CDL would still involve unauthorized copying, such conditions of friction ostensibly minimize market harm. Given the public benefits of distribution, the library practice would comfortably fall within fair use.

A second option is to adopt a “digital public lending right” (ePLR) akin to the Public Lending Rights in EU countries that collect royalties for lending books (because the EU does not have the equivalent of the first sale doctrine). An ePLR would allow libraries full digital exhaustion rights as they enjoy with print books, but publishers would be entitled to collect royalties determined by a public governance body to offset revenue loss.

A third way to achieve digital lending is to support market segmentation along variables of time, usage, and wealth. For example, digital books might be unavailable for new titles (similar to home movie streaming which is often delayed until after theaters show new releases). Or public libraries could offer preferential digital access to patrons whose income is below a certain wealth threshold and who are less likely to allocate their scarce resources to purchasing books (or ebooks).

My favorite of his suggestions focus on state-run public libraries (including public university libraries). These suggestions encourage states (1) to use their market power to demand favorable licensing terms from publishers, and (2) to exercise sovereign immunity if sued for copyright infringement stemming from their CDL practices. Given how important libraries are for state government and communities, encouraging states to get in the fight to save them makes a lot of sense.

Each of these suggested solutions (some of which Professor Rub acknowledges) pose problems, but they are worth considering to save our most “cherished institutions.” Some of my favorite quotes about libraries explain why: “Libraries are full of ideas – perhaps the most dangerous and powerful of all weapons.” (Sarah Maas, from Throne of Glass) And “the only thing that you absolutely have to know, is the location of the library.” (Albert Einstein) Whether you like your books in paper or electronically (and there is some interesting empirical research on just that question), libraries should provide both and they need help doing so. Professor Rub’s article significantly advances the conversation and hopefully recruits more lawyers and legislatures to the cause of saving the free public libraries.

Service Dress: Trademark Law’s Secret Third Thing

Sep 4, 2024 Alexandra RobertsAdd a Comment

In an oft-quoted moment in the Supreme Court’s Wal-Mart v. Samara opinion, Justice Scalia articulated three types of trade dress: product packaging, which can be protectable from its earliest use if deemed inherently distinctive; product design, which is only ever protectable upon a showing of secondary meaning; and a third category, “some tertium quid that is akin to product packaging,” which is also capable of being inherently distinctive. As Professor Dustin Marlan sees it, Scalia coined the phrase to save face. He “needed a conceptual mechanism for distinguishing restaurant décor (previously held capable of inherent distinctiveness [in Two Pesos]) from product design (now considered incapable of such [in Wal-Mart]), without overruling the previous Two Pesos holding outright.” In so doing, Scalia conflated trade dress for services with product packaging in a way that has sowed confusion since 2000.

So what exactly is a tertium quid—Latin for “third thing”—and why should trade dress in that category be treated as capable of inherent distinctiveness? And how have courts perpetuated the vague, amorphous idea of tertium quid for more than 24 years without any real interrogation?

In his forthcoming article, Marlan takes a magnifying glass to the phrase, working backward to consider its derivation (alchemy; religion) and then forward from Wal-Mart to explicate every trade dress case that incorporates it. What he finds is fairly straightforward. Just about every case categorizing trade dress as tertium quid has at its heart what Marlan labels “service dress”: not product design, which is the shape of a tangible good; not product packaging, which is what a tangible good gets boxed inside; but rather experiential elements of branded services, such as restaurant décor, store layout, retail displays, employee uniforms, menu presentation, “look and feel,” and other aspects of design connected with services and the places in which they’re provided. Service dress is In-N-Out’s red and white diner-style setup, the layout of a Yankee candle display shelf, the cuffs and collars worn by Chippendale’s dancers, or the design of an Apple store from floor to ceiling. Mostly service dress is about protectability of spaces, rather than objects or symbols. The tertium quid is trade dress for services, and Marlan argues that it demands decidedly different treatment from trade dress for goods when it comes to assessing distinctiveness and protectability.

Why? The primary purpose of product packaging is usually a branding purpose—it’s designed to catch the eye, communicate source-indicating information, and improve commercial efficiency by distinguishing the brand from others and enabling consumers to find what they prefer quickly and consistently. It’s possible for product packaging, like word marks and logos, to do what a trademark does from its very first use. Product design, on the other hand, is far more likely to serve utilitarian and/or aesthetic purposes. It follows that product design faces more hurdles to registration: it may be deemed functional; it may fail to function as a mark; it may require substantial investment in the form of sales and look-for advertising before it comes to serve as a source indicator to consumers. Marlan argues factfinders should treat service dress with the same caution. It certainly isn’t akin to packaging, as Scalia claimed, because “a service…has no container, being an intangible concept without material exteriority.” Instead, like product design, service dress’ primary purpose is usually something other than source identification, such as user experience, efficiency, effectiveness, quality, cost, aesthetic appeal, or desirability. In marketing parlance, service dress takes the form of “touchpoints,” which consumers tend to value for non-source-indicating reasons. So service dress doesn’t deserve the free pass it has received since Wal-Mart.

Marlan advocates instead that trademark law treat service dress as incapable of inherent distinctiveness, requiring a user to establish “commercial significance prior to removing that touchpoint from the experiential commons.” The competitive interest in copying service dress, like the competitive interest in copying product design, is substantial and benefits consumers, new entrants, and the marketplace up the point when the service dress becomes clearly source-indicating. Requiring secondary meaning also gives competitors better notice of the scope of rights that might be asserted against them, lowering transaction costs and improving predictability. In addition, Marlan observes, trademark law lacks a consistent doctrinal test for determining inherent distinctiveness of nontraditional marks, leaving factfinders to rely heavily on intuition, so those determinations tend to be erratic and unpredictable. Determinations of secondary meaning are based on more robust information and track more objective indicators than determinations of inherent distinctiveness for trade dress.

In Tertium Quid Unveiled: Trade Dress and Service Design, Marlan gleans guidance from the field of service design and analyzes the entire set of federal “tertium quid” cases. His proposal is well-supported, persuasively argued, and far from radical, although it does require a walking-back of some case law from the last quarter-century. Once he reveals tertium quid trade dress for what it is—not something ineffable and unknowable, but simply service-related design elements—it becomes readily apparent that requiring secondary meaning would better serve the interests of fairness and competition.

Samuel Johnson Was a Blockhead

Jul 24, 2024 David FagundesAdd a Comment

If you jostle an IP scholar awake in the middle of the night and ask them, “What is the canonical justification for copyright and patent,” the first thing they’ll say is, “What the hell are you doing in my bedroom?” But the second thing they’ll say is, “Limited exclusive rights in works of authorship and inventions are necessary to preserve incentives to create them.” Or as Samuel Johnson more bluntly put it, “No man but a blockhead ever wrote, but for money.”

Everyone knows that this is the received wisdom. But strangely, at the same time, no one actually believes it. Intuitive counterexamples to Johnson’s “blockhead” comment are easy to conjure. Authors often produce content with zero expectation of remuneration simply because they have something to say and want to share it with others. Scientists engage in pure research because they want to contribute to how we understand the world (and also because they are paid a salary, by universities, or drug companies, etc.). Developers produce innovations not only to become the next Uber or Google but to improve others’ lives and for the love of making stuff.

The transparent incompleteness of the Johnsonian view that only financial incentives motivate creation raises a further question: If love of money doesn’t (or doesn’t solely) explain creativity, what does? Here is where Andres Sawicki enters the conversation with his fantastic recent article, The Law of Creativity?, which makes major advances in our understanding of how creativity works and what law can do to better encourage it.

Sawicki’s model of creativity begins with identifying three components. First, a domain of extant artifacts and ideas that promise to function as the building blocks of creative production, such as books, art, or scientific theories. Second, makers who combine their insights with content in those domains to produce new innovations and artifacts. And third, evaluators who assess and curate the content of those domains.

This domain-maker-evaluator model in turn yields a temporal model of how creativity emerges and declines, one that complicates traditional assumptions that creation is simply a product of individual effort inflected by state or private incentives. Sawicki identifies several historical instances illustrating that creativity tends to follow a standard pattern. At first, domains tend to be sparsely populated, making it difficult for makers to find material from which to develop new work. In some instances, though, evaluators intervene to organize and popularize the content of some domains to render them more accessible to makers. When this happens, domains may take off, producing the kind of bursts of collective production familiar from, for example, impressionism in the late 1800s or nuclear physics in the early 1900s. Such efflorescence, Sawicki cautions, can have downsides. As domains become overcrowded they tend to ossify, leaving little space for new content.

Sawicki’s descriptive account of creativity as a self-sustaining ecosystem with uniform, predictable features yields several substantive insights. For example, he argues that patent’s written description requirement should be revised to render it less technical and more accessible to a general audience. Such a move, Sawicki suggests, would enable more cross-discipline creativity by allowing a wider range of evaluators to understand and leverage the domain of patented inventions.

In terms of copyright, Sawicki argues that imposing an attribution requirement—and in particular, one that honors the contributions of all makers rather than just a few dominant authors—would facilitate a richer understanding of how creativity works, allowing evaluators to better understand how domains operate and calibrate their understanding of multiple makers’ contributions to works of authorship.

There is so much to enjoy about this article. For one thing, it reaches well beyond the closed universe of law review scholarship, inviting insights from scholars working in fields such as psychology and sociology (e.g., Amabile, Czikszentmihayli) that have made major advances in how creativity works. It is also replete with fascinating stories that illustrate its author’s point. The Law of Creativity? doesn’t just articulate a compelling theory of human and social creativity. It also explodes the myth that Van Gogh was a solitary genius creating ex nihilo and explains why it took so long for someone to invent the bicycle.

Sawicki’s piece is as important as it is entertaining. He is certainly not the first author to propound alternative accounts of creativity that complicate the dry and no longer plausible Johnsonian model.² The Law of Creativity? makes an important move beyond preexisting work, though, in two respects. First, it identifies the central importance of evaluators who, alongside creators and artifacts, play a formative role in creative ecosystems. Second, he translates insights about the psychology of creativity at an individual level into a claim about how creativity operates both temporally and socially.

And while Sawicki’s arguments about how his model should inflect IP doctrine are cogent, his work motivates other lines of inquiry as well. For example, if IP is not (or is not only) a public goods problem to be solved by state intervention, what posture should law take toward creative production more generally? Should law even seek to intervene in these processes, or should it let the domain-maker-evaluator dynamic develop without government interference?

If anything, Sawicki’s work invites much bigger questions than just how a few features of patent and copyright law could be tweaked. It should cause us to rethink basic premises of our IP system. Here’s just one: Sawicki observes that domains sparsely populated with content often languish absent evaluators who seek to intervene in them to make these domains more susceptible to innovation. This appears to be a shortfall that law could remedy, suggesting in turn that patent and copyright may do well to incentivize evaluators to engage with early-stage domains rather than focusing their incentive policies solely on creators themselves.

A host of other questions arise out of Sawicki’s model, further illustrating its generative potential. He collapses, for example, the very different kinds of creativity that lead to the subject matters of patent and copyright. It seems entirely plausible that the domain-maker-evaluator dynamic may play out differently with respect to works of authorship and inventions. And while Sawicki has convincingly shown (again) that creativity does not exclusively depend on financial incentives, it remains true that for some categories of high-investment works (most obviously large-scale motion pictures), exclusive rights are a prerequisite to protect creators’ investments. So rethinking how IP systems work may not mean choosing between competing models of creativity, but acknowledging their non-mutual-exclusivity and imagining how law can help optimize social creativity that takes into account multiple such models and motivations.

The foundational Johnsonian premises of our IP system are as old as the American Republic itself, so it’s hardly surprising that they could use some serious updating. Andres Sawicki’s The Law of Creativity? is a compelling and readable effort in this direction, one that invites us to rethink basic features of how creativity works and what that means about how law should engage with it.

The Textualist Supreme Court Misreads the Copyright Act Once Again

Jun 18, 2024 Christopher J. BuccafuscoAdd a Comment

Virtually no one in the scholarly community is happy with the Supreme Court’s 2023 decision in Andy Warhol Foundation v. Goldsmith. The case produced aggressive majority and dissenting opinions by justices whom we normally think of as well aligned: Justice Sotomayor writing for the majority, and Justice Kagan writing in dissent. Peter Karol’s recent article shows that the opinions generated more heat than they did light, because the two Justices fundamentally misunderstood the case, the law, or both. This leaves the case’s precedential value deeply in doubt.

The case pitted the Andy Warhol Foundation (AWF), a nonprofit organization created after Warhol’s death to license uses of his artwork, against Lynn Goldsmith, a photographer who took a photo of the musician Prince in 1981. In 1984, Goldsmith’s licensing agency granted Vanity Fair a license to use the photograph as an artist reference for a story that would appear in the magazine. Vanity Fair then commissioned Warhol to create an image to illustrate a story about Prince. Warhol (and/or his team) created 16 images based on the Goldsmith photo (the Prince Series), one of which was used by Vanity Fair. Then, when Prince died, Condé Nast contacted AWF about licensing one of the Prince Series prints for a commemorative issue, which it published in 2016. Condé Nast chose a different Warhol work depicting Prince for the cover of that issue.

Litigation began when AWF, the licensing agency, filed a declaratory judgement action against Goldsmith asking the court to find that “the Prince Series is a fair use.” As Karol notes, this was a strange first step, because AWF wasn’t asserting that any particular use (e.g. creation of the series) was fairly done, but rather that the works as a whole represent a fair use.

But the confusion quickly grew with Goldsmith’s counterclaim. Goldsmith alleged that AWF infringed her copyright in the photo by: (1) reproducing; (2) publicly displaying; (3) commercially licensing; (4) distributing; and (5) incorporating into derivative works her photo. As Karol explains, however, while four of these activities could constitute copyright infringement (1, 2, 4, & 5), there was no evidence that AWF actually did any of those things. That is, Goldsmith did not show that AWF copied the photo or created the cover image. Those behaviors were done by non-parties, by Warhol and his team or by Condé Nast. Goldsmith did claim that AWF commercially licensed a work based on her photograph, but granting a license simply isn’t copyright infringement. It’s not one of the owner’s enumerated exclusive rights.

Building on recent work by Pam Samuelson, Karol next shows how this “licensing use” became the centerpiece for the Supreme Court’s judgment. Samuelson has argued that the Office of the Solicitor General was responsible for “hijacking” the case and setting it down the wrong path. Based on the SG’s brief, the Court only addressed the “licensing use” by AWF, because it thought that Goldsmith waived any claims she might have had about the creation of the series or against museums’ display of the works. Thus, Justice Sotomayor’s opinion focused almost exclusively on a behavior that is itself non-infringing and for which a fair use defense is unnecessary.

Karol helpfully explains why licensing a copyrighted work isn’t a copyright-relevant use of the work, but rather just a grant of permission and a contract not to sue. The owner of the licensed asset (here AWF) grants permission to someone else who actually uses the asset (here Condé Nast) in a copyright-relevant way by making and distributing copies of it to the public. The license, on its own, needn’t assert that the licensor actually owns any copyright in the work. It simply indicates that the licensor won’t sue the licensee. The best argument for how AWF violated one of Goldsmith’s exclusive rights is that AWF “authorized” others to reproduce the work when it was not entitled to do so. But as Karol argues, any claim in this direction would require pleading and proving that AWF was liable for some sort of secondary infringement rather than direct infringement. And, of course, Goldsmith never attempted to do that.

So what should we take from this case? It seems unlikely that the Supreme Court intended to create a new species of direct copyright infringement for unauthorized licensing. If so, many parties in art, film, and music licensing have new liabilities to fear. Karol, understandably, doesn’t like that reading, so he offers two other suggestions that “stay faithful to the Court’s arguments and intent while avoiding the potential hazards of its foundational error.”

The first is simply to treat Condé Nast as the true direct infringer and interpret the Court’s analysis in that light. As noted, this would require the challenging task of locating some secondary liability for AWF, but doing so is not implausible.

The other alternative is to assume—despite a lack of evidence—that AWF created a digital copy of the Warhol image that it distributed to Condé Nast. To me, this is probably the easier way to teach the case to students, but as Karol notes, many art licensing agencies clearly do not distribute images to their licensees, so it’s hard to know how the Court’s opinion affects them.

Once again, the Supreme Court has made life even more difficult for copyright law professors. And just as it did in Star Athletica, the Court’s misreading of the Copyright Act created the mess. Is it too much to hope that a Court committed to textualism could read the statute properly? I guess so.

Reviewing Four Decades of Supreme Court Patent Decisions

May 29, 2024 Pamela SamuelsonAdd a Comment

Gugliuzza and Lemley have produced an important contribution to the literature about the Supreme Court’s engagement with patent law issues over a forty-year period since 1982. That was the year that the Court of Appeals for the Federal Circuit (CAFC) began having exclusive appellate court jurisdiction over patent cases. Their article considers whether certain tenets of the conventional wisdom about the Supreme Court’s patent cases are myths or reality.

Does the Court distrust the CAFC? Has the Court’s rather large volume of patent cases (62 since 1982) had major impacts on patent law? Does the Office of the Solicitor General (OSG) always get its way in patent cases? Conventional wisdom would answer all three questions in the affirmative. Gugliuzza and Lemley conclude that the conventional wisdom is correct in some respects, but not so much in other respects.

To set the stage for their analysis, the article offers a novel categorization of the Court’s patent cases: 1) the common law of patents (e.g., subject matter, validity, and infringement); 2) statutory interpretations of the patent act; 3) jurisdiction or procedure issues; and 4) non-patent substantive law issues (e.g., antitrust). Gugliuzza and Lemley characterize the common law and statutory interpretation cases as “core” to patent law, while jurisdiction, procedure, and non-patent cases are, in their parlance, “peripheral” to patent law.

The article reports that since 1982, the Court agreed with the CAFC’s ruling in only 8 of 29 core patent cases (27%) and disagreed in 21 others. In 24 of these cases, the Court addressed a rules v. standards issue, which the Court resolved in 20 cases by adopting a standard instead of a rule. The authors conclude that it is “fair to say that the Supreme Court has tried to rein in the rule formalist proclivities of the Federal Circuit, at least in cases involving core patent law doctrines of validity, infringement, claim construction and remedies.”

Gugliuzza and Lemley say that CAFC has the worst record with the Court in its patent remedy cases and does only slightly better in jurisdiction and procedure cases. Yet, if one excludes the Court’s remedies/jurisdiction/procedure patent cases, the Court agreed with the CAFC in 42%, including 5 of the 10 most cited Supreme Court patent rulings. The CAFC’s overall record is, the authors conclude, not as bad as the conventional wisdom might suggest.

One might infer from the rather large number—62—of Supreme Court patent cases since the mid-1990s that the Court has had a major impact on patent law. Some rulings—particularly those on patent subject matter, the nonobviousness standard , claim construction, venue, and injunctive relief—have, the authors agree, had profound effects on patent law.

Yet Gugliuzza and Lemley conclude that the Court’s high impact patent cases are more the exception than the rule. For one thing, more than half—33 of 62, or 53%—of the Court’s patent cases involved peripheral issues. Of the Court’s 29 core patent cases, the authors report that many involved issues that do not come up very often, including 3 cases interpreting § 271(f). They are consequently skeptical of claims that the Court has had major impacts on patent law.

OSG’s exceptional record of success in patent cases has been documented in several prior studies. Gugliuzza and Lemley report that the Court agreed with OSG in all but 4 of the 45 CAFC cases in which OSG filed briefs. On the merits, the Court ruled as OSG recommended in 38 of 48 cases (79%). OSG has had even greater success in cases involving core patent issues (23 of 25 cases).

Yet, the authors report that OSG has been less influential with the Court in patent cases since 2010. In 4 of 9 cases, the Court affirmed the CAFC despite OSG’s recommendation to reverse. OSG has also had less success with the Court when appearing as a party. The Court followed OSG’s recommendation in only 5 of 12 such cases.

Gugliuzza and Lemley identified three patent eras since 1982. The first era ran from the founding of the CAFC in 1982 to 1994, during which the Court reviewed no patent cases. The second is what they call the Rader era, running from 1995 to 2014, during much of which Judge Rader was Chief Judge of the CAFC. They name the third era as modern. While the CAFC was 0 for 10 in the Rader era between 2002 and 2009, I was surprised to learn that the Court agreed with the CAFC at a higher rate during the Rader era than in the modern era.

While Gugliuzza and Lemley do not set forth a grand unified theory of the Court’s patent jurisprudence, they have provided their readers with much useful data and a nuanced perspective on the evolution of the Court’s patent cases since 1982.

The Surprising Predictability of Patent Eligibility

Apr 29, 2024 Lisa Larrimore OuelletteAdd a Comment

It is hard to think of a patent doctrine—or indeed any doctrine in IP law as a whole—that has received more critical attention over the past decade than patentable subject matter. In a series of four cases from 2010 to 2014, the Supreme Court sparked an ongoing controversy by imposing sharp limits on patenting inventions such as medical diagnostics, human genes, software, and business methods. In the wake of these decisions, an invention may be groundbreaking and important, but nonetheless unpatentable if it falls into the Court’s implicit exceptions to patent eligibility for “laws of nature,” “natural phenomena,” and “abstract ideas.” Under the “Alice/Mayo” test, if a patent claim is “directed to” one of these ineligible concepts, it is patentable only if it also contains an “inventive concept” such that the claim “amounts to significantly more” than a patent on the ineligible concept.

These subject matter limits led to a barrage of criticism, much of which focused on the test’s unpredictability. The criticisms have come from judges, academics, practitioners, the DOJ, and even memes. Bipartisan legislation has been repeatedly introduced to address the “confused, constricted, and unclear” law. Senators have also tasked the USPTO with collecting public comments on the issue.

Yet, according to a new draft article by Nikola Datzov and Jason Rantanen, the narrative of unpredictability is on “shaky empirical ground.” Surprisingly, they argue that over the past decade, disputes about patentable subject matter have been more predictable than disputes about other patent doctrines. Datzov and Rantanen analyzed all patent eligibility decisions by the Federal Circuit between 2012 through 2022. This court hears appeals both from all district court patent litigation and from decisions by examiners at the USPTO. They found that the Federal Circuit not only affirmed lower tribunals almost 90% of the time, but also almost always affirmed on the same basis. These cases also involved fewer dissents than on other patent law issues. The authors are not arguing that the Alice/Mayo test is easy to apply, or that it is necessarily good policy. But their results should shift the focus of the ongoing patentable subject matter debates.

Datzov and Rantanen are not the first scholars to argue that handwringing about patent eligibility’s unpredictability is unwarranted. For example, Jason Reinecke surveyed over 200 patent attorneys in 2017 about actual litigated claims and concluded that the Alice/Mayo test is “not as amorphous as many commentators have suggested.” Ben Dugan was able to train an AI classifier in 2018 based on USPTO eligibility decisions. Mark Lemley and Samantha Zyontz’s empirical study of judicial decisions on patent eligibility through 2019 also found a high rate of affirmance at the Federal Circuit.

Nevertheless, the conventional wisdom remains that the doctrine is a quagmire. Datzov and Rantanen tackle this narrative with a thoughtful analysis of why evidence cited in favor of the unpredictability thesis does not indicate that the sky is falling. They also offer a more detailed and updated empirical study of their preferred predictability indicators that includes both methodological innovation and an admirable commitment to transparency and data availability.

Datzov and Rantanen used the Federal Circuit Dataset Project, an open-source dataset of all Federal Circuit decisions. This dataset includes a large number of summary affirmances under Rule 36, which the Federal Circuit frequently and asymmetrically used in patent-eligibility cases. They found 368 eligibility decisions between 2012 and 2022. About one-quarter of these appeals came from USPTO and three-quarters from district courts.

The Federal Circuit affirmed the USPTO’s decisions over 95% of the time. This is perhaps unsurprising given that only ineligibility decisions are appealed from the USPTO. Moreover, the agency’s guidance to examiners is more eligibility-friendly than the Federal Circuit’s caselaw. But the Federal Circuit affirmed district court decisions 85% of the time. In almost all cases, it did so in procedural postures in which the district court receives no deference. This is higher than its affirmance rates for claim construction and obviousness. Despite some high-profile fractured decisions, there are nonetheless fewer dissents in patent eligibility decisions than in decisions on all other patent law issues, whether one focuses on all appeals (6.5% vs. 8.1%) or just appeals from district courts (8.6% vs. 10.7%).

Reversal rates and dissent rates are established metrics for evaluating the predictability and uniformity of a particular doctrine. Datzov’s and Rantanen’s data suggest that patentable subject matter isn’t out of step with other patent doctrines. They also look to a third metric that is an important innovation for empirical work: whether the Federal Circuit identified a legal error in the lower tribunal’s analysis even if it affirmed the result. Error rates provide an additional perspective on whether the law can be predictably applied because they can show whether judges get the right results for the wrong reasons. Three coders reviewed each of the 153 affirming opinions (excluding Rule 36 affirmances). They found that the Federal Circuit identified errors in only seven opinions—less than 5% of the cases.

Datzov and Rantanen argue that the very high rate of error-free decisions “significantly undermines the assertion that the law cannot be predictably applied by judges.” Because of the novelty of this empirical analysis of error rates, this result cannot be compared with other patent doctrines, but it should serve as a benchmark for future studies.

What do these results mean for patent-eligibility reform efforts? Datzov and Rantanen note at the outset that their goal is not to defend the Alice/Mayo test. They explicitly cabin normative issues such as whether limiting patents in certain areas has increased or decreased innovation. This is a question that existing evidence cannot answer. They also acknowledge that the doctrinal test could be clarified further. Some of their results may stem from patent eligibility being used largely as a shortcut to quickly dispose of clearly invalid patents early in litigation.

If judges do not feel confident resolving eligibility motions at the pleadings stage, patent challengers may shift their efforts to doctrines like obviousness that are easier to explain to a jury. These considerations do not undermine Datzov and Rantanen’s conclusions. Rather, this would suggest that in practice, eligibility is being used in the easier cases where the results are more predictable, perhaps reducing litigation inefficiencies.

Of course, the surprising predictability of patent eligibility may offer little solace to law students who struggle with applying the Alice/Mayo test to borderline claims in casebook practice problems. But every patent doctrine has thorny borderline cases. Just because law professors love to live in the grey areas doesn’t mean we shouldn’t remind students that in practice, the answer isn’t always “maybe.”