The course I teach at Wharton has an IP component, which in turn has a patent component, which in turn has me trying to explain to skeptical would-be entrepreneurs why one would possibly want to have a world in which people can invent something, not file for patents, and still defeat patent holders in litigation based on the first-to-invent doctrine. Next week, Congress will be voting on whether to change the US's first-to-invent rule to match the rest of the world's first-to-file rule, and my colleagues on the other side of the unversity, David Abrams and Polk Wagner, have done a study on whether the change would be a good idea. As Polk observed over on Patently-O, "the results do reveal that, contrary to the conventional wisdom, a change to first-to-file ... is likely to result in reduced patenting behavior by individual inventors."
That's quite a policy-relevant take away, on quite a big potential change in patent law. Congress may find it quite interesting - although it could be that they feel constrained by international harmonization impulses to change to first to file anyway. At any rate, the paper's up on SSRN, here's the abstract:
Even as as we stand on the cusp of the broadest set of changes to the US Patent Law in two generations, virtually no empirical analysis has been conducted on the impact of the primary components of the proposed reforms. Until now. In this paper we investigate the expected effects on patenting behavior of the major change in the America Invents Act of 2011: a shift in the patent priority rules from the US’s traditional “first-to-invent” system to the dominant “first-to-file” system. This is a deeply controversial change: Opponents argue that first-to-file disadvantages small inventors and leads to lower quality patents. Those in favor emphasize administrative simplicity and the cost savings of first-to-file. While there has been some theoretical work on this topic, we use the Canadian experience with the same change the US is considering as a natural experiment to shed the first empirical light on the question.
Our analysis uses a difference-in-difference framework to estimate the impact of the Canadian law change on small inventors. Using data on all patents granted by the Canadian Intellectual Property Office and the US Patent and Trademark Office, we find a significant drop in the fraction of patents granted to small inventors in Canada coincident with the implementation of first-to-file. We also find no measurable changes in patent quality. The results are robust to several different specification checks. While the net welfare impact that can be expected from a shift to first-to-file is unclear, our results do reveal that, contrary to the conventional wisdom, the rule change is not free — it is likely to result in reduced patenting behavior by individual inventors.
(posted by Shubha Ghosh)
In the past few posts, I have discussed various aspects of IP3.0, the current focus within intellectual property law on transactional practice and uses of IP, the recognition of IP as a business asset. Today, I examine the implications of IP 3.0 for IP policy.
My appreciation of IP 3.0 arose from the need for IP reform. Like other law professors and practitioners, I have watched the ongoing debates over the past fifteen years or so (roughly when I formally entered into the area of IP with coursework in law school) and the debate over ownership and access and the role of each in promoting innovation. I have watched as these issues were worked out at the statutory and constitutional levels. My continuing concern, however, has been with IP practice in its many ways, in other words, how do the policies of IP become reflected in practice. Of course, practice means different things to different constituencies. For the IP bar, it often means how to ensure that one's patent is granted and not challenged (even seemingly at the expense of whether the patent covers a valuable invention or at the expense of future inventors or users). The IP bar, for obvious reasons, is concerned with strong IP protection even if such protection is not conducive from a broader perspective for innovation. Users and follow-on inventors, creative and inventive people of many stripes, are often ignored in the balance. One needs to recognize IP practice pretty broadly, especially the way in which it is used by and affects wide sets of constituencies, not just ones represented within the IP bar.
The response in these IP debates has been one of balance, which often means find some utilitarian, highly principled way to define legal rights to reach the correct policy result. I have actually become skeptical of this notion of balance, not just in the area of IP, but perhaps more broadly. Focusing on IP policy here, I want to suggest that reaching the right result is not a matter of balance in the abstract, but in recognizing the practices affected by a legal rule and coming up with an approach that attempts to be the least disruptive to the broad set of practices that arguably tend to promote innovation. I want to suggest that recent Supreme Court decisions in the field of intellectual property pursue this goal by implicitly recognizing what I have called IP 3.0 and has been largely successful, especially when compared to reforms pursued by Congress and the USPTO. I want to emphasize this last point: my argument is about relative institutional success as opposed to absolute success. The latter is rarely possible in a world with a large set of often irreconcilable interests. From the perspective of incremental change and relative competence, Supreme Court patent reform has done a good job.
I will touch on three cases in which the Court has implicitly recognized IP 3.0, the role of IP as a business asset, and make the point for the success of the decision. In eBay v. MercExchange, a 2006 decision, the Court ruled that patent injunctions were discretionary. The Court split three ways on how this discretion was to be exercised, with one group of three supporting traditional equitable principles, another group of three supporting principles based upon patent policies, and a third group supporting principles based on the business effects of the injunction on the defendant. In KSR v. Teleflex, a 2007 decision, the Court attempted to raise the standard for nonobviousness in patent law, in response to concerns over low-quality patents issued by the USPTO that potentially affected the integrity and reputation of the patent system. Finally, in Quanta v LG Electronics, a 2008 decision, the Supreme Court applied the principle of patent exhaustion, specifically the first sale doctrine, to strike down certain licensing practices that allowed the patent owner to control use and distribution by downstream users of the patented technology. Each of these decisions, as well as others I could have mentioned, were shaped by the business use of patent law and potentially its disruptive effect on markets and competition. These cases are examples of IP 3.0 in action.
Today, I will discuss how to integrate a transactionally oriented IP course into the law school curriculum. Some of the ideas here are based on my experiences writing and teaching a co-authored casebook on this subject, Intellectual Property in Business Organizations: Cases and Materials (Lexis-Nexis 2006).
For more reading and a different perspective, I highly recommend, Sean M. O' Connor, Teaching IP From an Entrepreneurial Counseling and Transactional Perspective, 52 Saint Louis U. L. J. 877-90 (2008). I know many schools have implemented a transactional IP course, and I apologize for not mentioning these efforts in more detail. But I hope people will chime in with their own experiences in this area.
Let me first address the issue for the law school with the lean curriculum where faculty and administrators may view a transactionally oriented IP course as too exotic or impractical to offer. There are ways to integrate a transactional IP component to lean curricula, beyond hiring an upper level adjunct to teach a specialized course to a handful of students. First, transactional concepts can be introduced into a basic IP course with some attention to licensing and employment issues. Second, IP issues can be integrated into a business organizations course, especially one that discusses start-ups. IP issues may also be raised in a discussion of securities and due diligence, to the extent that these topics are addressed in the business curriculum. Such inclusion can enrich the discussion of these fields and introduce contemporary topics.
For a school with a slighter bigger curriculum, there is of course more room to integrate transactional IP courses into the set of electives available for students. A third year capstone course on transactional intellectual property would be a desirable way to introduce business students to intellectual property and intellectual property students to business. Ideally, a survey IP course or a basic Business Organizations course could be prerequisites for the course, or you could require one of these two as a prerequisite. The course could be open to business school students, permitting classroom assignments allowing business and law schools to work together. As a third year capstone course, the focus would be on integrating skills learned during the previous two years of law school and for laying a foundation for future practice. Such a capstone course would complement courses on law and entrepreneurship like the ones taught and developed by Gordon Smith, Darian Ibrahim, and others. Furthermore, for law schools that are associated with universities with technology transfer offices, such a course might benefit students employed by these offices or might serve as a basis for a clinical IP component in the curriculum, very likely connected to a technology transfer office.
Thinking more globally, a transactional IP course might alter how IP and business transactions are taught. In most schools, IP is introduced through a survey course. There is some ongoing controversy over whether an IP course is necessary, but my sense is that the debate is over with most serious schools offering a survey IP course that presents the four big areas of IP (trade secrets, copyright, patent, and trademark) in an integrated and comprehensive way. The idea behind such a course is to lay a foundation for more advanced courses. While this survey course has traditionally been doctrinally focused with an eye towards litigation practice as the norm, there is no reason why the basic survey course could not be taught as a transactions-oriented course. The two principle themes of the course would be identifying IP assets (that is, identify what can be the basis for trade secret, copyright, patent, or trademark protection), learning how to secure rights in these assets (use of NDA's and non-competes, the basics of patent and trademark prosecution, an introduction to work-for-hire and other employment issues), and learning how to realize value through licensing practice. Personally, I have not taught the survey course primarily in this way when I have taught it. I do touch on some of the business issues raised by IP, but my course has been fairly traditional. There is no reason, however, why the survey course could not taught with a transactional slant as opposed to the traditional litigation or constitutional policy slant. I should point out here that my co-authors Richard Gruner and Jay Kesan have an IP survey casebook with Thomson-West (on which Robert Reis is also a co-author), and we have tried to integrate transactional concepts into that book, partly to lay a foundation for our IP and Business Organizations course and casebook (previously mentioned).
In addition, transactional IP might alter how we think of the traditional business organizations course. Intellectual property is an important tool for business organizations, a mechanism for codifying knowledge within a firm and for defining its boundaries. Scholarship by Paul Heald, Dan Burk and Brett McDonnell (as well as myself) have explored this issue. In terms of teaching, the links between IP and the firm would shift the focus of the traditional business course to start-ups, employment, and licensing issues. For those who cover business taxation, the intersection of IP and tax could also be introduced. Some reading this may view my suggestion as just adding more to an already bulging course. My suggestion, however, is not to add to the set of materials out there, but to propose an alternative way of teaching transactional skills that recognizes how intellectual property issues inform current practice and shape the legal regulation of business activity.
Tomorrow, I turn to this last point, legal regulation, and show how IP 3.0 reflects and shapes how IP policy has evolved over the past few years, especially as seen in Supreme Court decisions.
In the previous post, I talked about IP 3.0, the latest version of IP teaching and scholarship that focuses on transactional issues in intellectual property. Today, I want to talk about why IP provides an excellent vehicle for conveying transactional skills and thinking in law schools.
The main reason, and this is more serious than it appears, is that intellectual property can often make the bitter pills of law school go down more smoothly. That is not a slam on transactional courses or on law school. I am just amazed how raising intellectual property issues into the law school classroom can turn a student's attention away from Facebook, Bejewelled, Expedia, or whatever web page may be up on his laptop at the moment. Want to teach about dreary subjects like common law process or tort damages? Let me pass on some cites to right of publicity cases to you. If your experience is like mine with these cases, classroom discussion will exponentiate with previously inert hands rising to attention and undifferentiated faces suddenly become attached to a voice. The concept of a contract not getting through? Let me suggest a couple of IP cases involving licenses and transfer of copyrighted works or trademarks. Constitutional decision making unusually opaque today? Try talking about Eldred to show deference to Congress and the bending of constitutional language in action. Analogously, some of the inert concepts of transactional practice can be better appreciated when seen through the lens of intellectual property.
There is something more than window dressing going on here. After all, legal doctrine can be spiced up in other ways. There are many substantive points where IP overlaps with the goals of a transactional law curriculum.
There are five areas where intellectual property and transactional legal skills overlap: (1) formation of a business, (2) licensing, (3) employment, (4) identifying sources of transactional value, and (5) securities disclosure and due diligence. Transactional skills are most critical at the formation stage of a business. The formation stage also raises numerous intellectual property issues: trademark registration and protection, patenting, the identification and clearance of IP rights. Businesses, at various stages, have to decide between making or buying, a decision which affects the negotiation and drafting of licenses. The internal organization of a business also hinges on employment decisions, the choices of whether to use independent contractors or employees and the terms on which these parties are hired. The choice of type of worker and terms may be shaped by the intellectual property strategies of the firm. Finally, intellectual property is a source of transactional value within a firm, and the identification of IP sources of value would affect disclosure requirements and the due diligence of a seller and purchaser of a firm's securities and other assets.
These five practical areas of overlap translate into a distinct set of transactional skills that can be effectively conveyed through the teaching of intellectual property. The first is identifying business assets. Understanding intellectual property law and institutions is critical in identifying the sources of value for a business and the types of business assets which can be the basis for realizing value. Identifying what is a patent, copyright, and trademark as well as what can be protected by patent, copyright, or trademark is foundational for recognizing and valuing business assets. The second skill is understanding how background common and statutory law serve as defaults for contractual negotiation in some instances and as immutable rules in others. In other words, law shapes the contours of a business asset and affects its value. The final skill is negotiating rights over intellectual property in order to realize and transfer these sources of value and to avoid litigation over these assets. Intellectual property provides a basis for teaching business planning and organization skills.
Today's post highlights the overlap between intellectual property and the transactional curriculum in law. Tomorrow, I discuss how this overlap can be implemented in the curriculum.
Then, something changed in the 1990’s. The field received a lot more attention at the domestic and international levels, perhaps out of greater concern with the need to promote innovation and economic growth, perhaps out of industry pressures as certain high technology industries expanded economically and then politically, or perhaps out of the move to privatize and liberalize legal systems, whether the shift from the New Deal paradigm in the United States or the shift towards more liberal political and economic regimes in certain developing countries. Intellectual property became hot, all schools starting expanding in this area (albeit at different rates) and much academic inquiry focused on intellectual property law and policy. The field obtained constitutional valence both through an increased focus on constitutional law and norms in intellectual property and through a recognition that intellectual property law may perhaps be constitutive of (i.e. the foundation for) the law and the economy more broadly. This expansion seemed to reach a plateau with some big Supreme Court defeats for the academy (Eldred v Ashcroft, Universal Studios v Grokster) and increased legislative efforts which took intellectual property out of the realm of academic theory and back into the dealings of the Beltway world. Intellectual property has become normalized with many voices formulating arguments within an established academic frame of ownership, on the one hand, and access, on the other.
Now, we are talking about IP 3.0, and my sense is that this recent stage of intellectual property is about recognizing and developing the transactional practice of intellectual property, as opposed to defining the rights structure of intellectual property within a set of constitutional norms. At one level, IP 3.0 is about ordinary practice: IP is a business asset, a source of value, and we need to understand how this set of rights called intellectual property is transferred and restructured through transactions within and between firms. What is relevant in IP study is how these rights are licensed, acquired, and transformed into value. In some ways, this progression is the logical one from constitutional IP: once foundational rights are established, the next step is to see how they are practically administered and used. At another level, IP 3.0 reflects some dissatisfaction with IP 2.0. The constitutionalization of IP failed. Eldred was a disappointing decision with the Court’s seeming to conclude that Congress can pretty much do what it wants as far as copyright (and patent) legislation. If Congress pulls the strings, then IP constituencies would have to learn how to play Beltway politics to move the game in their favor. Grokster, perhaps, solidified this sense of failure (at least symbolically; the case really may not be much of a watershed practically) by revealing that Sony, the keystone of copyright fair use, may not be that protective or limiting on copyright after all. If the cathedral fails to stand, then we are left to play with the individual stones.
The latter scenario is overly pessimistic. The shift to considering IP as a business asset, the core of IP 3.0, may be an acknowledgement that true IP reform can best occur through better IP practice. If we want to promote greater use and dissemination of protected works, then creating legal rules of protection may be wholly inadequate, especially if rights protective of users and employees can readily be transacted away. Focus instead on the transactions themselves: develop a richer set of licensing terms, understand how these terms can be disseminated and then enforced by the courts, consider doctrines that shape transactional practice (such as the first sale doctrine in the recent Supreme Court decision in Quanta v LG Electronics), think about the life of intellectual property in the world of commerce, and see how the wheels of commerce can shape the scope of intellectual property rights.
Hence the transactional turn in intellectual property which I am seeing in current intellectual property study. This vision is not myopia on my part since I am the co-author of a casebook on Intellectual Property in Business Organizations. I see this turn in the scholarship of many IP colleagues, in the conferences on entrepreneurship, in the curriculum of some law schools, and in the development of case law, particularly the big Supreme Court IP decisions since 2005 (eBay, Independent Ink, KSR, Quanta). I will discuss the implications of this transactional turn for IP policy towards the end of this series of posts. But I would first like to explore what this transactional turn entails, looking at the important overlap between intellectual property and transactional practice tomorrow and then at the details of a transactional intellectual property course the next day.
Thanks to Gordon for the invitation to guestblog this week. Actually, I am not sure if he offered or I volunteered earlier on this year, but in any case here I am, quite ready and excited to share my thoughts with the world (or our small part of it).
I plan to post on the specific topic of integrating intellectual property issues in a transactional law school curriculum.
Everyone has some sense of what intellectual property is about (the set of rules and institutions designed to promote innovation and creativity in society), but the term transactional law may be less clear. The term covers, at the least, traditional business law courses such as Business Enterprise (or Bus Orgs or Business Associations, or some similar term), Securities, Mergers & Acquisitions, and related doctrinal areas. More broadly, the transactional law curriculum would also include skills-focused courses such as negotiation, contract drafting, and deal-making. So described, what I am calling the transactional law curriculum includes clinical and doctrinal courses that are geared towards developing transactional skill sets, both through learning the details of transactional practice and through understanding legal relationships as transactional (as opposed to adversarial).
Over the next few days I will be making the case for the importance of intellectual property in a transactional law curriculum and for thinking of intellectual property in transactional terms. I will make these points through the following series of posts: (1) the transactional turn in intellectual property, (2) the intersection of intellectual property and transactional law, (3) what a transactional intellectual property law course would look like and (4) the policy and conceptual implications of the transactional turn.
The next few blogs can be viewed as a preview of a presentation by me and my two co-authors (Richard Gruner and Jay Kesan) at the 2009 AALS Midyear Business Association to be held next June. (Of course, all ideas here are my own and do not represent the opinions of my co-authors.)
The W$J has an interesting story today about the Allied Security Trust. A response to the recent explosion in patent litigation, the AST will "buy up key intellectual property before it falls into the hands of parties that could use it against them." More detail:
The new Allied Security Trust aims to buy patents that others might use to bring infringement claims against its members. Companies will pay roughly $250,000 to join the group and will each put about $5 million into escrow with the organization, to go toward future patent purchases....
TMC.net points out the irony of Verizon as a founding member of the AST, when Verizon sued Vonage (and others, it turns out) for patent infringement. Verizon won that lawsuit, by the way, and Vonage ultimately agree to pay Verizon $120 million. Obviously, Verizon would argue that the AST is designed to prevent unmeritorious litigation, and that seems fair. Still ...
UPDATE: In an unrelated story, GigaOM spots more irony, this time from AT&T.
Google is the assignee of this patent, filed last week:
At a client, a video is received. The video includes one or more advertisement slots. The video is played back to a user. During the playback of the video, an impending advertisement slot is detected. One or more advertisements are requested for placement in the advertisement slot. The one or more advertisements are received and placed in the advertisement slot.
Is this the future of YouTube? From a quick browse, I can't tell how this would differ from the television playbacks, which are now routine.
[UPDATED] In our continuing effort to keep you apprised of developments on the frontiers of law and cheese, I note today's decision of the European Court of Justice holding that ["Parmesan" is not a generic product name.] "Parmigiano Reggiano" is a protected designation of origin [and only authentic "Parmigiano Reggiano" can be sold under the name "Parmesan."] According to the BBC story, authentic Parmesan is "made by fewer than 450 cheese-makers close to the Po River in northern Italy." In honor of the decision, take a look at this promotional video with a catchy jingle ...
If you have been to Berlin, I assume that you have sampled Currywurst. I prefer Bosner (or Bosna) Wurst, which I encountered as a Mormon missionary in Linz, Austria, but the core ingredients are the same: sausage/hot dog, ketchup/tomato sauce, and curry powder. (The Bosner also has onions and a bun.)
Butchers in Berlin who make sausages for Currywurst are upset by imported sausages from other EU member states. So the butchers have applied for "geographic indication" protection, like that afforded "Champagne" or "Parmigiano Reggiano." The butchers want their sausage to be known as "Berliner Currywurst." The problem is that the sausages don't become "Berliner Currywurst" until you top them off with tomato sauce and curry powder. As explained by Axel Nordemann is an attorney with Boehmert and Boehmert, one of Germany's top intellectual property law firms:
The sausage itself is not a Berliner currywurst, it needs something additionally to become a currywurst. You see, you can take this ground sausage for the currywurst, you can take it and eat it with mustard, and then it's certainly not a Berliner currywurst.
As noted by Nordemann, the average consumer of Berliner Currywurst can't tell the difference between the local sausages and the imports. "Es ist mir wurst," so to say.
Last Monday, Marketplace described Tonya Andersen's battle with the Recording Industry Association of America (RIAA). Andersen was accused of downloading music files. Despite her repeated denials and the lack of credible evidence of infringement, the RIAA continued to press its claims. Ultimately, the RIAA agreed to dismiss its lawsuit, but only after Andersen had incurred substantial attorney's fees.
Last Friday, in response to Andersen's motion for attorney's fees, a magistrate judge in the US District Court for the District of Oregon ruled in Andersen's favor:
Copyright holders generally, and these plaintiffs [RIAA] specifically, should be deterred from prosecuting infringement claims as plaintiffs did in this case. Plaintiffs exerted a significant amount of control over the course of discovery, repeatedly and successfully seeking the court's assistance through an unusually extended and contentious period of discovery disputes. Nonetheless, after ample opportunity to develop their claims, they dismissed them at the point they were required to produce evidence for the court's consideration of the merits. Despite the protracted nature of this action, at this point, as noted by plaintiffs, there is no explanation for the inconclusive nature of the evidence relevant to their claims. Plaintiffs assert that the unresolved, or unresolvable, status of the merits provides no basis for deterrence. Plaintiffs are incorrect, because this case provides too little assurance that a prosecuting party won't deem an infringement claim unsupportable until after the prevailing defendant has been forced to mount a considerable defense, and undergo all that entails, including the incurring of substantial attorney fees.
This is deja vu for the RIAA.
Last month I blogged about the lawsuit against Facebook founder Mark Zuckerberg by his former Harvard classmates. (The judge has given the plaintiffs until tomorrow to produce more evidence of a contract, noting that "Dorm room chit-chat does not make a contract.")
Today brings word that Facebook is being sued for patent infringement. (Surprise!) The short complaint is light on detail, but the claim is based on a 2002 patent for a "System for creating a community for users with common interests to interact in." Which appears to cover any social networking site.
Earlier this month we reported on another putative class-action lawsuit filed by law firms Proskauer Rose and Bernstein Litowitz against Google. They represent the Premiership (Britain’s professional soccer league) and music outfit Bourne Co.
Grisman’s complaint, filed by Berman DeValerio in San Francisco and Lovell Stewart in New York, bears a striking resemblance to the one filed by Proskauer and Bernstein. For you, O Law Blog reader, we’ve highlighted the very substantial portions of the Berman DeValerio complaint that match word-for-word the Proskauer/Bernstein one. (Click here for the Proskauer/Bernstein complaint, and here for the Berman/Lovell complaint.)
As you will see if you click on the second complaint, most of it is copied directly from the first. Peter asks, "Should lawyers be able to copy each other's litigation documents?" Yes.
If this topic interests you, see this article by Davida Isaacs.
The Supreme Court's new opinion KSR Int'l Co. v. Teleflex Inc. on the "obviousness" inquiry under §103 of the Patent Act has IP bloggers hopping. Michael Barclay calls KSR "the most important patent case of the last 20 years, and perhaps since the passage of the 1952 Patent Act." Dennis Crouch is not so moved, stating that "the opinion appears to simply refine the particulars of how prior-art can be combined and when a 'combined patent' will be seen as obvious."
David French calls the opinion an "anti-patent initiative by the US Supreme Court," and Mike Madison offers examples from the opinion where "Justice Kennedy, writing for the Court, may have let his pen run away from him," but Joe Miller loves this sentence from the Court's opinion: "A person of ordinary skill is also a person of ordinary creativity, not an automaton."
For my money, the most interesting part of the opinion is the section in which the Court discusses the effect of the obviousness inquiry on innovation:
The obviousness analysis cannot be confined by a formalistic conception ofthe words teaching, suggestion, and motivation, or by overemphasis on the importance of published articles and the explicit content of issued patents. The diversity of inventive pursuits and of modern technology counsels against limiting the analysis in this way. In many fields it may be that there is little discussion of obvious techniques or combinations, and it often may be the case that market demand, rather than scientific literature, will drive design trends. Granting patent protection to advances that would occur in the ordinary course without real innovation retards progress and may, in the case of patents combining previously known elements, deprive prior inventions of their value or utility.
The bloggers seem to agree that KSR could lead to more patents being rejected by the PTO and more existing patents being declared invalid. Is this a good thing?