(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.

 As I have stated before, these cases are not examples of perfection. Members of the IP bar and business practitioners are often up in arms about these decisions. But these cases illustrate how to pursue patent reform narrowly, and IP reform more broadly, by giving attention to the use of IP as a business asset. I would suggest that these are examples of practical reforms, ones that attempt to align IP law more effectively with its goals of promoting innovation and shaping markets.

 At a recent conference, a speaker described the Court's treatment of IP as an example of neoconservative appeal to markets and resulting skepticism of IP. I am not sure if this is completely the case. Perhaps there are Justices who are influenced by neoconservative ideology. I am not sure if that is the case for the more liberal justices on the Court. Perhaps, IP 3.0 reflects a neoconservative consensus in the political arena that in turn affects the legal system. I am not convinced of that either; one can identify support for IP from both conservative and liberal camps. A better explanation is that the Court is engaged in common law decision making to resolve what is viewed as the anti-competitive effects of intellectual property law. The eBay decision, with its defense of judicial discretion, is a good example of common law reasoning in action. In their interpretations of the Patent Act, so are the KSR and Quanta decisions.

 Skeptics of my interpretation of the Supreme Court decisions, particularly the appeal of IP 3.0, may point to two decisions in which the Court perhaps supported business interests too readily. In Eldred v Ashcroft, the Court upheld Congress' extension of the copyright term for already created works by 20 years. In Grokster, the Court found a P2P network potentially liable under a novel theory of secondary liability. Arguably, each of these cases reflect how the Court bends too readily to business interests. I have two responses to this argument. First, the cases can be understood under other terms than business ones. In Eldred, the Court was deferring to Congress' legislative judgments, which is admittedly a selective decision by the Court, but one that is ostensibly based on deeply-rooted institutional grounds. In Grokster, the Court was following the logic of its 1984 Sony decision, which was correctly decided (within the terms of IP 3.0) for upholding disruptive technologies, but was fundamentally misguided in reading a broad secondary liability taken from the Patent Act into copyright law. Second, and more importantly, these two cases illustrate the need for what I have called IP 3.0 because in each of these two cases the Court ignored the business implications of the rule at issue and, as a result, decided cases that were antithetical to the principles of competition and innovation that is at the heart of IP 3.0.

 I may already have crossed the line from blog post to (god forbid!) law review article.  So, let me end my writing at this point. For those who read all this, thanks for the attention and I welcome any response. Most importantly, thanks to Gordon Smith and the other members of Conglomerate blog for sharing  this virtual real estate this week.

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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.

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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.

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Intellectual property as a legal academic field has evolved through three stages. The first is as a set of service courses, offered by some law schools in recognition that some attention had to be paid to patent, copyright, and trademark law in the curriculum because some students would be interested in practicing in these areas. Except for the field of trademark, which sometimes would arise in the context of competition law or consumer protection courses, intellectual property was not viewed as a serious discipline, certainly not one suitable for serious academic inquiry or for policy.

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.

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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.)

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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.

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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.

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[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 ...

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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.

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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.

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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.

Another data point for the case against patents? HT Peter Klein.

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Last year we discussed copyright and deal documents (read the comments, too, if that topic interests you). Today Peter Lattman has an excellent post on a dispute over complaints. Peter writes:

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.

UPDATE: Larry Ribstein reminds me (again) that he has a paper on this topic. Indeed, the definitive paper! Mea culpa for the oversight, Larry.

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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?

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Michael Geist has the early analysis.

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Last year I called the Vonage IPO a train wreck. Since then, the company has lost 80% of its value. The remaining 20% could be gone soon.

On Friday federal district court judge Claude Hilton issued an order prohibiting Vonage from signing new customers unless it stopped infringing on Verizon's patents. The order was issued one month after a jury found that Vonage had infringed Verizon's patents and set damages at $58 million plus a 5.5 percent royalty on future business. (Vonage's total market capitalization is only $522 million.)

Fortunately for Vonage, the appellate court stayed Judge Hilton's order, pending appeal of the case. Unfortunately for Vonage, the part of Judge Hilton's order requiring an appeal bond of more than $60 million was not removed by the appellate court. While a workaround may exist, Vonage looks to be in big trouble.

Silver lining: I won't have to remember to cancel my phone service before we move this summer.

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The "they" in that title is the United States Court of Appeals for the Federal Circuit. Adam Jaffe is an economist who criticizes the Federal Circuit for its role in "breaking" the patent system.

The Supreme Court heard oral arguments in KSR International v. Teleflex today, which will allow the Court to re-examine the current standard for evaluating the "obviousness" of an invention. Section 103 prevents a patent from being issued "if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains."

According to the Federal Circuit, the "evidentiary component" of obviousness is a "showing of a suggestion, teaching, or motivation to combine the prior art." Brown & Williamson Tobacco Corp. v. Philip Morris, Inc., 229 F.3d 1120, 1124-25 (Fed. Cir. 2000). During the oral arguments today, Justice Scalia said of that standard, "This is gobbledygook!"

The W$J has some background on the case, but if you want the legal briefs, go to Findlaw.

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Things are happening in Austin. On Friday and Saturday, the UT Law School will host the First Annual Conference on Empirical Legal Studies, organized by Jennifer Arlen (NYU), Bernard Black (Texas), Theodore Eisenberg (Cornell), Michael Heise (Cornell) and Geoffrey Miller (NYU).

Two weeks later, Ronald Mann will be hosting the Frontiers of IP Conference, which has an amazing lineup of speakers. And when you have had your fill of IP, you can get a stuffed avocado from Trudy's!

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Trademark gone wild here in Badgerland. Mike Madison has some thoughts.

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For ten years of my misspent youth, I walked from my house to my piano teacher's house once a week where she guided me through various songs of increasing complexity from sheet music.  I was only allowed to play popular music in the summers, so most of the sheet music was quite dusty and came either from the music store a few blocks away or from the publishing company.  I didn't play by ear, and I was never taught to improvise, so my doorway to music was sheet music.  However, earlier this year I decided to take guitar lessons.  The method was quite different.  My teacher would either play something and say "copy me," or write out on staff paper the chords or fingering to a popular song that we both knew -- "Landslide" for example.  I even went shopping for sheet music, my old habit, but found that sheet music is fairly rare these days, and expensive.  Music stores don't carry a lot of sheet music any more.  My teacher told me that if I wanted the guitar tabs for a song, I should look on the Internet.

Apparently, my guitar teacher was a criminal, both for teaching me the chords of popular music, and for writing them down, and for frequenting Internet sites.  According to this NYT article today, music publishing companies are cracking down on both sites that offer free tabs and on musicians who swap guitar tabs on chat sites.  Who knew that my crazy friend who played piano by ear was really a hacker?  In the 1980s, his hacking benefitted only himself, but through the Internet he could have parlayed his talent into an industry.

One point made in the story is that these sites have filled a void -- the market for accessible, affordable sheet music.  I would have gladly paid iTunes or anyone $1 for the sheet music to Landslide (my guitar teacher's handwriting was less than perfect) if I could have.  We'll have to see how this controversy resolves itself; Jonathan Zittrain is quoted in the article as saying the case may not have much merit.

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"Our regressions on a random sample of 4,227 life scientists over a 30-year period show that women faculty members patent at about 40 percent of the rate of men."

This is from a recent paper by Waverly W. Ding, Fiona Murray, and Toby E. Stuart. What explains the difference? This is a very short paper, and the causation issue is not developed extensively, but here are some possibilities explored by the authors:

• Productivity, social networks, scientific field, and employer attributes all affect patenting levels, but even after controlling for all of these, the authors found that gender matters. A lot.

• Do men and women engage in qualitatively different kinds of research? The authors suggest, "if women are risk averse in their research choices, there may be a gender difference in research 'patentability'." The authors look at "scholarly impact" (measured by citation count) and find only a small gender effect, with women actually ahead of men.

• Based on interviews with scientists, the authors suggest two other explanations for the gender gap in patents: (1) female scientists had fewer industry contacts than their male counterparts, and (2) women more often expressed a concern that pursuing commercial opportunities might hinder their university careers.

• The authors observe a substantial generational gap. Their data go back 30 years, and senior female scientists were much less likely to engage in patenting than senior male scientists, but that gap has narrowed.

• This was interesting: "[r]egardless of gender, those [who] experienced patenting during training were undaunted by the challenges of combining academic and commercial science." So experience in training seems to wipe out the gender gap, but men are more inclined than women to patent in the absence of training experience.

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From the W$J. Any surprises for you?

The high representation of California cities is to be expected, but Boise is a mild surprise to me. I have visited Boise, and I know that it is more than just Micron, but its placement at #8 is a bit surprising.

The W$J also has an interesting podcast to go with the story, though the story's author says Bend, Oregon like it's an obscure Tibetan village. Bend is a widely known vacation spot, right?

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Last week, at the Harvard Conference on Case Studies, John Coates offered a fascinating and harsh critique of the lawyering in the Oracle-PeopleSoft takeover battle (described expertly in a case study by David Millstone and Guhan Subramanian). One of John's big-picture points was that deals lawyering generally suffers from the fact that quality is difficult to evaluate, even after the fact, and firms are not rewarded for innovation.

With respect to this last point, we all know (don't we?) that contracts can be copied freely in subsequent transactions, without fear of liability under copyright. The usual justification for such appropriations is "fair use," and an alert reader -- former student Chris Phillips -- noticed that the W$J Law Blog is blogging about the fair use of litigation documents and quoting from this article by Davida Isaacs, a professor at the Salmon P. Chase College of Law. From the abstract:

[C]ourts should permit attorneys’ unauthorized adaptation of copyrighted litigation documents as “fair use” for two reasons. First, penalizing attorneys would not advance copyright’s goal of providing incentives to create additional works, because subsequent unauthorized use does not diminish their market value. Second, because of the presence of market failures, the copyright owners do not license their documents, as one might otherwise expect: unfortunately, both a substantial number of hold-outs as well as transaction costs thwart frequent licensing; moreover, the marketplace is ill-equipped to permit the authors to capture the cumulative increase in value caused by the benefit to the public welfare from the dissemination of the documents.

Are you convinced?

P.S The article actually begins with a vignette about copyrighting contracts, not litigation documents.

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CKX acquired the rights to exploit Muhammad Ali's image, and formed a company called "G.O.A.T. LLC" to house the operations. Goat?

By the way, the price tag on the acquisition was $50 million. According to CKX's filing with the SEC, "This transaction is a continuation of CKX’s mission to partner with iconic content and to use its resources to preserve, protect and grow this content."

CKX also owns rights to the name, image and likeness of Elvis Presley and the IDOLS television brand, which includes "American Idol."

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As part of the continuing coverage of GMU's basketball successes, Peter Lattman announces that Prof. Kimberly Moore will be nominated to the Federal Circuit.  I only met Prof. Moore for the first time this Fall, so I'm glad I'll be able to say "I knew her when."  Lattman, who does not seem to have had the pleasure, seems conservative in extolling her virtues, so we will do so here at the Glom.  Congratulations on your well-deserved nomination!

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Bruce Sewell, the general counsel for Intel Corp., wrote a commentary in Monday's Wall Street Journal entitled "Troll Call."  He discusses the recent $612.5 million settlement that RIM, maker of the ever popular BlackBerry, agreed to pay NTP, a patent holding company that is said to consist of one inventor and one patent lawyer (talk about winning the lottery).  His commentary points out some problems with the ways NTP and other patent trolls use the patent system to force settlements from companies who might be faced with injunctions that would shut down their businesses.  The judge also seems to have played a role here in pushing the settlement.  This most recent settlement is also significantly more than the $450 million settlement that Judge Spencer invalidated in 2005.  RIM's stock price increased by close to 20% after the $612.5 million settlement was announced, showing that markets are at least happy that a major source of uncertainty about RIM's business has been removed.  This was also the biggest one-day increase on the Toronto Stock Exchange since March 16, 2005, when the subsequently invalidated $450 million RIM-NTP settlement was announced.  Sewell suggests that patent owners that have not commercialized inventions should not be able to block others from using such inventions and suggests that the injuction remedy not be applied so broadly for all patents.  He also points to the eBay v. MercExchange case, which the Supreme Court will hear, that will address (and from his perspective hopefully limit) the use of injunctions in patent cases.  The question remains whether this is the way our patent system should work.  I am working on a paper on strategic behaviors and competition and am particularly interested in patent trolls and strategic uses of intellectual property.  I am also looking at the role that the increasing predominance of intangibles plays in intellectual property generally.  What should we consider to be a strategic use of IP?  Have strategic uses of intellectual property increased in recent years?  Do markets value intellectual property and other intangibles in a different way today than they did in the past?  Should it be harder for the NTPs of the world to use the injunction weapon to extract settlements from those who actually commercialize inventions?  Is NTP just taking advantage of the fact that BlackBerry devices have an avid and in some cases addicted user base (leading some to call them CrackBerries)?  What are other examples of strategic uses of IP (copyright and patent) that have had an adverse influence of competition?  Do examples exist where strategic behaviors have enhanced competition?                                                                        

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I can't wait to see what kind of traffic we get today, but apparently Hooters of America, Inc. is suing another Florida restaurant chain for violation of its trade dress.  The trade dress in question is the use of female waitresses that wear tight tank tops and short sport shorts.  (Note that the tops/shorts are of different color combinations.)  At some point, I would think that the objectification of young women with physical gifts cannot be described as "trade dress."  But then I'm not sure that tying one's tank top in a knot behind one's back to make it really tight is purely functional, either.

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As I was wringing my hands about whether to buy a Blackberry (I didn't), the U.S. Patent & Trademark Office was clearing the way for the company who manufactures Blackberries to keep operating. On Monday, the PTO notified Research In Motion that it was planning to invalidate all five patents on which NTP is basing its patent infringement claim. A blog called Blackberry Cool has this scoop and lots more on Blackberries.

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Interesting news today on the book digitization front: According to this story in the New York Times, Microsoft has joined the Open Content Alliance. (For those who can't link through to the Times, you can read the same basic info in this OCA press release.) OCA is the alternative to Google Print. It thus appears that both MSN and Yahoo! will offer search results from the same OCA-sponsored digital data well.
In the shadow of the two recent suits against Google, the most salient difference between Google Print and OCA relates to the decision to scan a library book into the digital archive. Google Print is opt-out (such that the copyright holder must notify Google not to scan it), and OCA is opt-in (such that OCA must inquire of the copyright holder before knowing whether to scan it).
Put aside the (highly contentious, and already well-blogged) copyright law questions. The real debate here is about the completeness of the digital archive, right?
And the juiciest bit in the Times story is not that Microsoft has joined. It is that Google might, too:
"Mr. [Brewster] Kahle [founder of the Internet Archive and a key player behind OCA] has said repeatedly that one of his greatest hopes is to have Google join the project. Mr. Kahle said Tuesday that talks with Google seemed to be progressing toward an agreement. Nathan Tyler, a Google spokesman, confirmed Tuesday that Google was speaking with Mr. Kahle about joining the alliance, but there was nothing yet to announce."

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Executive compensation issues, including disclosure questions, are doubtless part of the regular intellectual diet for hearty Conglomerate fans.  What connection could executive compensation disclosure rules have with patent law?  Find out below the fold ...

Patent blogs and listservs have buzzed a bit over the last few days with the Patent Office's release of its decision in Ex parte Lundgren, overturning a patent examiner's rejection of a patent claim to a "method of compensating a manager ... ."  Dennis Crouch has excellent coverage of the decision on the Patently-O blog (a daily must-read for me), here and here.  It's the latest milestone case in the business method patent craze sparked by the Federal Circuit's decisions in State Street Bank v. Signature Financial Serivces (1998), about a patent on a mutual fund structure, and AT&T v. Excel Communications (1999), about a patent on a data structure that enabled a long-distance calling plan.

The focus for patent lawyers is on the continuing expansion of what's patentable subject matter.  Processes have long been patentable - processes like tanning leather or refining oil.  Computer-assisted industrial processes have also generally been eligible for patent protection at least since 1981, with the Supreme Court's decision in Diamond v. Diehr.

But a process for compensating an executive?  How can that be patentable?  The governing standard at the Federal Circuit (without the benefit of a Supreme Court opinion on this point since 1981) is whether the process yields a useful, concrete, tangible result.  That's met in the compensation method claim: if you carry out the process, you end up with a transfer of funds from a firm to an executive.

And how does this connect up with corporate law's regulations for disclosure of executive compensation?  The more we mandate disclosures that chip away at trade secret protection as a way for firms to get returns on investments in process innovations (like returns on compensation method inventions in the market for manager talent), the more attractive we make patent protection for such process innovations (including by making it easier for patent owners to detect infringement by others).  It strikes me that those who disfavor the rise in business method patenting for reasons internal to patent law (such as the worry that the Patent Office doesn't have sufficient expertise or resources to determine whether such inventions are really new and nonobvious) should think carefully about how business disclosure rules, which they might desire for a host of good reasons unrelated to patenting rates, interact with intellectual property rules.

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Four years ago, almost to the day, we had a dustup with Bayer over our too-small ciprofloxacin stockpile.  The mail-borne anthrax attacks on the Senate, NBC News, and elsewhere drove the surge for more cipro.  This past Friday, stories by both the Associated Press and the Financial Times show that a similar, far graver donnybrook may be upon us ... this time, over Roche's exclusive license to make tamiflu (i.e., oseltamivir), a therapy that may help fight avian flu.  Stephen Gordon urges the U.S. government to push forward to make tamiflu now, and pay Roche later.  Tyler Cowen urges a very different approach, focused on inducing Roche to act much faster to boost tamiflu output.  Neither, however, mentions the cipro flap of four years ago.  The deal we struck with Bayer for our cipro stockpile makes a helpful point for today.

Cowen quite rightly warns against expropriating Roche's tamiflu production rights, and the premium those rights bring.  He focuses on dynamic efficiency:  "If we confiscate property rights this time around, there won't be a Tamiflu, or its equivalent, next time."

Respecting Roche's property rights does not, however, entail paying whatever price Roche demands, no matter how high.  A credible threat to trigger our compulsory license rights under TRIPS provides us with important bargaining leverage, and using it will not, I think, prevent there being a tamiflu, or its equivalent, next time.

With cipro, we bargained hard with Bayer and extracted a 46% discount, from $1.77 to $0.95 per pill.  Today, Roche sells tamiflu in the U.S. for $60 per treatment course.  My guess is that we can get a deep discount and still provide Roche a healthy return, so that it (and others) will continue to develop powerful antivirals and other drugs.  If we need to rattle the expropriation saber in our talks with Roche, so be it.

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A colleague at Yale forwarded a link to this interview with David Kelley, founder of the super hip design firm IDEO and now co-founder of the new Institute of Design at Stanford, known as the "d.school."

For any given project, multidisciplinary teams are formed that have a cross-section of students drawn from engineering, education, humanities, business and/or medicine. This innovative approach has allowed us to work on incredibly interesting projects. This year, we offered a unique class on how design can enrich the lives of autistic children and another using design to help subsistence farmers in India collect and distribute water to irrigate their backyard farms. Our industry project this year was with Electronic Arts on shaping the future of gaming.

But there is something missing . . .

Kelley continues:

When we did group projects before, everyone was from the same discipline and therefore had a similar approach to the problems presented. In d.school design classes, each student has something different to offer their team and seems to be thrilled that they can contribute in unique ways while leveraging the broader scope of their classmates. One of the challenges is to get the faculty to collaborate as easily as the students do! We have been lucky so far and are getting along famously.

Aren't they missing a discipline?  Where are the law students?  Where are the law faculty?  As one (non-law) colleague responded when I described my paper on the role of law in constructing "things":  well, law is design.  Sometimes that means that lawyers tell designers what not to do.  Sometimes it means that lawyers can tell designers what they might try.  Either way, law is inevitably in the room, along with business development, finance, engineering, marketing, history, and behavioral psychology.  At Pittsburgh, I'm in no position to tell David Kelley and his d.school colleagues what to do, but really, Stanford has some very smart people on the law faculty, and they should be connected with this enterprise somehow.

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They've done it:  the Author's Guild has gone ahead and sued Google over the Google Print program, alleging the threat of copyright infringement on an unprecedented scale.  The relevant part of Google Print would scan the entire contents of several major libraries (including the University of Michigan's), including works still covered by copyright; store the contents on Google servers; and enable full-text searches of the entire database that would return results limited to excerpts of the full books.  In principle, users would be able to get whole books only by going to the libraries themselves, or by buying copies.  Google has offered to permit publishers of copyrighted works to "opt out" of the progam if they object.

Bill Patry posted a thoughtful comment recently about the legitimacy of Google's plan under existing copyright doctrine (he's pretty skeptical of Google's fair use argument).  Eric Goldman has echoed Patry's position, though (it appears) with some reluctance.  On the other side of the debate, Jonathan Band has articulated a straightforward application of the fair use argument [pdf] in Google's defense.

For a variety of reasons, I hope that Google actually fights the lawsuit to an adjudication on the merits.  On the merits of the doctrinal question, I suspect that Bill and Eric are right, though I think that Google has some important arrows in its quiver, and I'd like to hear what an appeals court has to say.  And if it manages to win, Google may be planting the seeds of the destruction of copyright as we know it.  Depending on your point of view, that may not be a bad thing.

More below the fold . . . .

First:  Should Google fight the case?  Absolutely.  From a litigator's and trial lawyer's point of view, this is a case worth fighting.  There's lots of money at stake, and both sides have lots of money to spend on fees.  It's very high profile stuff!  And it doesn't (yet) have a clear storyline.  Right now, it's good guys ("do no evil") v. good guys (hard-working, creative "authors").  Moreover, it isn't very often when a fair use argument gets raised by a big-time, well-financed corporate entity.  Usually fair use is the province of the little guy, who has to rely on the legal kindness of strangers.  Sometimes the little guy wins; usually the little guy loses.  That's not healthy for fair use.  One of the partners at my old firm used to say that sometimes, you have to fight the close ones.  Otherwise, you never win the close ones.

Second: I'd love to see some push back against the premise that Google has misbehaved by going ahead with its plans.  Bill Patry calls it Google's " chutzpadik manner"; the Times repeats the Author's Guild mantra that Google "turned longstanding precedents in copyright law upside down, requiring owners to pre-emptively protect rights rather than requiring a user to gain approval for use of a copyrighted work."  Where does the Copyright Act say that it's a game of Mother-May-I?  The Act says that if Google invades one or more of the exclusive rights of the copyright owner without permission, and without an acceptable defense, then Google suffers the penalties provided for in the Act.  Fair use is a defense provided for in the Act.  Google may turn out to be wrong, but if Google turns out to be right, then it's Erich Segal time:  Fair use means never having to say you're sorry.  This is what courts are for.  It seems to me that the Authors Guild, not Google, is being a little presumptive here.

Third:  This is where the conceptual takes over from the pragmatic.  For me, that's where the game gets especially interesting.  Should we agree so quickly that what Google is doing is all well and good -- even if (if your sympathies lie with the Authors Guild) it violates copyright law?  More information for more people!  All information all the time!  No more locking up information in these restrictive things called (watch for it) "books" and these limited access places called (watch out again) "libraries."  I want to ask this question in a slightly different way:  Will Google Print kill the book? 

Books are really, really important things culturally, particularly in Western culture.  Have been for hundreds of years.  Almost everyone loves books and depends on books.  And books are absolutely central to modern copyright law, both conceptually and doctrinally.  (They're even more important than authors, in my view.  But I'll take on one controversial topic at a time.)  Books are fixed, limited containers of creativity.  Books have beginnings, middles, and ends.  Without books, we wouldn't have "works," and without "works" we wouldn't know how to process questions of incentives and questions of access.  We wouldn't know where to put the author's "moral right," if there is one; we wouldn't know what to refer to when we make "fair use" of a work.  We wouldn't know what to distribute, and distribution of creativity is the ultimate goal of the whole system.

If you expose the creativity without framing it in a book -- and this is what Google proposes to do --  all you have is data.  Data that you can mix and remix and reuse and share in bits (bytes) and pieces and aggregates of new scale and scope.  Data that is everywhere and nowhere, all at once. 

When this happens -- and Google may not do it, but I suspect that in the long run, it will happen -- we'll need to rethink not only the premises of copyright law, but we'll also need to rethink some of our arguments about where culture comes from, where it goes, and what we do with it.  This is the sense in which Google Print may be killing the book.  And if the book dies, copyright as we know it ultimately dies too.  (Note, by the way, how this question tracks what has been happening for the last few years in the music business, and particularly how it tracks the evolution of the concept of the copyrighted "work" in the context of sampling litigation.  When copyright protects individual chords, then copyright really is protecting just data.)  I confess that I have mixed feelings about this, and I haven't come to a conclusion about where my sympathies lie.  Right now I'm looking forward to, or at least hoping for, a good fight.

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Yesterday I posted some thoughts about Altera Corp. v. Clear Logic, decided in the Ninth Circuit last week.  Altera, which makes semiconductors, sued Clear Logic, also a semiconductor manufacturer, for stealing Altera's chip designs and for inducing Altera's customers to breach their Altera software license agreements.  Altera won in the trial court, and the Ninth Circuit affirmed. 

But IP licensing issues are tricky, and the case isn't as conceptually simple as it sounds.  The complexities have been nagging at me.

Altera's customers use Altera software to generate designs for programmable semiconductors that can then be etched into Altera-supplied chips.  The software license comes with a restriction on use:  the customers can use the software "for the sole purpose of programming logic devices manufactured by Altera and sold by Altera or its authorized distributors."  This seems straightforward, and a lot of practicing lawyers may look at licenses as mere contracts.  So long as the parties assent, they can agree on pretty much whatever they want.  But (i) even under state law, some terms in ordinary contracts are unenforceable, and (ii) license agreements deal in federally-granted rights (copyrights) that come with some important limitations.  Copyright law preempts some licensing provisions; antitrust law (for example) invalidates others.  License agreements need justification that goes beyond mutual assent.  Is this the sort of contract term that a court should enforce?

The Ninth Circuit blows by the preemption question pretty quickly, and it is pretty quick to reject an antitrust-style argument (framed not as an actual antitrust claim, but as a copyright misuse claim).  I think that the result is right, but the reasoning could use some more explication.

The specific problem is that the Altera software isn't being used to produce the Clear Logic chips.  The Altera software, used by Altera customers, produces a data stream that is used to produce the chips.  The license restriction, as interpreted by Altera and the court, means that the data stream can be used only in connection with Altera chips.  Altera, in effect, "owns" the data stream, by virtue of the license term. 

Though the opinion isn't particularly clear on this, I infer that Clear Logic argued that once Altera customers paid for use of the Altera software, and generated these data streams, then (i) t