EcoFactor and Alternate Expert Theories

Hello world! I've finished my (long) stint as an administrator and suddenly find myself with time to do the things I used to do, like writing blog posts. It's been slow around here, but I am glad Written Description is alive and kicking. I hope to blog on a regular basis going forward - I've missed it.

For my first post in a while, I thought I would tackle EcoFactor v. Google, the first en banc utility patent case heard by the Federal Circuit in many years. With the help of a firm in Texas, I filed one of only two substantive amicus briefs in favor of EcoFactor. I'll discuss the case a bit, what my position was, and my take on the ruling.

The case itself was a run-of-the-mill patent infringement case. EcoFactor won, and presented expert testimony on a reasonable royalty for damages. Google did not present an expert. A key evidentiary problem is that all the prior actual licenses were lump sum, and they were for multiple patents. The expert used recitals in the contract as well as an EcoFactor witness to extrapolate a per unit royalty. He testified that the licenses agreed to an $X royalty [note that I'm not waffling, the actual amount has been kept secret for some reason.]. The expert also testified that the addition of other patents didn't really affect the rate because the technology was all the same.

A divided panel affirmed the infringement and the damages. The en banc court vacated and asked for briefing on the court's role as gatekeeper for expert testimony under the Daubert case. Google and amicii submitted briefs on this, and also argued that apportionment was improperly done. The Federal Circuit instructed parties to leave the apportionment question aside, and I think rightly so (as discussed in my paper on patent portfolios and by Parchomovsky and Wagner here: the value of any given patent in a portfolio is zero, and in the aggregate is basically the royalty rate).

Google and its amicii argued, unsurprisingly, that Daubert requires the judge to ensure that all damages calculations follow the law, and that obviously hadn't been done here. Parties favoring neither side emphasized that courts should not exclude experts just because facts are disputed. I won't discuss these much more - there are plenty of summaries around. They all basically say the same thing (when not focused on policy), with the variation being how strict people think the court should be in determining reliability of damages opinions.

I tend to agree with most of the legal arguments folks made. It is hard not to - there are decades of precedent on admission of expert testimony, at least at the general level. The primary dispute was really on the facts and how those rules should apply to this case. And so I decided to file a brief based in part on my paper (Un)Reasonable Royalties, which discusses the history of royalty remedies as well as a discussion of expert witnesses.  Our argument, pretty simply, was that the opinion was well within the norm of reliability. Experts often extrapolate royalties from lump sums, the language in the agreements at least supported what a willing buyer would want, and there was other evidence in the record (not mentioned in the expert report) that supported the royalty.

The en banc court ruled, 8-2, that the expert testimony should have been excluded. One ground for reversal was that the court didn't explain the ruling admitting it (why it was reliable). This is important for future courts. The second ground, which we'll discuss here, was that the expert's testimony that the royalty rate agreed to in the contracts was $X was not supported by contract interpretation (as a matter of law), and therefore the opinion was unreliable (and non-salvageable by other evidence in the case, which was a primary point of contention with the dissent). In reaching this decision, the Court cited a lot of precedent on Daubert, all of it

My thoughts on the case are below.

Oswald: Do trade secret injunctions last forever?

An injunction in a trade secret case should generally end when the trade secret does. But new empirical research by Professor Lynda Oswald sheds new light on the actual lifetime of these injunctions. The results are surprising. Oswald finds that in the vast majority (~80%) of cases in her dataset, courts simply grant an open-ended injunction without a fixed term. While defendants could in theory move to dissolve the injunction when the trade secret ceased to exist, Oswald found no evidence this happened.  In effect, the injunctions appear to have remained in effect indefinitely.

Lynda Oswald is the Louis and Myrtle Moskowitz Research Professor of Business and Law at University of Michigan's School of Business. Professor Oswald's article, An Empirical Analysis of Permanent Injunction Life in Trade Secret Misappropriation Cases, has now been published in the Iowa Law Review.

OpenEvidence v. Pathway: The Legal Battle Over AI Reverse Engineering

Can generative AI models like ChatGPT be "reverse engineered" in order to develop competing models? If so, will this activity be deemed legal reverse engineering or illegal trade secret misappropriation?

I have now written a few articles exploring this question, including Trade Secrecy Meets Generative AI and Keeping ChatGPT a Trade Secret While Selling It Too. But when I first asked this question a year and a half ago, I was getting responses purely in the negative. I asked a panel at a trade secret conference at Georgetown in 2023, "Can ChatGPT be reverse engineered?" Several members of the panel laughed.  I would talk to AI experts, and the answer I got was along the lines of: "it's not going to happen." 

This post is cross-posted on Patently-O.

Fagundes & Perzanowski: A new framework for conceptualizing the end of IP rights

 Dave Fagundes and Aaron Perzanowski have just posted a very interesting and thought-provoking paper draft on SSRN called "How Intellectual Property Ends."  

The paper, which follows up on their prior work on copyright abandonment, closely examines how IP rights come to an end through doctrines like "expiration," "forfeiture," or "abandonment." The paper seeks to provide a “taxonomy” for thinking about how IP rights end. The authors argue that imprecise or inconsistent uses of terms like "abandonment" and "forfeiture” deprives these terms of meaning and “obscures the underlying logic” of the doctrines as originally developed at common law (5). They instead posit a single unified framework for consistently conceiving of termination that can work across the four IP regimes. 

Buccafusco, Masur, & Varadarajan: Does Trade Secrecy Have an "Information Paradox"?

One of the key purposes of trade secret law is to address the "Arrow information paradox." The information paradox posits that there is a fundamental challenge in information exchange: It is difficult to assess the value of information without first sharing it, but once the information is shared, it becomes vulnerable to being copied, leaving the originator without compensation and without a competitive advantage.  

Guest Post: Diversity Pilots Initiative Comment on Proposed Changes to PTAB Practice

Guest post by Ashton Woods, a JD candidate and member of the Juelsgaard Intellectual Property and Innovation Clinic at Stanford Law School. 

This post is part of a blog post series by the Innovator Diversity Pilots Initiative (DPI), which advances inclusive innovation through rigorous research. DPI will be hosting its second conference at Emory University Law School in Atlanta on Friday, September 20, 2024. Indicate your interest by signing up here.

On February 21, the USPTO issued a Notice of Proposed Rulemaking for Expanding Opportunities to Appear Before the Patent Trial and Appeal Board (PTAB), and DPI filed one of seven comments on the proposal. DPI’s full comment can be found here.

Currently, parties appearing before the PTAB who are represented by counsel must designate lead and backup counsel. Lead counsel must be a USPTO-registered practitioner, meaning that they have technical training and have passed the registration exam (commonly known as the “patent bar” exam). Backup counsel may be non-registered if they are recognized pro hac vice. Under the Proposed Rule, counsel can switch roles, with a non-registered practitioner acting as lead counsel and a registered practitioner acting as backup counsel. Additionally, parties who can show good cause, including financial hardship, can waive the backup counsel requirement, though the party’s sole counsel must still be a registered practitioner. Finally, the Proposed Rule streamlines the pro hac vice recognition process for non-registered practitioners, though they still must be accompanied by a registered practitioner in the lead or backup role. 

As explained in more detail in the full comment, DPI views the Proposed Rule as a modest step toward reducing the accessibility gap for potential patentees, patent practitioners, and patent challengers. The goal of the Proposed Rule is laudable, and it may provide a solid foundation for future efforts to diversify the Patent Bar and the patent system more broadly—if it can effectively expand the pool of eligible practitioners in proceedings before the PTAB, the Proposed Rule may support wider USPTO efforts to increase the participation of underrepresented communities in the innovation ecosystem. 

Gaia Bernstein on "Unwired: Gaining Control over Addictive Technologies"

Guest post by Gaia Bernstein Technology Privacy and Policy Professor of Law, Co-Director of the Institute for Privacy protection and the Gibbons Institute for Law Science and Technology, Seton Hall University School of Law, based on her recent TEDx talk.   

Nine years ago, when I sat down to research in a coffee shop took out my laptop, Kindle and phone, but hours later realized that I accomplished little, but felt fatigue. What happened? I realized the hours were wasted on emails, texts and mostly aimless web surfing. I started understanding them that something was wrong.

Catalog of Court-Mandated AI Disclosures (cf. USPTO Guidance)

Guest post by Victoria Fang, a JD candidate at Stanford Law. Before law school, Fang worked as a patent examiner at the USPTO in the medical imaging and diagnostics space.

In the past year, two “ChatGPT lawyers,” a California eviction law firm, Michael Cohen, and a Colorado attorney have each made headlines for making the same mistake—citing fake cases in legal filings. In attempts to speed up their legal research, these lawyers used generative AI tools like ChatGPT and Google Bard that “hallucinated” nonexistent case law. 

Indeed, use of generative AI by litigants raises issues of accuracy and confidentiality. ChatGPT has been known to “hallucinate” and has other limitations, including being limited to information on the internet before certain date cutoffs and not actively searching the internet or dedicated legal databases for new information. 

Courts have responded to the increased use of generative AI by litigants through judge- or case-specific guidance, standing orders, and local rules, which I have summarized in this spreadsheet. These court mandates have been collated from various news articles, Ropes & Gray’s Artificial Intelligence Court Order Tracker launched in January 2024, and independently searching uscourts.gov. As summarized in the catalog, only a few courts or judges outright prohibit the use of AI. Among courts that do not prohibit the use of AI, some courts require disclosure and/or certification, and others make clear that verification by a human is required. A number of judges even put a special emphasis on confidentiality. More recently, judges have begun requiring litigants to keep a record of the prompts and responses they used, in case issues arise.

Diversity Pilots Initiative Blog Post Series

Happy 1-year Anniversary to the Innovator Diversity Pilots Initiative (DPI)! 

Today we feature two new posts, one by Lolita Darden, PPAC Chair, and one by Colleen V. Chien & Jillian Grennan, on “Unpacking the Innovator-Inventor Gap: Evidence from Engineers.”

See below for links below to all the Diversity Pilots Initiative blog posts so far, cross-posted at DiversityPilots.org and Patently-O.

Guest Post by Chien & Grennan: Unpacking the Innovator-Inventor Gap: Evidence from Engineers

Guest post by Colleen Chien, Professor of Law at the University of California, Berkeley School of Law and co-director of the Berkeley Center for Law and Technology, and Jillian Grennan, Associate Professor of Finance and Sustainability at the University of California, Berkeley Haas School of Business

This post is part of a series by the Diversity Pilots Initiative, which advances inclusive innovation through rigorous research. The first blog in the series is here, and resources from the first conference of the initiative are available here.

Which IP professionals ascend to partnership or top counsel roles? Which professors publish in the top journals? And which innovators become inventors? This question of who among lawyers, academics, or innovators reaches the next milestone in the progression of a career is relevant in many settings. It has been a central focus in the world of innovation since USPTO’s Director Kathi Vidal’s urgent call to ensure that we “get everyone off the bench” in order to solve world problems and foster economic prosperity.

This call is motivated by the observation that while women comprise 35% of the STEM workforce, they make up only 13% of inventors; Black professionals represent 9% of STEM workers but only 1.2% of inventors. What explains this innovator-inventor gap, the reduced rate at which underrepresented innovators become inventors?  Just as lawyers of varying backgrounds do not equally ascend in firms—with women comprising a slight majority of associates but just 24% of equity partners—the journey from conceiving an idea to becoming a named inventor on a patent is not just a matter of technical merit, but, rather, is significantly influenced by the broader work environment.  Because the progression from innovator to inventor happens largely behind closed, corporate doors, this critical gap has largely been overlooked and its causes, largely unexplored, despite technological innovations' critical role as a driver of economic growth.

In our study, "Unpacking the Innovator-Inventor Gap: Evidence from Engineers," which reports on a survey of close to 4,000 innovators across 4 firms, and collaborating firms’ invention disclosure databases, we use detailed administrative and survey data to unpack the forces underlying this gap and provide novel insights into the invention process, how it is influenced by firm policies, and its variation by demographics.  The study's unique empirical data reveal that inventorship, far from being a rote translation of ideas into patents, reflects an opt-in, competitive process, in which only one-third of engineers engage with their firm's formal invention submission processes, and only half of these submissions progress to the patent application stage.  Strikingly, participation rates for women at each step of this journey are significantly lower.  

Guest Post by Lolita Darden: PPAC’s Bold Strategy to Transform Patent Inclusion

Guest post by Lolita Darden, Chair, U.S. Patent and Trademark Office Patent Public Advisory Committee; Managing Partner, Darden Betts Strategic Intellectual Property Counselors; Visiting Associate Professor, George Washington University Law School

This post is part of a series by the Diversity Pilots Initiative, which advances inclusive innovation through rigorous research. The first blog in the series is here, and resources from the first conference of the initiative are available here.

This year the Patent Public Advisory Committee, also known as PPAC, turns 25.  Established in 1999, PPAC is a 9-member advisory committee appointed by the Secretary of Commerce. Each member serves a 3-year term, and I am starting my second year. The primary purpose of the Committee is to review the policies, goals, performance, budget, and user fees of the USPTO with respect to patents. The Committee is also charged, by statute, to advise the Director of the USPTO on these matters and to prepare a report to Congress on the advisory actions the Committee has undertaken during the calendar year. You can find the 2023 PPAC Annual Report here. 

As the new Chair of PPAC, I look forward to collaborating with the Committee and Director Vidal to serve the interests of the American people and the IP community in ways that enhance national and global competitiveness, accelerate growth in GDP, and drive innovation and entrepreneurship.  

For those of you not familiar with PPAC, another function of the Committee is to provide the Director with feedback from our constituents about initiatives being undertaken by the USPTO with respect to patent matters. In that regard, I view my role as Chair as a facilitator, working closely with Committee members to provide advice and counsel to the Director based on feedback received from our respective constituencies. 

This year, PPAC will continue to work with Director Vidal to link patents and invention more explicitly to national competitiveness, through both increasing invention activity and making patent protection available to more inventors around the U.S. It is widely known that innovation is a key driver of competitiveness and long‐term economic growth. It is also known that patents are important measures of innovation. Recent studies show that significant increases in U.S. innovation are achievable by encouraging inclusive innovation, which involves bringing under-represented individuals and communities into the innovation ecosystem. For example, one study finds that “[i]f women, minorities, and children from low-income families were to invent at the same rate as white men from high-income (top 20%) families, the rate of innovation in America would quadruple,” which represents substantial potential growth to the United States economy. 

Beyond the AI Black Box: Links to Articles and Excerpts From Interview With Charlotte Tschider

Maybe others are in the same boat. Until ChatGPT took the world by storm, I didn't have specific plans to write about AI at a granular level. Now my students and in-laws are asking about it. I have to write essays explaining how AI affects my work. The cases are cropping up. For others seeking to write about AI, and especially generative AI, I am sharing links to some articles I found helpful for understanding basic issues, as well as excerpts from an interview I did with Professor Charlotte Tschider, where I asked her questions about AI that she patiently answered.

Guest post by Gugliuzza, Goodman & Rebouché: Inequality and Intersectionality at the Federal Circuit

Guest post: Paul Gugliuzza is a Professor of Law at Temple University Beasley School of Law, Jordana R. Goodman is an Assistant Professor of Law at Chicago-Kent College of Law and an innovator in residence at the Massachusetts Institute of Technology, and Rachel Rebouché is the Dean and the Peter J. Liacouras Professor of Law at Temple University Beasley School of Law.

This post is part of a series by the Diversity Pilots Initiative, which advances inclusive innovation through rigorous research. The first blog in the series is here, and resources from the first conference of the initiative are available here.

The ongoing reckonings with systemic racism and sexism in the United States might seem, on first glance, to have little to do with patent law. Yet scholarship on racial and gender inequality in the patent system is growing. Recent research has, for example, shown that women and people of color are underrepresented among patent-seeking inventors and among lawyers and agents at the PTO. In addition, scholars have explored racist and sexist norms baked into the content of patent law itself. 

In a new article, we empirically examine racial and gender inequality in what is perhaps the highest-stakes area of patent law practice: appellate oral argument at the Federal Circuit. 

Unlike many prior studies of inequality in the patent system, which look at race or gender in isolation, our article looks at race and gender in combination. The intersectional approach we deploy leads to several new insights that, we think, highlight the importance of getting beyond “single-axis categorizations of identity”—a point Kimberlé Crenshaw made when introducing the concept of intersectionality three decades ago. 

The dataset we hand built and hand coded for our study includes information about the race and gender of over 2,500 attorneys who presented oral argument in a Federal Circuit patent case from 2010 through 2019—roughly 6,000 arguments in total. Our dataset is unique not only because it contains information about both race and gender but also because it includes information about case outcomes, which allows us to assess whether certain cohorts of attorneys win or lose more frequently at the Federal Circuit. 

Perhaps unsurprisingly, we find that the bar arguing patent appeals at the Federal Circuit is overwhelmingly white, male, and white + male, as indicated below, which break down, in a variety of ways, the gender and race of the lawyers who argued Federal Circuit patent cases during the decade covered by our study. (Note that the figures report the total number of arguments delivered by lawyers in each demographic category. Note also that the number of arguments we were able to code for the race of the arguing lawyer was slightly smaller than the number of arguments we were able to code for the gender of the arguing lawyer, so the total number of arguments reported on the figures differ slightly.)

Federal Circuit Patent Case Oral Arguments, 2010-2019 

What is surprising, however, is that the racial and gender disparities illustrated above dwindle when we look only at arguments by lawyers appearing on behalf of the government, as shown below, which limit our data only to arguments by government lawyers. (About 75% of those government arguments were by lawyers from the PTO Solicitor’s Office; the others came from a variety of agencies, including the ITC and various components of the DOJ.)

Guest post by Heath, Seegert & Yang: Open-Source Innovation and Team Diversity

Guest post by Davidson Heath, Assistant Professor of Finance, Nathan Seegert, Associate Professor of Finance, and Jeffrey Yang. All authors are with the University of Utah David Eccles School of Business.

This post is part of a series by the Diversity Pilots Initiative, which advances inclusive innovation through rigorous research. The first blog in the series is here, and resources from the first conference of the initiative are available here.

Diversity in innovation is essential. Varied perspectives, experiences, and skills foster creativity and problem-solving. Diverse teams are more likely to challenge assumptions, leading to novel solutions and breakthroughs. Variety in tastes and background can help identify and serve a wide range of user needs. 

Open-source software (OSS) is often praised for its ability to foster innovation. Part of the rationale is that OSS allows for open collaboration, enabling continuous improvement and adaptation by a diverse community. For example, a vast garden of open-source large language models such as Meta’s Llama 2 are flourishing and are projected to surpass closed-source AI in the near future. 

Figure 1. Capabilities of Machine Learning Models: Open vs. Closed-Source 

The open-source collaborative model has accelerated innovation in many fields. Yet to date, we know little about how these teams form, and how their diversity impacts productivity. How does the diversity of OSS teams compare to the overall contributor pool? And what are the productivity outcomes for OSS teams that increase their diversity compared to those that do not?

Guest Post by Paola Cecchi Dimeglio: An Invitation to Inclusive Innovation

Guest post by Dr. Paola Cecchi Dimeglio, Chair of the Executive Leadership Research Initiative for Women and Minorities Attorneys at Harvard Law School and Harvard Kennedy School

This post is part of a series by the Diversity Pilots Initiative, which advances inclusive innovation through rigorous research. The first blog in the series is here, and resources from the first conference of the initiative are available here.

Virtual reality, AI chatbots, and other emerging technologies are fueling a drive to innovate, improve, and patent new products and services that are inclusive from the beginning. This goal is not only morally right but also economically essential; inclusive innovation has become a multibillion-dollar necessity. However, engaging diverse inventors at large technology companies still presents layers of challenges.

In 2022, the USPTO reported a 32% growth in the number of U.S. counties where women patented over the 30-year span from 1990 to 2019; in 2019, over 20% of patents issued included at least one woman inventor; similar data is not available for minority inventors. 

Perhaps more than at any time in their history, technology companies are under pressure to achieve patentable breakthroughs. One factor driving the urgency of innovation is the need to create and commercialize products and services that meet the promises of emerging technologies. Once the stuff of sci-fi and fantasy, the Metaverse and humanlike generative AI have taken substantial steps out of movies and literature. Virtual and augmented reality has gone mainstream, and the premier generative AI chatbot, ChatGPT, set user records shortly after it was released late in 2022. Having sampled the Metaverse and prompted chatbots to pour out pages, the public wants more, and they want it now.

Technology giants often partner with smaller, specialized businesses for the purpose of achieving technological breakthroughs. These collaborative ventures may produce new platforms, result in extensive IP development, and spawn multiple families of products. Most often, they fail. 

In the current race to innovate, businesses are looking within their ranks for beneficial patentable ideas. It makes sense, as employees at all levels of a company have a close relationship with that organization’s products, patents, and aspirations. Leaders realize that the next big invention can emerge from unexpected quarters at their businesses, and many have begun casting the net as wide as possible. 

This time around is different. Innovation has to be highly inclusive at the outset. The environments, cultures, policies, and dynamics of virtual worlds have to operate without traditional biases. And AI has to think and decide without the incidents of discrimination that are dragging many businesses into court. It’s about the bottom line. A Metaverse that is not tuned to highly diverse users cannot achieve its full value potential, estimated at $936.6 billion by 2030. To realize these earnings, inclusion has to be a real part of the innovation process.