Tuesday, January 10, 2017

IP and Federalism: An Expanding Field

Thanks to those of you who attended the "Intellectual Property & Federalism" panel at AALS, moderated by Jennifer Rothman and organized by Joe Miller. I truly enjoyed each of the presentations of my fellow panelists: Guy Rub, Brian Frye, Rothman, and Sharon Sandeen. If you missed it, read more at the jump.

Patent preemption 
I spoke about my paper "State Anti-Patent Law". The paper assesses the rules that govern preemption of what I term "state anti-patent laws": state laws that challenge or impede enforceability of federal patents. I show how the Federal Circuit's current approaches err, and reveal a better preemption rule based on the IP Clause itself that has a long and surprising history.

Copyright preemption
Guy discussed his paper on express preemption in copyright. He argues that copyright judges use a highly formalistic analysis in applying the "extra element" test, and that this test sometimes leads to absurd results, such as preempting contracts that do not expand the rights of the copyright owner while declining to preempt contracts that do. Guy makes an important insight: while we may get frustrated with the uncertainty and broad discretionary scope of "purposes and objectives" preemption in patent law, copyright preemption shows that express preemption comes with its own pathologies. His project also leads me to wonder, as I have many times before: is state law every really preempted, even when it's preempted?

Copyright re-sale royalties
Brian discussed his paper on resale royalty rights for artists. Resale royalties have been proposed at the federal level, but only passed in California. Until recently, the California Resale Royalties Act gave artists a royalty right to 5% of the sale price of an artwork sold for more than $1,000 in California or by a California resident, if the artwork had increased in value. However, the Act was recently held to be preempted in two cases––first under the Dormant Commerce Clause, and then by copyright law itself. Brian is not too upset by this outcome because he doesn't think California's law was the best policy solution for the problem of under-compensated artists. Critiquing the inequity of a re-sale royalty right that aides only commercially successful artists, Brian proposes an alternative: a federal tax on re-sales of copyrighted artworks and distribution of the proceeds into a fund to benefit all artists, whether commercially successful or not. Indeed, he says, somewhat tongue-and-cheek, "my ideal proposal would be more progressive and benefit only unsuccessful artists."

The panel then shifted gears to discuss the costs, and possible benefits, of disuniformity among state IP laws, and the prospect of federalization.

Disarray in the right of publicity 
Jennifer discussed the remarkable diversity among state rights of publicity. State publicity rights differ on fundamental issues like who can bring a claim when someone uses her likeness or name without permission, only celebrities or regular folks, only the living or the dead too (or at least their heirs). They also differ on what sort of uses are infringing, only ones in commercial speech or that are made for profit, or any uses. Some might see state-by-state difference as a sign of healthy experimentation. But Jennifer is concerned about an overall expansion of the publicity right, since putative defendants must effectively conform to the law of the most expansive state––or, from defendants' perspective, the most restrictive state.  (This is the "least common denominator" problem seen in other areas of state regulation.) Jennifer's forthcoming book on this subject, A Right is Born: The Right of Publicity, Celebrity and Privacy in a Public World, will be published shortly by Harvard University Press. In the mean time check out her much publicized website tracking publicity rights across the states

Is uniformity in IP law a "myth"?
Sharon closed out the panel by discussing her new paper on federalization of IP laws, and the "myth" that federalization increases uniformity of law. Sharon began by raising the following possibility: while it is tempting to propose federalization in any case where state-by-state disuniformity becomes unworkable, the notion of federalization as a panacea to disuniformity may be wishful thinking.

Sharon's project flags five basic, fundamental impediments to uniformity in a given federalized IP regime, and one complicated, but arguably more marginal impediment. I discuss each below.

(1) Non-Preemption and Substantive Divisions in the Law
The first problem is that, as alluded to above, Congress does not really ever preempt state law when it creates a federal IP regime. (See note on Guy's project, and think about all that litigation surrounding ERISA.) This means we get cases like Goldstein upholding a state sound recording right pre-1976 Act, or copyright law being used to remove subject matter from the public domain that would not qualify for federal copyright. Regardless of whether we think such state-driven expansions of federal IP are a good or a bad thing, they cut against the notion of "uniformity" even in the substance of the IP rights themselves. Divisions in substantive law could lead to uncertainty as to what the law actually is and competing state and federal rights. We might say: why would anyone choose a state IP right versus a federal IP right? For patent law, generally speaking a national scope would be preferred over a state-level right. But this is not necessarily the case because absent clear preemption, states can expand IP rights beyond what Congress provides (see note on Guy's and Jennifer's projects above).

(2) Jurisdictional Competition
Second, in trademark, and now in trade secret, state and federal courts have concurrent jurisdiction. Concurrent jurisdiction means diversity of law in several respects: different procedural rules, different case outcomes among federal and state judges, and the possibility for differential interpretations of law (see note on Erie below). We may think this sort of "jurisdictional competition" is positive. Paul Gugliuzza, for example, has provocatively challenged federal courts' exclusive jurisdiction in patent law vis a vis state courts. But the fact remains that concurrent jurisdiction isn't particularly conducive to uniformity of law.

(3) Circuit Splits
Third, in copyright, trademark, and now trade secret, issues on appeal go up through the regional circuit courts rather than a singular Federal Circuit. The possibilities for circuit splits abound.

(4) Disagreement at the Federal Circuit (or its hypothetical equivalent)
Fourth, even in patent law, where we'd assume the Federal Circuit would give us clear, uniform rules, many academics contend this just isn't happening. The Federal Circuit judges cannot seem to reach agreement on key issues like claim construction and patentable subject matter. This leads to disuniformity among panel decisions and changes in the rules from one year to the next. (Others contend the opposite, saying the Federal Circuit should be joined by regional circuits to liven up patent doctrine and escape an "isolated and sterile jurisprudence".  Ryan Vacca's review chapter comprehensively discusses the wide range of research and views on this issue.)

(5) Slap-Downs from the Supreme Court
Lastly, even when there is a singular appellate court hearing all appeals in a particular IP field, and the judges on that appellate court tend to agree on clear and uniform rules...their decisions may still get overruled by a dissatisfied Supreme Court. This may not lead to disuniformity per se. The Supreme Court announces the IP law of the land. But it does lead to significant "temporal disuniformity", as the rule today is not necessarily the rule tomorrow.

In any case, Sharon's basic point is well-taken: even assuming (express or implied) preemption, even assuming exclusive federal jurisdiction, and even assuming a single harmonious circuit court to handle all appeals, federalization does not necessarily mean complete uniformity.

(6) Suspect Authority to Make Federal Common Law?
Sharon highlighted a final problem that further hinders federalization's march to uniformity: Erie's mandate to apply state law when deciding common law issues in cases where federal courts may lack authority to make common law. This mandate encompasses, obviously, contract law issues that arise in federal IP disputes. It also, says Sharon, encompasses a lot of the "gap filling" that goes on in interpreting federal IP statutes. This position, if true, could lead to surprising results. For example, imagine state A's courts interpret state A's trade secret law as protecting secret ideas with highly uncertain future value. Federal judges in state A would have to interpret federal trade secret law as also protecting secret ideas with uncertain future value.

IP scholars are likely to disagree how much of an impediment the Erie mandate really is to generating uniform federal IP law. Ann Bartow appeared skeptical, asking from the audience: "Have you ever actually seen a federal judge in an IP case say that they lack authority to make federal common law to fill in the gaps in an IP statute?" Sharon, though, suggested that unresolved issues remain regarding the degree to which federal judges can make federal common law to fill in what Congress left unsaid in IP statutes. If she is right, this may impede creation of a uniform federal IP law. Federal IP statutes are not comprehensive of every detail of an IP regime (they arguably never can be). So if judges cannot, or simply will not, craft federal common law to fill in those details, then they will end up drawing on the law of the state in which they sit.

Moreover, it is worth nothing that even if federal judges do end up crafting federal common law with respect to federal IP law, if state IP law is not preempted––as in trademark and trade secret, and to some degree in copyright and patent––then state judges need not bend to federal interpretations of federal IP statutes when interpreting their own laws. Thus, we would be left with even greater substantive divisions in the law. Taking the example above, even if state A's judges interpret state A's trade secret law as protecting secret ideas with highly uncertain future value, federal judges would be free to interpret federal trade secret law as requiring a far greater showing of actual or potential economic value to others. Guess which law trade secret owners would prefer?

However it plays out, federalization is, in Sandeen's view, an unobtainable myth.

"IP needs an Erie theory"
Whether we agree with Ann or Sharon regarding federal judges' actual (or perceived) common-law-making authority in IP law, Sharon's project––which stems from her forthcoming article in Berkeley Technology Law Journal on federalization of trade secrecy law (co-authored with Chris Seaman)––suggest that the IP field does not actually have a coherent "Erie theory" for IP law.  Joe Miller ended the panel by proposing this as a future avenue for inquiry. In what circumstances must federal courts rely on state versus federal common law? When are federal judges authorized to make federal common law for IP law? How do we know when federal courts are making common law versus interpreting a federal statute? How do the answers change for each area of IP? I look forward to seeing Sandeen and others expand on this.

For the time being, here are a few articles addressing the IP/Erie issue, several of which come from Shyam Balganesh's edited volume entire volume on "IP and the Common Law." Peter Menell has a paper on IP and the common law, in which he suggests IP law has a  “mixed heritage” of of statutory and common law development, blogged on by Sarah Tran hereMark McKenna has a paper on trademark's trajectory from state to federal-plus-state law, quoted below. As blogged on previouslyShubha Ghosh has written on state contract law's role in patent jurisprudence and the implications of Erie.   

Absentee member: trademark law
Audience member Jeremy Sheff commented that none of the panelists focused particularly on trademark law even though trademark, like trade secret, was a state regime for a long while before it was federalized. ("We're used to it," he said.) So it is worth noting that Jennifer's and Sharon's talks raised several of the same issues as federalization in trademark. Trademark law went from being state law to federal-plus-state-law––possibly foreshadowing what will happen in trade secret. I will end with my favorite quote from McKenna's article on the subject of trademark federalization:
State [trademark] law claims, of course, have remained technically available even as federal [trademark] law has expanded, but those state law claims are substantively irrelevant in the vast majority of cases. For infringement claims, courts overwhelmingly see state law as redundant of federal law: courts’ discussions of state law claims generally consist entirely of simple statements, often in footnotes, explaining that state and federal law are identical.  The coincidence of state and federal law should not be particularly surprising, since courts frequently have held that state law cannot narrow the scope of federal law.  Where federal law reaches the same conduct – which, at this point, it essentially always does – states can implement their policy choices only in one direction: by expanding the scope of protection.

Seeking input on IP and Federalism issues:

Following the rich discussion, some of the panelists are seeking input from IP experts (you) on a variety of questions related to the IP/Federalism interface. Respond in the comment section or by email to chrdy@uakron.edu  I will update these as responses and more questions come in.

Camilla Hrdy asks:

Describe a state law, current or past, that challenges the validity of a federal patent or impedes the ability of patentees to enforce or profit from a federal patent. Obvious examples include the "bad faith patent assertion" laws passed by Vermont and other states since 2013 and state tort counterclaims brought by defendants in patent infringement lawsuits. But I am looking for other less obvious examples. State licensing laws, state taxes on IP royalties––any instance where a state directly attacks validity or enforcement of a patent or impedes the patentee's ability to profit from the patent. Any input appreciated: email chrdy@uakron.edu

Guy Rub asks:

What is the best argument, from a statutory construction perspective, for allowing courts to consider the principles of conflict preemption notwithstanding the Copyright Act’s saving clause. In other words, how can we reasonably interpret section 301(b)(3) in a way that would not preclude the application of conflict preemption and allow courts to consider whether or not the state law conflicts with copyright's "purposes and objectives"?  (The text of section 301(b)(3) provides: "Nothing in this title annuls or limits any rights or remedies under the common law or statutes of any State with respect to... activities violating legal or equitable rights that are not equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106.")

Sharon Sandeen asks:

1.      List one or more issues in your area of IP on which there are unresolved circuit splits or other instances of non-uniformity, including definitional differences.
2.      List one or more principles in your area of IP law where a federal court interpreting and  applying that area of law made “federal common law” (aka “specialized common law”) to define terms of a statute (where a definition did not exist in a statute) or to otherwise fill gaps in a statute.
Email responses to: sharon.sandeen@mitchellhamline.edu


In every branch of IP law, in domains from innovation to entertainment to sports, challenging questions exist about which level of government—local, state, national, international—is best positioned to craft and implement law and policy. As Congress debates a new national trade secret law, the President negotiates new trade pacts with controversial IP provisions, the courts consider the constitutionality of a state resale royalty law for fine arts (Sam Francis Found’n v. Christie’s, Inc.) and the copyright status of pre-1972 sound recordings, and states pass statutes to combat abusive patent lawsuits, federalism remains a critical lens through which to consider IP law’s challenges and opportunities. Papers will be published in a symposium issue of the Journal of Intellectual Property, published by the University of Georgia School of Law.

Camilla Hrdy, Akron Law School
Guy Rub, Ohio State Law School
Brian Frye, University of Kentucky School of Law
Sharon Sandeen, Mitchell Hamline Law School

Moderator: Jennifer Rothman, Loyola Los Angeles School of Law

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