Dan Brean and Bryan Clark: Casting Aspersions in Patent Trials

There are two main bases for rectifying misconduct in a patent case. First, a prevailing patentee can collect treble damages from a willful infringer. Second, on the flip side, a prevailing patent infringement defendant can force the patentee to pay attorneys'  fees for bringing a claim in bad faith.  Currently, the question of whether the infringer's actions were "willful" is decided by a jury, but the question of whether the patentee brought the case in "bad faith", such as to harass or eek out a settlement, is decided by a judge without jury input. In their new article, Casting Aspersions in Patent Trials, forthcoming in the University of Pittsburgh Law Review, my Akron Law colleague Professor Dan Brean, along with Bryan Clark, argue that, to the extent the parties get the opportunity to "cast aspersions" on the other side in front of the jury, the parties should be on equal footing in doing so. Better yet, they argue, both issues should be decided by a judge. The jury should not be involved in deciding either willfulness by infringers or bad faith by patentees.

The majority of the paper is devoted to convincing the reader that this is the right result, and to demonstrating that, contrary to common perception, the Seventh Amendment requires neither issue to go to a jury.  They also do a deep dive into similar scenarios in other areas of law, where the character of both parties becomes an issue–such as parallel considerations of the defendant's and the victim's character in the criminal context. They point out that, when character evidence is introduced, "the Federal Rules of Evidence contemplate that juries should be able to consider the 'character' of the defendant if the victim’s character is put in issue. ... this important exception ensures a fair trial: if the criminal defendant casts aspersions at the victim, the victim may do the same so that the jury can determine if the defendant was truly the culpable one." The authors also discuss similar fairness policies surrounding comparative negligence in tort law.

The authors conclude that, in the best case scenario, "both willfulness and bad-faith enforcement should be resolved by judges after trial when matters of liability and damages have already been established, and when the risk of 'bad actor' arguments tainting the liability and damages verdicts is gone."  In the second best scenario, they argue that so long as the status quo of trying defendant's willfulness before juries persists, "the more immediate question" is what to do about defendants who allege the patentee is asserting its patent in bad faith, which, as said, is currently tried before the judge. It is "fundamentally unfair," they contend, to "require defendants to endure aspersions cast by a patentee at trial but be unable to demonstrate how the patentee is itself engaged in culpable misconduct when proving bad faith." Thus, to the extent willfulness is tried to a jury, bad-faith enforcement by patentees should also be considered and decided by the same jury in order to even up the score.

The paper is clearly written and quite timely, given the Supreme Court's parallel holdings in Octane Fitness, recalibrating the standard for bad faith determinations under Section 285, and in Halo, doing the same for willfulness determinations under Section 284. If there is a chance to change current practice, and to better align the two remedial rules, this could be it.

Patent Exhaustion Policy Tradeoffs in the Impression v. Lexmark Oral Argument

Rather than grappling with the hard economic policy issues that patent exhaustion presents, the Justices were surprisingly quiet during Tuesday's oral argument in Impression v. Lexmark. I've previously discussed the Federal Circuit decision in this case, and Ronald Mann has a preview and recap of the argument, so I'll just add a couple of additional thoughts on the policy tradeoffs:

Daniel Hemel and I have explained how a ruling for Impression would likely hurt consumers in poor countries in a Columbia Law Review Sidebar piece last year and in a Wall Street Journal op-ed on Monday, and our longer Minnesota Law Review article explains why a U.S. rule of international patent exhaustion would undermine the ability of other countries to experiment with alternatives to the patent system for allocating access to knowledge goods. The only acknowledgement of this concern during argument seemed to be when the advocate for Impression, Andrew Pincus, implied that pharmaceutical parallel imports would not be a problem because "the FDA has full authority to prevent imports under 21 U.S.C. 381." But as Daniel and I note in our Columbia piece, this statute is far from a substitute for U.S. patent rights—it depends on discretionary government enforcement (which might not be particularly vigorous when U.S. policymakers are concerned about health care costs), it is subject to a personal use exemption, it only prohibits re-importation (not importation of drugs manufactured abroad), and it only affects prescription drugs (not trade in other patented products including medical devices or low-cost laptops).

So what were the Justices concerned about? The only policy consequence they asked about was the argument of pro-exhaustion parties that the current system generates needless complexity. Chief Justice Roberts asked about the "products with literally thousands of different patents" such that "it just gets too complicated," Justice Sotomayor questioned whether "having different rules with respect to copyright and patents … will complicate the checking," and Justice Breyer was concerned about needing "a sticker on every toy" to explain the relevant patent rights. But as Daniel and I have explained, "the cost of determining whether the patentee has reserved its U.S. patent rights does not seem particularly onerous in comparison with all the other information costs involved in verifying that a product is noninfringing." And none of the amici have been able to quantify—or even point to good examples of—severe information-cost externalities related to the current patent exhaustion laws. Justice Alito asked counsel for Impression whether the current rule has "caused a lot of problems," and he didn't get any concrete examples.

Given the relatively cold bench, it is difficult to predict where the Court will end up. Justice Breyer, Justice Sotomayor, and Chief Justice Roberts asked questions favoring Impression, but Justice Alito seemed to lean toward the status quo, and Justice Kennedy asked if the Court should be "cautious in extending" patent exhaustion because it is not codified. Justices Kagan and Thomas were silent. Ronald Mann thinks the Justices "are well aware of the major implications here and don’t see any obvious way to avoid doing something that will have real economic consequences"; I hope he's right that they have really had a chance to consider the inevitable tradeoffs at stake.

Copyright Survives

When I teach ProCD in my internet law class, I make two primary points. First, the case can't possible be right. Judge Easterbrook mangles UCC law and how the battle of the forms works. Second, the case can't possibly be wrong: companies have to be able to price discriminate by restricting usage of information that is unprotected by copyright but expensive to gather. Without this ability, either the price of such information products will be higher, or they may not be created at all.

Many people disagree with me on the second point. In their view, the goal of copyright law is to regulate not just what should be protected, but to ensure that what is not protected stays in the public domain, no matter what. It is against this backdrop that Guy Rub (Ohio State) gives us his article forthcoming in the Virginia Law Review: Copyright Survives: Rethinking the Copyright-Contracts Conflict, now available on SSRN. The abstract is here:

Twenty years ago, copyright died. More accurately, it was murdered. In 1996, in ProCD v. Zeidenberg, Judge Easterbrook, writing for the Seventh Circuit, held that a contract that restricted the use of factual information was not preempted by the Copyright Act and therefore enforceable. The reaction among copyright scholars was swift and passionate. In dozens of articles and books, spreading over two decades, scholars cautioned that if the ProCD approach is broadly adopted, the results would be dire. Through contracts, the rights of copyright owners would run amok, expand, and in doing so they would invade, shrink, and possibly destroy the public domain. Contracts, we were repeatedly warned throughout the years, would kill copyright law.

This Article challenges this scholarly consensus by studying the 288 court opinions that have dealt with the copyright-contract conflict over the past four decades. This examination reveals surprising facts: Notwithstanding the scholars’ warnings, ProCD’s approach won the day and was embraced by most federal circuit courts. However, the doomsday scenarios scholars warned against did not materialize. The overall effect of contracts on the size and scope of the public domain, or over copyright law as a whole, seems minimal. The Article explains this discrepancy and shows that contracts are an ineffective tool to control information because they are too weak of a device to threaten or replace copyright law. Indeed, to paraphrase Mark Twain, the reports of the death of copyright were greatly exaggerated.

The Article concludes by placing this analysis in context, as part of a broader ongoing discussion on the desirability and enforceability of standard-form agreements.

I really love this article. I think that resolving questions of how we should balance free ideas, access controls, and freedom of contract is incredibly difficult, and I have yet to see a good solution. I certainly don't have one myself (yet). I have an article I've been working on since I was a fellow - the empty shell has a nice title, and little text. This article may inspire me to take another look at it. That said, I do have a few comments, after the jump.