Saying Goodbye to Chief Wahoo?

A couple years ago, my youngest son was “drafted” onto the Indians Little League team. It was cringeworthy. The name was bad enough (and I’m thankful my alma mater had the good sense to abandon it nearly 50 years ago), but right there on the hat was Chief Wahoo. Needless to say, among the many baseball caps we have in our family, that one hasn’t seen the light of day since the season ended.

Yesterday, the Cleveland team and Major League Baseball announced that they are retiring the logo from uniforms in a year (they had already removed it from in and around the stadium apparently). It’s unclear why it cannot be done sooner, but I’ll give them the benefit of the doubt that manufacturing for next season is already underway and cannot be changed. Good riddance.

Buried in this news is an interesting IP theory and policy tidbit worth discussion. The team is not abandoning the logo altogether. To maintain trademark rights, it will continue to sell Chief Wahoo merchandise in the Cleveland area. That’s right, trademark law is forcing the team to keep selling merchandise with an offensive logo that it claims to no longer be using.

As I discuss below, this is an area where I expect folks will be torn.

Evidence of Peer Group Influence on Patent Examiners

Michael Frakes and Melissa Wasserman have gotten a lot of mileage out of their micro data set on patent examiner behavior over time. Prior work includes examination of grant incentives, agency funding, time availability, and user fees.

Their latest paper tackles peer group influence - that is, the effect that both peers at the same level and supervisory examiners have on grant rates. The draft is on SSRN and the abstract is here:

Using application-level data from the Patent Office from 2001 to 2012, merged with personnel data on patent examiners, we explore the extent to which the key decision of examiners — whether to allow a patent — is shaped by the granting styles of her surrounding peers. Taking a number of methodological approaches to dealing with the common obstacles facing peer-effects investigations, we document strong evidence of peer influence. For instance, in the face of a one standard-deviation increase in the grant rate of her peer group, an examiner in her first two years at the Patent Office will experience a 0.15 standard-deviation increase in her own grant rate. Moreover, we document a number of markers suggesting that such influences arise, at least in part, through knowledge spillovers among examiners, as distinct from peer-pressure mechanisms. We even find evidence that some amount of these spillovers may reflect knowledge flows regarding specific pieces of prior art that bear on the patentability of the applications in question, as opposed to just knowledge flows regarding general examination styles. Finally, we find evidence suggesting that the magnitude of these peer examiner influences are just as strong, or stronger, than the influence of the examination styles of supervisors.

I'll admit that I was skeptical upon reading the abstract. After all, I would expect that grant rates would rise and fall together in any given art unit, based on either technology or the trends of the day. Indeed, the effect is not so large as to rule some other influences.

But by the end, I was convinced. Here are a couple of the findings that were most persuasive (in addition to the fact that I think they specified fixed effects nicely):

1. The effect is more present during the early years, and tends to get "locked in" with experience
2. The effect is more present with peers than with supervisory examiners
3. The effect is more present for examiners who do not telecommute - this, to me, was the best robustness check
4. Examiners who do not telecommute tended to behave similarly in obviousness (v. novelty) and also to cite the same prior art (that was not cited as frequently by those to telecommute)

This paper's framing is interesting. I read it, of course, because it is a patent paper, but Frakes & Wasserman open with a more generalized pitch that this is about employment peer effects. I suppose it is about both, really, and it is worth taking a look at if you are interested in either area.

What happened in patent law in the past year?

Last Thursday I gave a 25-min recap patent law update to judges and practitioners at the Northern District Practice Program Patent Law Symposium, and I thought blog readers might be interested in my recap of highlights from the past year:

Patent Case Filings and Procedure: Venue, PTAB, and Stays

Lex Machina reports that there were 4057 cases filed in 2017, down 10% from the 4529 in 2016. The biggest procedural change was to venue. As I have explained, in its May 2017 decision in TC Heartland, the Supreme Court held that for purposes of the patent venue statute, a corporation only "resides" in its state of incorporation. The Federal Circuit has since held that this was a change in law, so the venue defense was not "available" under FRCP 12(g)(2), allowing district courts in pending cases to consider venue arguments that were not previously raised by defendants. And the Federal Circuit has offered guidance on the other possibility for proper venue—"where the defendant has committed acts of infringement and has a regular and established place of business"—saying that this requires (1) a fixed, physical presence that (2) is regular and established (not transient) and that (3) is a place of the defendant (not merely of an employee).

TC Heartland is likely responsible for the decline in cases filed in E.D. Tex. and the uptick in districts like D. Del. and N.D. Cal., though in neither of the latter have filings reached pre-2015 levels:

Crowdsourced Bibliography on IP and Distributive Justice

Professor Estelle Derclaye recently sparked a terrific email thread among IP professors about articles tackling IP from a distributive justice perspective. Here is a lightly edited list of the suggested works, roughly in chronological order, with links (open access, where possible) and, for somewhat arbitrarily selected works, short quotations or descriptions. If you have additions or corrections, feel free to email me or add them to the comments.

A New Trade Secrets Survey of In-House Counsel

It feels like all trade secrets all the time these days, but the hits keep coming. I've got some patent scholarship queued up, but this new survey caught my eye. David Almeling and Darin Snyder have provided some quality empirical analysis of trade secret cases in the past. Their two articles (written with others) cover both state and federal courts, and provided solid empirical support for the proposition that most trade secret cases involve ex-employees rather than strangers.

They have now extended this work with a new study (co-authored with Carolyn Appel) that surveys in-house counsel about trade secret usage.  The study is here, though it is behind the Law360 paywall, which is unfortunate. It is available on Lexis, I believe, or through a free preview.

The authors surveyed 81 in-house counsel from a variety of industries; however, they acknowledge that their sample is self-selected, which means that those who care most about trade secrets may have answered. They did overyield (another 27 people were not such in-house counsel), which lends some support for the idea that answers were not simply driven by those who cared the most. On the other hand, most respondents worked for large, multi-state companies, which makes one wonder why more in-house counsel for smaller companies did not participate and whether their answers would be any different.

In my prior post on the DTSA and in the Evil Twin debate, I ask why there is a sudden push for the DTSA. This survey gives us some answers about the political economy - 75% of respondents said that trade secrets had grown more at risk in the last ten years, and 50% said they were at much more risk. This fear may or may not be well grounded, but if this is the perception, it will certainly drive policy. Relatedly, respondents reported that patent law changes were not driving use of trade secrets -- only 30% reported using trade secrets instead of patenting. Most, I suspect, want more of both.

A whopping 70% reported that their company had been a victim of trade secret misappropriation. Of those, employees or ex-employees were the perceived culprits 90% of the time, confirming (again) that most misappropriation is not stranger misappropriation.

The most surprising finding of the survey, in my view, was a question about whether the DTSA should preempt the UTSA. Non-preemption allows both to stand, which can not only create conflict, but also allows plaintiffs to choose the most favorable law. In my discussions with people after the debate, some thought non-preemption was the part of the DTSA that most showed a desire to expand trade secret's reach.

So, the surprising result was a nearly even three-way split between supporting preemption, opposing preemption, and not caring one way or the other. While academics seem to think that lack of preemption is a big deal, this self-selected group of in-house counsel seem to not care one way or the other. This finding could actually drive policy choices in the future.

I'll conclude with that brief recap - while the article is short, there is more to see, about the types of secrets, the role in innovation, and the cost of misappropriation. I will end on this note, however: the costs borne by most companies from misappropriation were investigation and litigation. This is to be expected, as everyone investigates and litigation costs are high. But the other costs of misappropriation were spread out among price erosion, loss of sales, increased costs of protection (my own personal theory), and even none. I think this shows two things. First, when messaging in this area is not consistent, it may be that companies are perceiving the problem in their own ways. Second, it may be that enforcement efforts wind up dwarfing the actual harm of misappropriation in some cases.

Is the Defending Trade Secret Act Defensible? The Movie

As noted a couple weeks ago, Orly Lobel (San Diego) and I debated the DTSA at the AALS Conference. As promised, I'm posting video of that conference here.

The Powerful Effects of Copyright Reversion

A common type of client I've seen in practice is the founder who sold IP (or company) to another, only to see the creation buried for one reason or another. The client usually wanted the rights back, so as to see the work grow. We invariably had to give the bad news: there was little to do but negotiate for a return (which we sometimes achieved). [Practice tip: build reversion rights into the sales contracts, though the buyer often chokes on such language].

Of course, we explored copyright reversion, which allows for reversion after 35 years for post 1978 works. But in the software area, 3 years might as well be forever. Few software products last 35 years (is Linux a work made for hire? Uh oh).

Paul Heald (Illinois) has done some really useful work in this area. His prior work shows the U-shape curve of books available on Amazon. Recent books are available, and books in the public domain (before the 1920s) are available, but books in copyright but not recent are not available, even those published as few as 20 years ago.

One theme of this work is obviously that copyright terms should be shorter, and that may well be true. But one of my initial takes was that the publishers are to blame - they are sitting on books that authors may well want to publish. Reversion rights are a way to handle this - authors can take over those books and get them published if they want.

In a new article, Paul Heald again looks at this market in a draft article called Copyright Reversion to Authors (and the Rosetta Effect): An Empirical Study of Reappearing Books (located here on SSRN). Here is the abstract:

Copyright keeps out-of-print books unavailable to the public, and commentators speculate that statutes transferring rights back to authors would provide incentives for the republication of books from unexploited back catalogs. This study compares the availability of books whose copyrights are eligible for statutory reversion under US law with books whose copyrights are still exercised by the original publisher. It finds that 17 USC § 203, which permits reversion to authors in year 35 after publication, and 17 USC § 304, which permits reversion 56 years after publication, significantly increase in-print status for important classes of books. Several reasons are offered as to why the § 203 effect seems stronger. The 2002 decision in Random House v. Rosetta Books, which worked a one-time de facto reversion of ebook rights to authors, has an even greater effect on in-print status than the statutory schemes.

Heald gathers three different data sets: bestselling authors, bestselling books, general population of reviewed books. He looks at whether they were available, who published them (big publisher v. independent), and where (paper or ebook). In the rest of the post, I'll briefly discuss the findings and some thoughts.

Extraterritorial Reach Of The Defend Trade Secrets Act: How Far Did Congress Go?

In the aftermath of the Defend Trade Secrets Act (DTSA), a little discussed, but potentially quite significant, issue is whether civil trade secret plaintiffs can now use federal trade secret law to reach misappropriation that occurs in other countries pursuant to DTSA Section 1837. See 18 U.S.C. § 1837.  This post is a follow-up to my prior post on presentations at last spring's conference "The New Era of Trade Secret Law: The DTSA and other Developments", hosted by the IP Institute at Mitchell/Hamline School of Law. Professor Rochelle Dreyfuss spoke at the conference about her work-in-progress with Professor Linda Silberman, discussed herein.

Defending the DTSA

I'm excited to be a participant in the annual Evil Twin debate, coming this Friday in San Diego in connection with the AALS conference. The debate is sponsored by the University of Richmond Law School and will take place at 4:30 at the Thomas Jefferson Law School.

The topic this year is: "Is the Defend Trade Secrets Act Defensible?" I'm taking the "yes" side. My Evil Twin is Orly Lobel, the Don Weckstein Professor of Labor and Employment Law at the University of San Diego Law School.

As a prelude to give her a head start, I thought I would share a recent essay by Professor Lobel: The DTSA and the New Secrecy Ecology, available on SSRN. The abstract is here

The Defend Trade Secrets Act (“DTSA”), which passed in May 2016, amends the Economic Espionage Act (“EEA”), a 1996 federal statute that criminalizes trade secret misappropriation. The EEA has been amended several times in the past five years to increase penalties for violations and expand the available causes of action, the definition of a trade secret, and the types behaviors that are deemed illegal. The creation of a federal civil cause of action is a further expansion of the secrecy ecology, and the DTSA includes several provisions that broaden the reach of trade secrets and their protection. This article raises questions about the expansive trajectory of trade secret law and its relationship to entrepreneurship, information flow, and job mobility. Lobel argues that an ecosystem that supports innovation must balance secrecy with a culture of openness and exchanges of knowledge. This symposium article is based on Professor Orly Lobel’s keynote presentation at the March 10, 2017 symposium entitles “Implementing and Interpreting the Defend Trade Secrets Act of 2016,” hosted by the University of Missouri School of Law’s Center for Intellectual Property and Entrepreneurship and the School’s Inaugural Issue of the Business, Entrepreneurship & Tax Law Review.

The essay lays out a good background of the DTSA and points to some of its key drawbacks. It's a useful read for anyone looking for a relatively balanced synopsis of concerns about the DTSA some experience with it.