Tuesday, April 23, 2019

How Does Patent Eligibility Affect Investment?

David Taylor (SMU) was interested in how patent eligibility decisions at the Supreme Court affected venture investment decisions, so he thought he would ask. He put together an ambitious survey of 14,000 investors at 3000 firms, and obtained some grant money to provide incentives. As a result, he got responses from 475 people at 422 firms. The response rate by individual is really low, but by firm it's 12% - not too bad. He performs some analysis of non-responders, and while there's a bit of an oversample on IT and on early funding, it appears to be somewhat representative.

The result is a draft on SSRN and forthcoming in Cardozo L. Rev. called Patent Eligibility and Investment. Here is the abstract:
Have the Supreme Court’s recent patent eligibility cases changed the behavior of venture capital and private equity investment firms, and if so how? This Article provides empirical data about investors’ answers to those important questions. Analyzing responses to a survey of 475 investors at firms investing in various industries and at various stages of funding, this Article explores how the Court’s recent cases have influenced these firms’ decisions to invest in companies developing technology. The survey results reveal investors’ overwhelming belief that patent eligibility is an important consideration in investment decisionmaking, and that reduced patent eligibility makes it less likely their firms will invest in companies developing technology. According to investors, however, the impact differs between industries. For example, investors predominantly indicated no impact or only slightly decreased investments in the software and Internet industry, but somewhat or strongly decreased investments in the biotechnology, medical device, and pharmaceutical industries. The data and these findings (as well as others described in the Article) provide critical insight, enabling evidence-based evaluation of competing arguments in the ongoing debate about the need for congressional intervention in the law of patent eligibility. And, in particular, they indicate reform is most crucial to ensure continued robust investment in the development of life science technologies.
The survey has some interesting results. Most interesting to me was that fewer than 40% of respondents were aware of any of the key eligibility decisions, though they may have been vaguely aware of reduced ability to patent. More on this in a minute.

There are several findings on the importance of patents, and these are consistent with the rest of the literature - that patents are important for investment decisions, but not first on the list (or second or third). Further, the survey finds that firms would invest less in areas where there are fewer patents - but this is much more pronounced for biotech and pharma than it is for IT. This, too, seems to comport with anecdotal evidence.

But I've always been skeptical of surveys that ask what people would do - stated preferences are different than revealed preferences. The best way to measure revealed preferences would be through some sort of empirical look at the numbers, for example a differences-in-differences approach before and after these cases (though having 60% of the people say they haven't heard of them would certainly affect whether the case constitutes a "shock" - a requirement of such a study).

Another way, which this survey attempts, is to ask not what investors would do but rather ask what they have done. This amounts to the most interesting part of the survey - investors who know about the key court opinions say they have moved out of biotech and pharma, and into IT. So much for Alice destroying IT investment, as some claim (though we might still see a shift in the type of projects and/or the type of protection - such as trade secrets). But more interesting to me was that there was also a similar shift among those folks who claimed not to know much about patent eligibility or think it had anything to do with their investment. In other words, even for that group who didn't actively blame the Supreme Court, they were shifting investments out of biotech and pharma and into IT.

You can, of course, come up with other explanations - perhaps biotech is just less valuable now for other reasons. But this survey is an important first step in teasing out those issues.

There are a lot more questions on the survey and some interesting answers. It's a relatively quick and useful read.

Thursday, April 18, 2019

Beebe and Fromer: Study on the Arbitrariness of 2(a) Immoral or Scandalous Refusals

For those who have not had the pleasure of seeing it, I recommend the fascinating and, honestly, fun, new study by Barton Beebe and Jeanne Fromer on the arbitrariness and unpredictability of the U.S. Patent & Trademark Office's refusals of trademarks that are deemed to be "immoral" or "scandalous."

The study, entitled Immoral or Scandalous Marks: An Empirical Analysis, has been posted on SSRN. This paper served as the basis for Professors Beebe and Fromer's amicus brief in Iancu v. Brunetti.

This study follows up on Megan Carpenter and Mary Garner's prior 2015 paper, published in the Cardozo Arts & Entertainment Law Journal and Anne Gilson LaLonde and Jerome Gilson's 2011 article, Trademarks Laid Bare: Marks That May Be Scandalous or Immoral.  

All of these studies come to similar conclusions: there are serious inconsistencies in trademark examiners' application of the Section 2(a) "immoral-or-scandalous" rejection. The Beebe/Fromer study is technically 161 pages long, but it's mostly exhibits, and it's very accessible  – worth at least a read to see some of the examples they give, and to oggle at the bizarre interplay between Section 2(a) "immoral-or-scandalous" refusals and Section 2(d) "likely to confuse with prior registered mark" refusals.

Thursday, April 11, 2019

What was the "promise of the patent doctrine"?

What was the "promise of the patent doctrine"?  The short answer is: a controversial doctrine that originated in English law and that, until recently, was applied in Canadian patent law to invalidate patents that made a material false promise about the utility of the invention. A common example would be a claim to therapeutic efficacy in a specification that is not born out.

Warning: the content of this doctrine this may seem bizarre to those familiar with U.S. patent law.

Tuesday, April 9, 2019

Making Sense of Unequal Returns to Copyright

Typically, describing an article as polarizing refers to two different groups having very different views of an article. But I read an article this week that had a polarizing effect within myself. Indeed, it took me so long to get my thoughts together, I couldn't even get a post up last week. That article is Glynn Lunney's draft Copyright's L Curve Problem, which is now on SSRN. The article is a study of user distribution on the video game platform Steam, and the results are really interesting.

The part that has me torn is the takeaway. I agree with Prof. Lunney's view that copyright need not be extended, and that current protection (especially duration) is overkill for what is needed in the industry. I disagree with his view that you could probably dial back copyright protection all the way with little welfare loss. And I'm scratching my head over whether the data in his paper actually supports one argument or the other. Here's the abstract:
No one ever argues for copyright on the grounds that superstar artists and authors need more money, but what if that is all, or mostly all, that copyright does? This article presents newly available data on the distribution of players across the PC videogame market. This data reveals an L-shaped distribution of demand. A relative handful of games are extremely popular. The vast majority are not. In the face of an L curve, copyright overpays superstars, but does very little for the average author and for works at the margins of profitability. This makes copyright difficult to justify on either efficiency or fairness grounds. To remedy this, I propose two approaches. First, we should incorporate cost recoupment into the fourth fair use factor. Once a work has recouped its costs, any further use, whether for follow-on creativity or mere duplication, would be fair and non-infringing. Through such an interpretation of fair use, copyright would ensure every socially valuable work a reasonable opportunity to recoup its costs without lavishing socially costly excess incentives on the most popular. Second and alternatively, Congress can make copyright short, narrow, and relatively ineffective at preventing unauthorized copying. If we refuse to use fair use or other doctrines to tailor copyright’s protection on a work-by-work basis and insist that copyright provide generally uniform protection, then efficiency and fairness both require that that uniform protection be far shorter, much narrower, and generally less effective than it presently is.
The paper is really an extension of Prof. Lunney's book, Copyright's Excess, which is a good read even if you disagree with it. As Chris Sprigman's JOTWELL review noted, you either buy in to his methodology or you don't. I discuss below why I'm a bit troubled.

Saturday, April 6, 2019

PatCon9 at University of Kansas

Yesterday and today, the University of Kansas School of Law hosted the ninth annual Patent Conference—PatCon9—largely organized by Andrew Torrance. Schedule and participants are here. For those who missed it, here's a recap of my live Tweets from the conference. (For those who receive Written Description posts by email: This will look much better—with pictures and parent tweets—if you visit the website version.)

Tuesday, April 2, 2019

Why do I blog?

Friday and Saturday I'll be at PatCon9 at the University of Kansas School of Law. I'll discuss a scholarly work-in-progress with Janet Freilich, and I've also been invited to serve on a panel on "Roles and Influence of Patent Blogs" (with Kevin Noonan from Patent Docs and Jason Rantanen from Patently-O, and Written Description's own Camilla Hrdy serving as moderator). So I thought this would be a good opportunity to reflect on why I've written over 300 blog posts throughout the past eight years. (For those who want to read some highlights, note that many individual words below link to separate posts.)

I started Written Description in February 2011 when I was a 3L at Yale and was winding down my work as a Yale Law Journal Articles Editor, which had been a great opportunity to read a lot of IP scholarship. I noted that there were already many blogs reporting on the latest patent news (like Patently-O and Patent Docs), but that it was "much harder to find information about recent academic scholarship about patent law or broader IP theory." The only similar blog I knew of was Jotwell, but it had only two patent-related posts in 2010. (In 2015, I was invited to join Jotwell as a contributing editor, for which I write one post every spring.) Written Description has grown to include guest posts and other blog authors—currently Camilla Hrdy (since 2013) and Michael Risch (since 2015).

Most of my posts have featured scholarship related to IP and innovation. Some posts simply summarize an article's core argument, but my favorite posts have attempted to situate an article (or articles) in the literature and discuss its implications and limitations. I also love using my blog to highlight the work of young scholars, particularly those not yet in faculty positions. And I enjoyed putting together my Classic Patent Scholarship project; inspired by Mike Madison's work on "lost classics" of IP scholarship, I invited scholars to share pre-2000 words that they thought young IP scholars should be aware of.

Some posts have focused on how scholarship can inform recent news related to IP. For example, I recently posted about the role of public funding in pharmaceutical research. And I have drawn connections between scholarship and Supreme Court patent cases such as Impression v. Lexmark, Cuozzo v. Lee, Halo v. Pulse, Teva v. Sandoz, FTC v. Actavis, Bowman v. Monsanto, and Microsoft v. i4i. My compilation of Supreme Court patent cases has been cited in some academic articles, and my post on Justice Scalia's IP legacy led to some interesting discussions. I have also reflected on patent law scholarship more generally, such as on how patent law criteria apply to evaluating legal scholarship, what experience is needed to write good scholarship, choosing among academic IP conferences, transitioning from science to patent law, and why IP isn't on the bar exam.

I sometimes debate whether blogging is still worth my time. I could instead just post links to recent scholarship on Twitter, or I could stop posting about new scholarship altogether. But a number of people who aren't on Twitter—including from all three branches of the federal government—have told me that they love receiving Written Description in their email or RSS feed. Condensing patent scholarship seems like a valuable service even for these non-academic readers alone. And the pressure to keep writing new posts keeps me engaged with the recent literature in a way that I think makes me a better scholar. I don't think blogging is a substitute for scholarship, or that it will be anytime soon. Rather, I view my blogging time as similar to the time I spend attending conferences or commenting on other scholars' papers over email—one of many ways of serving and participating in an intellectual community.

I still have a lot of questions about the role of law-related blogs today, and I hope we'll discuss some of them on Thursday. For example: Has the role of blogs shifted with the rise of Twitter? Should blog authors have any obligation to study or follow journalism ethics and standards? How do blog authors think about concerns of bias? For many patent policy issues, the empirical evidence base isn't strong enough to support strong policy recommendations—do blog authors have any obligation to raise counterarguments and conflicting evidence for any decisions or academic papers they are highlighting? What are the different financial models for blogs, and how might they conflict with other blogging goals? (This may be similar to the conflicts traditional media sources face: e.g. clickbait to drive readership can come at the cost of more responsible reporting.) Do the ethical norms of blog authorship differ from those of scholars? How should blogs consider issues of diversity and inclusion when making choices about people to spotlight or to invite for guest authorship?

I'll conclude by noting that for PatCon8 at the University of San Diego School of Law, I tried a new blogging approach: I live Tweeted the conference and then published a Tweet recap. (Aside: I started those Tweets by noting that 19% of PatCon8 participants (13 out of 68) were women. The PatCon9 speaker list currently has 24% (7 out of 29) women speakers, but I don't know which direction non-speaker participants will push this.) For PatCon9, should I (1) live Tweet again (#PatCon9), (2) just do a blog post with some more general reactions (as I've done for some conferences before), or (3) not blog about the conference at all?