Naruto, the Article III monkey

The Ninth Circuit released its opinion in the "monkey selfie" case, reasonably ruling that Naruto the monkey doesn't have standing under the Copyright laws. The opinion dodges the hard questions about who can be an author (thus leaving for another day questions about artificial intelligence, for example) by instead focusing on mundane things like the ability to have heirs. As a result, it's not the strongest opinion, but one that's hard to take issue with.

But I'd like to focus on an issue that's received much less attention in the press and among my colleagues. The court ruled that Naruto has Article III standing because there is a case or controversy. I'll admit that I hadn't thought about this angle, having instead gone right to the copyright authorship question (when you're a hammer, everything looks like a nail). But I guess when you're an appellate court, that whole "jurisdiction and standing section" means something even though we often skim that in our non-civ pro/con law/fed courts classes in law school.

I'll first note that the court is doubtful that PETA has standing as "next friend." Footnote 3 is a scathing indictment of its actions in this case, essentially arguing that PETA leveraged the case for its own political ends rather than for any benefit of Naruto. Youch! More on this aspect here. The court also finds that the copyright statute does not allow for next friend standing, a completely non-shocking result given precedent.

Even so, the court looks to whether Naruto has individual standing even without some sort of guardian. Surprisingly enough, this was not an issue of first impression. The Ninth Circuit had already ruled that a group of whales had Article III standing. From this, the court very quickly decides that Naruto has standing: the allegation of ownership in the photograph easily creates a case or controversy.

Once again, the best part is in the footnotes. I'll reproduce part of note 5 here:

In our view, the question of standing was explicitly decided in Cetacean. Although, as we explain later, we believe Cetacean was wrongly decided, we are bound by it. Short of an intervening decision from the Supreme Court or from an en banc panel of this court, [] we cannot escape the proposition that animals have Article III standing to sue....

[The concurrence] insightfully identifies a series of issues raised by the prospect of allowing animals to sue. For example, if animals may sue, who may represent their interests? If animals have property rights, do they also have corresponding duties? How do we prevent people (or organizations, like PETA) from using animals to advance their human agendas? In reflecting on these questions, Judge Smith [in the concurrence] reaches the reasonable conclusion that animals should not be permitted to sue in human courts. As a pure policy matter, we agree. But we are not a legislature, and this court’s decision in Cetacean limits our options. What we can do is urge this court to reexamine Cetacean. See infra note 6. What we cannot do is pretend Cetacean does not exist, or that it states something other, or milder, or more ambiguous on whether cetaceans have Article III standing.

I was glad to see this, because when I read the initial account that Article III standing had been granted, I wondered why the court would come to that decision and thought of many of these questions (and more - like what if there's no statute to deny standing, like diversity tort liability).

I'll end with perhaps my favorite part of the opinion: the award of attorneys' fees. The award itself is not surprising, but the commentary is. It notes that the court does not know how or whether the settlement in the case dealt with the possibility of such an award, but also that Naruto was not part of such a settlement. It's unclear what this means. Can Slater collect from Naruto? How would that happen? Can Slater collect from PETA because Naruto was not part of the settlement? The court, I'm sure, would say to blame any complexity on the whale case.

A Comprehensive Study of Trade Secret Damages

Elizabeth Rowe (Florida) has shared a draft of "Unpacking Trade Secret Damages" on SSRN. The paper is an ambitious one, examining all of the federal trade secret verdicts she could find (which she believes is a reasonably complete set based on her methods) that issued between 2000 and 2014. The abstract is:

This study is the first to conduct an in-depth empirical analysis of damages in trade secret cases in the U.S. From an original data set of cases in federal courts from 2000 to 2014, I assess the damages awarded on trade secret claims. In addition, a wide range of other variables are incorporated into the analysis, including those related to background court and jurisdiction information, the kinds of trade secrets at issue, background details about the parties, the related causes of action included with claims of trade secret misappropriation, and details about the damages awarded.

Analysis of this data and the relationship between and among the variables yields insightful observations and answers fundamental questions about the patterns and the nature of damages in trade secret misappropriation cases. For instance, I find average trade secret damage awards comparable to those in patent cases and much larger than trademark cases, very positive overall outcomes for plaintiffs, and higher damages on business information than other types of trade secrets. The results make significant contributions in providing deeper context and understanding for trade secret litigation and IP litigation generally, especially now that we enter a new era of trade secret litigation in federal courts under the Defend Trade Secrets Act of 2016.

I think this study has a lot to offer. Although it doesn't include state court cases, it provides a detailed look at trade secret cases in the first part of this century. Of course, the verdicts, which were about 6% of all trade secret cases filed, are subject to the same selection effects as any other verdict analysis - there is a whole array of cases (more than 2000 of them in the federal system alone) that never made it this far, and we don't know what the tried cases tells us about the shorter-lived cases.

The study offers a lot of details: amounts of awards, states with the highest awards, states with the most litigation, judge v. jury, attorneys' fees, punitive damages, the effect of NDAs on damages, etc. It goes a step further and offers information about the types of information at issue, and even the types of information that garner different sizes of awards. It's really useful information, and I recommend this study to anyone interested in the state of trade secret litigation today.

There are, however, a couple ways I think the information could have been presented differently. First, the study has some percentile information which was great, but most of it focuses on averages. This is a concern because the data is highly skewed; one nearly billion dollar verdict drives much of the relevant totals. Thus, it is difficult to get a real sense for how the verdicts look and there is no standard deviation reported.

Of course, the median award according to the paper is zero, so reporting medians is a problem. I particularly liked the percentile table and discussion, and I wonder whether a 25/50/75 presentation would work. Speaking of zero dollar awards, though, I thought the paper could be improved by clarifying what is calculated in the average. Is it the average of all verdicts? All verdicts where the plaintiff wins? All non-zero verdicts? Related to this, I thought that clearly disaggregating defendant verdicts would be helpful. The paper reports how many plaintiffs won, but this is not reflected in either the median or average award data (that I can tell - only total cases are reported). At one point the paper discusses the average verdict for defendants (more than $800,000) which is confusing since defendants shouldn't win any damages. Are these part of the averages? Are they calculated as a negative value? If these are fee awards, they should be reported separately, I would think.

Though I would like more data resolution, I should note that this really is just a presentation issue. The hard part is done, and the data is clearly available to slice and dice in a variety of ways, and I look forward to further reporting of it.

Defending a Federal Trade Secrets Law

This last week, 42 professors sent a letter to Congress opposing the Defend Trade Secrets Act. This same week, James Pooley, a well-known attorney and former Deputy Director General of WIPO, released a draft of The Myth of the Trade Secret Troll: Why We Need a Federal Civil Claim for Trade Secret Misappropriation, forthcoming in the George Mason Law Review.

Jim Pooley is the author of a treatise on trade secrets, and I respect him greatly. He has forgotten more about trade secrets than most people will ever know, and it should be no surprise that this support of the DTSA is the most well-reasoned that I've seen. He considers each of the studies one by one and and addresses their concerns: that the UTSA is not that uniform, that the seizure provision is narrow, that global trade secret risks require federal jurisdiction, and that state trade secret laws will not be preempted.

The paper is worth a read. It is likely to be persuasive to those who are on board. It might sway those that are undecided.

I'm right in the middle on this one. I signed on the professor's letter, but barely. I think the latest version of the proposed law is much improved from before, but I have concerns about inevitable disclosure and the seizure rules.

Here is my take on four of the primary defenses of/needs for the new act:

It's a cyber world that needs federal procedures: A big part of the push for a federal law is that it opens up federal courts to trade secret cases and thus better procedures. While I understand this, I wonder whether the argument proves too much. If the concern is about foreign actors acting over the network, then federal courts will have diversity jurisdiction, and all the procedural hurdles melt away. Further, if it's about procedure, then a simple solution would be to allow filing of trade secret actions in federal court. Furthermore, the procedural advantages are not a panacea; sometimes state court judges are more accessible and move faster than federal judges. Pooley argues the opposite, but my own, admittedly more limited, experience is that it depends on the judge, not the forum. Furthermore, the procedures are improved in a federal system, but it was only in 2014 that out of district subpoenas could issue in the local district court, and one must still file motions in the remote district to enforce them.

The UTSA is not really that uniform: This is true. Indeed, I wrote an empirical essay and book chapter showing that courts routinely fail to cite other state court Uniform Trade Secrets Act decisions. But it is not clear that the non-uniformities, either in statute or in practice, are of the type that will affect important outcomes when there is a real trade secret misappropriation. I've yet to hear of a case where the venue's peculiar trade secret laws made a difference to the types of "global cyber-espionage" type misappropriation that Pooley is concerned with.

Seizures rules are narrow, and they are narrower than they were in prior drafts: In my studies, injunctions were the types of decisions least likely to result in citation to UTSA cases, as opposed to "general" injunction law. This seems to favor the need for a specialized procedure. That said, I've yet to hear a convincing reason why TRO practice is insufficient or why they must be in federal court. I've represented clients on both sides of seizures, and I've seen how court papers can be manipulated to get desired results. This is not to say that we shouldn't have ex parte seizures; just that the case for a specialized procedure is not clear. I've yet to hear of a case with a real misappropriation of the "global cyber-espionage" type where a TRO was refused and the bad guys got away. I also think that the seizure laws are not quite as narrow as they could be - there is still plenty of room for abuse. [UPDATE: Eric Goldman provides good analysis--and critique--of the seizure provisions.]

The proposed act is neutral on inevitable disclosure: The paper makes a good point: inevitable disclosure is not substantive trade secret law, but instead how courts apply "threatened" misappropriation injunctions. This is true, but it doesn't answer the concern. Some states have a stronger policy of employee mobility than others, and thus require more evidence of a threat. The concern with a federal law is that precedent in one circuit (or district court) will be applied in other district courts. That state trade secret law is not preempted is no answer, because the supremacy clause will dictate how federal law applies. State trademark laws aren't preempted either, and we don't see those applied very often-and never to allow more use by the defendant, only less. Thus, the standard for what constitutes a "threat" could be weakened, and that concerns those who view employee mobility important for competition policy. While I agree with Pooley on the doctrine, I don't think the doctrinal view is enough to persuade that this is not a concern.

So, where does that leave us? Quite frankly, I don't know. I think that the case for a federal trade secret law is not that strong. There are benefits to such a law, but I'm not convinced they are so great that we should supplant 150 years of state regulation of trade secrets. On the other hand, I don't think the case for keeping state trade secret laws is that great either. I like the federalist experiment argument, but there are a whole lot of states that have rules that I don't like (such as the inevitable disclosure doctrine). In my view, no one has made the case that one system is better than the other.

What I do think would be helpful - to me, at least - would be to hear the horror stories of trade secret misappropriation where current law and procedure failed, and the misappropriator got away because we did not have this law. I bet there are some such stories, but I haven't heard one yet.

Do We Need a Federal Trade Secret Statute?

There is a current push for federalizing civil trade secret law. I don't really understand it, quite frankly. I've listened to many folks in IP intensive industries, and their reasons for asking for it, for the most part, are nothing that can't currently be achieved procedurally under current law. I also spent most of my career litigating trade secret cases, representing both plaintiffs and defendants, and the concerns I've heard about state practice just weren't there in my experience. That's not to say there are a few outliers, but I have yet to hear of an actual, real-live compelling case where the outcome would have been different if only we had a civil federal trade secret statute. Thus, I'm not convinced that federalization will actually aid IP owners in solving the very real problem of trade secret misappropriation in the information age. It reminds me of a great line from The American President:

Well then, congratulations. It's only taken you three years to put together crime prevention legislation that has no hope of preventing crime.

This makes me wonder whether the push for federalization is because the substantive law will be different. Drafts I've seen, for example, are unclear about whether reverse engineering is a defense. That, to me, is a big deal. Changing the law of reverse engineering would be huge. Or, maybe the goal is to impose inevitable disclosure on California, which has rightly rejected that doctrine so far. I don't know, but it worries me. Those who know my work know that I usually fall much more toward the IP owner's view of life than your average academic. If this federalization thing bothers me, that's saying something.

It also worries Dave Levine (Elon; Princeton fellow) and Sharon Sandeen (Hamline), who've written Here Come the Trade Secret Trolls. They posit that the proposed statutes could have the unintended effect of causing trade secret hold-up cases by small shops that overvalue their secrets that aren't really secret.

Seaman: The case against federalizing trade secrecy

In his new article, The Case Against Federalizing Trade Secrecy, forthcoming in the Virginia Law Review, Chris Seaman does what the title suggests: he makes the case against federalizing trade secrecy protections and challenges the wisdom of current proposals in this direction. I'll quickly summarize the article and then make a few points. In general, I found the article highly educational and think Seaman makes a compelling case that federalization would be an unnecessary legal innovation.

Shubha Ghosh: IP Federalism

In his new piece, Short-Circuiting Contract Law: The Federal Circuit's Contract Law Jurisprudence and IP Federalism, Shubha Ghosh discusses what he sees as the Federal Circuit's inappropriate encroachment on state contract laws respecting intellectual property rights, especially patent rights.  In doing so, Ghosh joins many other scholars in addressing the fascinating topic of IP and federalism, including Mark Lemley, Paul Goldstein, Paul Heald, John Shepard Wiley, Douglas Lichtman, Xuan-Thao Nguyen, Jeanne Fromer, Paul Gugliuzza, and myself.  (Notably, Gugliuzza recently made a similar argument to Ghosh that the Federal Circuit has inappropriately impeded state courts from influencing the patent system with their own laws, blogged on here.) 

Moretti & Wilson: Do State Incentives for Innovation Work?

Do state incentives for innovation work? As I recently discussed in a short presentation at IP Scholars on August 8, state and local incentives for innovation, from R&D tax credits to competitive awards for research or commercialization, have become increasingly common as states attempt to build regional "clusters" of innovation like Silicon Valley. Due to the importance of proximity and localized knowledge spillovers in generating innovation, in theory, state and local innovation incentives that result in self-sustaining "clusters" of innovation could have significant effects on patenting activity and other measures of innovation.

Patent Experimentalism

I haven't had much time for blogging recently because I've been writing and revising a new article, Patent Experimentalism, which I'll be presenting at IPSC on August 8. This is still a work in progress, so please send me your feedback and suggestions! Here is the current abstract:

Hrdy: State Patents

Yale ISP fellow Camilla Hrdy has just posted Dissenting State Patent Regimes (IP Theory). Here is the abstract:

Inventors who believe in open innovation should start applying for state patents instead of U.S. patents. Patenting at the state level prevents rivals from obtaining U.S. patents and generates valuable innovation spillovers in other states where the patent has no legal effect. It also creates a unique opportunity to force patent law reform from the bottom up. In exchange for filing fees, inventors can demand patents based on rules that support open innovation, like shorter terms in fast-moving industries, stricter disclosure requirements, or new restrictions on patenting by non-practicing entities. The lobbyists who stymie reform at the national level will have a much harder time blocking reform in all fifty states. Meanwhile, patent law’s dissenters need only one state to start granting patents in order to get courts, the media, and eventually Congress to pay attention.

Patent Law, State Law, and Abraxis v. Navinta

I am studying for my federal jurisdiction exam, so I have been thinking about how patent law fits into the themes of this course. We used the classic casebook, Hart and Wechsler's The Federal Courts and the Federal System, and one of the themes emphasized by the book is the interstitial nature of federal law. From p. 459:

Federal law is generally interstitial in its nature. It rarely occupies a legal field completely, totally excluding all participation by the legal systems of the states. . . . It builds upon legal relationships established by the states, altering or supplanting them only so far as necessary . . . . Congress acts, in short, against the background of the total corpus juris of the states in much the way that a state legislature acts against the background of the common law, assumed to govern unless changed by legislation.

One might think that patent law is entirely federal, but Professor Amar (who has also reviewed an earlier edition of the casebook) liked to remind us that federal law is never in a vacuum.