Maggie Chon on IP and Critical Theories

I tend to approach IP law primarily through a law-and-economics lens, but I enjoy learning about how scholars with different methodological toolkits tackle the same subject matter—especially when their work is clear and accessible. I was thus delighted to see a draft chapter by Margaret Chon, IP and Critical Methods, for the forthcoming Handbook on Intellectual Property Research (edited by Irene Calboli and Lillà Montagnani). Chon provides a concise review of critical legal theory and its application to IP law.

According to Chon, critical theory includes a critique of liberal legal theory as based on the fallacy that legal institutions fairly reflect constituents' interests (as reflected in the marketplace or ballot box). Instead, the interests of privileged or empowered social groups are over-represented, and institutions contribute to these inequalities to the extent that enduring change requires reimagining these institutions themselves. Of course, as she notes, "critical theory would not exist without some belief (however thin) that law and legal systems contain some of the tools necessary for structural transformation."

Chon argues that one need not be a self-identified Crit to engage in critical methodology, and that many IP scholars have stepped closer to critical method by moving from doctrinal to structural analysis, and by "perform[ing] this structural analysis with attention to power disparities." And she gives a number of examples of the influence of critical theory across different areas of IP.

Data Driven Creativity

My school started much earlier than my kids' school this year, so I spent a couple weeks at home while the rest of the family visited relatives across the country. I am not too proud to admit that I bingewatched an obscene amount of TV during the two weeks they were gone while I was completing some writing projects. It's really the first time I have done so; while I have shows that I like, I rarely get to watch them all at once, or to pick the next one on the list in rapid succession.

So, it was with a new interest that I enjoyed The Second Digital Disruption: Data, Algorithms & Authorship in the 21st Century by Kal Raustiala (UCLA) and Chris Sprigman (NYU). A draft of the article is on SSRN, and they blogged about it in a series of posts at Volokh Conspiracy. Here is the abstract:

This article explores the intellectual property ramifications that flow from the explosive growth of mass streaming technologies. Two decades ago rising internet usage led to what we call the first digital disruption: Napster, file-sharing, and the transformation of numerous content industries, from music to news. The second digital disruption is about the age of streaming and, specifically, how streaming enables firms to harvest massive amounts of data about consumer preferences and consumption patterns. Coupled to powerful computing, this data—what Mark Cuban has called “the new gold”—allows firms such as Netflix, Amazon, and Apple to know in incredible detail what content consumers like and how they consume it. The leading edge of this phenomenon—and the primary vehicle for our examination—is the adult entertainment industry. We show how Mindgeek, the little-known parent company of Pornhub and the dominant player in pornography today, has leveraged data about viewing patterns to not only organize and suggest content but even to dictate creative decisions. We first show how the adult industry adapted to the internet and the attendant explosion of free content. That story aligns with many similar accounts of how creative industries adapt to a loss of control over IP by restructuring and recasting revenue streams. We then show how content streaming firms have used data to make decisions about content aggregation, dissemination, and investment. Finally, we consider what these trends suggest for IP theory and doctrine. A key feature is that by making creative production less risky, what we call “data-driven authorship” drives down the need for strong IP rights.

I thought the discussion about how data drives what to create to be fascinating, and the article is well worth a read. I think the perfect example of what the authors are describing is the Netflix movie Bright, in which Will Smith plays a cop who teams up with an Orc on the LA Police. The movie was critically panned. Rotten Tomatoes: 26%. But viewers seem to like it a lot: Rotten Tomatoes Audience Score: 84%. Netflix is surely on to something here.

I could certainly see it playing out as I watched. I watched "The Five," a show by one of my favorite authors, Harlan Coben. So then Netflix gave me nothing but mysteries and suspense to watch, plus another show by Coben, Safe (both were great, by the way). But I'm not really a mystery show person - I like sci-fi. So, I watched one show, and then the suggestions got weird: do I like mystery? sci-fi? sci-fi mysteries? I wound up having to dig a bit for the next show.

But here's the interesting thing: the quality of the shows varied wildly, even among the genres that I liked. The writing, acting, editing, and direction mattered. I don't know about the Mindgeek and porn clips, but I will note a couple distinguishing factors. First, there is likely a...er...utilitarian factor associated with those works; people are not watching for the articles, as it were. Second, the works are much shorter; it is much easier to have a highly focused 15-25 minute clip than a 10 episode series. Even with these differences, I suspect viewers have their preferences about what they see in the different clips with the same data driven attributes.

My broader point, then, is that how we consider the effect of data driven works will depend a lot on how we view creativity. The data certainly reduces the creativity in certain major plot points, as well as the quantity of different types of works. But to some extent studios have always done this, only with rules of thumb and intuition rather than actual knowledge. In that sense, data will democratize creativity - if viewers want more women in better roles, there will be more women in better roles; no need to rely on a male studio executive's views on the matter.

Beyond selection, though, I suspect there is still room for surprise, storytelling, differentiation, and other forms of creativity. Consider Bright: write what you want, but it just has to star Will Smith, include the police, and feature orcs and elves. At the limit, too much data may constrain creativity, of course - the more you add, the less you can create.

To be clear, Raustiala and Sprigman don't say anything that contradicts my intuitions here. They make clear that creativity is on a continuum, and that data merely slides to one side. But they do question how viewers will perceive works, and it is there that I disagree with them. I suppose that we could hit that limit where everything is automated, but my gut says that despite having preferences for particular story aspects, viewers will always be able to separate the wheat from the chaff (though not the way I would - as just about every American Idol vote shows) and thus will always look for something new and different within their preferences. At least, I sure hope so.

Yochai Benkler on Innovation & Networks

Yochai Benkler is a giant within the intellectual history of IP law; some of his work will surely end up on my Classic Patent Scholarship page if I expand it to post-2000 works. Even though I don't agree with all of his conclusions, I think IP scholars should at least be familiar with his arguments. For those who haven't read his earlier works—or who just want a refresher on his take—you might enjoy his recent review article, Law, Innovation, and Collaboration in Networked Economy and Society, 13 Ann. Rev. L. & Soc. Sci. 231 (2017). Here is the abstract:

Over the past 25 years, social science research in diverse fields has shifted its best explanations of innovation from (a) atomistic invention and development by individuals, corporate or natural, to networked learning; (b) market-based innovation focused on material self-interest to interaction between market and nonmarket practices under diverse motivations; and (c) property rights exclusively to interaction between property and commons. These shifts have profound implications for how we must think about law and innovation. Patents, copyrights, noncompete agreements, and trade secret laws are all optimized for an increasingly obsolete worldview. Strong intellectual property impedes, rather than facilitates, innovation when we understand that knowledge flows in learning networks, mixing of market and nonmarket models and motivations, and weaving of commons with property are central to the innovation process.

Note that the shift Benkler is describing is a shift both in scholars' understanding of innovation and in the nature of innovation itself—particularly due to changes in organizational structure made possible by technologies such as the internet. The optimal innovation policy 100 years ago was likely different from the optimal innovation policy in today's more networked economy. To be sure, historical innovation studies can still be quite illuminating—but it is always important to consider how applicable the conclusions are likely to be in the modern context.

Abstraction, Filtration, and Comparison in Patent Law

Last April, I had the good fortune to participate in a symposium at Penn Law School. The symposium gathered a variety of IP scholars to focus on the "historic" kinship between copyright and patent law. That kinship, first identified in Sony v. Universal Pictures, supposedly shows parallels between the two legal regimes. I use scare quotes because it is unclear that the kinship is either historic or real. Even so, there are some parallels, and a collection of papers about those parallels will be published in the inaugural issue of Penn's new Law & Innovation Journal.

My article is about the use of abstraction, filtration, and comparison (a distinctly copyright notion) in patent law. I have cleverly named it Abstraction, Filtration, and Comparison in Patent Law. A draft of the article is now on SSRN. Here is the abstract:

This essay explores how copyright's doctrine of abstraction, filtration, and comparison is being used in patent law, and how that use could be improved. This test, which finds its roots in the 1930s but wasn't fully developed until the 1990s, is one that defines scope for determining infringement. The copyrighted work is abstracted into parts, from ideas at the highest level to literal expression at the lowest. Then, unprotected elements are filtered out. Finally what remains of the original work is compared to the accused work to determine if the copying was illicit.

This sounds far removed from patent law, but there is a kinship, though perhaps one that is not so historic and a bit hidden. The essence of the test is determining protectable subject matter. These same needs permeate patent law as well. This essay explores how the test is implicitly used and should be explicitly used.

With design patents, the test might apply as it does in copyright, with functional elements being filtered out during infringement. Current precedent allows for this filtering, but not clearly or consistently. With utility patents, the abstraction, filtration, and comparison happen earlier, during the test for patentable subject matter. Here, the comparison is with what is conventional or well known. The essay concludes by discussing why the application is different for design and utility patents.

I think the article is interesting and brings some useful insights into how we should think about patentable subject matter, but you'll have to be the judge.

Use Based Copyright Terms

I didn't blog last week because, well, I was at Disneyland. But I love IP, and when you're a hammer, everything is a nail. So, I couldn't help but think as I looked at the gigantic Mickey Mouse on the Ferris wheel that things are going to start getting messy when the copyright in Mickey runs out.

It occurs to me that serial, long term uses of copyrighted works are different than one time publications. To the extent that copyright is intended to incentivize investment in creative works, then losing protection over time can limit the incentive to develop quality long term work.  I'm not just talking about Mickey - Superman (and the additional complication of rights clawback) and other serial comics create issues. Star Trek is 50, Rocky and Star Wars are 40, and even Jurassic Park is 25 years old. The solution we got to this problem, a longer term for everything, was not the right one. A better solution is that terms should last as long as copyrights are in use, plus a few years. Works that are simply "sold" without any new derivative work would be capped, so works without improvement could not last forever.

Now, this is not to say there aren't costs to protecting copyrights while they are still in use. There is a path dependency that can reduce incentives to come up with new works (in other words, bad sequels instead of new creativity). There is also value associated with the public being able to use works in their own ways.

I'm personally not worried about either of these. On the first, there are plenty of incentives for new entrants to create new works (we got Star Trek, then Star Wars, then Battlestar Galactica (I and II), and now the Expanse), and even serial works become stale after a while (there was no Rocky 50, as some parodies predicted). On the second, I think it is inconsistent with the first concern to worry about path dependence while also worrying that others should be able to use the works. Of course, fresh eyes can bring new ideas to the expression, but hopefully the original owners do that. At this point, non-utilitarian concerns come into play. As between a party who has invested in making a work valuable over a long period of time and a party who would like to use that value, I side with the investor and say newcomers can create their own new value. I realize that many disagree with me on this point. That said, I think there are some noncompetitive uses - fan fiction, say - that can bring new ideas and allow some new works.

Note that a use-based term cuts both ways. As Paul Heald has demonstrated, there is a significant drop in availability for older books that are still within the copyright term. A use-based rule would either end the term, or perhaps create a commercialization bounty similar to that proposed by Ted Sichelman for patents.

A great idea, right? Except, I thought no way that nobody else looked at Mickey and thought the same thing. So, at the IP Scholars Conference last week (which was great, by the way), I asked my colleague Shyam Balganesh from Penn about it, and he didn't even blink before saying that Landes and Posner wrote an article 15 years ago called Indefinitely Renewable Copyright, located here.

As you would expect from these two authors, they detail the costs and benefits of copyright terms, and they provide empirical evidence that showed how shorter copyright terms led to very few renewals. The primary divergence from my idea is that I would allow a challenge based on lack of use, whereas Landes and Posner seem to assume that use is synonymous with registration (as their data shows). But I can imagine times when parties renew but then do not use their works. Thus, the system should look a bit more like trademarks.

I've done no literature review, so it's entirely possible that others have written about this. If you wrote or know of such an article, feel free to pass it along, and I'll add it here for posterity.

#IPSC18 Preview: General IP

This week I've been previewing all 140+ abstracts for the 18th Annual IP Scholars Conference next week at Berkeley, with patents & innovation on Monday, copyright on Tuesday, trademarks on Wednesday, and design/trade secrets/publicity yesterday. Here are all the remaining panels, in which multiple areas of IP are combined (either in individual papers or across the panel). Looking forward to seeing everyone next week!

#IPSC18 Preview: Design, Trade Secrets, and Right of Publicity

To get ready for IP scholar speed dating at Berkeley next week, I've previewed the panels focused on patents and innovation, copyright, and trademarks. Today: design, right of publicity, and trade secrets (including some notes on other panels where you can also find papers on these topics).

#IPSC18 Preview: Trademarks

The 18th Annual IP Scholars Conference is Aug. 9-10 at Berkeley Law. Monday I previewed the eighteen panels primarily related to patents and innovation, and yesterday I previewed the six panels related to copyright. There are only two trademark-focused panels, and I didn't see any trademark-focused papers on general IP panels.

#IPSC18 Preview: Copyright

Yesterday I previewed the panels on patents and innovation at next week's IP Scholars Conference at Berkeley Law. Here are the copyright-focused panels:

#IPSC18 Preview: Patents & Innovation

The 18th Annual IP Scholars Conference is next week (Aug. 9-10) at Berkeley Law, and it includes over 140 academic talks given in six parallel tracks. It's not a great format for deep substantive engagement, but it's my favorite conference for getting an overview of what the IP academic community is working on. Of course, you can only see one-sixth of the projects, so if you want a taste of everything: I just read all the abstracts for this year's conference and wrote one sentence on each of them.

Here are all the panels that seem primarily focused on patents and innovation; I'll post about other IP areas (including panels combining patents with other areas of IP) in the coming days. For coauthored papers, the presenting author is listed first.

The Real World Impact of the Copyright Registration Prerequisite

Just before the summer recess, the Supreme Court snuck in a certiorari grant that I don't think has received much attention in proportion to its importance--Fourth Estate Public Benefit Corp. v. Wall-Street.com LLC. The issue is seemingly simple: before filing a lawsuit, a copyright owner must register the copyright. But what does it mean to register the copyright? Simply file the application, or actually receive the registration certificate.

I'd say this question is one of the most practically important IP questions the Court has faced in the last decade. When I was in active practice, I would estimate that a quarter to a third of our clients did not have a registration at the time they wanted to sue, and we relied on the Ninth Circuit's permissive "application is enough" rule to get a case filed (and sometimes seek injunctive relief). The alternative was to file and wait, sometimes months or even more than a year, to get a registration. (I've read that pendency is now about six to eight months). Alternatively, one can pay $800 for an expedited registration within 10 days.

Why might someone not file a registration well in advance of suing? First, because they don't have to. The post-Berne Convention adoption amendments from 1989 allow copyright to vest from the time of fixation. Indeed, in order to maintain compliance with Berne, the pre-filing registration requirement only applies to U.S. Works. Foreign works may sue at will--more on this later.

More practically, there are plenty of reasons why one might not file. In an era of mass digital photography, it would be ridiculously expensive to register every work in case one was infringed; it is far more efficient to see if anyone infringes, and then register that work. In software, new versions are created all the time--almost literally so in software as a service platforms. It would be impossible to file a new derivative work registration for every single released version, especially for open source (though I bet Microsoft does it).

As a result, the registration requirement would become a hammer that would keep rightful owners from bringing suit. The Supreme Court even recognized this several years ago in Reed Elsevier, Inc. v. Muchnick. In that case, a class of journalists filed suit for transfer of their print works into electronic databases. Some putative class members objected to a settlement, but they had not registered. The Court ruled that registration was not jurisdictional. Does this mean that one can apply and sue, so long as registration occurs before any final determination?

I won't run through the pro and con arguments in detail, as arguments can be made on each side from different interpretive points of view. The statute clearly states that registration is required. But another section states that registration is effective from the date of application. But another part states that one may sue if the registration has been denied, which implies that registration is not complete until accepted. But then one wonders how long an applicant must wait until there is an assumption that the work has been "pocket denied," especially when registration is a ministerial act. But then the copyright office might argue that registration is not a ministerial act. And so forth. But the outcome of the arguments will have a real effect on real people and businesses.

I'd like to end with the challenge not made in the case: equal protection. While a couple commentators here and there have mentioned this problem with the dual registration rules, I can find no case with "411(a) & 'equal protection'" as search terms. Requiring a separate hurdle for some works and not others is about as unequal as I can think of. It is unclear why SAP can file suit immediately, but Oracle may not. I don't know if the Supreme Court can reach this issue as part of its interpretive determination (it's not an issue and it wasn't briefed), but I hope it does.

NBER Summer Institute 2018: Innovation

Last week I was a discussant at the Innovation section of the 2018 NBER Summer Institute (full schedule here), which I highly recommend to scholars interested in the economics of innovation. The quality of the papers and the discussion was pretty uniformly high. There were a few examples of the insularity of economics, such as remarks about topics that "no one has studied" that have been studied by legal scholars, but I think this just illustrates the benefits of having scholars familiar with different literatures at disciplinary conferences.

Here are links and brief summaries of the innovation-related papers. (There was also a great panel discussion on gender and academic credit, which I might post about separately at some point.)

What Drives Product Companies to Sue?

There are many studies of patent litigation, including the reasons that firms litigate - I have worked on some myself. Much of it is really helpful information, but all of the studies lack one key component: the patents that get litigated are highly selected. They are selected for a) the firms that litigate (practicing v. non-practicing), b) the patents that are litigated (individual, portfolio, lead), and c) the cases that are litigated to judgment (default, settlement, summary judgment, trial).

In the realm of which firms and patents litigate, most of the studies have looked at the litigation level, comparing characteristics of patents and technology with samples of those patents and technologies that were not litigated. This is helpful information, but it certainly doesn't tell the whole story. So, Dirk Czarnitzki and Kristof Van Criekingen (KU Leuven Managerial Economics) have used suvey data of Belgian firms to be better understand which firms litigate. A draft of their paper New Evidence on Determinants of IP Litigation: A Market-Based Approach is posted on SSRN.  Here is the abstract:

We contribute to the economic literature on patent litigation by taking a new perspective. In the past, scholars mostly focused on specific litigation cases at the patent level and related technological characteristics to the event of litigation. However, observing IP disputes suggests that not only technological characteristics may trigger litigation suits, but also the market positions of firms, and that firms dispute not only about single patents but often about portfolios. Consequently, this paper examines the occurrence of IP litigation cases in Belgian firms using the 2013 Community Innovation Survey with supplemental information on IP litigation and patent portfolios. The rich survey information regarding firms’ general innovation strategies enables us to introduce market-related variables such as sales with new products as well as sales based mainly on imitation and incremental innovation. Our results indicate that when controlling for firms’ IP portfolio, the composition of turnover in terms of innovations and imitations has additional explanatory power regarding litigation propensities. Firms with a high turnover from innovations are more likely to become plaintiffs in court. Contrastingly, firms with a high turnover from incremental innovation and imitation are more likely to become defendants in court, and, moreover, are more likely to negotiate settlements outside of court.

The paper itself is relatively straightforward and the results are unsurprising: firms that seem to rely heavily on big innovation sue more, and firms that "imitate" or make incremental innovations tend to get sued more.

I'm not sure what to make of the finding that defendants who imitate are more likely to settle pre-suit (patent portfolio quality being held equal). I suppose that defendants who are making their own big innovations are more likely to challenge validity or argue noninfringement. Then again, the study finds that imitator defendants are more likely to seek patent invalidity, so it may be that either a) they settle when they cannot do win the challenge, or b) innovator defendants rely more on noninfringement.

I suppose that my primary critique is not so much with the empirical method but with the literature review. I think the discussion could have been informed a bit by reference to some of the legal literature in this area. I realize that most economists see law reviews as articles non grata due to lack of peer review, but there's been plenty of decent enough work in this area to merit comment. For example, this draft argues that it is the first to consider out of court settlements, but Lemley, Richardson and Oliver circulated a draft of comprehensive survey results in 2017. Similarly, the article discusses patent portfolios in enforcement, but doesn't mention any of the several legal articles focusing on these dynamics. This is a small point, but an important one. I think legal scholars should look to the economics literature much more often than they do, and I think economic research wouldn't hurt by doing the opposite every once in a while.

In any event, this is an interesting paper that adds new information about how we should think about what drives competitive company litigation.

The Trade Secret-Contract Interface

Deepa Varadarajan's new article, The Trade Secret-Contract Interface, published in the Iowa Law Review, explores the role of contracts in trade secret law. This article returns to an issue that remained unresolved following rich exchanges between Robert Bone and other scholars such as Michael Risch and Mark Lemley. Varadarajan's article is a welcome follow up.

What do Generic Drug Patent Settlements Say about Patent Quality?

An interesting study about Orange Book patents challenged both under Hatch-Waxman and Inter Partes Review caught my eye this week, but perhaps not for the ordinary reasons. One of the hot topics in drug patent challenges today is reverse payments: when the patentee pays the generic to stop a challenge. The Supreme Court has ruled that these payments can constitute antitrust violations. Though the drug companies give reasons, I'll admit that I've always been skeptical of these types of payments.

One of the key questions is whether the patent was going to survive. Most seem to assume that if a company pays to settle, then the patent was likely going to be invalidated. That's where the draft, Maintaining the Balance: An Empirical Study on Inter Partes Review Outcomes of Orange Book-Listed Drug Patents and its Effect on Hatch-Waxman Litigation, by Tulip Mahaseth (a recent Northwestern Law grad) comes in. Here is the abstract from SSRN:

The Hatch-Waxman Act intended to strike a delicate balance between encouraging pioneer drug innovation and promoting market entry of affordable generic versions of pioneer drugs by providing a streamlined pathway to challenge validity of Orange Book patents in federal district courts. In 2012, the America Invents Act introduced Inter Partes Review (IPR) proceedings which provide a faster, cheaper pathway to challenge Orange Book patents than Hatch-Waxman district court litigation. IPRs also have a lower evidentiary burden of proof and broader claim construction standard, which should make it easier, in theory, to obtain patent invalidation in IPRs as compared to Hatch-Waxman litigation. This empirical study on IPR outcomes of Orange Book patents in the past six years shows that both generic manufacturers and patent owners obtain more favorable final decisions in IPRs as compared to their Hatch-Waxman litigation outcomes because the rate of settlement in IPRs is much lower than in Hatch-Waxman litigation. Moreover, generic manufacturers do not appear to be targeting Orange Book patents in IPRs during their drug exclusivity period. Only 2 out of more than 400 IPRs against Orange Book patents were filed by generic petitioners during the patents’ New Chemical Entity exclusivity period. About 90% of the 230 Orange Book patents challenged in IPR proceedings were also challenged in Hatch-Waxman litigation. It is likely that generic manufacturers are not deterred from Hatch-Waxman litigation because of the lucrative 180-day exclusivity period, which gives the first generic filer 180 days to exclusively market their generic version without competition from other generics when the Orange Book drug patent is successfully invalidated in a subsequent district court proceeding. Therefore, IPR proceedings do not appear to be disrupting the delicate balance sought by the Hatch-Waxman Act. Instead, the IPR process has provided generic manufacturers a dual track option for challenging Orange Book patents by initiating Hatch-Waxman litigation in district courts and also pursuing patent invalidity in IPRs before the Patent Trial and Appeal Board, which has reduced rate of settlements resulting in more patents being upheld and invalidated.

There's a lot of great data in this paper, comparing Orange Book IPRs with non-Orange Book IPRs, including comparison of win rates and settlement rates.

But I want to focus on one seemingly minor point: as the number of IPRs has increased, the rate of settlement has decreased. And, more important, the decreasing rate of settlement has led to more invalidation and more affirmance of patents.

This result gives a nice window into how we might view settlements. Traditional Priest-Klein analysis says that this is exactly what we should see - that the previously settled cases were 50/50. But proving this is harder, and this data set would allow for a nice differences-in-differences analysis in future work.

Additionally, a split among outcomes implies that the settlements were not necessarily because the patentee believed the patent was at risk.  If anti-competitive settlements were ruling the day, I would have predicted that most of the (recent) non-settlements would have resulted in patent invalidation. Then again, it is possible that a 50% chance was risky enough to merit a reverse payment settlement in the past. Regardless of how one comes out on this issue, this study provides some helpful details for the argument.