Tuesday, September 27, 2016

Network Neutrality in 1992

I've been remiss in blogging of late; I had a really busy summer and beginning of Fall. I have a bit more time now and hope to resume some blogging about papers and cases shortly. In the meantime, it doesn't take long to write a post about your own work, so I figured it would be an easy way to (re)break the ice.

I've written an essay with a former student, Christie Larochelle, who is now clerking in Delaware (she was a tenured physics professor before attending law school). As part of a hometown symposium for the Villanova Law Review's 60th anniversary, we tackled an interesting topic: rumblings about network neutrality at the birth of the commercial internet. More on the article and on coauthoring after the jump.

Tuesday, September 6, 2016

Sandeen and Seaman: Toward a Federal Jurisprudence of Trade Secret Law

If you're interested in the fate of trade secrets law, and you like conflicts of law, I recommend taking a look at Sharon Sandeen and Chris Seaman's paper, Toward a Federal Jurisprudence of Trade Secret Law, when it comes out. As we know, Congress has now passed a federal civil cause of action for trade secret misappropriation: the Defend Trade Secret Act of 2016 (DTSA). For the first time, civil trade secret plaintiffs can choose to sue under federal law. But the DTSA leaves courts with some major interpretive challenges. This is the subject of Sandeen and Seaman's project. I was fortunate to get a glimpse at the IP Scholars trade secrets panel last month.  Read more at the jump.

Thursday, September 1, 2016

Mark Rose: The Authors and their Personalities that Shaped Copyright Law

“Great cases like hard cases make bad law” said Justice Holmes at the turn of the twentieth century. By contrast in copyright law, complex personalities and facts seem to allow the law to work itself pure. That seems to be the principal takeaway from Mark Rose’s illuminating new book Authors in Court: Scenes from the Theater of Copyright.

A literary historian of copyright whose prior book is considered a seminal contribution to the field, Rose sets out in Authors in Court to tell the story behind several of copyright’s leading cases through an investigation of the personalities that prompted the dispute and its eventual resolution. The book’s main chapters each tell the story of a major copyright case that is today part of the copyright canon: Pope v. Curll, Stowe v. Thomas, Burrow-Giles v. Sarony, Nichols v. Universal, Salinger v. Random House, and Rogers v. Koons. Some of these cases (e.g., Nichols, Koons) continue to be cited by courts to this day.

Rich in detail, and lucidly written, each chapter showcases what the idea of “authorship” meant to the protagonists in each dispute and the range of values and influences that motivated the construct. To some, it involved the maintenance and policing of their public personae (e.g. Pope), to others it involved balancing the conflation of art and value (e.g. Sarony), and to yet others it involved melding authorship with narratives of honesty and authenticity. Rose does an excellent job of bringing to life the colorful personalities that initiated these famed copyright disputes.

Introducing New Blogger: Shyam Balganesh

I am very pleased to welcome Professor Shyam Balganesh as a new Written Description blogger. He is a Professor of Law at the University of Pennsylvania Law School, where he is also a Co-Director of the Center for Technology, Innovation & Competition (CTIC). His scholarship focuses on understanding how copyright law and intellectual property can benefit from the use of ideas, concepts and structures from different areas of the common law, especially private law. His article Causing Copyright (forthcoming in the Columbia Law Review) was featured on this blog in March, and Foreseeability and Copyright Incentives (published in the Harvard Law Review) is one of the most cited IP articles. I look forward to reading his contributions to Written Description!

Tuesday, August 30, 2016

Brennan, Kapczynski, Monahan & Rizvi: Leveraging Government Patent Use for Health

The federal government can and should use its power to buy generic medicines at a fraction of their current price, according to Hannah Brennan, Amy Kapczynski, Christine H. Monahan, and Zain Rizvi in their new article, A Prescription for Excessive Drug Pricing: Leveraging Government Patent Use for Health. They note that 28 U.S.C. § 1498 allows the federal government to use patents without license as long as it pays "reasonable and entire compensation for such use." This provision "is regularly used by the government in other sectors, including defense," and was relied on "numerous times to procure cheaper generic drugs in the 1960s," and should "once again be used to increase access to life-saving medicines." The article is chock-full of interesting details and is a recommended read even for those who disagree with their ultimate policy conclusions.

The authors discuss how § 1498 has been used recently to acquire patented inventions ranging from electronic passports to genetically mutated mice, and how the Defense Department used § 1498 to buy generic antibiotics from Italian firms before Italy started issuing patents on drugs. They synthesize the § 1498 caselaw and note that it is not a replication of the patent damages award; e.g., lost profits are strongly disfavored, and the cases show concern with "excessive compensation" to the patent owner. Adjustments to § 1498 royalties have been made based on risks and expenses incurred by the patentee in developing and creating a market for the products, and to account for "reasonable" profits, so the authors advocate awarding pharmaceutical patentees their risk-adjusted R&D costs plus average industry returns (perhaps a 10-30% bounty). This approach to calculating patent royalties is similar in many ways to that advocated by Ted Sichelman for all patent cases, as discussed on this blog in June.

Wednesday, August 10, 2016

16th IP Scholars Conference at Stanford

The 16th IP Scholars Conference (IPSC) will be held at Stanford Law School tomorrow and Friday, with about 150 presentations and 200 attendees from around the world. The conference schedule is here (which is largely thanks to the work of our terrific fellow, Shawn Miller). IPSC was my first law conference right out of law school, and I was overwhelmed by how welcoming and generous the IP scholarly community was.

I'll post in the coming weeks about some of the papers I hear about at the conference, but for those who want more immediate updates, Jake Linford (whose work I've written about here) will be live-blogging at PrawfsBlawg, and Rebecca Tushnet (who was just featured on this blog) likely will do the same at her 43(B)log. Given the size of the IP prof twitter network, I'm sure there also will be plenty of tweets about #IPSC16.

Looking forward to welcoming IP scholars to Stanford! (And if you read Written Description but haven't met me yet, please find me and say hello.)

Monday, July 25, 2016

Rebecca Tushnet: The Inconsistent and Confusing Role of Registration in American Trademark Law

Patent law scholars argue over how much time and money the Patent & Trademark Office (PTO) should spend on pre-grant review of patent applications. Likewise, they argue over the degree to which patents should be given a "presumption of validity" once granted. But what if patent law scholars completely ignored the details of the PTO's review, and simply assumed that patents are generally properly and efficiently granted? What if courts in patent infringement cases treated PTO review as a mere formality and focused exclusively on the appropriate scope of patents and whether they have been infringed in the marketplace? We would probably conclude this to be error. Given the time and public money expended each year on the process of patent examination, not to mention the role of published patent specifications in establishing and providing public notice of granted rights, it is worth paying attention to the administrative procedure through which patents are created and preserving the relevance of the PTO's analysis through doctrines like presumption of validity and prosecution history estoppel.

Yet, according Rebecca Tushnet's new article in the Harvard Law Review, Registering Disagreement: Registration in Modern American Trademark Law, foundational trademark law and scholarship suffer from a similar form of tunnel vision. Not only do they place inconsistent weight on the PTO's assessments during registration for establishing substantive trademark rights, but they do not apply a consistent vision of what the role of trademark registration actually is. Read more at the jump.

Friday, July 22, 2016

Merges & Mattioli on the Costs and (Enormous) Benefits of Patent Pools

Patent pools bundle related patents for a single price, reducing the transaction costs of negotiating patent licenses but creating the threat of anti-competitive harm. So are they a net benefit from a social welfare perspective? Professors Rob Merges and Mike Mattioli empirically tackle this difficult question in their new draft, Measuring the Costs and Benefits of Patent Pools, which at least for now is available on SSRN (though since its takeover by Elsevier, SSRN has conducted some egregious takedowns). Spoiler: They don't reach a one-size-fits-all answer, but they conclude that "[p]ools save enormous amounts of money," which means that "those who are concerned with the potential downside of pools will, from now on, need to make a good faith effort to quantify the costs they describe."

To address the benefit side of the equation, Merges and Mattioli interviewed senior personnel at two patent pool administrators: MPEG-LA, which administers 13 pools and provided information on the High Efficiency Video Encoding (HEVC) pool, and Via Licensing, which administers 9 pools and provided information on the MPEG Audio pool. The two pools focused on were "believed [to] represent[] the average (in terms of scale and cost) among the set of pools they administer." Based on these interviews, the authors estimate the total estimated setup expenses over a two-year period as $4.6M for HEVC and $7.8M for MPEG Audio. (Of course, pool administrators may not be the most unbiased source of information, but the authors itemize the costs in a way that makes it easy for others to check.) Merges and Mattioli then consider the counterfactual world in which all the associated licenses were negotiated individually, in which they estimate the transaction costs at $400M for HEVC and $600M for MPEG Audio. This suggests that the pools resulted in a staggering savings of about two orders of magnitude. They also estimate that the pooling arrangement reduces the ongoing transaction costs.

On the cost side of the equation, Merges and Mattioli state that patent pool critics have raised two main consumer welfare concerns: (1) combining substitutes, such that firms that should have been competitors are able to act as monopolists; and (2) grantback clauses, which could allow pools to suppress future competitors. They note that in practice, these are unlikely to be significant problems: most pools require members to make their patents available independently, which "makes technology suppression through a pool impossible." But if a pool does not have such a provision, how big are the potential consumer welfare losses?

Wednesday, July 20, 2016

New GAO Patent Studies

The Government Accountability Office released two new reports on the PTO today: one on search capabilities and examiner monitoring, one on patent quality and clarity. They also released the underlying data from examiner surveys.

I think the survey data is more interesting than the conclusions; examiners were asked questions including how much time they spend on different parts of examination, how useful they found PTO training, how often they searched for/used different types of prior art, what factors make prior art searching/examination difficult, how much uncompensated overtime they worked to meet production goals, how confident they were that they found the most relevant prior art, what they think of PTO quality initiatives, etc. Lots of rich data here!

Here are the concluding recommendations from each report, for which the GAO will track the PTO's responses on their website. (I believe the PTO is already working on quite a number of these.)

Wednesday, July 13, 2016

Neel Sukhatme: Make Patent Examination Losers Pay

Why do patent applicants pay higher fees when they succeed than when they fail? In a terrific new draft posted last week, "Loser Pays" in Patent Examination, Neel Sukhatme (Georgetown Law) argues that "such pricing is precisely backwards, penalizing good patent applications instead of bad ones." Instead of this "winner pays" system, he argues that the PTO should discourage weak applications by forcing unsuccessful applicants to pay more.

I think most patent scholars would agree that the PTO issues many patents that do not meet the legal standards for validity; see, e.g., work by Michael Frakes and Melissa Wasserman showing that time-crunched examiners have higher grant rates, or work by John Allison, Mark Lemley, and David Schwartz on the large number of patents invalidated during litigation. To address this problem, it may be worth increasing the resources devoted to examination—e.g., examiners could be given more time, and I have argued for some form of peer review. But I think most patent scholars would also agree with Mark Lemley that at some point the costs of increased scrutiny would not outweigh the actual social costs of the invalid patents that slip through (most of which are never asserted or litigated).

Sukhatme's paper builds on a growing body of scholarship that tackles the problem of invalid patents not through increasing the resources spent on examination, but rather through price structures designed to disincentivize socially costly behavior by patent applicants. For example, Jonathan Masur has argued that the high costs of obtaining a patent disproportionately select against socially harmful patents, and Stephen Yelderman suggests a number of more fine-grained way to rationalize application fees. Economists Bernard Caillaud and Anne Duchêne have developed some of these ideas in a formal model, including the possibility of "a penalty for rejected applications" which "would unambiguously encourage R&D" because it would have "no impact on the submission strategy for non-obvious projects." And it seems clear from work by scholars such as Gaétan de Rassenfosse and Adam Jaffe that changes in fees do affect applicant behavior in practice.

Sukhatme does a wonderful job expanding on these ideas to explore how loser-pays rules might be adapted to patent examination. For example, he suggests that applicants could be required to post a bond at the outset of examination, some of which would be returned if the applicant is successful. Continuations could be discouraged by reducing the recoverable bond amount as prosecution proceeds. Additional revenues could be returned to successful applicants, providing stronger incentives for filing valid patents. To reduce unfairness to individual inventors, the PTO could continue the current practice of offering discounts for small and micro entities.

The PTO could implement this system using its fee-setting authority under current law. Indeed, I think Sukhatme could go further and argue that the PTO has not only authority but also some obligation to do so. I've previously blogged about Jonathan Masur's work on cost-benefit analysis (CBA) at the PTO, in which he explains why the PTO's attempt to use CBA for its recent fee-setting regulations was a misapplication of basic principles of patent economics. If the PTO's current fee structure were compared with Sukhatme's under a correct application of CBA, I think Sukhatme's would win.

Friday, July 1, 2016

Use of IP and Alternatives by UK Firms (1997-2006)

This isn't a new report, but it's new on SSRN: the UK Intellectual Property Office commissioned a 2012 report by Bronwyn Hall, Christian Helmers, Mark Rogers, and Vania Sena, The Use of Alternatives to Patents and Limits to Incentives, which presents data on the choice of different IP protection mechanisms by UK firms from 1997 to 2006. The report starts with a terrific literature review, covering works like the Levin et al. (1987) "Yale" survey, the Cohen et al. (2000) "Carnegie Mellon" survey, and the Graham et al. (2010) "Berkeley" survey. Discussion of the UK data begins on p. 41. There are 38,760 observations, but few firms show up over the whole time period.

Just a few teaser results: Only about 30% of firms report any form of innovation, and only 1.3% of firms patent. Within formal IP categories, trademarks are considered the most important right. 92% of firms that do not report product innovations regard patents as unimportant, compared with slightly less than 30% of product innovators. Trade secrecy complements use of patents: almost 40% of patentees consider secrecy to be crucial, compared with 9% of non-patenting firms. The full PDF is 138 pages, so I won't even attempt a summary, but I thought patent scholars who hadn't discovered this yet might be interested.

Monday, June 27, 2016

Can You Induce Yourself to Infringe?

The Supreme Court granted certiorari in Life Tech v. Promega Corp. today to resolve an interesting conundrum of statutory interpretation having to do with foreign infringement. I won't provide all the details here - as Jason Rantanen and Dennis Crouch have ably done so. [Note: it turns out that the issue on which the court granted cert. is the one I find less interesting. Thus, I've edited this!]

The question is deceptively simple: when a manufacturer creates an infringing product in a foreign country, here a "kit," is it infringement of the patent for the manufacturer to buy or make a key component of that kit and then export it from the U.S. to the foreign manufacturing facility?

You'd think there would be a clear answer to this question, but there isn't. The statute, 35 U.S.C. § 271(f)(1), states:
Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.
I had always assumed that the exported product is a substantial portion. The jury found it was, and if it turns out it wasn't, then that's just not that interesting a question. But I guess not - as this is the question that the court granted cert on. Indeed, on this issue only, as discussed further below.

The only thing that's interesting about the substantial portion question is that the exported product is a commodity, and thus 35 U.S.C. § 271(f)(2) - which enforces liability for exporting specially made products used for contributory infringement - doesn't apply. In other words, this is an interesting case because inducement liability is the only type of liability available, and inducement liability is really hard to prove, especially with a commodity.

But inducement is much easier here, theoretically, because the exporter is the same company as the foreign manufacturer. In other words, you can assume that the intent of the export was to combine the product into the infringing combination. And, yet, the court did not grant cert on that issue.

Instead, it will have to answer the question in a roundabout way - whether self-inducement is possible, but not when the component is a commodity. I suppose the Court could say, well, it's not the commodity that matters, but that it was too small a component. But isn't that a jury question? It seems to me that the only way the Court can reasonable make a distinction is either to make some new threshhold for what "substantial" is, or say that a commodity can never qualify. I don't like either of those options much, though - as I note below - the commodity angle has more legs given that the same commodity could be purchased from a third party without liability.

When this type of combination is done by a single manufacturer in the U.S., we call it direct infringement under § 271(a). The concept of inducement simply never comes up, and thus all the precedent to date discusses inducing another and spends no time on the importance of each component (indeed, § 271(b) says you can induce without selling anything!). So, to say that Life Tech is liable under § 271(f)(1) is to say that it has induced itself to infringe by exporting the commodity component that it could have bought from someone else who would not have induced it.

I don't think this was such a clear cut case on the self-inducing point, and I think that granting cert. on only the substantial component issue muddles the question. I offer two opposing viewpoints.

On the one hand, of course one can induce oneself for this statute. Foreign infringement liability was written in order to stop parties from avoiding the reach of a U.S. patent by shipping parts overseas to be assembled there. Viewed from this angle, it is not only rational but mandated that a company be held liable for shipping components overseas for the purpose of combining them into an infringing product. From this perspective, the policy goals of the statute dictate liability - even if the component shipped is a commodity.

On the other hand, the key component is a commodity, supplied by any number of companies. If Life Tech had only ordered the commodity from one of the other companies for shipment from the U.S., rather than supplying it from it's U.S. arm, it surely would not be liable. Viewed from this perspective, the extraterritorial reach of the statute makes little sense -- is a little silly even -- if it turns on a detail as minute as whether a company bought a commodity and shipped it overseas to itself or whether it bought a commodity and had the seller ship it overseas to itself.

My gut says follow the statute and find liability, even if avoiding liability is ridiculously easy. There are lots of statutes like that, and there's no reason why this shouldn't be one of them. In that sense, the Court's denial of cert. on the self-inducement issue makes sense, but I don't know what to make of the issue on which it did grant review.

Thursday, June 23, 2016

Cuozzo v. Lee and the Potential for Patent Law Deference Mistakes

I wrote a short post on Monday's decision in Cuozzo v. Lee for Stanford's Legal Aggregate blog, which I'm reposting here. My co-blogger Michael Risch has already posted his initial reactions to the opinion on Monday, and he also wrote about deference mistakes in the context of the "broadest reasonable interpretation" standard in an earlier article, The Failure of Public Notice in Patent Prosecution.

The Federal Circuit's patent law losing streak was broken Monday with the Supreme Court's decision in Cuozzo v. Lee. At issue were two provisions of the 2011 America Invents Act related to the new "inter partes review" (IPR) procedure for challenging granted patents before the Patent and Trademark Office. IPR proceedings have been melodramatically termed "death squads" for patents—only 14% of patents that have been through completed trials have emerged unscathed—but the Supreme Court dashed patent owners' hopes by upholding the status quo. Patent commentators are divided on whether the ease of invalidating patents through IPR spurs or hinders innovation, but I have a more subtle concern: the Supreme Court's affirmance means that the PTO and the courts will evaluate the validity of granted patents under different standards of review and different interpretive rules, providing ample possibilities for what Prof. Jonathan Masur and I have termed "deference mistakes" if decisionmakers aren't careful about distinguishing them.

Monday, June 20, 2016

Cuozzo: So Right, Yet So Wrong

The Supreme Court issued its basically unanimous opinion in Cuozzo today. I won't give a lot of background here; anyone taking the time to read this likely understands the issues. The gist of the ruling is this: USPTO institution decisions in inter partes review (IPR) are unappealable, and the PTO can set the claim construction rules for IPR's, and thus the current broadest reasonable construction rule will surely remain unchanged.

I have just a few thoughts on the ruling, which I'll discuss here briefly.

First, the unappealability ruling seems right to me. That is, what part of "final and non-appealable" do we not understand? Of course, this leads to a partial dissent, that it means no interlocutory appeals, but you can appeal upon a final disposition. But that's just a statutory interpretation difference in my book. I'm not a general admin law expert, but the core of the reading, that Congress can give the right to institute a proceeding and make it unreviewable, so long as the outcome of the proceeding is reviewable, seems well within the range of rationality here.

But, even so, the ruling is unpalatable based on what I know about some of the decisions that have been made by the PTO. (Side note, my student won the NYIPLA writing competition based on a paper discussing this issue.) The court dismisses patentee's complaint that the PTO might institute on claims that weren't even petitioned for review as simply quibbling with the particularity of the petition and not raising any constitutional issue. This is troublesome, and it sure doesn't ring true in light of Twiqbal.

Second, the broadest reasonable construction ruling seems entirely, well, broadly reasonable. The PTO uses that method already in assessing claims, and it has wide discretion in the procedures it uses to determine patentability. Of course the PTO can do this.

But, still, it's so wrong. The Court understates, I believe, the difficulty of obtaining amendments during IPR. The Court also points to the opportunity to amend during the initial prosecution; of course, the art in the IPR is now newly being applied - so it is not as if the BRC rule had been used in prosecution to narrow the claim. Which is the entire point of the rule - to read claims broadly to invalidate them, so that they may be narrowed during prosecution. But this goal often fails, as I wrote in my job talk article: The Failure of Public Notice in Patent Prosecution, in which I suggested dumping the BRC rule about 10 years ago.

Whatever the merits of the BRC rule in prosecution, they are lost in IPR, where the goal is to test a patent for validity, not to engage in an iterative process of narrowing the claims with an examiner. I think more liberal allowance of amendments (which is happening a bit) would solve some of the problems of the rule in IPRs.

Thus, my takeaway is a simple one: sometimes the law doesn't line up with preferred policy. It's something you see on the Supreme Court a lot. See, e.g. Justice Sotomayor's dissent today in Utah v. Strieff

Thursday, June 16, 2016

Halo v. Pulse and the Increased Risks of Reading Patents

I wrote a short post on Monday's decision in Halo v. Pulse for Stanford's Legal Aggregate blog, which I'm reposting here.

The Supreme Court just made it easier for patent plaintiffs to get enhanced damages—but perhaps at the cost of limiting the teaching benefit patents can provide to other researchers. Chief Justice Robert’s opinion in Halo v. Pulse marks yet another case in which the Supreme Court has unanimously rejected the Federal Circuit’s efforts to create clearer rules for patent litigants. Unlike most other Supreme Court patent decisions over the past decade, however, Halo v. Pulse serves to strengthen rather than weaken patent rights.

Patent plaintiffs typically may recover only their lost profits or a “reasonable royalty” to compensate for the infringement, but § 284 of the Patent Act states that “the court may increase the damages up to three times the amount found or assessed.” In the absence of statutory guidance on when the court may award these enhanced damages, the Federal Circuit created a two-part test in its 2007 en banc Seagate opinion, holding that the patentee must show both “objective recklessness” and “subjective knowledge” on the part of the infringer. The Supreme Court has now replaced this “unduly rigid” rule with a more uncertain standard, holding that district courts have wide discretion “to punish the full range of culpable behavior” though “such punishment should generally be reserved for egregious cases.”