Tag Archives: 2010



September 23 / All Articles, Copyright

On Federal Preemption of Contractual First Sale Waivers

History has venerated the free transfer of tangible property, and this is partly why students of copyright law can purchase their textbooks “used” at discount prices. [1] If 2L Dave buys Professor William Patry’s copyright treatise at the bookstore, Dave acquires title to the book and can freely transfer it to thrifty 1L Sara the following year. [2] Of course, this is not great news for Professor Patry. Deep down, the renowned scholar would surely prefer to corral for himself all the eventual benefits that will be reaped from that single copy of his work. Perhaps Patry even dreams of showing up at Dave’s door just as Sara is exiting with the book in hand so that he can assert himself as the rightful beneficiary of the resale proceeds. Or, even better, why not snatch the book from Sara directly, return it to Dave, and then invite Sara to purchase a shiny new copy from the bookstore instead?

To some people, it may surely seem counterintuitive that Sara can “free-ride” at Professor Patry’s “expense” while Dave is allowed to play middleman and intercept what would otherwise be Patry’s income were Sara forced to buy the book “new.” But, at the same time, if Patry were to take action to prevent Dave from reselling his copy, Patry would be frustrating Dave’s personal property interest in a tangible possession–a bound book. [3] Meanwhile, ownership of material objects (such as books) has long been divorced from “ownership” of whatever intellectual fruits may be contained within them, [4] and an author has long been said to have “realized the full value” of a single copy of his work once it has been sold for the first time. [5] This rule, known as the “first sale doctrine,” is found today at section 109 of the Federal Copyright Act and can be traced back to 1908 when the Supreme Court first refused to allow an author to dictate the “future sale price” of a book he had already sold wholesale. [6] According to the Court, allowing authors such control would improperly constrain future contracts to which the author will not be a party (much like the hypothetical contract between Dave and Sara). [7] In sum, the first sale doctrine provides that the owner of a physical copy of a work may lawfully resell or otherwise dispose of that copy without permission from the copyright owner because the latter will be said to have “exhausted” his distribution right the first time he relinquished title. [8] Commonly (and perhaps more aptly) referred to as the “exhaustion doctrine,” first sale is a nearly universal principle of copyright law within modern democracies. [9]

So, if Patry will have already “exhausted” his distribution right with respect to Dave’s copy of his book, is there any other way he can rein in the secondary market for his own work? Well, if he could go back in time, one thing Patry might have tried to do is negotiate the terms of the first sale of his book a little more carefully. If Patry had conditioned his original sale offer on an agreement from Dave that he would not resell the copy, Sara would probably be stuck paying full price. [10] According to the legislative reports that accompany the 1976 Copyright Act, the resale entitlement “does not mean that conditions on future disposition of copies or phonorecords, imposed by contract between their buyer and seller, would be unenforceable between the parties as a breach of contract,” [11] and courts have indeed upheld such contracts in certain instances, especially in recent years. [12] History has of course venerated not only the freedom to transfer tangible property but also the freedom to enter voluntary agreements that will be enforced by the state. Essentially, the notion is that if Dave does not want to be bound by this term, he is free to find someone else who will sell him a copyright treatise, and if Patry cannot find enough consumers willing to be bound, he will in turn be forced to rethink the nature of his offer or else lose out to a competing scholar. Of course, this simplified explanation ignores consumer transaction costs and bargaining power asymmetries that favor the author, and it also assumes that the stuff of “intellectual property”– information, ideas, art–all conforms to the same notions of ownership, value, substitutability, and competition as tangible property. [13] In other words, it assumes a book of ideas is the same type of property as a book of matches. But intellectual property is a nonrivalrous intangible good that is only sometimes disseminated via rivalrous tangible media vehicles like the “book.” [14] And several prominent copyright scholars (including Patry) believe that “intellectual” property rights are actually much different from real property rights in tangible goods. [15]

According to Professor Mark Lemley, the ultimate goal of intellectual property law–promotion of the “Progress of Science and useful Arts” [16]–is best achieved by giving “as little protection as possible” to creators while maintaining the necessary incentives not only for creation but also for innovation. [17] This means maintaining the proper degree of public access to copyrighted works. In other words, intellectual property law is regulatory– it is not about fully shielding creators from free-riders and moochers; it is about shielding creators just enough that they earn a decent return on investment. [18] This sustainable return is necessary as a signal to other “would-be” creators that their efforts will pay off in the end. [19] But the “free-riders and moochers” from whom the creators would prefer to be shielded also happen to be “innovators.” [20] They are the consumers who piggy-back. They turn thoughts into theories. They turn suggestions into governments. They turn airplanes into jets. They turn jets into rocket ships. They do this by building on the ideas of others. [21] If intellectual property law allowed creators to reap the full value of their works, those works might either never make it to the hands of the many would-be innovators, [22] or the innovators would be forbidden from making improvements without proper permissions, regardless of potential benefits to the public. [23] Of course, giving ideas the same protection as land would, in theory, increase the rewards to be had by individual creators, but such a system would be worse for everyone. [24] The definitive purpose of federal copyright law per Article 1, Section 8 of the Constitution, is, after all, “progress,” [25] and full value protection would strike a great blow to progress by reducing the total number of existing creators and innovators (and thus reducing “creations” and “innovations”). [26]

This emphasis on “progress,” however, should not be seen as casting the interests of “creators” in direct opposition to the interests of the public. While it is true that intellectual property law is intended to benefit the public, it is wrong to think this implies a “Robin Hood” function. Copyright law does not serve to deprive creators of their duly earned “Lockean labors” in order to perform some sort of intellectual property redistribution role. In reality, copyright law is about giving creators a benefit, not taking something away from them–it is meant to protect creators from competition in a free market, not to limit the earnings a market would otherwise afford them. [27] In a competitive free market, ideas could be copied and re-sold at much lower prices than creators would demand in light of the need to recoup time and labor inputs as well as production costs. [28] Books could be distributed almost free of charge so that authors would recoup next to nothing. [29] Authors do not want this, but neither does Congress so long as the existence of authors and books continues to benefit the public as a whole. [30] This is the exact nature of the balance Congress is charged with striking. As such, content owners essentially depend on the federal statute for their livelihoods. Still, they remain determined to bite the hand that feeds them by endeavoring to enhance their rights beyond what the statute provides.

For the better part of history, copyright holders have properly deferred to Congress and the federal courts to protect their interests. [31] The shift to self-help measures–most pertinently, the vast increase in reliance on state contract law–stems almost entirely from concerns that the federal statute no longer provides sufficient protections in the wake of the technological revolution. [32] These concerns may be quite justified. But if so, then they are Congress’s concerns too. Public “progress” interests in access and innovation did not suddenly diverge from the interests of content owners the moment compact discs arrived on the scene–the future for both interests continues to depend, as it always has, on mutually beneficial balance. And Congress is the party properly charged with the balancing act because–like mortgage debt traders riding a housing bubble–creators and consumers alike will favor short-term utility maximization over broader long-term mutual needs. [33]

To be sure, contractual self-help may indeed succeed at placing an unbalanced scale back on kilter at times when creators accurately perceive a detrimental imbalance on their end. [34] But the rub is that they are not inclined to ease up once they have evened the score–rather, they keep pushing in attempt to tip the scale in their favor [35] or, unconcerned with collateral damage from blanket overprotection, they simply carpet their products with landmines in order to kill ants. As copyright holders have moved toward full-scale licensing of their products (that is, toward demanding consumers’ full assent upon purchase to the terms of an agreement), these consumers who believed they were ostensibly the “owners” of the things for which they had exchanged their money have seen their familiar assumptions about material property ownership shaved down to whatever is explicitly articulated in fine print. These days, whether content is acquired in intangible form (via “download” or “live-viewing” for instance) or in a fixed tangible medium (via disc or hardware rung up at a retailer’s cash register), licensing agreements attempt to confer little more than “life-time renter” status upon purchasers. In other words, content owners have been trying to prevent consumers from ever truly “owning” the copies of content they purchase, and since section 109(d) of the Copyright Act explains that “ownership” of a copy is a prerequisite of the ability to resell that copy under the first sale doctrine, [36] licensing agreements have been successfully obliterating the first sale rule for some time now. [37]

Today, section 109 remains unchanged, but licensing agreements are everywhere. They forbid purchasers from reselling software, [38] music CDs, [39] databases, [40] e-books [41] and sometimes even public domain works. [42] They prevent copying even for personal use only. [43] They prevent seventeen-year-olds from purchasing word processing software because minors cannot legally enter such agreements. Taken literally, they prevent Sara from trying out Dave’s copy of Rosetta Stone on his computer to see if she likes it. [44]

Since the inception of copyright licensing, many of these agreements have been upheld against challenge, and few have been deemed preempted by federal Copyright law. [45] There has been an ever-growing consensus among scholars, however, that while it is hard enough for Congress to calibrate the proper balance between creation and access, copyright holders are only making the task more difficult. [46] In other words, Congress is working with a very sensitive scale and it would be tough enough to keep things steady without copyright holders sneaking over and sticking a big toe on the edge every time they feel threatened. It is true that Congress (or at least some member or members of Congress) might have expected parties to contract around the first sale requirement, [47] and of course, the copyright holders assert that, with the world changing too fast for the statute to keep up, therefore the big toe has been absolutely necessary for protection from looting, piracy and/or insolvency–in other words, for protection from significant scale tips in the opposite direction. [48] But if licensing schemes merely serve a loophole function for skirting adherence to federal law, one would assume that the skirted law in question is trivial–a detail or a technicality–and generally unnecessary as a means to the overall statute’s charged interest of progress in the name of the public interest. This is not the case. [49]

This Note argues that the first sale doctrine is a necessary limit on the scope of protection granted to copyright holders under the federal statute, and when the public interest so dictates, the enforceability of contractual restrictions on the resale or disposition of lawfully purchased copies of copyrighted works should be held preempted by federal law. Part I will examine the ways in which an obliterated first sale doctrine disrupts the balance between creation, access and innovation that Congress is charged, in the name of public interest, with carefully maintaining. Part II will put forth a policy-based framework under which licensing agreements could potentially be held preempted by federal copyright law on the grounds of public interest….

 

Gary Miller

September 23 / All Articles, Copyright, Trademark

A Constitutional Right To Deceive?: The First Amendment Implications of Regulating Pay Per Click

Mainstream search engines derive their principal source of revenue from advertising. [1] Pay Per Click Advertising (hereinafter “Paid Placement”) is one of the most widely utilized advertising practices, offering content providers the opportunity to create short textual advertisements hyperlinked to their website. [2] Providers bid on keywords associated with their advertisement, [3] and when a user incorporates these keywords into his or her query, the provider’s textual advertisement will appear along with the engine’s organic results. [4] Generally speaking, mainstream search engines segregate these results, and refer to them as “Sponsored Links,” “Sponsored Matches,” or “Sponsored Results” [5] (hereinafter collectively referred to as “Sponsored Results”). These results most often appear in a separate column or are arranged directly above the search engine’s organic results. [6]

Despite Paid Placement’s utility from a marketing perspective, the practice has been sharply criticized. [7] Some authors argue that a search engine’s failure to clearly segregate Sponsored Results leads many users to believe they are delivered based on relevancy alone. [8] These authors argue that this misconception can only be corrected by incorporating uniform regulations for presenting Sponsored Results. [9]

Although these regulations are well-intentioned, requiring a normative framework for arranging Sponsored Results may come at a price. The right to freedom of speech necessarily includes the right not to speak. [10] Imposing a regulatory framework for presenting Sponsored Results would be akin to forcing a search engine to speak. [11] Whether this amounts to a First Amendment violation raises two questions: First, does the act of providing search results constitute a protected form of expression? Second, if so, what level of protection should this expression be accorded? [12]

This Note examines the constitutionality of regulating Paid Placement under the First Amendment’s freedom of speech guarantee. Part I of this Note provides an overview of how mainstream search engines operate and describes the controversy surrounding Paid Placement. Part II argues that the act of providing search results constitutes an expressive activity that falls within the ambit of the First Amendment. Part III examines whether regulating Paid Placement warrants exacting review; or, in the alternative, the commercial speech doctrine’s more deferential brand of scrutiny. Part IV argues that even if Paid Placement constitutes commercial speech, imposing a uniform set of regulations in this context does not materially advance the governmental interest in promoting informed online decision-making. Finally, Part V provides suggestions on structuring regulations in the event governmental intervention becomes a reality….

 

Peter T. Tschanz*

September 22 / All Articles, Patent

Patent Litigation: What About Qualification Standards for Court Appointed Experts?

Abstract–“The descriptions in patents are not addressed to the public generally, to lawyers or to judges, but, as [35 U.S.C.] section 112 states, to those skilled in the art to which the invention pertains ***.” [1] This leads to a tenet of patent law, that the meaning of patents and claim terms must be construed by a person of ordinary skill in the relevant art (“POSA”). However, federal district court docket statistics show that for tasks such as claim construction, the “experts” hired by courts to aid the courts themselves may, in fact, not meet the POSA standard In contrast, to perform the very same tasks, the testifying experts hired by the party litigants are now required to be POSAs. This article argues that logic dictates that there should be consistency in the requirement of skills for both court-appointed experts and party-employed experts when they perform the same tasks.

 

I. Introduction

 

Do you understand an invention regarding DC to AC power converter circuits used to drive cold cathode fluorescent lamps? [2] Would you understand the patent claims, the long run-on sentences defining the invention? [3] Well, sometimes courts may not either. However, when complex patents surface in litigation, there are many types of experts to help a court construe the words and decide whether patent claims are valid and whether they have been infringed. There are both experts hired by the parties (“party experts”) and experts hired by the courts themselves (“court experts”) whose roles are finely delineated. [4] For example, among party experts, there are trial-preparation experts, consulting technical experts, and Fed. R. Ev (“FRE”) 702 experts whose goals are to champion the particular party that hired them. [5] Among court experts, there are (special) masters, (technical) advisors, and FRE 706 court-appointed experts whose goals are to aid the judge who hired them. A problem is that, with regards to court appointed experts, practitioners continue to be concerned about the confidential nature of their influence on the ultimate decision of the court can obscure a possible lack of neutrality or relevant expertise of the purported expert. [6] The problem is exacerbated in patent cases because an invention may be complex and obscure so that there is often little choice but to use experts to elucidate the technology. [7] Accordingly, it is highly unlikely that courts will stop appointing experts; even the U.S. Supreme Court has occasionally utilized this practice that is allowed by statute and common law. [8] Thus, restraining the frequency of using experts is not a viable solution. But, setting threshold standards on the appointment requirements of the court experts is a reasonable compromise solution towards improving the quality of the influence that the experts do have. Presently, however, there is a lack of standards in the qualification of court experts in patent law. Therefore, this article proposes that courts implement a defined set of standards for court experts, specifically requiring them to be POSAs for matters that require a POSA point of view. This proposed solution is consistent with the traditional tenets of patent law, and it is now within practical reach due to recent case law. Setting qualification standards helps ensure that parties do not needlessly pay for court experts whose influence may be based on an inaccurate knowledge of the technology and which may lead to inaccurate analyses and decisions. Beyond patent law, the same concepts may be extended to other areas of law that also rely heavily on experts, such as products liability or criminal law. [9]

 

Setting qualification standards is compelling because of the frequent use of experts. Experts are so prevalent in patent litigation that even appellate judges in the U.S. Court of Appeals for the Federal Circuit (“CAFC”) lamented: “Evidentiary conflicts with respect to technology and science arise in a variety of cases; and the conflicting testimony of expert witnesses is ubiquitous.” [10] Given the likelihood of conflicting testimony and of complex inventions, court experts are necessary. But, it is important that their use be consistent with the traditional tenets of patent law, which includes a person-of-ordinary-skill-in-the-art standard (“POSA”) for patent claim construction, invalidity, and infringement determination. This POSA standard should also set restrictions on the qualification of all experts, whether they are party or court experts.

 

The CAFC recently set standards for someone to qualify as a FRE 702 party expert. In Sundance v. DeMonte, the CAFC held that a patent attorney who did not practice or have formal training in the technology was improperly permitted to testify as a FRE 702 party expert regarding invalidity and infringement. [11] The expert testimony was rejected because the attorney was not deemed a POSA. [12] Thus, Sundance seemingly heightened the standard to be a POSA. The CAFC also decided that party experts must be POSAs if they provide opinions on claim construction and other matters which traditionally have required a POSA point of view. [13] Given Sundance, rationally, it would be incongruous if court experts are not also as least as qualified as party experts. Presently, however, party experts must qualify at least as POSAs, but court experts need not do so, [14] which seems contrary if they are opining about the same issues. The incongruity is all the more a concern considering that court experts may have to distinguish between opposing technical viewpoints and play a decisive role in the outcome of a case. [15]

 

With this context, this article addresses the qualification standards of court experts. Section II provides an overview of court experts and relevant case law. In Section II-C, court docket statistics illuminate the present practice regarding the experts. Section III discusses the criteria to be a POSA. Section IV describes how Sundance and SEB v. Montgomery Ward [16] require higher standards for FRE 702 experts and also seemingly change the traditional POSA criteria. Section V considers the implications for court experts….

 

 

Dolly Wu*

February 2 / All Articles, Other Intellectual Property, Right of Publicity

The Presidential Right of Publicity

Although the right of publicity has historically been a cause of action invoked by celebrities to protect themselves from an extensive range of conduct, the question remains whether non-traditional celebrities deserve the same rights. [2] Can President Obama protect against the unauthorized use of his image since he has arguably attained celebrity-like status? I believe the answer is, to modify the President’s campaign mantra, “Yes [He] Can.” This Essay briefly discusses the application of the right of publicity to President Obama and concludes with suggestions on how he should protect that right.

 

As evidenced by the multi-million dollar industry surrounding celebrity endorsements and merchandise, image is a celebrity’s most valuable asset. [3] While some may cringe when they see celebrities shill a particular product, it is difficult to argue that celebrities deserve no compensation for the use of their names or images in advertisements since that image often requires time and expenditures to develop. Indeed, the sole reason advertisers use a celebrity’s image is its utility as an effective marketing tool. Also, if a celebrity’s image was built around being wholesome, it is unclear why they should be denied the right to control how their images are used. If a celebrity has the right to control the when, where, and cost of using their image, celebrity-politicians should not forfeit these rights solely because they enter office….

 

Sean T. Masson [1]