Category: Legislation

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Copyright Legislation

Just What Is the Case with the CASE Act? A Brief Overview

The following post comes from Ryan Reynolds, a 3L at Scalia Law and Research Assistant at CPIP.

chrome copyright symbolBy Ryan Reynolds

The phrase “creators have rights, but no remedies” is likely familiar to those aware of the current landscape of copyright protection for individual creators and small businesses (“Creators”). While the Copyright Act of 1976 grants a bundle of rights to Creators for the protection of their works, for years Creators have faced an uphill battle enforcing those rights against infringers. There are many who are optimistic, however, that things might soon change with the passage of “The Copyright Alternative in Small-Claims Enforcement Act of 2020” (CASE Act).

Signed into law as part of H.R. 133, the Consolidated Appropriations Act, [for Fiscal Year] 2021 (“CAA”), the CASE Act creates a Copyright Claims Board (“CCB”) within the Copyright Office to handle small copyright claims (small only in the sense of their relatively modest economic value). As there is some time before the CCB comes into operation, the earliest being December 21, 2021, and the latest June 2022, now is a good time to provide an overview of just what the CASE Act does. Before venturing fully into the mechanics of the CASE Act, however, it is important to first highlight why its supporters felt it was needed.

Why Is It Needed?

Copyright cases are almost exclusively an area of federal jurisdiction, meaning that copyright infringement cases must be brought in a federal rather than state court; however, litigating a copyright infringement case in federal court is anything but easy. First, the average cost of litigating a copyright infringement claim has been estimated at $397,000—a cost that often greatly outweighs any potential recovery for Creators’ works. It is for this reason that many attorneys are simply unwilling to take Creators’ copyright infringement cases, leaving many Creators feeling disenfranchised.

Second, the complexity of the federal court system is often overwhelming for Creators. As stated in the Copyright Office’s 2013 Copyright Small Claims report, “Small copyright owners, who frequently lack experience with federal courts, often find federal litigation too difficult . . . and may be unable to navigate ‘the often complex procedural rules that govern federal litigation . . . .’” As highlighted in the report, even the Copyright Act’s registration requirement—the gateway requirement to launch a copyright infringement claim—can be problematic for Creators. It requires that a copyright owner successfully register, or receive a rejection of registration, from the Copyright Office before launching an infringement claim. Moreover, for a Creator to qualify for statutory damages and attorney’s fees, the Copyright Act requires the registration of the work within three months of its publication, or if unpublished, before the act of infringement. The failure to register within the required time is critical, as without the potential recovery of statutory damages (which can range up to $150,000 per work infringed), a Creator’s recovery would not likely overcome the legal fees incurred litigating the case.

As stated in the report, the result of this cost and complexity is that “federal court is effectively inaccessible to copyright owners seeking redress for claims of relatively low economic value, especially individual creators who are of limited resources.” Enter the CASE Act, which aims to create a less expensive and less procedurally complex alternative to the current system by creating the CCB within the Copyright Office. But how will the CCB operate?

How Will It Operate?

When the CCB becomes operational, a party will have the choice of commencing a copyright infringement proceeding in either federal court or the CCB. In contrast to federal court, and as will be discussed in more detail later, proceedings in the CCB are completely voluntary. Another way in which the CCB differs from federal court is in its authority over copyright infringement claims only where the total damages sought do not exceed $30,000. As to the CCB’s structure, it will be composed of three full-time Copyright Claims Officers. Each of the Officers must have seven years of legal experience; two of them must also have extensive copyright adjudication experience, while one must have extensive alternative dispute resolution experience. The Librarian of Congress will appoint these Officers to staggered six-year terms, and they will be supported by at least two full-time Copyright Claims Attorneys with at least three years of experience.

To make the CCB more accessible to Creators, the CCB’s proceedings aim to be more streamlined and user friendly than federal courts. A proceeding before the CCB begins when the claimant files a claim to the CCB that includes the proper filing fee and a statement of the material facts. In contrast to federal court, the CASE Act only requires a completed application for registration of the claimant’s work(s), rather than a certificate of registration or refusal of registration by the Copyright Office to commence the claim. After the claim is approved for compliance with the law and applicable regulations by a Copyright Claims Attorney, the claimant has 90 days to complete service. After receiving service, the respondent then has 60 days to opt out of the proceeding before it becomes “active”; however, in the “interests of justice,” the CCB can extend this window another 60 days.

The user-friendly goal of the CCB is best exhibited by the Act’s requirement that the proceedings take place solely “by means of written submissions, hearings, and conferences carried out through internet-based applications.” The only exception to this convenience is when there is “material” “physical or other nontestimonial evidence” that otherwise the CCB cannot review. Further, proceedings before the CCB will be more informal than in federal court. There is no requirement for representation by an attorney, there is limited discovery, and the formal rules of evidence do not apply. If the parties do not settle, at the close of the proceeding the CCB must make factual findings based on the preponderance of the evidence and issue a publicly available written determination.

With regard to remedies, the CCB has the authority to award either actual damages, and the respondent’s profits, or statutory damages. If the CCB awards statutory damages, it “may not make any finding that, or consider whether, the infringement was committed willfully,” and if timely registration has been made with the Copyright Office, the CCB can award up to $15,000 for each work infringed, though this is subject to a $30,000 maximum. In an important shift from existing law, however, even if the work was not timely registered, the CCB may still award up to $7,500 for each work infringed to a maximum total of $15,000 in a single proceeding.

Within 30 days of the issuance of the final determination of the CCB, a party can request reconsideration by the CCB. After giving the other parties an opportunity to respond, the CCB may either deny the request or amend the determination. If the CCB denies the request for reconsideration, a party then has 30 days to request the Register of Copyrights to review the CCB’s determination. After giving the other parties time to respond, the Register may deny or remand the proceeding to the CCB for reconsideration. Finally, within 90 days of the final determination, or the post-determination reconsideration, a party can appeal to a U.S. District Court. It is also in federal district court where a party can seek enforcement of the CCB’s determination if the other parties to the matter refuse to abide by its determination. For a visual representation of this process, the Copyright Alliance has put together an informative flowchart.

The CASE Act requires that three years after the CCB becomes operational the Register of Copyrights make assessment of its effectiveness. While whether the CASE Act will create the change hoped for by its supporters is yet to be seen, in my view, the attention given to address the challenges to Creators is critically important.

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Copyright Legislation

Professors Balganesh and Menell on “The Curious Case of the Restatement of Copyright”

The following post comes from Ryan Reynolds, a 3L at Scalia Law and Research Assistant at CPIP.

a gavel lying on a desk in front of booksBy Ryan Reynolds

In 2015, the American Law Institute (ALI) made the announcement that it would restate an area of law that is dominated by a detailed statute—the Restatement of Copyright. ALI’s Restatements have played an important role in the development of the law, with judges, lawmakers, and law students referring to them as important tools in understanding different bodies of law. In the nearly one hundred years since ALI’s formation, however, its Restatement projects have historically eschewed legal fields dominated by statutes, instead focusing on common law topics. Therefore, when ALI announced its plan to create a Restatement of Copyright, there were many who were skeptical of the project.

It is in this context that Professors Shyamkrishna Balganesh and Peter Menell provide insight in their forthcoming article in the Columbia Journal of Law & the Arts, Restatements of Statutory Law: The Curious Case of the Restatement of Copyright. While Profs. Balganesh and Menell support a Restatement of Copyright, they argue against ALI’s application of the traditional Restatement format to an area of law dominated by a detailed federal statute. They argue that such an application ignores the analytical mismatch between the traditional Restatement format and statutory domains that will create more confusion than clarity. To resolve this mismatch, Profs. Balganesh and Menell argue for several modest changes that would allow the project to serve as a template for future statutory Restatements.

Historical Origins of the “Mismatch”

Looking to the origins of ALI, Profs. Balganesh and Menell illustrate that, from the beginning, it purposely avoided areas of law principally governed by statutes. ALI’s conception of its core function then, as now, was to resolve the uncertainty and complexity of American law—which, at the time of ALI’s formation, was derived from judge-made law that lacked general agreements on legal principles. Therefore, ALI provided guidance to judges and those involved in the legal field with the first Restatements of the law. These Restatements distilled black-letter rules of law from the disparate court decisions across the country and were seen as clear statements of the law.

It is for this reason that, soon after ALI approved a Restatement of Business Associations, fear arose among its membership that it was a subject too steeped in statutory provisions to fit the Restatement model. To address this fear, then ALI Director William Draper Lewis prepared a report outlining a framework to adapt Restatements to statutorily dominated legal fields. At its core, this framework advocated for placing the statutory provisions of subjects governed by uniform statutory law front and center. To Mr. Lewis, the primary value of these Restatements would not consist in distilling black-letter rules of law but would instead be the clarification of interpretive principles, providing the relevant judicial and executive efforts surrounding the statutory text.

Despite Mr. Lewis’ efforts, however, ALI ultimately abandoned the project and never revisited the framework of Lewis’ report. Following this affair, ALI’s Restatements avoided direct engagement with fields dominated by statutory law, instead using model codes as an alternative. That changed in 2015 when ALI announced the Restatement of Copyright project.

The “Mismatch” in the Current Restatement Initiative

As Advisors on the Restatement of Copyright project, Profs. Balganesh and Menell take time to outline their experience and criticism of the project’s use of the traditional Restatement model to copyright law. Despite ALI initially indicating that the project would focus on common law features of the Copyright Act, the first circulated draft indicated that its scope had expanded to include federal statutory provisions. To create its distilled black-letter rules of law, Profs. Balganesh and Menell note that the draft paraphrased, condensed, and reworded the statutory provisions of the Copyright Act. These changes were such that the “lack of attention to the text, legislative history, and administrative context of copyright law . . . would not aid busy judges in identifying pertinent sources for interpreting statutory provisions.”

To illustrate their criticism of the mismatch, Profs. Balganesh and Menell provide an in-depth case study of ALI’s efforts to restate the Copyright Act’s distribution right. As they explain, the interpretation of the distribution right has been subject to significant interpretive controversy. With the rise of peer-to-peer file sharing in the early 2000s, the distribution right was the subject of massive litigation. While some courts interpreted a violation of the distribution right narrowly to require proof that sound recordings placed in a share folder were actually downloaded by a third party, other courts read it broadly so that merely “making available” a sound recording through a peer-to-peer network could constitute a violation. As argued by Profs. Balganesh and Menell, the legislative history of the Copyright Act demonstrates Congress’ intention for a broad reading of the distribution right. This legislative history was not considered by a court until the Tenth Circuit’s opinion in Diversy v. Schmidly, where the court held that the distribution right included liability for “making available” copyrighted works to the public. This same interpretation was also reached by the Copyright Office in a 2016 report prepared at the request of the House Subcommittee on Courts, Intellectual Property & the Internet.

At its core, Profs. Balganesh and Menell criticize ALI’s draft of the distribution right for not presenting faithfully all the pertinent interpretive sources and instead improperly stepping into the role of a judge by making an interpretive decision itself. Despite it’s claiming not to do so, Profs. Balganesh and Menell argue that the draft intentionally put aside a meaningful discussion of the legislative history to adopt an interpretation of the distribution right that rejected the “making available” approach to liability. Further, in its formulation of its black-letter law, the draft relied solely upon court decisions interpreting the statute prior to the Diversy decision, where the legislative history was not understood, and at no point presented the language of the statute itself. Despite their raising of these concerns to ALI, Profs. Balganesh and Menell state that ALI only “double[d] down,” committing to its textualist interpretation while “purporting not to take a position.”

Proposed Remedies for the “Mismatch”

To remedy the mismatch in the current project, Profs. Balganesh and Menell first propose that the Restatement should modify its perspective. In the traditional model, Restatements purport to speak from the perspective of an “excellent common-law judge.” When it is extended to statutory areas of law, however, Profs. Balganesh and Menell argue that this perspective is inappropriate. As statutory interpretation relies on the discretion of judges, a black-letter rule prescribing a singular interpretation of the statutory language steps beyond the role of a Restatement to only clarify the law. Profs. Balganesh and Menell propose that the Restatement should instead act to aid judges in exercising their discretion by providing them with a forthright explication of the materials that inform statutory interpretation, such as an overview of the relevant legislative history or interpretive approaches by other courts.

Second, Profs. Balganesh and Menell propose an update to the Restatement template. Keeping with the idea from Mr. Lewis’ report, Profs. Balganesh and Menell propose that the traditional black-letter law section of the Restatement be replaced with the actual and complete text of the statutory provisions. They then propose that the Restatement lay out sources of interpretation available to a judge in the context of the statute. Since interpretation begins with the text of the statute, placing the text front and center, then followed by relevant interpretive tools, respects the role of a judge while ultimately aiding in the interpretive exercise. Last, Profs. Balganesh and Menell propose reworking the preamble to the Restatement of Copyright as an objective primer to the history surrounding the Copyright Act’s formation. Due to the complex and unique history surrounding the Act’s evolution, Profs. Balganesh and Menell argue that such a preamble would allow an interpreter from the outset to see some of the relevant tools and sources that could be used in interpreting its provisions.

Categories
Copyright Legislation

Senate IP Subcommittee Considers the Role of Private Agreements and Existing Technology in Curbing Online Piracy

The following post comes from Liz Velander, a recent graduate of Scalia Law and a Research Assistant at CPIP.

U.S. Capitol buildingBy Liz Velander

In mid-December, the Senate Intellectual Property Subcommittee, led by its Chairman, Senator Thom Tillis (R-NC), held a hearing entitled “The Role of Private Agreements and Existing Technology in Curbing Online Piracy.” The hearing came ahead of Sen. Tillis’s release of his first discussion draft of legislation to reform the Digital Millennium Copyright Act (DMCA). In his opening remarks, Sen. Tillis stated that reforming the DMCA is one of his top priorities in the 117th Congress, but it may take his entire second term to get a DMCA reform bill across the finish line. The purpose of the hearing was to identify voluntary steps that copyright owners and tech companies can take now to curb online infringement.

The hearing consisted of two panels. Panel I included: Ruth Vitale, CEO, CreativeFuture; Probir Mehta, Head of Global Intellectual Property and Trade Policy, Facebook, Inc.; Mitch Glazier, Chairman and CEO, Recording Industry Association of America (RIAA); and Joshua Lamel, Executive Director, Re:Create. Panel II included: Katherine Oyama, Global Director of Business Public Policy, YouTube; Keith Kupferschmid, CEO, Copyright Alliance; Noah Becker, President and Co-Founder, AdRev; and Dean Marks, Executive Director and Legal Counsel, Coalition for Online Accountability.

Sen. Tillis began the hearing by voicing his opinion on the matter, informed by a year-long series of hearings and months of feedback from creators, user groups, and technology companies. “There is absolutely more big tech can and should do to stop online piracy,” Sen. Tillis said. “Unfortunately, it seems that some in big tech aren’t serious about stopping online piracy, and I don’t know why that is. Maybe it isn’t a priority—or maybe some companies are actually profiting off the piracy on their site. It is clear as day to me that many multi-national, multi-billion-dollar companies simply aren’t using all the tools they have to stop theft from small creators. And that’s wrong.”

Mitch Glazier, Chairman and CEO of RIAA, stated that the problem is that big tech companies aren’t properly incentivized to take steps in combatting online piracy. Keith Kupferschmid, CEO of the Copyright Alliance, explained that Section 512 of the DMCA has been so misinterpreted by the courts that most service providers know that they have little risk of liability and need only do the absolute minimum required under the DMCA to avoid liability.

Mr. Glazier said that one of the most important things Congress can do is to provide the right incentives to encourage voluntary private agreements. He explained that there are two types of private agreements. First, there are individual agreements entered into by copyright owners and technology providers. These can be nimble and evolve with technology. Second, there are standards developed in the marketplace that eventually achieve broad enough consensus and use that they become required. In Mr. Glazier’s view, that is what the DMCA contemplated—a multi-stakeholder standard technical measure (STM) process where there was enough consensus and use that it would be unfair for outliers to compete without using them. Mr. Glazier said that a voluntary system only works if there exist the right incentives, which the DMCA does not currently provide.

The panelists disagreed as to whether Congress needs to reform the DMCA in order to incentivize voluntary agreements. The panelists representing big tech companies asserted that the process is working as the DMCA intended, pointing to the policies and procedures of their platforms and existing content protection technology. Probir Mehta, Head of Global IP and Trade Policy at Facebook, touted Facebook’s content management tool, Rights Manager. Katherine Oyama, Global Director of Business Public Policy at YouTube, pointed to Youtube’s Copyright Management Tools, which include a webform, Content ID, and Copyright Match. These panelists emphasized the significant amount of work their companies undertook to create these technologies, which they view as going above and beyond the requirements of the DMCA.

Members of the IP Subcommittee were very interested to hear how these tools work in practice. Ruth Vitale, CEO of CreativeFuture, testified that most individual creators are not given access to YouTube’s Content ID, nor are they given an explanation for why they are denied. Ms. Oyama stated that while Content ID has eligibility requirements, YouTube built an entirely new tool for smaller creators, Copyright Match, which runs on Content ID itself. She claimed that Content ID is such a powerful tool that, if used improperly, will erroneously take down content that is noninfringing.

Ranking Member Senator Chris Coons (D-DE) wanted to know what the panelists viewed as the path forward. Mr. Kupferschmid said that while voluntary agreements have a role, they cannot address everything. He emphasized that legislative action is appropriate in this circumstance because service providers are not being cooperative. Noah Becker, President and Co-Founder of AdRev, a digital rights management and media technology company, agreed with Mr. Kupferschmid. He explained his business’ revenue-sharing proposition is a better fit for copyright owners that do not want to use YouTube’s monetization tools. In addition to legislation, he explained that there should be some sort of support for the concept of a list of approved vendors, like AdRev, to be able to access copyright APIs on massive platforms. He urged that this would reduce the large cost and technology burden of accessing APIs, making takedowns more affordable for creators.

Sen. Tillis closed the hearing by stating that the parties need to engage with one another in order to avoid a potential legislative overreach. He said that the hearing showed that tech companies must do more to combat online piracy. Sen. Tillis stressed that they have the tools and resources but must find ways to get greater engagement and create voluntary paths to prevent Congress from paving less voluntary ones.

Categories
Legislation Patent Law

New Paper Looks at “Ill-Advised Legislative Proposals” to Address Pharmaceutical “Evergreening”

The following post comes from Yumi Oda, an LLM Candidate at Scalia Law and a Research Assistant at CPIP.

dictionary entry for the word "innovate"By Yumi Oda

Many believe that drug prices in the U.S. are unnecessarily high because the pharmaceutical industry is exploiting legal loopholes and acquiring dubious patents to extend protection and delay generics from entering the market (so-called “evergreening” behavior by drug innovators). However, CPIP Senior Scholar Chris Holman of the University of Missouri-Kansas City School of Law has published a new paper arguing that these recent concerns regarding patents and drug prices are unfounded. The paper, entitled Congress Should Decline Ill-Advised Legislative Proposals Aimed at Evergreening of Pharmaceutical Patent Protection and published in the University of the Pacific Law Review, further challenges recent legislative proposals aimed at pharmaceutical evergreening, finding that they “are largely misguided, and, if enacted, would be likely to cause more harm than good by discouraging innovation in pharmaceuticals without effectively addressing the core concern.”

Concepts and Doctrines in the Evergreening Debate

Prof. Holman starts by reviewing the academic literature and other commentaries relevant to the current evergreening debate. He divides his discussion into five concepts and doctrines that have come under scrutiny as purportedly facilitating evergreening: product hopping, product thicketing, secondary patents (or follow-on patents), double patenting, and continuation practice.

1. Product Hopping. Prof. Holman explains that the pejorative term “product hopping” is aimed at “pharmaceutical companies’ efforts to develop follow-on products and to switch patients to these products from an earlier version of the drug.” Critics, who now acknowledge “the fact that literal evergreening generally does not occur,” have shifted the argument to blame product hopping for forcing a market shift by making only a small change to an existing patented drug, such as with a new form, formulation, or dosage, and convincing doctors to prescribe it. Of course, while no patent directed to an earlier composition or biologic is permissible, a new patent on a new formulation, manufacturing process, or use of a previous drug is allowed in our patent system. While some may attack these new patents as a type of evergreening, Prof. Holman points out that these are the very types of innovations the patent system is meant to encourage.

2. Patent Thicketing. Prof. Holman describes another pejorative term, “patent thickets,” which refers to pharmaceutical “companies obtaining multiple patents covering a single pharmaceutical product.” Popularized in the early 2000s and dating back to the term “patent anticommons” that was coined in the late 1990s, patent thickets originally raised concerns that when “too many patents” around the same product are held by different owners, transactional licensing costs could increase substantially. Prof. Holman points to a recent review of patent thicket literature demonstrating that the term is not used coherently. In fact, patent thickets today are sometimes claimed to exist even when the patents are held by the same owner, where potential transaction cost issues would not apply.

3. Secondary or Follow-On Patents. So-called “secondary patents” are those that claim something other than the active ingredients in drugs, such as new formulations or dosages. Prof. Holman dislikes the term “secondary patents” since it suggests they are somehow less meritorious and less worthy of patent protection, and he instead chooses to call them “follow-on patents” since they generally follow the invention of the active ingredient. Critics often target follow-on patents based on the belief that “a drug is a single product and thus should only be subject to the protection of a single patent.” However, Prof. Holman explains that this view oversimplifies how pharmaceutical inventions come about and underappreciates their true value for patients. For example, his earlier article illustrates how Burroughs-Wellcome obtained a follow-on patent for AZT, a failed cancer drug that was ultimately used to treat AIDS.

4. Double Patenting. Some critics complain that pharmaceutical companies are engaged in “double patenting,” where they obtain multiple patents on the same invention or obvious variations of a patented invention. Prof. Holman explains that double patenting rejections—especially nonstatutory, “obviousness-type” rejections—prevent a patent applicant from extending the patent term by filing a second patent “on a non-identical but still merely obvious variant of a patented invention.” Nevertheless, some critics argue that companies are avoiding such rejections by “dressing up part” of their original invention “as a new one,” and they claim that prohibitions on double patenting should be strengthened. Prof. Holman notes that these arguments typically focus particularly on pharmaceutical products, and they fail to consider the effect such changes would have on inventions more generally.

5. Continuation Practice. Prof. Holman explains that some commentators argue that pharmaceutical companies are using continuation practice to engage in evergreening. Continuations entitle patent applications to benefit from the filing date of an earlier-filed patent application, and the patent applicant can amend claims or even add new ones so long as they are supported by the parent application. Some critics claim that this practice allows pharmaceutical companies to “obtain multiple patents covering obvious variants of the same drug” and to extend effective patent terms. However, Prof. Holman notes that these concerns have already been successfully addressed by Congress in statutory amendments.

Proposed Legislation Aimed at the Pharmaceutical Industry

Having identified and summarized the concepts and doctrines that arise in the evergreening debate, Prof. Holman then analyzes three proposed bills from 2019 that are specifically designed to rein in evergreening in the pharmaceutical industry: the Affordable Prescriptions for Patients Act of 2019, the No Combination Drug Patents Act, and the Terminating the Extension of Rights Misappropriated Act of 2019.

1. Affordable Prescriptions for Patients Act of 2019. The Affordable Prescriptions for Patients Act of 2019 attempts to tackle product hopping and patent thicketing. To combat product hopping, the bill would make it a prima facie antitrust violation for a drug manufacturer to (1) discontinue or withdraw the “reference drug’s” application (or announce discontinuance of or withdrawal of the application) once it receives notice of an application to market a generic version or (2) market or sell a follow-on product during a period of time referred to as the “competition window.” A drug manufacturer can rebut the presumption by showing that the drug was discontinued or withdrawn from the market for “significant and documented safety reasons.”

The bill would also make pharmaceutical patent thicketing a prima facie antitrust violation. The bill broadly defines “patent thicketing” as covering any action by a patentee to limit competition for an approved drug when certain conditions are met. A drug manufacturer can rebut the presumption by establishing that the pro-competitive effects of the action are not outweighed by its anti-competitive effects, which in turn can be rebutted by the FTC demonstrating that the harm to consumers outweighs the benefit from the action.

Prof. Holman warns that the effect of this bill “would be to discourage pharmaceutical innovators from improving existing products,” instead of encouraging further innovation and research to improve the first version of a drug. Prof. Holman cites testimony by Prof. David Olson before the Senate Judiciary Committee stating that, despite the common misconception that a large number of patents delays innovation, “there is no conclusive evidence that smartphone or other high-tech innovation is being retarded by the large numbers of patents that may cover these devices.” Prof. Olson explains that this is also true for pharmaceutical patents, where the number of patents covering one specific drug is relatively low—not enough “to constitute a substantial thicket that will deter innovation.”

2. No Combination Drug Patents Act. The No Combination Drug Patents Act would change the nonobviousness standard under Section 103 for follow-on pharmaceutical innovations. If enacted, it would create a presumption that any “covered claimed invention” is obvious if it “contains or uses a drug or biological product that is prior art” and differs from the prior art under one or more of four enumerated criteria. An applicant may rebut this presumption by showing that the invention is either a new treatment for a new indication or that it leads to a statistically significant increase in the drug’s efficacy.

Prof. Holman points out that the proposed “rule of construction” exempting certain claimed inventions “could largely eviscerate the bill’s effect,” depending on how it is interpreted. He presents three possible interpretations, two of which could be easily overcome by filing a divisional application. Under the third possible interpretation, which seems like the one the bill’s drafters intended, Prof. Holman predicts that pharmaceutical companies would be forced to significantly change their current patent filing strategy, which affords some time to figure out and secure claims directed to inventions that were unknown when the parent application was filed, by starting to file many patent applications at the outset.

Stepping back for a moment, Prof. Holman explains that the proposal to raise the nonobviousness bar especially for follow-on pharmaceutical patents is not new. However, he questions such a proposition because the “assumption that many types of pharmaceutical inventions are inherently obvious and undeserving of patent protection” does not withstand scrutiny. Prof. Holman notes that numerous follow-on inventions have been upheld by the courts and recognized for the positive impact they have on people’s lives. (For a CPIP policy brief by Prof. Holman responding to such a proposal by the United Nations, please see here.)

3. Terminating the Extension of Rights Misappropriated Act of 2019. Finally, Prof. Holman discusses the Terminating the Extension of Rights Misappropriated Act of 2019, which is designed to prevent double patenting in drug patents by presuming that the patentee has “disclaimed the patent term for each of the listed patents after the date on which the term the first patent expires.” Prof. Holman explains that the bill neither alters the standard for determining obviousness-type double patenting, nor the remedy, but it does shift the burden of proof from the PTO to the patent applicant to prove that the listed patents are patently distinct from one another. The bill would also require the PTO to conduct a comprehensive review of its examination procedures.

Conclusion

Prof. Holman echoes Senator Thom Tillis’ concern that “by just focusing on patent protections, and the number of patent protections available to a single product, [Congress] may be doing more harm than good to our nation’s innovation economy.” And he notes that it “is important to bear in mind that the reason there has been such an uproar over the price of drugs is that these drugs provide huge benefits for society, far exceeding most other patentable innovation.” Prof. Holman mentions that these drugs would probably not have been available in the first place without proper incentives, and he worries that the legislation aimed at preventing the perceived problems with evergreening “could discourage the investment necessary to bring the next generation of pharmaceutical innovation to patients.”

Further, Prof. Holman criticizes the current evergreening debate for failing to target the supposed misuse of patents by going after the patents and not that misuse. For example, if the claim of product hopping were true and patients were being prescribed much more expensive drugs with no additional benefit, that would be an issue with the market, not with the patent system. Similarly, if drug companies were using anti-competitive means in the same scenario, that would be an antitrust violation, not a patent issue. As such, instead of the current legislative proposals targeting the patents themselves, Prof. Holman concludes that any legislation should focus on the alleged bad actions of pharmaceutical companies, not on changing the patent incentives for pharmaceuticals inventions overall.

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Legislation Patent Law Uncategorized

Rep. Massie Introduces New Legislation to Restore America’s Patent System

dictionary entry for the word "legislation"Yesterday, Representative Thomas Massie introduced the Restoring America’s Leadership in Innovation Act of 2018 (H.R. 6264). This legislation would reverse many of the harms that have been caused by recent changes to the patent laws from all three branches of government. Patents are an important part of our innovation economy, providing an incentive for inventors to invent and protecting those creations for commercialization and investment.

Unfortunately, the past decade has witnessed the gradual weakening of our patent system. The America Invents Act (AIA) created new post-issuance methods for reviewing patent validity on top of the review that already occurred in federal courts. The Supreme Court has handed down case after case weakening patents and excluding broad swaths of innovation from the patent system entirely. The USPTO, through the Patent Trial and Appeal Board (PTAB), has been systematically invalidating worthwhile patents based on flawed procedures that are easily abused. Together, these changes have done substantial damage to our innovation economy.,

This new bill will reverse many of these recent changes. Although some of the proposals are new, most are merely the codification of what had long been the law for the patent system. The following provides a breakdown of the most important sections of this legislation:

    • Section 3 (the first substantive section), returns the United States to a first to invent patent system. As noted by CPIP Founder Adam Mossoff, giving patents to the first inventor rewards the intellectual labor that results in the invention. This conception of patents as private property rights protecting the innovator’s creation is arguably required by the Patent Clause of the Constitution, and thus, this Act will bring patent laws back within constitutional limits. Conversely, a first to file system merely rewards those who can win a race to the Patent Office.
    • Section 4 abolishes Inter Partes Review (IPR) and Post-Grant Review (PGR). In addition to covered business method review, which was created with a sunset provision, these procedures allow the Patent Office to cancel at patent it has previously issued. Numerous scholars have identified the substantial harms caused by the PTAB. The problems have been so extensive that other legislation focused on trying to fix these procedures has been introduced. This bill goes the necessary next step. Because these procedures fundamentally undermine the status of patents as private property, the bill eliminates IPR and PGR entirely.
    • Section 5 abolishes the PTAB. The PTAB is a terrible example of regulatory overreach. In light of the elimination of IPR and PGR and the return to a first to file system, the creation of the PTAB by the AIA to administer these systems serves no purpose. The legislation instead recreates the Board of Patent Appeals and Interferences, which existed prior to the AIA and handled the administrative appeals and trials that occurred under the prior system. This change also overrules the holding of Oil States v. Greene’s Energy and accomplishes legislatively the outcome of a CPIP led amicus brief in that case.
    • Section 6 eliminates fee diversion and provides for full funding of the USPTO. Innovators and the public alike count on the USPTO to perform timely, quality examinations of patent applications in the first instance. Ensuring that adequate resources are available for this purpose is essential, particularly given that applicants pay fees to the USPTO for precisely this purpose.
    • Section 8 is mainly technical to assure that the restored § 102 retains the one-year grace period and that certain disclosures by the inventor do not become prior art.
    • Section 9 reestablishes the previously long-held status of patents as a property right. The Constitution secures a patent as a property right and many scholars have noted the important implications of treating patents as property. This section not only states that a patent is a property right, but confirms that a patent may only be revoked in a judicial proceeding, which has substantial benefits, unless the patent owner consents to another procedure. This reverses the broad reasoning in Oil States. The parts of this section returning to patent owners the right to control their property also largely overturn Impression Products v. Lexmark International, now allowing patent owners to exclude unlicensed users from their supply chains.
    • Section 10 ends the automatic publication of patent applications. This change will allow applicants to keep their inventions secret until they have the security that comes with an issued patent.
    • Section 11 codifies the details of the presumption of validity and available defenses to patent infringement. For the first time, this will enshrine in statute that the “clear and convincing standard” must be used to invalidate a patent. Additionally, this section provides for tolling of the patent term during litigation challenging the patent’s validity.
    • Section 12 confirms that injunctions are available to protect the patent property. Although not explicit, the new statutory presumption that infringement of patent causes irreparable harm largely abrogates the Supreme Court’s decision in eBay, which dramatically limited the availability of injunctions. Furthermore, having this rule placed into the statute will limit the inter-court variability that has led to inconsistent outcomes.
    • Section 13 restores the possibility of invalidating a patent for failure to comply with the best mode requirement.
Categories
Legislation Patent Law

The STRONGER Patents Act: The House Receives Its Own Legislation to Protect Our Innovation Economy

U.S. Capitol buildingToday, Representatives Steve Stivers (R-OH) and Bill Foster (D-IL) introduced the Support Technology & Research for Our Nation’s Growth and Economic Resilience (STRONGER) Patents Act of 2018. This important piece of legislation will protect our innovation economy by restoring stable and effective property rights for inventors. This legislation mirrors a bill already introduced in the Senate, which I have previously discussed.

The STRONGER Patents Act accomplishes three key goals to protect innovators. First, the Act will make substantial improvements to post-issuance proceedings in the USPTO to protect patent owners from administrative proceedings run amok. Second, it will confirm the status of patents as property rights, including restoring the ability of patent owners to obtain injunctions as a matter of course. Third, it will eliminate fee diversion from the USPTO, assuring that innovators are obtaining the quality services they are paying for.

First and foremost, the STRONGER Patents Act aims to restore balance to post-issuance review of patents administered by the USPTO’s Patent Trial and Appeal Board (PTAB). The creation of the PTAB was a massive regulatory overreach to correct a perceived problem that could have been better addressed by providing more resources towards initial examination. While the USPTO has long been responsible for issuing patents after a detailed examination, it has recently taken on the role of killing patents the same USPTO previously issued. What the USPTO gives with the one hand, it takes with the other.

Data analyzing PTAB outcomes demonstrates just how dire the situation has become. Coordinated and repetitive challenges to patent validity have made it impossible for patent owners to ever feel confident in the value and enforceability of their property rights. In some cases, more than 20 petitions have been filed on a single patent. Although recent headway has been made to address this issue in the administrative context, it only listed factors to be used when evaluating serial petitions. A more complete statutory solution that prohibits serial petitions except in limited circumstances is necessary to fully protect innovators and provide certainty that these protections will continue.

The kill rate of patents by the PTAB is remarkable. In only 16% of final written decisions at the PTAB does the patent survive unscathed. The actual impact on patent owners is far worse. Disclaimer and settlement are alternate ways a patent owner can lose at the PTAB prior to a final written decision. Thus, the fact that only 4% of petitions result in a final written decision of patentability is more reflective of the burden patent owners faced when dragged into PTAB proceedings.

For these reasons, the PTAB has been known as a “death squad.” This sentiment has been expressed not only by those who are disturbed by the PTAB’s behavior, but also those—such as a former chief judge of the PTAB—who are perpetuating it. The list of specific patents that have been invalidated at the PTAB is mind-boggling, such as an advanced detector for detecting leaks in gas lines.

There are even examples where the PTAB has invalidated a patent that had previously been upheld by the Federal Circuit Court of Appeals. One recent examination further found that there have been at least 58 patents that were upheld in federal district courts that were invalidated in the PTAB on the same statutory grounds. The different results are not mere happenstance but are the result of strategic behavior by petitioners to strategically abuse the procedures of PTAB proceedings.

It has been well known that the procedures have been stacked against patent owners from day one. We and others have noted how broadly construing claims, multiple filings against the same patent by the same challengers, and the inability to amend claims, among other abuses, severely disadvantage patent owners in PTAB proceedings.

With the STRONGER Patents Act, these proceedings will move closer to a fair fight to truly examine patent validity. There are many aspects to this legislation that will improve the PTAB, such as:

  • Harmonizing the claim construction standard with litigation, focusing on the “ordinary and customary meaning” instead of the broadest interpretation a bureaucrat can conceive. This will promote consistent results when patents are challenged, regardless of the forum, by assuring that a patent does not mean different things to different people. Sections 102(a) and 103(a).
  • Confirming the presumption of validity of an issued patent will apply to the PTAB just as it does in litigation. This will allow patent owners to make investments with reasonable security in the validity of the patent. Sections 102(b) and 103(b).
  • Adding a standing requirement, by permitting only those who are “charged with infringement” of the patent to challenge that patent. This will prevent the abusive and extortionate practice of challenging a patent to extract a settlement or short a company’s stock. Sections 102(c) and 103(c).
  • Limiting abusive repetitive and serial challenges to a patent. This will prevent one of the most common abuses, by preventing multiple bites at the apple. Sections 102(d), (f) and 103(d), (f).
  • Authorizing interlocutory review of institution decisions when “mere institution presents a risk of immediate, irreparable injury” to the patent owner as well as in other important circumstances. This change will allow early correction of important mistakes as well as provide for appellate review of issues that currently may evade correction. Sections 102(e) and 103(e).
  • Prohibiting manipulation of the identification of the real-party-in-interest rules to evade estoppel or other procedural rules and providing for discovery to determine the real-party-in-interest. Because many procedural protections depend on identifying the real party-in-interest, this change will assure that determining who that real party is can occur in a fair manner. Sections 102(g) and 103(g).
  • Giving priority to federal court determinations on the validity of a patent. Although discrepancies will be minimized by other changes in this Act, this section assures that the federal court determination will prevail. Sections 102(h) and 103(h).
  • Improving the procedure for amending a challenged patent, including a new expedited examination pathway. This section goes further than Aqua Products, prescribing detailed procedures for adjudicating the patentability of proposed substitute claims and placing the burden of proof on the challenger. Sections 102(i) and 103(i).
  • Prohibiting the same administrative patent judges from both determining whether a challenge is likely to succeed and whether the patent is invalid. This section will confirm the original design of the PTAB by assuring that the decision to institute and final decision are separate. Section 104.
  • Aligning timing requirements for ex parte reexamination with inter partes review by prohibiting requests for reexamination more than one year after being sued for infringement. This section will prevent abuses from the multiple post-grant procedures available in the USPTO. Section 105.

Second, the STRONGER Patents Act will make other necessary corrections to allow patents to promote innovation. For example, as Section 101 of the Act confirms, patents are property rights and deserve the same remedies applicable to other kinds of property. In eBay v. MercExchange, the Supreme Court ignored this fundamental premise by holding that patent owners do not have the presumptive right to keep others from using their property. Section 106 of the STRONGER Patents Act will undo the disastrous eBay decision and confirm the importance of patents as property.

Third, the STRONGER Patents Act will once and for all eliminate USPTO fee diversion. Many people do not realize that the USPTO is funded entirely through user fees and that no taxpayer money goes to the office. Despite promises that the America Invents Act of 2011 would end fee diversion, the federal government continues to redirect USPTO funds to other government programs. This misguided tax on innovation is long overdue to be shut down.

Each of the steps in the STRONGER Patents Act will help bring balance back to our patent system. In addition to the major changes described above, there are also smaller changes that will be important to ensuring a vibrant and efficient patent system. CPIP co-founder Adam Mossoff testified to Congress about the harms being done to innovation through weakened patent protection. It is great news to now see Congress taking steps in the right direction.

Categories
Injunctions Innovation Legislation Patent Law Patents

The STRONGER Patents Act: Important Legislation to Protect Our Innovation Economy

U.S. Capitol buildingToday, Senators Chris Coons, Tom Cotton, Dick Durbin, and Mazie Hirono introduced the Support Technology & Research for Our Nation’s Growth and Economic Resilience (STRONGER) Patents Act of 2017. This important piece of legislation will protect our innovation economy by restoring stable and effective property rights for inventors.

First and foremost, the STRONGER Patents Act will bring some much-needed balance to the post-issuance review systems administered by the USPTO’s Patent Trial an Appeal Board (PTAB). Until now, the PTAB has been a “death squad”; an arm of the USPTO killing patents that the same USPTO had previously issued. There are even examples where the PTAB has invalidated a patent that had previously been upheld by the Federal Circuit Court of Appeals.

Data analyzing PTAB outcomes demonstrates just how dire the situation has become. Coordinated and repetitive challenges to patent validity have made it impossible for patent owners to ever feel confident in the value and enforceability of their property rights. Only 16% of patents reaching a final written decision at the PTAB have survived unscathed.

This is not surprising as the procedures have been stacked against patent owners from day one. We and others have noted how broadly construing claims, multiple filings against the same patent by the same challengers, and the inability to amend claims, among other abuses, severely disadvantage patent owners in PTAB proceedings. With the STRONGER Patents Act, these proceedings will move closer to a fair fight to truly examine patent validity. There are many aspects to this legislation that will improve the PTAB, such as:

  • Harmonizing claim construction with litigation, focusing on the “ordinary and customary meaning” instead of the broadest interpretation a bureaucrat can conceive. Sections 102(a) and 103(a).
  • Confirming the presumption of validity of an issued patent will apply to the PTAB just as it does in litigation. Sections 102(b) and 103(b).
  • Permitting only those who are “charged with infringement” of the patent to challenge that patent, thus preventing the abusive and extortionate practice of challenging a patent to extract a settlement or short a company’s stock. Sections 102(c) and 103(c).
  • Limiting abusive repetitive and serial challenges to a patent. Sections 102(d), (f) and 103(d), (f).
  • Authorizing interlocutory review of institution decisions when “mere institution presents a risk of immediate, irreparable injury” to the patent owner as well as in other important circumstances. Sections 102(e) and 103(e).
  • Prohibiting manipulation of the identification of the real-party-in-interest rules to evade estoppel or other procedural rules and providing for discovery to determine the real-party-in-interest. Sections 102(g) and 103(g).
  • Giving priority to Federal Court determinations on the validity of a patent. Sections 102(h) and 103(h).
  • Improving the procedure for amending a challenged patent, including a new expedited examination pathway. Sections 102(i) and 103(i).
  • Prohibiting the same administrative patent judges from both determining whether a challenge is likely to succeed and whether the patent is invalid. Section 104.
  • Aligning timing requirements for ex parte reexamination with inter partes review by prohibiting requests for reexamination more than one year after being sued for infringement. Section 105.

Second, the STRONGER Patents Act will make other necessary corrections to allow patents to promote innovation. For example, as Section 101 of the Act confirms, patents are property rights and deserve the same remedies applicable to other kinds of property. In eBay v. MercExchange, the Supreme Court ignored this fundamental premise by holding that patent owners do not have the presumptive right to keep others from using their property. Section 106 of the STRONGER Patents Act will undo the disastrous eBay decision and confirm the importance of patents as property.

Third, the STRONGER Patents Act will once and for all eliminate USPTO fee diversion. Many people do not realize that the USPTO is funded entirely through user fees and that no taxpayer money goes to the office.  Despite promises that the America Invents Act of 2011 would end fee diversion, the federal government continues to redirect USPTO funds to other government programs.  This misguided tax on innovation is long overdue to be shut down.

Each of the steps in the STRONGER Patents Act will help bring balance back to our patent system. In addition to the major changes described above, there are also smaller changes that will be important to ensuring a vibrant and efficient patent system. CPIP co-founder Adam Mossoff recently testified to Congress about the harms being done to innovation through weakened patent protection.  It is great news to now see Congress taking steps in the right direction.

Categories
Innovation Legislation Patent Law

CPIP Co-Founder Testifies at House Judiciary Committee Hearing on IP

U.S. Capitol buildingCPIP co-founder Adam Mossoff testified on June 13 before the House Judiciary Committee’s subcommittee on the Courts, Intellectual Property and the Internet.  He and other witnesses testified about the impact of the Supreme Courts recent decision in TC Heartland LLC v. Kraft Foods Group Brands LLC on innovators and the possibility of future changes to patent law.

For those not familiar with the decision, it held that patent lawsuits against corporations must be filed either where the corporation is incorporated or where it has infringed the patent and has a “regular and established placed of business.” This is different than the rule for most litigation which generally allows a lawsuit to be filed wherever a court may exercise jurisdiction over the corporation.  Thus, TC Heartland placed constraints on patent owners enforcing their rights that don’t exist for other litigants.

Although the hearing was nominally about TC Heartland and venue for patent suits, Members of Congress and witnesses took the opportunity to address broader issues of innovation policy.  In his opening statement, Professor Mossoff primarily described how patent owners—particularly individual inventors and small businesses—will now be required to file multiple lawsuits all across the country to enforce their rights.  This will drastically increase the costs of protecting their property from infringers, which for many innovators will be cost prohibitive.  Professor Mossoff mentioned one such inventor, Bunch-o-Balloons inventor Josh Malone, who is being seriously harmed by the inability to protect his invention from rampant infringement.  Together with the litany of other recent disastrous changes to our patent system, innovators are now in a precarious position when deciding to rely on patents to protect their inventions.

Much of the hearing was taken up by questions of what the impact of the TC Heartland decision will be.  There was general agreement that the concentration of patent cases in only a few districts will continue.  Under the old regime, many cases were filed in the Eastern District of Texas.  Under the new regime, these cases will now be filed in the Northern District of California or the District of Delaware.  There was also general agreement that this would benefit accused infringers, who will now be litigating in their preferred fora.

Adam MossoffUnfortunately, much of the discussion centered around a perceived problem with patent “trolls.”  This epithet based on myths is often used in the place of reasoned debate for patent policy.  As Professor Mossoff explained, as deployed in research and policy debates, this term would make even famous inventors like Thomas Edison a troll.  Furthermore, it is both wrong and irresponsible to assume that patent owners who license their inventions are practicing an illegitimate business model. Just as it is perfectly legitimate for a landlord to rent her property instead of selling it, it is likewise perfectly legitimate for a patent owner to license her patent rights instead of manufacturing and selling products to customers. And just as it is legitimate for a landlord to sue a squatter for trespass, it is equally legitimate for a patent owner who licenses her property rights to sue for infringement.

Several questions focused on broader patent issues in the context of whether or what Congress should do next for patent law. The Global Intellectual Property Center of the Chamber of Commerce recently reported that the United States had slipped from 1st to 10th in their annual ranking of patent systems.  Reasons for the degradation of our patent system are obvious: death squads killing patents at the PTAB, subject matter eligibility standards that make oil rigs outside the scope of patent laws, and the inability of patent owners to prevent others from infringing their rights through injunctions.

As Professor Mossoff emphasized, Congress’ first priority should be “do no harm.” Rather than make another attempt to pass legislation further restricting patent owners’ rights, it would be better for Congress to simply do nothing.  However, Congress could make the patent system better for innovators.  One step already being discussed that would be a positive improvement is the suggestion to amend section 101 to limit the scope of the judicial exceptions to subject matter eligibility.  At the hearing, Professor Mossoff astutely noted that the first patent ever issued in the United States—being held up at that moment by Chairman Darrell Issa—would likely be invalidated under current patent eligibility standards.

Many questions directed at the witnesses asked for them to propose specific solutions to either perceived venue abuses or broader patent law issues. Professor Mossoff stressed that systemic changes to the patent system will not just affect a few bad actors, but all of the individual inventors, small businesses, universities, licensing companies, and R&D-intensive high-tech and bio-pharma companies who rely on the patent system to protect their innovations.  These types of companies have been the fountainhead of the U.S. innovation economy for more than 200 years.  “Reform” that only addresses the concerns of accused infringers, but not the costs to patent owners, is doomed to do more harm than good.

Professor Mossoff’s written testimony can be found here.  Video of the hearing can be found here.

Categories
Copyright Legislation

Register of Copyrights Selection and Accountability Act is First Step Towards a Modern Copyright Office

U.S. Capitol buildingThe House Judiciary Committee today overwhelmingly approved the bipartisan Register of Copyrights Selection and Accountability Act by a vote of 27-1. Introduced last Thursday by Chairman Bob Goodlatte and Ranking Member John Conyers, Jr.—with the support of Senate Judiciary Committee Chairman Chuck Grassley, Ranking Member Dianne Feinstein, and Senator Patrick Leahy—the Act is the first legislative effort to follow a four-year review of U.S. Copyright law and aims to kick-start an overdue modernization of the United States Copyright Office (USCO).

Focusing on the selection process of the Register of Copyrights, the concise bill requires the Register to be nominated by the President of the United States and subject to confirmation by the U.S. Senate, rather than appointed and dismissed at the pleasure of the Librarian of Congress. Today’s markup saw the inclusion of an amendment that would create a panel—made up of the Speaker of the House, President Pro Tem of the Senate, House and Senate Majority and Minority Leaders, and the Librarian of Congress—tasked with submitting a list of three qualified nominees to the President, who would then nominate an individual subject to confirmation by the Senate. The bill reflects the need for greater stakeholder and Congressional input in the selection of a leader Congress looks to for expert advice and analysis on the copyright system, and it represents the first step in an unquestionably necessary Copyright Office modernization effort.

In 2013, the House Judiciary Committee began a comprehensive bipartisan review of the copyright system that included 20 hearings, testimony from over 100 witnesses, and a listening tour that invited input from copyright stakeholders across the country. According to the Committee, the goal of the review was “to determine whether the copyright laws are still working in the digital age to reward creativity and innovation.” In December 2016, the first policy proposal to come out of the review focused on Copyright Office modernization and stressed the need for information technology (IT) upgrades, the creation of advisory committees and a small claims system, and overall decision making autonomy.

The Copyright Office is currently part of the Library of Congress, a legislative government agency and the main research arm of the U.S. Congress. The Office’s budget and leadership are determined by the Library, which is able to make important decisions independent of any outside review or accountability. It’s a curious arrangement, different from most other federal agencies whose leadership is subject to the checks and balances of an executive nomination and Congressional confirmation process.

As former Registers of Copyrights Ralph Oman and Marybeth Peters point out in a recent letter to Congress, the Copyright Office’s residence in the Library of Congress is a largely the result of a historical accident from the late 19th century. In 1870, Librarian of Congress Ainsworth Rand Spofford convinced Congress that copies of works submitted for copyright registration should be deposited to the Library to help build its collection, and thus the Copyright Office came under the authority of the Library. But nearly 150 years later, the Library of Congress—due to its own unique mission and approach to copyright law—is not best positioned to oversee the operation of an agency in need of reform.

There’s no dispute that the Copyright Office is in need of a facelift. For years, the Office has been underfunded, understaffed, and undervalued, making growth and development with the digital age all but impossible. Before her unexpected ouster, Register Maria Pallante provided Congress with a Register’s Perspective on Copyright Review that included a detailed list of deficiencies within the Office in need of improvement. While Pallante is no longer leading the Copyright Office, her concerns were echoed by stakeholders during the review hearings and listening tour, and Congress has recognized the need to begin an extensive modernization effort.

The copyright system is vitally important to the U.S. economy. According to a 2016 report by the International Intellectual Property Alliance, core copyright industries contributed over $1.2 trillion to the U.S. GDP and employed more than 5.5 million U.S. workers. Despite unfounded claims that its role is “mundane” and leader inconsequential, the Copyright Office plays a central role in the copyright system by providing expert reports and advice to Congress on a variety of copyright-related issues. Section 701(b) of the Copyright Act charges the Register of Copyrights with a number of meaningful duties, and Congress regularly looks to the Register and the Office for input on the development of copyright law.

Making the Register a presidential appointee with the advice and consent of the Senate is necessary to ensure that all stakeholder concerns are addressed prior to confirmation and that the Register remains accountable to Congress. Since the unprecedented removal of Register Pallante in October, there is no permanent Register of Copyrights in place, and the current Librarian of Congress is taking a highly unusual internet survey-based approach to determine the qualities of the next Register. The direct line of communication to the USCO that Congress enjoyed in the past has been disrupted, and consequential decisions are being made with little accountability or regard for Congress’s important role in the process.

These troubling developments are evidence that the system needs to change, and it’s imperative the next Register be subject to the same processes used to select the leaders of equally important government agencies. Only when the value of the Copyright Office is recognized and its infrastructure and operations updated can the system begin to modernize and keep up with the creative culture it serves.

Categories
Copyright Copyright Licensing Copyright Theory Infringement International Law Internet Legislation Uncategorized WIPO

European Union Draws a Line on Infringing Hyperlinks

Cross-posted from the Mister Copyright blog.

a gavel lying on a table in front of booksLast week, the European Court of Justice—the judicial authority of the European Union—issued an anticipated decision in the Sanoma hyperlinking case, declaring that commercial linking with knowledge of unauthorized content constitutes copyright infringement. The opinion comes after years of similar cases in Europe stirred debate over whether linking to pirated works was a ‘communication to the public’ and therefore infringing, and provides a sensible test that protects the works of authors and creators while ensuring the internet remains a bastion of free speech.

Sanoma involved the popular Dutch news and gossip site GeenStijl, which ran an article in 2011 that included links to an Australian website where copyrighted Playboy magazine photos were made available. The photos were published on the Australian website without the consent of Sanoma, Playboy’s editor and copyright owner of the photos at issues, but taken down after the site was notified of their infringing nature. Despite similar notifications, GeenStijl refused to remove the hyperlinks and actually provided links to another website hosting the unauthorized photos after the Australian website took them down.

Sanoma brought a copyright infringement claim against GS Media, which operates the GeenStijl website, and the Supreme Court of the Netherlands sought a preliminary ruling from the European Court of Justice on whether hyperlinks represent the communication of a work to the public. According to an earlier EU directive, any communication to the public of works protected by copyright must be authorized by the copyright owner. Due to the ubiquity of links and hyperlinks on the Internet, a ruling classifying them as communications to the public would have major ramifications for anyone linking to unauthorized content.

In its judgment, the European Court of Justice found that the concept of ‘communication to the public’ requires individual assessment and laid out the following three factors that must be considered when determining whether a link or hyperlink qualifies.

1) The deliberate nature of the intervention – According to the Court, “the user makes an act of communication when it intervenes, in full knowledge of the consequences of its actions, in order to give access to a protected work to its customers.”
2) The concept of the ‘public’ covers an indeterminate number of potential viewers and implies a large number of people.
3) The profit-making nature of a communication to the public – The Court explains that when hyperlinks are posted for profit, “it may be expected that the person who posted such a link should carry out the checks necessary to ensure that the work concerned is not illegally published.”

Applying these criteria to Sanoma, the Court found that because GS Media runs a commercial website that makes money from advertising, it is undisputed that they posted the hyperlinks for profit, and that it is also undisputed that Sanoma had not authorized the publication of the photos. It also found that because they were notified by Sanoma and continued to repost links after the original source website took down the content, GS Media was aware of the infringing nature of the photos and “cannot, therefore, rebut the presumption that it posted those links in full knowledge of the illegal nature of that publication.” The Court concluded that by posting the links, GS Media therefor effected a ‘communication to the public.’

The Court goes on to detail its desire to maintain a fair balance between the interest of copyright owners and authors and the protection of the interests and fundamental rights of Internet users, “in particular their freedom of expression and of information, as well as the general interest.” After providing the criteria for assessing whether a link qualifies as a communication to the public, the opinion emphasizes the important role hyperlinks play in the exchange and free flow of information over the internet, and clarifies that linking—even to unauthorized content—is not a communication to the public if there is no profit motive or knowledge of the infringing nature of the linked-to works. Even so, it’s important to note that not-for-profit hyperlinking may still be considered a communication to the public if the person posting the link knew or should have reasonably known that the content was posted without authorization.

Perhaps most surprising about the Court’s decree is the relative approval by both copyright owners and supporters of the rights of those posting links. While it speaks to the reasonable approach the Court has taken in determining what qualifies as a communication to the public, it may also represent a hesitation to condemn or praise the order due to a significant ambiguity. It’s not entirely clear who carries the evidentiary burden of proving whether an individual knew or should have reasonably known certain content was posted on the Internet without authorization. If copyright owners and authors are forced to prove a user knew or should have known content was unauthorized every time they attempt to remove links that can appear online incessantly, it could render the new directives ineffectual in protecting creative works.

Regardless of the uncertainly surrounding this burden of proof, the current test seems to strike a balance that holds commercial websites more accountable, while allowing for some flexibility for the general public. With debates over the effectiveness of notice and takedown intensifying in the United States, the EU’s decision on communications to the public should be recognized as workable approach to dealing with infringing hyperlinks. As the United States Copyright Office admits in its 2016 study on the making available right, jurisprudence in the US regarding offering access to content hosted elsewhere on the Internet through hyperlinking is less developed as some foreign jurisdictions. But the study acknowledges the progress made in the EU, and emphasizes the need to include ‘offers of access’ in the crucial making available right.

Despite semantic differences, the EU and the US are both moving towards systems that will impose greater accountability for posting links to unauthorized works. The EU’s directive makes clear that commercial hyperlinking to unauthorized content is indeed a communication to the public and therefor copyright infringement, while ensuring that the free flow of information through general public linking will not be threatened and the Internet will remain unbroken. It’s an approach that represents the greater goals of copyright law around the world, and other jurisdictions should follow the lead of the EU when crafting copyright policies that address the intricacies of the Internet.