Tag: Supreme Court

Categories
Copyright

Recap of the Supreme Court’s Unicolors, Inc. v. H&M Hennes & Mauritz, L.P.

The following post comes from Sabren H. Wahdan, a 3L at Scalia Law and a Research Assistant at C-IP2.

the word "copyright" typed on a typewriterIn one of his final majority opinions before announcing his retirement, Justice Steven Breyer penned a nuanced ruling that carefully threads the policy needle on copyright registration issues. The case pitted fabric designer Unicolors against fast fashion company H&M, but it was ultimately a victory for creators of art, fashion, music, dance, literary works, and others who rely on copyright registrations to protect their rights but lack the means to hire an attorney to ensure that their registration applications are legally and factually perfect. As a result of the ruling, they can register their works without fear that their registration could be invalidated by a good-faith mistake.

Unicolors v. H&M answers a narrow question of copyright law: what is the requisite level of knowledge to invalidate copyright registration? Justice Stephen Breyer’s majority (6-3) opinion holds that actual knowledge of either a factual or legal mistake is required before a registration is invalidated. This makes good sense because copyright registration applications are often completed by creators who are not lawyers. Some background on the case is useful.

The District Court

In 2016, Unicolors sued H&M for copyright infringement in the United States District Court for the District of Central California, alleging that H&M sold apparel, specifically a jacket and skirt, with a design remarkably similar to a Unicolors-copyrighted design. The jury returned a verdict in favor of Unicolors.[i] Subsequently, H&M filed a renewed motion for judgment as a matter of law, arguing that Unicolors’ copyright registration was invalid because Unicolors knowingly submitted inaccurate information in its application for registration.[ii] The U.S. Copyright Office has established an administrative procedure that allows an applicant to register multiple works that were physically packaged or bundled together as a single unit and first published on the same date.[iii] However, under 37 C.F.R. § 202.3(b)(4), an applicant cannot use this provision if the works were published in different units or first distributed as separate, individual works.

Unicolors had filed an application with the Copyright Office seeking a collective copyright registration for thirty-one of its designs in 2011. H&M contended that Unicolors could not do so because it had sold some of the patterns separately to different customers at different times, invalidating Unicolors’ registration.[iv] The District Court denied H&M’s motion for judgment as a matter of law, holding that a registration may be valid even if it contains inaccurate information, provided the registrant did not know the information was inaccurate.[v] H&M had to show Unicolors had knowledge and intent to defraud in order to invalidate the registration. H&M appealed.[vi]

The Ninth Circuit Decision

On appeal, the U.S. Court of Appeals for the Ninth Circuit reversed the District Court’s judgment holding that invalidation under 17 U.S. Code § 411 does not require a showing that the registration applicant intended to defraud the Copyright Office.[vii] In other words, knowing about the inclusion of inaccurate facts and law in an application is enough to warrant invalidation. Furthermore, the Ninth Circuit stated that Unicolors had failed to satisfy 37 C.F.R. § 202.3(b)(4) – the single unit of publication requirement.[viii] The Court found that Unicolors’ registration was inaccurate because Unicolors registered all thirty-one of its designs together as a single unit with the same publication date, when in fact, the designs were not all published as a single unit. Some designs were available to the public, while others were confined designs only available to particular exclusive customers.[ix] The Court determined that Unicolors knew the designs would not be released together at the same time; therefore, they knew that the registration information was inaccurate.[x]  Consequently, the Ninth Circuit remanded the case to the District Court for further proceedings.[xi]

The Supreme Court Reverses the Ninth Circuit Decision

In 2021, Unicolors filed a petition to the Supreme Court asking whether the Ninth Circuit erred in determining that §411(b)(1)(A) required referral to the Copyright Office on any inaccurate registration information, even without evidence of fraud or material error in conflict with other circuit courts and the Copyright Office’s own findings on §411(b)(1)(A). The United States Supreme Court granted certiorari.

Justice Breyer’s Majority Opinion

Justice Breyer is well known for his use of analogies to probe the arguments of parties appearing before the Court. Likewise, in Unicolors, the majority opinion relied not only on statutory construction, legislative history, and the plain language of the statute as informed by dictionary definitions, but also on analogies––both to adjacent provisions of the code, and to analogies involving birdwatching––to reach its conclusion, in the end finding that §411(b)(1)(A) does not distinguish between a mistake of law and a mistake of fact and thus excuses inaccuracies in registration applications premised on either mistakes of fact or law.

To explain employing Justice Breyer’s birdwatching analogy, Breyer imagines a man who sees a flash of red in a tree and mistakenly says it is a cardinal when the bird is actually a scarlet tanager: “[A man] may have failed to see the bird’s black wings. In that case, he has made a mistake about the facts.” Alternatively, if said man saw “the bird perfectly well, noting all of its relevant features,” it is possible that, “not being much of a birdwatcher, he may not have known that a tanager (unlike a cardinal) has black wings.” For Breyer, that is a “labeling mistake” because the man “saw the bird correctly, but does not know how to label what he saw” (analogous to a mistake of law).[xii] A business person in the arts may know specific facts about her business; however, she may not be cognizant of how the law applies to it and applies the law to those facts inaccurately. §411(b)(1)(A) states that a certificate of registration satisfies the requirements of section 411 and section 412, regardless of whether the certificate contains any inaccurate information­­–—unless the inaccurate information was included on the application for copyright registration with knowledge that it was inaccurate.

The plain language of the text does not support an interpretation that would read constructive knowledge of how legal requirements bear on the facts at issue into the standard. To reach this conclusion, the majority opinion analyzed not only the plain language of the text but also “case law and the dictionary to find that “knowledge” means an applicant’s understanding of the relevant law that applies to the submitted information.[xiii] Therefore, an applicant who believes information submitted on a registration application is accurate cannot have acted with knowledge that the information was inaccurate.

The Majority also examined other provisions in the Copyright Act that refer specifically to circumstances where an individual should have been aware that a particular legal requirement is implicated (e.g., “‘reasonable grounds to know . . .,’” “‘reasonable grounds to believe . . .,`” ”‘not aware of facts or circumstances from which . . . is apparent’” and concluded that §411(b)(1)(A) does not contain any such analogous language.[xiv]

According to the majority, “the absence of similar language in the statutory provision before us tends to confirm our conclusion that Congress intended ‘knowledge’ here to bear its ordinary meaning.” When Congress includes particular language in one section of a statute but omits it in another, there is a presumption that Congress intended a difference in meaning.[xv]

Finally, the majority considered the legislative history of the Copyright Act. The Court understood that Congress wanted to make it easier, not more difficult, for artists and nonlawyers to obtain valid copyright registrations. Congress did not intend for good-faith errors to invalidate registrations, whether those errors were in issues of fact or issues of law. Invalidating copyright registration when a copyright owner was unaware of or misunderstood the law undermines the purpose of the Copyright Act. The Court dismissed the often-cited legal maxim that ignorance of the law is not an excuse by stating that it does not apply to civil cases concerning the scope of a statutory safe harbor that arises from ignorance of collateral legal requirement.[xvi]

Justice Thomas’ Dissent

Careful readers will note that the question the majority opinion answers is somewhat different from that granted certiorari. Justice Clarence Thomas filed a dissenting opinion, joined by Justices Samuel Alito and Neil Gorsuch, arguing primarily that the majority decided a question not properly presented to the Court. The question originally taken up by the Court was whether fraud was necessary to invalidate a registration. The majority found that the knowledge question is close enough to the question presented in the petition to qualify as a “subsidiary question fairly included” in the question presented.[xvii]

Justice Thomas, not joined by Justice Gorsuch, further dissents from the majority view that ignorance of the law is not an excuse.[xviii] He would have ruled that individuals are responsible for knowing the law, whether that be in the context of criminal or civil cases.

Conclusion

Based on the ruling, a mistake in an application for copyright registration is excusable so long as the copyright registrant or claimant lacked actual knowledge of the inaccuracy. The more complex issue perhaps is the proof issue––proving the relevant knowledge or lack of knowledge. While some may worry that there is a risk that claimants will falsely argue lack of knowledge, courts are well-versed in evaluating truthfulness and parsing evidence, including when they must evaluate subjective viewpoints and experiences.

The majority opinion demonstrates a sensitive balancing of the interest in promoting accurate registration with the understanding of the challenges faced by artists, creators, and other non-lawyers who may unintentionally make errors in filing registrations. Importantly, this decision gives little shelter to copyright lawyers if they register works and make a mistake; on the contrary, it should serve as a warning to copyright lawyers to be careful when filing a copyright registration lest they face potential validity challenges in the future.

The case is going back down to the Ninth Circuit on remand, and the question is: what facts and law did Unicolors know when it filed these registration applications?

[i] Unicolors, Inc. v. H&M Hennes & Mauritz, L.P., 959 F.3d 1194, at 1195* (2020).

[ii] Id at 1197.

[iii]  See U.S. Copyright Office, Circular No. 34: Multiple Works (2021).

[iv]  Unicolors, 959 F.3d 1194, at 1195 (2020).

[v] Id at 1197.

[vi]  Id.

[vii] Id at 1200.

[viii] Id.

[ix] Id at 1197.

[x] Id.

[xi] Id.

[xii] Unicolors Inc. v. H&M Hennes & Mauritz L.P., No. 20-915, 2022 WL 547681, at 4* (2022).

[xiii] Unicolors, WL 547681, at 4*(2022) (citing Intel Corp. Investment Policy Comm. v. Sulyma, 589 U. S. 140 S.Ct. 768, 776, 206 L.Ed.2d 103 (2020)).

[xiv] Unicolors, WL 547681, at 5*(citing §121A(a), §512(c)(1)(A), §901(a)(8), §1202(b) and §1401(c)(6)).

[xv] Unicolors, WL 547681, at 5* (2022) (citing Nken v. Holder, 556 U. S. 418, 430 (2009)).

[xvi] Unicolors, WL 547681, at 8*(2022) (citing Rehaif v. United States, 588 U. S. (2019)).

[xvii] Unicolors, WL 547681, at 8*(2022).

[xviii] Id.

Categories
Copyright Copyright Theory

Professor Justin Hughes on “Restating Copyright Law’s Originality Requirement”

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

the word "copyright" typed on a typewriterBy Ryan Reynolds

In the 89 years following the publishing of the first Restatement of Law in 1932, the American Law Institute’s (ALI) Restatements have become an important tool for those in the legal community to better understand different bodies of law. Despite the success of the Restatements, however, their expansion into different areas of law has not always been received with open arms. Such is the case with the Restatement of Copyright. Since the project was revealed in 2015, many have voiced their skepticism of the project, questioning both its utility and whether its supporters truly want to restate the law or instead reform it. It is against this backdrop that Professor Justin Hughes’ forthcoming article, Restating Copyright Law’s Originality Requirement, finds itself situated.

In his forthcoming article, Prof. Hughes provides a detailed review of the draft Restatement’s treatment of one of the threshold requirements for copyright protection: the “originality” requirement. This requirement is established per §102(a) of the Copyright Act of 1976, which states that “[c]opyright protection subsists . . . in original works of authorship [emphasis added].” To determine whether a work is sufficiently original to be copyrightable, however, the Supreme Court created a two-pronged test in its seminal 1991 Feist Publ’ns, Inc. v. Rural Tel. Serv. Co. opinion. First, the work must be “independently created by the author,” which means that the author created the work without knowingly copying another’s work; second, the work must possess a “modicum of creativity”—which, by all accounts, is a very low bar.

Prof. Hughes concludes that, despite the inspiration for the project “by academics who felt the pace of reform of copyright law . . . has been too slow, [and] in the wrong direction,” the draft Restatement “stick[s] to a centrist, sometimes minimalist, narrative of Feist’s two-step framework.” This notwithstanding, Prof. Hughes notes that there are several “occasional missteps” and “a few points of genuine concern” with the current draft Restatement.

The Draft Restatement’s Treatment of The “Originality Requirement”

As noted by Prof. Hughes, the draft Restatement follows the general framework of Feist with § 5 “‘Originality: In General,’” stating in 5(b) that, “‘[f]or a work to be original, the work must be independently created by its author, as discussed in § 6, and must embody expression that is at least minimally creative, as discussed in § 7.’”

In his review, Prof. Hughes examines § 6 and § 7 respectively, beginning first with § 7’s treatment of Feist’s modicum of creativity requirement.

§ 7’s Treatment of the Modicum of Creativity Requirement

Describing it as the “true heart of the draft Restatement’s originality exercise,” Prof. Hughes commends the draft Restatement for what it does well while also criticizing it on several grounds. As for what he believes it does well, Prof. Hughes approves of the language shift from 7(a)’s, which focuses on “expression that is…minimally creative,” to 7(b) and 7(c)’s, which focuses on the author’s “choices.” While acknowledging that others have criticized the section for “this sleight of hand,” Prof. Hughes believes that this properly reflects the “shift from what courts are supposed to do to what courts actually do [emphasis in original].” As explained by Prof. Hughes, while Feist directs courts to look for a modicum of creativity, the Supreme Court’s 1903 Bleistein v. Donaldson Lithographing Co. decision prohibits judges from making “aesthetic judgments” on what is and is not creative. To resolve this tension, Prof. Hughes explains that courts look to the creative choices in the creation of a work to determine minimal creativity. Therefore, Prof. Hughes believes the draft Restatement’s focus on author’s “choices” accurately reflects the practice of courts; however, as it barely mentions Bleistein, it does not adequately explain to the reader what it is doing.

Further, Prof. Hughes criticizes § 7 for not following its treatment of author’s “choices” consistently where 7(c) is concerned. The relevant language of 7(c) says that “‘[t]he minimal-creativity requirement is not satisfied by choices . . . (such as . . . the tools used to produce the work . . . ).’” Prof. Hughes argues that this provision is incorrect, as “[t]he artist’s choice of which tools to use is part of the creative process. The sculptor’s choice of which chisel to pick up—width of blade, angle of blade, hardness of steel, etc.––may be an expressive choice.”

Another problem Prof. Hughes identifies with the draft Restatement of § 7 is that “Section 7(b) clearly seems intended to limit ‘selection, coordination, and arrangement’ as possible bases for original expression to ‘compilation’ works.” While the current draft of 7(b) states that, “In the case of a compilation [emphasis in original], choices regarding the selection, coordination, or arrangement of elements can satisfy the minimal creativity requirement even if those elements are not themselves original,” the 2018 version “did not have this limitation and was more open-ended.” As expressed by Prof. Hughes, “This intent to limit selection, coordination, and arrangement of bases for minimal creativity to the category of ‘compilation’ works is not an accurate reflection of case law [emphasis in original].”

Prof. Hughes also criticizes the draft Restatement both for what it chooses to say and chooses not to say about creativity. As to the former, while comments to § 7 do not provide a definitive definition of what is or is not original, they do provide a list outlining what minimal creativity requires. While to Prof. Hughes this list is helpful, it is also imperfect and raises concerns. One concern he highlights is its potential to raise the minimal-creativity bar, thereby narrowing copyright’s protections. To this point, Prof. Hughes highlights that, in the draft Restatement’s list, it provides that creativity must be “‘making non-obvious choices from more than a few options.’” As Prof. Hughes breaks down, “[t]hat appellate court dictum is directly contradictory to the Supreme Court’s statement in Feist . . . that the minimal-creativity requirement . . . can be met by ‘some creative spark, ‘no matter how crude, humble, or obvious’’[emphasis in original].”

As to what the draft Restatement chooses not to say about creativity, Prof. Hughes first believes that, to improve, the draft Restatement should “includ[e] . . . a discussion of how choices that manifest individual personality,” such as the decisions of photographers on how they take pictures, are “protectable original expression.” To this point, Prof. Hughes believes that “the most serious shortcoming” of § 7 is the Reporters’ decision not to address Bleistein—which, in the cited words of Prof. Barton Beebe, “‘directly connected ‘originality’ with personal expression.’” Second, Prof. Hughes believes that § 7 should acknowledge “‘intellectual’ choices” as “part of the minimal-creativity equation.”

§ 6’s Treatment of The Independent Creation Requirement

Moving onto his review of § 6, Prof. Hughes first points to its language: “A work meets the independent-creation criterion for originality if the author has contributed some expression to the work without copying that expression from any preexisting work.” While Prof. Hughes believes that the “formulation is ok,” he quickly points out issues he sees with the section’s comments and Reporters’ Notes. First, Prof. Hughes notes that Comment a’s statement “that ‘[f]or expression to be independently created, it must come from the mind of the author’ . . . arguably conflates the two Feist prongs”—a conflation he notes Comment b also likely commits. As Prof. Hughes explains, “the independent production requirement is that the expression be made or brought into the world by a person who had not experienced the same expression previously [emphasis in original],” and therefore “[i]t is not necessary that it ‘come from the mind of the author.’” As Prof. Hughes illustrates, “If a person throws a set of dice one hundred times and writes down the resulting dice totals from each roll on a list, that list was ‘independently-created’ under Feist.”

Prof. Hughes is also critical of the discussion of “novelty” in Comment b, which says that “‘the expression need not be novel or unique.’” While he believes the Reporters’ Notes make an important point, he sees the use of the word “novelty” as simply “too loaded with patent law baggage.” As he explains, the independent-creation standard for Copyright is different from patent law’s “novelty” standard, as “[c]opyright’s independent-creation requirement does not mean that the thing cannot already exist in the world.” Therefore, as there may be confusion in using the word “novelty,” Prof. Hughes recommends removing it altogether.

Lastly, Prof. Hughes also questions the amount of attention the Comments and Reporters’ Notes to § 6 dedicate to nonhuman authorship. After providing an overview of the current limited case law surrounding this issue, he concludes that, while “[t]hese issues are fun conjecture for academics, . . . [they] are so rarefied as to wonder why the draft Restatement discusses them at all.”

Categories
Copyright

Artist Roundtable Presented by the Mason Sports & Entertainment Law Association and the Arts & Entertainment Advocacy Clinic

The following post comes from Austin Shaffer, a 2L at Scalia Law and a Research Assistant at CPIP.

the word "copyright" typed on a typewriterBy Austin Shaffer

On April 6th, the Mason Sports & Entertainment Law Association, in conjunction with the Arts & Entertainment Advocacy Clinic, hosted its Artist Roundtable event. Moderated by Professor Sandra Aistars of Scalia Law, the panel featured musician and producer David Lowery, filmmaker and photographer Stacey Marbrey, and author and director David Newhoff. To kick off the event, Prof. Aistars invited each of the panelists to introduce themselves and highlight any ongoing projects.

About the Panelists

Stacey Marbrey is an award-winning film director, producer, and internationally recognized editorial photographer and has programmed numerous film festivals. Previously, she acted as Program Director for an international film exchange under the auspices of the U.S. Department of State in concert with both the President’s Committee on the Arts and Humanities and the American Film Institute.

David Lowery is an American guitarist, vocalist, songwriter, mathematician, and activist. He is the founder of alternative rock band Camper Van Beethoven and co-founder of the traditional rock band Cracker. Throughout his career in the music industry, Mr. Lowery has worked in nearly every role imaginable, from both the business and music perspectives. Recently, he worked on a small project with limited online CD sales to experiment with a new revenue stream and business model. Mr. Lowery frequently posts at the popular blog “The Trichordist.”

David Newhoff is a writer and copyright advocate. He recently finished his first book, Who Invented Oscar Wilde? The Photograph at the Center of Modern American Copyright. He lives in New York’s Hudson River Valley, where he is currently working on his next book. Mr. Newhoff also writes the popular copyright blog “The Illusion of More.”

How do creative roles intersect with legal issues? What can lawyers do a better job of understanding when engaging with creators?

Mr. Lowery highlighted the importance of the intersection between the arts and legal roles. Unfortunately, he noted, there is a stigma in the artistic community regarding the use of legal action. He commented that, while you should generally attempt to resolve disputes internally, you cannot be afraid to use the legal system to enforce your rights. Even the legally savvy artists can misjudge the scope of the rights to which they are entitled. Mr. Lowery emphasized the need to provide artists with an “intervention”: register your works with the Copyright Office, guarantee your revenue streams with the Mechanical Licensing Collective, and enforce your rights.

On a similar note, Mr. Newhoff echoed the notion that some artists do not fully appreciate the scope of their rights and––perhaps more importantly—their obligations. It is not uncommon, he explained, for creators to assume that their publisher will handle all the legal responsibilities that go into creating a work (i.e., clearing photographs, obtaining permission to publish interviews, etc.). That assumption, however, leaves the author subject to potential liability for copyright infringement. Rather than taking that risk, Mr. Newhoff argued, creators should be proactive in fulfilling their legal obligations. 

Commenting on Mr. Newhoff’s observations, Ms. Marbrey remarked that, in many cases, creators wear many different hats and serve in various roles throughout the course of creating a work. Particularly in the film industry, it can be difficult for creators to keep their various duties and obligations separated and organized. Ms. Marbrey argued that this is one problem that lawyers can help to solve. By taking the time to understand the numerous roles in which a single creator may serve, lawyers can help to ensure that creators are getting maximum value out of their efforts.

The Stigma Against Contracts

The panelists each made unique observations on the use of contracts and how their respective industries tend to perceive them. Prof. Aistars pointed out a concerning trend: creators tend to have a negative view towards contracts and consequently refrain from using them. She commented that, in general, no one wants to be the person to involve lawyers in otherwise “friendly deals.”

The panelists shared stories from their careers that demonstrated this stigma. Ms. Marbrey, for example, worked on a collaborative project involving multiple SAG actors. The parties declined to set up a contractual framework to properly address various SAG-AFTRA requirements for actors. Consequently, the production was later paused to renegotiate deals with the actors after the film was already completed. Due to this misstep, the release of the project was delayed.

The panelists concluded that, while it may force some uncomfortable conversations at the onset of a project, creators should become more liberal with their use of contracts. Doing so allows for a mutual understanding between all parties before any time is invested into the creative process.

Current Trends to Watch in Copyright Law

This portion of the discussion offered a unique insight into the development of copyright law from creators’ perspectives. While the conversation was wide-ranging, there were several common topics that the panelists found especially significant.

The panelists came to a consensus that the general agenda of weakening copyright law could cause devastating effects to the creative community. Mr. Newhoff pointed specifically to the ongoing work being done by the American Law Institute (ALI) on a potential Restatement of Copyright. He argued that broadly speaking, the academic world tends to take an anti-copyright law stance. The panelists agreed that this should generate concern from the creative community and that individual creators should strive to have their voices heard as this project continues.

In general, creators tend to have difficulties understanding the scope of fair use. Especially given the recent Supreme Court decision in Google v. Oracle, there is an element of amorphousness to the fair use doctrine. The panelists concurred that, without legal assistance, creators will likely continue to struggle in determining what constitutes fair use and what requires a license to use.

The event concluded with a discussion on how creators can adapt to and update with the digital age. As a threshold matter, Mr. Newhoff argued that it is hard to fit 20th-century copyright doctrine into the 21st-century landscape. Moving forward, some of the copyright laws may need to be updated (or at least monitored) to better facilitate the production of creative works. Optimistically, Ms. Marbrey noted that the “streaming takeover” is exciting for filmmakers. Although streaming can pose tricky and previously unconsidered issues surrounding copyright law, it offers a new way for creators to showcase their works and opens the door to innovative revenue streams.

Categories
Copyright Fair Use Supreme Court

Recap of the Supreme Court’s Google v. Oracle Opinion

a gavel lying on a desk in front of booksThe following post comes from Liz Velander, a recent graduate of Scalia Law and a Research Assistant at CPIP.

By Liz Velander

The Supreme Court finally reached a determination in the decade-long dispute between two of the biggest technology companies in the world, Google and Oracle. Many have long-awaited the Court’s decision in this case, as it had the potential to provide market certainty in the software industry through its copyrightability analysis. The Court ultimately declines to give that certainty by bypassing the copyrightability issue and choosing to base its holding on a fact-intensive fair use analysis. The Court does this so as to “not answer more than is necessary to resolve the parties’ dispute,” “given the rapidly changing technological, economic, and business-related circumstances.” It emphasizes that its holding is narrow, only applies to declaring code, and does not modify its prior cases on fair use. However, by framing its opinion this way, the Court provides new arguments for infringers to use in a fair use defense in the software sphere and beyond. For this reason, the Court’s decision is not as narrow as it sets out to be. It may lead to lower court decisions that broaden the fair use doctrine and limit the copyright protection given to software.

The Court’s decision broadens fair use by using the doctrine to loosen copyright protection for certain types of code, allowing for a more expansive reading of a “transformative use,” and giving great weight to the public benefit of the use. Before it engages in its fair use analysis, the Court states that “fair use can play an important role in determining the lawful scope of a computer program copyright, such as the copyright at issue here.” Fair use “can distinguish between expressive and functional features of computer code where those features are mixed.” It can also “focus on the legitimate need to provide incentives to produce copyrighted material while examining the extent to which yet further protection creates unrelated or illegitimate harms in other markets or to the development of other products.” The Court describes fair use as a “context-based check that can help to keep a copyright monopoly within its lawful bounds.”

To highlight the ability of fair use to accomplish these goals, the Court begins its analysis with the second statutory factor, “the nature of the copyrighted work.” The Court uses this factor to discuss issues that would have come up if it analyzed the copyrightability of Oracle’s material, such as the applicability of the merger doctrine. It then moves to “the purpose and character of the use,” where it adopts an expansive reading of what constitutes a “transformative use.” The biggest impact of the Court’s fair use analysis, however, will likely come from the great weight it gives to the public benefit of the use under the market effect factor. By using fair use to determine “the lawful scope of a computer program copyright,” the Court’s holding may inadvertently broaden the fair use doctrine.

The Nature of the Copyrighted Work

The Court begins its analysis with describing “the nature of the copyrighted work.” The copyright at issue protects a portion of Oracle’s Java SE platform, called declaring code. Java SE has three essential parts: (1) implementing code, (2) method calls, and (3) declaring code. Implementing code tells the computer how to execute the particular task the programmer asks it to perform. Method calls are commands that help the computer carry out the task by choosing the correct programs written in implementing code. The declaring code is how the method call actually locates and invokes the particular implementing code that it needs to instruct the computer how to carry out a particular task.

For each task, the specific method call entered by the programmer matches up with a specific declaring code inside Java SE. That declaring code provides both the name for each task and organizes them within Java SE’s library. In this sense, the declaring code and the method call form a link, allowing the programmer to draw upon the thousands of prewritten tasks, written in implementing code. Without that declaring code, the method calls entered by the programmer would not call up the implementing code.

In this case, Google did not copy the implementing code from Oracle’s Java SE platform; it copied the declaring code. The Court draws a “critical line” between the uncopied implementing code and the copied declaring code under this factor. On one hand is the innovative implementing code and on the other, user-centered declaring code. The Court explains that the writing of implementing code requires balancing considerations as to how quickly a computer can execute a task or the likely size of a computer memory. The Court says that this balancing is “the very creativity that was needed to develop the Android software for use not in laptops or desktops but in the very different context of smartphones.”

Declaring code, the Court says, embodies a different kind of “creativity” because it is user facing. It must be designed and organized in a way that is intuitive and understandable to developers so they can invoke it. As part of a user interface, declaring code differs from most computer code because “its use is inherently bound together with uncopyrightable ideas (general task division and organization) and new creative expression (Android’s implementing code).” For these reasons, the Court concludes that “the declaring code is, if copyrightable at all, further than are most computer programs (such as the implementing code) from the core of copyright.” Therefore, the Court finds that the second factor, “nature of the copyrighted work,” points in the direction of fair use.

The Purpose and Character of the Use

The Court explains that the inquiry into “the purpose and character” of the use turns in a large measure on whether the copying at issue was “transformative,” that is, whether it “adds something new, with a further purpose or different character.” The Court finds that, even though Google copied Oracle’s declaring code verbatim, its use was “transformative” because it furthered the development of software programs.

The Court explains that what Google did is known as “‘reimplementation,’ defined as the ‘building of a system . . . that repurposes the same words and syntaxes’ of an existing system.” Google “reimplemented” Oracle’s declaring code to allow programmers expert in the Java programming language to use the “task calling” system that they had already learned. By using the same declaring code, programmers using the Android platform can rely on the method calls that they are already familiar with to call up particular tasks. Then Google’s own implementing code carries out those tasks.

The Court concludes that Google’s copying was a transformative use. “Google’s purpose was to create a different task-related system for a different computing environment (smartphones) and to create a platform—the Android platform—that would help achieve and popularize that objective.” Such use is “consistent with the creative ‘progress’ that is the basic constitutional objective of copyright itself.” Therefore, the purpose and character of Google’s copying was transformative to the point at which this factor also weighs in favor of fair use.

The Amount and Substantiality of the Portion Used

 The Court says that the question here is whether the over 11,000 lines of code Google copied should be viewed in isolation or as one part of a considerably greater whole. On one hand, those lines of code amount to virtually all the declaring code needed to call up hundreds of different tasks. On the other hand, if one considers the entire set of software material in the Java SE platform, the quantitative amount copied was small (only 0.4 percent).

The Court decides to view Google’s copying as one part of a greater whole because the amount of copying was “tethered to a valid, and transformative, purpose.” It explains that Google did not copy the lines because of their creativity but because programmers had already learned to work with the Java SE platform, and it would have been difficult to attract programmers to build its Android smartphone system without them. It describes the portion of the declaring code used at “the key that [Google] needed to unlock the programmers’ creative energies. And it needed those energies to create and improve its own innovative Android systems.” For these reasons, the Court holds that this factor weighs in favor of fair use.

Market Effects

The fourth statutory factor focuses upon the “effect” of the copying in the “market for or value of the copyrighted work.” The Court explains that this requires a court to consider the copyright owner’s potential loss of revenue, the source of the loss, and the public benefits the copying will likely produce. As to the likely amount of loss, the Court states that Oracle was ill-positioned to enter the smartphone market, so the jury could have found that Android did not harm the actual or potential markets for Java SE. As to the source of the loss, the Court finds Android’s profitability has much to do with third parties’ (programmers’) investment in the Java programs and less to do with Oracle’s investment in creating the Java SE platform. It says that the Copyright Act does not protect third parties’ investment in learning how to operate a created work.

Finally, given programmers’ investments in learning the Java SE platform, to allow enforcement of Oracle’s copyright here would risk harm to the public by operating as a lock on innovation. “The result could well prove highly profitable to Oracle (or other firms holding a copyright in computer interfaces). But those profits could well flow from creative improvements, new applications, and new uses developed by users who have learned to work with that interface. To that extent, the lock would interfere with, not further, copyright’s basic creativity objectives.” The Court concludes that the uncertain nature of Oracle’s “ability to compete in Android’s market place, the sources of its lost revenue, and the risk of creativity-related harms to the public, when taken together, convince that this fourth factor—market effects—also weighs in favor of fair use.”

The Court ends its opinion by noting that “the fact that computer programs are primarily functional makes it difficult to apply traditional copyright concepts in that technical world.” While that is certainly true, the Court made its work more difficult by basing its opinion in fair use instead of analyzing the copyrightability of Oracle’s code in the first place.

Categories
Patentability Requirements Patents Supreme Court

Professor David Taylor on Patent Eligibility and Investment

The following post comes from Terence Yen, a 4E at Scalia Law and a Research Assistant at CPIP.

files labeled as "patents"By Terence Yen

In his new paper, Patent Eligibility and Investment, Professor David Taylor of the SMU Dedman School of Law explores whether the Supreme Court’s recent patent eligibility cases have changed the behavior of venture capital and private equity investment firms. The paper comes from CPIP’s Thomas Edison Innovation Fellowship program, and it was published in the Cardozo Law Review. The tables referenced in this summary should be credited to his paper, and readers are encouraged to read the original publication for a deeper understanding of his survey results.

Prof. Taylor explains that, since 2010, the Supreme Court has come out with several decisions that have shaken up our understanding of patent eligibility. Not only do the new standards set forth by the Court lack administrability, but they have also created confusion and have far reaching consequences that have drawn concern and criticism from inventors, scientists, lawyers, judges, and industry groups. In fact, these new standards have required lower courts to make determinations of eligibility that the judges themselves recognize as flawed.

As Prof. Taylor explains, the crux of the issue lies in the Supreme Court’s new patentability standard, which requires an inventive application of a newly discovered law of nature, a natural phenomenon, or an abstract idea beyond the mere practical application of such a discovery, as had been previously required. The result is that a scientist cannot obtain a patent for merely making a new discovery (e.g., the cure to cancer) and disclosing how to apply that discovery to advance the state of the world (e.g., treating a patient using the cure). The inventor must additionally include a disclosure of how to apply the new discovery in a new way, creating a double novelty requirement.

Prof. Taylor points to Ariosa Diagnostics v. Sequenom to illustrate some of the issues with this new standard. In Ariosa, scientists discovered that a pregnant woman’s bloodstream included genetic material from her unborn baby. Upon making this discovery, they used known techniques to create methods to use the material to identify fetal characteristics. These new methods were a significant improvement on prior ones, which required the invasive and risky process of taking samples from the fetus or placenta.

The inventors obtained a patent, but the Federal Circuit was forced to invalidate it because the claimed method did not include any inventive concept transforming this natural phenomenon into a patent-eligible invention. In his concurring opinion, Judge Linn condemned the Supreme Court standard, as it required the court to find that an otherwise meritorious invention was ineligible to obtain the protection it deserved. He particularly criticized the second part of the standard, the requirement of an “inventive concept”, which discounts “seemingly without qualification” any conventional or obvious steps in the process.

Many people have criticized this new two-part test and the additional requirement of an “inventive concept.” Indeed, Prof. Taylor previously condemned this standard as reflecting “a lack of understanding of the relevant statutory provisions, precedent, and policies already undergirding the patent statute.” In this new paper, Prof. Taylor seeks to understand how this has impacted investment decisions, and he begins to compile the data largely missing from the existing literature that would start to shed light on the matter.

To gather the relevant data, Prof. Taylor conducted a survey of 475 venture capital and private equity investors from at least 422 different firms representing the various early stages of venture capital funding: early, seed, middle, growth, expansion, and late investors. In general, he asked two types of questions:

    1. Whether the Supreme Court’s rulings on patent eligibility have impacted their decisions to invest in companies developing technology, and if so, how

 

  1. Indirect questions related to the same issue, such as asking about any changes to decisions to invest in companies over the relevant time period, and whether those changes relate to any decreased availability of patent protection

The tables below indicate the different stages of venture capital funding represented by the surveyed firms, as well as the variety of represented industries. The total percentages come out to over 100%, because most firms focused on multiple investment stages and industry areas. It should be noted that the survey questions related only to U.S. patents and only to financing activities in the United States.

Table 1: Investment Stages of Respondents' Firms. Early stage, 59%. Seed stage, 45%. Middle Stage, 27%. Growth Stage, 22%. Expansion stage, 15%. Lat stage, 1%.

Table 2: Investment Industries of Respondents' Firms. Industry to percent. Software and the Internet, 70%. Medical Devices, 63%. Computer Electronics/Hardware, 61%. Biotechnology, 55%. Pharmaceutical, 54%. Communications, 53%. Energy, 49%. Semiconductors, 48%. Transportation, 47%. Construction, 42%.

The Findings

Overwhelmingly, investors reported that patent eligibility is an important consideration for their firms when deciding whether to invest in companies that are developing technology. In total, 74% agreed with this idea, while only 13% disagreed.

Table 7: Patent Eligibility Is an Important Consideration in Firm Decisions Whether to Invest in Companies Developing Technology. Response to percent. Strongly agree, 43%. Somewhat agree, 31%. Neither agree nor disagree, 13%. Somewhat disagree, 9%. Strongly disagree, 5%.

This led to the natural follow-up question: If the laws of patent eligibility make a patent unavailable for a certain technology, would the firm be less likely to invest in companies developing that technology? In response, 62% agreed that their firms would be less likely to invest given the unavailability of patents.

Table 8: Less Likely to Invest if Patent Eligibility Makes Patents Unavailable. Response to percent. Strongly agree, 23%. Somewhat agree, 39%. Neither agree nor disagree, 19%. Somewhat disagree, 13%. Strongly disagree, 7%.

The response changed slightly when the scenario was changed to one where the patent was merely more difficult to obtain. However, there was not a significant change from the response to the previous question, and respondents weighed in at 59% agreement.

Table 9: Less Likely to Invest if Patent Eligibility Makes Patents More Difficult to Obtain. Response to percent. Strongly agree, 19%. Somewhat agree, 40%. Neither agree nor disagree, 18%. Somewhat disagree, 17%. Strongly disagree, 5%.

From the data collected, it appears that investors in the medical device, biotechnology, and pharmaceutical industries tend to value patentability slightly more than investors in the software space. Additionally, early-stage investors seemed to value patent eligibility slightly more than their late-stage counterparts, though there was not a statistically significant difference reported between the different stages of investment. Prof. Taylor theorizes here that a larger sample size might indicate a more obvious trend.

Prof. Taylor notes one interesting statistic: those who were familiar with the Supreme Court’s recent eligibility decisions tended to value patent eligibility higher than those who were not familiar with the cases. This may indicate that the more aware an investor is of the recent opinions, the more they value the impact of those opinions. Prof. Taylor makes sure to note, however, that the data do not preclude the possibility that the more one knows about a subject, the more importance one places on one’s own knowledge of the subject. Additionally, patent eligibility did not appear to be the primary focus for investors. When compared with various other factors typically considered by investment firms, patent eligibility was consistently relegated to a lesser role. It is significant to note that the present survey focused on the availability of patents based only on patent eligibility.

Table 15: Factors Relied upon when Deciding to Invest in Companies Developing Technology: Weighted Mean. Factor to mean (1-9 scale). Quality of People, 7.77. Quality of Technology, 7.55. Size of Potential Market, 7.24. Availability of U.S. Patents, 5.31. First-Mover Advantage, 4.94. Availability of Foreign Patents, 3.72. Availability of Trade Secrets, 3.31. Availability of Copyrights, 3.13. Other, 2.03.

In general, investors indicated that the loss of patent protection would cause them to decrease their investments, though Prof. Taylor finds that this decreased investment would be more pronounced in some industries than others. As shown using weighted averages, the three industries with the greatest reported decrease would be the pharmaceutical, biotechnology, and medical device industries.

Table 18: Impact of Elimination of Patents on Investment Decisions: Responses. Industry to increase or decrease. Construction: Strongly Increase, 1%, Somewhat Increase, 5%, No Impact, 75%, Somewhat Decrease, 14%, or Strongly Decrease, 6%. Software and the Internet: Strongly Increase, 3%, Somewhat Increase, 10%, No Impact, 53%, Somewhat Decrease, 27%, or Strongly Decrease, 8%. Transportation: Strongly Increase, 2%, Somewhat Increase, 7%, No Impact, 53%, Somewhat Decrease, 31%, or Strongly Decrease, 7%. Communications: Strongly Increase, 2%, Somewhat Increase, 8%, No Impact, 48%, Somewhat Decrease, 32%, or Strongly Decrease, 10%. Energy: Strongly Increase, 2%, Somewhat Increase, 4%, No Impact, 49%, Somewhat Decrease, 30%, or Strongly Decrease, 15%. Computer/Electronics Hardware: Strongly Increase, 4%, Somewhat Increase, 6%, No Impact, 33%, Somewhat Decrease, 39%, or Strongly Decrease, 18%. Semiconductors: Strongly Increase, 4%, Somewhat Increase, 3%, No Impact, 33%, Somewhat Decrease, 34%, or Strongly Decrease, 27%. Medical Devices: Strongly Increase, 6%, Somewhat Increase, 3%, No Impact, 11%, Somewhat Decrease, 32%, or Strongly Decrease, 47%. Biotechnology: Strongly Increase, 7%, Somewhat Increase, 2%, No Impact, 14%, Somewhat Decrease, 22%, or Strongly Decrease, 55%. Pharmaceutical: Strongly Increase, 7%, Somewhat Increase, 1%, No Impact, 19%, Somewhat Decrease, 11%, or Strongly Decrease, 62%.

Next, Prof. Taylor explores the impact that the Supreme Court’s decisions have had on investment behaviors. The survey showed that 38% of investors were familiar with at least one of the patent-eligibility cases. About 40% of those knowledgeable investors indicated that the decisions had a negative effect on their firms’ existing investments, compared with 14% who indicated positive effects.

Table 21: Impact of Supreme Court's Eligibility Cases on Existing Investments. Response to percent. Very positive, 1%. Somewhat positive, 13%. No Impact, 46%. Somewhat negative, 33%. Very negative, 7%.

However, Prof. Taylor notes that these numbers represent only the static impact of the Supreme Court cases. Dynamic impact—meaning, the impact on future decision making—is likely the more important statistic. Interestingly, only one-third of investors indicated that the cases would impact their decisions on whether to invest in companies going forward, with no statistically significant difference based on industry or stage of funding.

Table 22: Have Any of the Supreme Court's Eligibility Cases Affected Firm Decisions Whether to Invest in Companies. Yes, 33%. No, 61%. Don't know, 6%.

With the numbers above representing investors with knowledge of the patent eligibility cases, it should be no surprise to learn that investors unfamiliar with the Supreme Court cases overwhelmingly responded that the decreased availability of patents had not impacted their firms’ changes in investment behavior.

Table 28: Has Decreased Availability of Patents Since 2009 Contributed to Your Firm's Change in Investments (Unknowledgeable Investors Only). Type of change to reply percentage. No change: Yes, 2%; No, 95%; Don't Know, 4%. Increased investments overall: Yes, 0%; No, 88%; Don't Know, 12%. Decreased investments overall: Yes, 14%; No, 82%; Don't Know, 5%. Shifted investments between industries: Yes, 4%; No, 84%; Don't Know, 12%.

Conclusion

While there were a wide variety of opinions from the many investors regarding the current state of patent eligibility, the general consensus was that the Supreme Court’s decisions have had a negative impact on patentability, leading to a potential decrease in a willingness to invest. This attitude was most prevalent in, but not limited to, the biotechnology and pharmaceutical industries.

As presented in his paper, Prof. Taylor’s survey provides the first empirical data on how the current state of patent eligibility has affected the attitude of investors. Like all surveys, however, it is susceptible to a certain degree of error caused by various unavoidable human characteristics. Even recognizing its limitations, this survey provides useful information that can be used to begin analyzing the question of whether the Supreme Court’s eligibility cases have impacted investment decision making, and it sheds light on an issue about which many experts in the field have become increasingly concerned.

Categories
Patent Law Patent Theory

Rethinking § 101: Professor Talha Syed Takes a Different Look at Subject Matter Eligibility

The following post comes from Colin Kreutzer, a 2E at Scalia Law and a Research Assistant at CPIP.

shelves full of booksBy Colin Kreutzer

When most people think of patentability requirements, they think of whether an invention has been “done before.” Novelty and non-obviousness under 35 U.S.C. §§ 102 and 103 are certainly key hurdles to obtaining a patent. But courts are often tied up over the more fundamental issues presented in § 101. That provision addresses patent eligibility itself—whether an idea, new or not, falls within some class of inventions that qualify for patent protection.

Section 101 of the Patent Act of 1952 says that a patent may be issued to “[w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter.” It seems fairly straightforward. But the common law decisions, both pre- and post-1952, are riddled with exceptions and questions that the statute hasn’t resolved on its own. How do we treat intangible notions, such as scientific principles or other abstract ideas? Is a business method a patentable process? What property rights can be granted to an inventor who discovers a fundamental law of nature? And should we treat the realm of pure mathematics as being fundamental to nature itself? As we move deeper into the information age, these questions aren’t getting any simpler.

In a new paper from CPIP’s Thomas Edison Innovation Fellowship program entitled Owning Knowledge: A Unified Theory of Patent Eligibility, Professor Talha Syed of Berkeley Law argues that the confusion surrounding this issue is two-fold. First, it results from our failure to develop a functionality doctrine that can clearly distinguish technological applications of knowledge from other forms of knowledge. Second, he offers a root cause of this failure. There is a distracting preoccupation in patent law with “physicalism,” that is, the notion that a patent is awarded for a thing (tangible or not) rather than for knowledge of that thing.

In order to move forward, Prof. Syed states that we must first unwind the physicalist assumptions that are tangled up in our § 101 analyses. Only then can we develop a functionality doctrine free of those encumbrances. As he puts it, “[r]econstructing eligibility doctrine requires, then, extricating incipient functionality concerns from the physicalist thicket, developing their independent basis, and properly following through on their doctrinal implications.”

On its face, when someone proposes that we fundamentally rethink a subject, it sounds as if they are calling for some kind of seismic shift. But Prof. Syed argues that his proposal merely provides a clearer perspective on a subject that has long needed clarity. Rather than requiring any major statutory reforms or total abandonment of our jurisprudence, he says that the “dephysicalization” of patent eligibility serves to better integrate our existing statutory and common law frameworks.

How We Got Here

The questions mentioned above are not new. To understand the current state of things, Prof. Syed first details some of the cases that led us here, beginning with Neilson v. Harford, Le Roy v. Tatham, Boulton & Watt v. Bull, among others.

Neilson is instructive. It was an 1841 English case that dealt with an improvement to an industrial process. The applicant’s invention involved pre-heating air before it was injected it into an iron furnace. The Court of Exchequer expressed some doubts as to whether this intangible aspect of an industrial process was truly patentable. In the end, it only granted a patent because the inventive principle—that the pre-heated air provides better ignition efficiency than cold air—was embodied in a physical machine designed for that purpose. The patentee “does not merely claim a principle, but a machine embodying a principle.”

Neilson and the others influenced a number of cases in the 20th century American courts. Prof. Syed points to three variants of the general rationale. While a principle on its own is not patent eligible, it becomes so: (1) in an embodied application of the principle, (2) if it is delimited to a specific zone of industry, or (3) in an “inventive” mode of application.

These variants illustrate a schism already appearing by the end of the 19th century as to why an “abstract” idea may be unpatentable. If “abstract” is taken in the dephysicalized sense, then the problem may only be cured by applying the idea in some physical form. Alternatively, it could be abstract in the sense that it is a pure unapplied principle. In this case, patent eligibility may not require a tangible form, but instead some delimitation to a specific industrial zone of applicability. Prof. Syed attributes what came next at least partly on a failure to recognize and fully develop these distinctions.

Principles, in the abstract, were but one concern. The eligibility problem was compounded by similar questions about patent rights over natural phenomena. In the 1948 case of Funk Brothers Seed Co. v. Kalo Inoculant Co., the Supreme Court considered whether a set of naturally occurring bacterial strains—unmodified except by their selective combination—was a patentable invention. They answered “no.” Citing Le Roy, the Funk Bros. Court ruled that “patents cannot issue for the discovery of the phenomena of nature. . . . The qualities of these bacteria, like the heat of the sun, . . . are part of the storehouse of knowledge of all men.” Therefore, an invention based on a natural phenomenon must do more than rely upon “the handiwork of nature” in order to become patentable.

Then the waters got even muddier. At the crossroads of abstract principles and natural phenomena lies the fundamental concept of mathematics itself. In Gottschalk v. Benson, the Court addressed an algorithm for converting signals from one numerical form into a computer-friendly binary form. In Parker v. Flook, it was an algorithm for updating threshold alarm limits while monitoring certain chemical processes. In both cases, the Court held that the claimed invention was not a patentable process, but merely a mathematical formula which belonged to the “basic tools of scientific and technological work.”

However, both cases offered a different manner of distinguishing these abstract concepts from patentable inventions. Benson mentioned, but did not require, that an eligible process should transform a particular article or require a particular machine (much later, the Federal Circuit imposed the “machine-or-transformation test” as the sole test for eligibility, only to have it demoted to “useful tool” by the Supreme Court). Flook, on the other hand, looked for some “inventive” aspect that went beyond the algorithm itself.

The whole story is too convoluted to do it justice here. The strength of these various eligibility bars has fluctuated over the years. But through these cases and more, we arrived at the modern two-part test under Mayo Collab. Svcs v. Prometheus Labs, Ass’n for Molecular Pathology, Inc. v. Myriad Genetics, and Alice Corp. v. CLS Bank.

Quoting Alice, Prof. Syed lays out the test as:

(1) Step 1: First, we ask “whether the claims at issue are directed to” a law of nature, natural phenomenon, or abstract idea.(2) Step 2: If so, “we then ask, ‘what else is there in the claims before us,’” considering “the elements of each claim both individually and ‘as an ordered combination’ to determine whether the additional elements ‘transform the nature of the claim’ into a patent-eligible application.” Step two of this analysis is “a search for an ‘inventive concept.’”

Critique of the Modern Test, and a New Proposal

Prof. Syed cites a fundamental disconnect in this test between its “why” and “how,” that is, why an invention is ineligible at all (claiming “basic building blocks” of scientific and technological work) and how it may become eligible (by containing an “inventive concept in application”). He asks, “[i]f the reason certain spaces of knowledge are ineligible is because they are ‘basic,’ then why doesn’t delimiting the claims to a zone of ‘application’ suffice for eligibility?”

Prof. Syed says that at each stage of our § 101 development, courts have touched on proper functionality issues only to leave them obscured by physicalist notions. He moves to recast the three exceptions as “laws of nature, products of nature, and abstract formulas.” More importantly, he insists that when discussing eligible categories or their exceptions, we preface them with the phrase “knowledge of.” So, knowledge of a law of nature can include discovered knowledge of some natural process. To analyze whether that knowledge should be patent-eligible, we should focus on the functional application of that knowledge. The inventor must go from “knowing that” to “knowing how.”

Prof. Syed uses Neilson as an example to distinguish between understanding (having basic knowledge) and intervening (having applied knowledge). A claim to “[k]nowledge of the principle that heated air promotes ignition better than cold” is not patent eligible. But why? Not because it is an abstract idea, but because it claims the sheer knowledge that some process exists rather than knowledge of how to do something with it. This may not seem like a huge difference from the analysis we have now in the Alice/Mayo test. It isn’t. But it might arguably be a clearer way of looking at things.

Prof. Syed’s version of the Alice framework would ask, at step one, whether the claim seeks to cover knowledge of a law of nature, product of nature, or abstract formula. If so, then step two asks whether the claim delimits the ambit of its coverage to a zone of practical application. Finally, he urges (as others have) that the § 101 analysis be kept separate from analyses of substantive issues under §§ 102 and 103: “claims should be truly evaluated ‘as a whole’ so that, for instance, a claim whose delimited application is obvious, but which also involves a nonobvious basic contribution, should pass matter under § 103 just as easily as one whose delimited application is itself nonobvious.”

Conclusion: Reconstructing § 101

Taking these considerations, Prof. Syed reconstructs § 101 into three patentability requirements for “inventions” or “discoveries” in the “useful arts”:

(1) Such “inventions” or “discoveries” must be conceived in a thoroughly dephysicalized way, as spaces of “knowledge of” a “process, machine, manufacture, or composition of matter.”(2) Such spaces of knowledge must be spaces of “useful”—i.e., applied or functional—knowledge.

(3) Finally, such candidate functional spaces of knowledge still need to satisfy the substantive requirements laid out in the rest of the statute to qualify for protection.

Prof. Syed further recasts the statutory categories of subject matter eligibility. Where the “process, machine, manufacture, or composition of matter” comprises one intangible process category and three tangible product categories, his version is the opposite. There are three distinct process categories and one category for knowledge of physical things:

(1) “Knowledge of” a way of doing something (so-called “functional” claims)(2) “Knowledge of” some thing, its structure, and at least one property (“product” claims)

(3) “Knowledge of” a way of making something (method-of-making process patents)

(4) “Knowledge of” a way of using something (method-of-use process patents)

This reconstruction reflects the two fundamental concepts of Prof. Syed’s paper—physicalism and functionality. In order to see the latter clearly, one must abandon the former. But Prof. Syed says that’s easier said than done: “What gives physicalism its lasting power in patents—what makes the spell linger—is, in fact, precisely functionality: it is precisely because patents properly obtain only in spaces of functional knowledge, or knowing how to do something, that it becomes easy to forget that they nevertheless still only obtain in spaces of functional knowledge, or knowing how to do something.” That could help explain why courts have long struggled with this deceptively complicated subject.

To read the paper, please click here.

Categories
Copyright

Google v. Oracle at the Supreme Court: Copyrightability, Fair Use, and Standard of Review

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

U.S. Supreme Court buildingBy Chris Wolfsen

Grocery store shelves, QWERTY keyboards, and restaurant menus. These are just three of the analogies that Supreme Court justices used to grapple with the complex issues in the long-awaited Google v. Oracle oral argument that was heard last Wednesday, October 7. The case between the two tech companies that has been brewing for over a decade comes down to 11,000 lines of Oracle’s Java code that Google copied, without permission, for use in its well-known Android smartphone platform—a competing product.

Oracle originally filed suit in 2010 against Google in the U.S. District Court for the Northern District of California for both patent and copyright infringement. In 2014, the Federal Circuit ruled that Oracle’s code was copyrightable, and Google appealed to the Supreme Court, only to be denied review. On remand, again in the district court, Google claimed that its use of the Oracle code was fair use—meaning that even if it were an infringing use it should still be allowed by law. In 2016, a jury sided with Google, and Oracle filed a motion to challenge the jury verdict, which was denied. So instead, Oracle appealed the case back up to the Federal Circuit where the court reversed the lower court’s judgment and held that Google’s copying of the code was not fair use and that the copyrightability issue that was resolved in its 2014 decision still applied. In 2019, Google filed its petition for Supreme Court review once again, and finally the time for oral argument arrived.

The main issues for the Court to decide are a review of the Federal Circuit decisions—whether Oracle’s code was copyrightable to begin with and whether Google made fair use of the code. But also, and perhaps most importantly, the Court must decide what standard of review should be used to make a fair use determination. This last question will have a lasting impact far beyond this particular dispute.

Copyrightability

Under the Section 102 of the Copyright Act, software is considered a “literary work” and is afforded legal protection. Oracle would therefore have the right to prevent others from using its code or, as was the case, license the use of its software for others to use. But Google makes an argument under the merger doctrine that the code was never subject to copyright protection. The merger doctrine states that when an idea and its expression are inextricably merged there cannot be any copyright protection for the idea. This doctrine gets right to the heart of copyright law: original expression is protectable; an idea—a method, a system, a way to explain something—is not. Google’s argument is that there is only one way to express Oracle’s code, and therefore the code itself cannot be copyrightable at all. Google repeatedly suggests that to rule otherwise would be imparting protection over a method, which is something reserved for patent law.

The Court, and perhaps the rest of us not well-versed in computer science, struggled with this concept in the context of a very technical set of facts. Google’s counsel, Thomas Goldstein, drew comparisons to the Baker v. Selden Supreme Court case where Selden created a new method of bookkeeping and attempted to assert copyright protection over his ledger forms. Goldstein likened Oracle’s code to those ledgers—innovative and hugely successful, but merely a methodology that does not warrant copyright protection. The justices took turns proposing different hypotheticals to challenge this argument. First was Chief Justice Roberts, “cracking the safe may be the only way to get the money that you want, but that doesn’t mean you can do it,” followed by Justice Thomas’s analogy to a football team’s playbook that Google swiped for its own win. Mr. Goldstein argued back that copyrighting the knowledge itself of how to crack a safe would not be allowed and that Google is not “trying to take someone’s fan base or their football players or anything else.” The justices did not seem convinced by Google’s assertion that Oracle’s method of writing code was the only way to create the function Google wanted for its Android platform.

It is easy to get lost in the technical language of the case, between declaring code and implementing code and shortcut programs. Oracle’s counsel, Joshua Rosenkranz, cut through all those distinctions saying, “code is code,” and he pointed out that no circuit court drew a distinction between the types of code. Congress could have carved out different types of code in its consideration of the Copyright Act, but it expressly chose otherwise. Mr. Rosenkranz also circled back to distinguish Oracle’s code from the accounting ledgers in the Baker v. Selden case, highlighting that Oracle is not trying to prevent others from creating their own programs. “Others are free to write and organize their own prewritten programs however they see fit, as long as they don’t copy ours.” Mr. Rosenkranz underscored, and multiple justices acknowledged, that other competitors like Apple and Microsoft did not resort to pure copying to create their products, and that companies like IBM and SAP paid Oracle to properly license the code. Just because Oracle’s method was the most elegant, and therefore popular, way of expressing the code does not make it the only method of doing so. Mr. Rosenkranz summarized this issue well, saying, “the Copyright Act does not give Google a pass just because it would be expensive to recreate our expression.” 

Fair Use

Even if the code were copyrightable in the first place, Google argues, fair use still justifies its copying of the code. Fair use is an affirmative defense to an accusation of copyright infringement. A person or entity who has plainly copied another’s protected work can argue fair use to justify their taking and subsequent use of the copyrighted material. Congress has enumerated a four-factor test within the Copyright Act for courts to follow when evaluating a fair use claim—a test that the Supreme Court last used 26 years ago in Campbell v. Acuff-Rose Music—weighing the purpose and character of the use, the nature of the original work, the amount and substantiality of the portion used, and the effect of the use on the market value of the original work.

Modern courts, when evaluating the first factor of purpose and character of the infringing use, often focus on whether the use was transformative. Google has used this argument successfully in the past, in Authors Guild v. Google, defending its copying of millions of books for use in its Google Books search engine. The court in that case found that digitizing books for use in an online search database was highly transformative. In this case, Mr. Goldstein tried to make a similar argument that Google wrote an improved version of Oracle’s Java code to be more suitable for use in a smartphone. Mr. Goldstein said that this is “what Congress would want, that is to be able to take the functionality of a computer program, [and] someone else comes along and does it better.” He then stated that computer code only performs one function and therefore can still be considered transformative even if it does nothing different than the original work, only to later argue that the word “transformative” is not used in the Copyright Act and might not even be the correct standard of evaluation in this case.

Google also maintained a policy argument that “reusing software interfaces is critical to modern interoperable computer software,” and that to rule in Oracle’s favor would “upend that world” and make computer programming so inefficient as to have fewer creative computer programs. Justice Kavanaugh pointed out that despite Google and its amici claiming a dire result if the Court should rule for Oracle, in the years since the Supreme Court first denied certiorari, “I’m not aware that the sky has fallen.”

Oracle made a more direct argument based on legal precedent, noting that the Supreme Court had already held in Harper & Row and in Stewart v. Abend that no court had found or upheld a fair use verdict where an infringer copied so much of an original work for use in a competing commercial product, all while retaining the same meaning and purpose as the original work. Mr. Rosenkranz pointed out that Google conceded that every line of code copied serves the same purpose in Google’s Android platform as it did in the original software—there was no alteration or transformation of the original code—and Malcolm Stewart, arguing on behalf of the United States in support of Oracle, echoed that point. Mr. Rosenkranz then cited the Court’s own decision in Campbell, saying that what Google did is the “epitome of commercial superseding use: using a work ‘to get attention or to avoid the drudgery in working up something fresh.’”

Standard of Review

The discussion quickly turned to the standard of review that the Court should use to evaluate fair use—whether the determination must be left up to a jury, like the jury that ruled in Google’s favor previously, or whether it can be made by a court, such as the Federal Circuit that overturned the jury verdict to side with Oracle. Google argued that fair use is determined by “whether the jury could reasonably find fair use,” and that “no previous court ever held that only a court may decide fair use.” Mr. Goldstein argued that giving the decision to a jury is the better choice due to the numerous factors involved in a fair use verdict and that jury instructions exist to give appropriate legal certainty and guidance to the jurors.

Oracle disagreed and argued that de novo, meaning “anew,” is the correct standard to resolve this question. This would allow for a court to make a fair use determination without being bound by the decision of a previous court or verdict. Mr. Rosenkranz again cited Harper & Row: “an appellate court may conclude, as a matter of law, that the challenged use does not qualify as fair use once it has the factual record and resolves all subsidiary factual questions in favor of the fact-finder.” Judicial review provides certainty to a fair use determination that would be lost if left to a lay jury. Mr. Rosenkranz also noted that making fair use a fact-finding mission that only a jury may evaluate would all but preclude summary judgment determinations, which are exclusively judge-made decisions and currently comprise the vast majority of fair use cases.

Conclusion

The stakes in this case are extremely high—if it was not made clear by the number of times the justices and attorneys referenced the sky falling—not only for Oracle and Google and the computer science world at large, but also for any copyright creator or user who will eventually face a fair use determination. Joshua Simmons, co-counsel for Oracle and partner at Kirkland & Ellis, looks forward to the Court’s decision, writing:

Given that Google’s copyrightability argument would make it difficult for any code to be protectable, I am hopeful that the Court will follow the text of the Copyright Act and the intent of Congress that code, like Oracle’s, is protectable. Likewise, I hope that the Court will follow a century of precedent allowing courts to decide as a matter of law that, when the defendant creates a substitute that competes with the original, it simply is not fair use.

 

People of all industries, from professionals to hobbyists, should take note of last week’s oral argument and what will be an historic decision from the Court.

Categories
Copyright

RBG’s Legacy Can Guide High Court In Oracle Copyright Case

This post first appeared on Law360.

U.S. Supreme Court buildingAs America mourns the passing of one of its great civil rights icons and judicial pathmakers — Justice Ruth Bader Ginsburg — stakeholders and other observers must not only contemplate what her absence means for the upcoming election but also next month’s start of oral arguments at the U.S. Supreme Court.

Among other cases on the docket, the Supreme Court will hear oral arguments in the watershed copyright case Google LLC v. Oracle America Inc. on Oct. 7.

Justice Ginsburg’s Legacy

Justice Ginsburg inspired documentaries and Oscar-nominated, full-length feature films and made cameo appearances in three operas: twice with Justice Antonin Scalia in Richard Strauss’ “Ariadne auf Naxos” and also in Johann Strauss’ “Die Fledermaus,” where she, Justice Anthony Kennedy and Justice Stephen Breyer entered Prince Orlofsky’s ball in the second act of Fledermaus billed as “the Supremes.”

The justice had a deep appreciation for the arts that went beyond her love of opera. Two Mark Rothkos, a Josef Albers and a Max Weber — some on loan from the National Gallery of Art — hung in her chambers, and she took a literature class at Cornell University under Vladimir Nabokov, which she sometimes referred to in interviews and lectures, noting that law should also be a literary profession.

Given her love for the arts, it’s not surprising, then, that Justice Ginsburg was a knowledgeable justice in copyright matters. The justice authored numerous important opinions affecting creators’ rights and was highly respected for her ability to offer clear, concise judgments that were understandable even to ordinary readers.

Some of her most notable opinions in copyright law include: New York Times Co. v. Tasini — upholding protections for freelance authors in the digital age; Eldred v. Ashcroft — upholding Congress’ extension of the duration of copyright for existing and future works as consistent with both the copyright clause and the First Amendment; and Petrella v. Metro-Goldwyn-Mayer Inc. — articulating that the equitable defense of laches cannot be used to bar a claim of copyright infringement brought within the three-year statute of limitations window.

By the end of her career, she had earned the respect of arts and technology lawyers alike. For instance, in 2015 Justice Ginsburg was inducted into the Chiefs in Intellectual Property Hall of Fame for her commitment to the advancement of women in IP and technology careers. ChIPs was started by seven female chief counsels of patents and intellectual property at Silicon Valley companies to promote women in the high-tech industry.

Google v. Oracle: The First IP Case to Be Heard Without Justice Ginsburg

Now, with a momentous, tech-centered copyright case again making its way to the court, there’s a sad irony that one of the most thoughtful justices, able to cut to the heart of a matter and make it readily understandable, is no longer with us. But while Justice Ginsburg’s thoughtful scholarship and legal acumen will no doubt be missed by her colleagues in every case they consider, they’ll have her legacy to guide them in Google v. Oracle.

Google v. Oracle is a relatively straightforward case. Google committed an obvious act of copyright infringement for business convenience. Oracle Corp. owned Java, a creative and intricately crafted work of software, widely popular among device manufacturers and application designers.

Google wanted to compete but didn’t want to invest the time and resources needed to develop its own platform, nor did it wish to take any of the multiple licenses offered by Oracle, which would have required Google to make its platform interoperable with Java. So, Google copied over 11,000 key portions of code, along with the organizational structure and began competing with Oracle — earning billions of dollars in revenue using the code and structure it had copied.[1]

While Google doesn’t dispute that it took the code, it argues that the portions of Java in question are not copyrightable, that fair use justifies its unlicensed usage, and that the Seventh Amendment right to a jury trial prevents an appellate court from overturning a jury’s decision on fair use.[2] All of Google’s arguments are wrong.

Software is copyrightable.

Congress has protected computer code as a literary work under the Copyright Act since 1980, and it has never sought to limit protections applicable to software, despite the many opportunities it has had to do so.

As copyright scholars noted in an amicus brief to the court:

Even [in 1980,] at that relatively early stage in the development of the computer software industry, Congress considered versions of many of the arguments and issues present in this litigation, including whether computer code should be protected as a literary work, the degree to which computer programs can be considered “functional” or necessary “machine-controlled elements” (as opposed to expressive works protectable under the Copyright Act), and the interests of protecting and incentivizing innovation. After careful analysis and debate … Congress legislated that computer programs are protected under the Copyright Act with no qualifications that would differentiate software from any other type of literary work under the statute.

Since 1980, software development has grown exponentially, and its application continues to expand into new industries. Congress has amended the Copyright Act to address issues raised by technological advances in particular industries — by enacting, for example, the Computer Software Rental Amendments Act in 1990, the Digital Millennium Copyright Act in 1998, and the Music Modernization Act in 2018. Congress has not, however, amended the Copyright Act to decrease the scope of protection for computer programs. Because the statutory protections for computer software remain the same as for all other creative works, adopting Google’s position would amount to a judicially created software-specific amendment. It would also result in singling-out the protections afforded to computer programs, which contradicts the plain text of the Copyright Act.[3]

Google’s copying of Java doesn’t qualify as fair use.

Google’s arguments that its theft of Oracle’s code should be excused as fair use — a defense to copyright infringement intended to excuse limited uses of works, especially for noncommercial purposes, where the use does not compete with the original work — also fall flat.

There is no business convenience exception under the fair use doctrine. As the copyright scholars’ amicus brief noted:

Google and its amici try to characterize [their infringement] as “efficient infringement,” or “permission-less innovation.” Yet its conduct is entirely contrary to the goals of copyright law as expressed in the Copyright Act or the Constitution.[4]

In her 2018 opinion for the U.S. Court of Appeals for the Federal Circuit, in favor of Oracle, U.S. Circuit Judge Kathleen O’Malley said as much, writing, “There is nothing fair about taking a copyrighted work verbatim and using it for the same purpose and function as the original in a competing platform.”[5]

While there is an essential role for fair use in copyright law, Congress and the courts have set reasonable parameters, which do not include business convenience or efficient infringement.

The Supreme Court can rule on fair use.

Having failed to convince past judges of the merits of its position, Google has now raised the argument that neither the appellate courts below, nor the high court’s justices can reverse the jury trial’s previous findings on fair use. Google made a last-ditch Seventh Amendment procedural argument challenging the standard of review applied by the courts, which the court will also consider.

That decision is also straightforward: The fair use issue was put before the court because of Oracle’s successful motion for judgment as a matter of law. A party is always entitled to a judgment as a matter of law if no reasonable jury could find for the nonmoving party.[6]

The Federal Circuit correctly found that only one finding is reasonable — that it is not fair use to infringe many thousands of lines of creative and intricately designed literary computer code for business convenience and to use it for the identical purpose in direct competition with Oracle.

Or, as Judge O’Malley put it: “There is nothing fair about taking a copyrighted work verbatim and using it for the same purpose and function as the original in a competing platform.” Hence, Oracle was entitled to a judgment as a matter of law regardless of the standard by which fair use is determined.

There are of course other, more nuanced, reasons to find for Oracle on this procedural issue as well. On a motion for judgment as a matter of law, the court determines matters of law de novo and assumes that all matters of fact have been found by the jury consistent with the verdict.

In applying the law to the facts, the court determines de novo any mixed questions of law and fact, especially where it is required to “expound on the law, particularly by amplifying or elaborating on a broad legal standard.”[7] Whether a use is a fair use is exactly the kind of determination that presents a mixed question of law and facts to be determined by a judge de novo.[8]

In making fair use rulings, judges routinely are called upon to balance the interests of property owners and the public, to ensure that the intent of the framers of the constitution are upheld by enforcing both the copyright clause and the First Amendment and to apply each of the four fair use factors in a manner that ensures the body of law develops in a stable fashion that the public can rely on. De novo standard of review for such an examination is thus entirely appropriate.

Conclusion 

While debates over who will replace Justice Ginsburg are focused on the political makeup of the court, for this case, as well as for many other IP-related matters, decisions are rarely influenced by a justice’s political leanings. The court of course aspires to politically unbiased justice in all matters, but copyright law in particular has always been an area where decisions are rendered without a view to whether one’s politics are progressive or conservative.

Nevertheless, the stakes in Google v. Oracle are high, and a strong opinion from the court is needed to ensure a company cannot blithely assert business convenience when it wishes to appropriate the creative work of another.

Although unlikely, it would be alarming if the court should be split 4-4 in its decision, but were that the case, the Federal Circuit’s ruling in favor of Oracle would stand, and the Supreme Court would not issue an opinion. Such a result, while technically correct, would be anticlimactic for copyright scholars and a missed opportunity for the court to once and for all time do away with the outlandish notion of efficient infringement.

[1] Brief of Respondent Oracle America Inc., Google v. Oracle, https://www.supremecourt.gov/DocketPDF/18/18-956/93436/20190327160337558_190311%20for%20E-Filing.pdf.

[2] Brief of Petitioner Google LLC, https://www.supremecourt.gov/DocketPDF/18/18-956/127663/20200106172508533_18-956%20ts.pdf.

[3] Brief of Amici Curiae Nine Professors and Scholars of Intellectual Property Law In Support of Respondent, Google v. Oracle, https://www.supremecourt.gov/DocketPDF/18/18-956/133538/20200219155838307_18-956%20bsac%20Nine%20Professors%20and%20Scholars%20on%20Intellectual%20Property%20Law.pdf.

[4] Id.

[5] United Sates Court of Appeals, Google v. Oracle (2017), http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/17-1118.Opinion.3-26-2018.1.PDF.

[6] Federal Rules of Civil Procedure Rule 50 https://www.federalrulesofcivilprocedure.org/frcp/title-vi-trials/rule-50-judgment-as-a-matter-of-law-in-a-jury-trial-related-motion-for-a-new-trial-conditional-ruling/.

[7] U.S. Bank National Ass’n v. Village of Lakeridge LLC , 138 S Ct 960, 967-68 (2018).

[8] See Harper & Row Publishers Inc v Nation Enters , 471 U.S. 539, 560 (1985) ([w]here the district court has found facts sufficient to evaluate each of the statutory factors, an appellate court ‘need not remand for further factfinding but may conclude as a matter of law that the challenged use does not qualify as a fair use of the copyrighted work.).

Categories
CPIP Roundup

CPIP Roundup – August 31, 2020

Greetings from CPIP Executive Director Sean O’Connor

Sean O'Connor

August has seen the beginning of a highly unusual school year, but I hope everyone is continuing to stay safe. And, since even a pandemic can’t keep the world from having a busy back-to-school month, I’ll keep this month’s note short.

First, we’re gearing up for The Evolving Music Ecosystem conference on September 9-11, 2020. The conference will be held via Zoom and feature a keynote address by singer, songwriter, and author Rosanne Cash. Registration is still open, and we hope you’ll join us!

Second, I’d like to welcome University of Missouri-Kansas City School of Law Professor Chris Holman as CPIP’s new Senior Fellow for Life Sciences. He will be taking over the role from Professor Erika Lietzan of University of Missouri School of Law, who has been supporting CPIP in that capacity for the past year. (Clearly, we have an affinity for the Show-Me State!) We’re excited to have him join us, and by way of an introduction, we encourage you to check out his recent guest column for The Phoenix advocating for protection of new uses for old medicines.

Third, we are finalizing the schedule for our Eighth Annual Fall Conference, to be held via Zoom on October 7-8, 2020. This year’s theme is 5G at the Nexus of IP, Antitrust, and Technology Leadership.

In other news, CPIP Senior Fellow for Innovation Policy Jonathan Barnett is now blogging at Truth on the Market, a platform for academics and economists to discuss various aspects of business law. You can read his inaugural post here. CPIP Senior Scholar Erika Lietzan has been appointed a Public Member at the Administrative Conference of the United States (ACUS), which focuses on improving the administrative process. CPIP Director of Copyright Research and Policy Sandra Aistars spoke this past month on a copyright licensing panel hosted by Artomatic with the goal of informing visual artists about essential aspects of copyright law. It has also been a busy month for CPIP Senior Scholars Kristen Osenga and Mark Schultz—I encourage you to keep reading below to keep up with their recent news!

Registration Closing Soon for Evolving Music Ecosystem Conference with Rosanne Cash on September 9-11

Rosanne Cash

Please join us for The Evolving Music Ecosystem conference, which will be held online from Antonin Scalia Law School in Arlington, Virginia, on September 9-11, 2020. The event features three days of panel presentations by leading experts and a keynote address by Grammy-winning singer, songwriter, and author Rosanne Cash.

This unique conference continues a dialogue on the music ecosystem begun by CPIP Executive Director Sean O’Connor while at the University of Washington School of Law in Seattle. In its inaugural year in the D.C. area, the conference aims to bring together musicians, music fans, lawyers, artist advocates, business leaders, government policymakers, and anyone interested in supporting thriving music ecosystems in the U.S. and beyond.

For more information, and to register, please click here.

Spotlight on Scholarship

a pair of glasses, an apple, and a stack of books

Kristen Osenga, Patent-Eligible Subject Matter… Still Wielding the Wrong Weapon–12 Years Later, 60 IDEA: L. Rev. Franklin Pierce Center for Intell. Prop. 104 (2020)

CPIP Senior Scholar Kristen Osenga has published a new paper on patent-eligible subject matter at IDEA entitled Patent-Eligible Subject Matter… Still Wielding the Wrong Weapon–12 Years Later. The paper looks at changes to patent eligibility that have developed since Prof. Osenga published an article on the same subject in 2007. At the time, she concluded that the Patent Office was using the “elephant gun” of new guidelines on the “ants” of patent eligibility. In the new paper, Prof. Osenga traverses the Supreme Court’s subsequent Section 101 decisions that drove the courts and Patent Office to continue wielding an “outsized elephant gun” when it comes to patent eligibility. However, she does note that recent activities at the Patent Office and Congress offer some hope that things may be changing for the better.

Mark F. Schultz, The Importance of an Effective and Reliable Patent System to Investment in Critical Technologies (USIJ July 2020)

Venture capitalists pouring money into a small startup has become a sort of new American Dream for many innovators. The success stories of big American companies starting with nothing more than an idea have pervaded their way into pop culture, inspiring TV shows, movies, and the like. However, CPIP Senior Scholar Mark Schultz has released a new report for USIJ entitled The Importance of an Effective and Reliable Patent System to Investment in Critical Technologies showing that this dream may be harder to attain today due to recent shifts that have weakened the patent system and driven away venture capital investment. Our blog post summarizing the report is available here, and you can read the summary at IPWatchdog here.

Activities, News, & Events

a lit lightbulb hanging next to unlit bulbs

On August 5, 2020, CPIP Director of Copyright Research and Policy Sandra Aistars joined Jaylen Johnson, Attorney Advisor at the U.S. Copyright Office, and Kim Tignor, Executive Director at the Institute for Intellectual Property & Social Justice (IIPSJ), for a virtual panel presentation on copyright protection for visual artists that was hosted by Artomatic. The panel focused on explaining key concepts of copyright law pertinent to visual artists and sharing resources that they can use to learn more about the basics of copyright protection. It also touched on common pitfalls among visual artists when it comes to protecting their creative works, including those that befall joint authors, and common misconceptions about fair use. Our blog post summarizing the event is available here.

On August 25, 2020, CPIP Senior Fellow for Innovation Policy Jonathan Barnett published a new essay at Truth on the Market entitled Will Montesquieu Rescue Antitrust? In the post, Prof. Barnett examines recent pressure on state and federal regulators to use antitrust laws against firms that have established market dominance, and he praises the genius of the eighteenth-century philosopher Montesquieu for developing the theory of separation of powers that allows the judiciary to police overly zealous antitrust prosecutors today. Traversing recent—and failed—antitrust enforcement actions, including AT&T’s acquisition of Time-Warner, Sabre’s acquisition of Farelogix, and FTC v. Qualcomm, Prof. Barnett explains how the judicial branch has become an important counterbalance to prosecutorial antitrust overreach that betrays the fundamental objective of promoting the public interest in deterring anticompetitive business practices.

On August 25, 2020, CPIP Senior Scholar Kristen Osenga published an op-ed in the Washington Times entitled If We Want Innovation, Companies Must Be Able To Rely on Patent Law To Protect Their Investments. The op-ed explains the importance of effective patent protection for innovative companies to develop and commercialize their new technologies. In particular, Prof. Osenga praises the recent antitrust victory of Qualcomm over the FTC in the Ninth Circuit, noting that a “race that results in innovation that other companies, and the public, dearly desires is exactly the point of competition.” Prof. Osenga also authored a recent op-ed for the Richmond Times-Dispatch, With Biomedical Research, Taxpayers Are Getting a Great Deal, explaining how the critics are wrong to argue that the government should take control of important biomedical inventions like remdesivir. She was also quoted in a recent article at Bloomberg Law entitled Court Split Over Driveshaft Patent Muddies Eligibility Question about the Federal Circuit’s recent 6-6 split on whether to review an important patent-eligibility case en banc.

Categories
Trademarks

Consumer Perception Wins the Day: A Case Overview of USPTO v. Booking.com

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

U.S. Supreme Court buildingBy Ryan Reynolds

Last week, the Supreme Court in USPTO v. Booking.com held that a combination of an otherwise generic term and a generic top-level domain (TLD) may be protected as a trademark so long as consumers perceive it as capable of distinguishing among the members of a class of goods or services and not as a reference to the class itself. The Court rejected the nearly per se rule applied by the United States Patent and Trademark Office (USPTO) that such combinations are necessarily generic.

The Background

Between 2011 and 2012, Booking.com filed four trademark registration applications for the “Booking.com” mark with the USPTO. The USPTO denied the registrations because it found that the mark was generic as applied to online hotel reservation services. On appeal, the Trademark Trial and Appeal Board (TTAB) affirmed the denial. The TTAB analyzed “Booking” and “.com” separately and found the mark generic.

The Lanham Act provides that a trademark is “any word, name, symbol, or device” used by a person in commerce “to identify and distinguish his or her goods . . . from those manufactured or sold by others and to indicate the source of the goods.” Five categories of marks are recognized under the Lanham Act that have varying levels of protection. Fanciful, arbitrary, and suggestive marks receive immediate protection. Descriptive marks only receive protection upon showing secondary meaning, that is, once consumers understand the mark to communicate a single source. Lastly, generic marks can never receive trademark protection. A generic mark does not help a consumer distinguish one good or service from another; it instead merely refers to the common name of the good or service itself. The restriction on generic marks is based on the concern that competitors should have free use of the terms necessary to identify their products or services to consumers.

Having lost at the TTAB, Booking.com then filed suit in the U.S. District Court for the Eastern District of Virginia. The district court applied the primary significance test, which states: “[T]he primary significance of the registered mark to the relevant public . . . shall be the test for determining whether the registered mark has become the generic name of goods or services in connection with which it has been used.” The district court held that “Booking.com” was a descriptive mark that had acquired secondary meaning, based on the perception of the mark by the relevant consuming public. On appeal, the U.S. Court of Appeals for the Fourth Circuit affirmed, finding that “Booking.com” was eligible for trademark protection. The USPTO then petitioned the Supreme Court for a writ of certiorari, which was granted.

The Arguments

The central issue was whether the Lanham Act had legislatively overruled the Supreme Court’s 132-year-old decision in Goodyear’s India Rubber Glove Mfg. Co. v. Goodyear Rubber Co. In Goodyear’s, the Court created a per se rule that the addition of an entity designator such as “company” to the end of an otherwise generic mark could not create a valid trademark. The Court reasoned that entity designators do not serve a source-identifying function, but instead only indicate that parties have formed an association to deal in goods or services.

The USPTO contended that, like entity designators, TLDs such as “.com” do not serve a source-identifying function as they only communicate a business’ online presence to the public. Therefore, it argued that Goodyear’s per se rule controlled the case as both lower courts had found “Booking” alone to be generic. It further argued that ruling for Booking.com would cause competitive harm by opening the door to the registration of countless generic marks. It stressed that this harm was heightened by the competitive advantages the internet already grants to Booking.com as the only party that can use its domain name. It argued that, due to these competitive advantages and the opportunity for Booking.com to pursue protection under unfair competition laws, “Booking.com” does not require trademark protection.

In contrast, Booking.com alleged that the Lanham Act had legislatively overruled Goodyear’s through its creation of the primary significance test. It argued that the primary significance test is the exclusive test for all marks to determine genericism, with the Lanham Act creating no special category for domain names as marks. Likewise, Booking.com maintained that the piecemeal analysis by the USPTO of “Booking” and “.com” separately went against the Lanham Act’s directive to assess the mark as a whole for purposes of registration.

Booking.com further contended that the primary significance test reinforces the aims of trademark law by helping consumers navigate the marketplace. By requiring marks to pass both the primary significance test and show secondary meaning in order to receive protection as a descriptive mark, non-source-identifying marks are eliminated. Booking.com also pointed out that the USPTO has inconsistently applied Goodyear’s per se rule by allowing marks similar to “Booking.com” to be registered, and this inconsistency has not caused harm to fair competition in the marketplace. It also warned that the USPTO’s per se rule would usher in a “mass extinction event” for hundreds of registered marks.

 The Ruling

In its opinion affirming the Fourth Circuit’s decision, the Supreme Court rejected the USPTO’s per se rule as to combination terms like “Booking.com.” The majority opinion, authored by Justice Ginsburg and joined by seven other justices, held: “Whether any given ‘generic.com’ term is generic, we hold, depends on whether consumers in fact perceive that term as the name of a class or, instead, as a term capable of distinguishing among members of the class.”

The majority stated that USPTO’s reliance on Goodyear’s was flawed since it would find terms ineligible for trademark protection even if consumers would understand them to signify source: “That bedrock principle of the Lanham Act is incompatible with an unyielding legal rule that entirely disregards consumer perception.” The majority reasoned that the Court’s decision in Goodyear’s stood only for the proposition that a “compound of generic elements is generic if the combination yields no additional meaning to consumers capable of distinguishing the goods or services.” Thus, the majority held that a consumer could understand “Booking.com” to refer to the source of the goods or services and not merely to describe the website itself.

Addressing the anticompetitive arguments raised by the USPTO, the majority noted that the concern of hindering competitors “attends any descriptive mark” and that the likelihood of confusion and fair use doctrines would “guard against the anticompetitive effects.” Further, the majority rejected the USPTO’s argument that unfair competition laws could provide an adequate remedy for Booking.com, stating that there is “no cause to deny Booking.com the same benefits Congress accorded other marks qualifying as nongeneric.” Lastly, the majority declined to “open the door to cancellation of scores of currently registered marks” due to the inconsistency of the USPTO’s own application of the per se rule for which it argued.

In her brief concurrence, Justice Sotomayor raised two observations. First, she noted her appreciation for the dissent’s skepticism of consumer-survey evidence as an “unreliable indicator of genericness.” Second, she observed that the USPTO may have properly “concluded based on such dictionary and usage evidence, that Booking.com is in fact generic” and that the district court may have erred in concluding otherwise—an issue that was not before the Supreme Court.

In his dissent, Justice Breyer argued in favor of the USPTO’s per se rule, stating that the Lanham Act had not repudiated Goodyear’s and that its “principle is sound as a matter of law and logic.” In addition to tracing many of the same arguments advanced by the USPTO in its briefs, Justice Breyer criticized the “fact-specific” approach established by the majority to determine genericism. He claimed that survey evidence is an unreliable metric of genericness and that there would be little to stop the registration of countless generic marks. Justice Breyer argued that this influx of “generic.com” marks would open the door to potentially serious anticompetitive consequences, and he contended that the Court’s decision may lead to costly litigation that will “no doubt chill others from using variants on the registered mark and privilege established firms over new entrants to the market.”

While the ultimate consequences are not yet known, this decision clearly marks the strong resolution of the Supreme Court that, where genericism is concerned, consumer perception is key.