Thursday, May 19, 2016

Galasso & Schankerman on the Effect of Patent Invalidation on Subsequent Innovation by the Patentee

In a paper previously featured on this blog, economists Alberto Galasso (Toronto School of Management) and Mark Schankerman (London School of Economics) pioneered the use of effectively random Federal Circuit panel assignments as an instrumental variable for patent invalidation. That paper looked at the effect of invalidation on citations to the patent; they now have a new paper, Patent Rights and Innovation by Small and Large Firms, examining the effect of invalidation on subsequent innovation by the patent holder. They summarize their results as follows:
Patent invalidation leads to a 50 percent decrease in patenting by the patent holder, on average, but the impact depends critically on characteristics of the patentee and the competitive environment. The effect is entirely driven by small innovative firms in technology fields where they face many large incumbents. Invalidation of patents held by large firms does not change the intensity of their innovation but shifts the technological direction of their subsequent patenting.
Their measure of post-invalidation patenting is the number of applications filed by the patent owner in a 5-year window after the Federal Circuit decision. They also present results suggesting that large firms tend to redirect their research efforts after invalidation of a non-core patent (but not for a core patent), whereas "the loss of a patent leads small firms to reduce innovation across the board, rather than to redirect it." (A "core" patent is one whose two-digit technology field accounts for at least 2/3 of the firm's patenting.)

This is a rich paper with many, many results and nuances and caveats—highly recommended for anyone interested in patent empirics.

Monday, May 16, 2016

Rules, Standards, and Change in the Patent System (Keynote Speech Transcript)

Last weekend I was honored to give the keynote speech at the Giles S. Rich Inn of Court annual dinner held at the Supreme Court. It was a great time, and I met many judges, lawyers, clerks, and consultants that I had not met before.

Several people asked me what I planned to discuss, so I thought I would post a (very lightly edited) transcription of my talk. I'll note that the kind words I mention at the beginning refer to my introduction, given by Judge Taranto, which really was too kind and generous by at least half.

The text after the jump.

Wednesday, May 11, 2016

Buccafusco, Heald & Bu: Do Pornographic Knock-offs Tarnish the Original Work?

Trademark law provides a remedy against "dilution by tarnishment of [a] famous mark" and the extension of copyright term was justified in part by concerns about tarnishment if Mickey Mouse fell into the public domain. But there has been little evidence of what harm (if any) trademark and copyright owners suffer due to unwholesome uses of their works. Chris Buccafusco, Paul Heald, and Wen Bu provide some new experimental evidence on this question in their new article, Testing Tarnishment in Trademark and Copyright Law: The Effect of Pornographic Versions of Protected Marks and Works. In short, they exposed over 1000 MTurk subjects to posters of pornographic versions of popular movies and measured perceptions of the targeted movie. They "find little evidence of tarnishment, except for among the most conservative subjects, and some significant evidence of enhanced consumer preferences for the 'tarnished' movies."

Before describing the experiments, their article begins with a thorough review of tarnishment theory and doctrine, as well as consumer psychology literature on the role of sex in advertising. For both experiments, subjects were shown numerous pairs of movie posters, and were asked questions like which movie a theater should show to maximize profits. In the first experiment, treatment subjects saw a poster for a pornographic version of one of the movies; e.g., before comparing Titanic vs. Good Will Hunting, treatment subjects had to compare the porn parody Bi-Tanic vs. another porn movie. Overall, control subjects chose the target movie (e.g., Titanic) 53% of the time, whereas treatment subjects who saw the porn poster (e.g., Bi-Tanic) chose the target movie 58% of the time, and this increase was statistically significant. Women were no less affected by the pornographic "tarnishment" than men, and familiarity with the target movie did not have any consistent effect.

Sunday, May 8, 2016

Jotwell Post: Is It Time To Overrule the Trademark Classification Scheme?

As I've noted before, Jotwell is a great way to keep up with interesting recent scholarship in IP and other areas of law. My latest Jotwell review, of Jake Linford's Are Trademarks Ever Fanciful?, was just published on Friday. As I describe in the post, this is the latest in an impressive trifecta of recent articles that have attacked the Abercrombie spectrum for word marks from all sides. The full review is available here.

Tuesday, May 3, 2016

[with Colleen Chien] Recap of the Berkley Software IP Symposium

Slides and papers from the 20th Annual Berkeley Center for Law and Technology/Berkeley Technology Law Journal Symposium - focused on IP and software are now posted. Colleen Chien and I thought we would discuss a few highlights (with some commentary sprinkled in):

David Hayes' opening keynote on the history of software and IP was terrific. The general tenor was that copyright rose and fell with a lot of uncertainty in between. Just was copyright fell, patent rose, and is now falling, with a lot of uncertainty in between. And trade secret law has remained generally steady throughout. David has long been the Chair of the Intellectual Property Group of Fenwick and West, former home to USPTO Director Michelle Lee, as well as IP professors Brenda Simon, Steve Yelderman, and Colleen Chien and is one of the wisest and most experienced IP counselors in the valley. (Relatedly, Michael Risch's former firm was founded by former Fenwick & West lawyers.)

Peter Menell's masterful presentation on copyright and software spanned decades and ended with a Star Wars message, "May the Fair Use Be With You."

Randall Picker took a different view of copyright and software, focusing instead on whether reuse was simply an add-on/clone or a new platform/core product. Thus, he thought Sega v. Accolade came out wrong because allowing fair use for an unlicensed game undermined the discount pricing for game consoles, but thought Whelan v. Jaslow (a case nearly everyone hates) came out properly because the infringing software was a me-too clone. Borland, on the other hand, created a whole new spreadsheet program to create competition. In related work, Risch published "How can Whelan v. Jaslow and Lotus v. Borland Both be Right?" some 15 years ago.

Felix Wu presented an interesting talk about how the copyright "abstraction-filtration-comparison" test might be used to determine the meaning of "means plus function" claims in patent law.

MIT's Randall Davis's "technical talk" explained how software is made and how abstractions are the essence of software. It's turtles all the way down: one level that seems concrete is merely an abstraction when viewed from the level below. The challenge, it seems, is that calling anything abstract can have wide meaning.

Rob Merges further discussed how we might define abstract. His suggestion was to look at abstract as the opposite of concrete and definite. Thus, patents would need to be far more detailed than many that are being rejected now, but such a standard might be more clear to apply.

Arti Rai discussed a similar solution, noting that lower levels of abstraction were more likely to be affirmed. Furthermore, solutions to computer specific problems seem to hold a key. Rai and Merges should be posting papers on these topics soon.

Kevin Collins presented a draft paper on Williamson v. Citrix Online. He posited that Williamson would present difficult challenges for courts trying to determine structure - including structure that's supposedly present in the claim. He presented some ideas about how to think about solutions to the problem.

Similarly, Lee Van Pelt showed some difficulties with Williamson (including Williamson itself) in practice.

Michael Risch's talk and paper leaves off where Hayes ended, with the fall of patents. It explores whether or not, in the wake of the trouble software patents are in, developers might turn to trade secret to protect visible features, and what the implications might be. It turns out that less than a week after the conference, a software company won a $940m jury verdict on exactly this theory.

Colleen Chien's talk explored, if software is eating the world (H/T MarcAndreesen), how much IP and its default allotments matter, in a world where contract is king, and monopolies are coming from data, network effects, scale (a la Thiel) and, possibly, winner take all dynamics, as discussed on Mike Masnick’s recent podcast rather than patents and copyrights. It presents early results and an early draft paper from an analysis of ~2000 technology agreements and some 30k sales involving software, finding evidence of both technology and liability transfers.

Aaron Perzanowski's presentation and forthcoming book with Jason Schultz suggests that perhaps the IoT should be known as IoThings-We-Don't-Own.

Relatedly, John Duffy addressed the first sale doctrine and presented his recent paper with Richard Hynes that shows how commercial law ties to and explains how exhaustion should work. This is relevant to the Federal Circuit's recent decision in the Lexmark case on international exhaustion.

Second day lunchtime keynote, William Raduchel, talked about the importance of culture to innovation and IP. As Mark Zuckerberg mentioned on an investor call, Facebook develops openly (some of it's IT infrastructure and non-core innovation, at least) because that's what it's developers demand and need to get the job done. He also discussed how "deep learning" may change how we consider IP, because computers will now be writing the code that produces creative and inventive output.

The empirical panel provided a helpful overview of recent studies. Pam Samuelson’s talk highlighted changes in the software industry, particularly with the growth of software as a service (SaAS), the cloud, the app market, the IoT, and embedded software as well as the software IP protection landscape since the Berkeley Patent Survey was carried out in 2007. Samuelson also discussed how recent invalidations of algorithms and data structure patents will affect copyright. If those features are too abstract for patenting, then we should consider whether they are too abstract for copyright protection, even if they might be expressed in multiple ways. (NB: A return to the old Baker v. Selden conundrum: bookkeeping systems are the province of patents, not copyrights. But can you patent a bookkeeping system? Maybe a long time ago, but surely not today).

John Allison gave an overview of what we know (empirically) about software patents. And the chief IP officers panel was a highlight, as each person had a different perspective on the system based on its own position - though they did agree on a few basics, such as the need for some way to appropriate investments and the preference for clear lines.

There is much more at the link to the symposium, including slides, drafts, and past (but relevant) papers. It's well worth a look! TAP is also running a seven-part series on the conference, starting with this overview of David Hayes' talk.

Saturday, April 30, 2016

A Trend at Pat Con: Regulating Patents Earlier

I was thrilled to attend "Pat Con 6" this year at Boston College, thanks to this year's host David Olson, along with Andrew Torrence and David Schwartz.  I noted a trend in several of the papers: many sought, either explicitly or implicitly, to shift back the timeline in which bad patents are kicked out of the system or in which low quality patent assertions are halted––presumably in order to avoid the high costs of litigation and the imposition on consumers and downstream innovation. I suppose we can think of this as "ex ante" versus "ex post" regulation of patents. In theory, this is a way to limit the toxic effects of low quality patents, and low quality patent assertions, on the system. Read more at the jump.

Thursday, April 28, 2016

Jonathan Masur on Improving Cost-Benefit Analysis at the PTO

Federal agencies are required to use cost-benefit analysis (CBA) for all "economically significant" regulations—those with an impact of at least $100 million. Given the economic importance of patents, even small procedural changes at the PTO likely cross this threshold. But as Jonathan Masur notes in CBA at the PTO, the PTO regularly promulgates regulations without following CBA procedures. The PTO did deem its recent fee-setting regulations economically significant, and Masur writes that "the PTO deserves commendation for attempting CBA in such a difficult field." Yet the resulting analysis "misunderstands basic precepts of patent economics."

CBA is supposed to measure the social costs and benefits of a proposed regulation, not just the private costs and benefits for the agency and the regulated party. The PTO's analysis for its fee-setting regulation correctly counted PTO operating costs as a real administrative cost. But the only other costs and benefits it considered related to the quantity and speed of patent grants—where more/faster patents were viewed as benefits, and fewer/slower patents were viewed as costs. The PTO viewed a "decrease in successful patent application filings" as a "cost to society." As Masur notes, this approach "improperly conflates the private value of patents to their owners with the value of patents to society at large." (As I've previously discussed, this distinction can also be conflated in academic work.) The private value of a patent—the supracompetitive rents it enables—is a transfer from consumers to the patent owner, not a social gain. If there is a social benefit, it is in the dynamic incentives the patent creates.

In addition to making this "fundamental" error about the benefits of patents, the PTO's CBA "entirely ignores the costs that accompany patents" such as deadweight loss and inhibition of follow-on innovation. The PTO did note that uncertainty about the scope of others' patent rights can inhibit innovation, but this was treated "as a cost created by pending patent applications, as if the cost disappears entirely when the patent is granted"—which Masur notes is "entirely backward." In prior work, Masur has explained that high patent filing fees can serve the benefit of screening out low-value inventions. The PTO's CBA, however, "errs by treating lower fees—and greater numbers of patents—as an unalloyed good."

Tuesday, April 26, 2016

The AIA Is Not a Taking

I have just published, along with Ben Picozzi, a response to Greg Dolin and Irina Manta's article, Taking Patents. In the response we refute Dolin and Manta's argument that the America Invents Act effectuated a compensable "taking" under the Fifth Amendment by making it easier to invalidate patents in administrative proceedings. The response is particularly timely in light of the Supreme Court's upcoming decision in Cuozzo regarding the propriety of interpreting claims using the "broadest reasonable construction" standard in inter partes review proceedings, and whether the PTAB's decision to institute an IPR must be judicially reviewable. The response is available here:

Wednesday, April 20, 2016

McDowell & Vishnubhakat on the USPTO Patent Pro Bono Program

Until I came across this new article by Jennifer McDowell (USPTO) and Saurabh Vishnubhakat (Texas A&M), I'll admit I wasn't aware that the USPTO has a pro-bono program to provide free legal assistance to inventors. Here is the abstract:
In recent years, the United States Patent and Trademark Office has systematically been engaging the legal community with inventor assistance beyond the agency’s usual business of examining applications for patents and trademarks. The purpose of the USPTO’s effort has been to support innovators who are constrained by a lack of resources to pay for patent counsel necessary to protect the full scope of their inventions. This Article describes the brief history, flexible structure, and ongoing growth of that effort, embodied in the USPTO Patent Pro Bono Program. The Patent Pro Bono Program is a national network coordinated by the USPTO to connect inventors and small businesses with registered patent attorneys and agents to assist in the filing and prosecution of patent applications for free. At the regional level, a broad array of non-profit organizations, bar associations, community economic development organizations, and institutions of higher education support the USPTO in matching low-income inventors with experienced patent professionals. At the individual level, volunteer patent attorneys and their inventor clients engage in the usual back-and-forth of the USPTO examination process, seeking patent protection as a way to enter or advance in the marketplace. In short, the program is a structural effort to bring independent inventors and startups the same opportunity of investment and economic competition that large and established incumbents enjoy.
In addition to providing a thorough description of the program, the authors attempt to study its impact so far based on initial data from the pilot program in Minnesota. But the analysis is complicated by the small sample size and selection effects. (This is a broader problem—the USPTO implements all its pilots in ways that are difficult to learn anything from, rather than in a controlled way.)

Tuesday, April 12, 2016

Do Non-Compete Agreements Really Impede Innovation?

I spent my entire practice career in California, representing clients who were, by and large, free to move from company to company due California's ban on covenants not to compete. At the time, the question of inevitable disclosure was unsettled in California; the law allowed for injunctions to stop "threatened" misappropriation, but the question was whether merely being in the same business is a sufficient threat. Most people though no, and the courts eventually went there.

But employees were not always free to do as they wished. I represented many employees against their awful former employers who (wrongfully) claimed that the employee had exited with trade secrets. And I represented many companies against their awful former employees who (wrongfully) claimed they had exited cleanly without trade secrets. For this reason, I've always bristled at the notion that California is a place where everyone happily moves from company to company and nobody cares or legitimately worries about trade secrets because it's all good.

But through this all, I always thought employee mobility was a good thing. I still do. And so do a lot of other people. Indeed, a sort of orthodoxy has arisen where you simply can't be honest, pro-innovation, and pro-noncompete all at the same time. It's as if an entire strand of the literature on how non-competes can improve investments in human capital training got lost in the mix, replaced by theory that says the contrary. This theory is supported by evidence from empirical studies on the matter. It seems crystal clear.

Not so, according to Jonathan Barnett (USC) and Ted Sichelman (San Diego). A draft of their paper, Revisiting Labor Mobility in Innovation is now up on SSRN. In it, they take on the orthodoxy:
It is now widely asserted that legal regimes that enforce contractual and other limitations on labor mobility deter technological innovation. First, recent empirical studies purport to show relationships between bans on enforcing noncompete agreements, increased employee movement, and increased innovation. We find that these studies misconstrue legal differences across states and otherwise are flawed, incomplete, or limited in applicability. Second, scholars have largely adopted the view that California’s policy against noncompetes promoted Silicon Valley as the world’s leading technology center. By contrast, Massachusetts’ enforcement of noncompetes purportedly stunted innovation in the Route 128 region near Boston. We show that this account is incomplete. During the rise of Silicon Valley, California noncompete law did not as vigorously preclude noncompetes as today and firms could substantially mimic noncompetes through contractual and other instruments. Rather, fundamental technological and economic factors more persuasively account for the rise of Silicon Valley and the Boston area has remained a significant innovation center. There is little compelling ground for the view that barring noncompetes and other limitations on employee mobility promotes innovation.
I believe this is an important paper, even if you are not inclined to agree with its conclusions. I'll discuss more after the jump.

Monday, April 11, 2016

Hidden in Plain Sight

I've posted a draft of my new trade secrets article at SSRN. Here is the abstract:
Software developers have long tried to appropriate the value of visible features and functions of their programs. Historically, they used copyright to do so, but then shifted to patenting as copyright protection for methods of operation waned. Given newfound difficulties patenting software functions, developers have one more place to turn: trade secrets.
Trade secrets have always protected the hidden aspects of programs, but can they be used to protect visible or easily discernible program features? This article suggests a new way developers might use trade secrets to protect visible program features. It examines how they might do so, relying on traditional case law and confidentiality precautions used to keep secrets. In doing so, the article considers whether and how such protection could be achieved in theory and in practice.
The article then asks how software licensing would change if trade secret protection of discernible features were achieved. It considers how software might be delivered (including software as a service), the potential for trade secret trolls, the role of open source development, and the potential effect on innovation incentives.
Finally, the article considers the alternative normative views associated with this new type of software protection.
 Comments are appreciated!

Friday, April 8, 2016

Ben Picozzi on the Role of the Solicitor General in Patent Law

This is a Guest Post by Ben Picozzi, J.D. Candidate at Yale Law School and Student Fellow at the Information Society Project. Ben discusses a prize-winning paper he recently posted on SSRN about the litigating relationship between the PTO and the DOJ. In the paper he argued that the DOJ has used its exclusive litigating authority as an administrative control mechanism in patent law. Ben summarizes his argument in the paper, and tells readers how he would have done things differently in hindsight.  Read more at the jump.

What If They Forgot to Record the Super Bowl?

I've been slow in my blogging due to a heavy semester, though I've got some new posts coming.

In the meantime, I have a new post at the Villanova Moorad Sports Law Journal page, in which I discuss the legal ramifications of broadcast network failure to retain copies of Super Bowl I (and the lone individual who made his own recording of the broadcast).

Wednesday, April 6, 2016

Larry Helfer on Access to Medicines

Readers interested in the social justice concerns described in Monday's post may be interested in a book chapter that was recently posted by Professor Laurence Helfer: Pharmaceutical Patents and the Human Right to Health: The Contested Evolution of the Transnational Legal Order on Access to Medicines. Helfer is one of the leading scholars of international IP institutions; see, e.g., his classic work on regime shifting.

In this new chapter, he describes the collision of two "transnational legal orders" (TLOs): one focused on IP, and one on the right to health. He breaks down the history into three phases. In Phase 1 (pre-mid-1990s) the two TLOs "existed in relatively stable but distinct policy spaces." In Phase 2 (mid-1990s to 2000), the IP TLO rapidly expanded. Phase 3 (2000 to the present) has involved "a backlash against pharmaceutical patents and a campaign by developing countries and civil society groups to increase A2M [access to medicines]." In broad strokes, this account is probably familiar to many IP scholars, but for those interested in the detailed institutional dynamics behind this story, Helfer's chapter is well worth a read.

In related news, the pharmaceutical firm GlaxoSmithKline made headlines with its recent announcement that it will stop filing patents in 50 low-income countries and will grant licenses to generics manufacturers in another 35 lower-middle-income countries.

Monday, April 4, 2016

Peter Menell on IP and Social Justice

Professor Peter Menell recently posted a new essay, Property, Intellectual Property, and Social Justice: Mapping the Next Frontier, from a conference celebrating Professor Joseph Singer. As he explains, "[t]he ascendency of intangible resources profoundly affects social justice—from access to life-saving genetic information to the control of knowledge dissemination, creative freedom, group identity, and, increasingly, the distribution of wealth." His essay canvases a huge array of topics in just 52 pages, and it is a great review of the literature in this area. (The essay is worth downloading even just for the collection of key works in footnote 13, from scholars including Anupam Chander and Madhavi Sunder and Amy Kapczynski.)

For each of the four main bodies of IP law, Menell examines the law's internal legitimacy (is IP the best way of achieving the law's goals?) and external effects (how does the law affect various social justice considerations?). For example, he compares patent law with the other legal institutions that Daniel Hemel and I discuss in Beyond the Patents–Prizes Debate, and he reaches the same conclusion we do: each institution has limitations, and "the patent system works best in conjunction with other institutions." On patent law's external effects, Menell notes the troubling implications of patent law's use of price as an allocation mechanism for certain technologies such as medicines. He notes that this does not require one to reject the patent system—rather, it highlights the need in certain areas for non-patent institutions such as government health care policies. (Of course, as Ted Sichelman nicely summarizes, we think the negative distributional effect of patents will be replicated by any system that taxes users of the technology—marginal cost pricing can only be obtained by requiring consumers to broadly subsidize each other's technology use, which is the whole idea of government health care and other health insurance programs.)