IPSC Breakout Session #5 Platforms & Interfaces/IP Enforcement

Xuan-Thao Nguyen, Tech Bros, Social Media, and the End of IP Financing?

Ideas are nothing without financing. Banks will not give loans secured by patents; banking law constraints. How was Silicon Valley Bank able to make loans to startups before its demise? Piggyback on VC due diligence, valuation. Funding round provides money to pay back loan; SVB also took a warrant on the startup itself—the right to purchase shares. If the value of the startup goes up, the value of the warrant comes up.

What will happen now that SVB collapsed? Operated in US, Israel, China. Note that access to funding was never equitably distributed for women and minorities. Nonbank lenders may come in, but problems are associated with that. Nonbank lenders demand higher fees and interest rates b/c their money comes from investors, not depositors. Bank loans are typically much cheaper. IP is considered very risky for loans—not good collateral.

Felix Wu: What should happen?

A: senior consultant for World Bank: banking law is not going to change. Banking focuses on deposits; we have to protect the depositors. The loans rely on quantifiable collateral. Lessons from China: patent office can work with bank and experts to value specific IP, issue a certificate, and the bank can then rely on that. Insurance policy. Can also have government provided guarantee.

RT: TM as collateral?

A: Has paper in Houston LR: an established company w/royalty stream can rely on them as accounts receivable. Even a new company, if they have customers ordering, the bank can use that as financing based on accounts receivable. The byproducts of the TM can be financed. But IP, including TM, are not viewed by banking sector as the type of corporate assets on which they can rely for lending.

David Stein, Rethinking IP Incentives Following a Process Shock: Lessons from Online Consumer Services

Software IP broke about 10 years ago and no one noticed. First divide in protecting implementation but not interface, for competition-based/network effect-based reasons. The problem is that this system fell apart around 2008-2012 when smartphones came out. Once I have a phone connected to the internet, I want my software available to me everywhere. Everything moved into the cloud. No need to bear all implementation costs up front, as there was before; can add or remove features over time, handle edge cases that develop. At the same time, the risk of copying essentially went away. Access to market is now about having enough computers to run the software for all your users. So now, we have lots of protection for implementation where we don’t need it and no protection for interfaces where new entrants can easily be copied.

It’s worse than that b/c of the difference b/t disruptive and incremental innovation. Totally new product: risks cannibalizing existing market; risks entire portfolio (example: Google Buzz—still in a consent decree w/FTC). That doesn’t exist for startups. That means small companies largely introduce disruptive innovations, while A/B testing of small changes favors size/economies of scale. Thus if a large company copies a small company’s innovation, it can accelerate faster than the small company and make it much better.

Recommendations: dump most precedent. Some need in installable software world, but if we’re worried about concentration and innovation in online spaces, the scheme we have doesn’t quite work. Like to see more protection for disruptive interfaces. Problems exist w/lasting IP rights in interfaces, b/c right to stop people from distributing software does create barriers, so misappropriation and unfair trade practices may be more suited.

Fred Yen: These interface problems have existed since Lotus v. Borland; pick a few examples that people can get their hands around, especially for a general audience.

A: you have to be a large incumbent before there’s a community depending on Lotus. Big difference is the direction of copying. If Lotus controls the market and people are dependent on it, then others need to support Lotus’s interface to compete. But that’s not the direction of copying he’s seeing—cool new interfaces by startups are copied by Meta and Google and Microsoft. That’s more problematic.

RT: Why is IP the solution space? Why won’t the big companies just acquire and kill startups unless there’s a structural remedy? Meta knows how to write a big check.

A: Cares about activity levels; ruinous copying decreases the incentive to try to get bought out. Thinks there’s too much copying—why would anyone buy when they could copy? [And yet they do buy, a lot.] Structural remedies mean that there’s no hope of being acquired which depresses innovation.

Jessica Silbey: Give a menu of options: reverse confusion protection for unregistered trade dress; improvement patents; etc. Much better for doctrinal gravitas.

A: could have FTC exercise its §5 authority; startups won’t use the law b/c they can’t survive the length of time it takes to bring a case.

Wu: not convinced there isn’t © protection for many interfaces; the lock-in effect may override that in a market dominance situation but that’s different from there being no protection.

Ben Depoorter, Copyright Small Claims Litigation: An Empirical Analysis

Goal: stick to infringement. Time frame ongoing; 428 cases so far. Reproduction and public display are the main alleged rights violated (with lots of overlap); only 71 derivative work claims. Smaller cases, under $5000, are more streamlined—only 1 Board member evaluates; 163 of the claims choose this. Statutory damages requested 22% of time. 71% pro se, 28% represented.

Few repeat players, but Joe Hand live entertainment is—business model is working with bars etc for live entertainment broadcasts. 7% optouts, but note that you don’t need to opt out if the claim is noncompliant.

Little evidence of trolling, opt-outs; many noncompliant claims.

Next steps: identify trends, decision analysis, damage awards, types of noncompliance.

Silbey: also look at who asks for the smaller awards.

Q: maybe optouts are lower because of risks of fee-shifting if the defendant makes a big federal case out of it. [registration status makes a big difference here]

A: generally, there is a selection effect—wants to track that over time. There are a lot of considerations; the opt out notice is an ad for the board—the CO warns about what can happen in federal court.

RT: asked about registration status—which would interact w/risk of fee shift in federal court. I just checked and the CCB does not explain the effect of a timely registration in federal court in its list of considerations about whether to opt out or not.

Number one consideration is what makes initially noncompliant submissions not try to correct.

Kristelia García, Imperfect Enforcement

What makes people underenforce—retweet fan videos instead of shutting them down? Mechanisms and benefits are similar in IP and outside. Unlike public enforcement discretion, private enforcement discretion/selective enforcement is not well studied or theorized.

Taxonomy: private enforcement can be selective, delayed, algorithmic; private forbearance can be nonenforcement by default or intentional; intentional can be ex ante or ex post. Comedians suing Spotify; tattoo artists suing videogame companies. Questions of reliance/implied license can arise from delayed enforcement.

Intentional nonenforcement: foreclosures are an example where there is nonenforcement, disproportionately in wealthier neighborhoods. Video game developers who allow piracy in hopes that users will buy in game content.

As with other forms of private ordering, selective nonenforcement does raise some concerns. Propensity for bias is obvious as w/mortgage enforcement. Sometimes it’s economically rational—wealthier people are better credit risks, so maybe they can get their accounts current and take advantage of loan modifications. Lack of transparency about reasons.

Advantages: decision in hands of party best positioned to evaluate. Valuable info to lawmakers about what industry cares about and what it doesn’t. Not every wrongdoing results in a loss.

Lemley: caution about any suggestion of use it or lose it—leads in TM to bullying and threats of lawsuits that are unnecessary and harmful. Larger issue: we have this nonenforcement b/c we’ve created an overbroad set of legal rights such that infringement goes on all the time. So we recognize that lots of copyright infringements are not worth enforcing, either not harmful or even helpful. If we’re not ok with that, think about narrowing the scope of the enforceable right.

Xiyin Tang: what’s the difference b/t delayed and intentional? Petrella seems to involve elements of both.

Alex Roberts: how does this play into a monitoring strategy? Aggressive monitoring v. sit back and wait to see what comes to your attention.

A: yes, and algorithms also come into that. Some pass it off to algorithms.

IPSC Breakout Session #2: mostly copyright and then marijuana innovation

Michael Carroll (w/ Peter Jaszi), Fair Use After Google and Warhol

Codification is a big deal; clarifies that fair use is a distinct doctrine, whereas well into 20th century courts were using it as noninfringement. Courts weren’t using four factors before that. And it creates statutory construction issues that justify SCt intervention, which hadn’t happened before.

Early stage: focus on fourth factor—fiscalization—Sony arises as secondary issue/throwaway piece in context. Harper & Row gets litigated as a First Amendment/free press case by Floyd Abrams; Court relies on Nimmer. Campbell is the first case that squarely presents §107 construction without other distractions, and the Court takes a fresh look.

Warhol reinforces transformative uses; creates a straw man version where new meaning or message is enough and rejects that, but he didn’t see that in the lower courts anyway. The movie adaptation of the book isn’t inherently fair use. Likely to see the vocabulary of whether the secondary use is for a “distinct purpose” increase in future cases, but functionally, it’s the same inquiry as in previous cases. Court chose to rule quite narrowly in part b/c of concessions during litigation. Second Circuit had buyer’s remorse about Prince v. Cariou, but by only affirming the judgment, Prince v. Cariou is still arguably good law w/the exception of the relevance of artist’s intent. Emphasis on narrowness of opinion—the only use we’re ruling on—suggests that we need to take them seriously, and the concurrence wants to drive that point home. So he doesn’t think this undoes the progress of Campbell and Google v. Oracle.

By defining purpose only as licensing image of Prince—use in a well-structured conventionalized market—the majority gets to be dismissive of the dissent; it doesn’t matter how much Warhol contributed b/c he created a substantially similar image which is now competing with her photograph.

The analysis does raise the level of generality issue: how do we decide what the purpose is? The dissent is very concerned about limiting available distinct purposes—Whelan v. Jaslow distinction between idea/expression. But he doesn’t see that in majority and its emphasis on the specificity of the use. The majority says that limiting doctrines account for Kagan’s examples—which involved use of expression—as well as the dissent’s own copying and the Court’s too.

Commercial use in well-structured conventionalized market in which the © owner’s work participates, then the first factor will weigh against the use absent some additional justification. Google added interesting things under the fourth factor. Purpose is now to be determined by objective evidence; Court says nothing about what that might be.

RT: Does the Wind Done Gone have a different purpose from Gone with the Wind? It participates in the same conventionalized market.

A: b/c it’s not a substitute—it appeals to a different market.

RT: but no one would read WDG w/o having read GWTW. And we could make up a reason why they’re substitutes the same as the Court made up the idea that one would choose between the Warhol and the Goldsmith photo.

A: it’s a different experience.

Matt Sag: Why do you think the holding has to do w/markets? Court also says: Difference can’t be a matter of degree, can’t be new aesthetic—he sees that as explicit rejection of Cariou. We don’t even get into the market stuff.

A: but the holding is specific that this is only about licensing in commercial markets.

Rosenblatt: does factor four do anything that factor one doesn’t do under this analysis? Your answer was that the two works didn’t compete.

A: to the extent you think purpose still counts as transformative, it’s a different user experience than the original.

Jessica Silbey: same work in different uses will sometimes be fair and sometimes not?

A: yes. They chose not to say the making was not a fair use, hanging on wall, and use in art history book—seem to be conceded fair uses at oral argument.

Silbey: what about the language of the case about the necessity of the use? Seem to demand need to take Goldsmith’s photo as opposed to any other photo. That goes to why Warhol took it not why Vanity Fair took it. You’re reading rationality into the opinion where there’s a lot of inconsistency. Justifying the use goes to the commentary aspect.

A: b/c he’s not commenting on her photo, his justification for using her photo is lower.

Hughes: Why is GvO broad and Warhol narrow? Neither case says it’s broad or narrow.

A: scope of QP, since Warhol is only factor one and decided as only licensing uses.

Zahr Said: what do we do about risk aversion as a result?

A: on the ground, have to give individualized advice and write up guidelines that make similar arguments.

Fred Yen: Wish the Ct had been honest that it thought Warhol was garbage and not transformative. All the other bits are disguising the Ct’s appraisal of the value of the Warhol work, the very thing it says no one else is supposed to do.

A: we have to give meaning to the verbiage.

Yen: no we don’t, not as scholars. Don’t say the text of this opinion reveals the truth of fair use.

William Henslee, The Transformation of Transformativeness: The Implications of Fair Use on AI

Fair use should be limited to uses in the preamble of 107; has become a catchall for ripping people off. Sony v. Universal was wrongly decided and there should have been a blank tape royalty. Campbell was transformative as a parody. But using 100% of another’s work shouldn’t be allowed; transformative became the main event. But any lawyer can generate a reason that there is a transformation. Must add something new to the original work. The fourth factor is about economics; the first factor should be about artistic expression. Warhol licensed the photo b/c he knew that if he wanted to use another’s work he should pay for it. [This is a factual misdescription—Vanity Fair licensed the photo and sent it over; the public record does not contain details about what Warhol knew/believed.]

Recently, lawyer got in trouble for submitting AI-generated legal argument. But data mining has been found to be a fair use. Data mining legal documents, work product, court cases, and then create work based on previous work. The input was copyrightable; the output is not. Taken copyright-protected material and transformed it into public domain material—dangerous for law firms.

Copyright for humans only? We do have WFH, and could say that someone does own the AI output as WFH. Other solutions: statutory license for sampling. Bridgeport is a great case; 9th Circuit was wrong. Fair use is a failure b/c the only way to know if something is fair or not is to litigate to the Supreme Court, and you might not know even then. If we’re going to have © for computer code, we could have a different fair use rule for code.

Bob Brauneis: the preamble says “such as,” and it doesn’t have a unifying principle—teaching, including multiple copies for classroom use, is very different from many of the others. Hard to get a narrow rule out of that.

A: most of those categories are nonprofit. Parody should be on the list, as comment and criticism, and some commerciality is ok.

Chris Newman, Fair Use: Against Weighing

Balancing rhetoric is mostly not useful; use factors to describe outcome that they were already heading to by intuition, or they gravitate to one part that they treat as dispositive. Not everything has to be transformative to be a fair use; we’d be better off focusing on why that is than focusing on rhetorical sleights of hand. Instead, we should think of factors as lenses for triangulating on same object—they’re interrelated aspects of the same question. We should never find factors pointing in different directions; they should be reconciled not outweighed.

Breyer in GvO is model: discussion of nature of copyrighted work should provide a qualitative grounding for the analysis and for distinctive lines of precedent for different types of work.

You have to know what you’re looking for and we don’t have a clear articulation of what we want from fair use. Wants to give mid-level frameworks to guide analysis but that aren’t so restraining that they can’t evolve and cover new situations. There are actually two different paradigms of fair use and we should analyze them separately, even when one case raises both.

What are we looking for? “Supersedes the objects” of the original = not fair use. Two dimensions: internal, expressive objects of the work—what does it do for the person who consumes it? Folsom paradigm. Originally this was internal to substantial similarity, and it still is and should be until we get a better notion of substantial similarity—claim construction/scope/boundary—charting boundary b/t derivative works and things changed enough that they aren’t w/in the scope of © owner’s rights. If there’s enough change, it doesn’t matter if it’s commercial.

Separate set of problems: external, instrumental—Sony paradigm. May be using same thing for same purposes but it can still be ok. What is the © owner justly entitled to and to what extent are you interfering with it? It’s a nuisance analysis. Nonexpressive use and market failure are part of this analysis.

Folsom: Story is clearly just focusing on the idea that, sometimes, infringement is prima facie quite difficult b/c the boundaries aren’t clear. Transformative fair use ought to be limited to this inquiry: have the original expressive purposes/concrete expression used to further those purposes been altered beyond the proper scope of the © owner’s claim? Social value isn’t relevant to Story’s analysis—it’s still the same work with the same expressive purpose. If it is transformative, we don’t care if it’s commercial; if it’s not transformative, we care about social value. Transformativeness should ask whether the content changes serve some expressive purpose distinct from the original or its derivatives and so the resulting work is no longer serviceable as a substitute for original or its derivatives. Orange Prince doesn’t satisfy this standard b/c it’s still a picture of Prince with a lot of artistic meaning added (the artistic contribution has not been removed or effaced) but Leslie Nielsen in the position of Demi Moore does b/c the picture is no longer a picture of Demi Moore. Blanch v. Koons = collage creates a new gestalt; but String of Puppies is just added color.

Warhol is a Folsom case: it’s the same artistic depiction, altering but not transforming its visual impact.

In the Sony paradigm, you don’t have to be transformative. Conflicts b/t instrumental means of using the same work to exploit value. Is the value being exploited properly w/in owner’s use and enjoyment? Would a prohibition merely destroy value w/o helping © owner exploit its own value? GvO is this kind of nuisance dispute—it’s clear that the value they’re exploiting isn’t the value of the expression of the code but the fact that people are locked in to knowing this code. Using factor two allows us to do this.

Warhol: external, instrumental inquiry into use can focus on the specific use being made; you can say that the art world uses are outside the scope of what Goldsmith has the right to expect. What sorts of demand is the author seeking to fulfill? Is the accused use fulfilling that sort of demand?

Search engine cases: the initial copying is not transformative but it’s nonexpressive, which isn’t dispositive but it creates value that doesn’t satisfy demand for original. And the output is a Folsom situation: the output doesn’t use 100% of the original/vastly reduced size or snippets.

[hard to make this labeling move post Warhol, which leans into transformative purpose like the Court’s own use of images and also insists that the inquiry is into use and not work: for the latter, if seeking consistency w/Warhol. perhaps you should also reframe the first part of the inquiry to analyze the use and not the work?

Larger issue: You’ve just made the first inquiry depend on one’s conception of the derivative work right, and if you do the second inquiry in Warhol you also need a concept of the scope of the derivative works right. Relatedly: Annie Liebovitz doesn’t own what Demi Moore looks like and does own the specific expression that Naked Gun 33 1/3 copied, so taking away Moore’s face shouldn’t affect whether the expression was copied.]

Betsy Rosenblatt, Considering the Role of Fairness in Copyright Fair Use

Could we make fair use more fair by considering equity and distributive justice and favor the historically disadvantaged/less privileged in fair use inquiries? Just v. unjust enrichment. Fair use allows less privileged groups to develop skills, support educational equity. The other side: privileged players are more likely to prevail in fair use litigation and courts are more likely to recognize transformative merit of famous or popular user. Litigation is not wealth-neutral. Could allow/permit exploitation. A teenager who sells a fanwork based on a tentpole movie feels different than a movie studio that creates a tentpole movie from her short story. In the latter case, they weren’t deprived of expected income, but it feels like unjust enrichment in the moral sense. © can be conceived of as helping the less privileged. Dilettantes can afford to create w/o ©, but © allows professionalization.

It would be doctrinally permissible to distinguish between relative status and cultural market share, but extremely hard to implement. Economic and sociocultural disadvantage, historical oppression put into the same bucket—they’re very different in every other way but they’re barriers unrelated to inherent ability to create works of authorship.

Complications: we’d have to think about when in someone’s career we’re looking at. Time of alleged (initial) infringement v. time of suit. Look through use and user to the beneficiary. HathiTrust was done by big companies, but on behalf of less privileged users. We also have to look through © owners to look at ultimate beneficiaries of ownership. This might be too hard to implement. But we could include in jury instructions that we could consider these things. Might prevent unnecessary litigation. Might give marginalized creators more ownership (v where they don’t own any rights in an infringing derivative work).

Ruth Okediji: what does the Court’s equal protection jurisprudence have to say about this?

Jacob Victor: kind of a market failure argument! If we are inquiring into ability to pay etc.

Kristelia Garcia: how do you deal with generative AI? Fan fiction in the style of Betsy Rosenblatt: is that a small creator in need of a leg up or a help for another small creator?

A: may depend on who ultimately benefits from the existence of LLMs, which we don’t know the answer to yet. Fans have very mixed opinions about having their works used, especially for attribution and the fact that the works were created in a gift economy; a machine provides neither attribution nor participation in the gift economy.

Lucy Xiaolu Wang (w/ Nathan W. Chan), Is Grass Greener in the Gray Zone? Legalization and Innovation in the Cannabis Market

Most widely used globally, 18% of US population used in 2019, legal market globally estimated at $100 billion by 2026. Medical/adult use legal in 50+ countries; still most widely trafficked and abused illicit drug. US: federally illegal but patented by fed. But we have little evidence for medical treatment.

Documenting trends of R&D in cannabis market, estimate causal effects of legalization, and examine heterogeneity of policy responses/mechanisms.

856 US registered cannabis trials, 559 in US. About 80% are in a single states. Funding: 6% industry, 47% NIH. Looked at treatment of conditions; usage/effects on body and function of cannabis receptors; abuse factors, including risk factors for abuse.

Medical legalization doesn’t appear to have any impact, while US trials increase mildly after adult/recreational use legalization—consistent w/anecdotes on creative use of dispensaries/wider access to more cannabis users for trial recruitment. Not enough medical R&D. More patenting post recreational legalization, but mainly downstream-oriented.

IPSC Opening Plenary Session

 Matthew Sag, Copyright Safety for Generative AI

Not addressing whether training is always fair use in every circumstance; explain how generative AI fits w/in existing law (nonexpressive uses) and identify best practices to make generative AI fairer.

Non expressive uses: reverse engineering, anti-plagiarism, search plus text data mining, snippets. Although Authors Guild didn’t discuss it, that was very much about machine learning—the endgame was more sophisticated analysis using machine learning, not just frequency tables. His theory: rights of © are defined w/r/t communication of original expression to the public. Nonexpressive uses don’t involve human enjoyment of the original expression contained in a work and don’t lead to other humans potentially enjoying that original expression. Thus, nonexpressive uses don’t interfere w/the kind of interest © is designed to protect, which is why they are such strong candidates for fair use.

But is generative AI really the same? Are the outputs copies of the training data? Copying takes place prior to training; converted into tokens and training is a process of adjusting weights in the model, not copying tokens. Info acquired is much more abstract than the training data. The output is a novel synthesis, not just a cut and paste, usually combines abstract latent features learned from training data.

But CS literature on extraction attacks exists: in successful attacks, models may be trained on many duplicates of the same work; images associated with unique text descriptions; ratio of model size to training data is relatively large. Generally the extraction attacks fail; only succeed in edge cases. These are real risks, but rare. More common: The Snoopy problem: text to image models are set up to learn attributes of ©able characters: b/c same text description paired w/relatively simple images that vary only slightly. Not limited to characters; other images repeated w/ minor variations and consistently tagged w/same keywords: Banksy’s girl holding a red balloon.

Implications: too much memorization undermines arguments in favor of fair use. Hard to argue it’s highly transformative if training data come out as output. May also have implications under fourth factor. What to do? Ten suggestions in paper, but key: (1) reasonable measures to deduplicate; (2) reasonable measures in training and deployment to reduce probability of infringement—curate/pre-processing training data; using reinforcement learning through human feedback; installing restrictions on model outputs. (3) reasonable measures to safeguard privacy interests. (4) detailed records of works used and their provenance.

Sonia Katyal, A Trademark Theory of Rebranding

Lots of rebranding out there. Cultural and economic factors (change in what the business does over time, including startup drift and embrace then rejection of crypto). Practices are undertheorized and underregulated. Not transparent/information asymmetry for consumers. Internal contradiction in TM: rebranding could be characterized as contradiction b/t law and marketplace: marketplace gives incentives to rebrand, given lack of legal regulation thereof. A single user can obfuscate its past identity from its present. Source concealment/distortion.

Most common reason: change of ownership or structure, merger, acquisition, sponsorship change, shift from private to public, demerger

Change in corporate strategy—globalization or localization, diversify or divest. Change in competitive position or external environment (attracts the most commentary). TM doctrine assumes marks are chosen for potential for perpetuity. Allows tacking of priority w/continuing commercial impression. Material alteration requires new filing. This rule facilitates information asymmetry that can harm consumers by adding information costs. Distortion: expansion of boundaries by continuing commercial impression (actual TM boundaries). Also identity concealment—Worldcom to MCI; organizational misdescription—renaming, reorganization, shell companies; source obfuscation, where FB rebrands to Meta as distraction; affiliative disinformation—broader rebranding associated w social movements.

TM law should facilitate disclosure or it will fall behind market.

Sheff: What about licensing/merchandising in this system? That deprives consumers of info in the way that you’re talking about; the law used to treat it as a kind of deception but now we all love it.

Sag: Why isn’t this like bankruptcy? Fresh start.

A: good for companies, not so good for consumers.

Alex Roberts, Multi-Level Lies: Distinctive feature is that laypeople are making advertising claims to friends, social media followers, acquaintances, etc. Sellers make money by selling product but also by recruiting others. Exploitative: 99% make no profit/lose money; stuck w/unwanted inventory; exploitative based on false promises of wealth and miracle products—the seller gets free advertising. Not surprising that sellers make false claims—they’re desperate to sell. Lack knowledge/training; rules aren’t intuitive, including risks of sharing true but unrepresentative experience. Nondisparagement clauses, some of which purport to bind family members. Indemnification clauses (likely uncollectable, but still scary). Many contracts—77%--say sellers can only use marketing claims or materials provided by company; 71% say other claims must be pre-approved (that seems contradictory). 57% say sellers could be liable for false etc. claims, but only 24% reference or explain specific rules.

Many actual sellers (convenience sample) make effectiveness claims—80% almost always/half the time; 85% make testimonial claims; 73% make data-based claims (lose 1.8 pounds/week); 86% make positive subjective claims; 78% make business opportunity claims. 59% were aware that laws/rules constrain the claims they make, mostly made aware by training or other reps from company. Did they influence how you advertise? Many people said yes, but many people skipped the respondents—47% said they almost always follow the rules. Many expressed uncertainty that the rules applied to them. 46% said desire to sell outweighed desire to comply; didn’t expect enforcement. 37% said the company didn’t say anything about restrictions on claims or said that there were no restrictions.

Takeaway: companies, not lay sellers, must be held liable for false, misleading, or noncompliant claims disseminated by sellers. FTC and FDA think this already!

More enforcement; more training for MLMs with interactive onboarding/continuing education. Expand social media monitoring.

Contract issues: limiting arbitration and class action waivers would help; classify sellers as employees? Platforms should enforce own TOS against these claims.

Katyal: are the influencer rules different/should this be folded in?

A: biggest difference is that influencers get paid by the seller and MLM sellers don’t. Affiliate marketers get a cut of sales; that’s similar to how MLM works, so it’s pretty easy to see how they fit in, but you don’t really need that piece because FTC has said elsewhere that the companies are liable for claims made by sellers—the case law doesn’t require the endorsement piece to hold the company liable for the claims.

Q: endgame?

A: even with the ones that aren’t snake oil, and many are, there are risks of false income claims that should be guarded against. FTC could go harder against supplement market in general; FTC/FDA should team up more often.

Christopher S. Yoo, Common Carriage and Social Media

Hating on social media is bipartisan. Turning to common carriage analysis. Declare as matter of statutory announcement that they’re common carriers and hope that makes the regulation constitutional, as in Fl and Tex. Can that be right? No. Turner Broad. Sys. v. FCC says that the Court has to assess those judgments. Thomas once said that labeling a regulation a common carrier scheme “has no real First Amendment consequences.”

What about common law? Rationales are almost all debunked but one works.

“Affected with a public interest.” That’s not enough. It’s an empty category. Newspapers were critical for disseminating information, but that doesn’t deprive them of 1A protection for editorial judgments.

“Monopoly power.” That’s historically not been true. The root is not in 17th century English common law, but 20th century laws creating public utilities. Even if that were the case, should it make a difference to the 1A analysis? Not in Tornillo, even though most cities were one-newspaper towns at the time.

“Transportation/communication.” This is a useless category. Lumping things together doesn’t teach anything (Oliver Wendell Holmes). Too general to be helpful. There are tons of communications media that aren’t regarded as common carriers.

“Quid pro quo.” Section 230 as a quid pro quo. But not clear that common carriers are the beneficiaries of 230. Another statute enacted at the same time says “nothing in this section shall be construed to create interactive computer services as common carriers or telecom carriers.” There’s clearly some immunity for entities that aren’t common carriers.

“Holding oneself out as serving the entire public.” It’s an antifraud test, but easily evaded. DC Circuit says that FB, Google, etc. don’t hold themselves out as affording neutral, indiscriminate access and that net neutrality didn’t apply to any services involving editorial judgment.

The real motivation: syllogism, not 1A analysis.

Major premise: old regimes like common carriage must be constitutional.

Minor: new regulations of social media are like common carriage.

Conclusion: new regulations ok.

Major premise is problematic; SCt has never resolved. Precedents uphold access regulation only for media in which one actor exercises physical, not economic, control that social media lack. Invoking common carriage accomplishes nothing/serves as a distraction.

Lemley: What do you do with telephones? We clearly apply that to telephones.

A: dial-a-porn cases can help answer. Both sets of cases say that even a common carrier offering services, you can also offer video over which you exercise complete discretion. You can be a common carrier for only part of your services.

Lemley: but only b/c we put telephony and cable in different buckets. Why not exercise discretion over how and under what circumstances we deliver telephone calls?

A: is the logical implication that there are limits on that? Yes.

Interestingly, neither Fl nor TX bars discrimination in the ordinary sense—deplatforming and shadowbanning are not the same things. Not a true common carrier regulation.

Chris Newman: nondiscrimination in common carriage is about passage, not behavior on the vehicle/harassing other passengers.

A: agreed. The author of the 5th Circuit opinion said we reject constitutional challenges to nondiscrimination laws, but that’s about economic discrimination, not speech discrimination. That’s handwaving.

Nicholson Price, Empirical Studies of Medical AI Patents (w/ Mateo Aboy & Seth Raker)

Applications are up even after Bilski, etc. Grant rates dipped but then went back up. 3 of top 5 patent applicants are the 3 biggest MRI makers. Disclosure is only ok; universities do better. Predictions to contrary underestimated the cleverness of patent lawyers. We’ll get lots of patents anyway; people figure out ways over around and through doctrinal barriers.

IPSC Breakout Session 4: IP, AI, & Data

Resolving Online Content Infringement Disputes with the Use of AI Technology

Faye Wang

European perspective: Corporations manage notice and takedown, but should a government authority be involved? Large platforms use voluntary automated filtering/content moderation to minimize legal risk. Previous EU legislation was tech-neutral and did not impose a general monitoring obligation. New © Directive does require prevention of future uploads, apparent contradiction of prohibition on general monitoring. Poland challenged; CJEU dismissed challenge; new guidance from 2021: Art. 17 should not be transposed in a way that leads to a general monitoring obligation, but the guidance does not explain how this is supposed to be done if they are also supposed to use automated systems and prevent future uploads. CJEU then held that refraining from putting into place appropriate automate monitoring/filter systems was a factor in whether they communicated to the public. But there is also a proposed AI Act that requires intervention of a human person, requiring assessment of AI before adopted so that they won’t cause harm.

Remaining questions: can AI assisted content recognition/moderation accurately monitor or determine infringement without human intervention? Her conclusion: no. Misrecognition of audio and video may occur. And tech has limited ability to understand context of fair use/fair dealing.

Possible solutions to reduce cost/human hours: AI assistance should be designed to provide better understanding of appropriate context. AI can do preliminary recognition. Then:  Automated computing investigatation process (not AI). Expert manual review for notice and takedown. If failed, online dispute resolution/court litigation.

Good for finding substantial part, but not appropriate for shorter excerpts. In marginal cases, human needs to be involved in reviewing, but they need to be properly trained to identify commentary.

Appropriation of Data-driven Persona

Zahra Takhshid

Should extend privacy to cover data about us. Background in the four torts: use the appropriation tort: one who appropriates to his own use or benefit the name or likeness of another is subject to liability to the other for invasion of his privacy. Expanded to other characteristics such as voice, surroundings/lookalikes (White v. Samsung).

Data privacy as the new frontier. May help address TransUnion case: finding a concrete injury rooted in the common law. What type of data? PII, treated as a standard and not a rule/contextually. Commerciality requirement? Quotes SD Fla: “the mere act of misappropriating the p’s identity may be sufficient evidence of commercial value to survive even a motion for summary judgment.” Consent: we’re transferring our rights all the time by contract. But scope can be challenged.

Q: CCPA—is there a need for this in California with its comprehensive regulation?

A: Yes, because we continue to rely on common law privacy torts.

RT: Thinking about Dobbs and the focus on private benefit in proposals like yours: is this supposed to be a right against the government? If so, the regulatory state is under threat in ways you might like for Dobbs but not so much for taxes. If not, whether categorically or because the government’s interests essentially always count as substantial enough to override the privacy right, that’s a reconfiguration that speaks to a profound change in the relationship of privacy to protecting the individual versus protecting the individual against non-government actors, which concerns me deeply. If you don’t change contract law, you may not have bought much with this reconfiguration either.

A: Should be against anybody including the government. [Then I reiterate my concerns about the regulatory state: how should we handle the gov’t’s interest? Balancing isn’t part of the tort, though it comes in for First Amendment-inflected defenses. Does the gov’t have to show justification? Why won’t it always win?]

Q: we consent all the time. How does that work in your model?

A: we need to help the common law grow and not die.

Jennifer Rothman: May want to spend time defining what you mean by privacy to deal with the gov’t q. If your project is just about the private law appropriation tort, that can be made clear. [Can it be asserted against the gov’t?] The real challenge is the First Amendment. Her own position is that ROP can protect privacy in the way you’re proposing, but the First Amendment has to be considered: how much we can tolerate this protection as against speech interest in public data. Need to engage that. Not convinced that you need a commerciality restriction; the common law tort doesn’t have that. [I think that the gov’t’s interest in collecting taxes is not a First Amendment interest; perhaps one can take the position that you aren’t entitled to not pay taxes so that doesn’t count as an “advantage” appropriated by the government, but that formulation strikes me as extra manipulable—and especially since data such as “what I bought from Amazon” are co-created with Amazon, I wonder if you’re entitled to that data as against Amazon under the same logic.]

Zahr Said: Have you developed a theory of abuse of the right? Copyright trolling, TM trolling, what would systematic abuse of this right look like? Sometimes that can help you build in limitations/appropriate scope of the rights.

The Right of Publicity: A New Framework for Regulating Facial Recognition

Jason Schultz

Sociotechnical change and the ROP: moving away from privacy framing, even though FR does have real problems of surveillance and discrimination. Think about when new tech comes along with ability to mass appropriate identities: law evolves, especially w/r/t visual image and identity, going up to videogames and films where people’s identities are reconstituted after death.

Visual identity is central to the existing case law, so there’s no innovation required in subject matter. Setting gov’t and university research aside, there is also clear commercial benefit, e.g., Clearview. Clearview also scraped and didn’t get consent; consent can also be very contextual, as the No Doubt/Activision case indicates.

What are the damages from being used in AI? Commercial value = damage; control; dignity.

Questions about copyright preemption: the distinction is balancing with innovation policy; you don’t have that in ROP cases because the ROP doesn’t care about innovation. Zacchini might be wrong, but if you take all of someone’s identity that’s too much for First Amendment purposes. Baseball stats cases=you aren’t taking everything about the person; taking the image goes too far.

Q: Universities have ethical rules about human subjects; would you change the framing under which they’d go about research?

A: could distinguish university research b/c it’s not products and services. Under Common Rule, publicly available info is ok, so ethical rules don’t restrain anything there. But the consent questions are real.

RT: (1) Universities benefit from research. If you stick with the common law, universities are 100% covered. You can say either universities shouldn’t be able to do this or that there should be a limit for this type of claim, but you need to say something. (2) It’s not persuasive to say that the ROP is better because it doesn’t engage in balancing with innovation policy. [I.e., that it ignores important social concerns.] Copyright didn’t always balance with tech innovation policy; it did so when it started to have big conflicts with it. If this is a common law right, you need to explain why it shouldn’t adapt to new conflicts by balancing.

Rothman: need to develop a bit further the “why.” You’re trying to avoid that by saying you’re just dealing w/commercial appropriation, but the traditional tort is broader; even if it was limited to commerciality you still need a normative justification for these claims, not least b/c you need to do so to figure out the First Amendment analysis. You can likely make out a prima facie case; the harder part is the 1A. Is the advantage/benefit coming from an individual’s identity or from the corpus? That’s a different type of use in the prototypical celebrity or even ordinary person in an ad. That gets to the why of the claim.

A: focusing on dignity and control in the paper. Argument is that the individuals matter because each individual makes the dataset better.

Q: I’m irritated about lots of things corporations do: a traditional phone book can expose information. Why this?

A: Individual rights focus: some people can object even if others don’t. How do you distinguish between “too much” appropriation and fragmented unprotectable data, which is why he’s thinking about the sports cases. There’s something about the image that makes the courts confident there’s a tort there, making it too much. [That ignores a bunch of the news reporting cases, but newsworthiness might be the distinction there.]

AI as Inventor in the Cambridge Handbook of Artificial Intelligence

Chris Mammen

Fed Cir unambiguously concluded that inventors must be human; UKIPO, EIPO have agreed, but the conversation is not done globally/at the marginal cases. One success in South Africa for an AI inventor, but there’s no statutory definition of inventor there and there is no substantive examination of patents, so TBD if/when litigated.

Humanists on one side, industrial policy advocates on the other: both can claim some justification in past statements about patent policy. Practical reality: AI is lab equipment; assisting a human researcher. Sometimes lab assistants get named on a patent but sometimes not. Not just a formal Q of whether the statute requires a human, but the act of invention itself: requires conception, which requires a theory of mind; diligence, which requires a theory of work; and reduction to practice, which requires ability to build the invention or write the patent application. We wave our hands about all of those but we need to address each one for the “AI inventor.”

UK decision is under review: primary holding says an inventor has to be a human. But UK application has some formalities that narrowed the Q. (1) requirement to list inventor to best of applicant’s knowledge. There may be room to say “I don’t know, but I have a right to apply for this patent.” Consider accession doctrines as well.

In response to Q: If we’re going to have a rights regime for AI, we also need a responsibility regime. We’re a long way from the point where I can depose an AI about its claim of inventorship.

Dastar bars some claims about "patented" statements but related superiority statements are still at issue

BPI Sports, LLC v. ThermoLife Int’l, LLC, 2021 WL 4972975, No. 19-60505-CIV-SMITH (S.D. Fla. Jul. 27, 2021)

BPI sued ThermoLife for violations of the Lanham Act, 15 U.S.C. § 1125(a), common law unfair competition, and false patent marking. ThermoLife’s Muscle Beach Nutrition CRTN-3 says, on the label and on its website, (1) that CRTN-3 is a “first-time fusion of Creatine Nitrate, Creatine HCl, and Creatine Monohydrate”; (2) that CRTN-3 has a “Hyper Infused Creatine Matrix”; (3) that CRTN-3 has a “Hydro-GO electrolyte matrix”; (4) that CRTN-3 has “THREE OF THE MOST EFFECTIVE FORMS OF CREATINE IN ONE CUTTING-EDGE FORMULA”; and (5) that CRTN-3 will “INCREASE VASODILATION.” ThermoLife’s website also advertises its “Patented Nitrate Technology.” (DE 178-3.) ThermoLife claims to hold “19 Nitrate Related Patents,” “More Than 450 Valid Claims,” and “Patent Coverage in 26 Countries.” It states:

If you are interested in making a dietary supplement with nitrates in it there is a very good chance your intended use or composition is covered by one or more of the 450 valid claims in our patent portfolio, so make sure to speak with us about a license. We are the only legitimate source for patented and licensed amino acid nitrates.

It requires licensees to use its NO3-T logo on products containing ingredients or technology purportedly protected by any one or more of ThermoLife’s patents. Between 2015-2019, its website identified 14 patents as “protect[ed]” by the logo, though in 2019 it modified the site to include a table purporting to demonstrate which of ThermoLife’s patents were practiced by ThermoLife’s licensees. One of the patents was reexamined in a way that did not favor ThermoLife.

ThermoLife argued that BPI didn’t show materiality. But a factfinder could conclude that “the challenged advertising statements are material in that the statements involve inherent qualities or characteristics of the CRTN-3 product that could influence a consumer’s decision to purchase the product.” Each of the five targeted statements “plainly relate to the quality or describe a characteristic of the CRTN-3 product as a dietary supplement,” whether to ingredient quality/characteristics or to purported performance benefits:

The quality of ingredients that compose a dietary supplement directly correlates to the nutritional and/or performance benefits that derive from consuming the product. While most consumers could care less about the chemical composition of glue, it is possible that a consumer who purchases a dietary or nutritional supplement with a desire to “push harder, get stronger, recover quicker, and reach [his or her goals] faster” could be so scrupulous as to care about the quality of ingredients contained within and the performance results advertised to derive from the product that he or she ingests.

Injury: likewise a factual issue. BPI’s CEO’s declaration stated that it suffered a decline in sales of its creatine products because of the introduction of products containing creatine nitrate, which compromised its ability to fairly compete in the market with its traditional creatine-based product. This evidence of lost market share was sufficient to get to a factfinder.

Falsity: Some (“expert” or other) evidence of misleadingness would be required, but the plaintiff could still argue that the ads were misleading even though it didn’t produce market research or a consumer survey; it did produce declarations stating that the ads created a false impression in the marketplace that creatine nitrate was a new, superior form of creatine. And BPI’s expert offered opinions that the five challenged statements were literally false (and misleading and unsubstantiated).

What about statements about the scope of patents? ThermoLife relied on Baden Sports, Inc. v. Molten USA, Inc., 556 F.3d 1300 (Fed. Cir. 2009) and Robert Bosch LLC v. Pylon Mfg. Corp., 632 F. Supp. 2d 362 (D. Del. 2009), to argue that they weren’t covered by the Lanham Act. Baden relied on Dastar to hold that “authorship, like licensing status, is not a nature, characteristic, or quality, as those terms are used in [the Lanham Act].” BPI didn’t successfully distinguish the cases, though the statements about proprietary rights to and licensing requirements for creatine nitrate could be used in support of the remaining claims, where applicable.

False marking: The court previously concluded that ThermoLife didn’t have patent rights in the composition of matter “creatine nitrate” under one of the cited patents. As for intent to deceive, it could be inferred from circumstantial evidence: Notwithstanding the fact that the USPTO rejected ThermoLife’s claim for creatine nitrate, a decision that was affirmed by the PTAB and the Federal Circuit Court of Appeals, it continued to assert propriety rights to creatine nitrate on its websites, and issued a press release entitled “ThermoLife To Be Announced Additional Patent Claims on Creatine Nitrate By The USPTO, Effectively Monopolizing The Use of Creatine Nitrate in Dietary Supplements.” For damages, BPI argued that the false marking prevented it from entering the creatine nitrate market itself and caused decreased sales of its own creatine-based products. This was enough to create a genuine issue of material fact.

press release in supplement battle could be false advertising

ThermoLife Int’l LLC v. NeoGenis Labs Inc., 2020 WL 6395442, No. CV-18-02980-PHX-DWL (D. Ariz. Nov. 2, 2020)

Plaintiff/counterdefendant ThermoLife and defendant/counterplaintiff HumanN both hold patents related to the use of nitrate technology for supplements. ThermoLife alleged that HumanN engaged in false advertising and false marking by, among other things, marking three of its nitrate-related products with inapplicable patent numbers. HumanN’s counterclaims were based in part on a previous, unsuccessful lawsuit that ThermoLife filed against HumanN, in part on a press release that ThermoLife’s principal Kramer issued after this lawsuit was filed, and in part on ThermoLife’s alleged interference with HumanN’s business relationship with Amazon.com.

This decision deals with ThermoLife’s motion to dismiss the counterclaims.

The prior litigation was stayed when the PTO instituted proceedings to reexamine the ThermoLife patent asserted in the suit. During reexamination, Kramer allegedly sent a letter to HumanN to “open a dialogue for possible resolution” of the litigation. He “threatened to bring a false advertising suit” and another infringement suit based on two additional patents if “HumanN did not...negotiate a deal.” Kramer and ThermoLife allegedly “promise[d] to stifle competition for HumanN if HumanN agree[d] to a sub-license, and alternatively threatened to drive HumanN out of business entirely if it [did] not.” ThermoLife voluntarily dismissed the infringement suit, but allegedly continued to demand that HumanN pay licensing fees despite HumanN’s contention that it didn’t practice the patent.

ThermoLife also told Amazon that HumanN’s products infringed another of ThermoLife’s patents, as a result of which Amazon took down some of HumanN’s product listings. This allegedly caused HumanN to expend “significant efforts to restore its product pages,” rendered HumanN “unable to sell three of its top selling products on Amazon” for one month, and diminished HumanN’s seller ranking.

ThermoLife ultimately sued again, and issued a press release entitled “ThermoLife Serves HumanN A Beet Down For Selling Falsely Advertised And Misbranded Products Including SuperBeets, BeetElite, And Neo40.”  

The Sherman Act attempted monopolization counterclaim was dismissed because of failure to sufficiently define the relevant market, albeit with leave to amend.

Lanham Act false advertising: This was based on the “Beet Down” press release, which disclosed that ThermoLife had filed this action and described ThermoLife’s basis for doing so.

ThermoLife argued that because the press release simply repeated the allegations contained in its complaint in this action, while prefacing each set of allegations with the phrase “has alleged,” the press release was truthful. Not so. The headline was not qualified and affirmatively stated that HumanN “sell[s] falsely advertised and misbranded products.” “Resolving all reasonable inferences in favor of the non-movant, this is a statement of fact.” Also, a quotation from Kramer included an assertion that “HumanN relies on false representation after false representation to deceive consumers into purchasing HumanN’s products.” This was also plausibly a statement of fact rather than a statement of opinion.

Arizona’s state-law litigation privilege also didn’t bar HumanN’s Lanham Act claim. And the press release wasn’t protected by Noerr-Pennington immunity. It accused HumanN of falsely marking HumanN’s products with patents the products do not practice; it didn’t mention ThermoLife’s patents except for in Kramer’s quote, “ThermoLife holds the patents for the technology in HumanN’s products, not HumanN.” But that seemed to be about ThermoLife’s earlier contention that “contrary to HumanN’s false advertising, none of [the] patents that HumanN licenses and falsely marks on its products protect ‘patented Nitric Oxide technology.’ ” ThermoLife couldn’t claim Noerr-Pennington immunity for asserting its patent rights “in a press release about a lawsuit that has nothing to do with enforcement of its patents.”

The substantive analysis was the same for Arizona unfair competition and trade libel claims, but the court had to analyze Arizona’s litigation privilege. At this stage, ThermoLife hadn’t shown that it was entitled to a qualified privilege. Although the general rule is that “[a]nyone may describe what transpired at a public proceeding so long as the publisher provides a fair and accurate rendition...[o]ne exception to this wide application is the speaker who by design uses the privilege to republish defamation he previously made during the public proceeding.” This was because “[t]he privilege does not sanction self-serving re-publication.” That was exactly the scenario alleged here. Arizona also holds that a speaker can forfeit its entitlement to the qualified privilege via “abuse of that privilege,” such as by “excessive publication...to an unprivileged recipient not reasonably necessary to protect the interest upon which the privilege is grounded.” Given the posture, it was vital that “whether the occasion for the privilege was abused is a question of fact for the jury.”

Tortious interference with relations with Amazon: Federal patent law preempts state tort law where the state tort is based on “conduct that is protected or governed by federal patent law.” Thus, “patentees do not violate the rules of fair competition by making accurate representations, and are allowed to make representations that turn out to be inaccurate provided they make them in good faith.” HumanN didn’t sufficiently allege that plaintiffs acted in bad faith when they told Amazon that HumanN’s products infringed. “HumanN has not identified any authority suggesting that a judicial determination of infringement is a prerequisite to notifying a potential infringer (or a third party) of infringement.” And, while HumanN alleged specific facts suggesting that ThermoLife was aware that HumanN’s product didn’t infringe the initially asserted patent yet chose to file suit anyway, it didn’t provide any comparable allegations concerning the report to Amazon, which involved different patents.

Arizona also has a Patent Troll Prevention Act (PTPA), which prohibits “an assertion of patent infringement in bad faith.” The statute expressly exempts civil actions “that include[ ] a demand or assertion of patent infringement.” But HumanN sufficiently alleged that ThermoLife “threaten[ed] HumanN with sham litigation, even after [ThermoLife] dismissed its sham infringement suit.” As for bad faith, ThermoLife argued that the challenged communications contained “a detailed infringement analysis” and that there is “no dispute” that it provided information set out in the PTPA as relevant to the bad faith analysis: the patent number, contact information of the patent owner or assignee, infringement facts, and an explanation of standing. But on a motion to dismiss HumanN plausibly alleged bad faith. HumanN alleged that ThermoLife’s infringement analysis was unsupported, contradictory, and without merit and that, after ThermoLife dismissed its infringement suit, ThermoLife still “insisted” that HumanN grant a $1 per unit licensing fee and pay $1 million in “back damages” within 10 days. Those could plausibly show bad faith, and providing the information listed in the statute isn’t automatically sufficient to defeat a PTPA claim. The statute made clear that the factors are “nonexclusive”—a court may consider “[a]ny other factor that the court determines to be relevant.”

The court found it unnecessary to resolve whether federal law preempted the PTPA because ThermoLife raised the issue only in passing in a footnote.

statements to 3 of 15 market participants weren't "commercial advertising or promotion"

Globe Cotyarn Pvt. Ltd. v. Next Creations Holdings LLC, No. 18 Civ. 04208 (ER), 2020 WL 4586892 (S.D.N.Y. Aug. 10, 2020) 

Globe, a fabric manufacturer, sued a fabric patent holder, AAVN, and its subsidiary, Next Creations, for allegedly falsely telling certain of Globe’s potential customers that Globe sold infringing products. Globe alleges Lanham Act false advertising and tortious interference and unfair competition under New York law. The court dismissed the amended complaint. 

Background: AAVN previously filed an ITC complaint against certain imported textiles. An (unrelated) respondent defended on the basis that its allegedly infringing product had been on sale before AAVN even received the relevant patent. The parties settled, but Globe alleged that in filing the ITC complaint AAVN had determined that the prior art product practiced claims of one patent, and also was within certain claims of other patents. Another company petitioned the PTO for review of three AAVN patents as invalidated by prior art; as to two of them, the PTAB found that “more likely than not that [the challenger] will prevail in showing that at least one of the challenged claims in each of the patents is unpatentable” (it didn’t rule on the third, which was challenged separately). The parties settled. 

Globe argued that defendants contacted a number of Globe’s customers and falsely accused Globe of selling infringing materials. Globe identified three importers, but contends on “information and belief” that defendants also spoke to the buyers of certain retailers who, in turn, relayed the message to other importers. For example, Next Creations’ CFO wrote to one importer: “I am reaching out to you today in regard to product your company sells to retailers throughout the United States that infringe upon AAVN’s CVC Patent. Your company is not authorized to sell this CVC product.” He wrote a similar letter to another, and the named inventor/alleged owner/officer of defendants, told another importer that it should not purchase CVC bed sheets from Globe because the sale of those products in the U.S. would infringe AAVN’s patent. Globe alleged that he also told buyers for five retailers the same thing.

Globe alleged that these five retailers, along with another, sell the “vast majority of CVC bed sheets” in the United States, and that the buyers informed importers of CVC bed sheets what defendants told them. According to Globe,“[o]ver half of the 15 to 25 companies who import CVC bed sheets into the United States for sale” sell or have sold CVC bed sheets to the five stores the buyers represent.

Lanham Act claims: Commercial advertising or promotion was a barrier. Globe still didn’t show that the messages were sufficiently disseminated to the relevant purchasing public. As the Second Circuit has held, a business “harmed by isolated disparaging statements do[es] not have redress under the Lanham Act” and should instead “seek redress under state-law causes of action.” Prior cases have held that, for example, “[d]issemination of a statement to one customer out of 36 simply does not meet [the necessary] standard,” and that “six statements, most directed at a single individual,” were not sufficiently disseminated to qualify as commercial advertising or promotion, “[e]ven if the relevant market, jewelry retailers, is in fact ... smaller than that for [previous Second Circuit precedent].” 

Though the allegations here were broader than that, they insufficiently alleged that defendants’ actions “were part of an organized campaign to penetrate the market.” Globe alleged specific communications to three importers, but the court declined to consider other allegations “on information and belief” withouth a further “statement of the facts upon which the belief is founded.” Statements relating to communications to buyers didn’t appear to be based on more than “conjecture and speculation.” With only communications to three of the “15 to 25” importers, “apparently made in private over a 10-month period,” the facts didn’t reasonably suggest “the contested representations [were] part of an organized campaign to penetrate the relevant market.” Instead, they appeared to be “isolated events, for which Globe should seek redress under state law, rather than the Lanham Act.” Out-of-circuit precedent was not to the contrary; compared to other cases, the three targeted importers didn’t allegedly “represent an outsized share of the relevant market.” 

Bad faith: both Lanham Act and state law claims required a showing of bad faith to avoid patent law preemption. “Bad faith is determined on a ‘case by case basis,’ but the Federal Circuit has held that if a patentholder knows that its ‘patent is invalid, unenforceable, or not infringed, yet represents to the marketplace that a competitor is infringing the patent, a clear case of bad faith representations is made out.’” Bad faith has both objective and subjective elements: that “no reasonable litigant could realistically expect to prevail in a dispute over infringement of the patent” and that the “lack of objective foundation for the claim was either known or so obvious that it should have been known.” 

Globe failed to allege objective baselessness.  It suggested that, having done analysis to show that the product at issue in the ITC proceedings practiced its patents and been through part of a PTAB proceeding, defendants now knew that these patents were invalidated by prior art. But the complaint didn’t sufficiently allege that all claims of the AAVN patents were invalidated by prior art, which matters because “statements that Globe products infringed its patents could not have been made in bad faith if only some portion of its patents were invalid.” [I’m not sure this is always true but it might require additional facts about the claimed infringement.] 

Tortious interference: without sufficient evidence of bad faith/falsity or misleadingness, this also failed.

IPSC plenary

Tonya Evans, CryptoKitties, Cryptography, and Copyright

Nonfungible digital creativity, enabled by the ERC 721 standard on the Ethereum blockchain: verifiable, indestructible digital scarcity.  NFTs overcome failures of existing digital structure for creators by providing for ownership, provenance, chain of title.  The inability to distinguish master from copies currently harms demand/value.  Creator can participate in secondary market, unlike current first sale situation.  Can prevent forgery/theft unless the owner’s private key is compromised or lost.  Securely distinct asset from a reproduction.

Sprigman: as I view the CryptoKitty, it’s just pixels on the screen. Why can’t I just copy it? If it’s valuable, it’s the picture they care about. Blockchain is valuable as a speculation market, like tulips. The only difference here is you don’t get the tulip. That’s interesting, but does this new thing prevent piracy?

A: On the NFT side of things, where you look for provenance/uniqueness. If you just want the copy, it might not matter. But blockchain can establish a record of ownership, assisting in enforcement.

Sheff: proper analogy then seems like fine art market. Scarcity is useful to increase prices. W/r/t a digital image you can have anyway, which can be disaggregated from the blockchain record, you’re just creating scarcity for its own sake/conspicuous/wasteful consumption.

A: wholly digital from the beginning; not a representation but the thing itself.

Q: what’s the benefit of doing it this way?

A: decentralization; censorship-resistant.

Deepa Varadarajan and Joseph Fishman, Similar Secrets

Normative case for necessary similarity b/t secrets given that employees can’t wipe their minds between jobs. ©’s similarity framework makes some useful analytical moves. Like © but not patent, trade secret scope isn’t defined ex ante by written claims.  Trade secrets are easy to obtain on the front end, leaving the difficult scope work to be done on the infringement end.  (1) In terms of what courts should be looking at, focus should be end that the D is actually exploiting, not R&D along the way; (2) only material contributions should be actionable; (3) only reasonably foreseeable uses should be actionable. Shouldn’t affect core markets, but greater room for cumulative innovation in a world of mobile talent.

Our focus is use based misappropriation, not improper acquisition. Restatement says derivation must be substantial, but very few courts explain how to do this. A number of cases essentially ignore this in favor of a P-friendly conception of use in which any aspect of any reliance on the secret in R&D is enough. Courts don’t ask whether what was copied was the stuff that made the trade secret protectable to begin with.

Ds shouldn’t need to repeat known failures in their R&D.  Courts should look for a material contribution from the P’s secret—not just some benefit. Requires normative evaluation of whether the information D exploited was important to making the secret protectable in the first place. Contrast © which says copying isn’t enough; copying has to be significant/of protectable elements. Today’s Ps can prevail even if they aren’t competing with D; we think that competition in a relevant market should be required. Proximate cause for unforeseen benefits instead of unforeseen harms.

Q: similarity to © isn’t a good thing b/c of lack of ex ante definition problems. Why not use obviousness instead?  We know how to worry about hindsight bias in patent better than in ©. Here’s what you knew, here’s what you had reason to try/look for.

A: not all trade secret eligible info is patentable. Very different definition of trade secret would be required.

Lemley: the things you’re drawing from © are not from substantial similarity; they’re from fair use. Foreseeability etc. You are really saying trade secret should allow some productive use/fair use. Might be harder to read that view into the statutory term “use” though.

A: current actual copying requirement looks like an actual copying Q in © shorn of the improper appropriation next step.  Whether it’s substantial similarity or fair use, that’s b/c substantial similarity has grown to encompass so much more than it once did. The Q is still: are the two products/activities similar enough to be liable.

Lemley: but you’ve moved from intermediate copy to final copy, and the way we do that in © is fair use.

A: doesn’t think script/screenplay cases work that way [software cases do, Lemley notes w/o disagreement]. [Script/screenplay cases are weird and probably also affected by lingering questions not worth resolving about what constitutes a “work” and how many different works are involved when you have multiple drafts.]

Kristelia Garcia (and Justin McCrary), Reconceptualizing Copyright’s Term

Nielsen soundscan data for music. Will suggest extrapolation to other commercial info goods like books and movies, not to fine art. Findings best fit the average work—some of the potential suggestions may overprotect some works and underprotect superstar works. Random date-stratified sample of 1200 albums released b/t 2008 and 2017, proportional to genres, w/physical and digital album sales/streaming.  Then looked at all songs w/in random sample of 120 albums.

Unsurprisingly but dramatically, lose 1/3 of sales volume w/in 2 months, ½ by 6 months, by less than one year out 10% of initial volume. Songs decay more slowly. Album sales drop to almost zero after less than a year, but songs have a somewhat longer commercial life though nowhere near as long as current term.

Streaming: analysis is more limited b/c data are limited; main streaming services didn’t make data available until much later. 2016-2017 subset, sample size too small for statistical significance—streaming results in far higher volume. Ave. streaming volumes drop less rapidly than sales, as you’d think intuitively.

For typical music production, rapid dropoff for sales.  Later will look at genres and differences b/t blockbusters and others.

Implications: shorter term? All info goods engage in windowing—single first, then album exclusive to one service; similar in film (theaters, streaming, TV) and books. All of them go quite quickly relative to the term. Also consistent w/winner take all phenomena.  Albums are quickly hits or not, like movies and books. Also consistent w/network effects.

Maybe duration isn’t that important either way.  Perhaps this is useful for countries still on the fence about Berne/duration. This might tell them that extension isn’t efficient. Even adopts support for use it or lose it standard a la Posner & Landes. Could also try other things like reversion to the author [or limits on remedies].

Rothman: the spike is probably related to ad campaigns—can you look at that for blockbusters?  Could you argue that precipitous dropoff means that you need a really long term to recoup/make a living? Landes & Posner argued about distribution rights & commercial difficulties/investment—but streaming doesn’t have an additional cost, so far-out sales/revenue are opportunities for artists to benefit many years later.

A: Germany has something like this on the book side; if use it or lose it considered availability on iTunes, then that’s easy/costless. We’d need some sort of marketing standard to get some transfer back to authors.

Q: effect of illegal copies?

A: usually available through entire window and even before—so it’s hard to say but would buy an argument that this mattered.

Sprigman: §115 licensing/Harry Fox—given the dropoff, Harry Fox issues affiliate licenses on match, then processes, then pays out in arrears. So this may have implications beyond term.

Q: Streaming curve looks like a survival regression, with an uptick in song streaming at the end—the stuff that persists and remains listenable/popular with everything else fallen away.  [How much does the algorithm affect this?  If it surfaces the same relatively unpopular songs for every listener w/in a group, that might matter v. if it randomizes w/in a group of equally unpopular similar songs.]

Rachel Sachs, Regulating Intermediate Technologies

Health care tech where we want to incentivize improvement of existing tech but we’ve set up the system wrong. E.g., microbiome; pharma manufacturing (not much has changed over the past 50 years, even though new drugs are being created—still using batch manufacturing instead of continuous, for example, even though that could reduce cost by up to 50% and even though batch mfg can lead to delays/shortages); genetic testing. If we overregulate microbiome based therapies (which are unpatentable but require FDA approval b/c treated like drugs) then we might not get the end stage technology and never know what we’ve lost.  FDA knows its own regulations lock old manufacturing in place, and even though companies can obtain patents on mfg tech, the difficulty of enforcement is a disincentive.  Why did Myriad go differently, where the test for breast cancer associated genes has become a lot better in specificity?  B/c in the early days it wasn’t regulated.

Need to discuss how patent doctrines/sequential innovation literature interacts w/regulation from FDA.  Designing best practices: public investment in platform tech, calibrating regulation by stage at which the research is, calibrating health insurer reimbursement by stage. Procedurally, greater executive branch coordination and engagement w/regulated industry as well as public.

We’ve hamstrung insurers from calibrating reimbursement based on evidence of efficacy in groups/subgroups.

Can you patent the Barbra Streisand effect?

Lawyer sues EFF over its stupid patent of the month award.

"original" and "first" are mere puffery

Bern Unlimited, Inc. v. Burton Corp., No. 11-12278, 2014 WL 2649006 (D. Mass. June 12, 2014)

Bern sued six of its competitors in the market for sports helmets, alleging trade dress infringement.  Answering Bern’s third amended complaint, defendants asserted false advertising counterclaims, which the court struck in part.

First, defendants alleged that Bern falsely advertised that its helmets were the “first visor helmet offering a protective visor cover in the front.” The court found this, and claims that the helmets were the “original” and the “first functional visor lid” to be puffery. They were not specific and measurable, and thus not actionable.  (No Dastar analysis required, then.)

Second, defendants alleged that Bern falsely advertised that its helmets were covered by a patent, implying that its competitors’ helmets were imitations.  Bern argued that there could be no falsity because the patent in fact issued and was presumed valid.  But the presumption can be overcome by showing objective and subjective bad faith.  What counts as bad faith is determined on a case by case basis; if the patentee knows of invalidity but represents that a competitor is infringing, that’s clearly bad faith.

The counterclaims alleged that Bern advertised and sold the helmet more than a year before the applicant applied for the patent, triggering the old on sale bar.  If the counterclaims were true, Bern’s statements that the patent covered the helmet were made in bad faith because it couldn’t reasonably have believed that the patent was valid.

Bern argued that statements could only be actionable if they directly referred to a competitor or its products, and that it didn’t explicitly claim that the defendants were infringing its patent.  But the counterclaims alleged that Bern characterized competing helmets as imitations, and did so in the same marketing materials that included references to the patent.  One ad included, on the same page, both a reproduction of the first page of the patent and the statement, “Every single brand in the market now has a brim, but your customer wants the original!”  While the argument that these statements in combination would reasonably cause consumers to believe that competing helmets were infringing was “thin, at best,” the allegations were sufficient to state a claim.

Bern also argued that defendants didn’t allege proximate cause, as required by Lexmark.  But Lexmark’s requirement of injury flowing directly from advertising is satisfied when “deception of consumers causes them to withhold trade from the [claimant].” The counterclaims properly alleged that scenario.

The court also rejected Bern’s argument that the counterclaims were added too late.  Defendants argued that they didn’t know until they received Bern’s document disclosure that Bern knew the patent was invalid from its inception, thus completing their counterclaim with the requisite bad faith.  The court had “doubts” about the timing and purpose of the counterclaims, but still declined to strike them on grounds of undue delay.  There would be some prejudice to Bern, because Bern would be entitled to discovery on deception and materiality (even though literal falsity creates a presumption of deception, that can be rebutted, and materiality has to be shown independently; thus discovery would be appropriate).  But that prejudice was not enough to overcome the interest in adjudicating related claims together; much relevant discovery was already completed, and it would be a waste to separate the claims.