Mary-Anne Williams, Community based Invention
A car can become a useless asset, sitting in a garage when you’re away. Community-based invention/social product development offers alternatives to IP. Described a business model where people can collaborate on an ad hoc basis to solve problems, describe proposed solutions, offer special features of the proposed product, etc. Strong sense of gamification: winners and losers. Sell the product to those interested in developing it; people involved tend to become advocates for the product, like it more.
Quirky Inc.: 70,000 users, 40% in the US. Over 70 products in one year. Claim to have made a fair bit of money. ToS: as soon as you submit an idea it’s theirs, but if they don’t pick it for development you get it back. Own info about you as well.
Works because of the costs of R&D/startup for a lone inventor taking a product to market.
Kevin Collins: what do they do to screen for IP infringements?
A: User is contractually liable for any infringement, even though Quirky owns any resulting IP/patent. (User may not have very deep pockets, though. Perhaps Quirky is staying away from software and other conventional lawsuit bait.)
Christopher Newman, Divisibility, Ownership, and the Exclusive Copyright License
An assignment is a transfer to someone else of one’s entire title in a piece of property; I relinquish my presumptive role as decider/retain no legal interest (may have reversionary/beneficial interest if I contracted for royalties). A license is a grant of some privileges, giving away the grantor’s right to exclude the licensee, but the grantor retains other rights of ownership. But: Patent lawyer will tell you there’s a difference between an assignment and an exclusive license.
Copyright treatise, 1917: an exclusive license is merely a leave to do a thing and a contract by the licensor not to permit anyone else to do it. Perhaps an obligation to sue 3d parties on your behalf to protect exclusivity. Implication: licensee has no standing to sue in its own name for infringement because it had no property right. Traditionally, licensee was allowed standing if licensor was joined, which was available involuntarily if uncooperative or absent; this was a pain and led to some procedural jockeying, but was clearly understood. Also 1917: a license is personal and not transferrable, whereas an assignement is. Licensees can’t sublicense unless authorized to do so by licensor.
Now, the 1976 Act muddies the waters. Transfer of ownership includes assignment, mortgage, exclusive license, or any other conveyance, alienation, or hypothecation of an exclusive right. Does this mean there’s no difference between assignment/exclusive license?
Nobody really disputes that exclusive licensees have standing on their own. But does this language force us to decide that assignments are the same as exclusive licenses?
Position 1: Yes. Both are transfers of copyright ownership, so they’re the same. That’s silly. An assignment isn’t a mortgage, but it’s on the list too.
Position 2: No, it makes no difference at all. Finds this plausible, though not convincing.
Position 3: it changes some things, not everything. What was Congress trying to achieve? Indivisibility theory made it hard for copyright owners to sell different use privileges to different people in different markets: serial publication v. motion picture. Exclusive licenses were inadequate because of problems of required copyright notice technicalities (a problem of contracting/industry practices; magazine publishers could have put notices in the name of individual authors but didn’t want to) and right to sue. Now copyright owner can either sell right or license it; the copyright owner can now choose. Once we have divisibility, so partial transfer of ownership is possible, why do exclusive rights need to convey standing? The House Report says that this is the intent, but why? (Maybe because it can be hard to tell the difference between the two, especially for parties who are inexperienced or in industries with different traditions?)
9th Circuit: exclusive licensee is an owner who has standing, but that doesn’t mean that it has all aspects of title like an assignee does, such as the right to transfer/sublicense without consent. Nimmer etc. hate this, but is it wrong? People read into the idea of “ownership” that ownership means title, including right to transfer. Newman thinks that’s not necessarily. Ownership means an irrevocable right to possess, but lots of cases of ownership don’t involve alienability. Think of easements. Easement is an ownership interest, but it’s not title in the dominant property. Most easements aren’t transferrable (except to the owner of the dominant property).
Why should we care? Because default rules matter. Also because fragmentation of ownership is bad. We should put a thumb on the scale of centralized copyright ownership rather than radically fragmented use rights.
Grimmelmann: buys the analysis, but wonders about the terminology/skew between IP and property law. Easement: we think of license as revocable permission; it has to ripen into something that’s not a license—an easement—before it’s irrevocable. So the word “license” may be causing some of the problems here; may be better to speak of a copyright interest.
Newman: right, and that includes a use privilege and a right against third parties. Can you say that and also say the licensee has no right to transfer without consent? Yes!
Q: true assignment of ownership for royalties: the seller might have an action for damages for breach. Exclusive license: could revoke the license for breach.
Molly van Houweling: which way does the argument about fragmention cut? In whose hands should we concentrate ownership?
A: not sure that divisibility was necessary in the first place, but we do have it. Not necessary to say that the categories of exclusive licensees and assignees are the same. Licensors think they retain residual title even if they say the license is irrevocable and exclusive. He likes that. He doesn’t care who has the unified title.
Van Houweling: but the licensee might be the person to whom potential users might go for permission since it’s the one out there using the work.
Brauneis: Sublicensing wouldn’t then be fragmentation in the sense that an exclusive licensee couldn’t sublicense to 8 different people but might be able to assign the license as a whole (as with leases).
A: right, there is still a big difference between the surrender of all rights in assignment and the retention of a residual in license/sublicense.
Brauneis: there are lots of industries with practices that might justify the conclusion there’s an implied permission to sublicense.
Eric Priest, Acupressure: The Role of Market Forces in China's Emerging Copyright Enforcement Environment
Reasons for poor copyright enforcement record: history of Confucianism (learning through imitation) and socialism isn’t conducive to IP norms, per Alford. Government has little incentive to enforce; domestic copyright industries are poorly organized; copyright authority is weak; does a few high profile campaigns. Pervasive censorship stimulates demand for illegitimate products.
But: YouTube clones. Soaring price of copyrights led to financial losses for domestic video websites and drove prices of exclusive licenses up. Licensing bubble: exclusive license for most popular series in 2011 cost $300k/episode, v. $1500/episode in 2009. 20,000% increase in 2 years. By 2011, Todou spent nearly $50 million on licenses. Now sublicensing to others at inflated prices, and suing each other for infringement. Both competitive and money-losing; Youku and Todou are going to merge.
Why the sudden bubble in this notoriously difficult market? One, concerned about copyright litigation—sites have been sued a number of times. Two, responding to pressure from Chinese authorities. Third, burnishing reputations with US investors ahead of planned US IPOs. Fourth, hope to develop paying models.
Litigation unlikely to be major factor: low damages provide little deterrence; average awards are only a few thousand dollars. For example, in one case, Baidu was made to pay under $10,000. Increased pressure from authorities? Youku and Todou have skirted rules for years, operating without an online video permit, streamed foreign films in violation of regs prohibiting dissemination of foreign content not approved for public screening, and the censor org is more powerful than the copyright agency. Sites began reducing piracy before a crackdown. Maybe involved, but not primary motivation.
Burnishing reputation? Does IP liability rank highly among concerns of US investors? Baidu has been sued for years before and after its IPO, and that hasn’t stopped it from being the biggest IPO in 5 years in 2005; IFPI chair called it China’s largest violator of music copyrights and the share price went up.
Final explanation: hope to develop VOD and subscription models as revenue streamts. In SEC filings, admit this presently produces negligible revenue.
What is left? His interviews: we want to attract big transnational advertisers. If you’re not paying for the product, you are the product: these sites view their customers as advertisers, and those companies are concerned about infringing. Coke and Pepsi were named co-defendants in copyright cases related to these sites. Claim dismissed, but it made them nervous, and they’re IP owners themselves with codes of conduct concerning IP. Sites perceived risk of loss of ad dollars (RMB?). Caused them to get religion on copyright in a big way.
Microsoft also faces piracy in China. In Wash. & La., Microsoft lobbied for statutes making it unfair competition to make products using stolen/misappropriated info tech after notice and opportunity to cure. Purpose: get US retailers/producers to tell their Chinese/Mexican suppliers that they’ll pull business unless the suppliers clean up their acts.
Two categories face potential liability: manufacturers of products sold in the state if stolen tech was used in the manufacturing or supply chain, or third parites including retailers of $50 or more in annual revenue. Can also proceed in rem against the goods: potential issue for any producers, because there’s no revenue threshold.
Inapplicable to copyrightable end products, or to claims that the IT or its use infringe a patent or misappropriates a trade secret under US law, to avoid preemption.
Action may be brought by competing manufacturers of products sold in the state, or by the AG, subject to a notice and cure period (cure is stopping or buying a license), and only the copyright owner can trigger the period by sending the notice. Remedies include injnction, actual or statutory damages. (Is there a general Washington law making it unfair competition to engage in “unlawful” conduct? Because that might allow a consumer protection claim even if there’s no consumer standing directly under the statute.)
Louisiana statute is much broader. (Washington exempts, for example, theme parks: the Disney exemption. Big copyright owners, but still worry about the cost of their merchandise going up: my IP matters, not yours, big surprise.)
Microsoft is lobbying the FTC to get involved and use §5 of the FTCA to address this as unfair competition. (Interesting potential exam question.) Letter from 39 AGs asking the FTC to act.
Using market pressure to get infringers to stop infringing without threatening them with direct legal action. Similar to issues in environmental law: global private governance. Working better than pressure from the USTR.