Intellectual Property at the Edge part 2

Trade Secrets

Jeannie Fromer

Trade secret and patent are not as absolute as we imagine them in terms of disclosure/openness.  Quite a bit of disclosure in trade secret, and secrecy in patent.

Benjamin Tabor invented a successful rotary pump for thick liquids.  To commercialize it, he needed to make precise patterns.  He said he spent a long time doing this through trial and error.  Tabor said a patternmaker working in the same building, sometimes alongside Tabor’s machinist, measured and copied Tabor’s patterns.  He did so because another guy, William Hoffman, wanted to make the pumps too and Tabor alleged he wanted to avoid the necessary trial and error.

Hoffman says no, he didn’t tell the patternmaker how to make the patterns; they just happened to be in the patternmaker’s possession.  When we found out Tabor objected we went and measured from the pumps themselves. It’s not that much work to measure the pumps themselves.

Hoffman argues that patent law precluded the suit: there was an expired patent on a rotary pump, giving him the right to use the patterns to make a competing pump. Tabor’s response: that was a different pump.  The court infers that because Hoffman needed the patterns it must be a different pump.

Court ruled for Tabor overall.  Hoffman is free to make a pump, but not with Tabor’s patterns. Tabor worked very hard on the patterns!  Theme of unfair competition.  Hoffman has expert testimony that there are known rules for reverse engineering pumps pretty easily, though Tabor wasn’t trained in them. Trial court finds that reverse engineering is possible, but enjoins Hoffman anyway.  Affirmed on appeal, and by NY Ct of Appeal.

Court was willing to call it a secret even though the information was readily available.  This echoes in modern trade secret law—do we want to call it misappropriation when they used improper means to discover something discoverable by proper means.  Courts are willing to stop improper means, but they’re uncomfortable calling it a true secret if it would be simple to figure out.  In patent, we call very limited uses “public,” and it’s awkward to say that public uses are really secret. Why make people spend time/money on reverse engineering, then?  May sound in fairness; may also be about incentives to first movers.  (Evidentiary?  We don’t have to worry about which side is right about ease of reverse engineering?)

Tabor was allowed to share the info with certain people and it was still considered secret.  Compare to patent disclosure, which makes you broadcast to the public.

Maybe Tabor took advantage of both patent and trade secret.  He doesn’t reveal very much about how to make the patented pump.

Lionel Bently

Dr. James’ Powder for Fevers: multiple medical claims (1750).  Patent granted; action to revoke it because material was already in public domain. Privy Council held the patent valid.

Newbery, producer, was required to keep ingredients secret; was renewed for decades.  Ex-employee of Dr. James tried to set up as making the powder; big public scuffle over whether he was really capable of doing so.  Strong seller until 1810s and beyond—George III used the powders.  At some point, grandson of James decides he’s done with the deal and will change distributors.  Newbery brings an action for specific performance and to bar disclosure of the formula.

Ex parte TRO equivalent; then an inter partes proceeding, at which injunctive relief is refused. The report of the decision is terrible.  Why was relief refused?  Court does say that quack products of this kind don’t deserve protection, but that’s probably not the whole explanation.  He couldn’t possibly have been confident that it was a quack remedy in 1817.  A number of papers explicitly discussed the powder and deemed it a great benefit. In truth, major component was antimony (poison), that made you sweat and have a fever, so it felt like it was doing something.

Further reasoning: The patent should have revealed how to make the powders, so how could it be secret? Judge’s reasoning doesn’t quite add up, because everyone knew that the 1747 patent was insufficient to provide the person skilled in the art the means for making the medicine.  (Constructively not a trade secret?)

Patent specifications come in around 1710, obligatory from 1734, and courts hadn’t yet developed a doctrine of sufficiency; function of specification was being debated. Judge likely thought it wasn’t really a secret; the same papers that called the powder a great remedy also investigate what it’s made of, showing a wide public discourse examining its constituents.  Reputable people think they’ve IDed its ingredients.

Ginsburg: if the judge didn’t grant the injunction, the publisher can’t keep the heir in business with him.  Did that mean that Newbery could himself continue to distribute the medicine?

Bently: Not clear.

Dreyfuss: in South America, TM/the maker is the key to generics.  Neither one alone might have been able to make an equally valuable product.

Sichelman: Venetian patent system history: essentially no specification from mid-15^th century until fall of republic in 1788.  Incentive system; disclosure wasn’t considered an important function.

Patent should never trump trade secret; maybe the patent was invalid and wrongly granted, but that shouldn’t be used against me down the road because my rights might not have been enforceable.

Fromer: estoppel argument—not right to say that you’ve sufficiently disclosed and then turn around and say that your work represents effort that needs to be replicated.

Sichelman: but if you tried to disclose, that seems like pretty heavy punishment.

Jacob: not even with best mode do you need to provide a blueprint.

Dreyfuss: but a PHOSITA is supposed to be able to make it without undue experimentation.  (So what is the measurement of “undue” experimentation?  The same amount of time it took the inventor?  “Undue” has to be less than that, right?)  Seems to be a regime overlap issue.

Strandburg: is there/should there be any relationship between undue experimentation and enablement and public accessibility under trade secret.

Jacob: in Venetian days, you expected the patent to cover a device, and you had to expect that others would learn about it.

Sichelman: yes, and there was no expectation that the document would convey the info.

Strandburg: incentive to invent and incentive to disclose are not aimed at the same inventions.  If you only include stuff in the patent system that is about taking care of free riding, then you don’t worry too much.

Stacy Dogan: on the problem of leaving the old distributor, James might have thought he could maintain rights over “Dr. James.”  Thus he’d get most if not all of the money.

Fromer: the person who originated the secret is dead and the descendant wants to share the secret.  Maybe affects the equities.

Bently: the only obligation of secrecy in the agreement was on Newbery. 

Open innovation

Kathy Strandburg

Physicians as user innovators.  Why do physicians resist patents?  Why is the statute not litigated over physician uses, even though it’s very ambiguous?  Pallin v. Singer: Setting is controversial uses of patents in areas where patents are controversial for other reasons, like biotech and reproductive rights.  For a long time, Patent Office took the position that medical/surgical procedures were unpatentable, but this was reversed in the mid-20^th century.  Sense from responses to Pallin is that doctors didn’t think it was happening until around when this case arose, 1990s.  Doctors were starting to assert patents against other doctors and this was troubling.

Pallin involved cataract surgery: what shape of incision should you make when going into the eye to pull out the lens with the cataract and put in a new lens.  It was getting easier to do this with smaller incisions.  Sutureless surgery considered to be a big deal, because sutures risk distorting the eyeball.  Pallin’s invention: went to a meeting where there was a lot of buzz about sutureless surgery; one guy reported he’d developed a method, and another reported a different method and had shown a movie of it. These meetings apparently feature such movies as a standard and important feature.  Three people, at least, come up with the idea that the best way to do the surgery would be to have an incision with a v-shape.  Pallin calls it the chevron and Singer calls it the frown.  Dr. Gill also comes up with it.

Pallin claimed he wouldn’t have filed for the patent if he hadn’t been rejected by his colleagues.  This appears not to be true.  In the court proceedings, he says he filed at around the same time he attempted to publish.  Then he decided to start litigating.  He did eventually publish, and his was the first article about sutureless surgery in that journal.  He basically submitted three days after he did his first one, and the other people who do it do 500 before they try to publish.  He also gets some coverage in news updates.  Strandburg thinks that, as time went on and he wasn’t getting credit, he felt slighted.

Tried to donate his patent to different opthalmology associations, and they wouldn’t take it.  Then he starts suing: Singer, associated with Dartmouth.  They fight as a “patents on medical procedures are bad” issue.  Lawsuit is therefore surrounded by huge outcry.  Singer and Dartmouth take their position to the press, medical association meetings, etc.  General reaction favors Singer.  Pallin says this is a patent just like any other, appropriately issued and enforced.  Asking only a reasonable royalty.  Medical associations start lobbying Congress.  Biotech industry beats back “no patents on medical procedures,” and they end up with “no remedies against doctors for certain procedures.”

Why so much resistance when there’s no resistance to device & drug patents now?  Plausible story from user innovator community perspective.  Physician community of people who innovate have a system for publishing and sharing; reputational rewards. They view patents as a disruption to this functioning system. Devices are different; physicians need device manufacturers to be able to innovate and make devices; need partners outside the community. Patenting serves a role of crossing that boundary.  Role of patents in norms-based/governance-based systems—patents come in when they need to interact with someone outside; but patents will also cause problems within the group. 

A few guesses about similar scenarios: device innovation by physicians may have norms about when it’s ok to patent and when not, related to complexity of device.  May be norms about patenting new uses of drugs, which also seems internal to the community. 

Stephan Bechtold

[missed some] Europe has a narrow exception for physicians doing procedures as well.  Trying to protect communication within a narrow community; once it crosses to device manufacturers there is no more exception.

How does this relate to traditional justifications of patent?  European perspective: this is about protecting fundamental rights/health care.  How could we study this empirically?  Is this just a retelling of the story of social norms in biotech and whether patent should enter the field?

Ginsburg: A group of innovators getting together to ensure there isn’t property—compare to the story about the group of innovators getting together to ensure there is.  This is the bridge between emerging rights and emerging exceptions.

Frankel: despite this, the US is now negotiating in the TPP to get rid of exemptions. 

Strandburg: in fact, this was part of industry pushback: we already didn’t manage to hold the line on exceptions in TRIPS. If we allow any exceptions, who knows what exceptions other people will push!

Dreyfuss: Exceptions and scope turn out to be negative images: when you focus on scope, you start to talk about exceptions, and vice versa.  Tax strategies are also excluded—maybe a nice parallel story.  287(c) is an interesting boundary-spanning provision because it leaves partners liable while exempting the community itself—is this a template for further changes?  (17 USC § 512 seems like the obvious comparator; though it’s just a damages limitation but that makes no practical difference.)

Strandburg: 287(c) leaves secondary liability in place.  Mayo v. Prometheus is in fact a secondary liability case, but the doctors are still unhappy about it.  Tentatively: not everything that requires you to reach across the boundary requires collaboration on the innovation across the boundary.  So they can still rely on their own norms.  Why is 287(c) never limited?  Well, physicians haven’t sued other physicians.  The norm is broader than the exemption. The one case involves telemedicine, and the defendant is the company providing the IT.

Jacob: new uses of drugs is a huge issue for pharma.  Doctor prescriptions are excluded from coverage; the consequence is huge: artificial ways of getting around that limitation.  We have a new rule in Europe that a product for a particular purpose is treated as new even if the product is old.  (This interacts with drug approval.)

Hemphill: how much of the new uses come from physicians versus the drug companies, and how does that intersect with patenting practices and FDA approval?

Strandburg: one article showing a reasonably large fraction comes from doctors.  There’s not much evidence, but what there is shows a lot of physician innovation.  There are different compendia of recommended off-label uses, etc.  Physicians do communicate about these things.  Should we be trying to make that more effective?  If it turns out that doctors are probably not going to patent new uses, and drug companies probably are, it becomes important to know when the drug company will put it through the FDA approval process.

Ginsburg: Expense of infrastructure to produce drugs/devices may drive patenting.  Innovative community can afford not to have exclusive rights.  Generalizing: is the reason open source software is a community of sharers because that product doesn’t require investment in hard goods?

Strandburg: two things going on.  Maybe one dominates. One: investment.  Easier to have a community when it doesn’t require a huge amount of money. Historically, a number of user innovation communities have formed with commercial players with lots of money to invest that still shared.  Separate issue: needing to collaborate across a boundary, which doesn’t necessarily have to do with the amount of money needed.  Could look at patenting across the 3 FDA categories as the expense of approval goes up.

Bechtold: suppose a doctor invents a new device without needing anyone else. What’s the norm?

Strandburg: not sure.  Maybe they do go out and patent.

Sichelman: the norm he is aware of is to patent, in part because you need FDA approval.

Bently: boundary-spanning argument—artistic copyright: artists generally don’t mind appropriation by each other; object to those outside the community doing so. 

Ginsburg: lowbrow artists really mind being ripped off by high end artists.

Limitations: parody, nominative use

Rebecca Tushnet

Barbie’s marketplace success, and her ability to represent multiple overlapping and occasionally contradictory meanings, makes her a useful embodiment of some key exceptions to copyright and trademark law.  Mattel attempted to use both copyright and trademark to control the meaning of Barbie, reflecting a trend towards such overlapping claims and throwing copyright and trademark defenses into contrast. 

American copyright law has a number of highly detailed and even baroque limitations for particular types of uses and then a general fair use defense, which has often been decried for its vagueness and uncertainty.  American trademark law, by contrast, is largely judge-made, with the occasional statutory defense or limitation.  Likely confusion, the core of trademark infringement, now now has a multifactor test in every circuit, though it can be modified or substituted in certain circumstances, such as for keyword uses for competitive advertising (in some circuits) or what courts have come to call nominative fair use.  Notably, legislative as well as judicial complexity has increased over time; just as new copyright provisions tend to be complex and reticulated, the relatively recent trademark dilution law and its subsequent revision added a number of multifactor tests and multistep exemptions, instead of creating a general prohibition on dilution similar to the prohibition on confusion.  American judges have not been shy about adding further multifactor tests even to dilution, and the tendency of the law to become more complex over time has significant costs, especially for defendants who find their potential defenses turned into a confusing maze of overlapping but differently defined concepts.   Comparing trademark defenses to copyright fair use, copyright’s vagueness starts to look a little better.   Perhaps because of the four-factor fair use test codified in the 1976 Copyright Act, courts have been less likely to add new elements defendants must satisfy in order to qualify for fair use, though at the same time each individual factor remains highly manipulable to accord with a judge’s view of the equities.

Copyright: Copyright fair use as separating into uses about the body and uses about technology.  Dungeon Doll case: Pitt prompted a highly sympathetic fair use analysis from a judge on behalf of a pro se defendant.  The case involved what might well have looked like bullying, which may well have influenced the fair use outcome: Susanne Pitt agreed to remove the challenged pictures from the internet but Mattel pursued the case anyway.  Moreover, she was a resident of the United Kingdom, being forced to defend herself without counsel in an unfamiliar legal system.  (Given the absence of a general fair use defense in many jurisdictions, being sued in the United States may well have ultimately worked in Pitt’s favor once the case got to the point of a judicial resolution—but it is notable that a multinational company still chose to sue in the United States, most likely because of the statutory damages provisions that allowed Mattel to threaten the defendant with hundreds of thousands of dollars in alleged damages at the outset.)  Thus, Pitt, a case that precedes the key Ninth Circuit cases in time, introduces many of the relevant themes, from sexuality to the practical utility of defenses to small producers facing large corporations.

Transformation: the court commented that, to its knowledge, “there is no Mattel line of ‘S & M’ Barbie.”  (The court did not have the benefit of Mattel’s Catwoman Barbie, created in connection with the unsuccessful Halle Berry Catwoman movie, which while lacking nipples and genitalia at least suggests a gesture towards non-vanilla sensibilities.)

This transformation, the court concluded, sufficiently commented on Barbie herself rather than simply constituting general social criticism.  This distinction is typical in fair use cases, even though there is no real historical or market-based justification for distinguishing “parody” from “satire,” and even though drawing such a line regularly forces courts into the ill-fitting position of art critic.   Here, however, the court was readily persuaded that Barbie was at least in part the target of the transformation.  Pitt wanted to resurrect the “original idea of the female figure she claims inspired Barbie,” Lilli, who was a character of easy virtue and not a toy.  As a result of this origin, she suggested, sex was inherent in the doll, and she was “ simply revealing this sexual nature by placing Barbie in a ‘modern erotic context.’” 

This explanation reveals some of the inherent tensions in transformativeness analysis.  In theory, a successful defendant should add meaning that “transforms” the original with new meaning or purpose.  Yet courts are more likely to find that the original work is, at least in part, the “target” of the transformation if they can perceive the seeds of the transformation in the original; otherwise there seems to be no organic and justified connection between the original and the accused work.   So transformation in fact means revealing or exaggerating what is already there, rather than adding “something new,” even though the latter phrase is what courts use to explain what transformation is.

[MCA] Trademark only.  Nominative fair use; Rogers v. Grimaldi; problem of complex and overlapping multifactor defenses; note that the Fourth Circuit just suggested both that it would recognize 9th Circuit nominative fair use and that it was adding a good faith requirement to the Ninth Circuit formulation—

but the statutory defense for dilution is not much better; Louis Vuitton court interpreted it as requiring multiple steps and implemented a parody/satire distinction that makes even less sense for TM.

Walking Mountain: Nominative fair use expands again to cover images—turns into a reasonable use requirement instead of using only the minimum semantic unit.  This isn’t reflected in the test, of course, so matters are still unpredictable and confusing. 

Transformation as ineffable: you don’t have to explain what’s critical about these pictures in words.  Transformation as independent of survey evidence: Mattel’s survey rejected.  Basic idea: Copyright claim having failed, the TM claim must do so as well.

It’s common to point to a different area of law to look for a fix to problems in your own. Because law is fractal, often hard to recognize that things in that other area are actually just as incoherent and ill-justified as the problems you’ve identified in your own.  TM and copyright historically were judge made and legislatively made, but now may have switched positions. What’s the best way to deal with uses that should be protected against infringement or dilution liability?  Old common law—not adding factors but more rules of reason—looks increasingly attractive compared to either judicial or legislative creation of multifactor tests hyperspecialized for particular situations

Recently, norm entrepreneurs like Peter Jaszi and Patricia Aufderheide have vigorously argued that Larry Lessig’s famous claim that copyright fair use is “the right to hire a lawyer”  is overstated to the detriment of fair use.  Instead, they suggest, most fair use determinations—certainly most determinations of the kind that an individual creator or an educational institution is likely to be making—can be made by paying attention to context, norms of fair practice, and the statutory fair use factors (primarily the nature of the use).  Arguably this should also be true for TM as well.

A key question for limitations and exceptions to trademark and copyright, then, is how they will shape behavior on the ground.  The early critical uses of Barbie, including Dungeon Dolls, are often gone from the internet, but they were quickly replaced.  A fee award against Mattel (as in the Food Chain Barbie case) has some deterrent effect, but more significant might be the larger culture that empowers people to create responses to corporate productions, and then at least sometimes to resist threats when they materialize.

Robin Jacob

Cleopatra came out with a painting of Elizabeth Taylor as the poster.  A year later came Carry On Cleo, a uniquely British production.  Nothing like the Cleopatra movie, but the poster is arranged similarly. Judge found infringement because it was likely to call to mind the original—of course it was, though that shouldn’t make it infringing—and there was no parody defense.  Similar cases followed. Nadia Plesner v. Louis Vuitton.  These run from TM to copyright to community design right—the rightsholder doesn’t care what the basis is. LV behaved oppressively, going ex parte; eventually Dutch court dissolved the injunction on free speech grounds. 

We need an exception and are allowed to do so for caricature, parody, pastiche.  Government has now consulted on this 3 times and aren’t done yet.  We may have it by implication if some comes to be covered by our nearest equivalent to the US First Amendment, art. 10 of the convention on human rights.

Evidence-based: the British gov’t managed to ask: do you agree that a parody exception could create new opportunities for economic growth? What is the market for parodies in the UK and globally?  What would be the costs and benefits of such an exception?  Someone offered an answer but he thinks that’s rubbish. 

Has offered a draft exception: cannot be defined except to say “fair parody, caricature or pastiche.”  French allow it “according to the laws of the genre.” This is gibberish.  Idea that copyright is the most important thing in the world is nonsense.

Moral right as barrier to making fun of people, and there are a lot of silly folks at big companies, from Mattel to Carling beer; Warner Bros. (who wrote to Groucho Marx complaining about Casablanca).  You can’t rely on people to behave sensibly, so you have to have defenses.

Dogan: fair use has turned so much to transformativeness, but parody and commentary are a subspecies of transformativeness. Court favors commentary on copyright holder.

RT: I think that generally involves exactly the artistic judgment that courts should be avoiding in distinguishing between commentary on copyrighted work and commentary on something else. (The choice of the copyrighted work brings it into the commentary.)

Kur: droit moral does not prohibit parodies.  European Greenpeace/Esso and other cases generally come out right—Carling case (South Africa) would probably have come out the same way under our law. Still, would be good to make that positively clear in the law.  There is general agreement that parody is good and that if necessary a free speech argument can & should be interposed against liability; France used its own constitution.  Key questions: how explicit and how narrow should it be?  Do we need a framework of factors that may be difficult to apply in certain cases, or should we go to a more open analysis.

Jacob: this is the old dilemma.  It’s hopeless to list factors other than most general sort of thing you would take into account. 

Kur: cutting through all types of IP rights?

Jacob: absolutely!  Even if a patent if it were somehow in issue.

Ginsburg: institutional question—should it be codified?  How so?  French explicit exception for parody within the boundaries of the genre is one you made fun of; never been a judicial determination of what those are. There may be some gratuitousness threshold but it’s never been tested.  French don’t distinguish between copying the work to make fun of something else and copying the work to make fun of the work—famous case about making fun of the singer of a song; that came under the parody exception.

Gervais: look at the Canadian Mattel case: threw the brick at a Montreal restaurant called Barbie’s, generic name for barbeque—claimed copyright infringement, TM infringement, depreciation of goodwill.  Mattel has 6 lawyers at the argument including the 2 most expensive IP lawyers in Canada.  Restaurant has pro bono 29-year-old lawyer, clearly very nervous.  Judge: are you telling me the average Canadian will think this restaurant is operated by Mattel?  Mattel never recovered. Footnote on why Mattel believes it has the right to keep people from talking about it.

Fromer: do courts really distinguish parody and satire?

RT: not that often: Dr. Seuss and Salinger, when they want the defendant to lose.

Bently: Note that Plesner was still enjoined in France.

Hemphill: vivid facts plus overreaching.  Is Mattel ultimately a force for good through its overreaching?  On the one hand, people who are threatened may be deterred; on the other hand the courts get an opportunity to do a smackdown.

RT: Depends on norm entrepreneurs going out to explain that and what you can actually see going on around you.

Beebe: Leval, TM: The Champion of Free Speech, in Columbia-VLA.  He celebrates the common law aspects of the Lanham Act.

RT: so do I! I just don’t like adding a new factor for the defendant to satisfy on every go round.

Dinwoodie: Cases increasingly include design, copyright, and TM claims.  The holes in each cause of action are not the same holes.  If you want to protect a use, you need some trans-substantive defense.  Ginsburg suggested that eventually you may find copyright fair use migrating to TM, and even in more narrow form the dilution defenses.  Which should go where?  If it’s permissible exhaustion by the TM directive in Europe, we don’t let you use copyright to go around that, though the US hasn’t taken that position (though note the remand lets Costco keep on).

(RT: I think of right of publicity and of §230 in this context, pointing in different directions.)

Jacob: you could allow parody that wasn’t defamatory maybe

Strandburg: would it make more sense to go directly to free speech?  Won’t cover everything, but it is very strong rhetorically.

RT: I have a paper on this.  Short answer: I worry about that as insufficient.

Gangjee: Doesn’t work as well outside the US either because of the speech v. property debate and because of lower protection to non-political speech than the US allows.