Harvard & GW Law Conference, Intellectual Property, Private Law, and the Supreme Court: panel 1

Opening Remarks

Hon. F. Scott Kieff, U.S. International Trade Commission

Grokster required a heavy lift for those heavily oriented to positive law, b/c SCt took inducement—a doctrine in the patent statute, but absent from the otherwise very detailed © statute, and root and branch bring it over, but what drove that was the straightforward business appeal to Grokster’s investors acknowledging the appeal of infringement to its customers.  Private law is designed to be responsive to business results. Limelight is the same doctrine in patent; the key question was divided/joint infringement and SCt again acted unanimously.  One private law theme for Limelight: defective formation corporate law Q: group of folks get together to form a corporation but somehow overlook the corporate formalities. The result is, they’ve probably created a headache under state law—joint and several liability for torts and contracts of the partnership.  Straightforward business approach.  [I think I missed his point b/c I don’t speak patent.]  ITC Clear Correct case about 3D designs.  A business approach would have gone a very long way.  Try to make a private law oriented argument: a straightforward anticircumvention argument. The only reason this business model was bifurcated to run over the internet is that it started w/infringement that got enjoined; then the business split itself to import the models and have 3D printers.

You can respond w/parade of horribles about cosmetics, pharmaceuticals, orthotics, taillights for automobiles—entire market would change. On the flip side, you won’t trap innocent infringers b/c none will be infringers. You’re just updating for new tech, but these techs existed 100 years ago.  INS v. AP: electronic transmission in US is unfair competition.  Ben Hur: taking a physical book and turning it into a new medium, movies.  Remind us: each case allows us to think about private law approaches’ interaction w/IP.

The Nature of IP

Moderator: Prof. Ruth Okediji, University of Minnesota Law School

Prof. Henry E. Smith, Harvard Law School: Why private law/IP?  Concrete cases, historical and current through private law lens, they’re better as IP cases then conventionally thought to be.  People think private law = property all the time, and that’s not the case.

INS v. AP, eBay v. Mercexchange, and patent v. copyright.  INS v. AP: Held up as a Frankenstein’s monster of potential property rights generated in a free-floating way.  But if you read it all the way through, there’s material for thinking that but also a lot else going on. It’s a classic equity case.  Court says over and over it’s quasi-property, doesn’t bind the world. Let’s take that seriously.  Antecedently we have to take equity as a concept seriously.  Does that make it even worse?  No: equity cases in that period featured presumptions, constraints, rules of thumb, intersection w/commercial morality that didn’t make it free-floating exercise in Lockean fairness or unconstrained policy analysis.  As an equity case, it makes more sense, though you can still disagree; it’s really an unfair competition case.

eBay: Another equity case; cobbled together a test that was different from traditional test that emphasized more presumptions, good faith, and undue hardship.  The traditional approach based on the idea that there were situations of repeated violations/irreparable harm that got us most of the way to injunction but then we’d pull back if there was good faith + disproportionate hardship. Tailored to the idea of opportunism. If the motivation was trolls, makes sense to focus on opportunism/unfair surprise.  Fewer injunctions may be good, but a test that doesn’t turn on good faith/undue hardship will have a lot of mischief—the truly traditional test would do better if the problem is really trolls.  [I want to hear him talk about the tax evasion/tax avoidance distinction that arguably mapped better onto Aereo than other analogies. Or Kozinski on how IP rights emit no penumbras.]

IP regimes are not all equally property like.  Patent law is more property like; Patrick Goold has been writing about how copyright is more tort-like. Patent—abstracted from use, more like trespass. Idea of differing property-ness is important. These issues are still relevant: hot news and misappropriation claims now more than ever. eBay is wreaking havoc in the federal courts.  Private law lens can add a lot to the mix.

Aaron Cooper, Business Software Alliance (former Counsel to the Senate Judiciary Committee): Incentives and fundamental fairness—instinctively we feel that if we create something, others shouldn’t be able to take it.  AIA: shift in review of patents post-grant.  New system is more adversarial for post-grant review after issuance; after 9 months, you can only challenge on limited set of grounds.  Certainty for patent owners, business owners, users.  Certainty works well for everyone (but bad actors)—patent w/50% chance of invalidity is not good for anyone.

Patents and © are the only rights mentioned in the original Constitution.  [OK, if you say so, though I kind of thought the restraints on states’ abrogation of contracts, ex post facto laws, etc. were mandatory and ©/patent were optional.]  That has real ramifications in what congress does, v. trade secret/TM b/c those rely on Commerce Clause.  Many members of Congress view Commerce Clause scope as having gone too far. New trade secret law has interstate nexus requirement that is narrower than SCt would allow.

Donald B. Verrilli, Jr., Munger Tolles & Olsen LLP (former Solicitor General of the United States):

Once it had been determined that an invention qualified as IP, SCt will refer to private law notions and talk about the issues before the Court in property terms, as in Festo or Nautilus—use language of property right, drawing on private law concepts/analogy to the deed. We want to get the incentives right by creating enough of a property interest but not so much that we stifle innovation.

In whether patentability exists: No Lockean notion of entitlement to fruits of labor.  May take a lot of work to identify/isolate plant, but that doesn’t entitle you to a property right in Myriad.  Gov’t isn’t asserting its own interest over a thing, but rather leaving it open and uncontrolled.  Private law concepts of defining property don’t seem to be much use b/c courts are worried about tilting in Lockean direction rather than striking the right policy balance.  Seems like an interesting contrast to him.

Prof. Robert P. Merges, University of California, Berkeley School of Law: IP is property, but property-ism isn’t property absolutism.  Institution of property is much more flexible and nuanced than a lot of the critics of IP would say. Does eBay make patents “less than property”?  No. Analogies: encroachment/forced sale/conversion where lots of value has been added.  We have now over-solved the problem of trolls, as if we treated a headache with ibuprofen and aspirin and scotch. That’s led to the §101 cases that are fundamentally off track. The reason you can’t locate good property reasoning in those cases is that they’re sui generis. The remedy driven view of property is too limited.  The real action in eBay is old equitable concepts of hardship, good faith, etc.

Usual role of the state: passive enforcement of private bargains; role of state is always to grant the rights but w/patents that’s more visible b/c the right is more complicated.  Basic aim: identify rights, then let owners loose on the marketplace.  Occasional rule: insure legitimacy of market transactions; prevent undue leverage/undue hardship in the market.  

eBay within patent law: 75% of cases still get injunctions; where you don’t, tend to have the eBay concurrence factors indicating that there’s undue leverage.

[I took a phone call]

Verilli: Aereo has a tentative quality: we aren’t saying anything else is public performance etc.  Lacks same confidence w/IP as w/other areas it has handled.

Cooper: Figuring out the contours of the property right v. figuring out level of enforcement. Aereo, more than patent cases, looks like I know it when I see it, and so does INS v. AP.  There are words around it to try to provide some structure for lower courts, but it’s still Stewart’s obscenity.

Okediji: Private law as a basket of tools. Courts are more confident when they think they’re targeting bad actors.  Has the IPR system actually provided certainty for property owners? The investment in innovation took place long before the IPR stage.  AIA changes may give us better stronger patents, but would that really help the property interests of those investing in innovation in the first place.

Cooper: ideally, we’d make sure that the terms were as clear as possible when granted.   

Okediji: we’ve gotten rid of formalities in ©; Rebecca Tushnet argues that the TM registration system isn’t very useful; do we need more formalities or fewer?

Merges: it was a bad time to do away with formalities, given the rise of the internet and the need to track rights.  When we have a way to track individual property rights that’s relatively costless, it’s good.  TM, patents: I disagree that IP is regulation, but the differences b/t IP and real property is more complex system of registering, maintaining, and contesting rights, b/c mapping contours of idea is inherently more complex and overlapping than w/real property. Ideal division of labor b/t initial examination and post-grant review for all 3 (not trade secret? RoP).  PTAB/high volume of IPRs shows that AIA was right that people wanted a cheaper way to quiet title. We may need corrections in IPR review, but it’s cheaper than district courts, which gets rid of more nuisance suits/weeds out patents.

Prof. Lemley’s idea of no examination: that’s one of the bigger failures b/c people want more clarity, fewer cases in district court. But ½ of Fed. Cir. caseload is reviewing PTAB decisions, a big change in 5-8 years.  Optimal division b/t registration, post-grant review, and rare district court determination of validity. We should think about that as system design. Once you have that right out there, it becomes a private law system.

Smith: registries are insufficiently appreciated across the board in ©.  Registries are particularly important in areas where there are a lot of subsequent transactions—how central registration is in certain areas of property—land and company registries are important.  Including how registries should be organized, public and private.  Recommends book by Benito Arruñada, which I have just ordered.