WIPIP 2022, Session 4 IP theory

WIPIP 2022, Session 4

Michael Meurer IP Protection of Business Knowledge

Since Bilski: First, business method patent protection is a lot less significant for today’s innovators. Second, we have a lot more information about the costs of protection.

Giles Rich lamented that diaper service, a great invention, was not patentable in 1960; then he eventually got his way in 1999. Then we got a lot of business method patents. SCt: divided on whether it was an abstract idea; worried about emerging information age effects.

Case for categorical exclusion of business methods is stronger today than it was 10 years ago.

Mayo test is hard to apply to business methods and leads to litigation; is a categorical ban better? Maybe, but that’s not his argument here. It’s proven hard to ID a business method. Number of business method patents is still large; Bilski/Alice did not prove their death. Trade secret alternative is more potent than it was 10 years ago—the notion that free riding would be more common in the info age was not borne out. Also clear that trolls love business method patents and that the right generates significant social costs.

Non patent sources of return on business methods include reputational gains, reciprocity (businesspeople chat about advances), and first mover advantage. Exclusivity b/c of tacit knowledge and employee mobility restrictions too.

Why still popular though? Can impose costs on others. Easy to get, scope unclear, possibly invalid. Troll lawsuits case publicly traded firms to cut R&D, reduce VC funding, delay IPOs, and decrease employment by start-ups. Lots of new evidence, including that business method patents are older when asserted.  Patent reforms reduced troll barganing power and innovation tax.

Questions: how do we encourage diffusion of existing “best practices”? Access to knowledge workers is increasingly important but covenants not to compete, anti-poaching etc. creates problems for that. Decline in pace of diffusion of new business methods results. What business knowledge is socially valuable? Reducing transaction costs seems desirable, but capturing a bigger share of the pie may not be/privacy threats/[dark patterns]. How can doctrine be tailored to socially productive methods? How should we choose to channel protection?

Glynn Lunney, The Law & Economics of Trademarks

Where can L&E help TM and where can it not help? Formalism lost cachet [for the common law]. Promise of L&E was that it could tell you what the right answer was for society. The reality: conflicting conclusions w/in L&E frameworks. Sometimes multiple answers are efficient. Also, real GDP in the US doesn’t reflect any effect of broad adoption of L&E. So too with productivity. Many a slip between cup and lip.

L&E is really a new kind of formalism where you never have to prove that the posited outcomes will actually occur; you just assume that they will. Based on incentives to align private behavior w/socially beneficial outcomes. ID an externality and say internalize it, but you never need to show that will affect overall output. But people are not pulleys; they vary and respond differently. Human systems are complex and chaotic; responses may not be what you expect. Paying musicians more does not lead to more and better music! Eliminating a monopoly may not convert deadweight loss into consumer surplus if other monopolies remain in the market. Economics cannot answer whether removing Ferrari replica kits from the market makes people as a whole better off or worse (e.g. it cannot tell you how much better exclusivity feels for the exclusive and how much worse it feels to be excluded). The Shelby is widely copied/no enforcement of trade dress and vintage Shelbys are more expensive than vintage Ferraris.

Courts are incapable institutionally of identifying the efficient legal rule. Solution: be a formalist and apply what Congress said. You probably shouldn’t trust Congress, but it’s the worst option except for the other ones. And favor interests of dispersed interest groups who don’t have lobbying power.

Gibson: Why faith in public choice and not in the rest of L&E? And could courts really do that when TM claimants always argue that they’re in favor of the dispersed public?

A: it’s often convenient to believe in evidence quality for things we already believe and maybe he’s doing that for public choice, but he’s struck by the contrast b/t patent system w/AIA reforms—in better shape than TM and © and Congress did better than the SCt--but then again SHOP SAFE might come in and blow up TM law. And courts may struggle identifying the interests of dispersed public, true.

McKenna: formalism can be done by courts with rules at different levels of generality. When TM was what we both think was better it was almost purely common law. The more Congress meddled, the worse it got. INTA writes the law that Congress makes. Textualist TM SCt cases have not been good and lost the history/texture of law, trying to read it through textualist frame.

A: Takes the point. Maybe textualism is just a patch for broad likely confusion standard. More careful analysis of 1962 deletion of “purchasers as to source” could have helped [McKenna: textualists don’t look at legislative history!].

Meurer: L&E has had little influence over French or German TM law; they’re not better off than we are. Do you agree?

A: not sure, though that is the Q of, if you don’t do L&E, what is the alternative? “If value, then right” could be even worse. But free rider/misappropriation rationale have an aspect of L&E to them, so not in full agreement with proposition 1.

Ochoa: does behavioral economics do better?

A: how you frame the Q can determine the answer. Standing rules in TM cases frame the Q as should this P or this D prevail, when we want them to answer the Q whether consumers would be better off if the law allowed this or banned this.

Rosenblatt: not sure how to distinguish b/t concentrated and dispersed interest group. The music industry is a very concentrated industry but musicians are not.

Ochoa: 1988 TM Revision Act made things worse, not better, by blessing judicial expansion. Consistent w/public choice theory that consumers aren’t well represented in Congress. Are we better off with manipulable public choice than manipulable L&E?

A: if courts hadn’t expanded TM in the first place they might not have been in a position to get codification.