Intellectual Property

Post image for Is the FTC Already Capable of Regulating Patent Demand Letters?

The answer is no, except under special circumstances. The question itself arises from comments by Julie P. Samuels of the Electronic Frontier Foundation at last week’s panel held by the Senate Committee on Commerce, Science and Transportation over demand letters from patent assertion entities (PAEs), commonly known as patent trolls. Samuels proposed new legislation to expand the Federal Trade Commission’s (FTC) Section 5 authority, which allows the FTC to regulate “unfair or deceptive acts” by businesses.

PAEs are companies which buy patent rights from other companies and then sell licensing rights for those patents to other third party companies to produce products using said patents. Patent demand letters are letters sent by PAEs to companies which are accused of violating the patents held by a PAE in question.

Section 5 is codified in 15 U.S.C. § 45(a). It gives the FTC has the authority to regulate “unfair or deceptive acts or practices” by businesses. The FTC enforces Section 5 either by reporting such acts to relevant agencies, or bringing violators to court. The FTC issued a deception policy statement in 1983 in which it clarified its understanding of unfair and deceptive acts. Deceptive acts were defined as acts in which “representation, omission or practice” by a business would mislead consumers about the product they intended to buy. Furthermore, such deceptive acts don’t have to be intentionally deceptive. There merely has to be a consumer who is being deceived in order for the FTC to act as a regulator.

So the real question is, is there a consumer involved with patent demand letters? The problem here is that the FTC Act never gives a legal definition for what a consumer is, so a new law or policy statement would have to provide one. I argue that because there is no product being exchanged between a PAE and the letter recipient, demand letters are therefore not within the FTCs jurisdiction.

There is more to the story, though. As FTC Commissioner Joshua D. Wright has described in this speech, the PAE’s do have a consumer base that could enable regulation by the PAE: the companies which license the patent rights to create material products. The FTC could intervene, via anti-trust, if the PAE does not describe the details of patents accurately to licensees. That is, if patent licenses are sold with details omitted or lied about, then the FTC would have authority to intervene. Or, in Wright’s words:

To fulfill their notice function, patent claims must delineate the scope of patent rights with sufficient clarity that a person skilled in the relevant art can reliably determine whether planned activities would infringe. Many panelists declared that patents often provide little guidance as to their coverage because they lack “clarity,” i.e., they are “vague,” “ambiguous,” or otherwise difficult to interpret. Some of this testimony addressed patents across the board. [See here.]

Thus, the deception would not focus so much on demand letters, except as those letters are tied into protecting the patents that have been licensed to other companies from the PAEs.

Post image for Wikileaks’ Latest — Draft IP Chapter in Major Trade Agreement

Wikileaks has made another big splash yesterday — not about spying, but about a multinational trade agreement currently being negotiated. Wikileaks published a draft chapter on intellectual property that is part of the Trans-Pacific Partnership  Agreement (TPP), now being negotiated with 12 countries — Japan, Mexico, Canada, Australia, Malaysia, Chile, Singapore, Peru, Vietnam, New Zealand, and Brunei Darussalam.

The 95-page chapter, as a negotiating document, includes proposed provisions and language on a broad range of intellectual property issues, including copyrights, trademarks, patents, pharmaceuticals, and the Internet. The chapter also includes enforcement mechanisms for violations of the agreement. Individual countries’ initials next to the provisions or words in brackets show which countries support or oppose the particular language.

It’s a difficult document to parse, as many of the provisions reference other agreements and treaties, particularly the Agreement on Trade Related Aspects of Intellectual Property Rights, commonly known as TRIPS, which is administered by the World Trade Organization.

Intellectual property rights are likely to continue to be a difficult issue for the 12 countries to negotiate, as some countries are at the leading edge of technological developments, while others are hardly players.  However, some of the developing countries are pushing for intellectual property rights in plant varieties — likely to be a contentious issue as well.

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Post image for We Must Take a More Active Role in Challenging the FCC

On September 9, 2013 I entered the E. Barrett Prettyman Court house, which houses the federal Court of Appeals for the District of Colombia Circuit. It was 8:30am and in one and a half hours, oral arguments in Verizon v. FCC were slated to begin.

I assumed that arriving an hour before the doors would open would be time enough to get a seat for the case. However, I encountered a line of over a hundred people already waiting to enter the courtroom, and by the time I entered the court room, space was limited to standing room only.

As oral arguments proceeded, the panel asked a litany of questions about the question whether the FCC’s Open Internet Order treats broadband providers as common carriers. The arguments seemed rather esoteric, focusing on specific sections within the Order and the Telecommunications Act of 1996.

This was natural for a courtroom, and yet, it was rather strange to not hear questions about the FCC’s attempt at assigning itself ancillary authority over the Internet. What has seemed absent from much of the discussion about net neutrality is a serious opposition from the public to regulators self-implementing authority to manage the Internet.

In 2010, the FCC explored redefining broadband Internet from information technology to telecommunications technology in order to establish control over the industry. Content distributors, of course, supported the motion, but a majority of respondents were against the expansion. The FCC ceased exploration soon after.

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With time running out for the Senate to act on a continuing budget resolution, members are trying to find some magic pot of money that would mask the fact that our government spends far more than it raises in revenue. Tonight, it looks like Sen. David Vitter has resurrected an old proposal to ban what are known as reverse payment patent settlements — agreements in which brand name drug manufacturers pay generic firms not to challenge patents on the innovators’ drugs.

Critics, including the Obama administration and the Federal Trade Commission, call these settlements “pay-for-delay,” and argue that successful patent challenges would get generics to market sooner. In turn, they claim, that could save federal health programs billions of dollars every year, which is why the proposal is so popular with both Democratic and Republican members of Congress. A CBO analysis scored a ban proposed in 2011 as saving federal health programs $2.68 billion over 10 years.

The problem is, any alleged savings from a ban on these patent settlements is illusory because reverse payment settlements actually have the effect of getting generic drugs on the market sooner, thereby lowering drug costs, not raising them.

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Post image for Science And Technology Policy And The Democratic Convention

Now it’s the Democrats’ turn to gather for their convention in Charlotte and one element of the platform in common with basic Republican philosophy is the case for government funding of basic science.

The Democrats are much more ambitious, however, in calls for the funding of “investment” beyond basic science. The word “investment,” in fact, appears 40 times in the just-released 2012 Democratic National Platform.

Indeed most agree with the notion that such a basic science policy is “unimpeachable,” as Fareed Zakaria’s, “How Government Funding of Science Rewards U.S. Taxpayers,” put it in the The Washington Post.

But needless problems arise when an institution with the power to tax and compel gets overly involved in the very production of knowledge itself.

Problems include seducing industry with funds, inviting cronyism, and federal “steering” when Washington has no business doing so.

The alternative “Platform” is creating a tax and regulatory environment favorable for all, not the favored few, to engage in scientific knowledge and wealth creation, potentially on scales far beyond those of today.

Today, we see examples of artificially created conflicts rooted in governmental science and tech policy:

  • Over the fundamental merit of basic vs. applied research (a false split in many ways).
  • Over relative impacts of private vs. public funding on discovery, knowledge creation and well-being.
  • Over the alleged objectivity of government vs. “industry” science, and the improper disdain for industry science in the marketplace of ideas that public funding abets.
  • Over the right to not fund research programs with which one disagrees or is indifferent toward.

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Post image for Google, Antitrust Antagonism, Patent Trolling, and Joseph Schumpeter

Google has been in the news lately for all the right reasons, but also some wrong ones. The FTC is investigating its use of patents held by Motorola Mobility, recently acquired in a deal thought by many to be as much about intellectual property as hardware expertise. The European Union has also fined Google on antitrust grounds, claiming that it unfairly leverages its dominance of online search to serve its promote its own content.

This is not the first time the technology, advertising, and media giant has faced pressure from regulators. Google has fingers in lots of pies. Its name is synonymous with the dominant search engine that made its reputation, and with search itself. It arguably boasts the most popular and capable email platform, Gmail, integrated with a constellation of cloud services and social networks including Docs, Play, YouTube, Maps, Picasa, and Drive. Indeed, the same integration that draws competitors’ ire and regulators’ scrutiny is a crucial element of the firm’s UVP. It has turned Android into a mobile operating system that rivals and in some cases surpasses Apple’s iOS. And its Chrome web browser recently overtook Internet Explorer as the most popular in the world, commanding almost a third of global market share barely four years after its release. The question is, does Google constitute a monopoly?

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Post image for Going to Jail for Linking? What Sen. Amy Klobuchar’s S. 978 Could Mean for You

Earlier this month, the U.S. Senate Judiciary Committee unanimously approved S. 978, a bill that would expand the scope of felony criminal copyright infringement under federal law. While the legislation enjoys broad congressional support, a number of bloggers have slammed the bill on the grounds that it would allegedly impose criminal liability on lots of innocent U.S. Internet users.

In this essay, I’ll answer a few “Frequently Asked Questions” about the legislation — and explain why you should care.

Here are some links to get you up to speed:

  • Text of S. 978 as reported by the Senate Judiciary Committee on June 16
  • TechDirt’s latest commentary on S. 978
  • Electronic Frontier Foundation’s analysis of S. 978

If I embed on my website a YouTube video that turns out to be infringing and ten people watch it, in what circumstances could I be charged with a felony under S. 978?

Mike Masnick at TechDirt recently posed this question. To begin, federal law defines “public performance” in two ways:

  1. performing or displaying the protected material in a place open to the public or  in which it can be viewed by a “substantial number of persons” (not a small family or friends setting); or
  2. to transmit or communicate to such a place by using “any device or process,” regardless of whether the people viewing the material are in different locations and viewing it at different times, or in the same location viewing it at the same time

Streaming appears to fall under the second prong, as a recent White House Intellectual Property White Paper argued. This also comports with a 2010 case from the Second Circuit, in which the court observed that “[a] stream… like a television or radio broadcast, is a performance because there is a playing of the song that is perceived simultaneously.”  Thus, each stream of a copyrighted video could well constitute a public performance for the purposes of 18 USC 2319(b). As Masnick points out, under S. 978, you may be open to criminal liability in such a situation.

However, that only answers part of the question.  Embedding a video is linking to content which is potentially hosted elsewhere, so the act of embedding would not likely be direct infringement through reproduction or distribution of that protected content, though this is far from certain.  If you post copyrighted works and host them yourself for streaming, you could be charged provided you meet the other statutory criteria.

Terry Hart of Copyhype has a more nuanced view, arguing that even if the law would technically make criminals out of individuals who post infringing videos online, the chances of prosecution would be slim, especially given the limited resources of federal prosecutors and other considerations. Hart further notes that the higher standard of proof in criminal cases compared to civil infringement cases will serve as a check on rampant prosecutions.  But this sounds an awful lot like, “just because they can doesn’t mean they will.” Hart’s arguments, therefore, are unlikely to alleviate the concerns raised by skeptics of S. 978.

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Combating “rogue websites” is a top priority for many in Congress this year. Lawmakers have held several hearings over the past few months to explore ways to address these rogue sites, which are typically foreign-based websites that are dedicated to trafficking in counterfeit goods and/or facilitating unlawful copyright infringement. Most recently, on May 12, several U.S. Senators introduced the PROTECT IP Act (bill text). The bill would establish new legal mechanisms designed to enable the government and rights holders to combat Internet sites that are “dedicated to infringing activities.”

Congress deserves praise for incorporating several of the ideas we proposed last year in the context of COICA, a similar bill that was introduced — but not enacted — in the last session of Congress. As several dozen law professors warned last year, COICA lacked procedural safeguards, was overly broad in its scope, and risked hindering free expression by triggering “false positives” rendering lawful websites inaccessible. Compared to COICA, PROTECT IP represents a more balanced approach to fighting online copyright and trademark infringement while recognizing fundamental civil liberties.

However, in spite of these improvements, the PROTECT IP Act contains some troubling provisions that should concern lawmakers who believe in balanced, thoughtful intellectual property laws that “promote the Progress of Science and useful Arts.”

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In the ongoing copyright debates, areas of common ground are seemingly few and far between. It’s easy to forget that not all approaches to combating copyright infringement are mired in controversy. One belief that unites many stakeholders across the spectrum is that more efforts are needed to educate Internet users about copyright. The Internet has spawned legions of amateur content creators, but not all of the content that’s being created is original. Indeed, a great deal of online copyright infringement owes to widespread ignorance of copyright law and its penalties.

For its part, Google yesterday unveiled “Copyright School” for YouTube users. As Justin Green explains on the official YouTube blog, users whose accounts have been suspended for allegedly uploading infringing content will be required to watch this video and then correctly answer questions about it before their account will be reinstated:

Of course, boiling down the basics of copyright into a four and a half minute video is not an easy task, to put it mildly. (The authoritative treatment of copyright law, Nimmer on Copyright, fills an 11-volume treatise.) Copyright geeks and fans of “remix culture” will appreciate that Google’s video touches on fair use and includes links to in-depth resources for users to learn more about copyright. It will be interesting to see how Google’s effort influences the behavior of YouTube users and the incidence of repeat infringement.

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Over at the Technology Liberation Front, I discuss the “Combating Online Infringements and Counterfeits Act” (COICA), which the Senate Judiciary Committee unanimously approved last week. The bill would enable the U.S. Attorney General to obtain a court order disabling access to web domains that are “dedicated to infringing activities.”

These “rogue websites” are a real problem, as the website Fight Online Theft explains, so it’s a good thing that Congress is working to address them. However, some of COICA’s provisions raise profound constitutional concerns, and the bill lacks adequate safeguards to protect against the unwarranted suspension of Internet domain names, as the website Don’t Censor the Net argues. The bill also doesn’t provide a mechanism for website operators targeted by the Attorney General to defend their site in an adversary judicial proceeding. This week, a group of over 40 law professors submitted a letter to the U.S. Senate arguing that COICA, in its current form, suffers from “egregious Constitutional infirmities.”

To address these concerns, CEI is urging Congress to amend COICA to provide for more robust safeguards, including:

  • Providing a meaningful opportunity for Internet site operators to challenge before a federal court an Attorney General’s assertion that their site is “dedicated to infringing activities” prior to the suspension of their domain name;
  • Requiring that the Attorney General, upon commencing an in rem action against a domain name, make a reasonable and good faith effort to promptly notify the site’s actual operator of the action;
  • Clarifying the definition of an Internet site “dedicated to infringing activities” to ensure that websites with nontrivial lawful uses that facilitate infringing acts by third parties will not face domain name suspension if their operators:
    • Comply with legitimate takedown requests from rightsholders;
    • Do not receive a financial benefit directly attributable to infringing activities;
    • Do not design their site primarily for the purpose of facilitating infringing activities; and
    • Do not induce infringing activities.
  • Instructing the Department of Justice and federal prosecutors not to request that domain name registrars, registries, or service providers suspend domain names that have not been deemed to be “dedicated to infringing activities,” or otherwise unlawful, by a federal court; and
  • Requiring the Department of Justice to compensate domain name registrars, registries, and service providers for any reasonable costs they incur in the course of disabling access to infringing domain names.
  • Eliminating the provisions requiring the Department of Justice to publish a public listing of Internet Sites “alleged to be … dedicated to infringing activities” but that have not been the target of a successful in rem action by the Attorney General to disable access to their domain name.

Image credit: minkj’s flickr photostream.