Tuesday, May 20, 2014

Licensing Notes - introduction to the essential facilities doctrine

In this note, we prepare for our coverage of the Trinko case with an introduction to the essential facilities doctrine.

Let’s start will two fairly clear propositions about patent and copyright law in the United States. The first is that the proprietor of a patent or a copyright controls the extent to which she exploits her intellectual property. She need never manufacture or publish; there is no working requirement in U.S. law. And the proprietor may assign all or part of her IP rights to others. But there is no obligation to do so. A patent or copyright holder need not share her IP with anyone. To use the language of antitrust, there is no duty to deal, no duty to license.

Now the second proposition. A proprietor of a patent or copyright who chooses to exploit her intellectual property right -- whether directly or by means of a license to another -- may charge ‘what the market will bear.’ There are no limits -- imposed by either intellectual property law or antitrust law -- on the amount of license royalties that can be demanded.

Both of these propositions -- the freedom to license (or not) and the freedom to set royalties -- are seen to flow naturally from the very monopolies that patent and copyright law establish. A patent or copyright generates a set of exclusive rights. To require the proprietor to license to another is inconsistent with those exclusivities and undercuts the monopoly the intellectual property creates. A limit on royalties reduces the economic reward conferred by Congress on authors and inventors.

Monday, April 28, 2014

TTIP's IP Chapter: Nothing to be Gained (Part 2)

It would not be difficult to convince the various constituencies arrayed against the expansion of intellectual property rights to support the removal of the IP chapter from the projected U.S.-European Union free trade agreement (known as TTIP, the Transatlantic Trade and Investment Partnership). Open source advocates, First Amendment partisans, pirates and free riders, as well as ordinary American consumers, see little to be gained from yet another international commitment to strong IP. Eliminating the IP chapter from TTIP should appeal to the U.S. IP industries as well. There is little to gain, and perhaps much to lose, in including an IP component to TTIP. IP zealots (and I'm talking to you, Hollywood) might be better served to await a better day.

As I argued in part 1 of this essay, there is little ground the European counterparty is politically willing or able to give in any TTIP IP negotiations. The TTIP IP chapter is a lightning rod for anti-globalists - and the European Parliament will guard the populist victory it won in quashing ACTA. And neither the United States nor the European Union seem ready to undertake the extremely difficult task of harmonizing substantive IP law across the Atlantic. The Americans and the Europeans seem to share a resignation to let "vivre la différence” in substantive IP rules; each of course would be satisfied by a wholesale capitulation to its respective IP model, yet each recognizes the impossibility of such an outcome. Impending EU substantive IP harmonization - in patent and copyright - pursued through the EU legislative process might be a more favorable opportunity to highlight (with a light touch, of course) the gains to be achieved through transatlantic IP convergence (admittedly moving EU IP law closer to U.S. models).

Leaked reports suggest some Europeans see possibilities for U.S. movement in TTIP with regard to geographical indications (GIs). Perhaps. But the United States clearly recognizes the intense desire of certain European interests for a stronger GI regime (especially with regard to wines). The United States will likely make painful demands of the European Union before making concessions on GIs.

In the end, there is not much new nor important that can form the IP chapter of TTIP beyond simply restating the ongoing general commitment of the United States and the European Union to a high standard of IP protection. And there is a downside to a modest agreement (again from the perspective of those U.S. industries seeking a global advancement in the protection and enforcement of IP rights).

Monday, April 7, 2014

TTIP’s IP Chapter: Nothing to be Gained (Part 1)

President Obama announced in his 2013 State of the Union address that negotiations for the Transatlantic Trade and Investment Partnership (TTIP), a United States-European Union free trade agreement, were on. There is something silly about calling a trade agreement a 'partnership;' the on-going Trans-Pacific Partnership uses this same label. But the folks in Washington are more clever than you and me: they know that the older style ‘free trade agreement’ (FTA) would be DOA in Congress.

TTIP’s central features follow the FTA model. Little thought seems to have been applied to fixing the provisional TTIP agenda: TTIP would provide for zero-level tariffs for U.S.-EU trade, an address various non-tariff barriers between the United States and the EU, introduce a misbegotten investor-state arbitration mechanism, and include an intellectual property chapter. It appears now that little positive can be achieved from inserting an IP chapter into TTIP. It is at best a waste of time -- and could undercut U.S. and EU IP efforts in other fora. What were they thinking?

In this first post, I examine the constraints faced by European Union negotiators. The EU has precious little room for maneuver on the IP front; IP provisions can only attract and intensify opposition to the entire TTIP package. These political limits are clear to the Europeans; they are perhaps underappreciated by the U.S. proponents of TTIP's IP coverage.

Thursday, January 23, 2014

Federal conviction for trade secret theft? A comment on Nosal by Karl Manheim and Jeffery Atik

Stealing a trade secret (reprehensible though this may be) has generally not attracted federal criminal liability. Yet in the recent prosecution of David Nosal, the Justice Department applied a computer hacking statute to convict a departing employee for a rather run-of-the-mill trade secret theft: the unauthorized taking of customer lists. Many if not most trade secrets -- like the customer lists involved in Nosal -- are stored on computers. As such, aggressive use of the federal Computer Fraud and Abuse Act could convert many trade secret misappropriations -- traditionally civil offenses and a state law matter -- into federal crimes. And this policy shift -- criminalizing and federalizing -- results from the determinations of prosecutors and judges, and not from Congress.

For more of this comment, see Theft of Trade Secrets Brings Federal Conviction on Loyola Law School's faculty blog, Summary Judgments.

Tuesday, January 7, 2014

The Electronic Silk Road: How the Web Binds the World Together in Commerce by Anupam Chander

I saw a caravan once, in Afghanistan. It was a little caravan: three camels and a small family. But it was enough of a caravan to invoke in my imagination the Old Silk Road. I wondered (until a French officer ordered me to leave the area) where the travelers came from and where they were headed. All I could take away was their direction of travel: East.

In the Electronic Silk Road, Anupam Chander describes digital trade routes. The new trade proceeds along electronic pathways; it is fiber and cable and not camels that transmits value across great distances. But the Electronic Silk Road Chander studies has a marked geography; place still matters. We find Silicon Valley and Bangalore and (as before) China, marking the major stops and starts along the way (Chander likes the word entrepôt).

And the poles of the Electronic Silk Road, like the Old Silk Road, have valency. Chinese goods seduced the West for centuries: spices and trade goods and the silk that gave name to the trading route. The problem for the West was China’s notorious indifference to Western goods -- the West did not produce much the Chinese wished to have. Money was only a partial solution. It could of course pay for Chinese goods, but money, even in the days of gold and silver, was effectively a future claim on the West held by China. The Old Silk Road did not fit the mercantilist design of offsetting streams of goods.

Monday, December 16, 2013

The Sovereign Citizen: Denaturalization and the Origins of the American Republic by Patrick Weil

We each deploy an array of identities in forming our social selves -- we can be, say, a Methodist and also a Southerner, and black and a civil engineer and gay. And all of this and still an American. Each aspect distinguishes us; together they individuate us. No single identity -- even that of our nationality -- adequately describes who we are, how we see ourselves. In these times, we no longer see the possession of one nationality as excluding another; many have more than one nationality. We can be both French and American; one does not displace the other in the modern imagination. (A nod to the late Tom Franck here, who explored these themes, personally and in his writings on nationality.)

Yet certain identities have been viewed as inherently incompatible with the holding of the fullest form of American national identity: U.S. citizenship. At various times one could not be an anarchist or an Asian or a Nazi or a communist and become (or perhaps remain) an American. Patrick Weil examines these disabling identities in The Sovereign Citizen, a thorough history of U.S. naturalization law. His emphasis lies with denaturalization: that is, the legal reversal of the grant of U.S. citizenship to an alien. For much of the 20th century, the recourse to denaturalization expands in parallel with the stiffening of opportunities for immigration. The vulnerability to denaturalization marked the ‘second class’ nature of U.S. citizenship acquired through naturalization; the hold of U.S born citizens on their nationality was (and continues to be) more secure. Denaturalization as a broad practice then collapses: from the Warren Court onward denaturalization has become an exceptional act.

Our view of citizenship shifted during the 20th century. It began as an exclusive (if not jealous) relationship between the United States and its nationals, characterized by duty and loyalty. These understandings differ from today’s far more easygoing tolerance (if not encouragement) of multiple nationalities and distributed allegiance. Weil’s book explores and the targets and the techniques of denaturalization.

Wednesday, December 11, 2013

Extraterritorial Government Use of U.S. Process Patents after Zoltek

The federal government -- and its contractors and subcontractors -- have long enjoyed an effective ‘compulsory license’ for the use or manufacture of inventions covered by a U.S. patent. 28 U.S.C. §1498 relaxes the government’s sovereign immunity and supplies a special remedy to the patent holder. The patent holder may recover reasonable compensation from the federal government for the use or manufacture. Thus, a government contractor can carry out a contract without concern for an infringement action; the government will answer any patent holder’s claims.

The operation of Section 1498 applies to both product and process patents. Section 1498 contains an express limitation to any claims ‘arising in a foreign country.’ This limitation, as well as the territorial limitation found in the basic patent infringement statute [35 U.S.C. §271(a)], and their interpretation with respect to process patents, were the basis of the dispute between Zoltek Corporation and the federal government.

The eventual resolution of the Zoltek litigation by the Federal Circuit [672 F.3d 1309] settles various questions of interpretation concerning the extraterritorial dimensions of the government use ‘license’ with respect to process patents -- but it also leaves a rather worrisome ‘gap’ in the coverage of the basic provisions concerning process patent infringement. Consider these two propositions:

  1. In the absence of authorization, where every step of a process patent is practiced in the United States, liability under 35 U.S.C. §271(a) results. However, if any step of a process patent is practiced outside the United States, there is no direct infringement. 
  2. Where every step of a process patent is practiced outside the United States and the resulting product is imported into or used within the United States, liability under 35 U.S.C. §271(g) results. 
So here’s the gap (and the facts of Zoltek seem to fall into this gap): if a process patent is practiced partly in the United States and partly outside the United States, there may be no liability. This odd result seems to follow from the text of 35 U.S.C. §271(g), which is triggered by the importation or use of a product.