The University of Chicago Law School Faculty Blog

Apple v. Samsung: What Are Patents Good For?

Late Friday afternoon, Apple won a dramatic $1 billion-plus patent verdict against Samsung. The verdict has been described, by Samsung to be sure but also by many commentators, as anti-consumer, meaning presumably that prices will be higher and consumers will have access to fewer innovative products. That of course is a particularly after-the-fact perspective and one that ignores the basic design of the patent system. Pick your favorite “good” patent—meaning one that in your heart of hearts you think is entitled to be enforced against infringers (and if you don’t have such a patent, then that is a very different discussion and you can probably stop reading)—at the point that our good patent is enforced, we are blocking consumers from a product that some firm would like to produce and that consumers are eager to buy.

Politics, Copyright and the First-Amendment Commons

On the eve of the Republican primary in Florida, the Romney campaign started running a new television ad called “History Lesson.” Romney was coming off Newt Gingrich’s double-digit win in South Carolina and the momentum in the campaign for the 2012 Republican seemed to be shifting, perhaps decisively, in Gingrich’s favor. With only ten days between primaries, the Romney campaign needed a new, hard-hitting approach and it needed to act quickly.

The 14th Amendment Meets the Bankruptcy Code

The danger of blogging—especially late on Friday in the Summer—is that it is too easy to jump in on issues that you haven’t considered fully, but I guess that is one of its joys as well.

As an outsider to constitutional law, I have found the discussion of the 14th amendment a tad odd. Section 4 of the 14th Amendment provides that “[t]he validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any state shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.”

What does it mean that valid debts authorized by law “shall not be questioned?” I know what we would say if we were doing ordinary bankruptcy law. One of the key mechanical steps in an ordinary bankruptcy is what we call the allowance and disallowance of claims. A person who wants to collect from a person or firm in bankruptcy files a proof of claim with the bankruptcy court. The bankruptcy judge in turn subject to statutory standards has to decide whether that claim can be allowed or disallowed. The statute provides a number of bases for disallowing particular claims.

Allowance of a claim in bankruptcy just gets you in the door, just gets you the right to stand in line and participate in the case. It tells you nothing about priority of payment—that is your ability to get paid before someone else—and tells you nothing about the timing of payment. The original terms of a debt—legitimately owed debts—are changed all of the time in bankruptcy, indeed that is the point of the proceeding.

So what does it mean when Section 4 of the 14th Amendment says that debts cannot be questioned? I know with a bankruptcy lawyer would say: this is the equivalent of an automatic allowance provision. It means that a number of reasons that a debtor might have to challenge a particular debt cannot be asserted. But that says nothing—zero, nada, zilch—about whether a debtor can default on that debt or choose to prioritize one debt over another. That fact that a debt cannot be disallowed says nothing about default or timing of payment. And default and prioritization are the normal stuff of failing firms. They owe many legitimate debts and they can’t pay them all. The fact that your debt is legitimate—cannot be questioned—doesn’t begin to tell you for an ordinary debtor that you will get paid on time or that there will be no default.

 

Moving Forward in Google Book Search

On Tuesday, after more than a year of silence, Judge Denny Chin rejected the proposed settlement in the Google book search case. The innovative settlement asked more than Rule 23 could deliver. In his words, the settlement “would simply go too far.” Others have offered a detailed run down on the opinion itself (see Kenneth Crews here and James Grimmelmann here) but I want to turn to the bigger picture and ask: Where does this result leave us?

Vernor v. Autodesk: Copyright, Software Upgrades and Secondary Markets

Earlier today, the Ninth Circuit decided an important case about the scope of the first sale doctrine in copyright as applied to computer software. In Vernor v. Autodesk, the court concluded that the documents in question created a license rather than a sale of the underlying software with the consequence that copyright’s first-sale doctrine did not apply. Early commentary—at least of the 140 character kind on Twitter—is largely critical. The case is one of statutory interpretation and, for the Ninth Circuit, figuring out what some of its earlier software cases had said. The case raises some broad issues regarding copyright and secondary markets, but there is a narrower issue regarding software upgrades embedded in the case and that is the one I want to focus on here.

Viacom v. YouTube: When Is It Storage? When Is It a Public Performance?

Today, a federal district court in New York granted YouTube’s motion for summary judgment in its long-running litigation with Viacom. Viacom and—separately—the English Premier League sued YouTube and Google alleging that they were liable for infringing works that users posted on YouTube. Google is understandably trumpeting its victory though it of course is subject to appeal to the Second Circuit.

The issue in the case focuses on the scope of the Digital Millennium Copyright Act’s safe harbor for online service providers set forth in section 512 of the copyright statute. Section 512 is pretty chunky but most of the court’s analysis focuses on section 512(c). That subsection insulates service providers from liability “for infringement of copyright by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider” if the service provider can meet a three-part standard set forth in that subsection.

One part of that standard turns on the knowledge of the service provider of the underlying infringing activity and most of the court’s opinion focuses on how to assess that knowledge. The district court ultimately rejects the notion of generalized knowledge of infringement and instead focuses on “knowledge of specific and identifiable infringements of particular individual items.” We could have a lively discussion about the right way to structure knowledge of user infringement and whether the district court reads the statute correctly but I want to direct my attention elsewhere.

Quoting the statute, the legislative history and then the ensuing discussion of knowledge occupies slightly more than the first 22 pages of the 30-page opinion. I went to direct my attention to, as the court puts it “other points” and in particular to the question of exactly what protection emerges from the “storage” language in 512(c).

Consider a hypothetical. An online service provider offers backup storage for its customers. Customers copy files to a centralized server to protect against a local hard drive failure. Some customers upload files that infringe the rights of copyright holders, as might occur, for example, if a customer scanned an entire book so that it could have an electronic copy of the book. Assume such scanning to be infringing though I do understand that some contend that such full-scale digitization might be fair use under some circumstances.

The service provider notices that through its customers uploads it has amassed a very nice collection of digitized books. It decides to go into the print-on-demand business: customers check to see if a copy of the book is stored centrally and if so the service provider print outs a copy on demand and overnights it to the customer. Are these printed books protected by the storage safe harbor in section 512(c)?

I assume that the answer to that is no. The fact that part of your business may be protected by section 512(c) doesn’t insulate any other aspect of your business from potential charges of copyright infringement. Indeed, I assume that the YouTube district court agrees with me on this as it is crystal clear in stating that to the extent that YouTube’s activities go beyond the scope of storage and “allied functions” then normal principles of copyright infringement apply and YouTube is outside the safe harbor of section 512(c).

The district court’s analysis focuses on the definition of service provider and 512(k)(1) and takes the breadth of that definition to indicate that more than storage must be protected in the safe harbor: “[s]urely the provision of such services, access, and operation of facilities are within the safe harbor when they flow from the material’s placement on the provider’s system or network: it is inconceivable that they are left exposed to be claimed as unprotected infringements.”

It is certainly true that more than storage is protected. Indeed, 512 actually provides four well-defined safe harbors: for transitory digital network communications in 512(a); for temporary storage or system caching in 512(b); for permanent storage under the control of users in 512(c); and for information location tools under 512(d). The definition of service provider needs to encompass each of those four situations but that tells us little about what, if any, allied functions beyond those set forth in 512(a)-(d) are protected.

Change my hypothetical slightly. Switch from books to video and have the service provider offer a video-on-demand business rather than a print-on-demand business. Should we think that the analysis changes? We have now reached the nub of the case that the Second Circuit will have to decide, namely whether a website that enables public performance of works uploaded by users is engaging in simple storage or is taking a step beyond that as occurs, I believe, in my print on-demand hypothetical.

Supreme Court Blitzes NFL in American Needle

In the National Football League, 9-0 means three field goals, perhaps a tight defensive battle in the snow in the NFC’s black-and-blue division. In the Supreme Court, 9-0 is a shellacking. The NFL could have just been content to run out the clock, but instead, it got fancy and threw one away. The Supreme Court issued its opinion in the American Needle case this morning and ruled that the actions of the NFL in licensing its trademarks for sports gear were collective actions subject to Sherman Act Section 1 inquiry.

Scanning the Public Domain

I am working on a paper on the history of razors and blades (yes, I know that sounds obscure, even for an ivory tower sort; I’ll leave it to another day to try to persuade you that you should be fascinated, too). I have been reading turn of the century—that is the 19^th century—catalogues. The 1895 Montgomery Ward & Co. catalogue was a wonder. Montgomery Ward was the Amazon of its day, a market leader in the mail-order business. Local stores, especially outside of big cities, might offer only a limited selection, but Montgomery Ward promised the world to the entire country. Catalogue No. 57—Spring and Summer, 1895—was a behemoth, running 624 pages and offering tens of thousands of items for sale.

What is Your Killer App for the iPad?

The iPad arrives on Saturday. Not mine, unfortunately, as I want to see it live and in person before buying, but the iPad itself. I am not enough of a fanboy to rush out to see one immediately, though I confess to be eager to do so. I owned an original 1984 Macintosh and though I long ago joined the dark side of the force—Windows—I have long admired Apple's design sense. The iPhone/iPod Touch platform has been remarkably successful and has powerfully shaped the evolution of the smartphone. I confess to having an most unnatural relationship with my iPod Touch. Steve Jobs has billed the iPad as the arrival of the newest third screen, a device that will join our laptops and smartphones as part of our daily digital arsenal. (I guess Steve doesn’t watch very much TV, as this would be a fourth screen for many of us.) That said, there clearly is uncertainty about precisely how large the market is for the iPad and that is driven by one key question: what will you do with it?

Moving Forward in Google Book Search

Yesterday, the Department of Justice filed its second statement of interest in the pending Google Book Search (GBS) case. We now have a full slate of second-round filings as we head towards the fairness hearing set for a New York federal court on February 18, 2010. Where do we stand?

To recap very quickly, Google launched GBS with one core thought: all books available everywhere instantly. To try to come even close to that, Google entered into partnerships with leading libraries to gain access to their holdings so as to make digital copies of those works. Google then put the books online but did so in a way that tried to be sensitive to copyright (putting to one side, of course, the massive copying that it took to reach that point). Google offered full-text download access to works in the U.S. public domain. Google also offered more limited access to in-copyright works through agreements it struck with publishers.