It’s no secret that patent infringement is one of the hottest areas in which to practice law these days.  The inventor-friendly principles that governed the original United States Patent Office back when Thomas Jefferson ran it (though he personally wasn’t too much a fan of patents) are still the law today, even though the scope of prior art in most industries has expanded far beyond the point where any patent examiner could reasonably review it, much less ensure an inventor in an ex parte proceeding fairly describes it.

These days, if an inventor has enough determination, or enough funds to pay for his or her patent registration attorneys to go the whole nine yards, then they can likely obtain a patent even if their invention is at beast only arguably novel or useful. Once granted, the patent has immense value, and is protected against all but the strongest invalidity challenges thanks to the Supreme Court’s opinion in Microsoft v. i4i last summer.

As a matter of law, from the plaintiff’s perspective patent infringement claims are a sweet deal (assuming your claims aren’t totally meritless, in which case the sanctions can be quite severe). Patent infringement cases are less of an uphill climb than, say, anti-trust, drug or medical device product liability, or any claims dependent upon a class action, all of which have been under attack by the Supreme Court for years.  It’s no surprise that defendants facing patent infringement claims often run scared to large corporate defense firms, asking them to pull out all the stops to defend them.

As a practical matter, though, patent infringement cases are a little more complicated than that.  Continue Reading The Patent Troll Lawyer Business Model

[UPDATE, February 3, 2012: Adam Reid points out via Twitter that Apple has substantially re-written their EULA addressing the concerns raised in my post. (Reid characterizes them as merely “clarifying” the EULA). Now, the EULA asserts that “If you want to charge a fee for a work that includes files in the .ibooks format generated using iBooks Author, you may only sell or distribute such work through Apple, and such distribution will be subject to a separate agreement with Apple.” That puts Apple on far steadier ground — they no longer claim an exclusive license to author’s works at all, but rather restrict use of iBooks-formatted files.]

It seems Dan Wineman was the first to sound the alarm, with Ed Bott using his soapbox at ZDNet to shout it from the rooftops: Apple’s new “free” iBooks Author program, which allows authors to create their own professional layouts while they write books, includes an astonishingly greedy and overbearing clause in its end-user license agreement (“EULA”):

B. Distribution of your Work. As a condition of this License and provided you are in compliance with its terms, your Work may be distributed as follows:

  •  (i) if your Work is provided for free (at no charge), you may distribute the Work by any available means;
  • (ii) if your Work is provided for a fee (including as part of any subscription-based product or
    service), you may only distribute the Work through Apple and such distribution is subject to the following limitations and conditions: (a) you will be required to enter into a separate written agreement with Apple (or an Apple affiliate or subsidiary) before any commercial distribution of your Work may take place; and (b) Apple may determine for any reason and in its sole discretion not to select your Work for distribution.
Apple will not be responsible for any costs, expenses, damages, losses (including without limitation lost business opportunities or lost profits) or other liabilities you may incur as a result of your use of this Apple Software, including without limitation the fact that your Work may not be selected for distribution by Apple.

As Bott explains, “The nightmare scenario under this agreement? You create a great work of staggering literary genius that you think you can sell for 5 or 10 bucks per copy. You craft it carefully in iBooks Author. You submit it to Apple. They reject it. Under this license agreement, you are out of luck. They won’t sell it, and you can’t legally sell it elsewhere. You can give it away, but you can’t sell it.”

Jason Gilbert at Huffington Post considers the problems in enforcing the EULA as a “contract of adhesion” (because it’s included in the license and you have no ability to negotiate it) and as including “unconscionable” terms (a rare legal doctrine that courts virtually never apply). But there’s a more fundamental problem: the terms are unenforceable under the Copyright Act. Continue Reading Is Apple’s Dismal iBooks Author Software License Even Enforceable?

Yesterday, many of the largest and most influential websites on the Internet exercised their power in our attention economy by either going entirely dark (like Wikipedia and reddit) or by prominently displaying calls to action that recommended users contact their representatives and senators about the Stop Online Piracy Act (“SOPA”) in the House and the Protect IP Act (“PIPA”) in the Senate.  The effort apparently worked, with support for both bills collapsing, particularly in the Senate, where even seven of the former co-sponsors of the bill renounced their support. Of course, there’s a good chance some of the more dubious provisions of both will come back at some point.

There is of course no doubt that the SOPA and PIPA bills were bad laws, little more than major media and content companies buying from elected representatives more power to enforce private copyright interests than your local county District Attorney or United States Attorney has to prosecute violent crime.  The bills astonishingly allowed private companies to take down entire websites, and force other websites to change their entire business practices, upon nothing more than a vague allegation of copyright infringement.  As Donny Shaw at OpenCongress described it more than a month ago:

Back in the old days, Congress was a branch of the federal government, separate from corporations, that wrote and passed laws to defend the general welfare of the United State. These days, however, that work is being outsourced to private interests while the actual members of Congress, quaint as they are, spend their time fundraising for their next re-election campaign.

Obviously Congress bears most of the blame for allowing such an absurd piece of special interest legislation to even make it to the floor, and SOPA/PIPA are certainly not the only examples of Congress granting special privileges to content companies under the guise of copyright law, but let’s not forget another party responsible for this set of affairs: the United States Supreme Court. Continue Reading Blame The Supreme Court, Too, For SOPA and PIPA

There’s an interesting dichotomy in artistic fields like photography and music in which the audience often describes art as having ineffable qualities arising from inspiration, creativity, and talent, while artists describe art like work as being the product of persistence, experimentation, and drive. Great art looks effortless but never is.

Erica Simone is a photographer in New York who put together a project, “Nue York,” involving an unusual sort of self-portrait:

All of the photos are of her doing every day New York activities from riding the subway, buying a hot dog from a food cart, window shopping, shoveling snow, using an ATM machine at HSBC, except that in each one she’s nude, barring the occasional hat or pair of shoes and of course her ever visible tattoo. The photographs were taken by her, using a tri-pod and shutter release.

She’s criticizing image obsessed, overly fashion-conscious New Yorkers who care more about their looks and the next designer sale than what’s going on around them in the city. The concept for her collection was born from these observations and asking herself: “what would we do without clothes?, would we feel comfortable just being who we are?”

There’s of course nothing new about using the naked female form to express an artistic point — some of the oldest human art found does exactly that that — and there is similarly nothing new or original about exploring and pushing social boundaries through nudity.

But there is something new, creative, and original about what Erica Simone did. To understand that original element, we turn to an artist who knew more than a little bit about pushing social boundaries, or at least a lawsuit that related to him:

As Judge Pauley admirably recounted in SHL Imaging, Inc. v. Artisan House, Inc., photography was initially met by critics with a degree of skepticism: a photograph, some said, “copies everything and explains nothing,” and it was debated whether a camera could do anything more than merely record the physical world. 117 F.Supp.2d 301, 307 (S.D.N.Y.2000) (internal quotation omitted). These largely aesthetic debates migrated into legal territory when Oscar Wilde toured the United States in the 1880s and sought out Napoleon Sarony for a series of publicity photographs to promote the event.[6] Burrow-Giles, a lithography firm, quickly copied one of Sarony’s photos and sold 85,000 prints without the photographer’s permission. Burrow-Giles defended its conduct on the ground that the photograph was a “mere mechanical reproduction of the physical features” of Wilde and thus not copyrightable. Burrow-Giles, 111 U.S. at 59, 4 S.Ct. 279. Recognizing that Oscar Wilde’s inimitable visage does not belong, or “owe its origins” to any photographer, the Supreme Court noted that photographs may well sometimes lack originality and are thus not per se copyrightable. Id. (“the ordinary production of a photograph” may involve “no protection” in copyright). At the same time, the Court held, a copyright may be had to the extent a photograph involves “posing the said Oscar Wilde in front of the camera, selecting and arranging the costume, draperies, and other various accessories in said photograph, arranging the subject so as to present graceful outlines, arranging and disposing the light and shade, suggesting and evoking the desired expression. . . .” Id. at 60, 4 S.Ct. 279. Accordingly, the Court indicated, photographs are copyrightable, if only to the extent of their original depiction of the subject. Wilde’s image is not copyrightable; but to the extent a photograph reflects the photographer’s decisions regarding pose, positioning, background, lighting, shading, and the like, those elements can be said to “owe their origins” to the photographer, making the photograph copyrightable, at least to that extent.

From Meshwerks, Inc. v. Toyota Motor Sales USA, Inc., 528 F.3d 1258 (10th Cir. 2008)(bolding added).

Just like how no photographer can claim copyright protection over Oscar Wilde’s face — or Miles Davis playing the trumpet — no one can copyright the idea of taking nude pictures, not even nude pictures on the streets of New York City. Indeed, no one can copyright any ideas at all, they can only copyright their particular expression of an idea. See Feist Publications, Inc. v. Rural Telephone Service Co., 499 U.S. 340 (1991)(“[N]o author may copyright facts or ideas. The copyright is limited to those aspects of the work—termed `expression’—that display the stamp of the author’s originality,” quoting Harper & Row, Publishers, Inc. v. Nation Enterprises, 471 U.S. 539 (1985)).

Rather, a photographer can claim copyright protection and ownership of their own creative elements, like composition, lighting, color, contrast. In short, if you didn’t create the element in question by positioning the subject, pointing the camera, adjusting the camera, or processing the photograph, then you have no claim to ownership over that element of the work.

After Simone published her work, Mullen, the advertising agency for Zappos put together an advertising campaign that involved, perhaps not coincidentally, naked individuals in urban environments, to advertise that Zappos sells more than shoes. Frankly, it seems like an obvious idea to me; the interesting part is that a company of Zappos’ size committed to it.

Simone is quite upset about the matter, upset enough to talk with AdWeek and assert her belief that Mullen “ripped her off.” She says she’s “waiting to hear from different lawyers on what they plan on doing.”

Well, let me help out.

Village Voice seems to have the most reasonable analysis of the pictures’ similarities to one another:

We’re almost always on the side of the little guy in situations like these — take, for instance, Forever21’s beef with satire site WTForever21 or Urban Outfitters seemingly grabbing local artists’ designs. But, at the same time, and as every blogger knows, sometimes ideascan happen simultaneously among different people. And though we feel Simone’s pain, can you really own “being naked and doing everyday things”? If so, what does that mean for those Bluefly ads, which go all the way back to 2005? Or…for our lovely topless lady of the Bowery, for that matter?

And, yet, when we look at the catalog of Zappos ads, which also include riding a Vespa and hailing a cab, all shot in Manhattan locations, there does seem to be a certain similarity. Although Simone’s photos are prettier, and more authentic: During the Zappos shoot, reports the New York Times, “the models wore pasties and thongs or tiny bikinis, which were edited out later.”

Indeed. The jogger? The Vespa? There seems to be some similarity there, but even if we assume that Mullen saw Simone’s art and decided to make their own version, there still likely isn’t any claim there. The new art is simply too different; the idea of a naked woman jogging through New York is an idea, not the expression of an idea.

If Mullen had simply copied her photographs, or had simply re-done pictures with the same composition, that would be an infringement. But the mere idea of public nudity in New York City is not, by itself, protected by copyright.

[Update: the America Invents Act passed. Interesting passage from one of the reports: “Companies like Google, Dell, IBM, Apple, Cisco, and others also applauded the bill’s passage.  Innovation Alliance, which represents smaller tech companies, was more muted in its response. The bill was criticized by some in Congress for favoring larger businesses.” Indeed. The primary change to “first to file” and the secondary change allowing more administrative appeals benefits large companies with large budgets for patent filings. It doesn’t do anything at all to help small businesses; it puts them at a competitive disadvantage.

Update II: Freakonomics has a post about a recent study indicating that, when Canada passed the same change to “first to file,” individual inventors were disadvantaged. That’s consistent with my analysis below.]

Patent trolls, particularly software patent holding companies, are back in the news again with an excellent This American Life broadcast, “When Patents Attack”, examining Nathan Myhrvold’s company, Intellectual Ventures:

We told Intellectual Ventures that Chris Sacca compared their business to a mafia shakedown and in an e-mail, Peter Detkin called that ridiculous and offensive. He then reiterated some of the arguments you’ve heard about how IV protects inventors and went on to say, “We’re a disruptive company that’s providing a way for patent-holders to recognize value.” (By “recognize value,” he means “make money.”) “That wasn’t available before we came on the scene, and we are making a big impact on the market. That obviously makes people uncomfortable. But no amount of name-calling changes the fact that ideas have value.”

David E. Martin, Chairman of M·CAM Inc. (which has various patent analysis services), told NPR that ‘30 percent of U.S. patents are essentially for things that have already been invented.’

That’s a problem. Software patents have fallen under particular criticism because of their ability to frustrate the fast pace (and sometimes shoestring budgets) of internet startup companies. Smart folks who know about software and startups like Paul Graham and Marco Arment have differing views on whether software should even be eligible for patent protection.

Where ever one falls on it — I represent plaintiffs (in this context, inventors or their assignees) so am generally favorable to them, though at the moment I’m defending a infringement suit, too — there are obviously numerous problems with our patent prosecution and patent infringement litigation systems. In sum, patents are granted too easily and then patent infringement suits are too expensive to defend.

Continue Reading The America Invents Act’s Patent Reform Might Strengthen Patent Trolls

[Update: January 12, 2013. RIP, Aaron Swartz. He was 26. His family has released a statement describing his death as “the product of a criminal justice system rife with intimidation and prosecutorial overreach.” Eulogies from Cory Doctorow and Rick Perlstein

I wrote the post below back in July 2011, when the indictment was filed (then updated it once in Sepetember 2012). I thought from the onset the prosecution was dubious; after Swartz’s death, the expert who was going to testify on his behalf posted his conclusions, conclusions that to me are damning to the U.S. Attorney’s office. MIT’s network was extraordinarily open by design:

Aaron Swartz was not the super hacker breathlessly described in the Government’s indictment and forensic reports, and his actions did not pose a real danger to JSTOR, MIT or the public. He was an intelligent young man who found a loophole that would allow him to download a lot of documents quickly. This loophole was created intentionally by MIT and JSTOR, and was codified contractually in the piles of paperwork turned over during discovery.

In light of the expert’s disclosures — which suggest that Swartz did have “authorization” to obtain the articles, due to the structure of MIT’s network and the various JSTOR agreements — it seems that the prosecution was even weaker than it appeared on the surface. An AP article notes that JSTOR’s attorney, Mary Jo White, the former top federal prosecutor in Manhattan, had called Stephen Heymann, the lead Assistant U.S. Attorney on the case, to ask him to drop the prosecution; instead, the U.S. Attorney’s office continued to demand Swartz plead guilty to all charges. 

I think the circumstances demand an explanation from U.S. Attorney Carmen Ortiz about what she sought to accomplish with this prosecution (and what transpired between her and Heymann), as well as a statement from the White House as to whether they will continue these “exceeding authorization” prosecutions in the future. Arguably breaching a Terms of Service should not even arguably be a crime. For further reading on the abuse of prosecutorial discretion in light of the consequences here, see Lessig’s “prosecutor as bully.” Dan Gillmor has thoughts about how to remember him by continuing his work

Update: January 14, 2013. Back in late 2011, Aaron wrote to me about this post. My recollection here.]

 

The New York Times reports:

Aaron Swartz, a 24-year-old programmer and online political activist, has been indicted in Boston on charges that he stole more than four million documents from the Massachusetts Institute of Technology and JSTOR, an archive of scientific journals and academic papers. (Read the full indictment below.)

Mr. Swartz was indicted last Thursday by the United States Attorney for the District of Massachusetts, Carmen M. Ortiz, and the indictment was unsealed Tuesday. The charges could result in up to 35 years in prison and a $1 million fine.

JSTOR’s press statement is here. One of Swartz’s companies, Infogami, was funded by Y Combinator and acquired by reddit, so this is big news in the tech world. Demand Progress, a non-profit Swartz founded, is understandably upset:

Cambridge, MA –  Moments ago, Aaron Swartz, former executive director and founder of Demand Progress, was indicted by the US government. As best as we can tell, he is being charged with allegedly downloading too many scholarly journal articles from the Web. The government contends that downloading said articles is actually felony computer hacking and should be punished with time in prison.

“This makes no sense,” said Demand Progress Executive Director David Segal; “it’s like trying to put someone in jail for allegedly checking too many books out of the library.”

“It’s even more strange because JSTOR has settled any claims against Aaron, explained they’ve suffered no loss or damage, and asked the government not to prosecute,” Segal added.

There’s an interesting discussion (mostly about JSTOR) at Y Combinator. The commentators at reddit aren’t impressed either:

Good thing he didn’t rape or murder someone or he’d be facing 15 years.

* * *

Hell, if he was a Wall Street CEO they’d just give him a bonus.

Indeed. Let’s look at the indictment. He’s charged with:

  • 18 U.S.C. § 1343 (Wire Fraud)
  • 18 U.S.C. § 1030(a)(4) (Computer Fraud)
  • 18 U.S.C. § 1030(a)(2), (c)(2)(B)(iii)(Unlawfully Obtaining Information from a Protected Computer)
  • 18 U.S.C. § 1030(a)(5)(B), (c)(4)(A)(i)(I),(VI)(Recklessly Damaging a Protected Computer)
  • 18 U.S.C. § 2 (Aiding and Abetting)
  • 18 U.S.C. § 981(a)(1)(C), 28 U.S.C. § 2461(c),and 18 U.S.C. §982(a)(2)(B) (Criminal Forfeiture)

18 U.S.C. § 1030 is better known as the Computer Fraud and Abuse Act, which I’ve written a little bit about here. As I wrote there, “If the Circuit Courts and the Supreme Court interpret the CFAA the same way they’ve interpreted the RICO Act, we’ll see a lot more of these claims in the future,” and it sure seems like given how the Swartz indictment is primarily based on CFAA violations.

[Update: September 12, 2012. Seth Finkelstein notes that a superseding indictment was entered. As far as I can tell, the charges aren’t really different, there’s just more factual detail supplied. Wired explains. As I mentioned in my original post, even if we assume the prosecutor can prove every word of the indictment, it is by no means clear that Swartz has actually violated the Computer Fraud and Abuse Act.]

But there are a few problems, one democratic (little “d”) problem and a couple legal problems.

Continue Reading Examining The Outrageous Aaron Swartz Indictment For Computer Fraud

It’s old hat to blog about the problems of copyright law (e.g., here’s some of my thoughts on copyright trolls). There are over a quarter million pages discussing Lawrence Lessig’s “Free Culture” idea. Summed up in a quote:

There has never been a time in history when more of our ‘culture’ was as ‘owned’ as it is now. And yet there has never been a time when the concentration of power to control the uses of culture has been as unquestioningly accepted as it is now.

Which brings us to Miles Davis. No poetic license is needed to say that Miles Davis lives in the souls of millions of Americans, to say that, at a minimum, Kind of Blue is part of the fabric of American society. Whatever your preference, from electronica to indie rock, from Frank Zappa to Radiohead, there’s little doubt that consoles you when you’re down and inspires you when you’re up was influenced by Miles Davis, and likely specifically by Kind of Blue.

So it was with Andy Baio, who organized a “chiptune” tribute to Kind of Blue called Kind of Bloop. “Chiptune,” in which 8-bit electronic synthesizers are used to create the music, of course didn’t exist as a musical genre when Miles died in 1991. Such is the extraordinary influence of Davis.

So Baio did what a person preparing a music complication is supposed to do:

I went out of my way to make sure the entire project was above board, licensing all the cover songs from Miles Davis’s publisher and giving the total profits from the Kickstarter fundraiser to the five musicians that participated.

Baio’s post recounting it all is titled, “Kind of Screwed,” so you can see where this is going:

But there was one thing I never thought would be an issue: the cover art.

Before the project launched, I knew exactly what I wanted for the cover — a pixel art recreation of the original album cover, the only thing that made sense for an 8-bit tribute to Kind of Blue. I tried to draw it myself, but if you’ve ever attempted pixel art, you know how demanding it is. After several failed attempts, I asked a talented friend to do it.

You can see the results below, with the original album cover for comparison.

Kind Of Blue - Pixelated Fair Use Example

It’s the same image, but different because it is pixelated into “pixel art,” transformed in the graphical analogy to the 8-bit chiptune sonic crunching.

That prompted a demand letter from attorneys for Jay Maisel, the photographer who shot the original photo of Miles Davis. I won’t spoil the rest of Baio’s post, which is a must-read for anyone interested in copyright, except to say it ends with Baio paying Maisel $32,500 and agreeing not to use the pixelated image anymore.

Baio’s discussion is nothing unusual or unexpected to people familiar with debates over the viability of “fair use” in copyright law, but Baio writes it in a clear, evocative style with exceptional examples of the type of minimalist modifications that are commonplace on the Internet these days and undoubtedly their own breed of transformative art.

Baio did not admit guilt through his settlement, which makes it all seem even more unfair. As Jason Kottke says,

Seeing this kind of behavior from large clueless companies is almost expected but from a a fellow creative artist? Inexcusable. Surely some reasonable arrangement could have been made without visiting enormous stress and a $30K+ bill onto a man with a young family. Disgusting.

That sentiment seems pretty common across the Internet. Maisel was, of course, within his rights to raise the demand. Which raises an obvious question: should our law allow someone to do something “inexcusable” and “disgusting?”

Of course, there is a considerable Devil’s Advocate argument to be made here. What would Baio think if a group of artists devoted extensive time, energy and money towards creating an album of entirely new compositions, with original artwork, just to see someone either copy it without paying or claim a “transformation” through a trivial change in the sonic distortion? We need some type of protection for creative works, the question is what form that protection takes.

Fair use,” however, isn’t the answer, because “fair use” isn’t an answer, it’s a means of formulating a factual questions for a jury to decide, i.e.:

Section 107 also sets out four factors to be considered in determining whether or not a particular use is fair:

  1. The purpose and character of the use, including whether such use is of commercial nature or is for nonprofit educational purposes
  2. The nature of the copyrighted work
  3. The amount and substantiality of the portion used in relation to the copyrighted work as a whole
  4. The effect of the use upon the potential market for, or value of, the copyrighted work

These words do not, themselves, answer anything. They do not tell a documentary filmmaker whose camera pans across a TV screen in the room or a journalist publishing excerpts from a not-yet published work if they have infringed upon the original creator’s copyright. They set up a framework by which a jury decides the question.

Such is the nature of the law. I represent plaintiffs, and so have, unsurprisingly, long argued in favor of the need to use a jury trial, rather than judicial decisions based on mere lawyer arguments (rather than sworn testimony), as well as the problems with “loser pays” systems.

But copyright is different because copyright law is different, primarily because of the “statutory damages.” That’s how a record company can convince a court to enter a judgment deeming an MP3 to be worth $22,500 — because that’s the law as Congress has written it.

That’s what apparently happened here. Maisel’s lawyers claimed they sought “either statutory damages up to $150,000 for each infringement at the jury’s discretion and reasonable attorneys fees or actual damages and all profits attributed to the unlicensed use of his photograph, and $25,000 for Digital Millennium Copyright Act (DMCA) violations.” (Emphasis mine). Rubbish; the “actual damages” were minimal, as were the “all profits.” They were going to demand the statutory damages, the same ones that absurdly and unreasonably hold any copyright infringement or any size — even if only a single Kind of Bloop was sold — is worth up to $150,000.

In a word, that’s unjust. A brain damaged child is not presumed to have suffered any injury. A burned down house is not presumed to be worth a single dollar. A defrauded investor is not presumed to have lost anything at all. Each must prove, under the law, every penny to which they are entitled; the sole exception to this law is the statutory damages under copyright law.

I have a good idea of why Maisel wanted $32,500: that was probably somewhere near the fees his own lawyers charged him to investigate the case, send threatening letters, and jawbone Baio into giving up. In most lawsuits — like personal injury, negligence, or fraud — that sort of excess would be the plaintiff’s problem, since he wouldn’t be able to recover the attorney’s fees, much less “statutory damages” far larger than the real damage. The statutory damages were the Sword of Damocles dangling over Baio’s head, the only real threat that compelled him to settle rather than simply let the court process do its work and then, in the unlikely event he was found liable, pay back the de minimus “actual damages” and “profits” from the infringement.

It doesn’t have to be that way; we can send copyright claims initially to agency review or to arbitration or alter the statutory damages available. I’m normally on the plaintiff’s side in copyright claims, but, frankly, the cases I work on — in which a profitable business has literally copied my client’s creative work, without attribution or license — don’t need the statutory damages to survive, they can prove their damages just like my personal injury and financial fraud clients, and they would likely benefit from early resolution like agency review.

One of the nice things about the being a Justice of the United States Supreme Court is that you never have to explain yourself. You don’t have to ask questions at oral argument. You don’t have to read the briefs filed by the parties, not really, because you can interpret the facts stated and arguments raised however you want.

You certainly don’t have to be consistent across your own opinions. In one case, you can make an argument inconsistent with the argument you made in another case. Few people will notice and, worse, fewer will care, because caring about the consistency of Supreme Court opinions is a Sisyphean exercise in futility. The Justices are not going to see the error of their ways and change their minds.

Which brings us to Microsoft v. i4i Limited Partnership and Janus Capital Group v. First Derivative Traders, two major Supreme Court opinions over the past few days, in, respectively, patent infringement and financial securities fraud law.

First, in Microsoft v. i4i, the Supreme Court decided that a defendant challenging the validity of a patent-in-suit has to demonstrate the patent’s invalidity through “clear and convincing evidence,” a higher standard than the “preponderance of the evidence” burden of persuasion that’s the default in most cases. It wasn’t an unusual or unexpected outcome: the Federal Circuit has been applying that exact role for a generation now, and most everyone assumed the Supreme Court would leave things as they are. Patently-O has a longer summary.

There’s been a huge debate lately, particularly in the venture capital, startup, and technology industries, about the loose, excessively pro-patent-holder standards of patent law. I don’t want to jump into the debate about whether or not such a rule is the right rule as a matter of legal policy. Rather, let’s take a look at how the Supreme Court reached their answer:

In asserting an invalidity defense, an alleged infringer must contend with the first paragraph of §282, which provides that “[a] patent shall be presumed valid” and “[t]he burden of establishing invalidity . . . rest[s] on the party asserting such invalidity.”…

We begin, of course, with “the assumption that the ordinary meaning of the language” chosen by Congress “accurately expresses the legislative purpose.” Engine Mfrs. Assn. v. South Coast Air Quality Management Dist., 541 U. S. 246, 252 (2004) (internal quotation marks omitted). But where Congress uses a common-law term in as tatute, we assume the “term . . . comes with a common law meaning, absent anything pointing another way.” Safeco Ins. Co. of America v. Burr, 551 U. S. 47, 58 (2007) (citing Beck v. Prupis, 529 U. S. 494, 500–501 (2000)). Here, by stating that a patent is “presumed valid,” §282, Congress used a term with a settled meaning in the common law.

Our decision in RCA, 293 U. S. 1, is authoritative. There, tracing nearly a century of case law from this Court and others, Justice Cardozo wrote for a unanimous Court that “there is a presumption of validity, a presumption not to be overthrown except by clear and cogent evidence.” Id., at 2. …

Thus, by the time Congress enacted §282 and declared that a patent is “presumed valid,” the presumption of patent validity had long been a fixture of the common law. According to its settled meaning, a defendant raising an invalidity defense bore “a heavy burden of persuasion,” requiring proof of the defense by clear and convincing evidence. Id., at 8. That is, the presumption encompassed not only an allocation of the burden of proof but also an imposition of a heightened standard of proof.

That sort of analysis is a bit unorthodox — typically, courts are supposed to look first to the “plain meaning” of a statute and ignore anything about the statute’s drafting or origin unless that meaning is ambiguous — but it’s not an unreasonable analysis. In essence, the Supreme Court looked at the whole context of patent infringement law and decided that, because the federal courts have believed for decades that Congress believes that the patent office believes that it only grants good patents because it believes that inventors effectively disclose all relevant facts, the burden for anyone trying to argue that the patent office either made a mistake or didn’t have the full picture in front of it should be very high.

The Supreme Court recognized that was a bit of a stretch, and so used a couple of tools in the statutory interpretation toolbox, like the canon against superfluity (i.e., that a court should give effect “to every clause and word of a statute.”), to knock down multiple arguments raised in opposition.

Fair enough, I suppose. These questions don’t have easy, obvious answers.

But that’s where Janus Capital Group v. First Derivative Traders raises problems. In Janus, the Supreme Court decided that investors defrauded by misleading statements put into a financial prospectus by an investment advisor didn’t have viable direct securities fraud claims against the investment advisor. D & O Diary summarizes it more fully.

Did the Supreme Court reach that answer by looking at securities act as a whole? Did the Justices look at the circumstances surrounding the passage of the act, and carefully examine, with great deference, how the act has been interpreted the past?

Of course not. Those five justices of the Supreme Court whose nominations were endorsed by the large public corporations and Director and Officer liability insurance companies that make up the most powerful corporation lobbying groups in the country only deploy those analytical tools in certain circumstances. They read the key sentence Rule 10b-5 (17 CFR §240.10b–5(b)) that makes it unlawful for “any person, directly or indirectly, . . . to make any untrue statement of a material fact” in connection with the purchase or sale of securities in such a way that “any person” did not mean “any person,” “directly or indirectly” did not mean “directly or indirectly,” and “make” did not mean what any of the rest of us believe “make” means. No, those words are all superfluous except for “make,” which now means:

For purposes of Rule 10b–5, the maker of a statement is the person or entity with ultimate authority over the statement, including its content and whether and how to communicate it. Without control, a person or entity can merely suggest what to say, not “make” a statement in its own right. One who prepares or publishes a statement on behalf of another is not its maker. And in the ordinary case, attribution within a statement or implicit from surrounding circumstances is strong evidence that a statement was made by—and only by—the party to whom it is attributed.

That interpretation is entirely new. The Supreme Court already held almost twenty years ago in Central Bank of Denver, N. A. v. First Interstate Bank of Denver, N. A., 511 U. S. 164 (1994) that “Any person or entity, including a lawyer, accountant, or bank, who employs a manipulative device or makes a material misstatement (or omission) on which a purchaser or seller of securities relies may be liable as a primary violator under 10b–5, assuming all of the requirements for primary liability under Rule 10b–5 are met.” “Any person” means “any person.”

The new opinion destroys liability for those same “lawyers, accountants, or banks” identified in Central Bank through an interpretation of “make” that Justice Breyer quite rightly argues in dissent:

The English language does not impose upon the word “make” boundaries of the kind the majority finds determinative. Every day, hosts of corporate officials make statements with content that more senior officials or the board of directors have “ultimate authority” to control. So do cabinet officials make statements about matters that the Constitution places within the ultimate authority of the President. So do thousands, perhaps millions, of other employees make statements that, as to content, form, or timing, are subject to the control of another.

Of course, there isn’t a shadow of doubt that the Congress which passed the Securities Exchange Act of 1934 in the midst of the Great Depression intended the law’s scope to be as broad as possible and to impose liability on “any person” who “directly or indirectly … make[s] any untrue statement of a material fact” in connection with a security.

But who cares what Congress says? Five Justices of the Supreme Court reach a preferred conclusion and then either invent or omit words as best suits them. Little wonder lawyers and courts alike no longer look to the Supreme Court for guidance in interpreting the law, they just skim the holdings in the syllabus and try to figure it out themselves. The shame is that this conservative judicial activism persists unabated.

It was quite funny, if you’re into dark humor. Yesterday a group affiliated with the prankster Yes Men set up a “Coal Cares” website which, while falsely claiming affiliation with the very real coal company Peabody Coal, offered free children’s-themed asthma inhalers to any family living within a 200 mile radius of a coal plant. They then offered up such compelling facts in “favor” of coal as:

Wind Kills

Wind turbines can kill up to 70,000 birds per year, or 4.27 birds per turbine per year. Coal particulate pollution, on the other hand, kills fewer than 13,000 people per year.

Parody on par with The Onion. The site subversively directed visitors to pages like a non-profit report discussing “Death and Disease from Power Plants,” which shows that half of the country by geography, and more than half by population, is at an increased risk of death due to power plants.

Of course there’s nothing funny about electricity: we pay for power with lives. Put aside the cost in lives and treasure for our oil-dependent foreign policy. Here in the United States, natural gas drilling and hydraulic fracking contaminate some water supplies (like the water supplies around the Marcellus Shale here in Pennsylvania) so badly the drinking water literally catches fire from all the methane gas. Measured by kilowatt produced, coal production kills more than four-hundred times as many people as nuclear power. Coal plants dump into the atmosphere hundreds of thousands of tons of pollutants, including mercury, arsenic, lead, and dioxins — leading every year to 17,000 premature deaths, 120,000 cases of childhood asthma, and 12,000 hospitalizations and emergency room visits.

Maybe that’s a necessary evil. We shouldn’t keep all the lights on all night, but we obviously have to keep some lights on, keep some machines humming. Whatever you think about coal, oil, and climate change, the balance between public safety, future energy resource availability, and present economic security is one of the defining issues of our age, one that requires a robust and on-going debate.

Which brings us to the law. Can Peabody Coal sue the Yes Men for the spoof?

Maybe. (I know, lawyers say “maybe” a lot.)

But we have a lot more concrete idea of that “maybe” based upon two similar pranks and lawsuits, one involving Koch Industries (which the defendants just won on non-free speech grounds), and on brought by the U.S. Chamber of Commerce’s against the Yes Men for a similar stunt two years ago in which they faked a press conference in which the Chamber of Commerce changed course on climate change. A copy of the Chamber of Commerce’s Complaint is available here, alleging claims under the Lanham Act, including trademark infringement, unfair competition, trademark dilution, false advertising, cyberpiracy, in addition to several common law claims, including unlawful trade practices, publication of injurious falsehood, and “prima facie” tort.

The Yes Men, represented (pro bono, I presume) by the Electronic Frontier Foundation and Davis Wright Tremaine, filed a motion to dismiss (here), Public Citizen filed an amicus in support (here), the Chamber of Commerce responded (here), and the Yes Men replied (here), and they’re all still awaiting the Court’s order on that. In line with the prevailing practice in the District Court there, no discovery has taken place while the motion to dismiss is pending.

The Chamber v. Yes Men case is fascinating, well studied by anyone interested in free speech issues or who litigates defamation or trademark infringement cases. The case is right on the cutting edge of the First Amendment: on the one hand, we undoubtedly have speech on a matter of considerable public concern and importance — lobbying on climate change — while on the other hand we have an intentional attack on a private entity. Any future lawsuit by Peabody Coal would raise essentially the same issues.

Both situations raise an aspect of the First Amendment that is rarely considered. There are many ways in which to analyze the meaning of “free speech.” The most common analysis relates to what a defendant may say without legal consequence. In civil defamation lawsuits, for example, “truth is an absolute defense.” In other words, someone can always say the truth without suffering any legal consequences from a defamation claim.

Another way of analyzing free speech relates not to the absolute protections on speech, but on the necessary balance between a plaintiff’s right to seek compensation for their damages in a civil lawsuit and a defendant’s right to speak in a manner that might not be protected in all instances, but is protected in those particular instances.

That balance is the key to understanding the Chamber of Commerce case against the Yes Men, and any potential coal industry lawsuit against them. Like I wrote above, energy production is one of the defining issues of our age, but at the moment the public discourse is dominated almost entirely by the oil and coal industries. Day in and day out the American public is bombarded by “clean coal” advertising of questionable merit. When the deck is so heavily stacked in favor of this vested interests — and has recently been stacked even more heavily in favor of vested interests by the Supreme Court — is it so wrong to permit a some guerrilla political speech by the less powerful interests?

Answering that question necessarily calls upon each person’s political viewpoints, but the law as written already provides a partial answer: fact is, both the Chamber of Commerce and Peabody Coal will have a hard time proving any sort of coherent, compensible damages. Mere embarrassment isn’t enough for a corporation to start suing its critics, and as of yet neither the Chamber of Commerce nor Peabody Coal can point to any concrete, ascertainable financial loss.

We have to draw a line somewhere, and the absence of real damages is probably as rational and fair a line as any.

[Update, December 2012: as predicted, case dismissed, and dismissal just affirmed by the Second Circuit. The court didn’t even reach the class action issue, it just denied it on the merits. “[P]laintiffs were perfectly aware that The Huffington Post was a forprofit enterprise, which derived revenues from their submissions through advertising. Perhaps most importantly, at all times prior to the merger when they submitted their work to The Huffington Post, plaintiffs understood that they would receive compensation only in the form of exposure and promotion.”]

Writing has always been a tough business, one dependent upon unorthodox forms of compensation. Charles Dickens’ novels used to come with advertisements for alpaca umbrellas and quack medical treatments. One of Toni Morrison’s books was loaded with ads for cigarettes, the New York Times just put up an expensive but easily avoided paywall.

Which brings us to the Huffington Post, long despised by other writers who resented its obsession with search engine optimization and by SEO professionals who resented its success in repackaging other’s content.

But nobody hated the Huffington Post as much as its own bloggers, the folks who generated a ton of its content without compensation in a spirit of, I suppose, political activism, just to watch it be sold off to AOL for $315 million.

One of them has decided to sue:

[A] group of unpaid bloggers for the Huffington Post, led by union organizer and journalist Jonathan Tasini, filed a class-action lawsuit against the HuffPo; its foundress, La Arianna; and media giant AOL, which bought HuffPo back in February. The gist of the lawsuit, as Tasini told Jeff Bercovici of Forbes, is that the site’s unpaid writers “must share in the value they create” — $315 million worth of value, based on what AOL paid for the Huffington Post.As a writer myself, I’m all in favor of writers being paid for what they do. But the lawsuit against HuffPo strikes me as a bit dubious….

Forbes has the story. TechDirt has the complaint.

They’re proceeding under a theory of unjust enrichment. They filed as a class action, with a proposed class of:

All current and former unpaid content providers to TheHuffingtonPost.com residing in the United States and Canada and who did not and continue not to receive any compensation related thereto. [Excluding members of HuffingtonPost or the plaintiff’s law firm.]

That’s almost certainly not going to fly. Outside of the antitrust and corporate securities fraud context, nationwide class actions are very rarely granted, like so:

No class action is proper unless all litigants are governed by the same legal rules. Otherwise the class cannot satisfy the commonality and superiority requirements of Fed.R.Civ.P. 23(a), (b)(3). Yet state laws about theories such as those presented by our plaintiffs differ, and such differences have led us to hold that other warranty, fraud, or products-liability suits may not proceed as nationwide classes. See, e.g., Isaacs v. Sprint Corp., 261 F.3d 679 (7th Cir.2001);Szabo v. Bridgeport Machines, Inc., 249 F.3d 672 (7th Cir. 2001)In re Rhone-Poulenc Rorer Inc., 51 F.3d 1293 (7th Cir.1995). See also In re Mexico Money Transfer Litigation, 267 F.3d 743, 746-47 (7th Cir.2001). The district judge, well aware of this principle, recognized that uniform law would be essential to class certification.

As the plaintiffs in the Lycoming Engines aircraft product liability class action, learned the hard way, unjust enrichment laws differ from state to state — some call it a tort, some call it a quasi-contract, some call it just a claim in equity — and courts tend to demand a lot from plaintiffs trying to allege unjust enrichment in claims that cross state lines.

In the HuffingtonPost case, the proposed class is not just nationwide, but includes Canada.

 

Put simply, as much as I’d like to see more nationwide unjust enrichment class actions, they typically don’t go anywhere, because unjust enrichment laws from state-to-state simply vary too much. The plaintiffs in Lycoming Engines abandoned their unjust enrichment claims once the Third Circuit said the District Court would have to do a state-by-state analysis of unjust enrichment claims. The same will have to happen here.

 

Maybe he’ll refile as just a New York state-based class, or maybe New York and some other states with similar laws (the Lycoming Engines opinion is a good place to start for a survey on these laws), but that still leaves a lot of unanswered questions about how he’ll prove class-wide status for his claims. Posting on HuffingtonPost isn’t like buying a car or household appliance, the reasons people post vary considerably, as does the value conferred upon HuffingtonPost by each post. Class action status will thus almost certainly be denied.

 

Which leaves just the plaintiff himself. Assuming his claim prevails, how much are his two-hundred or so articles worth? If the going rate at Demand Media’s content farm is indicative, about $3,000 or so.

 

Maybe he should refile in small claims court.