Feature

IP and the Romance with its Policy Makers: Can This Marriage Be Saved?

Hayden W. Gregory

©2016. Published in Landslide, Vol. 8, No. 5, May/June 2016, by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.

Intellectual property (IP) is an extremely interesting, important, and challenging area of the United States law, and indeed of world law. It was my great pleasure to have served in that sector for the ABA and the Section of Intellectual Property Law (ABA-IPL) for almost 21 years. Before that I was on the staff of the House Judiciary Committee for a slightly shorter period of 18 years.

My time on the Hill was split between working criminal law issues and IP issues. From a perspective of both personal and professional satisfaction and enjoyment, intellectual property won hands down.

Although not as dominant and destructive as the partisan gridlock that currently prevails in and has produced a record low public approval rating in the single digits for Congress, partisan divide in Congress was also alive, growing, and damaging in the 1980s and early ’90s. However, there were a few areas of law and legislation where partisan division and bickering played little or no role. Happily, intellectual property was one of them. IP leaders in both major political parties in both the House and the Senate worked cooperatively to develop and enact legislation for IP protection. For IP protection, not just concerning IP protection, accurately characterizes the perspective and atmosphere that prevailed in IP law-making at that time. Dazzling technological advances such as the digital revolution presented unprecedented opportunities not only for IP-related industries and interests, but also for parasitic infringers looking to exploit the opportunities presented by the new technologies. IP interests did not have a hard sell in convincing Congress to enact strong laws to protect U.S. intellectual property, which Motion Picture Association of America president and CEO Jack Valenti repeatedly declared to be “the crown jewels of the U.S. economy.” Particularly with regard to copyright, with the onset of the digital revolution, Congress was quite willing to legislate against the image, and probably the real threat, of “making perfect copies with one click on a computer” of copyrighted sound recordings, books, and films.

In roughly the same time frame, the U.S. Supreme Court went through a period of years in which it rarely reviewed decisions of the recently established U.S. Court of Appeals for the Federal Circuit. This benign neglect allowed the Federal Circuit, under the powerful influence of Chief Judge Howard Markey, to shape coherent and workable patent law jurisprudence out of the chaos and near destruction of the patent system that had been produced by irreconcilable regional circuit precedent. In some circuits, the survival rate of patents involved in litigation had plummeted to near zero. Once up and running with its exclusive jurisdiction over patent appeals, the Federal Circuit seized the opportunity to fashion strong pro-patent jurisprudence.

For a long time, patent legislation was a matter left largely up to a small cohort of patent experts—the United States Patent and Trademark Office (USPTO), congressional committees, and leaders in the patent bar. As awareness of the importance of patents to the U.S. economy and society grew, so too did the participants in patent policy-making circles, including those who concluded that a strong patent system might not necessarily further their own economic or social interests. The late Howard Coble (R-N.C.) noted these changes as early as 1999, when he managed a major patent reform bill in the House during his chairmanship of the House IP Subcommittee. After witnessing the heated and protracted debate that resulted, Coble frequently thereafter noted with some amazement that patent law was no longer a matter of little interest and attention in Congress.

While Coble and other congressional leaders with primary responsibility for IP legislation no doubt took pride and satisfaction in the fact that their subject matter was of growing importance and prominence, this enhanced status came at a price. Like the financial institutions that were found to be too big to allow to fail following the 2008 meltdown and crisis, the value and importance of intellectual property grew to be too big to allow it to be controlled by a small group of experts who specialized in those matters.

If the interests involved grew too big to be governed by rules shaped by a small cadre of experts, they sometimes seemed too big to be governed by any rules, at least not rules that have historically governed. The Napster “peer-to-peer” file sharing technology that facilitated free online access to copyrighted digital sound recordings to millions of persons is a prime example.

This service seemed to be clearly infringing, and the Ninth Circuit Court of Appeals so ruled in February 2001.1 However, a couple of days later, Senate Judiciary Committee chairman Orrin Hatch and ranking member Patrick Leahy, both dedicated supporters of strong IP rights, took to the floor of the Senate to announce that the issues involved were anything but resolved, and that a hearing would be held to find a workable solution.

Hatch, noting that Napster had “developed a community of over 50 million music fans,” commented that the Ninth Circuit ruling could have the effect of shutting down Napster entirely, depriving more than 50 million consumers access to a music service they have enjoyed. The Napster community represents a huge consumer demand for the kind of online music services Napster, rightly or wrongly, has offered and, to date, the major record labels have been unable to satisfy.2

Leahy echoed similar concerns and perspectives:

It is a different world out there, but it is just one example of the kinds of issues we have to look at. Applying copyright principles to new situations should not be done just by court-made law which is imprecise, at best, because a court is limited to the factual situation before it rather than a full panoply of circumstances, but can be done here, recognizing we have a whole new way of doing things.3

A whole new way of doing things was indeed emerging. In the Senate hearing that followed, Chairman Hatch admonished the CEO of the Recording Industry Association of America to find a way to facilitate access to recorded music for those 50 million music fans, access through cutting-edge technologies such as those proven popular by the Napster experience. Hatch indicated that if the record companies did not find a way to deliver their products in a form and format desired by the public, Congress would find a way to do so, which could very well include establishing compulsory licensing, which Hatch well knew to be feared and loathed by most IP interests.

Napster was permanently shut down, as was four years later Grokster, a design around copycat service that succeeded Napster. Although Senator Leahy called for a legislative solution taking into consideration “a full panoply of circumstances,” in the end the Grokster controversy proved too politically polarized for a legislative solution. Despite the fact that, as noted by Leahy, “a court is limited to the factual situation before it,” or perhaps because it is so limited and does not have the option of reaching no decision, it was not Congress but the U.S. Supreme Court that put an end to the Grokster dispute, ruling that the service actively induced copyright infringement.4

It is not unusual for Congress to legislate to overturn court decisions. However, in most instances this occurs when Congress believes that the courts have misinterpreted the law. In the unsuccessful congressional attempts to fix the Napster problem, there was no suggestion that the courts had done that. In effect, Congress seemed to be saying that it did not disagree with the determination that the peer-to-peer exchange of copyrighted sound recordings was infringing, but that the infringing conduct was so massive and popular that it should be made noninfringing. This seemed to constitute a signal that in the twenty-first century IP interests should expect to be playing under new rules, rules that would be more demanding and less supportive of calls for policy decisions supportive of strong IP protection. Numerous examples support this trend analysis.

As a result of a series of U.S. Supreme Court decisions beginning in 1985 and culminating in two decisions in 1999, states and state entities are now immune from suit for infringement of patent, copyright, and trademark rights. In Atascadero State Hospital v. Scanlon, the 1985 decision holding the defendant California state hospital immune from suit under the Eleventh Amendment, the Court stated that Congress has power under the Fourteenth Amendment to abrogate state sovereign immunity under the Eleventh Amendment, but it can do so only by statute, and “only by making its intention unmistakably clear in the language of the statute.”5

Concerned about growing incidents of state infringement of IP rights, in the early 1990s Congress enacted three separate statutes to abrogate state sovereign immunity from suits for copyright, patent, and trademark infringement.6 In Seminole Tribe of Florida v. Florida, the U.S. Supreme Court again revisited the issue of litigation immunity, this time in the context of a congressional abrogation statute similar to the IP statutes.7 Although the Court acknowledged that Congress had made “its intention unmistakably clear in the language of the statute,” the decision imposed new and greater limitations on the power of Congress to abrogate.

In two companion cases decided by the same 5–4 vote in 1999, the Court invalidated the three IP immunity statutes on constitutional grounds.8 Congress had determined that states were engaging in acts of IP infringement and that infringement justified abrogation. However, the Court ruled that such garden variety infringement is not enough, and that Congress has power under the Fourteenth Amendment to abrogate immunity only when state infringement is so massive as to constitute a violation of constitutional rights.

Under pressure from Senate Judiciary Committee chairman Leahy, representatives of the states engaged in lengthy negotiations with organizations, including the ABA, representing IP interests to find a compromise position. After several months these negotiations stalled, and were abandoned entirely after state attorneys general (AGs) were brought to the talks to explain their legal position. The AGs boldly announced that they were “standing on their constitutional rights” and saw no need or justification for further talks. Invoking this moral high ground of course meant that, under the Supreme Court’s 5–4 decisions, states were claiming a right to infringe federal patent, copyright, and trademark rights with total immunity. I suppose that we should not be surprised that states, like any other entity, seek to deny or limit liability when confronted with allegations of infringement. Here, however, the states did not deny that they were infringing or claim that the level of infringement was inconsequential. Instead they proclaimed that the Supreme Court had elevated their defense to infringement to a constitutionally protected right to infringe, and that they were stickin’ with it.

As the Supreme Court increasingly narrowed the scope of patent eligibility in decisions in Bilski,9 Mayo,10 and Myriad,11 IP interests increasingly gave attention to seeking legislative changes to put an end to such erosion. However, the responses of usually reliable congressional friends of intellectual property have frequently not been encouraging. While they generally applauded the Court’s June 2013 holding in Myriad that complementary deoxyribonucleic acid (cDNA) is patent-eligible subject matter, many felt that the more significant holding of the case was that claims to isolated DNA do not cover patent-eligible subject matter. However, the response of the powerful chairman of the Senate Judiciary Committee did not seem to be one of concern that DNA had been rejected, but that Myriad’s patents on cDNA had been upheld.

Leahy’s July 2013 letter to the director of the National Institutes of Health noted that the Court’s decision left Myriad with the exclusive rights to conduct the genetic testing for breast and ovarian cancer covered by the patents, which testing is important to public health, and that the company itself conducts all the testing for $3,000–$4,000, which many women cannot afford.12 Noting that the test was developed with federally funded research, Leahy urged the government to exercise its “march-in rights” under the Bayh-Dole Act to require Myriad to license the test, and failing that, to exercise its right to license the patents itself. He did not address the public health consequences of the invalidation of patents on DNA analysis. A decade earlier, strong advocates of robust IP protection such as Leahy might have pointed out those consequences rather than expressing concerns about the validation of the cDNA patents, concerns which might be said to apply to any patent or to the patent system in general.

With the onset of the digital revolution in the final quarter of the twentieth century, Congress was all too willing to enact strong copyright laws, including laws to support a strong and independent Internet. When it became clear that the strong and independent Internet was being abused to facilitate massive infringement through the use of offshore websites that were able to elude U.S. jurisdiction, Congress moved to close the gap with legislation such as the Stop Online Piracy Act (SOPA)13 to bring these offshore sites to U.S. justice. One tactical component in SOPA was a provision entitled “market-based system to protect U.S. customers and prevent U.S. funding of sites dedicated to theft of U.S. property.”14 The offshore sites utilized service providers such as credit card companies and Internet search engines to effectuate their piratical schemes, and these service providers were reachable by U.S. jurisdiction. Under market-based enforcement, these service providers were called upon to serve as enforcement agents to stop the piracy or somehow get their offshore clientele to voluntarily submit to U.S. jurisdiction. However these market-based entities were not long in sending word that the market was not buying. In January 2011, as sponsors of the SOPA legislation and similar legislation in the Senate—the PROTECT IP Act (PIPA)15—were prepared to move the bills to passage, English Wikipedia, Google, and numerous other websites coordinated a service blackout to protest the legislation. The market had spoken, and the monster whose growth had been nurtured by U.S. policy makers came back to bite its benefactors. SOPA and PIPA were mortally wounded. IP leaders in Congress seemed to be stunned, surprised, and not sure just what hit them. However, see the experience as evidence that in the twenty-first century IP legislation is playing under new rules, and that enactment of pro-IP legislation is no longer a slam dunk as it seemed to be earlier.

In the first decade and a half of the twenty-first century, we see that attitudes and atmospherics have changed a lot. Developments in all three branches of government cause concern across a wide spectrum of IP interests that healthy respect for IP protection may be in jeopardy. Supported by the White House, in the past few years Congress has been seriously considering legislation to curb abusive patent enforcement practices by patent trolls. However, many stakeholders and knowledgeable observers are concerned that changes in law designed to combat despicable practices of a few patent trolls may seriously undermine the ability of a much larger cohort of legitimate patent owners to enforce their rights.

In the past decade, the Supreme Court has abandoned its laissez-faire approach to patent law, most notably marked by a fairly consistent rejection of Federal Circuit jurisprudence that established special rules for adjudication of patent cases and tended to result in greater patent protection, requiring instead that patent cases be judged by the same standards that apply generally. The Court’s 2006 decision in eBay Inc. v. MercExchange, LLC, rejecting more favorable rules for injunctions in patent infringement cases, is one such significant decision.16 Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc., the 2002 decision reversing a Federal Circuit decision relating to its own exclusive jurisdiction, where Justice Stevens’s concurrence opined that “specialized court[s] may develop an institutional bias,” seems to suggest reasoning behind this line of decisions reversing the IP “home court” Federal Circuit.17 The Bilski to Mayo to Myriad to Alice18 line of decisions, each seemingly further circumscribing patent eligibility, elevated IP community concern to consternation and, in some quarters, contempt for the perpetrators of the policy changes.

Allegedly scholarly studies, media coverage, and public opinion are all trending in a less favorable direction for intellectual property, likely encouraging or providing cover for policy makers moving in the same direction. It is not clear whether policy makers are responding to changes in these signposts and indicia of public perceptions and preferences, or if these indicators are merely reflecting and reporting changes dictated by policy makers. It is likely that they are acting synergistically, and it probably does not much matter who is leading and who is following.

Policy makers need advice and guidance from the public and from experts in order to make wise decisions on public policy, and it is understandable and appropriate to look to stakeholders in the IP community for this advice. Most useful in this regard is advice that is fair, balanced, and objective. Bar associations such as the ABA and its ABA-IPL Section are well positioned and equipped to provide such balance and objectivity because their members represent both sides in any dispute. Stakeholders whose interests always fall on the same side of a legal and policy issue are not well equipped to provide such balance. The ongoing effort to develop an effective legislative response to abusive enforcement practices of patent trolls is illustrative. Stakeholders who are predominantly defending against such actions are often willing to severely curtail patent rights across the board to address abuses by a small subset of patent owners, while those whose business success depends on strong patent rights would be happy with no change at all.

There is cause for concern that some of the support and advice for IP policy changes is not being proffered by the IP community in a manner that will provide the requisite balance and objectivity. In some quarters, there seems to be a tendency to view any support for curtailment or limitation on IP rights as ill informed, unfounded, and even motivated by malevolence. Labeling studies and proposals that question the economic and social utility of copyright as “copyleft not copyright” perhaps scores a rhetorical point or two, but does not set the groundwork for a solution. Similarly, declaring that recent Supreme Court decisions on patent eligibility demonstrate that the Court simply does not understand patent law is not only questionable as a matter of strategy, but also inaccurate as a matter of law. Supreme Court decisions are patent law, and challenging the competence and even the authority of the Court is likely not a good starting point for addressing any undesirable consequences of decisions of the Court.

Over is the honeymoon that intellectual property seemed to be on with policy makers in the late twentieth century, when proponents such as Jack Valenti could simply proclaim intellectual property to be “crown jewels” and expect a favorable response from policy makers.

The honeymoon may be over, but there is no reason that a sound marriage cannot be maintained. Intellectual property continues to be a key driver of the national economy. A 2012 USPTO report found that IP-intensive industries create 27.1 million jobs and indirectly support another 12.9 million, totaling 30 percent of all jobs.19 Intellectual property is also a major factor in the U.S. balance of trade, with goods from IP-intensive industries accounting for 60 percent of all U.S. exports.20 IP industries also account for over $5 trillion in value added, or 35 percent of U.S. gross domestic product.21

Intellectual property has been an invaluable component in the growth and expansion of the U.S. economy, and robust IP protection will continue to be essential to the economy. The United States needs intellectual property, and intellectual property needs support from the nation’s policy makers. They must work together cooperatively to continue production of the healthy progeny of a strong economy. The honeymoon may be over, but a working marriage can still be maintained, even if they are only staying together because of the kids.

Endnotes

1. A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001).

2. 147 Cong. Rec. S1380 (daily ed. Feb. 14, 2001) (statement of Sen. Orrin Hatch).

3. Id. at S.1378 (statement of Sen. Patrick Leahy).

4. Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913 (2005).

5. 473 U.S. 234, 242 (1985).

6. See Copyright Remedy Clarification Act, Pub. L. No. 101-553, 104 Stat. 2749 (1990); Patent and Plant Variety Remedy Clarification Act, Pub. L. No. 102-560, 106 Stat. 4230 (1992); Trademark Remedy Clarification Act, Pub. L. No. 102-542, 106 Stat. 3567 (1992).

7. 517 U.S. 44 (1996).

8. See Coll. Sav. Bank v. Fla. Prepaid Postsecondary Educ. Expense Bd., 527 U.S. 666 (1999); Fla. Prepaid Postsecondary Educ. Expense Bd. v. Coll. Sav. Bank, 527 U.S. 627 (1999).

9. Bilski v. Kappos, 561 U.S. 593 (2010).

10. Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012).

11. Ass’n for Molecular Pathology v. Myriad Genetics, Inc., 133 S. Ct. 2107 (2013).

12. Letter from Patrick Leahy, Chairman, U.S. Senate, to Francis S. Collins, Dir., Nat’l Insts. of Health (July 12, 2013), available at http://patentdocs.typepad.com/files/leahy-letter.pdf.

13. H.R. 3261, 112th Cong. (2011).

14. Id. § 103.

15. Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property (PROTECT IP) Act of 2011, S. 968, 112th Cong.

16. 547 U.S. 388 (2006).

17. 535 U.S. 826 (2002).

18. Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014).

19. Econ. & Statistics Admin. & USPTO, Intellectual Property and the U.S. Economy: Industries in Focus 43 (2012), available at http://www.uspto.gov/sites/default/files/news/publications/IP_Report_March_2012.pdf.

20. Id. at 53.

21. Id. at 45.

Hayden W. Gregory

Hayden W. Gregory recently retired from the ABA Section of Intellectual Property Law having served two decades as its legislative consultant. Landslide® magazine and its readers have had a treasure of insightful pieces from Mr. Gregory’s unique vantage point with regular publication of his “From the Hill” columns beginning in the magazine’s inaugural issue.