III. Property
E. Intellectual property
2. Intellectual property law
    a. Patent (cont'd.)

    --Patent criteria:

    Must be useful
    Lowell v. Lewis, 15 F. Cas. 1018 (C.C.D. Mass. 1817) -- the invention should not be frivolous or injurious to the well-being, good policy, or sound morals of society.
    Rickard v. Du Bon, 103 Fed. 868 (1900)
    Brenner v. Manson 383 U.S. 519 (1966). a chemical with no known uses is not patentable. (F132)

    about 3/4 of applications get approved. 1970s--70-80K per year; 1990s: 150K per year. (CU123)

    Protection is short--20 years from date of application
    14-21 years at various points in U.S. history.

    Patents increase dissemination of new ideas:
    (1) limited term -- idea becomes part of public domain afterwards
    (2) limited scope -- nonpatented parts of ideas are part of public domain    Note: If patent application fails, competitors will be able to use freely the invention described in the application. If the application succeeds, competitors will have a precise description of the invention, so they can try to emulate it without trespassing on the patent." (CU124)

    (1) Fuzzy boundaries
    [Q]uestions of breadth are decided in law according to the 'doctrine of equivalents,' which refers to a series of court findings about how nearly equivalent two inventions must be before finding patent infringement. This doctrine is obscure and unpredictable." (CU125)

    Basic research versus applied research: "[P]atent protection for pioneering inventions should be broader for those with little stand-alone value and . . . narrower for those with large stand-alone value. This is just the opposite of the result sometimes reached by U.S. courts." (CU126-7)

    (2) Coordination barriers
    "U.S. law has been perverse" in applying remedies
    Ex: "the application of antitrust law to R&D obstructed a solution to the problem of the joint production of inventions." (CU126)

    (3) Lack of flexibility
    Ideally, there should be varying patent lives for pioneering inventions and applications. (CU128)
    "Germany, for example, has established a two-tiered patent system. Major inventions in Germany receive full-term patents, while minor inventions and improvements receive petty patents for a term of three years. In addition, Germany requires patent holders to pay an annual fee to continue the patent. The annual fee is relatively modest for the first several years of a patent's life, but thereafter escalates at regular intervals until the patent period is exhausted." <5% of German patents go for full term; average is <8 years. (CU129)
    compulsory licensing common in West Europe. Must "show that patent-holders have failed to use their patents in the domestic market within a specified time period, have failed to license when that is essential to bringing a complementary invention into use, or have abused their position by, for example, excessively restricting the supply of their invention." Court then sets "reasonable royalty." (CU129)

b. Copyright

    "[T]he first copyright law in England dates from 1710 (and gave much less protection than modern copyright law), yet publishing had flourished for hundreds of years in England despite censorship and widespread illiteracy." (LEA209)
    More costly to copy then, freedom of expression thought then to have negative externalities. (LEA209)

    --Copyright vs. patent

    (1) What it protects:
    Patent: an idea
    Copyright: the "expression of an idea"

    (2) Benefit of protection
    More important for copyright due to ease of copying
    Copying writings is much easier than copying ideas, since all you have to do is photo-offset--no engineering required.
    Eliminating copyright protection would 
    -- reduce creative output (more than eliminating patent production would reduce invention)
    -- make output more faddish to frontload benefits
    -- promote other protection techniques (ex: private circulation) (LEA209)

    (3) Enforcement costs
    Lower for copyright due to ease of detecting copying
    Patent: relatively high <-- fuzzy boundaries
   Literal copying is easy to define and recognize, subject to some enforcement problems (i.e. individual copying is virtually impossible to track)
    Non-literal infringement is more of a problem, but still easier than for ideas

    (4) Rent seeking risk
    Patent: relatively high--patent race
    Copyright: negligible for copyright
    The chance that two people would independently write the same book is very close to zero, so when I write a book and copyright it I do not significantly limit your opportunities, so there is no significant negative externality, rent seeking problem, etc.
    One cost: Copyright can reduce output by raising cost of expression (LEA209)

    "Patent protection creates a form of property that is hard to define, hard to enforce, costly to transact over, and contains a potential inefficiency due to patent races leading to duplication and inefficiently early inventions. Hence we give patents grudgingly and for a short term. Copyright protection against literal copying creates a form of property that is easy to define, cheap to enforce, relatively easy to transact over, and subject to no rent-seeking problem. Hence we give copyright easily and for a long term." (F135-6)

    (5) How to obtain it
    Patent: apply to Patent Office up to within one year of commercialization
    Copyright: exists for any "protectable work" even without notice. (F131)
    "No effort is made by the Copyright Office to search copyrighted works before issuing an copyright, so copyright is simply asserted by the author or publisher." (LEA210)
    Registering it gives you statutory damages--otherwise you can sue to make someone stop violating your copyright, or for actual damages.

    (6) How long it lasts
    Patent: 20 years from date of application
    Copyright: life + 70 years since 10/98 Copyright Term Extension Act
    Historically: 1790: 28 years total (14+14 renewal); 1831: 42 (28+14 renewal); 1909: 56 (28+28); 1976: life + 50 years.

    Why not forever?
    nontrivial tracing costs --> time duration on copyrights (P41)
    longer term raises tracing costs (heirs and out-of-print) (LEA215)
    Current formula  frees up all work at a common date--also reduces tracing costs

    --Copyright coverage
    originally only for writings, (that's the literal word in the Constitution)
    Ex: paper tape for player pianos was not copyrightable since it was not intended to be read. Early software cases suggested not copyrightable either; more like a part of a machine. But wrong on function grounds--copyright protection is warranted (reading is not the only way to experience the expression of an idea). (F137)
    Since expanded to computer programs, pictures, music, and much else. (F128)
    federal laws prevent mold design copies for computer chips and boat hulls. (F138)
    A lot of the recent action is in Software copyright. Ex: spreadsheets. (F129)
    Is the interface of Lotus 123 an expression or an idea?

    Derivative works--translation, movie

   --Copyright exclusions

    (1) Independent duplication
    Accidental duplication is OK; not so with patents (LEA210)

    (2) Merger doctrine: expression = idea
    http://www.law.gwu.edu/facweb/claw/ch4b.htm
    Ex: Rosenthal Corp. v. Kalpakian (1971) -- jeweled bee pin

    (3) "scènes à faire" (scenes of action) doctrine: stock of the trade expressions
    Ex: common plots in literature or performing arts

    (4) "fair use" (nonprofit and education versus commercial); the nature of the work; the amount copied; and the effect on the revenue of the copyright holder. (F130)
    Fair use situations:
    (i) high transaction costs: ex: small excerpts.
    Denial for performance of full pieces: American Society for Composers, Authors, and Publishers (ASCAP) and Broadcast Music, Inc. (BMI) gets nonexclusive performance rights and licenses to users for an annual fee for full access. Fair use for performance would undermine this, and "performance distributions from ASCAP are an important part of composers' incomes" (LEA214)
    (ii) book reviews--a credible form of free advertising (LEA214)
    Fair use allows book reviewer to quote without permission. "[M]ost reviews are favorable, because most people are more interested in being told what they should read than what they should not read." (P42)
    favorable reviews are complements of the book, but video recorder and public performance are both complements and substitutes. (P43)
    (iii) parody (LEA215)
    "moral right" in continental Eur and gaining headway in US gives artists right to prevent alteration even after sale. Gaining headway because of Berne convention commitments. (P65)

    Assessment

    Past: protection without copyright
    1900--US had no copyright protection treaty with Britain, but first-mover advantage allowed Britain to get some royalties anyway. (F142)

    Present: copyright without protection. [unethical to use office Word at home] (F143)
    Ex: Sony v. Universal Studios (1984). the Betamax case: copying OK for "time-shifting: purposes but not necessarily for "archiving." (CU132)
    VCRs enlarge audience so can raise advertising revenues (but many can screen out ads now) (P42)
    Vault Corp. v. Quaid Software Limited 655 F. Supp. 750 (1987) -- an important case on copy protection of disks. Vault provided the software with which companies produced copy protected disks; Quaid produced the software with which people copied them. Vault failed in its attempt to legally suppress Quaid's activities. (F143)

    Future: uncertain:
    (1) pay to play (Napster)
    (2) encryption (CU133)
    If digital containers (encryption) work out, they are stronger than copyright protection. (F144)
    Ex: Intertrust = a company currently at the cutting edge of those technologies. (F143)

    "selling support, getting revenue from tie-in sales of products that cannot be easily copied, relying on the honesty of its customers, or getting most of its revenue from firms too large to risk being caught with pirated software." (F143)

c. Trademark

    Also called servicemarks.

   "The common law and statutes protected trademarks from as early as thirteenth century in England. Modern trademark law in the United States stems from the Federal Trademark Act of 1946, commonly called the Lanham Act."  (CU134)

    trademarks:
    "fanciful" marks = invented words (Ex: Kodak);
    "descriptive" mark = indentifying phrase (Ex: Holiday Inn allowed only if it has acquired a "secondary meaning.") (P43)

    no tracing costs, so time period = forever unless
(i) abandoned (CU134)
(ii) becomes generic (P43)

    Ex: Sterling Drug Company, 1921, lost "Aspirin" trademark for acetyl salicylic acid." Bayer has kept it in Canada and Mexico.  (CU135)

    Assessment:

    Benefits:
    Lower consumer search cost (P43)
    Higher product quality.
    Competition by brand

    Cost:
    Trademark protection efforts
    Coca-Cola: spends $2 million annually for a team of 25 investigators. "Since 1945, Coca-Cola has sued approximately 40-60 retailers per year." ("Mixing with Coke over trademarks is always a fizzle. Coco-Cola adds a little lif in court to those failing to serve the real thing." Wall Street Journal, March 9, 1978: p.1, col. 4.) (CU136)

    Potential monopoly
    Ex: Retailers complain it is costly to tell each consumers that they aren't using Coke in "Rum and Coke" so the real cost is to ensure a Coke monopoly