Trial (credit: Photograph by Joe Gratz via flickr / CC BY 2.0) Learning Objectives After completing this section, you will be able to Understand the importance of jury selection and opposing arguments. Grasp why patent trials are often called “morality plays.” The following describes a jury trial. A bench trial is essentially the same, but without the elements involving the jury. See generally, Rules 40-63, Fed. R. Civ. P. Jury Selection The trial begins with the selection of the jury. The jury is selected (or “picked”) from a group of prospective jurors called to court to serve in accordance with the laws and practices of the local jurisdiction. Each judge has a procedure for picking a jury. Most involve a questionnaire that each prospective juror must complete and provide to the judge and the parties’ lawyers. The answers are intended to reveal whether any reason exists why a prospective juror should not serve on the jury. Typical reasons for excluding a prospective juror include that the juror works for or knows one of the lawyers in the case, works for or does business with one of the parties, has a close relative that works for one of the parties, knows something about the subject matter of the case, or is unable to serve because of a disability or a previously planned vacation for which they have already purchased a nonrefundable ticket. The judge also typically asks the prospective jurors whether they have a bias or prejudice that would prevent them from making a fair decision. Once the judge has “excused” from serving any prospective jurors for “cause” (i.e., because of one of the reasons listed above or some other reason that court believes provides good cause for excusing that person), the clerk selects at random from the remaining prospective jurors the number that will be seated as the jury, plus six. The number of jurors seated in a case depends on the expected length of the trial and the practices of that judge. At least six and no more than twelve jurors must decide a case, but any number between six and twelve can be seated. See Rule 48, Fed. R. Civ. P. The reason a court usually seats more than six jurors is to assure that the trial will end with at least the minimum of six jurors necessary to decide the case even if one or more jurors need to be excused during the trial, such as for illness or emergency. Judges typically seat seven to nine jurors for this reason. Only rarely do judges in civil patent cases seat a full twelve jurors, because once seated a juror must participate in reaching the decision (unless excused for cause), and all jury decisions in federal cases, including patent cases, must be unanimous. See Rule 48(a) and (b), Fed. R. Civ. P. The general rule is, the more jurors there are, the longer it takes for them to reach a unanimous verdict, and the higher the likelihood that the case will result in a “hung” jury (i.e., an inability for the jury to reach a unanimous decision). The clerk selects the designated number for the jury, plus six, because each party gets three “peremptory challenges” to the proposed jury panel, whereby a party can remove a juror without having to give a reason why. Thus, if the judge has decided the jury should begin with eight jurors, the clerk will select 14 so that the plaintiff and defendant (collectively if there is more than one plaintiff and/or defendant) are each able to strike or eliminate three prospective jurors, leaving eight to hear the case. Once the jury is picked and sworn in, the judge will give the jury preliminary jury instructions. These explain what the case is about, how the trial will proceed, and a description of what a patent is and how the patent system works. Occasionally, judges opt to show the jury the video below, entitled “An Introduction to the Patent System,” which was created by the Federal Judicial Center and is intended to be neutral. You can see this video at https://archive.org/details/gov.ntis.ava21157vnb1. Opening Statements The next step is the opening statements by the opposing parties, starting with the plaintiff and followed by the defendant. If there are multiple plaintiffs or defendants, the judge will give equal time to each side and let the individual parties work out the allocation of time. The opening statement is intended to provide a road map for the jury about what the party intends to prove, and is expected to be devoid of argument. But lawyers rarely present an opening statement without some argument. The judge can intercede, and an opposing party may object, if a party crosses the “no argument” line too far. The opening statements are where many believe the trial is won or lost because the jury forms initial opinions about who is right and who is wrong in the case based on what they hear at this beginning stage. Thus, each party’s trial lawyer tries to craft a story to tell that casts their client in the best possible light. Trials can be likened to a morality play, in which each party tries to cast themselves as in the right, and the opponent as doing them wrong. In patent cases, plaintiffs often portray defendants as thieving freeloaders, attempting to benefit unfairly from the inventiveness of the plaintiff rather than invest in developing their own products. Defendants, on the other hand, often portray patentees as greedy monopolists, trying to stifle competition and deny consumers choice and less-expensive alternatives. Whether or not the common wisdom is correct, it is with the opening statements that the jurors begin their struggle to find truth among the competing stories they will hear during the trial. The Evidence is Presented The plaintiff then presents its case, calling witnesses and introducing exhibits that support its positions. Each opposing party has the opportunity to object to exhibits and testimony, and to cross-examine witnesses. The judge rules on all objections and generally oversees the proceedings to assure that the trial is conducted properly. After the plaintiff rests its case, the defendant presents its defense, again by introducing exhibits and offering testimony from witnesses. The trial concludes with the plaintiff calling rebuttal witnesses, who are limited to rebutting testimony from the defendant’s witnesses. Each side usually calls one or more experts to testify on the issues of infringement and validity (or invalidity), as well as on damages. Closing Arguments After the evidence has been presented, the parties make their closing arguments. Usually the plaintiff goes first, followed by the defendant. The plaintiff has the opportunity to reserve time for rebuttal if it chooses. In some jurisdictions, the defendant must go first and the plaintiff next. In this case, the plaintiff has the last word, and the defendant does not have any opportunity for rebuttal. Closing arguments give each party the opportunity to highlight what they believe is the critical evidence in their favor, and attack the deficiencies in their opponent’s case. It is here that an observer would see the greatest geographic diversity in style and practice. Quite apart from the different styles of trial lawyers and judges across the country, jurors in different parts of the country expect different things from trials, and especially from closing arguments. Thus, an observer would see a very different “show” during a closing argument in the Eastern District of Texas than in the District of Maine. After closing arguments are concluded, the judge reads the final jury instructions. These set forth the law to which the jury must apply the facts they determine during their deliberations. See Rule 51, Fed. R. Civ. P. Thereafter, the jury retires to the jury room, with copies of the exhibits admitted into evidence, to decide the case. Deliberation and Verdict In most patent cases, the jury must answer detailed questions listed in a verdict form, called a special verdict. See Rule 49, Fed. R. Civ. P. These questions typically list the accused product(s) and the asserted claim(s) and require the jury to decide infringement and validity for each claim and accused product separately. If appropriate, the jury may also be asked to decide what damages, if any, are to be awarded the plaintiff and whether any infringement they may have found to exist was willful or not. The jury deliberates as long as it takes to reach a unanimous decision on each question. During their deliberations, the jury may ask questions of the judge in writing, which the judge answers after consulting with the parties. Should the jury tell the judge that it cannot reach a unanimous verdict, the judge may provide additional instructions and return the jury to its deliberations to “try harder.” Most juries reach a unanimous decision, which is recorded on the verdict form and read by the clerk in open court with the parties present.

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Post-Trial Procedures (credit: Jim henderson via Wikimedia Commons / CC0) Learning Objectives After completing this section, you will be able to Grasp the significance of equitable proceedings in the post-trial phase. Following the jury’s decision, the court will set a schedule for any equitable proceedings required and for post-trial motions. Equitable proceedings deal with matters to be decided by the judge, not the jury. In terms of post-trial motions, the winning party will ask for entry of judgment. See Rule 54, Fed. R. Civ. P. The losing party will file a motion for judgment as a matter of law and usually also a motion for a new trial. See Rule 50, Fed. R. Civ. P. Equitable Proceedings Issues arise in most patent cases that must be decided by the judge and not the jury. Many of these are called “equitable” issues because they are left to the sound, equitable discretion of the court. The most common equitable issues are the defense of inequitable conduct and the affirmative claims of willfulness and exceptional case. Inequitable Conduct Misconduct by the patentee in dealing with the Patent and Trademark Office, through which the patentee or its attorney deceives or misleads the patent examiner in an effort to persuade the examiner to grant the patent, was historically called “fraud on the Patent Office,” but more recently has been renamed “inequitable conduct.” A defendant can raise this issue as a defense, which if proven results in the patent being unenforceable—that is, the patentee is unable to enforce the patent or recover any damages for its infringement. Many different types of inequitable conduct have been found to render patents unenforceable, from outright fabrications of alleged evidence of unexpected results in the development of the invention, to hiding relevant prior art showing prior solutions to the problem solved by the patent, to failing to tell the patent examiner that another patent examiner had rejected a related application. Most district courts defer ruling on inequitable conduct defenses until after the liability trial addressing infringement, validity, and damages. This is a commonsense attempt at efficiency because if the patent is found invalid or not infringed at trial, the inequitable conduct issues became moot. Only if the patent is found valid and infringed does the court need to hold a separate hearing to adduce evidence of alleged inequitable conduct. The court then decides whether such conduct had been proven, which is exceedingly rare. Nevertheless, because the consequences of such a finding essentially kill the patent, defendants assert inequitable conduct whenever possible in a final effort to avoid liability. By 1988, the Federal Circuit Court of Appeals stated: “the habit of charging inequitable conduct in almost every major patent case has become an absolute plague.” Burlington Indus., Inc. v. Dayco Corp. , 849 F.2d 1418, 1422 (Fed. Cir.1988). In an effort to stem the spread of this plague, the Federal Circuit sought to restrict its use by holding that inequitable conduct must be established by clear and convincing evidence of deceptive intent. Gross negligence does not suffice and “does not of itself justify an inference of an intent to deceive.” Kingsdown Medical Consultants, Ltd. v. Hollister, Inc. , 863 F.2d 867, 872 (Fed.Cir. 1988). Nevertheless, the plague continued, leading a Federal Circuit judge to write: “‘Inequitable conduct’ in patent practice means misconduct by the patent applicant in dealings with the patent examiner, whereby the applicant or its attorney is found to have engaged in practices intended to deceive or mislead the examiner into granting the patent. It is a serious charge, and the effect is that an otherwise valid and invariably valuable patent is rendered unenforceable, for the charge arises only as a defense to patent infringement. As this litigation-driven issue evolved, the law came to demand a perfection that few could attain in the complexities of patent practice. The result was not simply the elimination of fraudulently obtained patents, when such situations existed. The consequences were disproportionately pernicious, for they went far beyond punishing improper practice. The defense was grossly misused, and with inequitable conduct charged in almost every case in litigation, judges came to believe that every inventor and every patent attorney wallowed in sharp practice.” Ferring B.V. v. Barr Laboratories, Inc. 437 F.3d 1181, 1195 (Fed. Cir. 2006)(dissenting opinion). Still the plague continued, leading Federal Circuit Judge Gajarsa in 2010 to then refer to it as a “pandemic.” Taltech Ltd. v. Esquel Apparel, Inc. , 604 F.3d 1324, 1335 (Fed. Cir. 2010)(dissenting opinion). Research showed that the percentage of patent cases in which inequitable conduct was charged grew from less than 5 percent in 2000 to 40 percent by 2009. http://www.patentlyo.com/patent/2010/06/measuring-the-plague-of-inequitable-conduct.html. Finally, on May 25, 2011, the Federal Circuit restricted the doctrine of inequitable conduct by changing the standard for materiality and clarifying the requirements for finding intent to deceive. Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, passim (Fed. Cir. 2011) . To find inequitable conduct, the court held that the party alleging unenforceability must prove a specific intent to deceive the USPTO by clear and convincing evidence. Moreover, the decision to deceive the USPTO must be knowing and deliberate. The court also clarified that district courts may not use a “sliding scale” to find intent. In other words, the Federal Circuit held it improper to find that a weak showing of intent was sufficient based on a strong showing that the information was material, or that a weak showing of materiality was sufficient based on a strong showing of intent. Although intent can be inferred to meet the clear and convincing evidence standard, specific intent to deceive must be “the single most reasonable inference able to be drawn from the evidence.” Regarding materiality, the court required a “but- for materiality” standard. In other words, the standard for materiality now requires that “but for” the alleged deception, the USPTO would not have allowed the claim. Further, “[i]n making this patentability determination, the court should apply the preponderance of the evidence standard and give claims their broadest reasonable construction.” The court also recognized an exception to the requirement for but-for materiality, finding that “[w]hen the patentee has engaged in affirmative acts of egregious misconduct, such as the filing of an unmistakably false affidavit, the misconduct is material.” The number of successful inequitable conduct defenses asserted has plummeted due to the strict new requirements for pleading and proving inequitable conduct imposed by the Therasense decision. District courts are dispensing with many allegations of inequitable conduct now at the pleading stage, eliminating the need for separate hearings on inequitable conduct issues. Misuse of a patent is sometimes treated as a form of inequitable conduct, but it is more commonly treated as a separate affirmative defense. The elements of misuse are either a violation of antitrust laws or an effort to expand the scope or term of a patent beyond appropriate limits. For example, it is patent misuse for a patentee to file suit against products of a defendant that are far beyond the proper scope of any claims of the patentee’s patent, or to seek damages or an injunction beyond the expiration of the patent. Often such unreasonable demands are accompanied by threats to the defendant’s customers. If the misuse is proved, the patentee could be barred from recovering any damages until it has “purged” the misuse by abandoning its unreasonable assertions and dissipating any negative effects they caused. Willfulness If the jury (or judge, in a bench trial) finds that the asserted patent has been infringed, it is often asked to determine whether such infringement was “ willful .”A finding of willful infringement allows the judge to award enhanced damages under 35 U.S.C. § 284, which provides in relevant part that the court may increase the damages award by up to three times the amount found. This is a potent consequence of a showing that a defendant’s infringement was willful. The standard for showing willfulness has evolved over the years, but in 2007, the Federal Circuit significantly altered the standard governing willful infringement by requiring the patentee to prove that (1) the accused infringer “acted despite an objectively high likelihood that its actions constituted infringement of a valid patent,” and (2) the “objectively defined risk . . . was either known or so obvious that it should have been known to the accused infringer.” In re Seagate, 497 F.3d 1360, 1371 (en banc) . The first prong of this test is objective, whereas the second prong is subjective and involves the accused infringer’s actual state of mind. Each prong requires that the infringer knew the patent existed at the time it infringed. Because an infringer cannot be shown to have willfully infringed if it did not know the patent existed, some companies have adopted a “head in the sand” approach to others’ patents. This practice is thought to make sense when the field is very crowded (i.e., there are many patents owned by different patentees covering many different aspects of a product or service) because trying to uncover all the potentially relevant patents that could be asserted against a new product or service is extremely costly, if not impossible. This practice is used most frequently by large companies that can afford to deal with a patent infringement lawsuit should one be filed. Small companies and entrepreneurs, especially in emerging fields, often take great care to search for and work around any existing patents that might be close to their new product or service because they can ill afford patent litigation. Of course, searching for potentially troublesome patents and trying to avoid them is no guarantee of not getting sued. Not only are there more than two million patents in force, See Dennis Crouch, How Many US Patents are In Force? , http://www.patentlyo.com/patent/2012/05/how-many-us-patents-are-in-force.html. but creative patentees are not above taking a patent that was thought to cover one product and arguing it is broad enough to cover what a new market entrant has introduced. In 2012, the Federal Circuit again addressed the willfulness standard, and adjusted it again. Bard Peripheral Vascular Inc. v. W.L. Gore & Assoc’s. Inc. , 682 F.3d 1003, 1006-07 (Fed. Cir. 2012). With regard to the objective prong of the willful infringement test, the Federal Circuit concluded: “We believe that the court is in the best position for making the determination of reasonableness. This court therefore holds that the objective determination of recklessness, even though predicated on underlying mixed questions of law and fact, is best decided by the judge as a question of law subject to de novo review.” This further restricts the opportunity for a patentee to prove that a defendant’s infringement was willful. The patentee must first convince the district court that the defendant acted despite an objectively high likelihood that its actions constituted infringement of a valid patent. Only after that will the patentee be able to present evidence of the defendant’s alleged subjective intent to the jury in an effort to convince the jury that the infringement was willful. Patentees preferred the pre- Bard opportunity to present all of their willfulness evidence to the jury during the liability trial. They wanted this ability because they believed, probably correctly, that it helped the jury conclude not only that the defendant was a “bad actor” who willfully ignored the patentee’s rights, but also bolstered the underlying issue of infringement itself. Post- Bard , the patentee can only present willfulness evidence if it is able to convince a more dispassionate judge that the defendant acted objectively recklessly, which is a higher hurdle to overcome. If the patentee convinces the judge on the objective prong, and the jury on the subjective prong, resulting in a jury verdict of willful infringement, the issue of enhanced damages passes back to the court for determination after the trial. Because the Bard case was decided in mid-2012, little empirical evidence exists on its effect on the frequency with which significant enhanced damages are awarded by the courts. However, even before Bard , the evidence suggests that such awards were falling. Before the Seagate restrictions were imposed in 2007, 81.4 percent of cases finding willful infringement resulted in an award of enhanced damages, but after Seagate, that number fell to 54.9 percent. Christopher B. Seaman, Willful Patent Infringement and Enhanced Damages After In Re Seagate: An Empirical Study , 97 Iowa Law Review 417, 466; http://www.uiowa.edu/~ilr/issues/ILR_97-2_Seaman.pdf. Exceptional Case Courts have discretion to award reasonable attorneys’ fees in patent infringement cases that are deemed “exceptional.” 35 U.S.C. § 285 The Federal Circuit has referred to this provision as a deterrent to bringing of clearly unwarranted suits on invalid or unenforceable patents. Mathis v. Spears , 857 F.2d 749, 754 (Fed. Cir. 1988). Normally, the losing party is not liable to pay the winner’s attorneys’ fees—a practice referred to as the “American Rule.” The rationale for this is that any party should be able to approach the court for relief without fear of having to pay an adversary's attorney's fees. Thus, the provision of the Patent Act that permits an award of attorneys’ fees is an exception to the rule that each party bears its own costs in litigation. Congress said that it intended the rule allowing an award of attorneys’ fees to be applied sparingly and “that recovery of attorneys’ fees will not become an ordinary thing in patent suits. S. Rep. No. 1503, 79th Cong., 2d Sess. (1946) (discussing the predecessor statute to 35 U.S.C. § 285) The Federal Circuit repeatedly limited district court discretion to award attorneys’ fees to only those cases in which the district court found clear and convincing evidence of bad faith or at least gross negligence by the losing party in bringing or maintaining the suit, and any such determination was reviewable de novo on appeal. Mathis v. Spears , 857 F.2d 749, 754 (Fed. Cir. 1988) and Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc. , 393 F. 3d 1378, 1381-2 (Fed. Cir. 2005). But in April 2014, the Supreme Court struck down these restrictive Federal Circuit interpretations and held: “[A]n ‘exceptional’ case is simply one that stands out from the others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated. District courts may determine whether a case is ‘exceptional’ in the case-by-case exercise of their discretion, considering the totality of the circumstances [and without any] precise rule or formula for making these determinations.” In a companion case, the Supreme Court also rejected the rule that exceptional case determinations should be reviewed de novo on appeal. Highmark Inc. v. Allcare Health Management System, Inc. (572 U.S._)(No. 12-1163. Argues February 26, 2014-Decided April 29, 2014). There are increasing calls for a change to the American Rule, to require losing parties to pay the winner’s attorneys’ fee. The principal purpose of such a change would be to deter so-called “patent trolls,” entities that acquire patents for the sole purpose of making money by filing lawsuits, threatening crippling litigation expenses, and demanding settlements at or slightly more than the cost of litigation. See Section 2.10, infra . It is questionable whether such a change would in fact deter the so-called trolls or instead preclude small entities and entrepreneurs from pursuing legitimate claims due to the uncertainty of the outcome of any lawsuit. Even the most “bulletproof” patent can be subject to unexpected challenges from previously undiscovered prior art or the vagaries of a jury decision favoring the defendant for reasons other than the merits. Enforcing a patent requires resources, or the availability of a contingency fee lawyer willing to take the outsized costs, and risks that patent litigation can entail. Thus, shifting the responsibility for the winner’s attorneys’ fees to the losing party could effectively preclude small entities and individuals from even filing a lawsuit. The 2014 Supreme Court’s Octane Fitness and Highmark cases, and how district courts exercise their newly expanded discretion in finding a patent case exception under 35 U.S.C. § 285, may dissuade Congress from enacting a “loser pays” exception for patent cases. Entry of Judgment The winning party seeks entry of a judgment that grants it the relief to which it is entitled, based on the jury’s verdict and the rulings of the court. First, the judgment will declare who the winning party is. Then, it will set forth the relief or remedies to which the winning party is entitled. The relief may include damages, as awarded by the jury and supplemented by the court if there was a timing difference in the calculation of the damages by the jury and the date on which they are finally awarded. A winning patentee is also entitled to prejudgment interest on the damage award, calculated at the rate specified by law, to compensate for the time value of money lost due to the delay in obtaining damages. The judgment may also set forth the post judgment interest due, for any delay between the entry of the judgment and the payment of the award to the patentee by the losing parties. A successful patentee may also be entitled to injunctive relief, barring further sales of the infringing product or service. This is the most potent relief available to patentees. Prior to 2006, it was presumed that a patentee who proved patent infringement was irreparably injured and entitled to an automatic injunction. But in 2006, the Supreme Court rejected the presumption and ruled that, in all other kinds of cases, a successful patentee is required to prove each of the following requirements for injunctive relief: (1) that it has suffered an irreparable injury; (2) that remedies available at law are inadequate to compensate for that injury; (3) that considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; (4) that the public interest would not be disserved by a permanent injunction. eBay Inc. v. MercExchange, L.L.C , 547 U.S.388 (2006). Usually, patentees who are competitors of the infringer can meet these requirements. However, patentees who are not competitors of the infringer are usually unsuccessful in convincing courts that they are entitled to injunctive relief, and are left with only money damages(usually an on going reasonable royalty) to compensate for future infringement. This removes the most serious risk an alleged infringer faces—being barred from the market—making fighting cases through trial more palatable than before. This new rule from the Supreme Court has driven many plaintiffs out of federal court and into the International Trade Commission (ITC), when the allegedly infringing products are imported, because the ITC issues exclusion orders and cease and desist orders (roughly equivalent to federal court injunctions barring further sales) without regard to the requirements the Supreme Court laid down in the eBay decision. See footnote 7, supra . Motion for Judgment as a Matter of Law Called a “JMOL” motion, the premise of a motion for judgment as a matter of law is that the jury did not have a legally sufficient evidentiary basis for deciding the case as it did, and the court should intervene and decide the case in favor of the party moving for the JMOL. The moving party must explain in detail what legally required evidence is missing from the trial record. The opposing party (i.e., the party that won the jury verdict) then has the opportunity to identify in the trial record where the allegedly missing evidence is found, and the judge decides who is correct. The court must consider the evidence in the light most favorable to the nonmoving party. Thus, most JMOL motions fail. But the losing party always files such a motion because it is a chance to challenge the jury’s verdict and avoid the remedies the winning party is demanding. Motion for a New Trial JMOL motions are usually accompanied by a motion for a new trial, arguing that the jury’s verdict was against the manifest weight of the evidence or the jury’s verdict was grossly inadequate or excessive. See Rules 50 and 59, Fed. R. Civ. P. Other grounds also exist, such as newly discovered evidence that could not have reasonably been discovered earlier. The decision to grant or deny a new trial rests with the sound discretion of the judge, who typically presided during the trial and has a keen understanding of the evidence that was introduced and whether the jury’s verdict was against the weight of that evidence. The court’s decision is not whether the court would have decided the case the same way, but whether there is sufficient evidence in the record to support the jury’s verdict. The court must view the evidence in the light most favorable to the nonmoving party. Thus, most new trial motions, like most JMOLs, are unsuccessful.

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Appeals (credit: Photograph by North Charleston via flickr / CC BY 2.0) Learning Objectives After completing this section, you will be able to Understand what happens after a jury verdict is entered. Appreciate the chances of success of appeals based on fact versus legal issues. Once the post-trial motions are decided and the judgment entered, the losing party may appeal to the Federal Circuit Court of Appeals. This is the one federal appellate court in the United States that hears all appealed cases involving patent disputes. Almost all patent cases that conclude with a trial, or after a decision on summary judgment, are appealed. This is partly because the cost of an appeal is orders of magnitude less than the case up to that point (e.g., tens or hundreds of thousands of dollars vs. hundreds of thousands or millions of dollars). In addition, overall the Federal Circuit affirms in full less than 60 percent of the patent cases it decides on the merits. http://www.patentlyo.com/files/caseload_patent_infringement_affirmance_and_reversal_rates_2001-2010.pdf. Thus, it is well worth it for the losing party to pursue an appeal, because overall it has a 40+ percent chance of partial or full relief from the judgment below. Of course, the reversal rate varies by the nature of the issues before the Federal Circuit and the standard of review the court applies. Legal issues (such as claim construction, summary judgment, and jury instructions) are reviewed de novo , without deference to the district court’s or jury’s decision. This makes it much more likely that the Federal Circuit will reverse a decision because it need not give any deference to the decision of the district court. Fact issues (like infringement, many aspects of validity, and damages) are reviewed on a less flexible standard (i.e., does substantial evidence support the decision), such that the Federal Circuit (like the district court) is not free to substitute its own judgment for that of the jury. Evidentiary rulings, and other issues associated with how the trial was conducted are reviewed under the least flexible standard of review—abuse of discretion. It is rare that the Federal Circuit finds that a district court abused its discretion. For a deeper understanding of appellate standards of review in patent cases, see Michel, Paul R., Circuit Judge, CAFC, “Appellate Advocacy—One Judge’s Point of View, The Federal Circuit Bar Journal, Vol. 1, No. 2, Summer 1991 (makes analogy to baseball and is readable). For example, the Federal Circuit reverses claim construction decisions at a rate nearly twice as high as decisions without claim construction issues (32 percent vs. 18 percent). Ted Sichelman, Myths of (Un)Certainty at the Federal Circuit, 43 Loy. L.A. L. Rev. 1161 (2010). Available at: http://digitalcommons.lmu.edu/llr/vol43/iss3/27. It is not surprising, then, that most appeals to the Federal Circuit focus at least in part on claim construction as a basis for the appeal. Appeals at the Federal Circuit are usually resolved within 18–24 months. Oral argument is usually scheduled within a year, depending on how much time the parties take to file their appeal briefs. Oral argument is requested and granted in almost all patent appeals. The argument occurs in the Federal Circuit courthouse in Washington, D.C., before a panel of three judges, although yearly the Federal Circuit travels to other cities to hear arguments at local law schools, which allows students, local practitioners, and the public to attend more easily. The parties are typically given 15 minutes per side to make their arguments, and after the argument, the court renders a written decision within 3–6 months.

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Litigation Alternatives Learning Objectives After completing this section, you will be able to Understand the various alternative methods of dispute resolution. Distinguish the pros and cons of arbitration versus mediation. The high cost, delay, and disruption of litigation motivate many adversaries to seek alternatives to litigation to resolve their disputes. Mediation and arbitration are two popular alternative dispute resolution (ADR) methodologies. A thriving business exists in the United States providing adversaries the resources to conduct mediations or arbitrations. Retired or former judges or lawyers are available to serve as mediators or arbitrators. ADR is an increasingly popular way to resolve disputes because it is often faster, less expensive, and private, as compared with the public lawsuit procedures outlined above. The interactions among the parties and the mediators/arbitrators can be kept confidential, as can any settlements reached. Confidentiality is a driving force behind ADR. Mediation Mediation is simply an exchange between adversaries overseen (i.e., “mediated”) by an individual with expertise and/ or training in helping parties reach agreement. Often, the mediator will require the parties to submit their positions and relevant documents in a pre-mediation brief. Usually, each pre-mediation brief is confidential and only seen by the mediator and the party submitting it (i.e., the opposing party does not see the other side’s mediation brief). The mediator will review the materials submitted and then set a date for the parties to meet with the mediator, usually in the mediator’s offices or a neutral location (such as a hotel conference room). Each party commits to bring to the mediation one or more people with the authority to settle, so that the people at the mediation can discuss the dispute and reach an agreement settling it without having to seek approval from others. At the mediation, the mediator typically starts by meeting with all the parties together, and reviews the dispute and the issues that require settlement. The mediator will then meet with each party separately, engaging in “shuttle diplomacy,” in an attempt to bring the parties to a common middle ground. Occasionally, when it may appear that the parties’ respective positions leave a gap between them, the mediator may make a “mediator’s proposal” that tries to bridge that gap. If the parties agree, typically a written agreement will be signed before they end the mediation—which may be a list of terms for later fleshing out in a full agreement or an actual final settlement agreement. Because anything left to later discussion can give rise to further disputes, most mediators try to get the parties to a full, signed agreement before they depart the mediation. Perhaps surprisingly to some, mediation often succeeds, if not the first time, then weeks or months later, after the parties have a chance to think things through. Mediations can be conducted while litigation is pending, or before litigation is filed. In the latter case, often the parties will sign a “standstill agreement” that promises that neither will file a lawsuit against the other on the subject matter of the mediation until they agree the mediation has failed. District courts and the Federal Circuit often have mediation programs that attempt to help the parties resolve their disputes voluntarily. Increased attention is given to these programs as the resources of the courts have dwindled and the caseloads increased because each successful mediation is one less case that requires the resources of the court. Arbitration The principal difference between mediation and arbitration is decisiveness. Mediations result in settlements only if all parties agree to a resolution. In most arbitrations (so-called “binding arbitrations”), the parties agree to be bound by the decision of the arbitrator(s). There is a nonbinding version of arbitration, where the parties ask the arbitrator(s) to render a decision, but do not agree to be bound by it. In practice, these are actually mediations because they result in a settlement only if all parties agree to the result. Such nonbinding arbitrations are most often used when the parties have attempted to reach a mediated settlement but reach an impasse on one or more critical issues. They may then agree to submit those impasses to nonbinding arbitration, where one or more arbitrators (usually experts on the subject matter of the impasse issues) evaluate the facts, as presented by the parties, and render a decision that the parties can review to understand how an impartial third party looks at the issues. This often helps the parties craft a mediated settlement on their own. Most arbitrations are binding, and resemble lawsuits and trials more than mediations. The parties may agree to submit their dispute to a single arbitrator (like a retired judge), but most often a panel of three arbitrators is appointed to hear the case. The parties may agree on all three arbitrators, drawn from a list of suitable candidates provided by the American Arbitration Association http://www.adr.org/aaa. or some other entity in the arbitration business, or each party selects one arbitrator and those two arbitrators pick the third. The parties agree on the rules that govern the arbitration, which can limit discovery, evidence, witnesses, and trial time, in whatever manner the parties agree. Once the parties agree on the rules, the arbitration is controlled by the arbitration panel, which enforces the rules and renders a binding decision. Usually, arbitration decisions are not appealable (except for gross malfeasance by the arbitrators), but the parties can provide for appeal rights if they choose. But prolonging the resolution of the dispute by allowing an appeal is contrary to the cost and time-savings objectives of most arbitrations. Arbitrations have become particularly popular for resolving patent disputes that cross international borders and involve multiple patents issued by different countries. No one court can resolve such disputes, so international arbitration, with arbitrators expert in different countries’ laws can fill the gap.

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Patent Trolls and Efforts to Thwart Them (credit: Photograph by Alexandre Dulaunoy via flickr / CC BY 2.0) Learning Objectives After completing this section, you will be able to Appreciate the threat posed by patent trolls to innocent businesses. Understand the difference between legitimate patent holders enforcing their rights and extortionist patent trolls who try to game the legal system. Starting in the 1990s, but increasing in the new millennium, a type of plaintiff with a particular litigation and settlement strategy gained notoriety in the United States—the so- called “patent troll.” By 2012, the majority of patent suits were brought not by businesses making products covered by patents they owned and seeking to halt competitors believed to be infringing their patents, or even by small entities and entrepreneurs pursuing legitimate claims, but instead by what some detractors call “patent trolls” (after the mythical creatures that demanded payment for safe passage over a bridge). In 2012, one article suggests 56 percent of patent infringement cases filed in the United States were Filed by trolls: https://lexmachina.com/2013/04/09/lex-machina-releases-the-aia-500-expanded/. Another put the number at 62 percent: http://www.lexology.com/library/detail.aspx?g=1e1a0e7bd9a6-4366-818f-a6935ab0fabe&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+Federal+section&utm_campaign=Calibar+IP+section+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2013-04-29&utm_term. Although some have more recently attempted to discern a difference between what they consider “good” and “bad” trolls by labeling the former “non-practicing entities” (NPEs) or “patent monetization entities” (PMEs), for the purposes of this section, we will refer to such entities as trolls. As plaintiffs, trolls seek to take advantage of the fact that U.S. patent litigation costs have become so high that many defendants are willing to pay to make such cases go away. Trolls file lawsuits not to protect a business from an infringing competitor, but to derive settlement revenue from defendants willing to settle for less than litigation costs. Trolls often acquire patents of ambiguous scope and questionable value, file suit against multiple defendants, and rely on the presumption of validity accorded all issued patents to extract settlements for less than it would cost any one defendant to defend against the infringement claim. Because trolls have few documents other than the patents and their file histories, and even fewer employees, they are not subject to the outsized expense of discovery that a commercial business with warehouses of documents and scores of employees faces in patent litigation. Because discovery costs for such defendants are so much greater than for troll plaintiffs, defendants feel pressure to settle for less than the cost of litigation, lining the pockets of trolls. Such activities in the aggregate have proven very profitable for trolls, and expensive for defendants. Spurred by target companies, the America Invents Act legislation in 2011 (see infra, Section X.3.3) included a change in rules governing the joinder of parties, stating: “...accused infringers may not be joined in one action as defendants or counterclaim defendants, or have their actions consolidated for trial, based solely on allegations that they each have infringed the patent or patents in suit.” This eliminated a tool of trolls—namely, filing a single case against scores or even hundreds of alleged infringers. See, http://www.americanbar.org/publications/landslide/2012_13/march_april/joinder_over_year_after_america_invents_act.html. However, trolls simply adapted by filing multiple lawsuits and seeking consolidation for discovery, which increases their costs somewhat but avoids the purpose of the change. More recently, politicians have scrambled to propose a myriad of different legislative fixes, from shifting the cost of unsuccessful litigation to plaintiffs, to staying litigation against customers of another’s product until a suit against the manufacturer is concluded. “See http://www.ipo.org/wp-content/uploads/2013/06/Patent-Litigation-Bills-Summary-Comparison-Chart-EXPANDED.pdf, http://patentlyo.com/patent/2013/03/guesteDitorial-throwing-trolls-off-the-bridge.html, http://www.ipwatchdog.com/2013/08/13/congress-sirens-song-patent-litigation/id=44573/, https://truthonthemarket.com/2013/03/15/the-shield-act-when-bad-studiesmake-bad-laws/.” Even President Obama was involved, asserting his administration’s own views for a solution. http://www.nytimes.com/2013/06/05/business/president-moves-to-curb-patent-suits.html?_r=0. Not everyone thinks legislation is appropriate, or even necessary. A panel at Yale Law School in April 2013 yielded decidedly mixed views. http://www.patentlyo.com/patent/2013/05/patent-troll-panel-at-yale-law-school.html. And then Chief Judge Rader of the Federal Circuit Court of Appeals coauthored an op-ed piece in the New York Times , recommending that judges should use 35 U.S.C. §285 to foil patent trolls by imposing costs and sanctions at the judicial level. http://www.nytimes.com/2013/06/05/opinion/make-patent-trolls-pay-in-court.html. But again, not everyone thinks that is realistic. http://www.techdirt.com/articles/20130605/09065423327/chief-patent-judge-speaks-outagainst-patent-trolls.shtml. The Supreme Court embraced Judge Rader’s recommendation in its 2014 decisions in Octane Fitness and Highmark , significantly broadening the district court’s discretion in finding a case exceptional and awarding attorneys’ fees. (See supra , Section 2.7, “Exceptional Case.”) But even with such expanded discretion and power, trial judges cannot rule on the merits of a case without some basis for it, and that requires money spent by defendants. Thus, it is not easy for a district court judge to stop what trolls rely upon, namely the use of litigation expense and leverage to extract settlements. Getting to the merits of the claims takes time and significant expense—often more than the cost to settle, with no assurance as to outcome. As of early 2015, the problem of trolls remains a subject of widespread discussion and debate. Legislation that was proposed in 2014 to address the problem is stalled, and although new legislation is still being discussed, many experts believe that the state and federal actions already taken to rein in abusive patent litigation—including important U.S. Supreme Court decisions in 2015 regarding software patentability and fee-shifting in exceptional cases—make it less likely that new legislation will be introduced any time soon. District courts, for example, have already begun applying the standards recently announced by the Supreme Court in Octane Fitness and Highmark , and may be more willing to make abusive patent litigants pay attorneys’ fees. Time will tell if the new fee-award judicial regime will lessen the pressure to implement legislation against abusive litigants. The Eastern District of Texas, one of the most popular venues for patent litigation in the United States, has added a new Track B docket, which specifically addresses a number of proposals considered by Congress, including early disclosure of certain information, such as licensing information, as well as very early disclosure of both the damages sought and the method of calculating those damage. http://mcsmith.blogs.com/eastern_district_of_texas/2014/02/eastern-district-of-texas-resumescase-tracking-with-track-b-for-patent-cases.html. Meanwhile, a growing number of state legislatures and state attorneys general have also begun using consumer protection laws to clamp down on patent trolls. http://www.conversantip.com/blog/states-stepup-fight-against-patent-trolls/. And the White House in 2014 issued a series of Executive Orders intended to further curb patent litigation abuse and strengthen the patent system. http://www.conversantip.com/blog/usadministration-takes-smart-steps-to-strengthenthe-patent-system/. Finally, a movement is taking hold within the patent licensing industry itself to develop a voluntary code of conduct or standards of ethical behavior. Companies like Conversant and Dominion Harbor Group have committed themselves publicly to a set of ethical guidelines for patent licensing, and other companies are also considering doing so. http://www.conversantip.com/news-article/iam-guidelines-for-ethical-patent-licensingprovide-basis-for-new-approach-to-thetroll-debate/ and http://finance.yahoo.com/news/finjan-holdings-commits-licensingbest-130000509.html The Licensing Executives Society of the U.S. and Canada (LES), the industry’s principal professional organization, is also developing a set of “best practice” guidelines for ethical patent licensing activity. The importance of patents to America’s economic prosperity and competitiveness ensures that competing interests will continue to strive for an advantage commercially, legislatively, and judicially. Change will continue after the publication of this chapter. The status quo does not last long in our field.

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Introduction (credit: modification of work “Copyright symbol under magnifying glass” by Marco Verch/flikr.com, CC BY 2.0)

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The Basics of Copyright (credit: Wikimedia Commons / CC BY-SA 3.0) Learning Objectives After completing this section, you will be able to Understand the theoretical and legal underpinnings of copyright. Appreciate the important differences between copyrights and patents. A copyright is an intellectual property right granted by a government to the author of an original literary, dramatic, musical, artistic, or other eligible creative work that gives them the exclusive right to control how the work is published, reproduced, performed, or displayed—as well as whether or not derivative works (e.g., a movie version of a novel) may be produced. In the United States, the legal foundation for copyright is set forth, along with that for patents, in Article 1, Section 8, Clause 8 of the U.S. Constitution. This clause gives Congress the authority to “promote the progress of Science and useful Arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.” U.S. Constitution Arr. 1, § 8 Congress and the courts have interpreted the terms “authors” and “writings” very broadly so as to include the creators of a wide variety of artistic and intellectual works. Title 17 of the United States Code authorizes the grant of a copyright to the authors of “original works of authorship”—including literary works, dramatic works, choreographic works, graphic works, audiovisual works, sound recordings, and architectural works. In most cases, a copyright lasts for the life of the author plus 70 years. How to Obtain a Copyright In America, the copyright system is administered by the U.S. Copyright Office, which is part of the Library of Congress and maintains a registry of copyrighted works. Interestingly, registration is not required to obtain a copyright. It is automatically granted to an author at the moment of creation—i.e., as soon as the work is expressed in a tangible form that allows it to be seen or copied, such as being written on paper or on a computer, or recorded as video or audio. Registration is only required if a copyright holder wants to initiate a copyright infringement suit in federal court. Copyrights vs. Patents Unlike the case with patents, the United States never developed an examination system for determining whether or not a creative work merits copyright protection. That’s because while the validity of an invention can be evaluated fairly objectively based on its utility, novelty, and non- obviousness, the merit of any cultural work is a far more subjective affair, as demonstrated by the frequency with which publishers reject novels that later go on to become literary classics. What the patent and copyright systems share, however, is the recognition that unless the inherent property rights of inventors and authors to their creations are protected, the wellsprings of creation and productivity would be negatively affected by the reduced incentive. Both systems also share the public policy goal of marshaling the benefits of individual creativity—whether technological, as in the case of inventions, or cultural, as in literary works—to the public good so that these promote the progress of the nation and the “general welfare” of its citizens. How to promote that general welfare, however, was approached very differently by the Founders in the case of patents than it was with copyright. A portrait of Supreme Court Justice Henry Baldwin. (credit: modification of work by Wikimedia Commons / Public Domain) The explicit intention of patent law, explained Supreme Court Justice Henry Baldwin in Whitney v. Emmett (1831), was “to benefit the inventor, in the belief that maximizing individual welfare leads to maximum social welfare.” Inventors, after all, created tools that enabled the new nation to free itself from dependency on foreign imports and develop industries of its own. Whatever incentives were needed to prod these technologically creative people to take on the challenge and succeed were well worth the bargain (see Chapter 1). The Rights of Authors and the Public Interest When it came to copyright, however, the rights of authors were thought to conflict with those of the public to a far greater extent. “Democratic values emphasized equal and widespread access to learning and the importance of information flows for maintaining political freedom, whereas strong copyrights impinged on the fullest attainment of these objectives,” notes Bowdoin College historian Zorina Khan, author of The Democratization of Invention: Patents and Copyright in American Economic Development , which won the Alice Hanson Jones prize for outstanding work in economic history in 2005. B. Zorina Khan, The Democratization of Invention: Patents and Copyrights in American Economic Development, 1790O1920 , Cambridge University Press, 2005. As an example, a copyright owner’s right to prevent unauthorized use of their work may at times be constrained by the public’s First Amendment right of free speech—hence the doctrine of “fair use” (more on this later). It was believed that a strategy of strong patent rights but weaker copyrights also better reflected the differing incentives that motivated inventors and authors. Inventors, many felt, were driven primarily by economic gain, whereas authors were often interested as much in the prospect of celebrity and reputation as they were in monetary reward. Supreme Court Justice John McLean emphasized that this distinction between patents and copyrights exists in the structure of U.S. intellectual property law itself. In Wheaton v. Peters (1834) , the first high court ruling on copyright, he wrote: “It has been argued at the bar that as the promotion of the progress of science and the useful arts is here united in the same clause in the Constitution, the rights of authors and inventors were considered as standing on the same footing. But this, I think, is a non-sequitur … for when Congress came to execute this power by legislation, the subjects are kept distinct and very different provisions are made respecting them.” Wheaton v. Peters , 33 U.S. (8 Pet.) 591 (1834)Retrieved from http://supreme.justia.com/cases/federal/us/33/591/case.html courtesy of B. Zorina Khan . To understand why the Founders gave greater weight to the public domain in copyright law than they did in patent law, it’s important to examine the origin and development of early copyright systems and their political and economic impact on society.

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Early Copyright Systems Learning Objectives After completing this section, you will be able to Understand the role early copyright systems played in enforcing monopolies. Appreciate the degree to which authors’ rights were ignored at that time. As was the case with patents, the granting of book privileges (now called copyrights) began in the Republic of Venice in the fifteenth century. Prior to that, printed books were considered part of the public domain and anyone could copy or reproduce them. But in 1492—the same year Columbus sailed the Santa Maria to the New World—a Milanese author named Donatus Bossius petitioned the sixth duke of Milan, Gian Galeazzo Sforza, for an exclusive privilege for his book, arguing that without such a privilege he would be unjustly deprived of the fruit of his effort. He was granted a ten-year privilege, and the practice soon spread throughout Europe. The French copyright system was introduced in 1498. Exclusive rights to not only books but also translations, maps, type designs, engravings, and artwork were granted by the monarch for periods initially ranging from two to ten years. There were stipulations attached to such grants, sometimes including even price controls on the published works. It is important to realize, however, that authorship was not required for the granting of early copyrights. In fact, the early copyright systems of Europe more often than not enabled printers and publishers to establish quite effective monopolies over the commerce in books, the arts, and other cultural works that limited the diffusion of culture in society. The owners of such privileges may have waxed poetic about “droit d’auteur” (authors’ rights), but this was often just a way of deflecting public criticism of their monopolistic power and superprofits. Indeed, this was most glaringly revealed in the grant of exclusive privileges to French opera. According to a 1929 book by Henry Prunières, Henry Prunières, “La vie illustre et libertine de Jean-Baptiste Lully ,” Librairie Plon, Paris, 1929, courtesy of B. Zorina Khan. Louis XIV in 1669 granted a perpetual monopoly over all operatic performances in France to Jean-Baptiste Lully, the director of the Paris Opera. Lully also gained sole publication rights to opera librettos, and sold shares in the rights to printers. He then used his copyright privilege to limit the number of musicians who could perform outside the Paris Opera and to suppress competitors like the Comédie Francaise. In the end, Lully became fabulously rich and bequeathed his monopoly rights to his heirs. Not exactly your starving artist asking merely to enjoy the fruits of his work. Early copyright systems also quickly evolved into means of censorship and surveillance of the population’s reading habits. The 1566 Edict of Moulins in France, for example, required that any new book had to be approved and licensed by the Crown. Manuscripts first had to be read and approved by a censor before a permit was granted to print a book. The permit could be revoked if officials or influential citizens later complained about the book’s content. The Marble Court. Versailles Palace, France. (credit: photograph by Kimberly Vardeman via flikr / CC BY 2.0) Interestingly, a decree in 1777 enabled authors who did not sell off their rights to gain a copyright in perpetuity. But like the A.J. Liebling quote about freedom of the press belonging only to those with enough wealth to own one, so, too, were authors’ inalienable rights often just a lofty theory trumped by harsh economic reality. Because few authors had the capital required to print a book, they usually sold off their “exclusive rights” to commercial publishers. Much the same situation prevailed in the English copyright system, where copyright law began as a monopoly grant to benefit favored guilds and as a means to censor public opinion on behalf of the Crown. The Statute of Anne In 1557, the Worshipful Company of Stationers was granted a royal privilege that enabled it to control the book trade for the next 150 years. Only in 1709 did a new copyright statute, the Statute of Anne , begin to erode the monopolistic power of the Stationers Company. It stipulated that a copyright could be obtained by anyone, and instead of a perpetual right, the term was limited to 14 years with the right to renew for one additional 14-year term. According to Professor John Feather of Loughborough University in Britain, the statute “wholly ignored the authors of books, and certainly was not intended to confer any additional rights on them.” John Feather, “Publishing, Piracy, and Politics: An Historical Study of Copyright in Britain ,” Mansell, New York, 1994, courtesy of Khan. Assessing early European copyright systems as a whole, Zorina Khan observes that they “resulted in ‘odious monopolies,’ higher prices and greater scarcity, large transfers [of money] to officials of the Crown and their allies, and pervasive censorship [while it also] disadvantaged smaller book producers, provincial publishers, and the academic and broader community.” Op. cit., Khan. It wasn’t until 1774 in England, in the landmark case Donaldson v. Beckett , that a court ruled that authors have a fundamental right to their writings—at least until publication, after which the Statute of Anne still gave the rights to the publishers. The immediate claim in the case was whether Scottish bookseller Alexander Donaldson had acted as a pirate when he published an edition of James Thomson’s The Seasons , a work for which Thomas Beckett and other London booksellers claimed the copyright. But the larger principle at issue was whether copyright was a limited right granted by government under the Statute of Anne, or a common law right of publishers that existed in perpetuity despite the limitations of the statute. The case would prove pivotal in deciding not only the future of publishing, but also of authors, in whose name the London publishers claimed to be acting. The court took the claim of authors’ rights further than the publishers ever intended, however. It reaffirmed the limited statutory nature of copyright and also recognized that authors—with the decline of patronage, authors were only then emerging as independent professionals writing for a mass market of book buyers—were the true originators and proprietors of the product of their own creative labors. Photograph of Frontispiece – The Seasons by James Thomson Published by Alexander Donaldson. This work is published from the United States. (credit: Wikimedia Commons / Public Domain) As Michel Foucault would put it nearly two centuries later, “The coming into being of the notion of ‘author’ constitutes the privileged moment of individualization in the history of ideas, knowledge, literature, philosophy, and science.” In the century after Donaldson v. Beckett , European copyright systems expanded to include sheet music, maps, design, sculpture, and even lectures. The doctrines of “work for hire” and “fair use” would emerge (more on these later), but the law would still remain largely arbitrary, confused, and frequently injurious to the public until late in the nineteenth century. However, the process of transforming copyright from a scheme of monopoly privileges for publishers into a property right for the actual creators of cultural works had begun.

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Copyright in America (credit: photograph by Kenneth C. Zirkel via Wikimeda Commons / CC BY-SA 3.0) Learning Objectives After completing this section, you will be able to See the origins of copyright law in the United States. Appreciate the importance the Founding Fathers attached to the public need for widespread access to learning and information. Ever practical, the Founding Fathers sought to construct an intellectual property regime that above all else would encourage the growth of commerce and industry in order to ensure the survival of the young American nation during its precarious beginnings. For patent law, this meant creating the maximum possible incentives to those whose ingenuity would spur the development of agriculture and domestic industry. As economist Jonathan Hughes once noted, entrepreneur-inventors like Eli Whitney, who developed a cotton gin in 1793 that increased agricultural production a hundredfold, were“the vital few” upon whom the nation depended for progress. That’s why early Supreme Court Justice Joseph Story argued that patent rights were “sacred,” and the just reward for their contributions to society. But in copyright law, a different approach was taken—one that acknowledged authors’ rights but placed far greater emphasis on the public’s need for widespread access to learning and on the growth of markets. James Gilreath, the Library of Congress historian who in the late nineteenth century painstakingly reconstructed Thomas Jefferson’s massive library catalog burned by the British in 1814, explained the Founders’ view this way: “The constitutional copyright provisions’ emphasis on the useful arts sought not to bolster a professional literary establishment of novelists, poets, and critics such as the one that existed in England, but rather to ensure that books with demonstrably practical benefits to society would be available to readers of the new Republic.” This emphasis was certainly in tune with the realities of American book trade. Domestic publishers mainly produced newspapers, almanacs, and practical guides—reading material of useful value to a nation that needed to build an entire economy from scratch. Most important literary works, on the other hand, were imported from Britain and France. As a result, even in colonial times, states that passed copyright laws did so only with explicit rules that ensured widespread public access to knowledge and information. Take colonial Connecticut’s 1783 copyright law, for example. It certainly contained all the right rhetoric about authors’ natural rights: “Whereas it is perfectly agreeable to the principles of natural equity and justice, that every author should be secured in receiving the profits that may arise from the sale of his works, and such security may encourage men of learning and genius to publish their writings; which may do honor to their country, and service to mankind." State of Connecticut. (1906). Copyright Laws Passed by the Original States: 1783-1786. In T. Solberg (Ed.), Copyright Enactments of the United States, 1783-1906 (2 ed., pg. 11). Retrieved from http://books.google.com/books?id=xNA9AAAAIAAJ&oe=UTF-8 But it also made it quite clear that copyrighted books had to be offered at reasonable prices or the state would issue a compulsory license enabling anyone to copy these at will. No one failed to get the point. After the Constitutional Convention and the establishment of Congress, the first federal copyright statute was signed into law by President George Washington on May 31, 1790, less than two months after the first patent law was approved. The law stipulated that “the author and authors of any map, chart, book or books already printed within these United States, being a citizen or citizens thereof, shall have the sole right and liberty of printing, reprinting, publishing and vending such map, chart, book or books” for a period of 14 years, with the right of renewal for another 14 years. The Founders’ belief that 28 years was the proper maximum copyright term stands in sharp contrast to today’s controversial maximum copyright term of life-plus-70 years, an issue we will discuss later in this chapter. Anyone violating a copyright “shall forfeit all and every copy and all and every sheet to the author or proprietor who shall forthwith destroy the same.” What’s more, “offenders shall also forfeit and pay the sum of fifty cents for every sheet which shall be found in his or her possession.” As a final disincentive to infringers, the law allowed copyright owners to file suit “in any court of record in the United States within one year after the cause of action.” The US Copyright Act of 1790 reprinted in the Colombian Centinel, published 17 July 1790. (credit: Wikimedia Commons / Public Domain) Still, the law’s focus on the public interest was clear in the first five words of the text: “An Act for the Encouragement of Learning , by securing the Copies of Maps, Charts and Books, to the Authors and Proprietors of such Copies, during the Times therein mentioned.” The failure in the text to distinguish between “authors” and “proprietors” (i.e., publishers, printers, and booksellers), of course, also suggested that Congress did not view copyright as an innate or moral right of authors. In fact, copyright was conditional upon the author or proprietor depositing a copy of the work in the district court and paying a fee of 60 cents. Another sign that the emphasis of U.S. copyright law was to facilitate the diffusion of knowledge over the protection of authors’ inherent property rights was provided by this sentence: “Nothing in this act shall be construed to extend to prohibit the importation or vending, reprinting or publishing within the United States, of any map, chart, book or books by any person not a citizen of the United States.” In other words, America’s first copyright law explicitly authorized the piracy of foreign cultural works in order to promote widespread citizen access to the benefits of learning. And that’s exactly what Americans did, unabashedly pirating European culture and resisting for a century all attempts to alter what Europeans called its “obnoxious laws.” The first American to receive a U.S. copyright, one month after the Copyright Act was signed into law, was John Barry for his spelling book. The first woman granted a copyright was Mrs. Mercy Warren of Massachusetts for her Poems, Dramatic and Miscellaneous . Portrait of Mercy Otis Warren (1728-1814), American writer and first woman in the United States to be granted a copyright. (credit: portrait by John Singleton Copley via Wikimedia Commons / Public domain) Over the next decade, half of all copyrights went to proprietors, proving yet again that the law’s concern was not chiefly with the rights of authors. Most of these were for practical books such as atlases, dictionaries, and textbooks, as one would expect in a society hungering for practical knowledge and lacking in homegrown literary works equal in sophistication to those of the Europeans. The Pirates of Copyright As late as 1835, 65 percent of science books, 92 percent of business texts, and 75 percent of law books published in the United States were written by Americans. But even then, a half century after independence, only a third of poetry and drama books published in America were written by Americans. Op. cit., Khan. “A nation of artificers and innovators, both as consumers and producers, American citizens were confident of their global competitiveness in technology, and took an active role in international patent conventions,” explains Khan. “Although they excelled at pragmatic contrivances, Americans were advisedly less sanguine about their efforts in the realm of music, art, literature and drama.” According to Ainsworth Spofford, the Librarian of Congress from 1864 to 1897, “a group of publishing houses in the [U.S.], which made a specialty of cheap books, vied with each other in the business of appropriating English and continental trash, and printed this under villainous covers, in type ugly enough to risk a serious increase of opthalmia among American readers.” “ The Question of Copyright ,” compiled by George Haven Putnam, G.P. Putnam’s Sons, New York, 1896, courtesy of Zorina Khan. And not just “trash,” either. America gained a notorious reputation internationally for its piracy of English and European literary classics—a practice greatly encouraged by the protectionist levying of tariffs as high as 25 percent on imported books. (credit: Original artist: Joseph Ferdinand Keppler (1838-1894)Restoration: Adam Cuerden via Wikimedia Commons / Public domain) Put another way, America in those days was seen as a nation of technological innovators and cultural pirates. Between 1790 and 1875, more than a hundred petitions were submitted to Congress to bring the United States in line with international copyright laws. All were defeated by publishers’ and printers’ lobbies. It wasn’t until 1891 that the Chace Act granted copyright protection to select foreign authors—but only if their work was published in the United States on or before the publication date in their own countries, and only if the actual printing was done here. The United States failed to qualify for admission to the Berne Convention on copyright until 1988, an astonishing 102 years after the convention. Such piracy had its costs, however—and not just to foreign authors and publishers. According to Arthur Schlesinger, “So long as publishers … could reprint, or pirate, popular English authors without payment of royalty, and so long as readers could buy such volumes far cheaper than books written by Americans, native authorship was at a marked disadvantage.” Arthur M. Schlesinger, The Rise of the City, 1878-1898 , McMillan, New York, 1933. Some believe this helps to explain why no great American novels were written in the early nineteenth century. Only in the mid-1800s, with the emergence of novelists like James Fenimore Cooper, Nathaniel Hawthorne, and Henry Wadsworth Longfellow did a change in the relative balance of authorship between Americans and foreigners begin to take place. More and more authors took up the pen and influenced American culture, including Harriet Beecher Stowe, who copyrighted Uncle Tom’s Cabin in 1851. Nonetheless, it wasn’t until the early twentieth century, after the United States began to comply with international copyright standards, that Americans became the majority of best-selling authors in the United States. Alice Hackett and James Burke, Eighty Years of Best Sellers, 1895-1975 , Bowker, New York, 1971. An engraving of Nathaniel Hawthorne made by H. W. Smith circa 1880. (credit: Wikimedia Commons / Public Domain) It would be far too simplistic, of course, to ascribe the late- blooming of American literature simply to weak copyright laws and the prevalence of cheap pirated foreign literature. There are organic reasons why a young nation, and a new culture, needs time to develop its own literary voices. But it is also true, as research worldwide has repeatedly demonstrated, that where weak intellectual property protections exist in developing nations (like today’s China or early nineteenth-century America), citizens have an excessive incentive to copy and insufficient incentive to invent and create for themselves.

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Eligible Works Parthenon Marbles, East Pediment. Photograph taken at the British Museum by Justin Norris via flikr / CC BY 2.0 Learning Objectives After completing this section, you will be able to Know what kinds of creative work are eligible for Grasp the broad definition of "authors" and "literary works." Can I Copyright That? Before reading this section, please watch the overview video covering the basics of copyright law—eligible works, the distinction between ideas and their expression, the rights granted to copyright owners, and is copyright term—life plus 70 years. Title 17 of the United States Code Section 102 explicitly delineates eight categories of original works that are eligible for copyright. This list, while broad, actually includes a far more extensive range of work than the average citizen might imagine. For example, copyrightable works also include software. Copyrighting Software Why is software copyrightable? It’s because an appellate ruling in the 1983 case of Apple v. Franklin held that software was a kind of “literary work” and therefore eligible for copyright. The court noted that the Copyright Act defined the term “literary work” as follows: “Literary works are works, other than audiovisual works, [that are] expressed in words, numbers, or other verbal or numerical symbols or indicia, regardless of the nature of the material objects, such as books, periodicals, manuscripts, phonorecords, film, tapes, disks, or cards, in which they are embodied.” A pple Computer, Inc. v. Franklin Computer Corp. , 714 F.2d 1240 (3d Cir. 1983) Retrieved from http://bulk.resource.org/courts.gov/c/F2/714/714.F2d.1240.82-1582.html. Based on this definition, the court determined that a computer software program “is an appropriate subject of copyright.” Note, however, that copyright does not extend to the elements of works of authorship that are potentially patentable processes. And indeed, beginning in the 1990s, software companies began increasingly to patent those elements of their new software that could be described as patentable processes, precisely in order to secure the stronger protections of patent law. In any event, software is but one example of how the courts have tended to interpret broadly the eight categories of eligible subject matter. Just as technology drove the expansion of eligible subject matter into ever new realms—e.g., first photographs and then motion pictures—the courts have also expanded the definitions of all eight categories of eligible subject matter to include maps, games, puzzles, toys, fabric design, and many other creations. Ideas to Copyrightable Works However, not everything is copyrightable—far from it. Just as patent law makes a sharp distinction between ideas and their application—i.e., you cannot patent an idea for a better mousetrap but you most certainly can patent a new, non-obvious, and useful apparatus that catches mice—so, too, does copyright law differentiate between ideas and their expression. You cannot copyright, for example, the idea of an epic space opera in which a mystical cadre of Jedi knights wielding laser swords battle galactic evil, but you can copyright the particular expression of that idea in the screenplay and motion picture Star Wars . Because it is an abstract concept or idea, Einstein’s formula E = MC 2 is also not copyrightable. It is true that Einstein was the first to derive the famous formula involving mass and energy, which at first blush seems to fit the requirement for creative authorship in a copyrightable work. But the formula was derived from observation of natural physical laws, and must remain in the public domain lest private intellectual property rights create a blockade that prevents scientists and mathematicians from continuing their research and teaching. Also noncopyrightable are names, addresses, and other known facts that are not creatively compiled. That’s why a phone book cannot be copyrighted, whereas the creative compilation of facts in a Chinese-American phone directory listing “Bean Curd & Bean Sprout Shops” may be under certain conditions, as a judge ruled in the 1991 case Key v. Chinatown . To be copyrightable, a creative work must not only be expressed in a tangible form that allows it to be seen or copied (i.e., put to paper or some other medium), but it must also be original . The requirement for originality in copyright has its parallel in the necessity for novelty in patents. But this parallel works only to a point, for a copyrighted work need not be novel in the strictest sense to be original. As Arthur R. Miller and Michael H. Davis explain in their textbook on intellectual property for law students: “The author’s ideas and themes may have appeared in earlier works, Indeed, much of the expression may have been produced before. But copyright will be available to [this] second author if his is a work of independent creation.” Arthur R. Miller and Michael H. Davis, Intellectual Property: Patents, Trademarks, and Copyright in a Nutshell . (5th ed., p. 25). St. Paul MN: West Publishing Co., 2007. To reiterate, a copyrightable work must not only fit under one of the eight broad categories of eligible subject matter, but it must also be: Independently created. Expressed or fixed on a tangible medium that can be seen or copied. Creatively authored or compiled. Not a fact or abstract idea.

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Rights and Term Learning Objectives After completing this section, you will be able to Discern the specific rights granted to copyright owners. Understand the term of those rights as well as in some cases their limitations. Just as common law property rights grant owners’ exclusive powers of possession, use, and distribution, so, too, does copyright law provide for six roughly analogous exclusive rights: Derived from 17 U.S.C., § 106 Retrieved from http://www.law.cornell.edu/uscode/text/17/106 The right to reproduce the copyrighted work The right to prepare derivative works The right to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending The right to perform the copyrighted work publicly The right to display the copyrighted work publicly The right to perform sound recordings publicly through a digital audio transmission. These rights are exclusive to copyright owners—only they or those to whom they have legally assigned their rights can act upon them. Only the author of a copyrighted book, for example, can decide to make copies of (i.e., publish) the work and prepare derivatives of the book, such as a movie version of it. If any person other than the author and copyright owner were to make a movie based on the book, that person would infringe the copyright. The term or time period of a copyright varies. For an individual, the term of a copyright is the life of the author plus 70 years after the author is deceased. For a work with two or more authors, the term expires 70 years after the last author’s death. Finally, for works that are “made for hire,” or anonymous or pseudonymous works, the copyright term lasts 95 years from the first publication or 120 years from the year of the work’s creation, whichever comes first. Derived from 17 U.S.C., § 302 (c) Retrieved from http://www.law.cornell.edu/uscode/text/17/302 As examples, assume a musical artist writes a song that is published and performed under their name. The copyright will last 70 years beyond their death, and could conceivably be quite valuable to their heirs. On the other hand, imagine that an anonymous Korean War soldier’s diary, dated “December 1951” is discovered in an antique shop in the year 2013 and published that same year. Ordinarily, the copyright for an anonymous work would last for 95 years from the date of first publication, expiring in the year 2108. But because the date of creation is known to be 1951, the copyright would expire in 2071, or 120 years after it was written. As noted earlier and discussed later in Section 3.9 of this chapter, these lengthy terms for copyright are controversial and opposed even by many supporters of copyright. Work for Hire According to U.S. law, a work for hire is: “a work prepared by an employee within the scope of their employment, or a work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.” 17 U.S.C., § 101 Retrieved from http://www.law.cornell.edu/uscode/text/17/101 Imagine that you are an employee of a company, and you are asked to write one section of a white paper on a subject of interest to the industry. Or let’s say you’re a contractor hired to perform that same task under a “work for hire” arrangement. You will not own the copyright to that section of the white paper when it is completed, nor can you publish or use it if you leave the company and go to work for someone else. Although it is your creation, it is owned by the employer, who often uses your work product as part of an integrated project involving other contributors. The copyright for this particular white paper will last for 95 years from the year of first publication, or for 120 years from the year of its creation, whichever expires first. First-Sale Doctrine It is important to note, however, that an author’s distribution rights (No. 3 above) are strictly limited by what is known as the first-sale doctrine, which terminates those distribution rights once he sells or distributes the work to someone else. For example, once the author of a copyrighted novel lets a publisher distribute copies of that novel to a bookstore, the author’s distribution rights to those copies are ended and the bookstore can do whatever it wants with them—sell them, rent them, give them away, or throw them in the dumpster. The bookstore owner cannot, however, make additional copies of the book because the first-sale doctrine does not limit a copyright owner’s reproduction right (the first right listed above). The first-sale doctrine was first delineated in the 1908 Supreme Court case Bobbs-Merrill Co. v. Straus . The Bobbs-Merrill Co. distributed copies of a novel titled The Castaway to retailers with the proviso that these be sold for exactly one dollar. Printed right in the book itself, in fact, right after the title page, was the following notice: “The price of this book at retail is $1 net. No dealer is licensed to sell it at a less price, and a sale at a less price will be treated as an infringement of the copyright.” Retailers, however, sold the book for less than a dollar and the Bobbs-Merrill Co. sued one of them. The high court found that once copies of the book were sold, the distribution rights of the author terminated as to those copies. Derived from Bobbs–Merrill Co. v. Straus , 210 U.S. 339, 350 (1908) Retrieved from http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=us&vol=210&invol=339. The ruling came to be known as the first-sale doctrine and was codified into law as 17 U.S.C., § 109. The statute distinctly draws the line at distribution rights, leaving all other rights to the copyright owner. It’s the first-sale doctrine that explains why Amazon.com and eBay allow users to resell secondhand copies of printed books, music, and movies at prices of their own choosing—but only if those copies were legally obtained. It is still illegal to sell pirated works. In 2011, however, a new case in the United States Court of Appeals for the Second Circuit— John Wiley & Sons, Inc. v. Supap Kirtsaeng —waived the first-sale doctrine in cases where the copies of the copyrighted work were manufactured abroad. John Wiley & Sons, Inc. v. Kirtsaeng , 654 F.3d 210, 99 U.S.P.Q.2d 1641, 2011 ILRC 2481 (2d Cir. 2011) [2011 BL 211086] Retrieved from http://bit.ly/HOTFlb. But in March of 2013, the U.S. Supreme Court overturned that ruling in a 6-to-3 decision that affirmed that Mr. Kirtsaeng’s rights after first sale trumped the publisher’s right to ban imports. He couldn’t make unauthorized copies of the book. But just as with secondhand books or Gucci bags bought at a flea market, if the books had been bought legally (regardless of whether they had been imported or sold originally in the United States), Mr. Kirtsaeng had a right to sell them. The first-sale doctrine was also limited by Vernor v. Autodesk , when an appeals court in 2010 ruled that software was not subject to the first-sale doctrine because purchasers of software were actually only licensees and therefore could not resell the software to others. Does the first-sale doctrine apply to digital music, such as your iTunes library? In a case involving the start-up company ReDigi, U.S. District Court Judge Richard J. Sullivan ruled on March 30, 2013, that a resale of digital music that involved creating a new copy on someone else’s computer while erasing the copy on your computer actually concerned the reproduction right, not the distribution right, and the first-sale doctrine therefore did not apply. (You could sell your hard drive that has your music files on it, but most people would not want to do that!) But this decision is likely only the first round in what many feel will ultimately be a successful effort to create legal markets for secondhand digital goods. First-Sale vs. Moral Rights The first-sale doctrine does not affect an author’s moral rights, which under U.S. copyright law are limited only to certain works of visual art but under European copyright statutes are more broadly applied to other kinds of copyrightable work. Derived from the French concept of droit d’auteur, these give authors the power to protect the integrity of their work as well as the right of attribution. Zemer, L. (2011). Moral Rights: Limited Edition. Boston University Law Review, 91(4), 1524. Retrieved from http://www.bu.edu/law/central/jd/organizations/journals/bulr/volume91. Preserving the integrity of a work means that the author has the right to prevent its intentional distortion, mutilation, or modification by others. Authors also have the right to control the use of their name in relation to the work. Both of these rights, however, have limitations. Under U.S. law, because moral rights are personal , they exist only for the life of the author. Only the author can enforce those rights; they cannot be transferred by the author to heirs or anyone else. As noted at the beginning of this chapter, registration is not required in order to enjoy copyright protection. Once an author puts words to paper, paint to canvas, or software code into a digital file, it is immediately protected by copyright and nothing more is required. Although the requirement of registration as a condition of federal copyright protection was discarded over a century ago, when Congress passed the Copyright Act of 1909, the requirement that proper copyright notice be affixed to copies of published works survived much longer. It was only dropped in 1989, when the United States joined the Berne Convention and had to amend its copyright law to comply with the terms of that convention. Notice and registration of copyright are now discretionary, but recommended. Registration of a copyright provides a legal record of copyright ownership in cases where infringement is alleged, and in fact is required before the author can even file suit for infringement. 17 U.S.C., § 411 To register a published work, an author will usually need to submit two copies of the work to the U.S. Copyright Office.

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