By Eli Greenbaum*

Introduction

Open source hardware, the physical equivalent of open source software, is a movement that advocates the public provision of hardware design documentation. For example, a purchaser of an Arduino open hardware circuit board has access to the full design documentation of the product, as well as the source code of all accompanying software.[1] The ambitions of the open hardware movement have been inspired by the successes of open source software. Open principles of design have been central to the creation of significant pieces of software including, to take only some of the most prominent examples, the Linux and Android operating systems. Indeed, estimates are that more than half the software acquired in the coming years will be open source.[2] While the open hardware movement remains in its infancy, it aspires to harness the open source philosophy for hardware design as successfully as those ideals have been applied in the context of software.[3]

One of the factors central to the success of open source software has been effective and enforceable licensing frameworks.[4] On a theoretical level, licenses allow open source organizations to define community norms and the boundaries of acceptable behavior.[5] More practically, legally enforceable licenses provide an effective means of enforcing those community norms and standards on non-cooperative members of the community.[6] Unfortunately, it has proven difficult to construct a license to effectively implement an open hardware arrangement.[7] This Article, however, shows how the rapidly evolving technology of three-dimensional printing can be used to construct a robust open hardware license.[8]

Those seeking to develop a sustainable model for open source hardware have struggled with both economic and legal obstacles. On the economic front, open source hardware differs in important ways from open source software. First, software can be compiled from source code and distributed at close to zero cost. In contrast, producing a piece of hardware involves a more involved and costly undertaking to source appropriate materials and structure an often-complex manufacturing process.[9] Similarly, while a work of software can be copied and distributed at zero cost, the manufacturing costs of hardware make the expense of reproduction and distribution not insignificant. Hardware manufacturers may therefore find that restrictive intellectual property protection is necessary to recoup any expenses of production.[10] Moreover, relatively small open source communities may find it difficult to compete with the economies of scale of commercial manufacturers.[11] While collaborators on a software project can easily test modifications proposed by the group, the cost of building and prototyping improvements in physical objects makes this more difficult in the hardware context.[12]

Open source hardware must also overcome legal obstacles. Open source software can rely on copyright law to support its legal structure. As copyright automatically protects all original software works, a copyright license is necessary for the lawful reproduction, modification or distribution of software. This copyright license can be made subject to certain conditions such as, for example, the “copyleft” conditions of the most prominent open source software license, the General Public License (“GPL”).[13] The GPL grants licensees broad rights to copy, modify and distribute licensed works, only on the condition, however, that licensees make all works “based on” the licensed code available under the terms of the GPL as well.[14] This mechanism ensures that the GPL’s broad rights are also granted to any improvements to the licensed code.[15] Similar mechanisms are used in other open source software licenses to ensure, for example, the continued attribution of works to their authors.[16] Unfortunately, as discussed in greater detail below, since useful physical objects are generally not protected by copyright, these relatively simple legal devices cannot be used in the open source hardware context.

Three-dimensional printing offers the opportunity to overcome these economic and legal hurdles. With regard to the economic obstacles, three-dimensional printing reduces the cost and complexity of obtaining raw materials from a variety of sources, and of constructing assembly lines and manufacturing plants. These efficiencies may allow open source communities to compete with the economies of scale of commercial manufacturers.[17] Three-dimensional printing also offers the possibility of easy and rapid prototyping of physical objects and thereby increases the opportunities for collaboration on open hardware projects.

Against the backdrop of this economic potential, this Article describes how the technology of three-dimensional printing can also be employed to surmount the legal challenges in creating an effective open source hardware license. Section I of the Article describes the shortcomings of current open source hardware licenses, especially how such licenses fail to implement regimes to ensure that proper attribution for inventors is provided and that documentation for open source hardware designs is shared with the community. Section II provides some technological and historical background regarding three-dimensional printing, and analyzes the application of copyright law to this technology. Section III details a licensing regime that, applied to three-dimensional printing, can implement an effective and enforceable open hardware license. This section also discusses some of the advantages and disadvantages of the proposed regime. The Appendix includes a first draft of the Three-Dimensional Printing Open License, which implements the proposed open hardware licensing regime.

I. Open Hardware Licenses

To date, several open hardware licenses have been developed. The most prominent of these include the TAPR Open Hardware License and the CERN Open Hardware License.[18] This Section details the practical shortcomings of current open hardware licenses, and then goes on to explain why these shortcomings are the inevitable consequence of the legal foundations of those licenses.

A. The TAPR and CERN Open Hardware Licenses.

The TAPR license was developed under the auspices of the Tucson Amateur Packet Radio association, an international organization which supports research and development in the area of amateur digital communications.[19] The license is intended to emulate the “copyleft” provisions of the GPL in the arena of open hardware – in other words, to ensure that licensed design documentation (and modifications to that documentation) continues to be made available under the terms of the TAPR license itself.[20] The CERN license was created in 2011 by employees of CERN, the European Organization for Nuclear Research, in order to allow groups across organizations to collaborate on hardware projects.[21] The CERN license also includes copyleft provisions.[22]

Unfortunately, neither the TAPR nor the CERN license successfully implements open hardware principles, and this failure is rooted in the tenuous legal foundations of the licenses themselves. For example, one of the fundamental goals of an open hardware framework should be the provision of design documentation to recipients of hardware.[23] This provision of design documentation allows recipients to modify and improve the hardware design. While the TAPR and CERN licenses provide that the initial recipient of an open hardware product should be supplied with design documentation, for reasons discussed below they do not provide that such design documentation should be passed on to downstream recipients.[24] Another important aim of open hardware should be the proper provision of attribution to designers of the products.[25] Attribution requirements can provide important incentives for designers, who may be assured that they will receive proper credit for their innovations.[26] Again, neither of the TAPR or CERN licenses provides that downstream recipients of hardware should receive attribution notices.[27]

While the TAPR and CERN licenses may prove useful for allowing research collaboration or amateur experimentation, they do not provide an adequate legal framework for the integration of open hardware in manufacturing or distribution networks. Modern large scale manufacturing is characterized by complex supply chain structures, in which the ultimate manufacturer (an “original equipment manufacturer” or “OEM”) purchases components from a network of suppliers.[28] These first tier suppliers themselves integrate parts purchased from an array of second tier suppliers, and this structure continues to cascade in a pyramid form.[29] Such supply chain structures exist, to take a few examples, in the automotive,[30] aerospace,[31] computer[32] and mobile phone industries.[33] In a similar vein, a product (or spare parts for a product) may move through multiple tiers of distributors before reaching the final end user.[34] Given these arrangements, a robust open hardware framework must ensure that obligations of attribution and documentation are easily passed through complex supply chains, and that any such requirements are relatively frictionless and impose minimal transaction costs. The TAPR and CERN licenses, which do not address downstream recipients at all, do not provide an adequate framework for the easy integration of open hardware in these settings.

B. The Unsteady Legal Foundations of Open Hardware Licensing.

These shortcomings of current open hardware licenses reflect their unsteady legal foundations. Unfortunately, open hardware lacks the legal tools which allow the easy implementation of enforceable open source software licenses. Open source software licenses are generally based on copyright law. Since both the source code and compiled executable code of software are protected by copyright, a license is required to copy, modify, and distribute those works. These license permissions can be conditioned on compliance with, for example, copyleft and attribution requirements. In the hardware context, however, no copyright license is required to use design documentation to build or distribute hardware. Open hardware licenses therefore cannot use copyright law to impose such copyleft or attribution conditions. Moreover, as property rights, copyrights can be enforced against any third party – even third parties with which the copyright owner has no direct contractual relationship.[35] Open hardware licenses, however, cannot rely on copyright law to facilitate the enforcement of license conditions.

Basing open hardware licenses on patent law also presents challenges.[36] On the one hand, patents are property rights that protect against the unauthorized use and distribution of patented hardware by any third party. As a result, a patent license can require compliance with certain obligations in order to engage in these activities, and these requirements can be enforced against downstream users of the hardware. Patents, however, are expensive to obtain and costly to enforce.[37] Unlike copyrights, patents are not provided for all inventions, but only those that meet relatively high standards of non-obviousness, novelty, and utility. Moreover, the “patent exhaustion” doctrine limits a patentee’s ability to impose requirements on the post-sale activities of a purchaser.[38] Given these constraints, patent law is an unwieldy tool for constructing an open hardware license.[39]

Contract law could be another avenue to enforce the conditions of an open source license and does, in fact, form part of the foundations of both the TAPR and CERN licenses.[40] These licenses contractually bind the recipient of design documentation to pass on such documentation to recipients of physical hardware. The formation of a contract, however, generally requires the satisfaction of elements of offer, acceptance and consideration, so contract-based license conditions may not be enforceable against entities not party to the contract.[41] As a result, in order to bind downstream recipients, an open hardware license would need to require recipients to contractually bind all further recipients to the same obligations.[42] This chain of contracting and recontracting imposes transaction costs, which would be significant in industries characterized by long supply chains.[43] One break in this sequence of contracts would result in downstream recipients not being bound by the license terms. This inherent limitation of contract law seems to be the reason that the TAPR and CERN licenses do not pass on requirements to downstream recipients.[44]

Contract law may prove inadequate in the open source context for other reasons. Damages for breach of contract are typically measured by the financial injury to the non-breaching party.[45] Such calculations may be impossible in the setting of open source licensing, where the material is provided without charge or for a nominal fee. Federal copyright law, in contrast, provides for remedies that are not measured by the injury to the licensor, such as the disgorgement of the infringer’s profits.[46] Other remedies available under copyright law include preliminary or permanent injunctions to enjoin copyright infringement.[47] Indeed, the Federal Circuit has opined that open source licenses restrictions “might well be rendered meaningless absent the ability to enforce through injunctive relief.”[48] Copyright law also provides for the possibility of attorney’s fees[49] and the destruction of infringing articles,[50] both of which can prove effective weapons in the open source context. The absence or limited availability of these remedies under contract law, however, makes contract law a weak foundation on which to build an open source framework.

Efforts have been made towards designing a practical system that would provide downstream users with easy access to design documentation. Under a process proposed by the Open Source Hardware and Design Alliance (OHANDA), each manufactured piece of open hardware could receive a registration key to be engraved or printed on the hardware.[51] Recipients of the hardware would be able to use that registration key to locate and access the specific design documentation at the online OHANDA database. OHANDA, however, only offers a system for providing attribution information and distributing hardware documentation to the initial recipient of an article. Subsequent manufacturing activities with such documentation would presumably be governed by one of the open hardware licenses described above. OHANDA thereby provides a marginally improved open hardware arrangement, but does not address the fundamental legal issues with open hardware licenses themselves. For example, the OHANDA system cannot require the provision of hardware documentation to downstream recipients.

Much of the success of open source software can be attributed to the fact that it has succeeded in integrating itself in the commercial software industry, and that open source software licenses provide robust legal structures for dictating and enforcing the terms of such integration. In the same way, a viable framework for open source hardware must be capable of incorporation in global manufacturing, and must be supported by enforceable licensing terms. Current open hardware frameworks, however, cannot easily impose documentation or attribution obligations on downstream users, and cannot enforce their terms with effective legal remedies. Even so, an open hardware license that satisfies these requirements can be built in the technological context of three-dimensional printing. The next Section reviews some technical nuts and bolts of three-dimensional printing, and provides some legal analysis of that background.

II. Three-Dimensional Printing and Copyright

A. Technology of Three-Dimensional Printing

Three-dimensional printers use digital designs to automate the manufacture of physical objects. Three-dimensional printing technologies were independently invented in the mid-1980s in a number of different countries.[52] 3D Systems, founded in 1986, was the first company to commercialize three-dimensional printing technology.[53] Since that time, more than 30 different techniques for three-dimensional printing have been commercialized.[54] The RepRap project, an open source project for the creation of inexpensive three-dimensional printers, was founded in 2006 after some of the initial patents that covered three-dimensional printing processes expired.[55] RepRap makes all of its designs and software publicly available under the terms of the GPL, such that they are available to the public to be used and improved.[56] Makerbot, for example, is a company that provides consumer three-dimensional printing machines based on the RepRap design.[57]

The three-dimensional printing process typically begins with a digital design created using computer aided design (CAD) software. This design is transferred to the printer, which breaks down the design file into a series of thin two-dimensional slices. Each slice is used as a blueprint to construct a single layer of the three-dimensional object. The physical object is constructed as each layer is sequentially laid down by the three-dimensional printer. [58]

A broad range of technologies is currently employed to lay down the individual layers in a three-dimensional printing process. “Fused Deposition Modeling,” the technique used by the RepRap machines as well as those developed by other companies, involves the controlled deposit of molten plastics or metal.[59] The molten material is deposited to create a single two-dimensional slice of the physical object. This material promptly hardens to form a single layer of the object, and this process is repeated to form successive layers. “Stereolithography,” the original method used by 3D Systems, uses an ultraviolet laser to harden successive layers of light-sensitive fluid.[60] Other prominent technologies use methods similar to standard ink-jet printing to inject powder with a binding material.[61] The common denominator of this diverse range of technologies is that they all involve an “additive” process, in which the final object is constructed from accumulations of raw material, in contrast to standard “subtractive” manufacturing technology, in which raw materials are cut and molded into the desired shape.

Current technologies can use a variety of plastics, metals and ceramics to construct three-dimensional objects.[62] The additive nature of three-dimensional printing allows for the manufacture of objects that would be difficult to produce using more traditional methods, such as objects with complex geometries or internal moving parts.[63] Additive manufacturing technology can also be used to construct articles with novel combinations of materials,[64] or even generate materials with novel properties including increased resiliency and strength.[65] Companies and researchers are exploring the possibilities of “printing” electronic circuits or even biological tissues.[66] Current commercial technologies allow the printing of details a fraction of a millimeter large,[67] and some researchers have used advanced technologies to print with a resolution of hundreds of nanometers.[68]

As the technology of three-dimensional printing has matured, both free and commercial services have developed to assist consumers in taking advantage of this progress. Thingiverse, for example, provides a free Internet platform for the sharing of digital designs.[69] Users who upload designs can choose to license them under a range of terms, including open source licenses. In addition, online commercial service bureaus provide consumers with printing services.[70] These businesses offer advanced printing technology with a variety of materials. Consumers can upload their designs to the business through the Internet, quickly obtain an automatic price quote of the cost of printing, and have the printed object shipped to their address.

B. CAD and STL Files

As noted, the printing process begins with a digital design of a three-dimensional object, typically created using computer-aided design (CAD) software. The standard CAD file formats, which can be understood and modified by humans, must be translated into a format that can be processed by three-dimensional printers.[71] The STL (STereoLithography) file format is the current de facto standard for three-dimensional printing.[72] An STL file format represents the outside surface of an object with a large number of tiny triangles.[73] The STL file format provides a relatively straightforward means of describing the geometry of a three-dimensional object in a manner that can be used by three-dimensional printers. Nevertheless, the format is not without its problems, and a number of alternative file formats or enhancements to the STL standard have been proposed.[74] Some alternatives to the STL format contain additional information, such as data regarding the color, texture and material of printed objects.[75] The relationship between CAD and STL files can be roughly compared to the distinction between software source code and object code. CAD files and source code are readily intelligible and modifiable by humans, while the STL files and object code designed to be used by computers are not.[76]

CAD designs and STL files are not computer programs in the conventional sense of the term. Software is a set of instructions for a computer to generate a specific result. In contrast, CAD and STL files are more akin to engineering or technical drawings in that they contain data that represent the contours of a specific object, but do not provide instructions to a three-dimensional printer regarding how that object is to be constructed.[77]

C. Copyright in Printed Articles and Design Files

Copyright in the physical objects created by a three-dimensional printing process will be limited. In general, copyright law does not grant protection to utilitarian objects. Section 101 of the Copyright Act provides that the design of a useful article will be protected “only if, and only to the extent that, such design incorporates pictorial, graphic, or sculptural features that can be identified separately from, and are capable of existing independently of, the utilitarian aspects of the article.” The aspiration of this statutory provision is relatively clear: to distinguish works of applied art, which should be protectable by copyright, from works of industrial design, which should not.[78] The clarity of the objective, however, has been belied by the practical difficulty of implementing the distinction in concrete situations.[79] To this end, a number of courts and commentators have proposed tests to distinguish between the copyrightable expression and non-copyrightable utilitarian aspects of physical articles.[80]

In contrast to the limited and uncertain copyright protection available for physical articles, both CAD and STL files easily qualify for copyright protection. Copyright law protects “pictorial, graphic and sculptural works,” which include: “two-dimensional and three-dimensional works of fine, graphic, and applied art, photographs, prints and art reproductions, maps, globes, charts, diagrams, models, and technical drawings, including architectural plans.”[81] Such files are protected by copyright law regardless of whether they are intelligible by humans or only by computers.[82]

Courts have recognized and enforced copyrights in designs, even as they have also generally held that copyright law does not proscribe the use of copyrighted designs to manufacture physical objects.[83] The manufacture of a physical object in an automated three-dimensional printing process, however, will infringe the copyright of the underlying design file. First, copyright law grants the copyright holder the exclusive right to reproduce the copyrighted work.[84] The manufacture of an object in a three-dimensional printing process will infringe this right of reproduction, since the process requires the copying of an STL file into the memory of a three-dimensional printer.[85] Second, copyright law grants the copyright holder the exclusive right to prepare derivative works of the copyrighted work.[86] The printing of a physical article from a design file will also infringe this exclusive right, since the three-dimensional printing process requires the transformation of the CAD or STL file into a series of print-ready two-dimensional slices.[87] In other words, the owner of the copyright in an STL file cannot prevent the use of that file in a general manufacturing process. But three-dimensional printing is not a typical manufacturing process – the use of digital designs and automated manufacturing creates a physical article that corresponds directly to the specifications of the digital design, and which requires the copying and transformation of the original digital file. As such, without a license, the use of the design file in a three-dimensional printing process will infringe the copyright in the design file.

III. An Open Hardware License for Three-Dimensional Printing

Two aspects of three-dimensional printing can provide the foundation for an effective and enforceable open hardware legal framework. First, the printing of a physical object necessarily requires the copying of the digital design used to print that object, in the same way that using software on a computer necessarily involves the creation of a copy of that software product. Second, objects created by three-dimensional printing bear a one-to-one correspondence between the digital file and the object that is actually printed.[88] In these two respects, three-dimensional printing differs from traditional manufacturing methods.

The author proposes the “Three-Dimensional Printing Open License” (the “TDPL”), an annotated draft of which is attached as an appendix to this Article. The TDPL draws on the unique characteristics of three-dimensional printing to construct a license that incorporates enforceable documentation, attribution and copyleft provisions. The application of the TDPL is limited to the specific technological setting of three-dimensional printing and, as described in more detail below, may not be appropriate in all circumstances. Nevertheless, as the technology improves and is gradually integrated into a broad swath of industries, the scope of the license’s application will increase. The next section describes the theory and structure of the license, and the section after that presents arguments in favor of and against the proposed framework, and analyzes certain limitations of the license. Matters more directly related to the specific language of the license are addressed in annotations to the draft.

A. Theory and Structure of the License

The TDPL acts as a copyright license for a digital design file and, in this sense, follows the precedent of open source software licenses. The TDPL provides that recipients of the licensed design file are granted rights to copy, modify and distribute the design file, subject to certain conditions.[89] Under this framework, as long as the recipient of the digital design file satisfies the conditions of the license, she will have the right to manufacture the designed object in a three-dimensional printing process. Without the permissions granted by the TDPL, however, the use of a digital design file in an automated printing process would involve the unauthorized copying of the design file and constitute copyright infringement.[90]

The TDPL imposes certain minimum conditions on the copying and distribution of the design file itself. These conditions are broadly comparable to similar provisions in open source software and hardware licenses, and are intended to ensure the continued attribution of the file to its author and the continued distribution of the design to downstream recipients under the terms of the TDPL itself. The license thereby generally prohibits the removal of any copyright information or other notices from the design file.[91] Second, in broad outline, the license provides that any recipient who modifies the design file must provide notice of such changes.[92] Third, the license provides that a recipient may only distribute the file (and derivative works of the file) pursuant to the terms and conditions of the TDPL.[93]

While these conditions do not materially differ from conditions in other open licenses, they can have consequential effects in the context of three-dimensional printing. For example, a design file may be structured such that certain copyright information or other notices will be imprinted on the printed physical object.[94] As the TDPL prohibits the removal of these notices from the design file, and as the printed article bears a one-to-one correspondence to the design file, the effect of this provision is that the license can require that all articles printed with the design file will incorporate specified notices. Such notices can include attribution information specifying the identity of the initial author of the file. No less importantly, such notices can include information, for example, regarding an Internet site where any recipient of the printed article can obtain the design file.[95] These notices would allow all downstream recipients of the printed, physical article to have access to the digital files needed to manufacture that article.

As noted, the TDPL also requires that a recipient who modifies the design file must communicate that fact in notices incorporated in the design. The details of this condition differ somewhat from other open licenses, and are intended to implement a copyleft obligation in the context of three-dimensional printing. The license provides that recipients may modify the design file, provided that the recipient at the same time also inserts in the design file, a notice describing where the modified design file may be accessed.[96] This new notice must also be included on the printed physical object.[97] Again, as a result of the correspondence between the file and the printed object, this provision provides downstream recipients of the printed article with access to the modified design files of the modified object. As the unauthorized use of the design file in a three-dimensional manufacturing process would infringe the copyright in the design file, a recipient of the file will not be legally permitted to use the design file to print objects unless she has complied with the requirements of the license.

B. Advantages and Disadvantages of the Licensing Framework

The TDPL licensing regime presents several advantages. First, the license is designed to allow the easy integration of open hardware into complex supply chains.[98] The license ensures that all recipients of the hardware throughout a distribution chain have access to the original design file, but this accessibility is achieved without imposing complex contracting requirements on supply chain intermediaries. Downstream intermediaries and integrators that make no changes to the design documentation should be able to market and distribute hardware, or incorporate hardware into larger articles, without concern for any legal obligations imposed by the license. In general, the license is intended to be self-executing in that the required notices should be the automated output of the three-dimensional printing process. This absence of contractual obligations, and the concomitant lowering of administrative and transactional costs, should ease the integration of open source hardware into commercial items without sacrificing access to the design.[99]

Another advantage of the TDPL regime is that it is straightforward to define the design information that must be made available. Developers of open source hardware licenses have struggled to specify the level of detail that should be provided in design documentation.[100] Arduino, for example, provides schematics and reference designs for its circuit boards, but does not provide the material composition and schematics for each individual component on that circuit board. The Arduino approach makes practical sense; the burden of disclosing the specifications of each and every component quickly becomes unwieldy, and recipients probably do not need that level of resolution in order to construct the Arduino circuit board from the design documentation. On the other hand, an effective licensing regime needs to ensure that recipients are provided with an adequate level of detail, and finding an ex ante definition for the proper level of resolution can prove difficult.[101] The TDPL regime, however, relies on the exact correspondence between the digital design file and the printed object to resolve this difficulty. The license simply provides that the recipient must be given access to the file used to generate the printed article. This file contains all the technical detail necessary for the recipient to print the article herself.

The TDPL recognizes that it may be burdensome to require licensees to provide continuous updates of all modifications made to the design file. To address this problem, the TDPL contains a limited exception to the requirement to provide access to modified design files. The license provides that modifications created solely for the internal use of the licensee do not trigger the requirement to include a notice in the design file.[102] The license also provides that the distribution of physical objects printed with the design file to third parties creates a presumption that the modifications were not made solely for the internal use of the licensee.[103] The intent of these provisions is to allow licensees the freedom to experiment and test new designs without the costs of compliance with the TDPL obligations. At the same time, the provisions attempt to ensure that once a licensee begins to distribute physical objects created with the modified design file she will be obligated to make the modified design files available.

Of course, the licensing framework of the TDPL also presents theoretical and practical disadvantages. Most importantly, the copyleft provisions of the TDPL to some extent depend on the use of the design document in a manufacturing process in which the design document is itself copied.[104] Otherwise, a recipient of the design would not require a copyright license to manufacture an article based on the design and, in such a situation, the use of the design could not be conditioned on compliance with the license. This suggests that the TDPL may be most appropriate for articles that are difficult or impractical to produce in a traditional manufacturing process, or in areas in which three-dimensional printing has a comparative advantage, such as the production of complex parts, customized articles, or articles incorporating novel materials.[105] As the technology of three-dimensional printing improves and its costs decrease, the TDPL will become appropriate for a growing and diverse number of articles. Second, even traditional manufacturing is increasingly making use of computer aided design.[106] Given this growing reliance on computers in the design process, the use of a design licensed under the TDPL will most likely be in the context of a process that does incorporate CAD, even if the entire process is not automated. Unauthorized use of the licensed design in such a process would also require a license. Third, to the extent this argument is a claim that an open hardware design can be easily reverse engineered and implemented in a separate, non-infringing design, the argument applies no less forcefully to the development of open source software.[107]

A second disadvantage of the TDPL is that copyrights in digital design files would be limited to the expressive, non-functional aspects of the file. Black letter law provides that copyrights do not protect ideas or information, but only the specific expression of an idea.[108] Furthermore, the “merger” doctrine provides that copyright law will not protect any expression that must be copied to implement a particular idea.[109] As many physical articles produced with three-dimensional printing will be functional objects, the copyright in the design document that describes those articles may be limited. And, since the enforceability of the TDPL depends on the design file copyright, the license may not be effective for useful or functional designs. Even so, the same contentions would argue against the use of open source licenses for software programs. Software, like a design file, contains both expressive and functional elements.[110] Moreover, software is typically valued for those very functional elements, rather than the expressiveness or creativity of the code.[111] Nevertheless, courts have continued to uphold copyrights for the expressive elements of software files, even as they have held that such copyrights cannot protect the functional elements of a program, or the elements of a program that have been dictated by external standards.[112] Despite this limitation on copyright protection for software, the enforceability of software licenses in general, and of open source software licenses in particular, is generally accepted.[113] The TDPL should be no less enforceable than such software licenses.

A third disadvantage of the TDPL is that the license requires recipients who modify a design to maintain an accessible, online repository of the modified design. This may require recipients to bear the costs of maintaining an Internet location where such designs can be accessed, as well as incurring the administrative costs of keeping and posting historical and up-to-date copies of such designs. Even so, this requirement does not significantly differ from similar obligations in open source software licenses. For example, version 3 of the GPL allows distributors to satisfy their copyleft obligations by providing recipients with a written offer to access source code from a network server.[114] In allowing distributors to satisfy their copyleft obligations in this fashion, the Free Software Foundation has noted that the advancement and proliferation of Internet technology should ensure that this option is not too burdensome for either distributors or recipients of source material.[115]

The text of the TDPL attempts to preempt another possible complication of the licensing regime. To a large extent, the scope of a licensee’s copyleft obligations under the license is relatively clear: a licensee is only obligated to provide design documentation for the specific printed article. This provision should serve to alleviate concerns that the incorporation of an open hardware article in a larger product would require the disclosure of design documentation not related to the specific printed article.[116] Nevertheless, as the technology of three-dimensional printing advances and becomes more widespread, it is possible that designers would develop “hardware design blocks” – modular designs, representing self-contained hardware pieces, which could be incorporated in a more extensive design for the printing of larger, more complex objects. This would parallel the use of software libraries for the development of complex software products, or the use of intellectual property cores in the development of semiconductor chips.[117] In such event, concerns could be raised regarding the impact of the TDPL’s copyleft obligations on independently designed modules. Similar questions in the arena of open source software licensing have proven to be the source of much debate and confusion.[118] The TDPL attempts to preempt such matters by providing that any design work that may be represented in a separate digital file will not constitute a derivative work of the licensed design. [119] In other words, the incorporation of a TDPL licensed “design block” inside a larger design will not cause the larger design to be subject to the terms of the TDPL.

The TDPL also attempts to address a situation where the techniques of three-dimensional printing may also be used to manufacture products on which no label could practically be attached. For example, it has been anticipated that future applications of three-dimensional printing may include the production of chemicals or even biological tissues.[120] The TDPL attempts to address such applications by providing that, in certain limited circumstances, the attribution and licensing notices may be imprinted on packaging ordinarily received by the end user.[121]

In sum, the TDPL provides a framework for licensing open hardware designs. The TDPL is enforceable under copyright law, since the use of a design document in a three-dimensional printing process not in compliance with the license will infringe the copyright in the design document. Under this framework, the licensor of a design document can be confident that the TDPL will be enforceable against downstream users of the design document, and that the law will provide effective remedies to enforce the terms of the license. In addition, all downstream users of printed articles will be provided with the attribution and documentation information made available on the printed article itself.

Conclusion

Open hardware proponents have expressed concern that intellectual property laws could be used to stifle the growth of three-dimensional printing. Most obviously, the physical objects created by three-dimensional printing could be the subject of patent protection, and patent law could be applied to prevent the manufacture, use or sale of those articles.[122] Other commentators have noted that copyright law could be used to restrict the use of digital designs. First, digital rights management (“DRM”) and other content access restrictions could be applied to three-dimensional printers in order to ensure that such devices only construct pre-authorized designs, in the same way that such technological restrictions are already applied to other forms of digital content.[123] The Digital Millennium Copyright Act (DMCA) would criminalize the circumvention of those DRM restrictions, even as applied to legitimate uses of digital designs.[124] In addition, Internet sites that allow for the easy sharing of digital designs could be subject to infringement lawsuits unless they found safe harbor under the DMCA “notice and take down” provisions.[125]

Intellectual property law can be used to restrain the advance of three-dimensional printing, but it can also be used to ensure broader access to such technology. This Article has shown that the construction of an open hardware license is possible in the technological domain of three-dimensional printing. As with open source software, this license is based on copyright law, and should therefore be relatively easy to apply and enforce. Moreover, and again as with open source software, such a license could be instrumental in creating a “commons” where the free exchange of design information can flourish.

Appendix: The Three-Dimensional Printing Open License

The Three-Dimensional Printing Open License (“License”) has been constructed specifically for situations in which a digital design is used to generate physical articles in an automated manufacturing process, and its application may not be clear in other situations. You may not use a work licensed under this License except in compliance with these terms. You are not obligated to agree to these terms, but nothing else grants you the right to use a work licensed hereunder.[126]

1. Definitions. The following terms, when capitalized in the body of this License, shall have the meanings set forth below.

1.1 “Build Form” means any form of the Work which is provided to any device for the manufacture of a Printed Article in an automated manufacturing process.

1.2 “Copyright” means copyright and any similar right (including any rights of industrial design and any semiconductor topography rights), whether registered or unregistered.[127]

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* Attorney, Yigal Arnon & Co., Jerusalem, Israel. J.D., Yale Law School; M.S., Columbia University. The author would like to thank Daniel Green, Andrew Katz, Carlo Piana and Michael Weinberg for their comments on earlier drafts of this Article. All opinions and positions taken in this Article, and any mistakes or inaccuracies are, of course, the author’s own.

[1] Arduino is an “open source physical computing platform,” which can be used to create hardware that interacts with the physical world. See Introduction, Arduino, http://www.arduino.cc/en/Guide/Introduction (last updated Dec. 23, 2009). The original design files for the Arduino hardware are available from the Arduino Internet website under the Creative Commons Attribution Share-Alike license, and the software is available under either the GPL or LGPL licenses. See Frequently Asked Questions, Arduino,http://arduino.cc/en/Main/FAQ (last updated Mar. 11, 2011). See also Brian Evans, Beginning Arduino Programming 5 (2011). For background on the Arduino project, see Clive Thompson, Build It. Share It. Profit. Can Open Source Hardware Work? Wired Magazine, Oct. 20, 2008, available online at http://www.wired.com/techbiz/startups/magazine/16-11/
ff_openmanufacturing.

[2] Rachel King, Big Companies Open up to Open-Source Software, Wall St. J., Sept. 6, 2012, available online at http://online.wsj.com/article/
SB20000872396390443589304577633733725243996.html.

[3] John Ackermann, Toward Open Source Hardware, 34 U. Dayton L. Rev. 183, 184 (2009); Thompson, supra note 1 (comparing the ambitions of Arduino to those of Linux and other successful open source software projects); Chris Anderson, Makers: The New Industrial Revolution 107 (2012). The “hardware” in “open hardware” can potentially refer to a variety of physical articles, from semiconductor chips to mechanical assemblies. This Article does not restrict the discussion to a particular category of article, but instead focuses on the range of objects that may be generated using the technology of three-dimensional printing.

[4] As stated by the Debian Group, a prominent distributor of open source software, “[t]o stay free, software must be copyrighted and licensed.” What Does Free Mean? Or What Do You Mean by Free Software?, Debian Group, http://www.debian.org/intro/free (last updated Mar. 19, 2013). See also Margit Osterloh & Sandra Rota, Open Source Software Development – Just Another Case of Collective Invention?, 36 Res. Pol’y 157,164 (2007); Steven Weber, The Success of Open Source 197 (2004) (describing business models that depend on licensing structures).

[5] Weber, supra note 4at 179 (describing a license as a “de facto constitution” for an open source organization, which, “[i]n the absence of hierarchical authority, . . . becomes the core statement of the social structure that defines the community of . . . a project”).

[6] The “BusyBox” litigation cases provide an example of the enforcement of open source licenses. BusyBox is software that is commonly used in consumer electronic devices. BusyBox is licensed under the GPLv2 open source license. From 2007 through 2009, the Software Freedom Law Center, representing several of the BusyBox copyright holders, filed suit against a number of entities that distributed BusyBox software, asserting that those distributors had breached the license. See Best Buy, Samsung, Westinghouse and Eleven Other Brands Named in SFLC Lawsuit, Software Freedom Law Center (Dec. 14, 2009), http://www.softwarefreedom.org/news/2009/dec/14/busybox-gpl-lawsuit. Many of these suits ended in a settlement in which the defendant agreed to comply with the terms of the license, and information regarding a number of these settlements is available at the Software Freedom Law Center Website. See, e.g., BusyBox Developers and Xterasys Corporation Agree to Settle GPL Lawsuit, Software Freedom Law Center (Dec. 17, 2007), http://www.softwarefreedom.org/news/2007/dec/17/busybox-xterasys-settlement/.

[7] Richard Stallman, the founder of the Free Software Foundation and a central figure in the open source software movement, has opined on the difficulty of creating an open hardware legal framework. See Richard Stallman, On “Free Hardware”, Linux Today (June 22, 1999, 4:27 AM), http://www.linuxtoday.com/infrastructure/1999062200505NWLF. See also Andrew Katz, Towards a Functional License for Open Hardware, 4 Int’l Free and Open Source Software L. Rev. 41, 45 (2012); Michael Weinberg, Open Source Hardware and the Law, Public Knowledge (Oct. 10, 2012), http://publicknowledge.org/blog/open-source-hardware-and-law.

[8] This Article uses the term “three-dimensional printing” to refer to a range of a computer-aided manufacturing technologies, where a digital design is used to automate the manufacture of an article in an “additive manufacturing” process. Alternative terms may also be used for some of these methods such as, for example, rapid prototyping, desktop manufacturing and CAD oriented manufacturing. See generally C.K. Chua et al., Rapid Prototyping: Principles and Applications 18 (2nd ed. 2004). Additive manufacturing means that physical objects are constructed from the accumulation of a number of layers, rather than resulting from the removal of portions of raw material. See Anderson, supra note 3, at 90.

[9] Christina Raasch, Product Development in Open Design Communities: A Process Perspective, 8 Int’l J. Innovation & Tech. Mgmt. 557, 568 (2011) (discussing the difficulty of sourcing parts in open hardware projects). See also Katz, supra note 7, at 51.

[10] Raasch, supra note 9, at 567 (noting that open hardware projects may protect certain intellectual property in order to “attract manufacturers willing to produce the design as well as component suppliers”); Thompson, supra note 3 (stating that “nobody is going to risk money inventing and selling hardware unless they can prevent competitors from immediately ripping off their designs”). The recent decision of Makerbot Industries to refrain from distributing some of its hardware designs provides a real world example of these concerns. Makerbot is a prominent producer of three-dimensional printers and, until recently, pursued an open hardware strategy by making all of its device designs publicly available. In September 2012, Makerbot decided to not make available certain designs of its newest printer model. See Rich Brown, Pulling Back from Open Source Hardware, Makerbot Angers Some Adherents, CNET (Sept. 27, 2012, 5:00 AM), http://news.cnet.com/8301-17938_105-57520633-1/pulling-back-from-open-source-hardware-makerbot-angers-some-adherents/. In justifying this decision, Makerbot noted that its open hardware business model resulted in competition from “carbon-copy cloning” of its products and stated that this undermined the company’s “ability to pay people to do development.” Bre Pettis, Let’s Try That Again, Makerbot Blog (Sept. 24, 2012), http://www.makerbot.com/blog/2012/09/24/lets-try-that-again/.

[11] Eric von Hippel, Horizontal Innovation Networks – By and For Users, 16 Indus. & Corp. Change 293, 311 (2007) (noting that the economies of scale involved in manufacturing may not allow open source networks to compete with commercial manufacturing); Eric von Hippel & Georg von Krogh, Open Source Software and the “Private-Collective” Innovation Model: Issues for Organization Science, 14 Organization Science 209, 215 (2003). See also Ackermann, supra note 3, at 210-11 (noting such economies of scale as a justification for including restrictions against the commercial use of designs in an open hardware license).

[12] See Raasch, supra note 9,at 569 (discussing the relative infrequency of releases in the RepRap on Openmoko open hardware projects). See also Jim Turley, Open-Source Hardware, Embedded (May 31, 2002), http://www.embedded.com/electronics-blogs/significant-bits/4023974/Open-Source-Hardware.

[13] The text of version 3.0 of the GPL is available at the Free Software Foundation website. See GNU General Public License, Gnu Operating System, http://www.gnu.org/copyleft/gpl.html (last updated Oct. 6, 2012) [hereinafter, GPLv3]. Unless stated otherwise, references in this Article to the GPL are references to version 3.0 of that license. See Glyn Moody, Rebel Code 312-13 (2001) (stating that the GPL serves as the “de facto constitution for the entire free software movement”). For a summary of United States case law interpreting the GPL, see Eli Greenbaum, Open Source Semiconductor Core Licensing, 25 Harv. J.L. & Tech. 131, 140 (2011).

[14] Section 5(c) of the GPL provides that a licensee “may convey a work based on” the licensed software, provided that the entire work must also be licensed under the terms of the GPL. GPLv3, supra note 13, § 5(c).

[15] For a brief overview of the GPL copyleft conditions, see What is Copyleft?, Gnu Operating System, http://www.gnu.org/copyleft/ (last updated Oct. 6, 2012).

[16] See Lawrence Rosen, Open Source Licensing: Software Freedom and Intellectual Property Law 80 (2005) (describing license conditions of the BSD open source software license). See also Jacobsen v. Katzer, 535 F.3d 1373, 1381-83 (Fed. Cir. 2008) (holding that the limitations found in the Artistic License were “enforceable copyright conditions”).

[17] Von Hippel, supra note 11, at 313.

[18] For background on the TAPR Open Hardware License, see Ackermann, supra note 3. A copy of the TAPR Open Hardware License is available online. See TAPR Open Hardware License, TAPR (May 25, 2007), http://www.tapr.org/ohl.html [hereinafter TAPR license]. For background on the CERN Open Hardware License, see Myriam Ayass & Javier Serrano, The CERN Open Hardware License, 4 Int’l Free and Open Source Software Law Review 71, 71-73 (2012). A copy of the CERN Open Hardware License is available online. See CERN Open Hardware License, Open Hardware Repository, http://www.ohwr.org/documents/88 (last visited Apr. 4, 2013) [hereinafter CERN license]. A third prominent open hardware license is the Solderpad License, a copy of which is available in Katz, supra note 7, at 56. The Solderpad license does not attempt to impose copyleft obligations on the use of hardware. Rather, the Solderpad license limits itself to granting permissions to use, modify and distribute a design file. Id. Given the limited ambition of the Solderpad license, it is not addressed in this Article. Hardware designs are sometimes licensed under documentation licenses rather than licenses specifically designed for hardware. For example, the Open Compute Project is a project founded by Facebook engineers that shares designs for scalable data center hardware under Creative Commons licenses. See Licensing, Open Compute Project, http://www.opencompute.org/licensing/ (last visited Mar. 30, 2013). As with the Solderpad license, documentation licenses only provide permissions to use, modify and distribute a design file, but do not impose conditions regarding hardware manufactured with that design file. For information regarding the Creative Commons licenses, see About the Licenses, Creative Commons, http://creativecommons.org/licenses/ (last visited Mar. 30, 2013).

[19] Ackermann, supra note 3, at 204.

[20] Id. at 205. See also About the OHL, TAPR, http://www.tapr.org/ohl.html (last visited Apr. 2, 2013) (“Like the GNU General Public License, the [TAPR license] is designed to guarantee your freedom to share and to create.”).

[21] Ayass & Serrano, supra note 18, at 71.

[22] Id. at 72.

[23] See Ackermann, supra note 3, at 192 (stating that one of the goals of open source hardware should be that the documentation received under an open source hardware license should be “available to all”). Section 1 of the definition of open hardware put forward by the Open Source Hardware Association similarly provides that “hardware must be released with documentation including design files, and must allow modification and distribution of the design files. Where documentation is not furnished with the physical product, there must be a well-publicized means of obtaining this documentation.” Definition, Open Source Hardware Association, http://www.oshwa.org/definition/ (last visited Apr. 2, 2013). The OSHWA Definition is based on the Open Source Definition of the Open Source Initiative, a statement of principles for open source software, and bears substantial similarities to that definition. Id. The Open Source Hardware Foundation was founded in 2012 as an organization to promote open source hardware. Its board includes founders of several open hardware companies as well as prominent open hardware activists. See Board Members, OSHWA, http://www.oshwa.org/about/board-members/ (last visited Apr. 14, 2013).

[24] The TAPR Open Source Hardware License generally requires licensees to distribute a copy of the design documentation together with the manufactured article. See TAPR license, supra note 18, § 5.2. However, the provision only applies to licensees that “make or have made” a product, and does not apply to downstream recipients of the articles. See id. Similarly, the CERN license provides that a licensee may distribute products developed with the licensed design documentation, provided that a copy of the design documentation is provided to each recipient of the hardware. See CERN license, supra note 18, § 4.1. This provision only applies to a “Licensee,” which is defined by the license as a person “exercising rights” under the license. Id. at § 1. In the absence of a patent, a downstream recipient does not require a grant of intellectual property rights to distribute products and, as such, does not exercise any rights under the license.

[25] See OSHWA Definition, supra note 23, § 6 ( “The [open hardware] license may require . . . attribution to the licensors when distributing design files, manufactured products, and/or derivatives thereof. The license may require that this information be accessible to the end-user using the device normally, but shall not specify a specific format of display”).

[26] See Catherine L. Fisk, Credit Where It’s Due: The Law and Norms of Attribution, 95 Geo. L.J. 49, 89-93 (2006) (providing an extensive discussion of the incentives created by attribution in the context of open source software development). See also Klaus M. Schmidt and Monika Schnitzer, Public Subsidies for Open Source? Some Economic Policy Issues of the Software Market, 16 Harv. J.L. & Tech. 473, 482 (2003). Even the most permissive open source software licenses contain attribution requirements that are passed on to downstream recipients of the software. For example, while the permissive BSD license does not include any copyleft obligations, it does require that distributions of the licensed software include a copy of the copyright notice and a copy of the license. See The BSD 2-Clause License, Open Source Initiative, http://opensource.org/
licenses/BSD-2-Clause (last visited Apr. 15, 2013). Similarly, all six Creative Commons licenses include an attribution requirement. See Attribution, Creative Commons, http://wiki.creativecommons.org/Attribution (last updated Jan. 26, 2010).

[27] Section 5.1 of the TAPR license provides that manufactured products must retain licensor’s notices, but this requirement does not apply to downstream recipients. See TAPR license, supra note 18, § 5.1. Section 3.1 of the CERN license provides that a licensee must retain all copyright, trademark and other notices. See CERN license, supra note 18, § 3.1. Again, this provision only applies to a “Licensee”, id., which is defined by the license as a person “exercising rights” under the license. Id. at § 1. A downstream recipient does not exercise any rights under the license.

[28] See John Mangan et al., Global Logistics and Supply Chain Management 40 (2d. ed. 2012). See also Ronald J. Gilson et al., Contracting for Innovation: Vertical Disintegration and Interfirm Collaboration, 109 Colum. L. Rev. 431, 436 (2009).

[29] Mangan, supra note 28, at 40.

[30] Gilson, supra note 28, at 438. One estimate of the automobile manufacturing industry has a handful of OEMs purchasing from six hundred to eight hundred first tier suppliers. See Omri Ben-Shahar & James J. White, Boilerplate and Economic Power in Auto Manufacturing Contracts, 104 Mich. L. Rev. 953, 956 (2006). See also Anath Iyer et al., Toyota Supply Chain Management: A Strategic Approach to Toyota’s Renowned System 90-91 (2009).

[31] Tim William, Demand Chain Management Theory: Constraints and Development from Global Aerospace Supply Webs, 20 J. Operations Mgmt. 691, 691 (2002).

[32] Gilson, supra note 28, at 439.See Jason Dedrick et al., Who Profits from Innovation in Global Value Chains?: A Study of the iPod and Notebook PCs, 19 Indus. & Corp. Change 81, 81 (2009).

[33] See Jason Dedrick et al., The Distribution of Value in the Mobile Supply Chain, 35 Telecomm. Pol’y 505, 507 (2011).

[34] Julian Dent, Distribution Channels: Understanding & Managing Channels to Market 11-12 (2d. ed. 2011).

[35] In the words of one of the original cases that enforced end user license agreements, “A copyright is a right against the world. Contracts, by contrast, generally affect only their parties; strangers may do as they please, so contracts do not create ‘exclusive rights.’” ProCD, Inc. v. Zeidenberg, 86 F.3d 1447, 1454 (7th Cir. 1996). See also MDY Indus. LLC v. Blizzard Entm’t Inc., 629 F.3d 928, 941 n.3 (9th Cir. 2010).

[36] Stallman, supra note 7.

[37] See generally Ackermann, supra note 3, at 194.

[38] See Quanta Computer, Inc. v. LG Elecs., Inc., 553 U.S. 617, 628-31 (2008) (holding that LGE’s post-sale restrictions could not be enforced under patent law); Static Control Components, Inc. v. Lexmark Int’l, Inc., 615 F. Supp. 2d 575, 584 (E.D. Ky. 2009) (holding that Quanta barred the enforcement of post-sale restrictions on printer cartridges).

[39] Notwithstanding these difficulties, the Open Innovation Network (OIN) provides an example of using patents to create an open licensing framework. OIN is a company owned by a number of prominent technology companies which freely licenses a patent portfolio to any company or institution that agrees not to assert its patents against the Linux operating system. See About OIN, Open Innovation Network, http://www.openinventionnetwork.com/index.php (last visited Apr. 15, 2013) (providing information regarding OIN). OIN may be a special case that could be difficult to generalize to new open source hardware projects. The OIN was founded by companies in order to protect their prior investments in the Linux operating system from patent infringement suits, rather than to create a new open source project. See id. The OIN patent licenses are not used to increase the enforceability of the Linux software licenses, but simply to protect Linux from patent infringement suits. See id. The copyleft and attribution obligations of the Linux system are imposed by the GPLv2 software license, rather than the OIN patent portfolio licenses.

[40] Ackermann, supra note 3, at 205 (explaining how the TAPR license is built around both license and contract concepts); Ayass & Serrano, supra note 18, at 72 (stating that the license to design documentation could “be the basis on which to form a contractual relationship” on which the CERN license is built). See also Static Control Components, 615 F. Supp. 2d at 587 (allowing contract claims to proceed even though patent claims were barred as a result of the patent exhaustion doctrine).

[41] See, e.g., Robert P. Merges, A Transactional View of Property Rights, 20 Berkeley Tech. L.J. 1477, 1507 (2005) (discussing the importance of intellectual property rights to a plaintiff where there is no privity of contract). These arguments against relying on contract law in an open hardware license recall similar claims against the enforceability of the GPL. Commentators had argued that the GPL was unenforceable because it was not validly accepted by licensees under the principles of contract law. See Heather Meeker, The Open Source Alternative: Understanding Risks and Leveraging Opportunities 177 (2008). The counterargument of the Free Software Foundation was that the GPL would be enforceable under copyright law, regardless of whether a licensee accepted its terms in accordance with contract law. See GPLv3 Second Discussion Draft Rationale at n.77, Free Software Foundation, Inc. (July 27, 2006), gplv3.fsf.org/gpl3-dd1to2-markup-rationale.pdf (“[The GPL was] intentionally structured . . . as a unilateral grant of copyright permissions, the basic operation of which exists outside of any law of contract. Whether and when a contractual relationship is formed between licensor and licensee under local law do not necessarily matter to the working of the license.”) [hereinafter GPL Second Draft]; Pamela Jones, The GPL is a License, not a Contract, LWN.net (Dec. 3, 2003), http://lwn.net/Articles/61292/. An open hardware license based solely on contract law would not be able to rely on these arguments in favor of the enforceability of the GPL.

[42] Katz, supra note 7, at 46.

[43] Shahar & White, supra note 30, at 966-70 (discussing how OEMs in the automotive industry erected barriers to negotiations of standard form agreements).

[44] It is possible to speculate that downstream recipients may be able to enforce the terms of an open hardware contract as third party beneficiaries. Generally, however, a third party beneficiary may only enforce the terms of a contract if the parties intended to grant the third party such right of enforcement, and neither the TAPR nor CERN licenses evidence such intent. See generally Melvin Aron Eisenberg, Third-Party Beneficiaries, 92 Colum. L. Rev. 1358, 1382 (1992). On a more theoretical level, current open source licenses generally envision enforcement by the copyright holder. See GPL Second Draft, supra note 41, at n.34 (stating that “enforcement of the GPL is always by the copyright holder”). Granting third parties the right to enforce open source obligations would introduce an unfamiliar and perhaps unwelcome dynamic. First, allowing any third party to enforce the license would expose a licensee to claims from a large range of individuals with which the licensee may have no prior or only a minimal relationship. Second, claims regarding open source obligations often depend on technical details regarding the content and use of the licensed material, details that a licensee may not want to publicize to a broad audience. In any event, enforcement by third party beneficiaries would not reach throughout a distribution chain, as the third party’s claims could only be directed at the specific party that should have provided open source material to the beneficiary. Last, third party beneficiaries would likely only advance claims to obtain hardware design or software code, but would be less likely to demand attribution information.

[45] According to the Second Restatement of Contracts, “[c]ontract damages are ordinarily based on the injured party’s expectation interest and are intended to give him the benefit of his bargain by awarding him a sum of money that will, to the extent possible, put him in as good a position as he would have been in had the contract been performed.” Restatement (Second) of Contracts, § 347 cmt. a, (1981). See also David McGowan, The Tory Anarchism of F/OSS Licensing, 78 U. Chi. L. Rev. 207, 216 (2011) (discussing how the difference between approaching open source license documents as contracts or license permissions affects the remedies likely to be granted by a court, with expectation damages being the default remedy for breach of contract).

[46] 17 U.S.C. § 504(b) (2012) (“The copyright owner is entitled to recover . . . any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages.”). See also MDY Indus. LLC v. Blizzard Entm’t, Inc., 629 F.3d 928, 941 n.3 (9th Cir. 2010) (detailing additional remedies available under copyright law in comparison to a breach of contract claim); Omri Ben-Shahar, Damages for Unlicensed Use, 78 U. Chi. L. Rev. 7, 9 (2011) (discussing remedies available for copyright infringement but not in breach of contract). Plaintiffs in a copyright infringement action may also be entitled to statutory damages pursuant to 17 U.S.C. § 504(c). See Software Freedom Conservancy, Inc. v. Best Buy Co., No. 09 Civ. 10155, 2010 U.S. Dist. LEXIS 75208, at *11(S.D.N.Y July 27, 2010) (granting enhanced statutory damages for copying software in violation of the GPL). Statutory damages are generally limited, however, to a maximum of $150,000 per infringed work and, as such, may not prove a sufficient deterrent. See 17 U.S.C § 504(c)(2) (2012).

[47] 17 U.S.C. § 502 (2012). Prior to the decision of the Supreme Court in eBay v. MercExchange, most courts were relatively liberal in granting injunctions to enjoin copyright infringement. See eBay v. MercExchange, 547 U.S. 388 (2006). See also H. Tomas Gomez-Arostegui, What History Teaches Us About Copyright Injunctions and the Inadequate-Remedy-At-Law Requirement, 81. S. Cal. L. Rev. 1197, 1205-06 (2008). In eBay, the Supreme Court held that courts must apply traditional principles of equity in determining whether to issue a permanent injunction against patent infringement, and that the Federal Circuit could not apply a general rule that “a permanent injunction will issue once infringement and validity have been adjudged”. 547 U.S. at 393-94 (internal quotation marks omitted). The practical effect of eBay in the context of copyright litigation is not yet completely clear. Nevertheless, commentators have noted that it remains relatively common to obtain an injunction against copyright infringement. See Jake Phillips, eBay’s Effect on Copyright Injunctions: When Property Rules Give Way to Liability Rules, 24 Berkeley Tech. L.J. 405, 420 (2009); Robert W. Gomulkiewicz, Conditions and Covenants in License Contracts: Tales From a Test of the Artistic License, 17 Tex. Intell. Prop. L.J. 335, 341 (2009) (stating that “injunctive relief is common for copyright infringement but granted rarely for breach of contract”).

[48] Jacobsen v. Katzer, 535 F.3d 1373, 1382 (Fed. Cir. 2008). Even so, upon remand from the Federal Circuit, the district court in Jacobsen stated that “there is also evidence in the record attributing a monetary value” for the infringed work. Jacobsen v. Katzer, No. C 06-01905, 2009 U.S. Dist. LEXIS 115204, at *11 (N.D. Cal. Dec. 10, 2009). The district court did not give further details or analysis regarding such evidence.

[49] 17 U.S.C. § 503 (2012) (setting forth impounding and disposition of infringing articles as potential remedies for infringement). See also Software Freedom Conservancy, Inc. v. Best Buy Co., No. 09 Civ. 10155, 2010 U.S. Dist. LEXIS 75208, at *15 (S.D.N.Y July 27, 2010) (ordering forfeiture of articles determined to be infringing the GPL).

[50] 17 U.S.C. § 505 (2012) (setting forth courts’ ability to assess costs and attorney’s fees). See also Lawrence Rosen, Bad Facts Make Good Law: The Jacobsen Case and Open Source, 1 Int’l Free and Open Source Software L. Rev 27, 29 (2009) (discussing the possibility of obtaining attorney’s fees in open source disputes).

[51]. See Juergen Neumann et al., OHANDA Label for Open Source Hardware, OHANDA, http://www.ohanda.org/brief (last visited Mar. 29, 2013).

[52]. Ian Gibson et al., Additive Manufacturing Technologies: Rapid Prototyping to Direct Digital Manufacturing 34 (2009).

[53] Id.

[54] Chua et al., supra note 8, at 10; Gibson et al., supra note 52, at 4.

[55] Michael Wienberg, What Happens When Patent Lawsuits Hit Home 3D Printing, Public Knowledge (Nov. 27, 2012), http://publicknowledge.org/
blog/what-happens-when-patent-lawsuits-hit-home-3d.

[56] See Adrian Bowyer, RepRap GPL License: Distributing and Copying RepRap, RepRap (Dec. 14, 2006), http://reprap.org/wiki/
RepRapGPLLicence.

[57] Anderson, supra note 3, at 94.

[58] Chua et al., supra note 8, at 10. See also Layer by Layer: How 3D Printers Work, The Economist, Apr. 21, 2012, at 16, available at http://www.economist.com/node/21552903 [hereinafter Layer by Layer]. See also Ormco Corp. v. Align Tech., Inc., 609 F. Supp. 2d 1057 (C.D. Cal. 2009) (hearing an action concerned with patent infringement, while also providing a detailed description of a specific proprietary three-dimensional printing process).

[59] Chua et al., supra note 8, at 137; Fused Filament Fabrication, RepRap, http://reprap.org/wiki/Fused_filament_fabrication (last visited Apr. 2, 2013) (stating that the RepRap Project uses the terms “fused filament fabrication” rather than “fused deposition modeling,” since the latter term has been trademarked).

[60] Chua et al., supra note 8, at 10. See also Solid Print, Making Things with a 3D Printer Changes the Rules of Manufacturing, The Economist, Apr. 21, 2012, at 18, available at http://www.economist.com/node/21552892.

[61] Chua et al., supra note 8, at 220.

[62] See Layer by Layer, supra note 58. Shapeways, a company that provides three-dimensional printing services over the Internet, provides a variety of materials including plastics, metals and glass. See Materials Comparison Sheet, Shapeways, http://www.shapeways.com/materials/
material-options (last visited Apr. 2, 2013).

[63] Gibson, supra note 52, at 290 (describing the capability of using three-dimensional printing to fabricate complex shapes). See also Gibson at 292-93 (describing the capability of using three-dimensional printing to create internal moving parts); The Shape of Things to Come, The Economist, Dec. 10, 2011, at 88, available at http://www.economist.com/node/21541382 (describing the use of three-dimensional printing to create articles with novel geometries).

[64] Gibson, supra note 52, at 295 (describing the use of additive manufacturing technology to combine materials).

[65] Id. at 291 (describing the use of additive manufacturing technology to create materials with unique internal structures); Id. at 295 (creating “heterogeneous materials with unique properties”); The Shape of Things to Come, supra note 63(describing the use of three-dimensional printing technology to create the “fine, lattice-like internal structure of bone” and “the basic design of a plant stem – a bundle of vertical filaments of different technology.”)

[66] Layer by Layer, supra note 58(discussing biological tissues); Print me a Phone, The Economist, Jul. 28, 2012, at 71, available at http://www.economist.com/node/21559593 (discussing electronic circuits).

[67] Materials Comparison Sheet, Shapeways, http://www.shapeways.com/materials/material-options (last visited Apr. 2, 2013).

[68] Florian Aigner, 3D-Printer with Nano-Precision, Vienna Univ. of Tech. (Mar. 12, 2012), http://www.tuwien.ac.at/en/news/news_detail/article/
7444/ (reporting that researchers at the Vienna University of Technology have used advanced printing technologies to construct a 285 micrometer racecar and approximately 100 micrometer models of St. Stephen’s Cathedral and London Bridge).

[69] Thingiverse, http://www.thingiverse.com (last visited Mar. 28, 2013).

[70] Examples of such business include Shapeways and Sculpteo. See Shapeways, http://www.shapeways.com (last visited Apr. 2, 2013); Sculpteo, http://www.sculpteo.com (last visited Apr. 2, 2013).

[71] The standard CAD file is represented in the IGES (Initial Graphics Exchange Specifications) format. For technical reasons, however. that format is not well-suited for three-dimensional printing. See Chua et al., supra note 8, at 337.

[72] Id. at 301.

[73] Id. at 28. Since the development of STL, other possible file formats for representing physical objects have been put forward as attempts to correct deficiencies in the STL format. Id. at 338.

[74] Id. at 338.

[75] See STL 2.0 May Replace Old, Limited File Format, RapidToday.com, http://www.rapidtoday.com/stl-file-format.html (last visited Mar. 28, 2013).

[76] Bre Pettis et al., Getting Started with MakerBot 65 (2012) (describing the limited possibilities available for modifying STL files).

[77] See Ormco Corp. v. Align Techs., Inc., 609 F. Supp. 2d 1057, 1071 (C.D. Cal. 2009) (describing a three-dimensional printing design file as “data file” rather than software in the context of an action for patent infringement).

[78] See H.R. Rep. No. 94-1476, at 54 (1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5667 (stating that the provision is “an effort to make clearer the distinction between works of applied art protectable under the bill and industrial designs not subject to copyright protection.”) See also Robert C. Denicola, Applied Art and Industrial Design: A Suggested Approach to Copyright in Useful Articles, 67 Minn. L. Rev. 707, 722 (1983) (discussing the rationales for excluding industrial design from copyright protection).

[79] See Pivot Point Int’l v. Charlene Prods., 372 F.3d. 913, 921 (7th Cir. 2004).

[80] Id.

[81] 17 U.S.C. § 101 (2012) (defining pictorial, graphic and sculptural works). See also Victor Stanley, Inc. v. Creative Pipe, Inc., No. MJG-06-2662, 2011 U.S. Dist. Lexis112846, at *7 (D. Md. Sept. 30, 2011) (holding that defendants infringed plaintiff’s copyright in manufacturing CAD files). But see Meshwerks, Inc. v. Toyota Motor Sales U.S.A., Inc., 528 F.3d 1258, 1268 (10th Cir. 2008) (denying copyright protection for 3D models of Toyota cars, since the models were “unadorned images of Toyota’s vehicles, the appearances of which do not owe their origins to Meshwerks.”). The rationale of the decision in Meshwerks seems to show that original 3D design files will generally be accorded copyright protection. The decision was based on the fact that Meshwerks did not add any creative content to the design of the pre-existing Toyota vehicles. Id. As such, the decision implies that 3D design files with original creative content will be accorded copyright protection.

[82] 17 U.S.C. § 101 provides that “copies” may be perceived “either directly or with the aid of a machine or device.” 17 U.S.C. § 101 (2012). Cf. Apple Computer, Inc. v. Franklin Computer Corp., 714 F.2d 1240, 1249 (3d Cir. 1983) (affirming that the code of a computer program, embedded in a memory chip, is an appropriate subject for copyright).

[83] See Victor Stanley, 2011 U.S. Dist. Lexis 112846, at *9-10 (holding that defendant could not be held liable for copyright infringement for using copied technical drawings to manufacture articles, but could be held liable for the unauthorized download, transmission, creation of derivative works and copying of the copyrighted drawings themselves); Forest River v. Heartland Rec. Vehicles, 753 F. Supp. 2d 753, 760 (N.D. Ind. 2010) (dismissing claims that the use of copyrighted design drawings to manufacture a trailer constitutes copyrighted infringement, but stating that allegations concerning the copying of the design drawing themselves “state a claim for copyright infringement as to the copies (as distinct from the actual trailer)”); Gusler v. Fischer, 580 F. Supp. 2d 309, 315 (S.D.N.Y. 2008) (stating that the plaintiff “holds a copyright in a technical drawing of a useful article, which does not preclude defendants’ manufacturing and marketing of the article itself”). Compare Niemi v. Am. Axle Mfg. & Holding Inc., No. 05-74210, 2006 U.S. Dist. LEXIS 50153, at *10 (E.D. Mich. July 24, 2006) (holding that the manufacture of a machine from a copyrighted technical drawing is not copyright infringement) with Niemi v. Am. Axle Mfg. & Holding Inc., No. 05-74210, 2008 U.S. Dist. Lexis 25995 (E.D. Mich. April 23, 2008) (analyzing claims regarding the copying of the technical drawings themselves, with such claims dismissed for lack of evidence of copying).

[84] 17 U.S.C. § 106(1) (2012) (granting an exclusive right of reproduction to the copyright holder).

[85] See Mai Sys. v. Peak Computer, 991 F.2d 511 (9th Cir. 1993) (holding that loading a copy of software onto a computer’s memory constitutes copyright infringement); Cartoon Network v. CSC Holdings 536 F.3d 121, 127 (2d Cir. 2008) (affirming the holding in Mai Systems, but interpreting MAI Systems to hold that the copy in the computer’s memory must be more than transitory). A digital design will be resident in the memory of a three-dimensional printer for more than transitory duration, since a printer will generally hold the file (or its derivatives) in memory for the period of time necessary to print the object, which can be several hours. Chua et al., supra note 8, at 31. The holding of Mai Systems applies to any copyrighted work (and not only software) that is loaded into a computer. See Nimmer on Copyright, § 8.08[A][1] (stating that “input of a work into a computer results in the making of a copy, and hence . . . such unauthorized input infringes the copyright owner’s reproduction right”). See also Jedson Eng’g Inc. v. Spirit Constr. Servs., 720 F. Supp. 2d 904, 919 (S.D. Oh. 2010) (copyright infringement resulting from unauthorized access of CAD files and technical drawings through Internet and CD-ROM); Gemel Precision Tool Co. v. Pharma Tool Corp., Civ.-A. No. 94-5305, 1995 U.S. Dist. LEXIS 2093, at *17 (E.D. Pa. Feb. 13, 1995) (holding that the defendant’s creation of CNC machine files infringed plaintiff’s copyright). Cf. Ormco Corp. v. Align Tech., Inc., 609 F. Supp 2d 1057, 1072 n.17 (C.D. Cal. 2009) (in a patent infringement claim, relying on copyright law to show that loading three-dimensional printing data files creates a copy of those files). But see Simon Bradshaw et al., The Intellectual Property Implications of Low-Cost 3D Printing, 7 Scripted 1, 25 (2010), available at http://www.law.ed.ac.uk/ahrc/script-ed/vol7-1/bradshaw.pdf. Bradshaw states that, under the law of the United Kingdom, the copyright in a design document is not infringed by using the design to create an article in a three-dimensional printing process. Id. In reaching this conclusion, Bradshaw does not address or analyze the copying inherent to a computerized manufacturing process.

[86] 17 U.S.C. § 106(2) (2012) (setting forth copyright holder’s exclusive right to prepare derivative works).

[87] See Victor Stanley, 2011 U.S. Dist. Lexis 112846, at *10 (D. Md. 2011) (finding copyright infringement when defendants created derivative works of CAD manufacturing files). The printer may also manipulate the file in other ways as well, to ensure that “it is the correct size, position and orientation for building.” See Gibson, supra note 52, at 5. In other situations, the printer may be required to segment a single STL file or merge several STL files. See id.at 45.

[88] In actual fact, there may not be an exact one-to-one correspondence between the design file and the final printed article. First, a printed article may require some amount of post-processing, such as finishing, polishing, sand-papering or coating. Gibson, supra note 52, at 46. Second, certain printing technologies may require the printing of additional “supports” during the printing process to buttress manufactured articles. Id. at 53.

[89] TDPL, § 2.

[90] See supra text accompanying notes 83-87.

[91] TDPL, § 3.2.

[92] TDPL, § 3.3(a).

[93] TDPL, §§ 3.1, 3.3(b).

[94] See Gibson, supra note 52, at 56 (discussing software that can imprint identification information on printed articles).

[95] TDPL, § 1.8 (stating that a Required Notice may provide “direction to a URL which displays” such attribution and licensing information). In situations where the inclusion of extensive attribution and licensing language would prove awkward or require the use of extensive area on a confined physical object, such notices could be composed of other digital means of providing such information. For example, two-dimensional bar codes could be used to provide an efficient means of directing users to the appropriate Internet site. A similar approach has recently been adopted by Thingiverse. See Help with Barcodes, Thingiverse, http://www.thingiverse.com/help/barcodes (last visited Apr. 2, 2013). Similarly, the Linux Foundation has proposed a similar means for tracking open source software components included in software products. See The Linux Foundation Announces New Tool for Tracking Free and Open Source Software Components, The Linux Foundation (May 30, 2012), http://www.linuxfoundation.org/news-media/announcements/2012/05/linux-foundation-announces-new-tool-tracking-free-and-open-source-s.

[96] TDPL, § 3.4. An important feature of the TDPL is that it conditions the right to modify the design file on the concomitant insertion of this notice. In order to be enforceable under copyright law, the provisions of the TDPL must constitute conditions to a copyright license rather than additional contractual covenants. See Omri Ben-Shahar, Damages for Unlicensed Use, 78 U. Chi. L. Rev. 7, 11-12 (discussing the differences between license conditions and covenants). In order to constitute a condition to the license, the provision at question must relate to an action that (a) exceeds the license’s scope (b) in a manner that implicates one of the licensor’s exclusive statutory rights. See MDY Indus. LLC v. Blizzard Entm’t Inc., 629 F.3d 928, 940 (9th Cir. 2010). Provisions that condition a software user’s right to create derivative works or modifications are, under this test, considered license conditions rather than contractual covenants. Id. at n.3. As such, the requirement of the TDPL that modifications must be accompanied by an insertion of the modification notice should constitute a condition to the copyright license rather than an additional contractual covenant. The GPL operates in the same way: the copyleft provisions of the GPL are formulated as conditions to the GPL’s grant of distribution rights. In other words, a licensee is not permitted to distribute works under the GPL unless it also provides source code as required by the license. See Heather Meeker, The Gift that Keeps on Giving – Distribution and Copyleft in Open Source Software Licenses, 4 Int’l Free and Open Source Software L. Rev. 29, 29 (2012). The conditions of the TDPL are structured to apply to the modification of the design file rather than the distribution of a physical object since, in contrast to the GPL’s software setting, the distribution of physical articles may not implicate any rights under copyright law. See supra text accompanying notes 78-80.

[97] TDPL, § 1.6

[98] Several industries with complex supply chains, such as the automotive and aerospace industries, have already begun to make use of three-dimensional printing. See Neil Hopkinson et al., Rapid Manufacturing: An Industrial Revolution for the Digital Age 13 (2006). See also supra note 30, noting the complex supply chains in these industries.

[99] TDPL, § 4 does contain a contractual commitment not to remove any notices from any physical objects printed with the design file and an obligation to pass this commitment onto downstream recipients of the object. Unfortunately, it is unclear whether this prohibition could be achieved without resort to such a contractual commitment. The Digital Millennium Copyright Act does contain a prohibition to “remove or alter any copyright management information.” 17 U.S.C. § 1202(b) (2012). It is unclear whether this prohibition applies to notices printed on a physical object, since the statutory provision only concerns notices “conveyed in connection with copies . . . of a work or performances or displays of a work.” 17 U.S.C. § 1202(c) (2012); see Textile Secrets Int’l, Inc. v. Ya-Ya Brand, Inc., 524 F. Supp. 2d 1184, 1201-03 (C.D. Cal. 2007) (holding that the prohibition does not apply to the removal of a tag attached to fabric). At the same time, however, the Textile Secrets holding was limited to a situation where there was an “absence of any facts demonstrating that a technological process was utilized in connection with . . . applying the copyright information . . . .” Id. at 1201, n.17.

[100] Katz, supra note 7, at 49-51. Katz attempts to resolve this problem by providing that an effective open hardware license could require the provision of complete design documentation, where that documentation could consist of components that are readily available with known specifications. This of course requires some judgment concerning which components should be considered “readily available.” In addition, what constitutes “readily available” could change over time.

[101] Id.

[102] TDPL, § 1.4

[103] TDPL, § 3.3.

[104] As noted above, a limited copyright may be applicable to certain physical articles. See supra text accompanying notes 83-87. As such, it may also be possible to use such copyright to enforce the license conditions of the TDPL, and the text of the TDPL recognizes this possibility. See infra note 127. Even so, as the existence and scope of such copyrights can be contentious, the TDPL relies on the copyright in the design document instead.

[105] See supra text accompanying notes 63-65(detailing the comparative advantage of three-dimensional printing in producing certain articles and materials).

[106] Peter Marsh, The New Industrial Revolution 26-28 (2012) (describing the widespread use of computer aided design in modern manufacturing); Eric Von Hippel, Democratizing Innovation 104 (2005); Victoria Gomelsky, Computerized Machines Aid Human Watchmakers, NY Times (Sept. 4, 2012), http://www.nytimes.com/2012/09/05/fashion/05iht-acaw-hitech05.html?pagewanted=all&_r=0 (describing the “ubiquity of computer-aided design” in the Swiss watch making industry); Anderson, supra note 3, at 76 (stating that “[s]oftware is increasingly driving the design process”).

[107] Indeed, in designing the Android platform, Google reverse engineered and reconstructed an equivalent to almost all of the Java programming language. Generally, Java was licensed by Oracle under either the GPL or pursuant to commercial terms. Google carried out this complex and costly process in order to circumvent these licensing terms. See Oracle Am., Inc. v. Google Inc., 872 F. Supp. 974, 978 (N.D. Cal 2012) (stating that “Google wrote or acquired its own source code to implement virtually all the functions of the 37 API packages in question. Significantly, all agree that these implementations — which account for 97 percent of the lines of code in the 37 API packages —are different from the Java implementations.”). The roots of the open source movement itself also grew out of such a feat of reverse engineering, when staff at UC Berkeley rewrote much of the Unix source code that was proprietary to AT&T. See Weber, supra note 4, at 40. The Linux operating system also grew out of a similar attempt to bypass the licensing restrictions imposed on the source code of Unix. See Moody, supra note 13, at 33-43.

[108] 17 U.S.C. § 102 provides that “[i]n no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.” 17 U.S.C. § 102(b) (2012).

[109] For a summary of the application of the merger doctrine in the context of software programs, see Lexmark Int’l, Inc. v. Static Control Components, Inc., 387 F.3d 522, 535 (6th Cir. 2004).

[110] See Computer Assocs. Int’l, Inc. v. Altai, Inc., 928 F.2d 693, 704 (2nd Cir. 1992) (noting that “[t]he essentially utilitarian nature of a computer program further complicates the task of distilling its idea from its expression”).

[111] See, e.g., Pamela Samuelson et al., A Manifesto Concerning the Legal Protection of Computer Programs, 94 Colum. L. Rev. 2308, 2317 (1994) (“Behavior is not a secondary by-product of a program, but rather an essential part of what programs are. To put the point starkly: No one would want to buy a program that did not behave, i.e., that did nothing, no matter how elegant the source code ‘prose’ expressing that nothing.”).

[112] See, e.g., Lexmark Int’l Inc. v. Static Control Components, Inc., 387 F.3d 522, 537-42 (6th Cir. 2004) (holding that Lexmark’s “Toner Loading Program” was not copyrightable since the expression of the program was constrained by compatibility requirements).

[113] For a discussion of software license agreements in general, see Raymond T. Nimmer, Copyright First Sale and the Over-riding Role of Contract, 51 Santa Clara L. Rev. 1311, 1322 (2011). Nimmer notes that “[i]n the digital era, all of the traditional content industries have moved to a mixed model of distribution and many new industries only use digital distributions subject to license agreements.” Id. With respect to open source licenses, the Software Freedom Law Center, for example, has been successful in enforcing the GPL with respect to “BusyBox” software. See supra note 6. See also Software Freedom Conservancy, Inc. v. Best Buy Co., No. 09 Civ. 10155, 2010 U.S. Dist. LEXIS 75208, at *15 (S.D.N.Y July 27, 2010) (ordering forfeiture of articles determined to be infringing the GPL).

[114] Section 6(b) of version 3 of the GPL provides that a licensee that may satisfy its obligations to provide source code by providing written notice regarding “access to copy the Corresponding Source from a network server at no charge.” GPLv3, supra note 13, § 6(b). In addition, Section 6(d) allows licensees to provide source code through a “network server” if object code was provided in the same manner. See id. at § 6(d).

[115] See GPL Second Draft, supra note 41, at n. 51. See also OSHWA Definition, supra note 23, at § 1 (stating that download from the Internet is the preferred method for making source documentation available); The Open Source Definition, The Open Source Initiative, http://www.opensource.org/osd (providing that download from the Internet is the preferred method of making source code available). Section 5.2(ii) of the TAPR license also provides that hardware documentation can be distributed by providing a URL where documentation may be downloaded. On the other hand, the Software Freedom Law Center (SFLC) has opined that, for much of the world, downloading source code from the Internet is either not possible or not practical. See Bradley M. Kuhn et al., A Practical Guide to GPL Compliance, Software Freedom Law Center (Aug. 26, 2008), http://www.softwarefreedom.org/resources/2008/compliance-guide.html. The opinion of the SFLC dates from 2008, and as Internet technology advances and become more accessible this well-grounded objection to Internet distribution should become less relevant. While the cost to licensors of establishing and maintaining an Internet website from which users could obtain source material is not negligible, this cost could be substantially lowered through the use of community websites such as Thingiverse, in the same way that software source code is made available on community Internet sites such as Sourceforge. See Sourceforge, http://sourceforge.net (last visited Apr.2, 2013).

[116] For example, Katz questions whether bolting a copyleft wheel to a car would require the distribution of design documentation for the entire car. See Katz, supra note 7, at 48.

[117] See generally Eli Greenbaum, Open Source Semiconductor Core Licensing, 25 Harv. J.L. & Tech. 131 (2011).

[118] See Malcolm Bain, Software Interactions and the GNU General Public License, 2 Int’l Free and Open Source Software L. Rev. 165, 165 (2010) (noting that “[t]he so-called ‘GPL linking’ debate has been raging for the last 18 years, and probably will go on for . . . quite a few more”).

[119] TDPL, § 1.3.

[120] See 3D printers could create customized drugs on demand, BBC News (Apr. 18, 2012), http://www.bbc.co.uk/news/technology-17760085. Commentators have noted the difficulty of applying open source development principles to biotechnology. See, e.g., David W. Opderbeck, The Penguin’s Genome, or Coase and Open Source Biotechnology, 18 Harv. J.L. & Tech. 167, 198-99 (2004). The TDPL, however, allows the easy application of open source principles to any biotechnology process that uses three-dimensional printing technology.

[121] TDPL, § 3.7.

[122] Michael Weinberg, It Will be Awesome if They Don’t Screw it Up: 3D Printing, Intellectual Property, and the Fight Over the Next Great Disruptive Technology (2010), Public Knowledge, http://www.publicknowledge.org/files/docs/3DPrintingPaperPublicKnowledge.pdf.

[123] Fred Chasen et al., Your Printer is Like iTunes: DRM and the 3D Printing “Revolution,” Information Law and Policy Blog (Oct. 21, 2012), http://blogs.ischool.berkeley.edu/i205f12/2012/10/21/your-printer-is-like-itunes-drm-the-3d-printing-revolution/. Intellectual Ventures, a well-known non-practicing entity, has been issued a patent for the application of DRM technology to three-dimensional printing. See U.S. Patent No. 8,286,236 (issued Oct. 9, 2012).

[124] Section 1201 of the Copyright Act prohibits both acts of circumvention as well as trafficking in the tools and technologies of circumvention. 17 U.S.C. § 1201(a)(1)(A) (2012) (providing that “[n]o person shall circumvent a technological means that effectively controls access to a work protected under this title”); 17 U.S.C. § 1201(b)(1)(A) (2012) (providing that “[n]o person shall manufacture, import, offer to the public, provide, or otherwise traffic in any technology . . . primarily designed or produced for the purpose of circumventing protection afforded by a technological measure that effectively protects a right of a copyright owner under this title in a work or a portion thereof”). For a summary of concerns regarding the use of digital rights management, see DRM, Electronic Frontier Foundation, https://www.eff.org/issues/drm.

[125] The DMCA safe harbor provisions protect online service providers (“ISPs”) from copyright infringement claims in respect of user activity, so long as the service provider complies with specific conditions. 17 U.S.C. § 512(a)(1-5) (2012). To avoid liability, the ISP must promptly remove or block access to alleged infringing material when they receive notification of an infringement claim from a copyright holder. 17 U.S.C. § 512(c)(1)(C) (2012). Thingiverse has received at least one DMCA takedown notice in respect of a digital design. Bre Prettis, Copyright Policy, Thingiverse Blog (Feb. 18, 2011), http://blog.thingiverse.com/2011/02/18/copyright-and-intellectual-property-policy/.

[126] These annotations to the text of the TDPL describe certain drafting decisions made in creating the license. Capitalized terms used in annotations notes have the same meaning given to those terms in the body of the TDPL itself.

[127] Certain circumstances might allow for a copyright in a Printed Articles itself. Such copyrights in Physical Articles often raise disputes as to their scope and enforceability. See supra text accompanying notes 78-80. As such, the TDPL does not rely on such copyrights to enforce the conditions of the license. Nevertheless, nothing in the TDPL prevents a licensor from claiming that the unauthorized copying of the Printing Article constitutes copyright infringement of the copyright in the Printed Article itself.

[128] The TDPL recognizes that there may be legitimate situations that require a change in the location or size of a notice on a Printed Article, including for aesthetic purposes. At the same time, the TDPL also recognizes the interest of the Licensor in ensuring that such notices remain accessible. As such, the TDPL allows licensees to change the location or size of any notice, so long as it remains reasonably accessible. The reference to “electronic devices” is intended to capture the possibility that a Required Notice will only consist of a bar code that directs a recipient to an internet location. See supra note 95.

[129] This requirement to maintain the URL providing the Source Form of the Work for at least three years is based on the three year time frame used in both Section 6(b) of GPLv3 and Section 5.2(ii) of the TAPR Open Hardware License. See GPLv3, supra note 13, at § 6(b).

[130] The TDPL contains an express patent license. In this manner, the TDPL follows the precedent of several open source software licenses that also contain express patent licenses, such as version 3 of the GPL and the Mozilla Public License (“MPL”). See GPLv3, supra note 13, at § 11; Mozilla Public License, Mozilla, http://www.mozilla.org/MPL/2.0/ (last visited Apr. 2, 2013), at § 2.1(b). The TAPR and CERN licenses also contain express patent licenses. See TAPR license, supra note 18, at § 2; CERN license, supra note 18, at § 3.4. At the same time, the TDPL gives consideration to legitimate concerns that the scope of this license not be overly broad. First, the license is limited to the use of the licensed design in an automated printing process. As such, the patent license cannot be used a shield for the use of the design in a traditional manufacturing process that does not require the copyright license of the TDPL. In this way, the patent license is tied to the copyleft obligations of the TDPL – only a licensee that is prepared to share derivative works in compliance with the obligations of the TDPL can enjoy the benefit of the patent license. Second, only a “Licensor” grants a patent license under the TDPL. As such, an individual or entity that simply distributes a design or article does not grant any patent license. Third, the license does not apply to works created in violation of the license. As such, an individual that violates the copyright license of the TDPL will also not have the benefit of the express patent license.

By Celia Lerman*

INTRODUCTION

Does copyright law protect graffiti? This is a question of growing importance in today’s art scene. Books, CD’s, t-shirts and other items featuring graffiti images are often released without permission from the original graffiti artists. For a recent example, take the graffiti exhibition mounted in a Buenos Aires art gallery by Peruvian artist José Carlos Martinat. Martinat’s exhibition consisted of appropriated pieces of graffiti that he had carefully removed, without permission, from the walls of private properties in Buenos Aires. Martinat also offered these pieces for sale. Local graffiti artists reacted furiously to this exhibition and collectively destroyed all of their graffiti pieces in situ during the gallery’s opening night. Examples like this lead us to wonder if graffiti artists could receive any protection under copyright law.[1]

At least some pieces of graffiti are suitable for copyright protection, insofar as they are original works, fixed in a tangible medium of expression. Still, why should we protect expressions created by an illegal act (painting a third party’s property without her permission)? Should the law help graffiti artists to benefit from their transgressions? Moreover, if the primary purpose of copyright is to incentivize the creation of valuable creative works, should we protect and promote illegal art?

Following an overview of recent cases concerning graffiti in Section I of this Article, Section II will argue that when graffiti complies with the minimum requirements for copyright protection (an original work, fixed in a tangible medium of expression), it should be protected under copyright law despite its illegality. As will be explained in Section III, this is because copyright should be neutral towards works created by illegal means. Because copyright should only be concerned with the immaterial work, the artist’s material transgressions should not exclude the work from copyright protection. Section III will also show that copyright protection for graffiti may be justified even under the incentive-based scheme of the U.S. Copyright Act. Illegal graffiti pieces are creative works of authorship that can fit into the concept of promoting “the Progress of Science and useful Arts,” as stated in the United States Constitution.[2] Protecting graffiti under copyright law, moreover, may incentivize graffiti artists to create more legal works.

Section IV analyzes the challenges that artists face when enforcing their rights in their graffiti under the Copyright Act and the Visual Artists Rights Act (“VARA”). I will claim that VARA can protect graffiti against modification and destruction from third parties, but not from the wall owner, whose property rights were violated when the graffiti was created. I will also argue that graffiti artists can fully claim their rights of attribution under VARA.

I. A RISING ARTISTIC MOVEMENT WHERE OWNERSHIP RAISES CONCERNS

Graffiti is one of the fastest growing artistic movements.[3] It has been compared to the cubist revolution,[4] and regarded as the twenty-first century heir to Pop Art.[5] Graffiti pieces can be found in all sorts of spaces with significant public exposure (streets, means of transport, and buildings), chosen carefully by graffiti artists to give high visibility to their work.

The term “graffiti” has both a broad and a narrow meaning. The broad meaning refers to an artistic movement that includes several different styles (spray-paint graffiti, street art and stencils), which, in turn, are associated with different socio-cultural groups. The narrow meaning only refers to spray-paint graffiti. In this article, unless otherwise noted, I will use the term “graffiti” only in the broad sense.[6] Moreover, I will primarily focus on illegal graffiti, that is, graffiti that has been fixed to a surface without permission from the surface’s owner.

Spray-paint graffiti includes elaborate signatures and tags, along with murals and other graphic pieces created with spray paint.[7] This technique is used not only by graffiti artists, but also by gangs to mark their territory, sports fans to support their teams, and by political groups to advance their causes. Spray-paint graffiti generally has a message that is written by and for the graffiti community: few people–generally those either from the same gang culture, or people from the same artistic community–understand the meaning of such graffiti pieces.

Spray-paint graffiti[8]

By contrast, street art techniques go beyond just spray-cans.[9] They range from traditional painting with brushes, rollers and palettes, to more innovative forms of expression such as stickers, posters, lighting installations and mosaics.[10] Street art, moreover, is often purely artistic: by this I mean that, unlike spray-paint graffiti, street art is an aesthetic work that the general public is able to interpret and with which the public can connect.

Street art[11]

Stencil graffiti combines elements from spray-paint graffiti and from street art. Stencil artists carefully prepare stencil blueprints on hand-made sheets, which they then place on a surface and cover with spray paint. Stencil graffiti works are the easiest and quickest pieces to replicate.[12] Like spray-paint graffiti, stencil art is created with spray-paint, and like street art, stencil art is generally artistic.

Stencil[13]

Graffiti pieces increasingly attract the attention of numerous collectors, gallery owners, publishers, filmmakers, and journalists. Pieces from famous graffiti artists have sold for hundreds of thousands of dollars in the art market.[14] Graffiti pieces have even been given as diplomatic gifts.[15] Galleries are seeing record attendance at exhibitions of graffiti works,[16] and publishers have generated a boom of photographic books on graffiti and street art.[17] As graffiti has grown in popularity, several conflicts have highlighted issues regarding the rights graffiti artists have with respect to their work.

The first group of examples involve the unauthorized reproduction of graffiti through other means of expression, such as books, clothing, film, and TV advertisements. For example, photographer and graffiti aficionado Peter Rosenstein published the book, Tattooed Walls,[18] which displays over one hundred pictures of New York City murals. Rosenstein had accumulated these photographs over the course of a decade; he then compiled and published these images without permission from the graffiti artists whose works were featured. Soon after publication, a dozen artists who created some of the book’s murals—including the group Tats Cru—sought a settlement from Rosenstein.[19] Rosenstein explained that he did not ask for permission because “the murals were in public spaces,”[20] and because he thought the publication “was covered under fair use provisions.”[21] However, US copyright law does not support these arguments, as we shall see below.[22] Eventually, a settlement was reached and the book was quickly taken out of the publisher’s catalogue.[23]

Another example of a book that reproduced graffiti without permission is Tony Hawk’s Pro Skater 2 Official Strategy Guide, published by Pearson Education a/k/a Brady Publishing. The book features a mural by Chicago’s graffiti artist Hiram Villa, known as “UNONE,” without the artist’s consent. Villa brought copyright infringement and state law claims against the publishers, but the court initially dismissed his case for lack of copyright registration.[24] In its decision, however, the court explained that it “assumed, without deciding, that the work is copyrightable.”[25] Villa then registered his work with the Copyright Office and filed suit again. This time, the publisher moved to dismiss the complaint, and the court rejected the publisher’s motion.[26] Unfortunately for this paper’s analysis, the parties reached an agreement before the court could issue any substantive decision on the case, leaving the question unsettled.[27]

Graffiti has also been reproduced on clothing. For example, Urban Outfitters recently printed t-shirts that featured a signature piece by street artist Cali Killa without his permission. Cali Killa and Urban Outfitters settled the dispute, and the clothing company stopped using the artwork.[28]

Cali Killa’s graffiti and Urban Outfitter’s clothing[29]

Another example of graffiti appropriation is the swimsuit worn by the Spanish synchronized swimming team in the 2008 Beijing Olympics. The swimsuit in question reproduced German artist Cantwo’s graffiti artwork without his permission.[30] Complicating the conflict, Spanish nationals performed the infringement of the German work in China.[31] The artist complained publicly, but it is unclear whether he took any legal action against the team.[32]

Cantwo’s art and swimsuits[33]

Films and TV advertisements have also featured unauthorized uses of graffiti. In 2011, a mural painted by the group of artists known as Tats Cru was featured without permission in a Fiat 500 commercial with Jennifer Lopez. The commercial, My World by J.Lo, emphasized the connection between the Lopez and the Bronx, and included the graffiti murals, among other distinctive scenes from her neighborhood. The parties reached an agreement regarding the commercial’s use of the mural.[34]

Stills from JLo’s Fiat commercial

Along with the unauthorized reproduction of graffiti pieces, there is a second group of conflicts; this group involves disputes over the preservation and ownership of physical graffiti works. One example concerns the 5 Pointz building in Long Island City, New York. The 5 Pointz building is an old, unused warehouse that has been curated by graffiti artist Meres One since 2002.[35] It serves as a center for graffiti artists in New York and is considered a landmark building both by the artists and by many locals.[36] The owner of the building, real estate developer Jerry Wolkoff, initially welcomed artists to the building[37] and currently tolerates the graffiti activity. Wolkoff has since announced, however, his intention to demolish the building in 2013.[38] Graffiti artists and supporters have started an online petition to protest the demolition of the building; the petition has received over 13,000 signatures.[39] It is unclear whether the graffiti works at 5 Pointz are legal. In order to avoid criminal liability for their graffiti, the artists would need to show that they received express consent to paint on the site.[40] However, as this piece will argue, any questions of civil liability remain intrinsically tied to determinations of copyright.[41]

Peruvian artist José Carlos Martinat’s exhibition in Buenos Aires illustrates this category of conflicts as well. Martinat mounted an exhibition that consisted of appropriated pieces of graffiti that he had carefully removed without permission, using a special art-removal technique, from the walls of private properties in Buenos Aires.[42] He only removed art that was not signed (but whose authors could be found within the local street art scene, given their characteristic style and strong presence in the local graffiti community) and small sections of larger murals that were signed.

Graffiti before and after Martinat’s actions[43]

In an act of “vandalism against vandalism,”[44] Martinat offered these removed pieces for sale in an art gallery. Local graffiti artists reacted furiously and collectively destroyed all of their own exhibited graffiti pieces during the gallery’s opening night.[45] Although some graffiti artists liked the conceptual foundations of the exhibition, most were enraged that an outsider had destroyed their artwork, harming not only the artists, but also the owners of the surfaces that had contained the art, as well as the local public who had previously enjoyed the art.[46]

For these artists, the story would have been different if other graffiti artists painting over their work on the same walls; this is understood as part of the natural life cycle of graffiti and as part of the artistic dialogue that street art entails. In this case, however, Martinat purposely intended to remove and modify the art for his own benefit–hijacking and ending the dialogue.[47] Martinat responded to the artists’ raid by claiming their intervention was part of his conceptual work: the vandalized vandals were vandalizing back.[48] Due to this incident, subsequent exhibitions in Brazil were cancelled.[49]

Artists’ reactions: “La pared no se vende” (“The wall is not for sale”)

Despite its increasing popularity, graffiti is punished severely by many local authorities. Artists may not only suffer fines for damaging property, but they may also be subject to criminal sanctions in many jurisdictions.[50] State and local laws usually punish graffiti production and associated conduct, such as the possession of graffiti instruments[51] and the sale and distribution of broad-tipped markers and spray paint to minors.[52]

With these examples of conflicts and sanctions in mind, let us now analyze some central questions regarding the ownership of unauthorized graffiti art.

II. GRAFFITI AS A VISUAL WORK UNDER COPYRIGHT LAW

In order to receive protection under copyright, an artistic expression must comply with the following minimum legal requirements: it must be a work of authorship that is original and fixed in any tangible medium of expression.[53] That is, the creative work must have originated with the author,[54] and its embodiment, by or under the authority of the author, must be sufficiently permanent or stable for it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration.[55] These are the necessary and sufficient requirements for protection of artistic expression under copyright. Thus, like any other artistic piece, if a graffiti work complies with these minimum requirements, it can be protected under copyright.

Consider, for example, Keith Haring’s famous street art in the New York City subway. These works featured dancing people drawn in Haring’s characteristic style, white chalk on unused black advertising panels in the subway.[56] These drawings were distinct, original, and were fixed on subway panels, which are a form of tangible media. Accordingly, Keith Haring’s art could have been protected under copyright law.

Keith Haring’s subway art[57]

Not all graffiti, however, qualifies for copyright protection. For instance, simple tags, signatures and other spray-paint graffiti may be too small or too simple to be considered artistic “work.” Graffiti that consists of words and short phrases, familiar symbols and designs, or mere variations of typographic ornamentation, lettering or coloring cannot be protected.[58] Nor are graffiti typefaces copyrightable as such, artistic though they might be, because typefaces are not considered protectable works.[59]

Examples of graffiti that may not qualify for copyright protection[60]

Copyright’s originality requirement could also prevent some works from being copyrightable. For example, take a common phrase, such as “Lucille, I love you,” “Laura was here,” or “Vote for Obama,” painted on a wall with one or two spray paint colors in simple handwriting. Even though this visual expression might constitute a “work of authorship,” it would lack sufficient originality to qualify for copyright protection.

Usually, graffiti works are fixed in a tangible medium of expression by being painted on a wall. Since copyright law’s fixation requirement only demands that the work is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than a transitory duration,[61] we should be able to identify a protectable graffiti work even if its physical embodiment is later destroyed. Copyright law distinguishes between the work and the physical support that embodies it; it only protects the former, not the latter. Most graffiti works are ephemeral because they will be painted over (either by the owner of the wall, the local authorities or other graffiti artists), or they will fade out from weather and lack of maintenance. Nevertheless, this temporary existence should be sufficient to meet copyright’s fixation requirement.[62]

Thus, if graffiti artwork is an original work of authorship fixed in a tangible medium of expression, it should be eligible for copyright protection.

Moreover, a graffiti piece could be categorized as a work of visual art.[63] This categorization is relevant only for the rights extended to the artist under the Visual Artists Rights Act (VARA), which I will analyze below in Section IV. Such a designation, however, has no bearing on the copyrightability of a work under U.S. copyright law.

A piece is considered a work of visual art under VARA if: it is a painting, drawing, or sculpture; it exists in a single copy or in a limited edition of 200 copies or less; and it is signed and consecutively numbered by the author.[64] The piece is excluded from this category, however, if (i) the author did not sign it and there were no other identifying marks of his in the work;[65] (ii) it was reproduced over two hundred times;[66] or (iii) if copyright requirements were not met in the visual aspect of the work.[67] Consider, for example, an original poem painted over a wall in a bar’s bathroom with plain ink. The poet could claim copyright protection over the written text of the poem, but it will be more difficult to claim copyright over the visual manifestation (the conjunction of a text on a wall), unless it is clear that the piece is an original visual artwork.

Under the general rules of copyright ownership, notwithstanding other legal concerns about the work’s production, the author of a graffiti work should hold the copyright over it.[68] The wall owner has no claim to the copyright because he did not make any authorial contribution to the graffiti artwork. Owning the physical embodiment of a work does not confer title to the copyright.[69] The tangible and intangible aspects of a work are independent from the physical embodiment, and so are the rights over each aspect. As I will discuss in more detail below, this independence explains why a graffiti artist can validly claim copyright over a piece, even if he did not have permission to affix work to another’s property.

III. HOW CAN WE PROTECT ILLEGAL EXPRESSION LIKE GRAFFITI UNDER COPYRIGHT?

A. Identifying Illegal Graffiti

For the analysis that follows, I will first identify instances where graffiti is illegal.

Graffiti is illegal when it is created without permission from the owner of the surface upon which the graffiti is placed.[70] The graffiti can be illegal even when the graffiti does not harm the property owner; a graffiti painting may actually increase the value of the painted property, for instance, when it is placed on a run-down building, or when a famous graffiti artist creates it.[71] Even in those cases, however, the graffiti would still be considered illegal. Although creating graffiti could provide artists with the opportunity to receive monetary rewards for adding value to another’s property,[72] this potential does not justify the illegal act.

If the owner consents to the artwork, no civil sanctions should occur because the act is covered under the owner’s property right (no matter how ugly or anti-aesthetic the graffiti is).[73] Property owners could even consent ex post facto to graffiti that was originally unauthorized. But whether such ex post consent would prevent criminal sanctions depends on the jurisdiction and on prosecutorial discretion.

Consent plays an important role in determining the legal status of a graffiti work. For example, Banksy, Keith Haring and Jean-Michel Basquiat have all created graffiti pieces with the consent of the owners of the physical property on which they are embodied. The government of Bristol, United Kingdom decided to keep one of Banksy’s controversial graffiti pieces after an open poll showed that city residents favored preservation of the work.[74] The New York City government accepted the preservation of one of Haring’s murals, entitled “Crack is Wack,” and even renamed a playground after it.[75] Owners of works by Banksy and Jean-Michel Basquiat have offered their originals for sale at considerable prices, revealing the high value they saw in the works.[76] In these cases, property owners have embraced and accepted graffiti works that were embodied on their property, and the artists were never accused of any crimes. This ex post acceptance could provide a reason not to prosecute.[77] This is especially true where a government consents to a graffiti work, as it would be surprising if the same government both criminally prosecuted and rewarded a graffiti artist for his mural.

Consent may even ratify the graffiti at 5 Pointz if the artists can show that the owner gave his implied consent.[78] Although the owner’s consent may not serve fully to deflect criminal charges under New York vandalism law, it might still help the artists fight any civil claims from the property owner.

Some have argued that graffiti should not be illegal because it is protected under the constitutional right to freedom of speech. This is the view of many graffiti supporters, who maintain that a “real solution lies in a candid application of the First Amendment,” and that “graffiti falls under the realm of symbolic speech and therefore, should be afforded First Amendment protection and be subject to the rights and limitations of freedom-of-speech precedents.”[79]

Internationally, political or meaningful graffiti could fall under freedom of speech protection when placed on public property.[80] In the Unites States, however, freedom of speech could protect graffiti in only a limited fashion, since regulations that are content-neutral, and which restrict time, place, and manner of expression, could validly restrict graffiti on public property. Content-neutral regulations are valid under first-amendment doctrine even when the public property in question could qualify as a public forum, such as a street or a park.

In Members of City Council v. Taxpayers for Vincent,[81] the U.S. Supreme Court ruled that an ordinance prohibiting the posting of signs on public property did not violate the plaintiff’s freedom of speech, relying on precedent that established the the city’s “interest in avoiding visual clutter . . . was sufficiently substantial to provide an acceptable justification for a content-neutral prohibition against the posting of signs on public property.”[82] Content-neutral regulations that are aimed at a wide range of behaviour and only have an “incidental” effect on speech are permitted.[83] Under freedom of speech jurisprudence, a content-neutral restriction of time, place, and manner is accepted if it is “narrowly tailored to serve a significant governmental interest”[84] and “leaves open ample alternative channels for communication.”[85]

For example, in Serra v. United States General Services Administration,[86] artist Richard Serra filed suit to prevent the removal of his Tilted Arc sculpture from public property, on the grounds that removal would violate his free expression rights.[87] Serra is not a graffiti artist, but this case is still illustrative due to its freedom-of-speech analysis. The United States government originally sanctioned and contracted the installation of Tilted Arc, although it later decided to remove the piece and change its location.[88] Serra maintained that Tilted Arc was site-specific, “designed for the Federal Plaza and artistically inseparable from its location,” and that removing the piece to another site would “destroy it,” depriving the work of meaning.[89] The court denied Serra’s complaint, stating that the removal of the sculpture was a permissible time, place and manner restriction.[90] This restriction conformed with the first-amendment requirements of “being narrowly tailored to serve a significant governmental interest”—namely, keeping the plaza clear of obstruction—and of there being “open ample alternative channels for communication of the information”–because there were other available means for Serra to express his artistic and political views that “did not entail obstructing the plaza”.[91]

Similar arguments could be made regarding why graffiti may be regulated under the First Amendment. Where graffiti is restricted on a content-neutral basis, it may be difficult to overturn the restriction using freedom of speech jurisprudence.

B. Illegality Is Not a Basis for Denying Copyright Protection

Now that we have identified when a graffiti work is copyrightable and when it is illegal, I will discuss why we should protect graffiti under copyright. Protecting graffiti under copyright feels wrong, intuitively. How could we let graffiti artists benefit from their crimes? Can we reward them with copyright on the one hand, while punishing them criminally on the other?

As a general legal principle, no one should benefit from his crimes. This principle is reflected in the Latin maxim ex turpi causa non oritur actio (“from a dishonorable cause, an action does not arise”). Courts have developed this principle as the doctrine of unclean hands: one cannot seek protection under the law if he has acted wrongly with respect to the matter of the complaint.[92] Does this mean that we cannot protect graffiti under copyright?

I do not believe so. We should still grant protection to illegal graffiti because the wrongdoing (fixing the work on another’s property without permission) is not relevant to the copyrightability of the work itself. Copyright should be neutral towards works created by illegal means. Indeed, copyright law imposes no negative consequences for illegal acts. Civil sanctions and criminal penalties are sufficient punishment for bad actors; copyright exclusion would be an unnecessary addition.[93]

Copyright is essentially a right in an intangible work, which is protected independent from its physical embodiment. Under copyright law, it is irrelevant if there are illegal elements in the tangible embodiment of a work (i.e., applying paint to a wall without the owner’s permission) or if the tangible embodiment of a work belongs to someone other than the author of the work. The rights (and wrongs) related to the work and to its tangible embodiment are independent, and one should not affect the other. Under the Copyright Act, “[o]wnership of a copyright, or of any of the exclusive rights under a copyright, is distinct from ownership of any material object in which the work is embodied. . . .”[94]

As long as there is a physical means by which the work is fixed, copyright should not take into account precisely which physical means is used to create or fix the work when deciding whether to grant or deny protection. To illustrate this point, there are several examples outside of graffiti where copyright protects right-infringing works.[95] Copyright still attaches to photographs taken that violate privacy rights: a paparazzi photographer has obtained copyright protection over a picture that he took of a celebrity while violating her rights to privacy,[96] and a camp counsellor obtained copyright over a picture of a minor, taken without her parent’s permission.[97] A journalist has received copyright protection over an article that reveals state secrets.[98] A student may also obtain copyright protection for a painting of a minor killing a policeman, even though the work could constitute an illegal threat under criminal law.[99]

Copyright protection is denied to a work only if the work itself violates copyright. If artist A’s work reproduces artist B’s old work without permission, then A’s work will not receive protection under copyright law. As the law establishes, “[P]rotection for a work employing preexisting material in which copyright subsists does not extend to any part of the work in which such material has been used unlawfully.”[100] Copyright law does not extend protection to works (or portions of works) that are created in violation of the exclusive rights of the same type that copyright law protects.

If U.S. copyright law included a general “illegality clause,” then copyright would not protect works that offend any other body of law. Such clauses are contained in other copyright and trademark laws around the world.[101] U.S. copyright law does not include such a provision.[102] Presumably, general illegality clauses would not be accepted in an intellectual property system like that of the United States, where copyright’s purpose is to promote, not to discourage, expression.

The unclean hands doctrine cannot be used to deny copyright protection to a work, unless the wrongful act alleged relates to the copyrightability of the work. The Fifth Circuit case Mitchell Brothers Film Group v. Cinema Adult Theater is illustrative of this point.[103]

Mitchell Bros. Film Group (“Mitchell”) owned the copyright over an adult motion picture that was exhibited, without permission, on the premises of the Cinema Adult Theater (“Cinema”). When Mitchell sued for copyright infringement, Cinema alleged that the work was not copyrightable because its content was obscene. Cinema further responded that Mitchell could not sue, based on the unclean hands doctrine. Cinema’s argument was that if Mitchell’s motion picture was obscene and therefore illegal, then Mitchell would lack the “clean hands” necessary to claim legal protection under copyright law.

The court, however, rejected Cinema’s argument and maintained Mitchell’s copyright. It explained “that there is not even a hint in the language of [the copyright act] that the obscene nature of a work renders it any less a copyrightable ‘writing’,” and interpreted this as a conscious decision by the legislature, designed to protect the broadest range of expressions.[104]

The court also ruled that the doctrine of unclean hands was not applicable, because it requires that the plaintiff’s unethical behavior be related to the subject matter of the lawsuit. In other words, Mitchell’s obscene behavior was not related to the subject matter of its claim for copyright infringement.

Specifically, the court stated: “The alleged wrongdoing of the plaintiff does not bar relief unless the defendant can show that he has been personally injured by the plaintiff’s conduct”[105] or that “the public injury . . . frustrate[s] the particular purposes of the copyright (or trademark or patent) statute.”[106] This suggests that the unclean hands doctrine might stand in a case like this, in the form of the copyright misuse doctrine.[107] The work would still be copyrightable, but the rights arising from copyright may not be enforceable against someone personally affected by the plaintiff’s conduct (such as, in graffiti, the owner of the wall), or where the particular purposes of copyright (“the promotion of originality”)[108] are frustrated in enforcing the rights over the work.[109]

Mitchell illustrates the reason it is consistent to reward graffiti artists with copyright on the one hand, while punishing them with criminal sanctions on the other: just as Mitchell was subject to obscenity laws, graffiti artists are subject to vandalism laws. However, their work can still be protected under copyright, because vandalism does not preclude copyright protection.[110] As one commentator stated, “The defendant’s unethical behaviour would be vandalism, an act for which the artist may be criminally prosecuted” but that “is not the subject matter of a [copyright] infringement case.”[111] The clean hands analysis in Mitchell differs from the analysis in a typical graffiti case, however, in that Mitchell’s illegality resided in the content of the work, while the illegality in graffiti usually resides in the fixation of the work.[112] This difference, nevertheless, should not affect the analogy; in graffiti, the method of fixation itself could be considered part of the subject matter of the work. The work’s fixation provides context that could be regarded as part of the message of the work and its content. In both cases, moreover, the bad behavior of the author does not frustrate copyright’s purpose of promoting originality through exclusive rights.[113]

C. Illegal Art Can Be Protected in an Incentive-Based Copyright System

To complete the analysis, I still need to answer a fundamental question: how can we protect illegal art in an incentive-based copyright system? In such a system, the goal of copyright is to promote the creation of works that advance knowledge, or, as expressed in the United States Constitution, to “promote the progress of Science and the Useful Arts.”[114] Copyright historically protects works such as books, maps and charts, which are valuable for society. However, graffiti is made through illegal means and does not seem like the kind of work that was originally contemplated when the copyright system was established. If we protect graffiti, are we supporting and promoting the wrong type of creations? Would we be promoting the commission of illegal acts?

In the face of the arguments supra, it has been claimed that a natural-rights based theory of copyright would be more suitable for protecting graffiti than an incentive-based one.[115]

However, there are reasons that illegal art such as graffiti should still be protected under an incentive-based copyright system. Protecting graffiti is not the promotion of illegal acts, but merely the promotion of creative expressions, without looking into the legality of those expressions. Copyright does not incentivize artists to engage in illegal creative acts because copyright is neutral towards the legality of creative acts, as long as copyright laws are not violated. Granting copyright protection to graffiti will simply promote more art, regardless of whether that art is legal or illegal.

Other bodies of law, such as criminal law, are charged with addressing the bad consequences of certain creative acts, but not copyright.[116] The copyright system may limit the undesirable or illegal consequences of enforcing a copyright by means of the copyright misuse doctrine; but this doctrine only stands to limit the enforceability of a copyright, not to determine the copyrightability of a work.[117]

This is how illegal graffiti works can promote the progress of science and useful arts. Because copyrightable works do not need to be useful, as patentable inventions do, the Constitution does not restrict copyright protection to legal works only.[118]

Furthermore, in an incentive-based copyright system it is not necessary that every work promote the progress of science, but instead, that the system as a whole promotes that desired end. The system does so by granting protection to all works, regardless of their legality. So concluded the court in Mitchell, maintaining that that the Copyright Clause of the U.S. Constitution was “best served by allowing all creative works (in a copyrightable format) to be accorded copyright protection regardless of subject matter or content.”[119] The court reasoned that:

“[B]y passing general laws to protect all works, Congress better fulfills its designated ends than it would by denying protection to all books the contents of which were open to real or imagined objection. . . . Judging by this standard, it is obvious that although Congress could require that each copyrighted work be shown to promote the useful arts (as it has with patents), it need not do so.”[120]

The Supreme Court has expressed a similar view in recent cases, stating that the Copyright Clause “empowers Congress to determine the intellectual property regimes that, overall, in that body’s judgment, will serve the ends of the Clause,” but not necessarily a system in which every element needs to serve the Clause’s goal.[121]

Furthermore, as a practical matter, it is somewhat counterintuitive to believe that protecting graffiti under copyright would cause more artists to paint illegally on walls. On the contrary, granting protection may result in their looking for more legal places to paint. Copyright protection could help artists build their reputations faster and switch to painting legally on walls more quickly. Legal acceptance of the art form would also encourage graffiti artists, otherwise excluded by society, to accept the possibility of creating their art by legal means and help them to view the law as an ally rather than an obstacle. Many professional graffiti artists start painting on walls legally as their careers grow and their work becomes more prestigious, probably because it is very hard to develop an artistic career through illegal graffiti only.[122] Keith Haring, Jean-Michel Basquiat, Brazilian artists Os Gemeos, and many others switched to legal art when they gained renown, and realized the commercial potential of their work.[123]

Of course, this does not mean that all graffiti artists would switch to legally painting if graffiti were copyrightable, since many artists choose to paint illegally in order to convey a rebellious message. However, copyright would give graffiti artists greater incentive to paint legally. Copyright is especially valuable for artists with growing reputations, as copyright protection could help them advance their careers.

Although obtaining copyright protection for graffiti artists’ work would benefit all graffiti artists, it would benefit some more than others. It seems that copyright would be less valuable, for example, to spray-paint graffiti artists who write messages intended solely for the graffiti community, or to artists who reject property rights in general and do not want to keep control over reproductions of their works.[124] Conversely, copyright would be more valuable to artists who develop art for the broader community or who seek to commercialize their work.[125] Even though some graffiti artists would be unmoved by copyright’s incentives, we should still grant copyright protection to graffiti. Under the United States copyright regime, authors receive copyright protection for their qualifying works, regardless what motivated the author to create; it is not necessary that every work serves the Copyright Clause’s goal, but rather that the overall system does.[126]

IV. CHALLENGES TO THE ENFORCEMENT OF ARTISTS’ RIGHTS IN THEIR GRAFFITI

As the examples and cases from Section I show, two important issues for graffiti artists are control over reproductions and preservation of works. We should keep in mind, however, that artists’ rights over their graffiti are limited. Indeed, an artist’s copyright extends only to the intangible aspect of the work, while rights over its physical embodiment remain with the property owner.[127]

As a consequence, the owner of a wall containing graffiti could sell the original art piece as part of the structure that contains it, or as a separate item.[128] For example, the owners of a wall that had a Banksy piece affixed to it were able to sell their wall for $200,000.[129] The owner of the wall may also destroy the painting or paint it over completely. The new owner of a building that contained one of Banksy’s works recently did so in the UK,[130] and the same could have been done in the United States.[131] Wall owners can also defend their property against third parties who try to destroy, paint over, or remove original works that have been fixed without permission, as happened recently with two Banksy murals, removed from a factory in Detroit and from a hotel in London.[132]

Banksy’s “Gorilla in a Pink Mask”, recently white-washed and restored[133]

However, there are limits to the rights that graffiti artists can assert in their work. Because graffiti artists do not own the material embodiments of their work, and since artists violate property owner rights by painting their possessions without authorization, artists cannot claim any rights over the tangible embodiments of their unauthorized works. While artists have rights over the intangible aspect of their graffiti, including the right to prevent unauthorized reproductions, they have do not have equivalent rights regarding the tangible embodiment of their work, such as the right to preserve it in its original condition, against the wishes of the owner. But they may still have certain rights to protect the tangible embodiment from actions of third parties.

A. Challenges in Enforcing Copyright

Graffiti artists should hold the copyright over their work.[134] Holding a copyright means that an artist can prevent third parties from reproducing their work in copies[135] (for example, by taking pictures); preparing derivative works based upon the copyrighted work[136] (by including images of the graffiti in other media, such as videos or posters); and distributing copies of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending[137] (by commercializing or distributing images or other products which feature the graffiti). CaliKilla, Tats Cru and Villa enforced these rights in court when others reproduced their graffiti without permission and sold clothing, videos and books that infringed their copyrights.[138]

The right to display the graffiti work publicly is a special case.[139] Despite being one of the rights granted by Copyright Law, the right to display could be considered a right in the tangible embodiment of a work, which should reasonably remain with the owner of the physical property in which the work is embodied.[140] This right to display also has a unique meaning in the context of graffiti because graffiti works are displayed publicly from their creation and being displayed publicly is part of their meaning.[141] Despite this fact, artists should not have the right to display their graffiti (or for that matter, not to display, after the graffiti is created) because they have no control over the tangible embodiment of their work, which belongs to someone else. Moreover, it should be noted that copyright actions may not prevail against a wall owner, who could allege a copyright misuse defense, showing that he has been personally injured by the plaintiff’s conduct.[142]

The fact that a work is displayed in a public setting does not prevent an artist from enforcing these rights.[143] This is not true, however, in jurisdictions that provide exceptions for photographing or filming works displayed permanently to the public. This exception, with variations, exists in the United Kingdom,[144] Germany,[145] and New Zealand,[146] among other territories,[147] but not in the United States.[148]

It has been pointed out that copyright protection for graffiti works could be problematic in practice because of the difficulty of establishing the authorship of unsigned works. Unsigned graffiti works may even qualify as “orphan works,” and reproducing them may entail significant infringement risk, at least until local laws address the issue of orphan works with proper legislation.[149]

However, concerns over unsigned works are exaggerated. It is often easy to find a work’s author by asking the local graffiti community.[150] A work’s style, traces and colors usually make it relatively easy to find the artist; this is especially true today, with online communities of local artists and digital image search tools.[151] Moreover, many works are identifiable by their style even when they are not signed, and multiple artists are reachable through their websites where they publish pictures of their works.[152]

B. Challenges Under the Visual Artists Rights Act

The Visual Artist Rights Act (“VARA”) is also relevant for our analysis.[153] VARA, a piece of legislation inspired by continental moral rights and preservation laws,[154] grants authors of works of visual art the following rights:

- Right of Authorship: Authors have a “right (1)(A) to claim authorship over their works; (1)(B) to prevent the use of his or her name as the author of any work of visual art which he or she did not create; and (2) to prevent the use of his or her name as the author of the work of visual art in the event of a distortion, mutilation or other modification of the work which would be prejudicial to his or her honor or reputation;”[155]

- Right of Integrity: Authors are entitled to prevent any intentional distortion, mutilation or other modification of that work which would be prejudicial to his or her honor or reputation. This excludes, however, modifications that are a result of the passage of time or the inherent nature of the materials.[156]

- Right Against Destruction: Authors have a right to prevent any intentional or grossly negligent destruction of a work of recognized stature.[157]

The rights of integrity and against destruction do not protect the work from modifications that are a result of conservation, unless they are caused by gross negligence, or that result from the public presentation of the work, including lighting and placement.[158] VARA rights are preservationist in nature, since they only apply to the original works of art and not to reproductions.[159]

Interestingly, there is only one court decision on the protection of illegal art under VARA to date. In English v. BFC & R. East 11th Street LLC,[160] the district court ruled that illegal murals could not be protected under VARA.[161] In this case, a group of six artists filed suit to prevent the removal of an art display in a community garden, consisting of several sculptures and murals, much of which had been set up without permission on New York City property.[162]

The artists based their claims on their rights to integrity and against destruction under VARA.[163] The copyrightability of the work (the art display as a whole) was not discussed in the case.

The district court dismissed the complaint on the grounds that VARA “does not apply to artwork that is illegally placed on the property of others, without their consent, when such artwork cannot be removed from the site in question.”[164] The court considered the special circumstances in which the case arose,[165] and reasoned that the illegality of the work, “[Was] a compelling argument [for preventing VARA protection], for otherwise parties could effectively freeze development of vacant lots by placing artwork there without permission. Such a construction of the statute would be constitutionally troubling, would defy rationality and cannot be what Congress intended in passing VARA.”[166] The court also rejected the plaintiffs’ arguments, based on the doctrine of estoppel, that the passage of time meant that the government accepted the works. According to the court, such a doctrine could not apply against the government’s inactivity.[167]

The district judge did not expand on her reasoning about the potential problems with applying VARA to unauthorized art, but we may find arguments to support this finding in our analysis from Section III. The case’s finding is consistent with the application of the unclean hands doctrine. Under this doctrine, the artists could not invoke any rights over the tangible aspect of their work, including VARA rights that preserve the physical embodiment of the work, because the artists violated the city’s property rights over the same tangible object. In this case, the artists’ wrongdoings were relevant to preventing the application of VARA rights. The artists could not have gained rights over the tangible aspect of their works because the works were affixed onto another’s property without permission. Moreover, it would be unworkable to allow the author of an unauthorized work to claim the right to protect it, as this would prevent property owners from modifying their own possessions.

In line with English, therefore, the owner of a wall can remove or destroy artwork affixed to that wall without being subject to the prior notification requirement of § 113(d)(2).[168] This is an interesting inference, considering that an important part of graffiti’s artistic meaning is its location on a public site.[169] Removing a graffiti piece from its site may be contrary to the creator’s artistic intent for the work,[170] but this artistic intent is not protected by VARA: (i) VARA cannot be invoked by an artist to protect the tangible aspect of a work, including its physical location, against modification by the owner of the property in which the work is embodied or situated, and (ii) in any event, VARA does not protect the public presentation and placement of a work.[171]

Nevertheless, English should not be understood as excluding graffiti artists from having any claims under copyright law or under VARA. Under the reading proposed in this article, it is only the unclean hands doctrine and the property owner’s rights that prevent graffiti artists from asserting rights under copyright or VARA. Therefore, English should not be read as preventing simple copyright claims over unauthorized works.[172] The court’s ruling on VARA’s scope does not affect copyright protection against unauthorized reproductions of works. As the Copyright Act expressly provides, “ownership of [VARA] rights with respect to a work of visual art is distinct from ownership of any copy of that work, or of a copyright or any exclusive right under a copyright in that work.”[173] The copyright holder can enforce his exclusive rights even if VARA rights are not enforceable.

Moreover, despite the ruling in English, artists may still have two types of claims under VARA:

1. Claims of attribution over the work

Artists could still enforce their VARA right of attribution over the original work. Since this right is not directly linked to the tangible aspect of the work, it is not pre-empted by an artist’s illegal acts.

Because graffiti artists do not have rights over the physical embodiment of their work, they lack the right to affix their name to the physical painting on the wall; but they should still be able to claim attribution in other ways, for instance, by preventing others from claiming that they produced the work.

Artists could still enforce a claim of attribution against any offenders, including the owner of the wall in some cases. Artists may not prevent wall-owners from erasing their signature on the wall, but they can still prevent owners from claiming that they authored the work. Because the owner made no authorial contribution to the work, they cannot claim authorship.

Some have argued that graffiti artists would be unlikely to claim attribution, as doing so might draw unwanted attention from police and ultimately lead to criminal liability.[174] This may not be the case, however, because the life of VARA rights and the statute of limitations for VARA infringements may be longer than the statute of limitations for graffiti penalties.[175] Therefore, an artist might claim attribution without fearing prosecution.

2. Claims against third parties to protect the integrity of the work and to prevent destruction of the work

Graffiti artists could still enforce their VARA rights against third parties who have no rights in the physical property.[176] By painting illegally on the city’s property, the plaintiffs in English did not forfeit their VARA rights. Instead, they simply could not enforce them against the city (the victim of their illegal paintings) due to the unclean hands doctrine. However, the doctrine of unclean hands would not apply towards unaffected third parties, because the artists did nothing wrong towards them. Thus, VARA rights should remain fully applicable against third parties.

In other words, although VARA rights to the integrity of a work and against destruction would not be enforceable against the owner of the property, they could be enforced against everyone else, such as bystanders who paint over a work or destroy it, including José Carlos Martinat.[177]

However, in the context of graffiti, it is worth noting some factors that may prevent application of the VARA rights of integrity and against destruction to third parties.

The right to integrity is shaped by the graffiti community’s codes of honor and reputation. Artists generally know that their work might be ephemeral and that someone else could paint the wall with other art or bring the wall back to its original state.[178] Some artistic modifications of the work are foreseen and expected by graffiti artists, and as such, might not implicate the artist’s right of integrity.[179]

The rules of the graffiti community can help us evaluate whether a modification affects the honor and reputation of the artist or not. For example, if an artist responds to overlapping graffiti on his work with a new graffiti (she does not just restore the original work, but she creates a new work in response to the intervention), then its reasonable to think that there is an artistic dialogue and that the modification of the work does not “prejudice the author’s honor or reputation,” because modifications are understood to be an element of graffiti art.[180]

The VARA right against destruction of a work, may be difficult for graffiti artists to use, as it only applies to works of “recognized stature.”[181] It may be difficult for many graffiti works to qualify for this status. Courts have interpreted the recognized stature requirement as a two-tiered standard, which demands: “(1) that the visual art in question has ‘stature’ i.e. is viewed as meritorious, and (2) that this stature is ‘recognized’ by art experts, other members of the artistic community, or by some cross-section of society.”[182] In graffiti art, this requirement was met in one case where the work was “a community work that exhibits the concerns of the community.”[183] The accepted work was a mural containing anti-drug, anti-alcohol and anti-smoking messages.[184] However, it is uncertain that the requirement would be met with regular street art that has no communitarian educational message in particular, or that was created by less than well-known artists. Some pieces by well-known graffiti artists would probably fulfill the recognized stature requirement without any communitarian or educational message because art experts, other members of the artistic community, and society as a whole recognize their stature.[185] However, works by less-famous artists may have more difficulty meeting the recognized stature standard.[186] This uncertainty is of real concern to artists who must embark on extensive legal research before litigation.[187]

CONCLUSION

In this article, I have argued that graffiti can and should be protected under copyright law. When an unauthorized graffiti work complies with the minimum requirements for copyright protection it should be protected under copyright law despite its illegality. This is because copyright should be neutral towards works created by illegal means. Copyright assigns rights over the intangible aspects of a work only; it does not exclude works that have been tangibly fixed in an illegal manner. This is true even under an incentive-based copyright system such as the one established by the United States Copyright Act. Illegal graffiti works are creative acts that comply with copyright’s goal of “promoting the Progress of Science and useful Arts.”[188] Protecting graffiti, moreover, may have the consequence of incentivizing graffiti artists to create more legal works.

I have also explored the challenges that artists face when enforcing rights over their graffiti, both under the Copyright Act and VARA. Graffiti has a unique position in relation to copyright’s nature and scope.

While “many people are too quick to view street art through the lens of vandalism,”[189] copyright law cannot simply dismiss graffiti works. Graffiti works must be treated on equal footing with other artistic works for the purposes of copyright law, without being discriminated against due to their illegality. Copyright protection is valuable to all graffiti artists since it gives them the ability to assert artistic control over how their works are reproduced and shared. It may be true that copyright is for losers, as Banksy has expressed.[190] But even if that is the case, graffiti artists should still have the option to be losers.

By Jonas Hein*

INTRODUCTION

“What hasn’t been said about patent hold-up in standard setting organizations (SSO)?” the discerning reader might ask. Since its beginnings[1] the issue has spurred an immense amount of research, has found its way into numerous litigations, and yet still appears to puzzle courts, economists and lawyers.[2] Antitrust agencies all over the world are discussing the problem. In the US, the Department of Justice (DOJ) and the Federal Trade Commission (FTC) are focusing their efforts on reviewing the Intellectual Property Rights (IPR) policies of SSOs. Recently, both Renata Hesse,[3] Deputy Assistant Attorney General at the DOJ, and Joseph F. Wayland,[4] then Assistant Attorney General of the FTC, have introduced policy suggestions aimed at reducing the likelihood of hold-up in the standardization process.[5] This article focuses on three of these suggestions. It argues that while Hesse and Wayland address the crucial issues of standard-essential patent hold-up, they remain precariously vague on pivotal points and overlook important repercussions of their suggestions. Presumably this will leave SSOs in a disturbing haze of uncertainty.

Both brevity and my intention to focus on a specific issue prompt me to establish some preliminary assumptions. I assume that patent hold-up does exist,[6] that it results in significant deadweight loss,[7] and that it reduces incentives of market players to invest in standard-specific applications, which are crucial to consumer welfare.[8] Therefore I assume that hold-up can result in inefficient accumulation of market power.

Before analyzing the individual suggestions in detail and formulating a conclusion, expedience suggests providing a brief overview of patent hold-up and the standard setting process in SSOs.

I. PATENT HOLD-UP, STANDARD-ESSENTIAL PATENTS, AND STANDARD SETTING ORGANIZATIONS

In Law and Economics the hold-up problem is seen as a form of duress.[9] A party to a contract uses the investment costs its counterpart incurred in reliance on reciprocal compliance as leverage to extract a return higher than the value of its contractual performance. To understand this, consider the following:

Example 1: A has won a machine with which he intends to produce widgets. As it happens, no worker skilled in the use and maintenance of widget machines can be found. Therefore, A agrees to the following: B will undergo widget-machine training that costs $1200 paid by A. Upon completion of this training, B will operate the machine for its entire 12-month durability at a monthly salary of $100. After B has successfully completed the training, he insists on a monthly salary of $199.91 instead.[10]

Here, B is holding up A by expropriating the return of his investment that cannot be recovered (so-called sunk costs).[11] Economists and intuition suggest that, once incurred, sunk costs should not influence a firm’s subsequent economic decisions.[12] A should ignore the costs of the training when comparing B’s offer to alternative strategies. He could either pay B a total wage of $2399 or he could pursue an alternative strategy by paying for training and wage of C, which, absent hold-up, would total $2400. Clearly, A has no rational choice but to accept the offer. Assume that the value of widget operation is the amount A and B agreed upon in the initial agreement, i.e. $100. Then B has extracted a wage that exceeds the market value of his labor by an amount slightly less than the cost of A’s alternative strategy.

The specific hold-up problem this paper addresses pertains to the standardization process in SSOs. Standards can be defined as “any set of technical specifications that either provides or is intended to provide a common design for a product or process.”[13] They are especially important for modern, high technology products. For instance, they ensure interoperability and make possible the use of networks, such as mobile telephone networks or the Internet.[14] The pro-competitive benefits of standards are unanimously accepted.[15] Notwithstanding, standardization carries some potentially anticompetitive baggage because it reduces competition to provide consumers with more choice.[16]

Standardization processes usually take place in private standard setting organizations, in which competing firms participate as members in a standard’s adoption.[17] For a number of reasons, the existence of SSOs is a conspicuous matter from the point of view of antitrust law.[18] First, they provide a communication forum amongst competitors that arguably facilitates collusion.[19] Furthermore, standardization processes can increase prices for consumers for the sake of other motives, e.g. social utility. For example, the members might agree to standardize certain minimum quality thresholds or eligibility requirements, sparing the consumer low quality goods but depriving them of the choice.[20] Finally, members might also be tempted to impose standards where there is no immediate need for them. This can decrease consumer choice and restrict competition for best designs.[21] Nonetheless, the general desirability of standardization has led to widespread acceptance of SSOs.[22] All that should be noted here is that the legality of the existence of SSOs is not obvious from the perspective of traditional antitrust doctrine. As we will see, this has implications for the limits of SSO policies and bylaws.

Now, to understand the type of hold-up relevant to this paper, consider the following:

Example 2: Firms A, B, and C are members of the D-SSO and are seeking to set a standard relevant to mobile phones. Once adopted, B and C, who are manufacturers of mobile phones, invest considerably in production sites, equipment and design of their new cell phones based on the standard. After a while, A discloses that it in fact owns a patent essential[23] to and incorporated by the standard. What will A do?

Quite possibly, A will now demand royalty fees from B and C. This would not be of significance if not for the threat of A obtaining an injunction against the manufacture or sale of the cell phones by B and C. According to the standard view in the literature on patent hold-up, the threat of injunctive relief provides the patent holder with leverage to extract a royalty rate that exceeds the value of the patents’ contribution to the end product.[24] In other words, as in example 1 above, A can potentially extract a royalty rate from both B and C that is slightly below their respective sunk investment costs. On this view, the peculiarities of the standardization process make it susceptible to the misuse of patents and allow for the amplification of the effect of hold-up behavior.

SSOs have reacted to this problem by implementing intellectual property rights (IPR) policies that structure the standardization process. These policies include obligations on the members that aim to protect manufacturers and assure uninhibited standard adoption and implementation. Yet, SSOs are confronted with a governance dilemma: the more extensive and effective the policy, the less attractive membership becomes and the lower the willingness of members to provide their efforts and technology to the adoption of a standard.[25] On the other hand, a lax IPR policy can raise serious anticompetitive concerns attracting the attention of antitrust agencies.[26] It is of no surprise then, that SSO IPR policies and their treatment of standard-essential patent hold-up have become central issues for antitrust law.

II. THE POLICY SUGGESTIONS

This section will focus on three of the policy suggestions for SSOs that have been made by both Joseph Wayland and Renata Hesse. It should be mentioned that Wayland and Hesse proposed these suggestions in speeches at international conferences, and thus they carry no binding legal weight. However, because FTC and DOJ enforcement decisions are largely discretionary, market participants will most definitely monitor any public comments made by antitrust officials. The suggestions will therefore likely have an immediate effect on the conduct of SSOs.

The following three recommendations will form the basis of my analysis: (I) adopting disclosure requirements, (II) implementing rules concerning the permissibility of cross-licenses, and (III) limiting injunctive relief for patents subject to reasonable and non-discriminatory (RAND) commitments.[27] The analysis will be structured in three steps. After presenting the specific suggestion and explaining its context, the article will identify the problem at its core by skimming relevant literature and case law. Finally, the article will analyze whether the suggestion appropriately addresses the contentious issues. This framework is meant to elucidate the strengths and weaknesses of each suggestion and will lend support for the article’s conclusion.

A. DISCLOSURE

1. THE POLICY SUGGESTION

With their first suggestion, Hesse and Wayland propose the adoption of disclosure rules for standardization processes. SSO members are to identify “in advance, if any proposed technology path involves IP which the patent holder has not agreed to license on RAND terms.”[28] Disclosure requirements are not at all new and can vary greatly in their scope and determinateness.[29] Essentially, they require some sort of publication of patents possibly tangential to the technology area of the standard.

2. THE PROBLEM

Patent hold-up is more likely to occur where SSO members are imperfectly informed about the existence of patents the adopted standard will be encumbered by. Yet, the patent application process does little to mitigate the issue.

Patent applications are kept secret for 18 months after their filing date.[30] This will often allow patent holders to delay disclosure until after the standard is set. It leaves the other SSO members behind a “veil of ignorance”[31] which is only lifted after the “fundamental transformation” of the market has taken place.[32] In other words, while different technologies competed for inclusion before standardization, now competition for substitution is restricted as lock-in[33] and network effects[34] make redesign costly and unprofitable.[35]

Moreover, patent law may even incentivize opportunism. A particularly egregious example of this is the divisional application procedure.[36] A divisional patent application is filed after a “parent” application has been filed and is pending. Such applications can “carve out” part of the subject matter of parent applications that encompass more than one invention. The result is, assuming the applications are successful, the grant of two (or more) individual patents by the United States Patent and Trademark Office (USPTO).[37] Alas, patent law considers the effective filing date of this type of subsequent application to be that of the parent application.[38] To understand how a divisional application can be misused in the standardization process, consider the following:

Example 3[39]: Firm B is a member of the D-SSO and is participating in a standardization process. It files an overly broad patent application with the USPTO that pertains to the technology potentially covered by the standard. By including more than one invention in the application, B ensures that it lacks the “unity of invention” condition to patentability.[40] The USPTO will now demand the “application to be restricted to one of the inventions.”[41] Because of its participation in the continuing standardization process, B knows which technology the standard covers. Therefore, B files a “divisional application” that “carves out” this technology from the parent application as an individual invention. Once the patent is granted, B sues its competitors for infringement.[42]

Strikingly, the Federal Circuit has approved the practice of amending a patent application with the intention “to cover a competitor’s product the applicant’s attorney has learned about during the prosecution of a patent application.”[43] Granted, “the new claims must find adequate support in the original application.”[44] Nonetheless, a firm participating in a standard setting process can secretly tailor an original application to encompass technologies it now knows are essential to the standard. Subsequently, it can hold-up competitors locked-in by sunk investments by threatening injunctions in order to procure unreasonable royalty payments.[45]

Such conduct has also been the subject of antitrust litigation. In Rambus Inc. v. FTC[46] the court was confronted with a monopolization claim under § 2 of the Sherman Act brought by the FTC against Rambus, a developer of computer memory technologies. The FTC accused Rambus of using its membership in JEDEC, an SSO, to gain “information about the pending standard, and then amend[ing] its patent application to ensure that subsequently-issued patents would cover the ultimate standard.”[47] The court disagreed with the FTC on the monopolization claim. It had not been shown whether absent the alleged deception, JEDEC would either have used a “nonproprietary standard” or extracted a RAND commitment from Rambus.[48] If the FTC could not prove the former, it had only proven deceptive behavior, which in itself did not constitute an antitrust violation.[49] The case shows the vice and virtues of disclosure rules. First, JEDEC had adopted an IPR policy with a disclosure requirement. However, it proved insufficient in the case of divisional patents. In a case brought by one of Rambus’ competitors, the court found the requirement far too imprecise to create an obligation to disclose future plans to “modify applications.”[50] Arguably, had JEDEC’s disclosure requirement been more precise, Rambus would more likely have felt obligated to disclose its pending divisional patent applications. On the other hand, the case also shows that deception itself is not sufficient for a monopolization claim. The court required a showing of a harm “to the competitive process” precisely because of the deception.[51] In light of this, it is conceivable that the mere existence of a precise disclosure rule in a SSO’s IPR policy would not subject all forms of deceptive behavior to antitrust liability.

Thus, a proposal to establish disclosure requirements is not surprising. It is consistent with the agencies’ earlier remarks[52] and has been mentioned by scholars as a tool to mitigate hold-up.[53] Rules for disclosure aim to enable participants to weigh the costs of available standardization paths in order to find the most cost-efficient outcome available. In this way they prevent the inefficient acquisition of market power.[54] The question of concern here is: does the policy suggestion address the contentious issues?

3. ANALYSIS

The policy suggestion is, perhaps intentionally, unclear on which mechanisms would be most helpful in confronting patent hold-up. This section will focus on three possible mechanisms.[55]

i. PURE DISCLOSURE RULE

A simple disclosure rule requires SSO members to inform other members of patents relevant to a possible technology path that are not yet subject to a RAND licensing obligation.[56] Such a rule would not however require a member to make specific RAND licensing commitments ex ante. The goal is generally to “minimize the possibility of inadvertent infringement of the IPR.”[57] However, while a pure disclosure rule certainly is helpful in some cases, it falls short of effectively countervailing patent hold-up.[58] Most SSOs have adopted disclosure rules in their patent policies.[59] Yet, as Rambus shows, IPR policies with pure disclosure requirements are often not sufficient to prevent hold-up.

Therefore, it is unclear why Wayland and Hesse are stating the obvious, rather than addressing the more pressing questions. Are SSOs concerned about what constraints antitrust law places on the extent and permissibility of further-reaching ex ante disclosure mechanisms?[60] For example, could SSOs require disclosure of maximum royalty rates and most restrictive licensing terms?[61] Is a rule that establishes joint negotiation on licensing terms by SSO members or the SSO itself permissible?[62] The DOJ and FTC have principally accepted both joint negotiation and most restrictive licensing terms and have signaled their intent to apply mere rule of reason scrutiny in the past.[63] Surprisingly however, the suggestions make no mention of them. This silence is striking as it aggravates existing legal uncertainty. Notwithstanding, it seems necessary to assess whether these rules could potentially alleviate the hold-up problem.

ii. JOINT NEGOTIATION RULES

A joint negotiation procedure would enable SSO members to collectively negotiate the licensing terms of a patented technology during the standardization process. Such a rule would necessarily accompany an ex ante disclosure requirement as described above. Critics of joint negotiation rules focus on two efficiency concerns: allocative[64] and dynamic efficiency.[65]

It is argued that joint negotiation rules could lead to a loss in allocative efficiency resulting from monopsony power[66] on behalf of the licensees.[67] Standard monopsonist models assume a static deadweight loss as the result of a decrease in demand below competitive levels.[68] Yet, Farrell et al. claim that such concerns are not relevant to IP licenses as supply curves in these markets are flat.[69] This is also true for the marginal cost curve of intellectual property, which equals zero.[70] This is because the use of an additional unit is cost-free. It follows that the price of a license is not a function of the buyers’ demand. Therefore, if the use of monopsony power by the jointly acting buyers leads to a reduction of the royalty rate of the patent, the amount of supply will not be affected. The effect of monopsony power is unnoticeable and the relation between demand and supply is much like in a competitive market.[71] The purchase of an additional unit does not affect the price of those already purchased. For antitrust purposes this is important because even if the royalty fee is set at a sub-competitive level on account of monopsony power, this merely leads to “redistribution of surplus from the sellers to buyers.”[72] However, a resource allocation problem, i.e. a decrease in total supply, does not ensue. If this is the case, rule of reason applies and SSOs can provide pro-competitive justifications by proving dynamic efficiencies resulting from joint conduct.[73] Specifically in the case of ex ante joint negotiations, SSOs could allege that they simply reschedule licensing negotiations to occur before lock-in and network effects take hold. In doing so, they mitigate the market power of patent holders and thereby allow for more vigorous price competition before standard adoption.[74] This could decrease royalty rates and lower prices of end products.

But in the longer term, monopsony could lead to unsustainably low royalty rates thereby ultimately deterring future innovation.[75] Gregory Sidak claims joint negotiation results in dynamic inefficiencies as soon as it pressures royalty rates to equal marginal cost.[76] Only rates that enable licensors to recoup costs sunk on successful and unsuccessful inventions provide a reasonable incentive for firms to engage in high cost innovation.[77] The defendants in Sony Electronics, Inc. v. Soundview Technologies, Inc. challenged this view.[78] Sony argued that it was in the interest of the buyers of technology to uphold incentives for the innovation their business model depended on. The Court rejected the argument: “[B]usiness conduct is not always rational, and economic actors do not always have access to perfect information, the utopian ideal of economics.”[79]

In my view, Sidak raises an important point about the source of patent hold-up. Patent law contains an incentive scheme, which grants an exclusive right to the licensor and allows him to charge whatever rate he can profitably obtain on the market.[80] Arguably, this is a structural flaw of patent law itself. But one should be mindful of modifying normal competitive market mechanisms to alter unreasonable, yet legislatively intended results of patent law. Policies enabling SSO members to collectively negotiate license terms come close to allowing oligopsonist collusion. Such market alterations directly impact the “implicit incentive/access tradeoff” scheme of patent law.[81] The resulting repercussions for dynamic efficiency are unclear. While there are pro-competitive benefits to joint negotiation rules, it seems preferable to support SSO policies that do not interfere with the market’s price system. Beyond that, a reform of patent law would more likely be able to avoid inconsistencies resulting from the prevention of the hold-up phenomenon.

iii. MOST RESTRICTIVE LICENSING TERMS DISCLOSURE RULES

These rules impose an obligation on the SSO’s members to make binding commitments ex ante as to the maximum royalty fee and other conditions they will use in licensing contracts.[82] In contrast to joint negotiation rules, they do not necessarily presuppose ex ante disclosure, although such conjunction might be advisable.

There are a number of arguments for and against these rules. Obviously, such requirements could lessen uncertainty SSO members face when calculating the future cost of a specific standardization path.[83] Information on maximum rates and conditions could therefore improve the economic quality of standard adoption decisions. Accordingly, such terms could alleviate the probability of welfare losses on account of imperfect information.[84] Also, they could competitively restrain rates patent holders demand ex ante in order to increase the chances for their patent to be included in the standard.[85] Essentially, price competition could ensue before firms are locked into the standard.

On the other hand, anticompetitive effects are conceivable.[86] It is argued that information on maximum licensing terms could allow SSO members to pressure patent holders into lowering rates, raising similar dynamic efficiency concerns as discussed above.[87] Moreover, ex ante RAND commitments are often vague and regularly entail costly disputes on their interpretation, specifically when licensors make sham proposals in order to formally fulfill their disclosure commitments.[88] These anticompetitive effects need to be addressed in the antitrust analysis, but the pro-competitive justifications available to SSOs are considerable.

Nonetheless, if phrased correctly it seems that most restrictive licensing obligations provide necessary information that inform beneficial calculations and market-based results.

iv. CONCLUSION

Presumably, the policy suggestion will leave many SSOs disappointed. The agencies do not address the most pressing issues. What is more, the policy suggestion encompasses “any proposed technology path.”[89] Such a wording would leave disclosure obligations dangerously vague and broad. Two consequences should be noted here. First, transaction costs might rise to prohibitively high levels if firms, in order to comply with their obligations, were pressed to provide vast amounts of information. SSO members would need considerable time to review all submitted documents, leading to more lengthy standardization processes. It is also possible that members would be incentivized to be excessively compliant by disclosing a large amount of their patents and thereby further complicating the process. On the other hand, most restrictive licensing restrictions could lessen these incentives. If a firm has made ex ante licensing commitments, over-disclosure would create a risk of granting blanket licenses to all disclosed patents.[90] This might restrict the scope of disclosure to more manageable levels. Thus, a disclosure obligation in conjunction with a most restrictive licensing commitment could be an acceptable IPR policy for SSOs.

At any rate, the silence concerning the permissibility of joint negotiations and most restrictive licensing terms revives uncertainty about their antitrust implications. Wayland and Hesse have chosen to make obvious as well as indeterminate statements. Conceivably, this may be detrimental to the standard setting process as SSOs balance the risk of hold-up with the chances of antitrust litigation. These uncertainties might also leave firms reassessing the benefit of further participation in SSOs.[91]

B. Cross-Licenses and Royalty Stacking

1. The Policy Suggestion

Wayland proposes to give licensees “the option to license RAND encumbered patents declared essential to a standard on a cash-only basis and allowing voluntary cross-licensing.”[92] Thus, the suggestion proposes a choice rule. Cross-licensing agreements involve two firms that license a number of their respective patents to each other.[93] Such cross-licenses will often not be a viable strategy for small firms or manufacturers with no particular patent portfolio. Cash-only licenses would seem more appropriate for such firms.

2. The Problem

In order to understand the problem this suggestion addresses, a brief analysis of the vices and virtues of cross-licensing is necessary. The practice of cross-licensing is believed to be a solution to the problem of “royalty stacking.”[94] This phenomenon occurs when a downstream firm[95] produces a product involving a standard, which carries a large number of patents, each owned by different patent holders, i.e. complementary patents. Then, the downstream firm is faced with a “stack” of royalties that it must pay in order to mitigate the risk of infringement litigation.[96] Consider the following:

Example 4: Firm A manufacturers mobile phones. Its newest creation, the Bphone, incorporates many different technologies: a camera, Internet access and wireless data transfer, a touchscreen, sleek casing and so on. All of these technologies incorporate patents owned by various firms. To A, this stack of patents is composed of strict complements, i.e. it needs to acquire licenses for all of them in order to manufacturer the Bphone without risking infringement suits. After its negotiation with all of the patent holders, A realizes that the cumulative royalty payments are so high that an economical production of the Bphone is no longer possible. What has happened? [97]

Economists call the underlying problem here the “Cournot complements” effect. Each patent holder can disregard negative externalities[98] that the royalty rate it charges imposes on the cumulative royalty rate paid by the manufacturer.[99] According to the “Cournot complements” effect, this results in an increase of marginal cost, leading the downstream firm to increase prices and reduce output below a level that would have been set by a vertically integrated monopolist.[100] In effect, these circumstances describe the “individual hold-up problem”: the effects of hold-up are exacerbated the more patents the standard encumbers.[101]

Cross-licenses are a market-driven mechanism that can reduce the effects of royalty stacking.[102] However, incentives to cross-license are only prevalent in cases in which various vertically integrated firms hold the patents encumbered by the standard. Such firms can obtain profits with downstream sales, rather than royalties.[103] Hence, it is rational to exchange licenses in order to avoid potential costs of infringement suits.

Yet, cross-licensing schemes can also have significant anticompetitive effects. The combined effect of patent hold-up and a strategy of market foreclosure by raising rivals’ costs may have considerable impact on the downstream market.[104] Consider the case where a non-integrated downstream firm faces vertically integrated firms that have all entered into cross-licensing agreements. A single integrated firm can raise the costs of its downstream rivals by simply raising its royalty rates.[105] Once the firm can undercut its rival’s end-product price, market foreclosure ensues. In other words “by restricting the supply available to rivals of a key input without similarly restricting the amount available to satisfy the purchaser’s demand,” the vertically integrated firm can attract consumers to switch to its product.[106] The result is an expansion of its downstream market share to the detriment of its competitors.[107]

The situation here is slightly different from the classic models of raising rivals’ costs. These rely on either direct foreclosure by means of control of a bottleneck or a significant portion of market supply or by inducing vertical restraints through collusion on the upstream market.[108] In the case suggested here, the integrated firm’s patent need not represent a major part of the standard technology for the anticompetitive effect to arise. This is because an injunction based solely on this patent would prohibit the production of the entire product.[109] Also, upstream collusion is unnecessary as each patent is in itself essential to the standard. Finally, specifying RAND terms is extremely difficult for the downstream firm when all vertically integrated firms have entered into cross-licensing agreements, essentially excluding any reasonable comparative benchmark.

3. Analysis

By giving licensees the option to demand cash-only licenses and by permitting cross-licenses, the agencies attempt to strike a balance between the pro-competitive and anti-competitive implications of cross-licenses. An SSO policy defining an express claim for cash-only licenses could help downstream firms that are not party to cross-licensing agreements.

However, considerable difficulties remain unresolved. A claim for a cash-only license in no way obviates the exercise of hold-up power by upstream firms. On the contrary, cross-license agreements can obscure the incremental contribution of the patent to the standard.[110] Moreover, upstream firms could quickly agree to cross-license in order to inhibit royalty rate negotiations amongst direct competitors. In such a case, a downstream firm would have little to gain by claims for cash-only licenses as it could hardly prove that the fees demanded exceeded RAND requirements. Moreover, cash-only licenses do not prevent the use of raising rivals’ costs strategies by vertically integrated firms in order to cut off downstream competitors from significant market shares. Thus, the implementation of this policy suggestion might result in vertical restraints potentially foreclosing non-integrated downstream firms from the market.

C. Limitation of Exclusion through Injunctions

1. The Policy Suggestion

As was shown in Example 2, injunctions are a central tool of patent hold-up strategies. In line with this, Hesse and Wayland suggest SSOs “[p]lace some limitations on the right of the patent holder who has made a F/RAND licensing commitment who seeks to exclude a willing and able licensee from the market through an injunction.”[111]

2. The Problem

In recent years a great deal has been said about the merits of and conditions for the issuance of injunctions following a finding of patent infringement by courts.[112] The policy suggestion points to the specific situation where a firm has committed to RAND terms in a standardization process. The literature on the relationship of hold-up and injunctions is too abundant to be treated in its entirety. Rather, this section will try to outline the general problem and focus on the two main conflicting positions. Importantly, different standards apply to federal courts and the International Trade Commission (ITC). The discussion is structured accordingly.

i. Injunctions by Federal Courts

Generally, there are two key remedies in patent litigation. First, a court can order an injunction to cease any further conduct in violation of the patent.[113] This remedial measure is essential to upholding the exclusive nature of the patent.[114] However, a court can also issue damages calculated by lost profits of the patentee or, in absence thereof, a “reasonable royalty.”[115] The requirements for ordering injunctions have recently been reviewed. Prior to the Supreme Court’s eBay decision, courts applied Federal Circuit precedent under which a finding of patent infringement triggered an automatic right to injunctive relief.[116] The Supreme Court reversed and pointed to the wording of 35 U.S.C. § 283. It prompted the court below to apply “traditional equitable considerations”.[117] Instead of a per se rule for the granting of injunctive relief, a four-factor test is to be applied by the courts. A plaintiff must now demonstrate “(1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, 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; and (4) that the public interest would not be disserved by a permanent injunction.”[118] Yet, the impact of eBay seems to have been humble. In 2007 Iancu & Nichols argued that “the vast majority of cases continue the traditional pattern of granting permanent injunctions to patentees who have successfully proven infringement.”[119] Other studies have reached similar conclusions.[120] Nonetheless, in some cases, perhaps more than before, injunctions were denied and compulsory licenses granted.

As mentioned, injunctions are crucial to hold-up theory. Some argue that even the threat of an injunction can exacerbate the hold-up problem.Shapiro and Lemley claim that by threatening an injunction, the patent owner is likely to achieve a royalty fee that exceeds the marginal contribution of his patent to the total value of the final product.[121] Moreover, to a standard, a single patent is typically only one of many contributions.[122] Hence, the threat of an injunction allows the patent holder to exploit a value extrinsic to his own invention as leverage in royalty negotiations. The authors analyze the proportion of the negotiated rates attributable to hold-up by assuming a threshold royalty rate of θβν, i.e. the rate the patent holder would receive absent hold-up.[123] Here θ is the likelihood that a patent will be found valid. β is the fraction of the total gains a patent holder gets (generally taken to be 50%), ν is the per unit value of the patented feature.[124] They find that for relatively strong patents, the threat of an injunction will lead to a negotiated royalty rate that is twice as high as the benchmark level.[125] Accordingly, if Courts apply eBay, award reasonable royalty rates, and take caution when issuing injunctions, “the hold-up component of negotiated patent royalties will be reduced or eliminated”.[126]

Others question the premise of this conclusion. Elhauge claims that the threshold level under appreciates the return necessary to incentivize socially desirable upstream innovation, because it assumes a monopsonistic downstream market.[127] He argues that the benchmark rate deters any innovation the costs of which (I) are I > (θβνX), where X is the number of units sold.[128] This leads to an unsatisfactory outcome. In a case where investment costs of an invention are less than its total value (θνX), it will only be pursued when the investment costs are lower “than β times the expected value of the investment.”[129] Elhauge claims that this result reflects the assumption that it is appropriate for the licensee to extract part of the value (β) of the upstream invention. By including β, the model essentially allows for a monopsonist licensee to hold-up the licensor in reverse. Then, θβν in fact does not assume the absence of hold-up.[130] He proposes a “natural” royalty rate of θν, that is the likelihood that the patent will be found valid multiplied by the per unit value of the patented feature.[131]

Notably, the disagreement here lies not in whether issuance of an injunction or threat thereof could lead to higher royalty rates as a matter of fact. Rather, what is disputed is how interests and efficiencies should be balanced.[132] This is a matter of “economics of improvement.”[133] Hold-up theorists argue that the threat of hold-up ultimately leads to socially suboptimal investments by downstream firms and their consequent avoidance of “follow-up innovations.”[134] Their critics view injunctions as a means of the patent system to attribute to the patent holder the return necessary to incentivize innovation on the upstream market. In stressing equitable principles, the Supreme Court has assumed a more narrow interpretation of injunctive relief. This complicates matters for patent holders trying to demonstrate the inadequacy of damages.[135] Particularly, firms that have committed to RAND terms face significant difficulties in this respect, given that they have already committed to license.[136]

ii. Exclusion Orders by the ITC

The ITC is not obligated to follow the eBay mandate.[137] It has jurisdiction over matters relating to Section 337 of the Tariff Act of 1930.[138] Plaintiffs can obtain exclusion orders if they can show that the downstream product infringes “a valid and enforceable United States patent”.[139] An exclusion order effectively shuts down all imports of that product. It is to be granted after the ITC has considered “the effect of such exclusion upon the public health and welfare, competitive conditions in the United States economy, the production of like or directly competitive articles in the United States, and United States consumers”.[140] Unsurprisingly, plaintiffs have increasingly chosen the ITC as their venue of choice for patent infringement claims.[141] A recent case reveals some of the difficulties of exclusion orders where the complainant had made RAND commitments.

The complainant, Motorola Mobility, Inc. (MMI), accused Microsoft Corp. of violating five Motorola patents in the design and production of Microsoft’s Xbox 360 video game system.[142] Four of these patents were subject to RAND commitments MMI had made.[143] Microsoft sought to bar the exclusion order by means of equitable estoppel. First, it invoked a RAND defense. It claimed that by committing to license under RAND conditions, a patent holder had essentially forfeited the right of issuance of equitable remedies by the ITC.[144] In response to this, the ITC stated that Microsoft had not shown any precedent “in which a section 337 remedy was foreclosed due to the existence of RAND obligations.”[145] Therefore, the existence of a RAND commitment did not necessarily amount to a waiver of the right to seek equitable or exclusionary remedies.

In an attempt to establish the three elements of equitable estoppel under the A.C. Aukerman Co. v. R.L. Chaides Constr. Co. standard,[146] Microsoft first accused MMI of misleading communication, because it had sent assurance to the SSO that it would license under RAND terms. Yet MMI could show that Microsoft had let two letters offering licenses go unanswered, and that MMI had thereby fulfilled its RAND obligation to engage in “good-faith negotiations.”[147] Microsoft in turn contested that the offered rate of 2.25% on the end price was a sham, unreasonable offer.[148] The ITC conceded that the rate offered by MMI “could not possibly have been accepted by Microsoft” and was thereby misleading.[149] In arguing the second element, Microsoft pointedly stated that it relied on MMI’s commitment because both firms benefited from the standardization process, “which depends on reliable and enforceable RAND assurances.”[150] Interestingly, the ITC disagreed. Microsoft had not proven that it had in fact relied on any of MMI’s statements. Because of this, Microsoft was denied equitable estoppel of MMI’s exclusion order.

The example shows that the ITC is a potential venue for parties to engage in patent hold-up, even where district courts might not be. Yet, two further conclusions can be drawn. First, the case showcases conduct that could be called “reverse hold-up.” An alleged patent infringer could simply claim that the proposed rates are inconsistent with the RAND commitments and refuse to enter a licensing agreement. Suppose the patent holder has previously resigned the right to get an injunction, as the policy recommendation here suggests. Then it must essentially submit to compulsory damages based on a reasonable royalty as issued by a court. The patent infringer can effectively evade royalty negotiations thereby shifting the burden to the courts. Secondly, as the ITC states, the mere fact that a patent holder has committed itself to license on RAND terms in a SSO, does not prima facie create legally sufficient reliance of the SSO members to be eligible for equitable estoppel. This casts significant doubt on the effectiveness of ex ante RAND commitments.

3. Analysis

With this policy suggestion, the agencies attempt to strike a balance between the acknowledged rights of patent holders and the perceived menace hold-up exerts on the standardization process. After the eBay decision, this policy could more dominantly concern ITC cases. It reflects the view expressed by Microsoft as explained above: when a SSO member commits to license its patents under RAND, it is implicitly relinquishing its right to seek an injunction against those firms willing to agree on RAND terms.[151] This also seems to be the view of the 9th Circuit. It recently expressed doubts whether RAND commitments are consistent with the issuance of injunctions.[152] However, the wording of the suggestion leaves room for less radical solutions, i.e. that the patent holder retains a part of his right to get an injunction. For example, the patent holder could refrain from injunctions until the downstream firm can redesign non-infringing products.[153] Such a rule might be an option for SSOs intending to alleviate the threat of reverse hold-up and its repercussions on dynamic efficiencies on the upstream market. One of the policy suggestions not discussed here could further mitigate this issue: devising arbitration requirements directed to reach agreements on reasonable royalties.[154]

In conclusion, the policy suggestion strikes an acceptable balance. Yet, limiting the right to receive injunctions can result in reverse hold-up. As stated above, certain policies might counteract such conduct.

Closing Remarks

Hesse and Wayland have chosen to voice these policy suggestions at a time when the strategic use of patents has reached alarming significance, particularly in the smartphone market.[155] For instance, in June 2012 the FTC issued subpoenas in an investigation of Google’s RAND licensing policies after the company’s acquisition of Motorola.[156]

Hopefully, this article has shown where these suggestions provide useful guidance and where they lack necessary precision. Particularly with respect to the disclosure requirement, it is unclear what exactly Hesse and Wayland had in mind. A disclosure rule in conjunction with a most restrictive licensing terms commitment is a balanced way of providing SSO members with adequate information prior to standard adoption. However, joint negotiation rules would interfere with the market’s price system and therefore should not be pursued. Cross-licensing provisions can significantly reduce the Cournot complements effect, but the risk that vertically integrated firms will engage in strategies to raise rivals’ costs must be taken into account. The same is true for the potential lack of available comparative benchmarks for reasonable royalty rates that downstream firms might face when demanding cash-only licenses. Finally, restricting the right to seek injunctive relief addresses the focal point of patent hold-up. However, the possibility of reverse hold-up needs to be duly addressed. This might be accomplished by temporarily barring injunctive relief until the infringing features are redesigned.

Clearly the suggestions offered by Wayland and Hesse do not provide definitive solutions to standard-essential hold-up. But it is unlikely that they intended to do so. As has been stated, the actions of the agencies and SSOs can only present part of the solution; eradicating standard-essential patent hold-up completely would inevitably require a legislative reform of patent law.[157]

* LL.M. candidate, NYU School of Law, 2013; First German State Exam, Humboldt University of Berlin and State of Berlin. I would like to thank Vaughn Morrison, Nick Walrath, Dustin Williamson, Josh Baker, David Sullivan, Sabrina Mawani and the staff of the NYU Journal of Intellectual Property and Entertainment Law Journal for their invaluable comments and critique. This paper was written as part of the Antitrust Law and Economics Seminar taught by Prof. Daniel Rubinfield, to whom I am indebted for an insightful and stimulating class.

[1] See Robert P. Merges & Richard R. Nelson, On the Complex Economics of Patent Scope, 90 Colum. L. Rev. 839, 865 n. 115 (1990); see generally Oliver E. Williamson, The Economic Institutions of Capitalism: Firms, Markets, Relational Contracting (1987).

[2] For an overview of relevant literature until 2009, see Thomas F. Cotter, Patent Hold-up, Patent Remedies, and Antitrust Responses, 34 J. Corp. L. 1151, 1151 nn.1-14 (2009).

[3] Renata Hesse, Deputy Assistant Attorney Gen., U.S. Dep’t of Justice, Six “Small” Proposals for SSOs Before Lunch, Remarks Prepared for the International Telecommunications Union Patent Roundtable (Oct. 10, 2012).

[4] Joseph F. Wayland, Assistant Attorney Gen., U.S. Dep’t of Justice, Antitrust Policy in the Information Age: Protecting Innovation and Competition, Remarks Prepared for the Fordham Competition Law Institute Annual International Antitrust Law and Policy Conference 5 (Sept. 21, 2012).

[5] Id. at 3.

[6] For literature arguing the contrary, see Cotter, supra note 2, at 1152 n.7.

[7] Deadweight loss is a comparative term. It describes the difference between the total (i.e. consumer and producer) surplus attained in an inefficient market and a market in perfect competitive equilibrium, i.e. the point at which the value a consumer attaches to an additional unit equals the additional cost of production. Such inefficiencies can be caused by any external cost-increasing distortion that inhibits some amount of consumption, e.g. monopolies, taxes or tariffs. See Dennis W. Carlton & Jeffrey M. Perloff, Modern Industrial Organization, 70-72 (4th ed. 2005); Paul A. Samuelson & William D. Nordhaus, Economics, 182-83 (16th ed. 1998).

[8] See Joseph Farrell, John Hayes Carl Shapiro & Theresa Sullivan, Standard Setting, Patents and Hold-Up, 74 Antitrust L.J. 603, 632 (2007); see generally, Cotter, supra note 2, at 1152 nn.7-11.

[9] Péter Cserne, Duress, in 6 Contract Law and Economics 57, 68 (Gerrit De Geest ed., 2d ed. 2011).

[10] For similar examples see Robert Cooter & Thomas Ulen, Law & Economics 345 (6th ed. 2012); Antonio Nicita & Ugo Pagano, Incomplete Contracts and Institutions, in The Elgar Companion to Law and Economics 145, 148-49 (Jürgen G. Backhaus ed., 2d ed. 2005).

[11] Robert S. Pindyck & Daniel L. Rubinfield, Microeconomics, 231-32 (8th ed. 2013).

[12] Id.; Carlton & Perloff, supra note 7, at 29.

[13] Mark A. Lemley, Intellectual Property Rights and Standard-Setting Organizations, 90 Cal. L. Rev. 1889, 1896 (2002).

[14] Christine Varney, Assistant Attorney Gen., U.S. Dep’t of Justice, Promoting Innovation Through Patent and Antitrust Law and Policy, Remarks Prepared for the Joint Workshop of the U.S. Patent and Trademark Office, the Federal Trade Commission, and the Dep’t of Justice on the Intersection of Patent Policy and Competition Policy: Implications for Promoting Innovation, 5-6 (May 26, 2010); Damien Geradin & Miguel Rato, Can Standard-Setting Lead to Exploitative Abuse? A Dissonant View on Patent Hold-up, Royalty Stacking and the Meaning of Fraud, 3 Eur. Competition. J. 101, 103-04 (2007).

[15] See, e.g., Herbert Hovenkamp et al., IP and Antitrust, An Analysis of Antitrust Principles Applied to Intellectual Property Law § 35.1. (2d ed., 2012); Lemley, supra note 13, at 1900-01.

[16] Lemley, supra note 13, at 1900.

[17] Hovenkamp et. al., supra note 15, at § 35.1 (stating that standards might also be adopted de facto or by government action).

[18] Id. at § 35.2.

[19] Id.

[20] Id.

[21] Id.

[22] See Lemley, supra note 13, at 1900.

[23] A patent is “essential” to a standard if “there are no alternative ways to implement a particular element of a standard without infringing the protected technology.” Rudi Bekkers & Andrew Updegrove, A study of IPR policies and practices of a representative group of Standards Setting Organizations worldwide, 34 (2012), http://sites.nationalacademies.org/PGA/step/IPManagement/PGA_072197. This definition is not completely convincing, because alternative implementation paths often do exist that allow firms to design around the allegedly infringed patent. Yet, these design alternatives usually will be more cost-intensive than the royalty rates demanded by the patent owner and the firm might not know whether the re-design will itself infringe other patents. See Daniel L. Rubinfield & Robert Maness, Strategic Use of Patents: Implications for Antitrust, in Antitrust, Patents and Copyright: EU and US Perspectives, 85, 89 (Francois Leveque & Howard Shelanski eds. 2005); see Mark A. Lemley & Carl Shapiro, Probabilistic Patents, 19 J. Econ. Persp. 75, 82 (2005).

[24] Cotter, supra note 2, at 1160-61 (citing Mark A. Lemley & Carl Shapiro, Patent Hold-up and Royalty Stacking, 85 Tex. L. Rev. 1991, 1992-93 (2007)).

[25] See Bekkers & Updegrove, supra note 23, at 4; Joseph Scott Miller, Standard Setting, Patents, and Access Lock-in: RAND Licensing and the Theory of the Firm, 40 Ind. L. Rev. 351, 353 (2007) (detecting in this dilemma a “tension between free access and tight control.”).

[26] See Bekkers & Updegrove, supra note 23, at 4.

[27] What exactly “RAND” means in the ambit of standardization processes is the matter of some discussion. For a good overview and further literature, see generally Miller, supra note 25, at 355-59 (stating that “by making this promise all the participants who own patents in the resulting standard grant the adopter community an irrevocable right to use its patented technology to comply with the standard in exchange for a reasonable royalty and other reasonable terms, the details of which are negotiated later without any possibility of a court injunction.”).

[28] Wayland, supra note 4,at 5; see Hesse, supra note 3, at 10.

[29] See Bekkers & Updegrove, supra note 23, at 48-49.

[30] 35 U.S.C. § 122(b) (2006). This is the result of the American Inventors Protection Act of 1999 that sought to prevent the existence of so-called “submarine patents.” Before, applications were kept secret until the issuance of the patent. This lead to duplicative research by inventors unaware of the pending application that now were potentially infringing the issued patent. See Janine M. Mueller, An Introduction to Patent Law 25 n.73, 53 (3d ed. 2009).

[31] Miller, supra note 25, at 366-67 (citing John Rawls, Theory of Justice 136-142 (1971)).

[32] Williamson, supra note 1, at 61-63 by which is meant “what was a large numbers bidding condition at the outset is effectively transformed into one of bilateral supply thereafter.” See, e.g., Rambus, Inc., FTC Docket No. 9302, Opinion of the Comm’n 3 (Aug. 2, 2006), available at http://www.ftc.gov/os/adjpro/d9302/ 060802commissionopinion.pdf.

[33] “Lock-in” describes a situation in which the alteration of a given situation is uneconomical for an actor on account of switching and other transaction costs. Therefore, it “hinders customers from changing suppliers in response to (predictable or unpredictable) changes in efficiency, and gives vendors lucrative ex post market power over the same buyer in the case of switching costs (or brand loyalty), or over others with network effects.” Joseph Farrell & Paul Klemperer, Coordination and Lock-In: Competition with Switching Costs and Network Effects, in 3 Handbook of Industrial Organization 1968, 1970 (abstract) (Mark Armstrong & Robert Porter eds., 2007), available at http://www.nuff.ox.ac.uk/users/klemperer/
Farrell_KlempererWP.pdf (found in Farrell et al., supra note 8, at 617 n49).

[34] Also called “positive network externalities,” network effects refer to the increase of the individual value of a product in response to the growth of its purchase by others. See Pindyck & Rubinfield, supra note 11, at 135. In standardization processes, this means that the increased value of the product for the individual consumer due to network effects directly corresponds to an increase in the leverage power of the standard-essential patent holder vis-á-vis the alleged infringers; see Farrell et al., supra note 8, at 616.

[35] See Farrell et al., supra note 8, at 607; George S. Cary, Mark W. Nelson, Steven J. Kaiser & Alex R. Sistla, The Case for Antitrust Law to Police the Patent Hold-up Problem in Standard Setting, 77 Antitrust L. J. 913, 914 (2011); Andreas Klees, Das Missbrauchsverbot für Beherrschende Unternehmen, in Computerrechts-Handbuch, ch. 1, pt 6, ¶ 75 (Wolfgang Kilian & Benno Heussen eds., 2012).

[36] See 35 U.S.C. § 121 (2006).

[37] See Mueller, supra note 30, at 55-56; Lester Horwitz, Patent Office Rules and Practice 201.06 (8d ed., 2003).

[38] 35 U.S.C. § 120 (2005) (“Benefit of Earlier Filing Date in the United States“); see Mueller, supra note 30, at 45-46; Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law, ¶ 712a (3d ed. 2008).

[39] See Areeda & Hovenkamp, supra note 38, at ¶ 712b.

[40] Jon W. Henry, Some Comments on “Independent and Distinct” Inventions of 35 Usc 121 and Unity of Invention (Part i), 84 J. Pat. & Trademark Off. Soc’y 745, 777 (2002) (citing 37 C.F.R. 1.141(a) (2006)); see also Mueller, supra note 30, at 56 (“A patent may claim only a single invention, so any other invention must be “divided out” and claimed in a separate application.”).

[41] A so-called “restriction requirement,” 35 U.S.C. § 121 (2005).

[42] What is important to keep in mind is that if B had filed a first application after adoption of the standard, the standardized technology would be considered prior art and subsequently denied on account of the “novelty” requirement of 35 U.S.C. § 102 (2006).

[43] Kingsdown Med. Consultants, Ltd. v. Hollister Inc., 863 F2d 867, 874 (Fed Cir 1988); Areeda & Hovenkamp, supra note 38 at ¶ 712a n.7.

[44] Areeda & Hovenkamp, supra note 38 at ¶ 712n n.7.

[45] Areeda & Hovenkamp, supra note 38 at ¶ 712b.

[46] See Rambus Inc. v. F.T.C., 522 F.3d 456 (D.C. Cir. 2008); Areeda & Hovenkamp, supra note 38 at ¶ 712b.

[47] Areeda & Hovenkamp, supra note 38 at ¶ 712b.

[48] Rambus Inc., 522 F.3d at 462; Areeda & Hovenkamp, supra note 38 at ¶ 712b.

[49] Rambus Inc., 522 F.3d at 464; Areeda & Hovenkamp, supra note 38 at ¶ 712b.

[50] Rambus Inc. v. Infineon Tech. AG, 318 F.3d 1081, 1102 (Fed. Cir. 2003). It criticized JEDEC’s disclosure policy as containing “a staggering lack of defining details (. . .).” In fact, it found no express obligation of disclosure within JEDEC’s patent policy. Areeda & Hovenkamp, supra note 38 at ¶ 712b.

[51] Rambus, 522 F.3d at 465 (citing NYNEX Corp. v. Discon, Inc., 525 U.S. 128, 136, 139 (1998)); id. at 466 (distinguishing Broadcom Corp. v. Qualcomm Inc., 501 F.3d 297 (3d Cir. 2007)) (“To the extent that the ruling (which simply reversed a grant of dismissal) rested on the argument that deceit lured the SSO away from non-proprietary technology [. . .] it cannot help the Commission in view of its inability to find that Rambus’s behavior caused JEDEC’s choice; to the extent that it may have rested on a supposition that there is a cognizable violation of the Sherman Act when a lawful monopolist’s deceit has the effect of raising prices (without an effect on competitive structure), it conflicts with NYNEX.”).

[52] See Letter from Thomas O. Barnett, Assistant Attorney Gen., U.S. Dep’t of Justice, to Michael A. Lindsey, Esq., Dorsey & Whitney LLP (April 30, 2007) (on file with Department of Justice), 9-10; Letter from Thomas O. Barnett, Assistant Attorney Gen., U.S. Dep’t of Justice, to Robert A. Skitol, Esq., Drinker, Biddle, and Reath, LLP (Oct. 30, 2006), (on file with Department of Justice) 9; R. Hewitt Pate, Assistant Attorney Gen., U.S. Dep’t of Justice, Remarks at EU Comp Workshop, Competition and Intellectual Property in the US: Licensing Freedom and the Limits of Antitrust (June 3, 2005), 10; Rambus, Inc., FTC Docket No. 9302, Opinion of the Comm’n 4 (Aug. 2, 2006), available at http://www.ftc.gov/os/adjpro/d9302/
060802commissionopinion.pdf.

[53] Lemley, supra note 13, at 1904; Farrell et al., supra note 8, at 624; Gil Ohana, Marc Hansen, Omar Shah, Disclosure and Negotiation of Licensing Terms Prior to Adoption of Industry Standards: Preventing Another Patent Ambush?, 24 Eur. Competition L.R. 644, 646 (2003); David J. Teece & Edward F. Sherry, Standards Setting and Antitrust, 87 Minn. L. Rev. 1913, 1938 (2003).

[54] See Farrell et al., supra note 8 at 609.

[55] For a variety of possible disclosure and licensing rules in IPR policies, see generally Bekkers & Updegrove, supra note 23.

[56]Sew, e.g., ETSI Rules of Procedure § 6.4 (2008), available at http://www.etsi.org/WebSite/document/Legal/ETSI_IPR-Policy.pdf.

[57] NFC Forum, Inc. Intellectual Property Rights, 1 (2004), available at http://www.nfc-forum.org/join/join_thanks/NFC_Forum_IPR_POLICY.pdf.

[58] Bekkers & Updegrove, supra note 23, at 98.

[59] Lemley, supra note 13, at 1904.

[60] See Farrell et al., supra note 8, at 626; John J. Kelly & Daniel L. Prywes, Safety Zone for the Ex Ante Communication of Licensing Terms at Standard-Setting Organizations, Antitrust Source (Mar. 2006), 1; see also Barnett (2007), supra note 52, at 4.

[61] The VITA patent policy included this rule. Barnett (2006), supra note 52, at 4; Cotter, supra note 2, at 1202; Farrell et al., supra note 8, at 631.

[62] E.g., Cotter, supra note 2, at 1202; Farrel et al., supra note 8, at 632.

[63] Cotter, supra note 2, at 1202-3; Barnett (2006), supra note 52, at 8, 9 n.27; U.S. Dep’t of Justice & Fed. Trade Comm’n, Antitrust Enforcement and Intellectual Property Rights: Promoting Innovation and Competition, 52 (2007).

[64] “The use of economic resources that produces the maximum level of satisfaction possible with the given inputs and technology.” Samuelson & Nordhaus, supra note 7, at 744.

[65] An economy is dynamically efficient if it not only ensures current, static efficiency benefits, but also long-term benefits, such as innovation. J. Gregory Sidak, Patent Hold-up and Oligopsonistic Collusion in Standard-Setting Organizations, 5(1) J. Comp. L. & Econ. 123, 141 (2009).

[66] For a good explanation of monopsony power and monopsonist buyers, see Pindyck & Rubinfield, supra note 11, at 385.

[67] Sidak, supra note 65 at 142; see Cotter, supra note 2, at 1202 n.282.

[68] Roger D. Blair & Jeffrey L. Harrison, Antitrust Policy and Monopsony, 76 Cornell L. Rev. 297, 303 (1991); Pindyck & Rubinfield, supra note 11, at 382-84; see Farrell et al., supra note 8, at 632 (“The classic danger associated with collective negotiation is that, in order to depress prices, buyers collectively (facing an upward-sloping supply curve) will choose a smaller quantity than would be efficient or than they would individually.”).

[69] Farrell et al., supra note 8, at 632; Hillary Greene, Non-Per Se Treatment of Buyer Price Fixing in Intellectual Property Settings, 2011 Duke L & Tech. Rev. 4, ¶ 31-32 (2011); Sidak, supra note 65, at 151-160.

[70] Greene, supra note 69, at ¶ 31.

[71] See Sidack, supra note 31, at 155-56, who accepts this premise if output represents the number of licenses, but calls the observation “trivial” because it doesn’t focus on the ramifications for dynamic efficiencies; see also Carlton & Perloff, supra note 7, at 57.

[72] Greene, supra note 69, at ¶ 31.

[73] See Cotter, supra note 2, at 1202-1203.

[74] For ex ante group negotiations, see, e.g., U.S. Dep’t of Justice & Fed. Trade Comm’n, supra note 63, at 52.

[75] Richard Schmalensee, Standard-Setting, Innovation Specialists, and Competition Policy, 24-25 (April 30, 2009), available at SSRN: http://ssrn.com/abstract=1219784; see also Greene, supra note 69, at ¶ 36.

[76] Sidak, supra note 65, at 157.

[77] Id. at 158; Sidak’s argument rests on his understanding that patent hold-up, if it exists, is merely a legitimate means to reap the benefits of the legally awarded position of exclusivity. Cotter, supra note 2, at 1204. As mentioned above, I presuppose the existence of patent hold-up for the purpose of this paper.

[78] Sony Elecs., Inc. v. Soundview Tech., Inc., 157 F. Supp. 2d 180, 185 (D. Conn. 2001).

[79] Id. at 186.

[80] See Cotter, supra note 2, at 1205; Geradin & Rato, supra note 14, at 102, 111. The incentive argument has also been brought up by the Supreme Court, when it stated that “the opportunity to charge monopoly prices” attracts “business acumen”. Verizon Commc’ns, Inc. v. Trinko, 540 U.S. 398, 407 (2004).

[81] Cotter, supra note 2, at 1205 (“As long as patent law allows patentees to charge whatever the market will bear for their technology, joint conduct aimed to lower that price interferes with patent law’s implicit incentive/access tradeoff.”).

[82] See Bekkers & Updegrove, supra note 23, at 94.

[83] See Knut Blind et al., Directorate Gen. for Enter. & Indus. of the Eur. Comm’n, Study on the Interplay between Standards and Intellectual Property Rights,25 (Apr. 2011), available at http://ec.europa.eu/enterprise/policies/european-standards/standardisation-policy/policy-activities/intellectual-property-rights/index_en.htm).

[84] Geradin & Rato, supra note 14, at 137–38; Schmalensee, supra note 75, at 27; U.S. Dep’t of Justice & Fed. Trade Comm’n, supra note 32, at 54; Letter from Thomas O. Barnett, Assistant Attorney Gen., U.S. Dep’t of Justice, to Michael A. Lindsey, Esq., supra note 52, at 10; Bekkers & Updegrove, supra note 23, at 95.

[85] Bekkers & Updegrove, supra note 23, at 95.

[86] For a full study, see Blind et al., supra note 83.

[87] Damien Geradin & Anne Layne-Farrar, The Logic and Limits of Ex Ante Competition in a Standard-Setting Environment, 3 Comp. Pol. Int. 79, 103 (2007); Blind et al., supra note 83, at 26.

[88] See, e.g., Certain Gaming & Entm’t Consoles, Related Software, & Components Thereof, Inv. No. 337-TA-752, 2012 WL 1704137, at *167 (USITC Apr. 23, 2012) (Initial Determination) (discussed infra C.III.2.b).

[89] Wayland, supra note 4, at 9.

[90] Mark A. Lemley, Ten Things to Do About Patent Hold-up of Standards, 47 B.C. L. Rev. 149, 157 (2007).

[91] Lemley, supra note 13, at 1959.

[92] Wayland, supra note 4, at 9.

[93] U.S. Dep’t of Justice & Fed. Trade Comm’n, supra note 63, at 57; for an interesting description of the process, see Blind et al., supra note 83, at 74; Hovenkamp et. al., supra note 15, at § 34.2.

[94] Geradin & Layne-Farrar, supra note 87, at 94; Mark A. Lemley & Carl Shapiro, Patent Hold-up and Royalty Stacking, 85 Tex. L. Rev. 1991, 2014 (2007).

[95] This term simply refers to firms that manufacture goods, i.e. firms that are at the supply-end of the production process. Carlton & Perloff, supra note 7, at 406.

[96] Lemley & Shapiro, supra note 94, at 1993.

[97] Damien Geradin, Anne Layne-Farrar & A. Jorge Padilla, The Complements Problem Within Standard Setting: Assessing the Evidence on Royalty Stacking, 14 B. U. J. Sci. & Tech. L. 144, 146 (2008).

[98] A negative “externality occurs when consumers or firms do not bear the full cost from the harm their actions do to others. Pollution is one of the most important examples of a negative externality.” Carlton & Perloff, supra note 7, at 82.

[99] Geradin et al., supra note 97, at 145-46.

[100] Lemley & Shapiro, supra note 94 at 1993; Geradin et al., supra note 97, at 146.

[101] Lemley & Shapiro, supra note 94, at 2011; Geradin et al. supra note 97, at 154.

[102] See Geradin et al., supra note 97, at 165-66; Carl Shapiro, Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard Setting, 1 Innovation Pol’y & the Econ. 119, 130 (2001). Another possibility by which to achieve this aim is creating patent pools. Id. at 134.

[103] See Geradin et al., supra note 97, at 166. This solution is of no surprise as it is well known from the problem of “vertical double marginalization,” an effect that also plays into the royalty stacking problem displayed here. Double marginalization occurs when both upstream and downstream firms exert their market power resulting in a double markup. The remedy to the problem is often seen in vertical integration. See Carlton & Perloff, supra note 7, at 419; Klaus M. Schmidt, Licensing Complementary Patents and Vertical Integration 5 (Ctr. for Econ. Studies & Ifo Inst. for Econ. Research, Working Paper, Nov. 2006), available at http://ssrn.com/abstract=944169.

[104] On the theory of this form of exclusionary conduct, see Rubinfield & Maness, supra note 23, at 87; Thomas G. Krattenmaker & Steven C. Salopp, Anticompetitive Exclusion: Raising Rivals’ Costs To Achieve Power over Price, 96 Yale L.J. 209 (1986).

[105] Schmidt, supra note 103, at 6.

[106] Krattenmaker & Salopp, supra note 104, at 230.

[107] Rubinfield & Maness, supra note 23,at 87; Krattenmaker & Salopp, supra note 104, at 230.

[108] Krattenmaker & Salopp, supra note 104, at 234-42.

[109] See Farrell et al., supra note 8, at 638.

[110] See id.

[111] Hesse, supra note 3, at 11.

[112] See Farrell et al., supra note 8, at 638; Cotter, supra note 2, at 1160; Lemley & Shapiro, supra note 94, at 1993; Carl Shapiro, Injunctions, Hold-Up, and Patent Royalties, 12 Am. L. & Econ. Rev. 280 (2010); Lemley, supra note 90; Mark A. Lemley & Philip J. Weiser, Should Property or Liability Rules Govern Information?, 85 Tex. L. Rev. 783 (2007); Einer Elhauge, Do Patent Hold-up and Royalty Stacking Lead to Systematically Excessive Royalties?, 4 J. Comp. L. & Econ. 535 (2008); Miller, supra note 25, at 366-67.

[113] 35 U.S.C. § 283 (2005).

[114] Mueller, supra note 30, at 482.

[115] 35 U.S.C. § 284 (2005).

[116] Richardson v. Suzuki Motor Co., 868 F.2d 1226, 1247 (Fed. Cir. 1989) (“It is the general rule that an injunction will issue when infringement has been adjudged, absent a sound reason for denying it.”). There have been exceptions to this rule only if beneficial to public health and welfare. Mueller, supra note 30, at 483-84.

[117] eBay Inc. v MercExchange, L.L.C., 547 U.S. 388, 393-94 (2006); see also Cotter, supra note 2, at 1174.

[118] eBay, 547 U.S. at 391.

[119] Andrei Iancu & W. Joss Nichols, Balancing the Four Factors in Permament Injunction Decisions: A Review of Post-eBay Case Law, 89 J. Pat. & Trademark Off. Soc’y 395, 404 (2007).

[120] Rachel M. Janutis, The Supreme Court’s Unremarkable Decision in eBay Inc. v. MercExchange, L.L.C., 14 Lewis & Clark L. Rev. 597, 604 (2010) (citing Douglas Ellis, John Jarosz, Michael Chapman & L. Scott Oliver, The Economic Implications (and Uncertainties) of Obtaining Permanent Injunctive Relief After eBay v. MercExchange, 17 Fed. Cir. B.J. 437, 441-42 (2008)) (finding that injunctions were issued in 28 out of 36 cases); Benjamin Petersen, Injunctive Relief in the Post-eBay World, 23 Berkeley Tech. L.J. 193, 196 (2008) (finding that injunctions were issued in 24 out of 34 cases).

[121] E.g., Lemley & Shapiro, supra note 24, at 1993; Farrell et al., supra note 8, at 638; see Shapiro, supra note 112, at 283; see also Lemley & Weiser, supra note 112, at 787 (claiming “injunctive relief . . . can increase the value of an entitlement and make a holdout strategy possible”).

[122] Farrell et al., supra note 8, at 638.

[123] Shapiro, supra note 112, at 289.

[124] Id.; Lemley & Shapiro, supra note 94, at 1999; see generally Elhauge, supra note 112, at 538-42 (providing background to understand the implications of the findings).

[125] Shapiro, supra note 112, at 289, 296-97 (reflecting strong value of the patented feature, versus a lower rate for a relatively weak patent).

[126] Id. at 308.

[127] Elhauge, supra note 112, at 541.

[128] Id.

[129] Id.

[130] Id. at 542.

[131] Id.

[132] Cotter, supra note 2, at 1168.

[133] Id.

[134] Id. at 1164.

[135] Julie Brill, Comm’r Fed. Trade Comm’n, The Intersection of Patent Law and Competition Policy, Keynote Address at the University of Colorado Law School, 5 (Oct. 3, 2012), available at http://www.ftc.gov/speeches/brill/121003patentip.pdf.

[136] Id.

[137] Id.

[138] 19 U.S.C. § 1337 (2006).

[139] 19 U.S.C. § 1337(a)(1)(B)(i), (d)(1).

[140] 19 U.S.C. § 1337(d)(1).

[141] Brill, supra note 135, at 5.

[142] Certain Gaming & Entm’t Consoles, Related Software, & Components Thereof, Inv. No. 337-TA-752 at *2-4.

[143] Id. at *159.

[144] Id. at *162.

[145] Id. at *163.

[146] A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1041 (Fed. Cir. 1992) (“[1] The actor, who usually must have knowledge of the true facts, communicates something in a misleading way, either by words, conduct or silence. [2] The other relies upon that communication. [3] And the other would be harmed materially if the actor is later permitted to assert any claim inconsistent with his earlier conduct.”).

[147] Certain Gaming & Entm’t Consoles, Related Software, & Components Thereof, Inv. No. 337-TA-752,at *167.

[148] Id.

[149] Id. at *168.

[150] Id. at *170.

[151] Brill, supra note 135, at 5; see Wayland, supra note 4, at 4; Hesse, supra note 3, at 10; Jon Leibowitz, Chairman, Fed. Trade Comm’n, Remarks at Georgetown Law Global Antitrust Enforcement Symposium, 9 (Sept. 19, 2012), available at http://www.ftc.gov/speeches/leibowitz/
120919jdlgeorgetownspeech.pdf; cf. Third Party United States Fed. Trade Comm’n Statement on the Public Interest at 5, Certain Wireless Commc’n Devices, Portable Music & Data Processing Devices, Computers & Components Thereof, Inv. No. 337-TA-745 (USITC June 6, 2012), available at http://www.ftc.gov/os/2012/06/1206ftcwirelesscom.pdf.

[152] See Microsoft Corp. v Motorola, Inc., 696 F.3d 872, 885 (9th Cir. 2012) (“injunctive relief against infringement is arguably a remedy inconsistent with the licensing commitment.”).

[153] See Shapiro, supra note 112, at 308 (proposing courts grant stays pending redesign).

[154] Hesse, supra note 3, at 10; Wayland, supra note 4, at 9.

[155] See generally Charles Duhigg & Steve Lohr, The Patent, Used as a Sword, N.Y. Times, Oct. 7, 2012, at A1 (explaining recent developments in patent litigation).

[156] Steve Lohr, Widening Scrutiny of Google’s Smartphone Patents, N.Y. Times, Oct. 9, 2012, at B1.

[157] Shapiro, supra note 102, at 126.

By Dustin Williamson*

Introduction

Every year in the Dominican Republic, hundreds of boys enter baseball academies run by one of Major League Baseball’s (MLB) franchise teams.[1] While there, the players pursue baseball with a single-minded passion, with drills, games, and other instructional activities from dawn until dusk.[2] Competition is fierce, and many players take performance-enhancing drugs to better their chances of advancing within the system.[3] The dream of every player is to be sent to the team’s farm system in the United States and from there to be called up to the major leagues, where many Dominican players, including the New York Yankee’s Robinson Cano and the Boston Red Sox’s David Ortiz, have gone on to make millions of dollars. The reality of the situation, however, is much less glamorous. Over the last decade, only two percent of players signed out of the Dominican Republic made it to the major leagues.[4] That means that for every Cano or Ortiz, there are 50 players who never even make the League’s minimum salary.

While academies provide shelter and a salary for the athletes, only an exceptional few provide an educational component beyond some basic English classes and classes on American culture.[5] This means that when the vast majority of these athletes, who have devoted their lives to baseball, eventually wash out of the academy system after two or three years, they are thrown back into the working population with little education and no transferrable skills to show for the years they spent playing baseball.[6]

The situation is exacerbated by the treatment that players receive before they even get to the MLB academies. In the Dominican Republic, potential baseball players are cultivated as early as their preteen years by independent handler-agents known as buscones.[7] Children represented by buscones may be encouraged (or possibly coerced) to drop out of school in order to focus on baseball full time.[8] Most buscones operate independent baseball academies, which, unlike the MLB academies, may not provide any education outside of that needed to develop as a baseball player.[9] And again in contrast to the official academies that are overseen by MLB and governed by MLB rules, (insofar as the latter provide any guidance) the buscón?-run academies receive little oversight. Given the young age at which many athletes join unofficial academies, not only are they deprived of secondary education, but potentially primary education as well. While MLB does not contract with buscones or have any official connection with the independent camps, MLB, with its network of official academies and scouts throughout the Caribbean, is the only significant outlet for players produced through this system.[10]

This article proposes that, given the type and scope of labor rights violations that occur as a result of MLB’s presence in the Dominican Republic, MLB should promulgate a voluntary corporate code of conduct to govern the relationship between MLB and buscones in the Dominican Republic. In Part I, I explain the differences between the recruitment processes for players in the United States, the United States’ territories, and Canada, who are covered by the draft, and for players from the rest of the world, who are signed through international free agency. I then explain the practical effects of international free agency on how MLB operates in the Dominican Republic. In Part II, I draw an analogy between the academy system in the Dominican Republic, which produces MLB players, and a multinational corporation’s (“MNC”) supply chain. I then use this analogy to identify potential labor and human rights violations that may occur in the Dominican Republic as a result of the system that produces MLB players. In Part III, I introduce the example of corporate social responsibility as a movement under which MNCs have made efforts to self-regulate both their behavior and the behavior of their suppliers, through corporate codes of conduct. In Part IV, I examine the unique features of MLB and how these features affect the potential scope and shape of a code of conduct. In Part V, I examine specific aspects of a code of conduct that could be implemented, including a licensing program for buscones and independent academies. While at least one commentator has suggested an MLB code of conduct that would govern behavior in the Dominican Republic academies, I argue that a strict, penalty-based code of conduct would likely be counterproductive. A licensing program with a commitment to dialog instead of punishment might have a better chance of positively affecting the lives of young baseball players. Central to my argument is the recognition that, while MLB may contribute to labor law violations in the Dominican Republic, it also spends a substantial amount of money in the country. Additionally, players who “make it” in in the major leagues typically send some part of their earnings back to their families and communities in the Dominican Republic. As such, any solution should encourage cooperation between MLB, the teams, buscones, and the Dominican government, instead of punishing players or forcing teams to leave the Dominican Republic if violations are found. In Part VI, I discuss the problem of applying pressure to MLB to adopt a corporate code of conduct for the Dominican Republic.

I. The Selection of Players and Its Effect on the Dominican Republic

A. Major League Baseball Recruiting

The Major League Rules (MLR) governs the method by which MLB teams recruit baseball players.[11] Under the current rules, teams wishing to sign players who are not already within the MLB system must abide by the draft rules for players from the United States, Puerto Rico, and Canada, or by a different set of rules for international players who are not covered by the draft. Under Rule 3 of the MLR, players who are residents of the United States, Puerto Rico, and Canada are subject to the amateur draft [12] held every June.[13] Players who are eligible for the draft cannot bargain for the best deal that they can reach with any team; rather, teams pick individual players during successive rounds of drafting. MLB supplies suggested signing bonuses for different draft slots. The slotting system is not binding, and the most eagerly sought after players often garner signing bonuses far above the suggested value.[14] Players who do not sign with the team that drafted them are prohibited from signing with a different team but may enter the draft again in the future.[15] This often occurs with players who are just out of high school and would rather go to college before signing with a team, or players who are already in college and would either like to wait for a better offer in the future or finish college.

The most significant restriction on draft eligibility is that teams may not draft players who are currently in high school.[16] In addition, although teams may sign high school graduates, they are typically prohibited from signing college players until after their junior year.[17] The NCAA and other university regulatory systems may also require teams to abide by additional rules when dealing with college players. Therefore, although there are a few players who sign when they are as young as 17, most players are adults, and a large portion have at least a couple of years of junior college or university education when they sign with an MLB team.[18]

Players from the rest of the world are not subject to the draft, but instead are signed as international free agents. The MLR puts few restrictions on how such players are signed. The main restriction is the 17-year-old rule, which prohibits teams from signing international players younger than 17.[19] Even under this rule, a player may be signed when they are 16, so long as they will turn 17 by the end of the current baseball season.[20] Under this system, teams may bid against each other for a player’s talents; though if a player is relatively unknown, a team may be the only one to make an offer.[21]

In addition to the MLB’s 17-year-old rule, the country from which the player is drafted may impose additional restrictions on MLB recruitment. For instance, in Japan, another country with a developed professional baseball league, an MLB team wishing to sign a player must pay the player’s team a substantial sum even to open negotiations with the player.[22] The Dominican Republic, on the other hand, does not have its own professional league, nor does it have independent requirements supplemental to the 17-year-old rule. This means that players from the Dominican Republic are usually lesser known than players coming out of other countries MLB teams target, such as Japan and South Korea. Given the lack of regulation, the chance of finding an underexposed player, and the economic conditions, which lead to lower bonuses and salaries for Dominican players, teams are highly motivated to scout the Dominican Republic for cheap players.

B. MLB in the Dominican Republic

MLB scouting in the Dominican Republic is run out of each team’s baseball academy. Once signed by an MLB team, the vast majority of players, whether signed through the draft or as an international free agent, spend years honing their skills in the team’s minor-league affiliates, spread throughout the United States.[23] Most players from the Dominican Republic begin by playing for up to three years at the MLB team’s academy before even being called up to the United States to play in the minor leagues. Currently, 28 out of the 30 MLB teams run a baseball academy in the Dominican Republic.[24] It has been estimated that MLB has invested more than $75 million in the Dominican Republic and created more than 2,000 jobs in the country.[25] Players in the academies are signed according to the 17-year-old rule. In the past, teams may have hidden younger players at academies and then signed them when eligible; this practice allowed them to avoid having to bid against another team for the player’s services and kept the signing bonus owed to the player much lower.[26] This type of subterfuge may not be as much of a problem as it once was, since under the current rules teams may only allow an unsigned player to remain at an academy for a month.[27] On the other hand, given deficiencies in the Dominican Republic’s record keeping system, players younger than the signing age may routinely be admitted to academies under a false birth certificate.[28] In a highly publicized case, it was discovered that employees of the Los Angeles Dodgers falsified records to sign the Dominican baseball player Adrian Beltre, who was found to have been 15 when he signed with the team.[29] As a result, MLB shut down the Dodger’s academy in the Dominican Republic for a year.[30]

Conditions at the camps vary. While some may be relatively luxurious, others are more spartan.[31] When journalists first reported on the academies, they found the facilities to be overcrowded and lacking in basic medical facilities—resembling prisons more than athletic training facilities.[32] Today, even on the low end, the academies are much improved, though there are exceptions. After visiting the Chicago Cubs academy for a 2010 article, Time magazinereporter Sean Gregory gave the following account of the facility:

At the Cubs academy one hazy afternoon, 10 prospects piled into a room that, at best, could comfortably fit two or three. There were four bunk beds crammed into the space; two kids napped while sharing a mattress on the floor. Several players said they all lived in that room. I snapped a picture of the scene and showed it to Sandy Alderson, the veteran baseball executive who was tapped by MLB commissioner Bud Selig earlier this year to clean up the sport in the D.R. He said the conditions were “not acceptable,” though he later insisted that not all 10 prospects actually lived in that room and that players sometimes sleep on the floor because it’s cooler. Still, he stood by his “unacceptable” assessment. It’s difficult to disagree with a Dominican man who also saw the scene. “It looked like f______ county lockup,” he said.[33]

In most academies there is little to do besides play baseball. Players in the academies get up, have breakfast, and are on the field by 7:30; other than a lunch break, they practice until the sun goes down.[34]

Competition within the camps is fierce. Given the lower cost of signing and training Dominican players, teams are able to take a “quantity over quality approach,” signing a large number of players for the same price it would have cost to sign a single American player.[35] Because the investment in most Dominican players is small, teams are more concerned with finding a diamond in the rough than developing talent.[36] Consequently, only about two percent of academy players ever make it to the American major league system.[37] The small percentage of players who make it to America through the minor leagues and onto an MLB team will be able to provide for themselves, their families, and their communities, even if they only play in the majors for a short period, since the league minimum salary is high. For instance, in 2011, players who made the league minimum were paid $400,000 for the season.[38] By comparison, the per capita GDP in the Dominican Republic is $8,300,[39] and 34.4% of the country lives below the poverty line.[40] Therefore, the players’ incentive is to gain any advantage they can over other players. This includes pushing themselves to their physical limits day after day. It may also include hiding injuries—and thereby exacerbating them—for fear of being cut from the academy.[41] The pressure to succeed may also lead to the use of performance-enhancing drugs.[42] Such drugs both exacerbate the risk of immediate injury and can contribute to life-long health problems.[43]

At most camps, the only supplemental education that the participants receive are classes in basic English and classes designed to prepare athletes for life in the United States[44], although some camps have partnered with local schools.[45] A few camps provide educational facilities on site.[46] When compared with the astronomical salaries paid to MLB players, the cost of running an educational program is small. In 2010, the Pittsburg Pirates, MLB’s poorest team, spent only $75,000 to run its educational program, a partnership with a local provider that offered high school classes to the athletes in its Dominican academy.[47]

Before players ever get to an academy, most spend time either at an independent camp or under the control of a Dominican agent, known as a buscón.[48] A buscónis similar to an agent in that he or she represents unsigned Dominican players in negotiations with a team that wishes to sign the athlete. However, instead of representing a player for a span of his professional career, a player’s relationship with a buscón ends when he is signed by an academy.[49] The player receives a signing bonus; the buscón takes a percentage cut; and the relationship is severed.[50] While players younger than 16 may occasionally make it into an MLB academy because of forged papers, buscones routinely recruit players as young as 10 or 12.[51] These children may drop out of school and enter the custody of the buscón.[52] Instead of completing compulsory education, which in the Dominican Republic is 8 years,[53] these children spend their formative years developing their baseball skills with the sole goal of being signed by an MLB academy.

Unlike the MLB camps, which are regulated to some extent by the league through its office in Santo Domingo,[54] the buscones and independent academies have no substantive supervision. Simply put, the Dominican Republic has not made it a priority to regulate the system that places Dominican youths with teams in MLB, an organization that has made significant capital investments in the country.[55] Therefore, the worrisome behavior that may occur at an MLB academy, including overwork and the use of performance-enhancing drugs, is rampant throughout the domestic system that produces players.[56] Likewise, problems that may occur less frequently in the MLB system, such as players younger than 16 taking part in the academies, are a fact of life in domestic Dominican baseball.[57] Exacerbating all of these problems is the fact that a buscón has no financial stake in a player once he has signed with an academy. Therefore, a buscón may not care about players’ long-term health or ability to play baseball for any length of time after leaving their care.

II. Potential Labor and Human Rights Violations: An Analogy to a Multinational Corporation Supply Chain

A. Overview

While it may seem unfair in some general, moral sense that MLB academies do not provide transferrable skills for many of the players that pass through their gates, by itself, this treatment is not that much different from how any minor league player is treated; most players wash out of baseball before making it to the majors and without ever making significant money.[58] The major difference between the treatment of players in the Dominican Republic and in the United States is that while most U.S.-born players will enter professional baseball with at least a high school education,[59] the combination of the rules governing the signing of international players and the Dominican Republic’s poor education system, leads many young players to drop out of school at a much earlier age. Since there is no domestic professional baseball,[60] the only reason these children take up baseball (either willingly or because they are coerced by a buscón or parent) is the hope of being signed by an MLB team. Because MLB is the dominant employer of Dominican baseball players who take up baseball with the aim of playing professionally, we should establish a legal duty that runs from MLB to the players to protect the labor and human rights of Dominican players inside official MLB academies, as well as children who have not signed but have spent their childhood preparing for the opportunity, under a buscón’s care. While it may be difficult to bring a legal claim based on the duty, the existence of one would provide labor and human rights advocates leverage to convince MLB to better regulate their behavior. Any solution must also take into account MLB’s large investment in the country and the fact that those players who are signed, especially those who eventually make major league salaries, typically send a large percentage of their earnings to their families and communities.[61]

The first step is to identify the ways in which MLB owes an obligation to protect labor and human rights. Then, Part D will identify, which, if any, labor and human rights standards have been violated.

B. Is This Labor At All? An Analogy to the Multinational Corporation Supply Chain

In the globalized economy, MNCs operate across national borders. While the international scope of economic activity is nothing new, globalized MNCs exhibit a cohesiveness that prior forms of international economic activity did not.[62] As described by Gary Gereffi, globalized supply chains may be divided into two types – “producer-driven” and “buyer-driven” global commodity chains:[63]

Producer-driven commodity chains are those in which large, usually transnational, manufacturers play the central roles in coordinating production networks . . . . This is characteristic of capital- and technology intensive industries such as automobiles, aircraft, computers, semiconductors, and heavy machinery. Buyer driven commodity chains, on the other hand, refer to those industries in which large retailers, marketers, and branded manufacturers play the pivotal roles in setting up decentralized production networks in a variety of exporting countries, typically located in the third world. This pattern of trade-led industrialization has become common in labor-intensive, consumer goods industries such as garments, footwear, toys, handicrafts, and consumer electronics. Tiered networks of third world contractors that make finished goods for foreign buyers carry out production. Large retailers or marketers that order the goods supply the specifications.[64]

In a buyer-driven commodity chain, companies often receive goods or services from many low-level suppliers, or through an intermediary.[65] While a lead firm may have a contract with some of its suppliers, those suppliers, in turn, deal with their own constellation of lower-level suppliers.[66] At the lowest end, or in very small shops, individuals supply piecemeal work to other unregulated firms—some within a lead firm’s chain, but often supplying to many different firms.[67] While a lead firm may have a direct relationship with some other firms on the supply chain, it likely does not know that the firms on the lowest end even exist, let alone have a contractual relationship with them.[68] Typically, even if an MNC would like to do so, lead firms have a difficult time policing the bottom rungs of their supply chain.[69] However, as I show in the following sections, through the advent of corporate codes of conduct, MNCs have developed a system to attempt to regulate the behavior of their suppliers, as well as those their suppliers buy from.

MLB shares characteristics with both producer-driven and buyer-driven supply chains. At higher levels, such as in MLB’s minor leagues, or even the MLB-owned academies in Latin America, MLB teams are directly responsible for molding the growth of their potential major leaguers, even though that development is relegated to a lower rung of the organization. In this way, MLB teams can be seen as producer-driven: a central entity coordinating its disparate production network.[70] The independent academies and the demand for cheap players from the Dominican Republic (and other parts of Latin America) lends this arrangement an aspect of the buyer-driven supply chain, in which MLB teams “buy” players. However, even though this arrangement may, at first glance, resemble the bottom rung of a buyer-driven supply chain, there are aspects of the relationship between MLB and the buscones that run the independent academies that may allow us to categorize these academies as entities analogous to a subsidiary branch of the MLB. While MLB teams do sign players from these independent academies, the players are neither raw recruits nor fully formed baseball players. Unlike a buyer-driven supply chain, in which the producers at the lowest rung produce textiles or shoes,[71] players produced by the independent academies are not fungible; MLB teams must scout players at the independent academies, deal directly with buscones, and decide which players to sign.[72] Finally, as noted earlier, MLB’s presence in the Dominican Republic is responsible for the development of the independent academy system.[73] Although the MLB teams do not have a contract with the buscones, similar to low-level suppliers in a buyer-driven supply chain, the actual teams operate in the Dominican Republic and deal directly with the buscones and players in the independent academies.[74] As such, MLB’s relationship with the bottom rung is, in some ways, more like a producer-driven supply chain and is certainly a closer relationship than a typical MNC with its suppliers in a buyer-driven supply chain.[75] The lack of a contractual relationship and the fact that buscones operate according to their own prerogatives may prevent us from defining the independent academies as subsidiaries of MLB as a legal matter, but the analogy to a supply chain would lend legitimacy to a movement to pressure MLB to adopt a code of conduct for dealing with buscones.

Even if independent academies can be analogized to the bottom rung of a supply chain, can the activities performed by Dominican players be defined as labor in such a way that it would be recognized under international labor and human rights standards? In the case of athletes who enter the official academies, this question is easily answered in the affirmative. Quite simply, the players in the official academies are employees as defined by common law master-servant agency principles,[76] and accordingly, the employment relationship is subject to the international laws described in the proceeding section, which apply to employment conditions. Under agency law, although no one factor is determinative, the issues to consider when determining whether someone is an employee include the following:

[T]he skill required; the source of the instrumentalities and tools; the location of the work; the duration of the relationship between the parties; whether the hiring party has the right to assign additional projects to the hired party; the extent of the hired party’s discretion over when and how long to work; the method of payment; the hired party’s role in hiring and paying assistants; whether the work is part of the regular business of the hiring party; whether the hiring party is in business; the provision of employee benefits; and the tax treatment of the hired party . . . .[77]

In the case of the official MLB academies, these factors weigh heavily in favor of classifying the players as employees. The players sign contracts with the individual teams, receive pay for the time spent playing and training at the academy, and while there, are under the control of the staff of the academy.[78] However, as noted in the previous section, while there may remain a problem within the official academies, MLB understands that they bear some responsibility to the players in those academies. The argument about the regulation of official academies is an argument over the scope, not the existence of a duty.

The independent academies, on the other hand, are a substantively different problem. It is not immediately clear that what the players at these academies do is labor in a traditional sense, despite the long hours and physical toll that life in the academy may have on their bodies. Although many have argued that the activity of amateur college athletes constitutes labor and should be covered by U.S. labor and employment law,[79] unlike college athletes, players in independent academies do not play for revenue generating teams. Just because one trains to become a baseball player does not automatically qualify that activity as labor. Millions of children spend substantial amounts of time practicing an athletic or artistic skill; whatever obligations the parent(s) of a young oboe player owes the child, it would be a stretch to argue that international labor standards apply to teenage musicians’ practice regimes. Similarly, although attending school may require a good deal of work in the form of studying, writing papers, and taking tests, that activity is not labor; rather, it is a personal investment in cultivating skills that will lead to a better job than one could get without such education.

However, the role of the buscones in the independent academies lends a unique feature to the situation that is not present in typical training programs; the children in the academies spend their time training to become the player that is produced by the academies, from which the buscones make their living.[80] Unlike the intensive training that takes place under the tutelage of, say, a gymnastics or swimming coach in the United States, the buscones receive their money when the player signs with a team, not upfront from a parent whose child is an Olympic hopeful. Buscones make a living by training players and then taking a cut of the player’s signing bonus or receiving a finder’s fee for their services.[81] While the time at which the trainer receives her money might seem like a semantic distinction, under the master-servant principles enumerated above, this distinction militates in favor of treating the young athletes under the care of a buscón as servants and thus employees. If a parent sends his child to an independent academy, as opposed to paying to board their child with a coach, the food, shelter, and training provided by the buscón is a form of payment for the athlete’s services. The fact that not every child under the buscón’s care eventually makes it to an MLB team makes this more like a traditional employment relationship than some sort of deferred payment scheme for the training that the athletes receive, since the buscón pays out whether or not the athlete makes him money. If one views the room, board, and potential stipend as payment, the rest of the factors for determining whether the athletes under the buscón’s care are employees weigh in favor of categorizing them as such.[82] The athletes train on facilities controlled by the buscones; the relationships can exist from the time the athletes are in their preteens until they are signed by an MLB academy; the type and extent of training is dictated by the buscones; and, the buscones are in the business of training players, from which they make their living.[83] Also, the temporal difference likely has a large effect on how the child athletes are treated. While children under both a traditional coach and a buscón may be pressed to their physical limit, a coach also has a stronger incentive to maintain her reputation. If, for instance, word gets out that a coach treats the athletes under her care poorly, she may lose customers. Similarly, if a parent discovers that her child is being neglected in favor of another athlete, that parent may simply find another coach. The buscón’s incentives, on the other hand, only run towards getting the largest signing bonuses for the athletes under his care. This means he is likely to push a large number of athletes whose skills are on the margins to the breaking point in search of the handful that have the talent and training necessary to sign with an MLB academy.[84] A parent may object to the treatment of players, but given the poverty and lack of education in the Dominican Republic, they may feel they have little choice other than to send their children to train with the buscón who gives them the best deal.[85] This feature further highlights the particularly coercive and controlling nature of the buscón-athlete relationship under the master-servant analysis.

Because there is no other significant outlet for the training the players receive at the academies, the academies operate as the de facto bottom rung of MLB’s supply chain, analogous to very low-level manufacturing on an integrated supply chain that ultimately provides players—as both goods and laborers—to MLB teams. Since the players produce themselves and the buscones make a living off of those players, it is sufficiently analogous to labor to be so understood when determining whether the regulated party, in this case the buscones, is violating international human rights and labor laws.

Although independent academies and the buscones who run them are similar to typical low-level suppliers in some ways, such as their lack of contracts with MLB, there are ways in which they are different that would make it easier for the league to regulate them. Unlike low-level manufactures that supply goods to MNCs, either to a number of MNCs or a large supplier of goods, independent academies only supply MLB teams and the number of players “sold” is small.[86] Agents of the teams must scout the players represented by a buscón and come to an agreement with both the player and the buscón.[87] As described above, the connection in this regard has elements of a production-based supply chain, in which the MNC is more finely attuned to the behavior down the supply chain.[88] This means that the connection between MLB and the independent academies, despite the lack of a legal contract, may be much tighter than that between a supplier of widgets and the MNC that eventually buys them, thereby making it more feasible to regulate than it would be in a scenario in which hundreds of micro manufacturers ship fungible products to the next step up the supply chain.[89]

C. Sources of Potentially Applicable Labor and Human Rights Standards

Given the fact that under an analogy to an MNC supply chain, MLB may owe a duty to child athletes in independent academies, the next step is identifying the duties that MLB and the Dominican Republic may have under international law, as well as potential violations of such duties. Although I am not advocating bringing a claim before an international body, especially given the fact that the duty owed by MLB is only analogous to a typical MNC supply chain, sources of international law serve as a reference point for corporate codes of conduct developed under a corporate social responsibility model.

1. International Labor Organization (ILO)

The International Labor Organization (ILO) promulgates conventions that set international labor standards.[90] Both the United States and the Dominican Republic are members of the ILO. [91] Countries that ratify any given convention are obligated to make the convention a part of their national law.[92] However, in addition to voluntary ratification, in 1998 the ILO adopted the “Declaration of Fundamental Principles and Rights at Work.”[93] In the declaration, the ILO noted that the following are fundamental rights: “(a) freedom of association and the effective recognition of the right to collective bargaining; (b) the elimination of all forms of forced or compulsory labour; (c) the effective abolition of child labour; and (d) the elimination of discrimination in respect of employment and occupation.”[94] Whether or not a country has ratified the conventions underlying the fundamental rights, they “have an obligation arising from the very fact of membership in the Organization to respect, to promote and to realize, in good faith and in accordance with the Constitution, the principles concerning the fundamental rights which are the subject of those Conventions.”[95]

2. UN Convention of the Rights of the Child

In 1989, the UN General Assembly adopted and opened for ratification the Convention of the Rights of the Child.[96] The Convention covers a broad spectrum of rights tailored to the specific needs and dangers present for developing, non-autonomous children, covering such topics as child labor,[97] education,[98] and health and safety.[99] Both the United States and the Dominican Republic have ratified the Convention without reservation.[100]

The UN Committee on the Rights of the Child oversees compliance with the Convention.[101] The countries that have ratified the Convention are required to prepare reports documenting their compliance.[102] In addition, NGOs are allowed to file “alternative reports” with the committee if they believe the government’s report is not an accurate reflection of the conditions for children in the country.[103]

D. Potential Violations

1. Child Labor

One of the ILO’s core tenets is the prohibition of child labor, including the Minimum Age Convention (No. 138),[104] to which the Dominican Republic is a signatory.[105] The fundamental convention sets the minimum age for employment at 15.[106] However, there is an exception for countries “where the economy and educational facilities are insufficiently developed,” in which case the minimum allowable working age is 14[107] (13 for light work).[108] The Dominican Republic ratified under the exemption.[109] No matter which standard governs the Dominican Republic, if official MLB academies admit children under the age of 14, either because the children lie about their age or are taken in without a contract, the team’s actions would violate the treaty. Although there may be ambiguity as to whether players in unofficial academies are employees, players in the official academies undoubtedly are, as they receive a salary and the MLB academies are an extension of their respective team’s minor league system. However, it appears such violations are isolated, and if not accidental, then at least not flagrantly willful either.[110]

If we extend the earlier analogy of the independent academy as a small firm, at the domestic level there may be widespread violations of the child labor standard.[111] Although baseball may be a game and buscones would likely dispute the characterization of their young charges as employees, these independent agents make their living by “producing” baseball players for the official MLB academies. In such a situation, to the extent that the production of players results in conditions that would violate the convention, it makes sense to apply the convention to the players as a means of regulating the buscones. Therefore, in instances where a Dominican player is under the age threshold and is primarily pursuing baseball as a career—instead of playing in a school or recreational league as an ancillary matter to attending school—under the above conception of the domestic Dominican baseball industry as the bottom rung of a multinational supply chain, that activity is sufficiently analogous to employment to be a violation of the Minimum Age Convention.

2. Education

The UN Convention of the Rights of the Child (Article 28)[112] and the UN Declaration of Human Rights (Article 26)[113] raise education to the level of a human right. The right to education is a human right with a labor rights connection since it puts a laborer in a better position to realize her other rights, whether human, labor, political, or economic. The declarations and conventions call for compulsory primary education and insist on the right to secondary education.[114]

Other than in the rare instance in which a player would use deception to get into an MLB academy, it does not appear that the academies directly violate the right to education by taking players of an age that the international and regional communities declare should otherwise receive primary education. And while there might be pressure to drop out of high school to attend an academy, it does not appear that athletes are, strictly speaking, required to do so.

On the other hand, the presence of the MLB academies is the sole reason for the existence of the domestic baseball training system. In the domestic system, there is no doubt that children are dropping out of school to pursue playing baseball in the academies.[115] The buscones and independent academies that take in young children and prevent them from going to school directly violate the child’s right to education. The players that are then lucky enough to be signed by an academy often arrive without the requisite education. The players that are not signed by MLB academies are returned to the labor market with very little education—not even the rudimentary English skills taught in most MLB academies.[116]

Although the Dominican Republic requires nine years of compulsory education, it is clear that most children do not receive the required level.[117] Therefore, the argument could be made that the independent academy system does not make the situation any worse in the Dominican Republic than it would be without such a system. However, even if most participants in baseball academies might drop out in any event, the academies arguably violate the right to education by providing a reason for doing so. This argument is made stronger in cases in which it would be impossible or at least incredibly difficult, given the time commitment, for children both to train at a buscón-run facility and to finish compulsory education. As outlined above and developed further below, I believe MLB should bear responsibility for the actions further down the player production chain as the party ultimately responsible for the existence of the buscones and independent academies.

3. Health and Safety

The ILO has promulgated standards regarding occupational health and safety.[118] Although the Dominican Republic has ratified some health and safety standards for particularly dangerous employment sectors, such as construction,[119] it has not ratified broader, cross-industry standards.[120] While academy athletes do not toil under life-threatening working conditions, they may be at risk of preventable injuries, and may not receive adequate care for the injuries they do receive (perhaps just getting cut from the program instead of receiving any treatment for injuries). Likewise, to the extent that steroid use is under regulated, it presents health and safety concerns. Given the fierce competition and the all-or-nothing stakes, despite a testing program, players appear to abuse steroids in high numbers.[121] As with any of the potential violations noted in this article, the violations are likely worse and more pervasive in buscón-run independent academies. Since the buscón has no economic commitment to the players outside of the bonus they receive—a relationship that is severed the moment the buscón gets his cut of the bonus—some may actively promote steroid use or otherwise disregard player’s injuries and long-term health.[122]

More broadly, Article 32 of the UN Convention of the Rights of the Child recognizes the right of children to be “protected from economic exploitation and from performing any work that is likely to be hazardous or to interfere with the child’s education, or to be harmful to the child’s health or physical, mental, spiritual, moral or social development.”[123] There is no question that steroid use that is either forced or enabled by baseball organizations and personnel in the Dominican Republic violates Article 32. Likewise, a system of child labor that leaves the child susceptible to routine injury, as is the case in baseball—both as a matter of accidents and stress injuries that result in muscle, tendon, and ligament damage—without adequate preventative measure, would violate the Convention. Moreover, even without steroid use and injury concerns, any situation in which adults make money by taking a share of any eventual signing bonus received by children coerced to drop out of school and take up a profession that provides few transferrable skills and a low probability of success is surely both economically exploitative and harmful to a child’s development. As such, no matter how pervasive the use of steroids is,[124] the treatment of young baseball players in the Dominican Republic surely violates Article 32.

III. Corporate Codes of Conduct

A. Overview

There are two obvious places at which pressure could be directed to remedy the labor and human rights abuses taking place within baseball academies: the Dominican government and Major League Baseball. Most commentators have suggested primarily pressuring one or the other.[125] At least one writer has suggested that the situation in the baseball academies is primarily a Dominican problem, since she believes that to the extent abuses occur, they occur almost exclusively within independent Dominican-run academies; therefore, any violation of domestic or international law falls squarely at the feet of the nation responsible for such conditions.[126] Even if this claim is true, I believe that MLB is responsible for conditions in the independent academies. The presence of MLB is the primary, if not the only, reason such academies exist.[127] In that way, as outlined above, the independent academies are analogous to supplier factories from which MNCs buy commodities to make their goods. In fact, since the independent academies (and the Dominican Republic more generally) are producing players almost exclusively for MLB teams, MLB’s connection to the player protection chain is tighter than it might be for other MNCs, even when a MNC has a supplier contract with a factory in a buyer-driven commodity chain.[128] While buscones may not be employees of MLB, independent academies are sufficiently analogous to supplier factories to apply pressure to MLB to help regulate the behavior of buscones. In other words, both the Dominican Republic and MLB should share responsibility for abuses.

If pressure is only applied to the Dominican Republic, there is little hope of changing the status quo. Although the Dominican Republic is a signatory to the ILO and has education laws on the books that ostensibly make some of the practices within the independent academies illegal, because of intense poverty and an otherwise low level of development, there is little chance that increased scrutiny of labor practices alone would provide sufficient incentives to the Dominican Republic to turn off or even regulate the spout of cheap, young talent flowing into the MLB academies.[129] This is doubly unlikely given the island nation’s fascination with baseball and the large amount of money that MLB spends in the Dominican Republic each year.[130] As such, it is necessary to make MLB shoulder some of the burden to ensure that players have not had their rights abused.

Unlike the Dominican Republic, MLB is highly susceptible to public pressure. Part of the product they sell is a sense of sportsmanship and fair play. In this way, MLB is no different than the countless consumer brands that offer a good or service that depends in some degree on the goodwill of the consumer.[131] I believe that a combined approach, bringing attention to the Dominican Republic’s failure to protect its young players and using that information to expose MLB’s role in that failure, stands the best chance of improving the conditions for Dominican baseball players. Although legal channels may be technically available, such as bringing a claim against MLB under the Alien Tort Claims Act (ATCA), such a claim is highly unlikely even to get far enough to expose MLB to substantial negative publicity.[132] Although the ATCA has been used to prosecute torts “in violation of the law of nations,”[133] the state of the law is in flux.[134] It is currently unclear whether a corporation can be found responsible under the ATCA, and if one is, to what degree a corporation must be aiding and abetting a state action.[135] In this case, it is even less clear whether MLB owes a duty to the players in the independent academies that could be violated under the ATCA. Even if someone brought a claim against the Dominican Republic for labor rights abuses, the claim is highly unlikely to get any traction with a court. In its broadest reading, claims under the ATCA typically deal with extreme issues, such as political murder and forced labor.[136] Therefore, the most efficacious way to improve conditions for young baseball players in the Dominican Republic is for the public and NGOs to push MLB to develop a code of conduct that puts MLB in the position of working with the Dominican Republic to ensure that players who enter MLB academies have received the proper education and are not exploited as child laborers. Recognizing the limits of a legal challenge to conditions in the academies, this type of campaign would rely on the moral underpinnings of the domestic and international law as opposed to the formal mechanisms of the various international institutions. In this way, the campaign would resemble the anti-sweat shop campaigns that led MNCs such as Nike and Levi Strauss to develop corporate codes of conduct (CCOC) under which these companies attempt to regulate their suppliers. While another commentator has suggested a code of conduct as a method to remedy potential abuses,[137] previous scholarship has promoted an “all-or-nothing” approach that would do more harm than good to both the children in independent academies as well as the Dominican Republic more broadly.

B. MLB and a Corporate Code of Conduct

Major League Baseball is a MNC whose success is highly dependent on fan perception.[138] One way in which other MNCs whose business depends on public goodwill have attempted to garner approval is through the development of a CCOC for dealing with supplier factories and other contractors in the developing world.[139] Because of their vast economic power, the presence of MNCs may overwhelm the public regulatory system of many developing states. This outcome occurs even in situations where the company does not make a conscious effort to subvert regulation of labor standards. Where the country and its citizens are desperate for contract work, the race (to the bottom) to produce goods at low cost creates a situation where the country would rather have jobs than enforce the domestic labor laws. During the 1990s, in response to a number of reports on horrible working conditions in supplier factories for some of the leading apparel and sporting goods companies,[140] companies began to see the benefit of corporate social responsibility (CSR), one part of which was establishing CCOC as a method of dealing with public outrage over MNCs’ complicity in labor and human rights abuses. While some of the codes of conduct may have been drafted proactively and presented to the public as an altruistic reflection of the corporation’s moral principles, many such codes were passed in response to a human or labor rights scandal, uncovered by activists, non-governmental organizations (NGOs), or journalists, implicating the company.[141] Over time, some corporations have also seen CCOC as a means to achieve other business ends, such as efficiency and retention of employees[142] and not merely as a public relations ploy. Whatever the reason for passing the code of conduct, the measure of success of any code of conduct is both the substance of the code itself, and, more importantly, the tangible steps taken by the MNC to prevent abuses. Although many CCOC began as vague, aspirational statements of principles, increased transparency, monitoring and enforcement efforts, including the use of independent agencies, have moved many CCOC past hortatory claims to enforceable regulatory mechanisms. [143]

Companies such as Levi Strauss,[144] Nike,[145] and Reebok[146] want to appear to be good corporate citizens. They have done so, in part, by developing codes meant to establish the company’s commitment to core labor, human, social, or economic rights. Organizations such as the Federation Internationale de Football Association (FIFA), the Swiss organization that governs international professional soccer, have created labeling programs that require suppliers of “official” gear to abide by such standards.[147] Under either type of code, many CCOC incorporate labor standards as set out by the ILO “Declaration of Fundamental Principles and Rights at Work.”[148] This often means making sure that the factories that are part of their production chain, either as producers of the product or the raw materials from which the products are made, respect certain minimum rights. Because it appears to be particularly frowned upon by Western consumers, the use of child labor is of core importance.

Levi Strauss is an example of a MNC with a highly developed, self-imposed code of conduct. Levi Strauss initially developed its code not just for ethical reasons, but also to protect its brand image in the face of other scandals implicating apparel companies in the abusive labor practices of their overseas contractors.[149] Levi’s dealings with contractors in countries across the globe are governed by the two-part “global sourcing and operating guidelines.”[150] Through its “country assessment guidelines,” Levi Strauss determines if a country in which it is considering doing business meets minimum levels of health and safety protections, human rights guarantees, a functioning legal system, and political stability.[151] If Levi Strauss decides to do business within a country, it then monitors the conditions in its contracting factories under its “Terms of Engagement” (TOE).[152] The TOE covers wages and benefits, working hours, child labor, prison and other kinds of forced labor, discrimination, and disciplinary practices.[153] Levi Strauss works with the third party, non-profit monitoring organization, Verité, to ensure that its suppliers comply with the code of conduct. [154] In some instances, Levi Strauss has withdrawn from countries for violations of the TOE.[155] According to a self-published case study, Levi Strauss says it withdrew production from Mauritius because of TOE violations as a result of discrimination against migrant workers in Mauritian factories.[156] According to the company, it met with the U.S. government to ask them to pressure Mauritius to investigate and change labor practices within the country as a condition to retaining trade benefits with the U.S.[157] Levi Strauss maintains that its actions led the Mauritian government to create the “Inter-Ministerial Committee on Foreign Labor” to examine labor conditions for migrant workers and strengthen labor protections.[158]

IV. An MLB Corporate Code of Conduct for the Dominican Republic

A. Features of MLB that Would Effect the Implementation of a CCOC

The hierarchy of the League is a unique feature that could make it easier to monitor and enforce a code of conduct. MLB as an organization oversees and coordinates 30 franchise teams. It, along with the players association, has developed a complicated set of rules governing how teams operate and how they treat their players.[159] Since MLB already operates as a top-down governing body of the teams, it is in a position to promulgate a CCOC that applies to the behavior of the franchises. It is also better able to monitor and enforce a code against teams, since unlike a manufacturer who receives the products produced by noncompliant suppliers, violations by low level producers (independent academies and buscones) directly benefit only the franchises. Because the League has less of a stake in whether a team is able to exploit players,[160] it will be better able to make sure that the teams are living up to their obligations. However, while this might be theoretically true, it is also true that MLB has been reticent to act as a monitor and enforcer in the past, such as when it was pressured to institute a drug-screening program in the wake of steroid scandals in the league.[161] The issue of developing a code of conduct for MLB academies would not likely be contentious in the same way, since the players association does not represent the players in the Dominican academies.

There are also a number of ways in which MLB’s relationship with the Dominican Republic is different than the typical MNC-developing country relationship, which make it difficult for MLB to enforce a code or create a situation in which strictly enforcing a code would have a deleterious impact on the same young athletes MLB should be trying to help. For instance, MLB’s relationship with buscones and independent academies is different than that between MNCs and in-country contractors. As noted earlier, MLB academies do not have an ongoing contractual relationship with independent academies and buscones. In fact, although MLB teams may visit independent academies or meet with scouts to determine which players they would like to sign, the only contractual relationship is likely to be between the boys and the buscones who represent them. The lack of a contractual relationship makes it even harder to regulate the behavior at the very bottom.[162] Even if MLB develops a CCOC that calls for compulsory education and the prevention of the usage of child labor, buscones, parents, and players will continue to see a system that results in very large payout for those that make it to the top. CCOC or not, it would be nearly impossible for MLB to have in-school monitors to make sure potential future players are receiving an adequate education. Likewise, if a young boy is a promising baseball talent, but dropped out of school before completing compulsory education, there is an incredibly strong incentive for that child to forge the proper documentation or otherwise shirk the CCOC. This problem is exacerbated by the fact that the education system is poor in the Dominican Republic to begin with, and that, baseball player or not, many children drop out of school after the 5^th grade.[163] After all, the player very literally has nothing to lose and everything to gain.

Similarly, even if MLB were to institute a code that requires players to receive compulsory education and prohibits independent academies from engaging in practices that amount to the use of child labor, an all-or-nothing approach would likely end up only hurting the Dominican Republic as a whole. This is analogous to a CCOC that requires a company to pull out of a country entirely if it finds that the factory or the country in which it operates is a flagrant violator of code provisions. A CCOC with such an enforcement mechanism gives the MNC leverage to make its partner accede to its demands—at least where the partner country or factory is able to meet those demands.[164] However, there are situations in which a partner cannot meet the standards set by the MNC. If the only recourse is ending business with that firm or in that country, while it might assuage the guilt of Western consumers, it does little to improve the conditions for workers in that country or factory who could have used the capital that the MNC would have expended to improve their economic situation, perhaps long term.

This situation is exacerbated in an industry like baseball and in a country like the Dominican Republic, where the primary focus of the code would be the regulation of behavior at the very bottom of the production chain. This behavior is typically difficult to regulate, given the fact that employees’ only competitive advantage is the low cost of their labor. This is especially true since every boy is in competition with every other boy; there is every incentive to cheat the system, especially when complaining about one’s treatment is likely the surest way to lose one’s chance to advance.[165] Even in the face of MLB pulling out of the country, as long as individual buscones see that other scouts and players are able to get an advantage out of not following the CCOC, they will also cheat the system. If an individual follows the rules and others do not, the individual loses out. If MLB pulls out of the country because the independent academies and buscones refuse to follow the rules en mass, the individual does not lose any more, but the rest of the country does, since MLB takes its $75 million a year investment with it. Also, without MLB in the country developing talent, there would be fewer Dominican players in the league and, therefore, less money being sent back by such players to families and communities throughout the Dominican Republic.

Instituting a corporate code of conduct vis-a-vis independent academies in the Dominican Republic presents another unique challenge. The product that the academies produce is not a good but a laborer in the form of baseball players. This presents problems because, in addition to creating ambiguity as to whether a player should be considered a laborer at all, it compounds the enforcement issues outlined above. If a code of conduct prohibits an MLB academy from signing a player who was taken out of school or otherwise exploited, it is an injury almost exclusively borne by the individual player. Therefore, any code of conduct adopted by MLB regarding the Dominican Republic should be drafted to avoid harming players, who, through little fault or their own, may have already been exploited by overzealous buscones. Any solution should work to create a closer connection between MLB and the independent academies and scouts who provide the academies with players. Likewise, instead of merely pulling out of the country or even scaling back its investment, any solution should provide incentives for MLB, the Dominican Republic, and domestic academies to work together to make sure core labor and human rights standards are met. This would go beyond the all-or-nothing approach of many codes and could lead to both a greater investment in the country by MLB and an increased commitment to public regulation by the Dominican Republic.

B. Suggested Features of an MLB Code of Conduct

1. Establish a Buscón Licensing Program

One way that MLB could potentially attempt to remedy the situation would be the adoption of a code of conduct that includes a buscón licensing program under which buscones would not be allowed to represent players unless they can verify that players under their control have finished compulsory education and have not been exposed to unduly hazardous conditions while under a buscón’s care. In the Dominican Republic, children are currently required to finish eight years of compulsory education.[166] However, most children drop out after the fifth grade.[167] Even if this is the case, since entrance to MLB is the primary reason such children take up baseball and its academies are the only real conduit for talent off of the island, MLB has an imperative to make sure that it is not responsible for children leaving school.

Given both the state of the Dominican education system and the international norm of requiring only compulsory education,[168] requiring players to have graduated high school is currently an unrealistic goal. In fact, such a standard would do more harm than good. If MLB teams were unable to sign Dominican players who have not completed high school, MLB teams would have to scale back their operations in the Dominican Republic without a corresponding educational benefit to potential players.

A code of conduct provision requiring documentation of completion of compulsory education would also have the effect of reducing any child labor violations within the independent academies. Requiring children to finish compulsory education would help correct the school-baseball balance. If baseball training was relegated to an after school activity, it would be less likely to qualify as employment under common law agency principles, since both the duration of the activity would be shortened and the player would be better able to set the bounds of his participation.[169]

One Note has argued that creating an obligation on the part of MLB to make sure academy players received an adequate education is not feasible because, even if MLB has an obligation to make sure the children who play in its academies have received an education, MLB’s efforts would not affect the children playing in independent academies.[170] If a code of conduct results in only baseball players receiving a better education in the Dominican Republic, I would consider it a success. MLB might have a general obligation to all children on some vague moral level, but as I argue in my prior analysis, it has a specific obligation to the children who drop out of school to become baseball players and enter the independent academies that supply players to MLB academies. There are also the indirect effects of both drawing more attention to the Dominican Republic’s poor educational system and contributing to the solution.[171] Heightened public awareness of the educational crisis in the Dominican Republic may spur further action by the Dominican government, NGOs, and other MNCs. Therefore, even if MLB only has an obligation to its players, that encompasses an obligation to verify that baseball players entering its academies have received adequate education. By enforcing such a rule, MLB would help children throughout the Dominican Republic.

Commentator Adam Wasch, focusing on prohibiting child athletes from working at the expense of education, provides an example of what a code of conduct of this kind might look like:

Enforcement of MLB’s Child Labor Code of Conduct. Major League Baseball will discontinue cooperation with any third-party that persists in non-compliance with our MLB Child Labor Code of Conduct.

Apprenticeship Programs. Major League Baseball accepts apprenticeship programs for children between the ages of fourteen and sixteen years, but only under certain conditions. The total number of hours spent on work and school together should never exceed seven hours per day. The apprentice must prove that work is not interfering with the child’s education, that the apprenticeship is limited to a few hours per day, that the work is light and clearly aimed at training, and that the child is properly cared for, housed, and fed. Apprenticeship program directors must file a report with the league that details that their apprentices are receiving a quality, formal education. We will not work with apprenticeship programs that do not comply with these terms.

Special Recommendations. Major League Baseball acknowledges that according to Article 1 of the UN Convention on the Rights of the Child, a person is a child until the age of eighteen. We therefore recommend that children in the age group of 14-18 be treated accordingly (i.e., by limiting the total number of working hours per day and implementing appropriate rules for overtime). Children in this age group are not allowed to perform strenuous work that will impair their ability to receive an education.[172]

While his proposed Child Labor Code of Conduct is a decent first step, it would likely be insufficient to remedy the child labor and education violations committed by buscones. First, it has been established that the record keeping system in the Dominican Republic is open to manipulation.[173] As such, an enterprising player or buscón could likely forge any required documentation to show that the requisite education has been received. This is especially true for exceptionally talented players, for whom there is an incentive to forge documentation or to do a less than thorough job of investigating dubious documents.[174] On the other hand, it is necessary because it makes the Dominican Republic responsible for enforcing its own education laws if it wishes to keep MLB academies in the country. After all, if verification becomes too difficult, MLB teams might significantly scale back their operations in the country.

Likewise, Wasch’s code suffers from an adversarial, all-or-nothing approach. Under his code, independent providers of baseball players would operate under a cloud of suspicion; and, if they fail to meet the strictures of the code, they will be cut out.[175] In a country without adequate regulation to prevent buscones from violating labor rights, a code that treats each buscón or academy as an independent data point will likely be ineffective in bringing the domestic system in line with international labor standards. As long as some independent actors are able to get away with violating labor standards, there will be intense pressure for others to push their luck.

A potentially more effective approach, which would retain the same thrust as Wasch’s code, is one that creates a closer partnership between MLB and the independent actors which supply the MLB academies with players, as well as the government of the Dominican Republic. For instance, the code could require Dominican scouts and independent academies to apply for a license from MLB. The license would require the independent provider to abide by certain minimum labor and educational standards, as set by Dominican law. In turn, MLB would require the teams in the league to sign only players who are represented either by a licensed scout or institution. Alternatively, MLB teams could sign players who are at least 17 years old and are currently attending or have already graduated from high school and, therefore, have received both the compulsory education required by Dominican law and are eligible to be signed under MLB rules governing international players. This combined approach would provide incentives for independent providers to abide by Dominican law but would not punish those players who decided to stay in school past the compulsory period. In fact, creating a closer relationship with buscones would inure to the benefit of the scouts, since only they would be allowed to make a premium off of players signed by MLB teams, likely more than offsetting the cost of compliance with the code.

The franchise structure of MLB could be useful in facilitating a partnership between the teams, buscones, and government. Since MLB is a corporation that exists outside of the teams it oversees, it has the ability to implement a code that governs the teams and buscones without the need for an outside monitoring group (though perhaps there is a role for such a group). Through the monitoring program, MLB would oversee the independent producers. Under this approach, instead of immediately withdrawing a license when violations are found, MLB should require the independent actors to demonstrate why they are unable to meet their obligations and what steps they are taking to reach compliance. MLB already has an international office in Santo Domingo.[176] If it implements a licensing program for buscones, it could use its office in the Dominican Republic to serve as a meeting place for all of the regulated entities to discuss violations, as well as successes and concerns with the program. For instance, buscones may complain that the education system in the country is in bad shape; children are not actually required to finish compulsory education and, in fact, most do not—therefore, the independent operators are unable to meet their obligations under the licensing program. The dialogue created through a partnership between MLB and independent baseball scouts could then be used to pressure the government to better enforce its education laws.[177] A code that produces communication instead of merely the threat of withdrawal of benefits would likely benefit young baseball players and the Dominican Republic.

2. Require Teams to Provide Additional Education, Either On-Campus or Through a Partnership with Local Schools

Even if MLB develops partnerships with buscones and independent academies, given the economic jackpot that a player receives if they are skilled enough to make it to the major leagues, the pressure to cheat would still be intense. Therefore, MLB may need to take additional proactive steps to ensure that its presence in the Dominican Republic does more good than harm. One method would be to require MLB academies to offer additional education to players in the academy. This could be accomplished either by bringing teachers to the academies to teach classes in addition to the English and American culture classes already taught, or alternatively, academies could provide busing from the academies to nearby schools. This educational component would be required for the high-school-age players (16-18) and, perhaps, could also be offered to older players who did not graduate high school as an optional program.

In fact, some MLB teams have already instituted additional education at the academies. As noted earlier, five teams currently either bus players to nearby schools[178] or have on-site educational facilities.[179] Given the relatively low cost to the teams,[180] the high value to the players, and the remedial benefit for athletes who dropped out of school to pursue baseball, there should be a push to get MLB to add such a provision to any code of conduct it adopts. The policies of the MLB academies would be easier to monitor than those in the independent academies. If MLB discovers that a team is not fulfilling the educational requirement, the league could impose fines and implement the program itself, charging the cost to the team. While MLB should be more willing to penalize a team than they would an independent operator, the penalty should be aimed at improving conditions for players and should not include forcing the team to close the academy, since the effects of that penalty would be felt most strongly by the Dominican players.

3. International Draft

Perhaps the mechanism most likely to change the fortunes of players in the Dominican Republic is the institution of an international draft. In fact, the latest collective bargaining agreement (CBA) between MLB and the Major League Baseball Players Association calls for an investigation into instituting such a draft.[181] An international draft would require teams to pick all first-time signers, instead of leaving those players subject to free agency and the vagaries of the market. Players chosen in an international draft may fall into “slots” with corresponding signing bonus values.[182] Even if there were not a hard slotting system with mandatory signing bonuses, a player would only be able to negotiate with the team that picked him. Proponents of an international draft believe it would be more fair, both to players from developing countries as well as to players already subject to the draft, who may not be able to command the same kind of premium that a proven talent from Japan or Korea could get.[183]

Most significantly, the institution of an international draft would largely undercut an MLB team’s incentive to maintain an academy in the Dominican Republic. The academy could still be the first stop for many drafted Dominican players; however, the reason that teams run academies is so they are able to give a large number of cheap players a test run before making a larger commitment to the players and sending them to the U.S. to play in the minor, and perhaps eventually, the major leagues. If teams were only allowed to sign the limited number of players that fell to them through a draft, which encompassed not only Dominican players but players from all over the world, this key function of the academies would be lost.

Some have argued that undercutting MLB teams’ incentive to operate academies in the Dominican Republic is a good thing.[184] While MLB’s current policies may contribute to labor and human rights violations in the country, the background conditions in the Dominican Republic are not rosy. MLB teams spend a significant amount of money in the country, including providing some infrastructure improvements.[185] Likewise, players in the official MLB academies make a wage that is many times higher than the prevailing factory wages.[186] Therefore, while there may be gains, such as more children pursuing occupations other than baseball, the goal should be for MLB to make a greater commitment to helping the Dominican Republic reach international standards—not reducing MLB’s investment in the country. After the institution of an international draft, there might not even be an appreciable decline in Dominican boys dropping out of school to pursue it; even without an academy system, there is still the lure of the enormous payday and a tradition of players who went on to become international sporting celebrities. Likewise, while there may be less money to go around, an international draft would likely not undercut the incentives for buscones to develop, represent, and garnish the signing bonuses of players to the same degree that it would reduce MLB’s investment in the country. Therefore, while it might be an inevitable development, it is not likely a good one for the Dominican Republic or its baseball players.

V. Development of an MLB Corporate Code of Conduct

Currently, MLB does not have a corporate code of conduct independent of the collective bargaining agreement (CBA) negotiated between team owners and the Major League Baseball Players Association (MLBPA), whose only relevant provision for this discussion is the requirement that MLB teams offer English-as-a-second-language courses if any major league player requests it.[187] Additionally, MLB maintains an office in Santo Domingo in the Dominican Republic, which has established rules regarding field conditions, housing, and nutrition in the academies.[188] Therefore, the rules governing MLB’s conduct in the Dominican Republic are the bare-bones requirements found in Rule 3(a)(1)(B)(i) and (ii) requiring that players are either 17 when signed, or will be 17 by the end of the current season.[189] That means most players in the Dominican MLB academies receive little outside training besides baseball-related English classes, and even then it is generally agreed that players do not develop English skills until they come to the United States.[190] Given the unique features of the academy system—including very young players, dire poverty, lack of government regulation, and an incredibly small chance of success—it is unlikely that Dominican players will develop the bargaining power necessary to substantially change their conditions. Any player who speaks out would likely be immediately let go from the academy. As such, the pressure to develop a code of conduct will need to come from an outside combination of public and MLBPA pressure, backed by the guidelines furnished by international labor and human rights law.

Although the MLB rules govern player selection and development, whenever there is conflict between the rules and the CBA, the CBA governs.[191] This means that players through the MLBPA have the ability to shape the rules to protect labor rights in the Dominican Republic. In fact, given the strength of the player’s association, its cooperation may be required to institute any rule change or corporate code of conduct governing MLB behavior in the Dominican Republic. Therefore, while an independent corporate code of conduct would help protect Dominican players, the player’s association insistence on adding the code to the CBA would carry additional moral force and operate not only as a self-imposed code but also as a binding contract with the MLBPA.

One potential problem with taking this approach is convincing the MLBPA to use their bargaining power to protect players not currently in the association. Even Dominican players, who make up a substantial minority of MLB players,[192] may not see the benefit in pushing for better treatment of other Dominican players; after all, they made it out of the Dominican system—some of them as millionaires. Also, as one commentator has pointed out, Dominican players may also be acutely aware of their fragile position as foreign baseball players, and may not be willing to stick their neck out, lest they be labeled troublemakers.[193] In fact, given the precarious position of most MLB players, even those who believe the situation in the Dominican Republic needs to change may be unwilling to rock the boat for the benefit of young future players. However, if the issue in the Dominican Republic could be shown to have a negative effect on the major leagues, the MLBPA might make a greater push toward remedying the education and child labor problems in the Dominican Republic. Perhaps the MLBPA would become stronger advocates for change in the Dominican Republic if it could be shown that the lower bonuses and salaries paid to players signed in the Dominican Republic suppress salaries across the league. Similarly, the MLBPA might take a lead role if the relatively unregulated international free-agent market leads MLB to focus attention on the Dominican Republic, churning through many players, few of whom become members of the association, instead of focusing on countries covered by the draft, in which a higher percentage of players initially signed, eventually make it to the majors. In that instance, the MLBPA would be most likely to push for a fix that levels the playing field for all potential major league players, such as the institution of an international draft.

Even without the involvement of the player’s association, MLB could adopt a corporate code of conduct that requires MLB teams operating in the Dominican Republic or elsewhere to abide by a set of rules, since those players are not currently covered by the CBA. In fact, unlike other codes of conduct, by which companies self-regulate, there is more distance between MLB and its independently owned franchises; while still self-regulation, this structure separates enforcement and compliance. However, MLB has been reticent to fully confront the labor rights violations that their presence in the Dominican Republic might cause. This reticence persists despite years of media coverage on the potential problems caused by academies.[194] The plight of Dominican players was even documented in the feature film Sugar.[195]Therefore, it may require additional public pressure for MLB to see that a CCOC is in its best interest.

Admittedly, a public campaign faces some pitfalls that were not present in the campaigns against sweatshop labor in the 1990s. For one, the problem is potentially more nuanced. Unlike a sweatshop where all of the workers, perhaps including child laborers, make subsistence (or lower) wages for work performed under dangerous conditions, there are large numbers of Dominican-born players in MLB that make millions of dollars a year, some of whom are the face of their franchise.[196] The plight of school-age children may not seem so pressing when there is such dramatic upside for a few lucky players. Similarly, unlike the anti-sweatshop movement, which drew strength from many interrelated groups and causes,[197] there may not be a similar block of baseball fans dedicated to labor rights. I have no doubt that there are individual baseball fans who care about labor conditions in the Dominican Republic, but baseball is, after all, a spectator sport, and many baseball fans wish to escape real-world problems. If the average fan’s critical faculties are engaged, they are likely directed toward dissecting the decisions of the team on the field, not the labor conditions that produced the players on the team. [198] However, it is likely that the prospect of getting Western consumers to care about the conditions under which their jeans and shoes were produced seemed similarly dire in early days of the anti-sweatshop movement.

On the other hand, because the problem is less extreme than some labor law violations, such as widespread labor and health and safety violations throughout a global supply chain, and the fixes would cost less, it may take less pressure before MLB decides that the benefit of implementing a code of conduct regarding players in the Dominican Republic is worth the cost. In fact, through continued discussions about possibly instituting an international draft, MLB may be coming to the conclusion that its brand will suffer if it continues to ignore the circumstances that produce players in the Dominican Republic. The degree to which a commitment to even an international draft is real, and not just a way of kicking the can down the road, is yet to be seen.[199] Although management and the players association may both agree with the draft in principle, neither appears to be willing to expend bargaining power to make it a reality. Without additional public pressure, even this small change may never come to pass.

Conclusion

While MLB has delivered benefits to the Dominican Republic, including making some of its citizens very rich, baseball has left many aspiring Dominican players who pursue a career in the big leagues with little educational or vocational skills. Exacerbating this problem is the presence of buscones, who have no incentive to make sure the children they train get a proper education or receive sufficient medical care. Given that MLB has contributed to this situation, as the only organization paying for young baseball players, it should bear some responsibility for remedying the educational and health deficit. Like MNCs, MLB should adopt a corporate code of conduct to regulate its behavior in the Dominican Republic. A corporate code of conduct, which institutes a licensing program for buscones, would go part of the way toward ensuring that children receive a better education and are not otherwise abused by licensed buscones. However, since such a licensing program would promote dialog over rigid punishment, the code of conduct may also need to require MLB academies to provide supplemental education, at least until improvement is shown in school attendance and conditions improve for child players at independent academies. Some commentators have called for the institution of an international draft. While an international draft may help prevent abuses, it would also have the effect of removing the incentives for MLB to invest in the Dominican Republic. Finally, any solution to the problem would require increased public pressure, since MLB has been slow to confront the scope of its obligation in the Dominican Republic. Although the prospect of rallying baseball fans around labor conditions in the Dominican Republic may seem daunting, given the scope of the harm and the relatively small changes required, it may not be as insurmountable a task as it seems.

* J.D., 2013, New York University School of Law; B.A., 2005, University of Wisconsin-Milwaukee. I would like to thank Cynthia Estlund for her helpful substantive and structural suggestions.

[1] See Sean Gregory, Baseball Dreams: Striking Out in the Dominican Republic, Time, Monday July 26, 2010, available at http://www.time.com/
time/magazine/article/0,9171,2004099-1,00.html.

[2] See Diana L. Spagnuolo, Swinging for the Fence: A Call for Institutional Reform as Dominican Boys Risk Their Futures for a Chance in Major League Baseball, 24 U. Pa. J. Int’l Econ. L. 263.

[3] See Gregory, supra note 1.

[4] Id.

[5]See Jesse Sanchez, Creating Complete, Healthy Players, MLB.com, http://mlb.mlb.com/news/article.jsp?ymd=20070918&content_id=
2215646&vkey=news_mlb&fext=.jsp&c_id=mlb.

[6] See Gregory, supra note 1.

[7] Id.; Steve Fainaru, The Business of Building Ballplayers, Washington Post, June 17, 2001, at A01, available at http://www.latinamericanstudies.org/sports/dominican-ballplayers.htm [hereinafter Fainaru, Business of Building].

[8] See Gregory, supra note 1.

[9] See Spagnuolo, supra note 2, at 275.

[10] See Bob Ruck, Baseball’s Recruiting Abuses, Americas Quarterly, available at http://americasquarterly.org/node/2745 (describing MLB’s overwhelming presence in the Caribbean, and how this presence led to the development of the buscón system).

[11] See Major League Rules, available at http://bizofbaseball.com/docs/MajorLeagueRules-2008.pdf [hereinafter MLR].

[12] Id. § 3(a)(1)(A) (“A player who has not previously contracted with a Major or Minor League Club, and who is a resident of the United States or Canada, may be signed to a contract only after having been eligible for selection in the First-Year Player draft.”).

[13] Id. § 4(a).

[14] J.P. Breen, Hard Slotting is Bad for Baseball, Fangraphs (Nov. 9, 2011), http://www.fangraphs.com/blogs/index.php/hard-slotting-is-bad-for-baseball/.

[15] MLR, supra note 11, § 4(h) (“A player who is selected at a First-Year Player Draft and who does not sign a Major or Minor League contract before being removed from the selecting Club’s Negotiation List . . . shall be subject to selection at the next First-Year Player Draft at which the player is eligible for selection.”).

[16] Id. § 3(a)(2)(A).

[17] Id. § 3(a)(3)(B)-(E).

[18] Even though the percentage of high school players drafted rose between the 2011 and 2012 draft, high school players still only make up 30% of the players drafted. See Kevin Askeland, MLB Draft 2012 by the Numbers, Max Preps, http://www.maxpreps.com/news/
Yb40hby1E0Ocecbsw72k9w/mlb-draft-2012-by-the-numbers.htm.

[19] MLR, supra note 11, § 3(a)(1)(B)(i).

[20] Id. § 3(a)(1)(B)(ii).

[21] Arturo Marcano & David P. Fidler, The Globalization of Baseball: Major League Baseball and the Mistreatment of Latin American Players, 6 Ind. J. Global Legal Stud. 511, 538 (1999) (“The power of the MLB scouts vis-‡-vis a baseball prospect in Latin America is greater than it was in the United States (generally speaking) because of the poverty and relative lack of education suffered by the prospect and his family. As a representative of a MLB team, a scout with the power to sign prospects has tremendous leverage over a vulnerable young player from a poverty-stricken country. In addition, although many MLB teams scout in Latin America, potential prospects may not see scouting frenzies over their talent because the scouting system is not as well structured as the pre-draft American system was. These factors lead to Latino prospects who are generally willing to sign anything a MLB scout puts in front of them without receiving anything close to the kind of signing bonuses received by American baseball draftees.”).

[22] See Posting System, Baseball Reference, http://www.baseball-reference.com/bullpen/Posting_System (in 2011, MLB’s Texas Rangers paid the Hokkaido Nippon Ham Fighters over $51 million to negotiate a contract with their star pitcher Yu Darvish).

[23] See Teams by Affiliation, MILB.com, http://www.milb.com/milb/info/affiliations.jsp.

[24] See Sanchez, supra note 5.

[25] See Adam Wasch, Children Left Behind: The Effects of Major League Baseball on Education in the Dominican Republic, 11 Tex. Rev. Ent. & Sports L. 99 (citing Office of the Commissioner MLB-Dominican Republic, MLB Investment in the Dominican Republic, http://www.dominican-baseball.com/articles.php?artid=9).

[26] See Spagnuolo, supra note 2, at 269-270 (“Many allege that not all players at the academies are actually signed, and that boys between the ages of twelve and sixteen often attend the camps.”).

[27] See Spagnuolo, supra note 2, at 275; Vanessa Marie Zimmer, Dragging Their Devotion: The Role of International Law in Major League Baseball’s Dominican Affairs, 4 Nw. U. J. Int’l Hum. Rts. 418, 421 (2005).

[28] See Zimmer, supra note 27, at 421 (noting that while it is clear that forging documentation is a problem, it might be more prevalent at the other end of the spectrum with players falsifying their ages to appear younger than they are. This behavior only reinforces the notion that players believe teams put a premium on youth.).

[29] See Spagnuolo, supra note 2, at 270.

[30] Id.

[31] See Gregory, supra note 1.

[32] Id.

[33] Id.

[34] See Spagnuolo, supra note 2, at 272-73.

[35] See id., at 271 (referring to this method of signing Dominican players as the “Boatload Mentality”).

[36] See Spagnuolo, supra note 2, at 271(“Critics argue that this unabashed behavior by scouts only proves their point: MLB sees these players as commodities and fails to recognize the long-term negative implications that some of their actions might have on the players’ lives.”).

[37] See Gregory, supra note 1.

[38] Major League Baseball-Major League Baseball Player’s Association Collective Bargaining Agreement, § 7(B)(1) [hereinafter CBA]. In November 2011, MLB and MLBPA negotiated a new CBA extending through the 2015 season, by the end of which the minimum salary will be $500,000 per season. Jayson Stark, Major League Baseball Players, Owners Sign New Labor Agreement, ESPN.com, http://espn.go.com/mlb/story/_/id/7269300/
major-league-baseball-players-owners-sign-new-labor-agreement.

[39] See Gregory, supra note 1.

[40] CIA, The World Factbook, https://www.cia.gov/library/publications/the-world-factbook/geos/dr.html.

[41] In fact, it appears that those players who are cut due to injury after they sign may never receive their signing bonus. See Marcano & Fidler, supra note 21, at 545.

[42] If fact, it appears this “succeed at all costs” mentality does not end once Dominican players reach the United States. Between 2005 and 2007, 58.5% of all players who tested positive for performance-enhancing drugs across major and minor league operations, including those in Latin America, came from the Dominican Republic. See Arturo J. Marcano Guevara & David Fidler, Fighting Baseball Doping in Latin America: A Critical Analysis of Major League Baseball’s Drug Prevent and Treatment Program in the Dominican Republic and Venezuela, 15 U. Miami Int’l & Comp. L. Rev. 107, 123-24 (2007).

[43] The dangers are exacerbated by the fact that many players take steroids intended for animals. See Fainaru, Injecting Hope—and Risk: Dominican Prospects Turn to Supplements Designed for Animals, Washington Post, June 23, 2003, at A01, available at http://www.majorwager.com/
forums/mess-hall/122165-injecting-hope-risk.html [hereinafter Fainaru, Injecting Hope].

[44] See Sanchez, supra note 5.

[45] See Sanchez, supra note 5. The article notes that four MLB teams, the Boston Red Sox, Cleveland Indians, New York Mets and Seattle Mariners, have established connections with high schools in Santo Domingo.

[46] See Wasch, supra note 25, at 108 (noting that the San Diego Padres built class rooms at their facility and have also “partnered with the Dominican Government, the American Chamber of Commerce in the Dominican Republic and the U.S. Agency for International Development (USAID) to improve the quality of basic public education in the Dominican Republic, specifically, . . . the surrounding schools that sit only a few miles away from the team’s new multi-million dollar baseball academy”).

[47] See Gregory, supra note 1(noting that in 2010, of the 31 prospects in the academy during that school year, 29 passed their current grade level and 5 were expected to earn high school diplomas).

[48] See Gregory, supra note 1; Fainaru, Business of Building, supra note 7.

[49] See Gregory, supra note 1; Fainaru, Business of Building, supra note 7.

[50] Fainaru, Business of Building, supra note 7(stating that not only do buscones take a cut, but in some cases steal the signing bonus from the player).

[51] Fainaru, Business of Building, supra note 7.

[52] Fainaru, Business of Building, supra note 7.

[53] U.S. Dep’t of Labor, Bureau of Int’l Labor Affairs, Dominican Republic (2005) available at http://www.dol.gov/ilab/media/reports/iclp/tda2004/
dominican-republic.htm#_ftnref1332 [hereinafter ILAB].

[54] See Santo Domingo Office Mission Statement, MLB.comDR, http://mlb.mlb.com/dr/santo_domingo.jsp.

[55] See Wasch, supra note 25.

[56] See Fainaru, Injecting Hope, supra note 43.

[57] See Gregory, supra note 1.

[58] See Mike Rosenbaum, Examining the Percentage of MLB Draft Picks Who Reach the Major Leagues, Bleacher Report (June 12, 2002), http://bleacherreport.com/articles/1219356-examining-the-percentage-of-mlb-draft-picks-that-reach-the-major-leagues. While Rosenbaum notes that sixty-six percent of first round draft picks reach the major leagues, the percentage drops precipitously from there, with players in the last rounds of the draft reaching the major leagues less than ten percent of the time.

[59] Id.

[60] There is a professional “winter league” in the Dominican Republic, but its players are drawn mostly from MLB players looking to stay in shape in the offseason, as opposed to a long-term domestic employment opportunity. See Dominican League, Baseball-Reference.com, http://www.baseball-reference.com/bullpen/Dominican_League (last visited Feb. 20, 2013).

[61] Spagnulo, supra note 2, at 278 (“Remittances from family members in the United States are one of the largest contributors to the Dominican economy.”).

[62] “‘Internationalization’ refers to the geographic spread of economic activities across national boundaries. As such, it is not a new phenomenon. Indeed, it has been a prominent feature of the world economy since at least the seventeenth century when colonial empires began to carve up the globe in search of raw materials and new markets for their manufactured exports. ‘Globalization’ is much more recent than internationalization because it implies functional integration between internationally dispersed activities.” Gary Gereffi, Outsourcing and Changing Patterns of International Competition in the Apparel Commodity Chain (2002), available at http://www.colorado.edu/IBS/PEC/gadconf/papers/gereffi.html.

[63] Id.

[64] Id.

[65] Citing a Department of Labor Study, one commentator mapped J.C. Penny’s complex supply chain: “J.C. Penney purchases its childrens’ apparel from Renzo, a U.S.-based importer; Renzo imports from Robillard Resources, its Filipino agent; Robillard purchases from a number of contractors in the Philippines, one of whom is Castleberrry [sic]; Castleberry subcontracts to about thirty plants; these plants employ factory workers and subcontract out certain jobs like smocking or embroidery to home workers on a piece work basis.” Maria Gillen, The Apparel Industry Partnership’s Free Labor Association: A Solution to the Overseas Sweatshop Problem or the Emperor’s New Clothes?, 32 N.Y.U J. Int’l. L. & Pol. 1059, 1085 (2000).

[66] Id.

[67] Id.

[68] Id.

[69] See Gillen, supra note 65and accompanying text. For instance, the soccer federation, FIFA, has had difficulty regulating the production of soccer balls, in part because the production is spread between many low-level suppliers. In 1996, after the use of child labor to make “official” FIFA soccer balls was exposed, labor unions and international soccer’s governing body reached an agreement by which FIFA would regulate the labor conditions of soccer ball manufacturers. See Frederick B. Jonassen, A Baby-Step to Global Labor Reform: Corporate Codes of Conduct and the Child, 17 Minn. J. Int’l L. 7, 39-40 (2008). In addition to the physical requirements (such as size and weight), manufactures that wished to produce FIFA soccer balls, which included the corresponding label, would be required to meet the core ILO labor standards. Id. However, after FIFA established the program, NGOs uncovered continued use of child labor in the manufacturer of “official” FIFA soccer balls. Id. In 2003, FIFA and the ILO entered into an agreement to try and stop the use of child labor called “The Red Card to Child Labor.” Id. (citing FIFA Tolerates Massive Violations of Labour Law, Berne Declaration, (Feb. 5, 2002), available at http://www.evb.ch/en/p25001374.html.) However, as late as 2010, NGOs were still reporting widespread use of child labor in the manufacture of soccer balls. See Press Release, World Cup Soccer Balls: Exploitation Still the Norm, Clean Clothes Campaign, (June 7, 2010), available at http://www.cleanclothes.org/media-inquiries/press-releases/world-cup-soccer-balls-exploitation-still-the-norm.

[70] See Gereffi, supra note 62.

[71] See id.

[72] See Ruck, supra note 10.

[73] Id.

[74] See Gereffi, supra note 62.

[75] See Gillen, supra note 65 and accompanying text. When set against the attenuated buyer-side supply chain that Gillen describes, the relationship between MLB teams and buscones seems exceedingly familiar.

[76] In a series of cases, the United States Supreme Court has determined the statutory scope of the term “employee,” when used in a statute, and otherwise undefined, as describing the master-servant relationship as understood by common-law agency doctrine. See Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 322-23 (1992) (citing Cmty. for Creative Non-Violence v. Reid, 490 U.S. 730, 439-40 (1989). In looking at the situation in the Dominican Republic, I believe common-law agency principles are applicable here, especially since I am proposing guidelines to govern the behavior of a U.S. multinational.

[77] Cmty. for Creative Non-Violence v. Reid, 490 U.S. 730, 751-752 (1989). This list is adapted from the Restatement (Second) of Agency, which provides the following factors to determine whether one is a servant or independent contractor:

(a) the extent of control which, by the agreement, the master may exercise over the details of the work;

(b) whether or not the one employed is engaged in a distinct occupation or business;

(c) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision;

(d) the skill required in the particular occupation;

(e) whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work;

(f) the length of time for which the person is employed;

(g) the method of payment, whether by the time or by the job;

(h) whether or not the work is a part of the regular business of the employer;

(i) whether or not the parties believe they are creating the relation of master and servant; and

(j) whether the principal is or is not in business.

§ 220(2).

[78] See Gregory, supra, note 1.

[79] See, e.g., Robert A. McCormick & Amy Christian McCormick, The Myth of the Student-Athlete: The College Athlete as Employee, 81 Wash. L. Rev. 71 (2006); Jonathan L. H. Nygren, Forcing the NCAA to Listen: Using Labor Law to Force the NCAA to Bargain Collectively with Student-Athletes, 2 Va. Sports & Ent. L.J. 359 (2003); Stephen L. Ukeiley, No Salary, No Union, No Collective Bargaining: Scholarship Athletes Are an Employer’s Dream Come True, 6 Seton Hall J. Sports L. 167 (1996).

[80] See Fainaru, Business of Building, supra note 7.

[81] Id.

[82] See Cmty. for Creative Non-Violence, 490 U.S. 730.

[83] See Gregory, supra, note 1.

[84] As noted above, this can include the use of steroids. See Fainaru, Injecting Hope, supra note 43.

[85] See Ruck, supra note 10(“Parents, who are most often poorly educated and know little about the business of baseball, rarely serve as a check on less-than-ethical buscones.”).

[86] The number of players entering the academies each year is only in the hundreds, as opposed to the millions of small pieces that may be manufactured when making small machinery, or, say, shoes. See Gregory, supra note 1.

[87] See Fainaru, Business of Building, supra note 7.

[88] See Gereffi, supra note 62.

[89] Id. (noting that an “attenuated supply chain is . . . perhaps the biggest obstacle to ensuring a code of conduct is implemented at all levels of production.”).

[90] Constitution of the International Labour Organisation, available at http://www.ilo.org/ilolex/english/constq.htm (last visited Apr. 13, 2012) [hereinafter ILO].

[91] Alphabetical List of ILO Member Countries, http://www.ilo.org/public/english/standards/relm/country.htm (last visited Apr. 13, 2012).

[92] See ILO, supra note 90, 19 ? 5(d).

[93] ILO Declaration on Fundamental Principles and Rights at Work and its Follow-up (adopted June 18, 1998 (Annex revised June 15, 2010)), available at http://www.ilo.org/declaration/thedeclaration/textdeclaration/lang–en/index.htm (last visited Apr. 13, 2012).

[94] Id. ? 2 (emphasis added).

[95] Id.

[96] UN Convention on the Rights of the Child, adopted Nov. 20, 1989, 1577 U.N.T.S. 44 (entry into force Sep. 2, 1990), available at http://www.ohchr.org/EN/ProfessionalInterest/Pages/CRC.aspx.

[97] Id. at Article 32.

[98] Id. at Article 28.

[99] Id. at Article 32.

[100] Status of treaty ratification as of Apr. 13, 2012, available at http://treaties.un.org/Pages/ViewDetails.aspx?src=TREATY&mtdsg_no=IV-11&chapter=4&lang=en.

[101] Monitoring the Fulfilment of States Obligations, UNICEF, http://www.unicef.org/crc/index_30210.html (last updated Nov. 5, 2005).

[102] Id.

[103] Id.

[104] Convention Concerning Minimum Age for Admission to Employment, June 26, 1973, 1015 U.N.T.S. 297 [hereinafter Minimum Age Convention].

[105] Ratifications of C138 – Minimum Age Convention, 1973 (No. 138), Int’l Lab. Org., http://www.ilo.org/dyn/normlex/en/f?p=1000:11300:2002906217888221::NO:11300:P11300_INSTRUMENT_ID:312283 (last visited Mar. 8, 2013) [hereinafter Ratifications C138].

[106] Minimum Age Convention, supra note 104, art. 2, no. 3, at 300.

[107] Id. at art. 2, no. 4.

[108] Id. at art. 7, no. 1, at 302.

[109] Ratifications C138, supra note 105.

[110] See Zimmer, supra note 27, at 421 and text accompanying note 128.

[111] See Fainaru, Business of Building, supra note 7; Gregory, supra note 1.

[112] See UN Convention of the Rights of the Child, supra note 96, art. 28, at 53.

[113] Universal Declaration of Human Rights, G.A. Res. 217 (III) A, art. 26, U.N. Doc. A/RES/217(III) (Dec. 10, 1948).

[114] See id.; United Nations Convention of the Rights of the Child, supra note 96, art. 28, at 53.

[115] See Fainaru, Business of Building, supra note 7.

[116] See Gregory, supra note 1.

[117] See Wasch, supra note 25, at 107 (noting that only the Dominican Republic spends only 2.3% of GDP on education and that only 58.9% of Dominican boys who enter first grade complete fifth grade).

[118] Occupational Health and Safety, Int’l Lab. Org., http://www.ilo.org/global/standards/subjects-covered-by-international-labour-standards/
occupational-safety-and-health/lang–en/index.htm (last visited Mar. 7, 2013).

[119] Ratifications of C167 – Safety and Health in Construction Convention, 1988 (No. 167), Int’l Lab. Org., http://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:11300:1820539468972702::NO:11300:P11300_INSTRUMENT_ID:312312:NO (last visited Mar. 7, 2013).

[120] Ratifications of C155 – Occupational Safety and Health Convention, 1981 (No. 155), Int’l Lab. Org., http://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:2643525827901069::NO:12100:P12100_ILO_CODE:C155:NO (last visited Mar. 22, 2013).

[121] See Guevara & Fidler, supra note 42, at 123-24.

[122] See Fainaru, Injecting Hope, supra note 43.

[123] See U.N. Convention of the Rights of the Child, supra note 96, art. 32, at 54.

[124] See Fainaru, Injecting Hope, supra note 43; Guevara & Fidler, supra note 42, at 123-24.

[125] Also, one writer has suggested that the United States and Latin American countries producing baseball players enter into a multinational agreement that would govern the situation. See Jessica N. Trotter, Rooting for the “Home Team”: How Major League Baseball and Latin America Can Better Provide for the “Safe”-ty of Their Players, 13 Sw. J.L. & Trade Am. 445 (2006).

[126] See Zimmer, supra note 27.

[127] See Ruck, supra note 10.

[128] See Gillen, supra note 65, at 1065-67 (identifying attenuation in the international production chain that “allows multinationals to disclaim responsibility for the inhumane labor standards” in developing countries).

[129] See Natasha Rossel Jaffe & Jordan D. Weiss, The Self-Regulating Corporation: How Corporate Codes Can Save Our Children, 11 Fordham J. Corp. & Fin. L. 893, 901 (2005) (“Underdeveloped countries benefit greatly from the presence of MNCs, and the incentives are skewed against regulating them. They create wealth in the states where they operate by providing jobs, producing goods and services, introducing technologies, and developing markets.” (footnotes omitted)).

[130] See Wasch, supra note 25, at 101.

[131] See Jonassen, supra note 69, at 42-48 (describing the responses of a number of MNCs to scandals over labor conditions within their supply chains).

[132] Terry Collingsworth, The Key Human Rights Challenge: Developing Enforcement Mechanisms, 15 Harv. Hum. Rts. J. 183, 202 (2002) (“The ATCA presents the potential to address claims involving intentional physical or mental harm, but is not likely to reach less extreme but much more common claims, including abominable working conditions.”).

[133] 28 U.S.C. § 1350 (2006).

[134] The Supreme Court is currently deciding Kiobel v. Royal Dutch Petroleum Co., where the questions include whether the ATCA applies to corporations, and whether and under what circumstances the ATCA applies to violations occurring within the territory of a sovereign other than the United States. No. 10-1491 (U.S. argued Oct. 1, 2012).

[135] See Collingsworth, supra note 132, at 197.

[136] See Collingsworth, supra note 132, at 185-95.

[137] See Wasch, supra note 25, at 123.

[138] One needs look no further than the ongoing steroid scandals in baseball for evidence of how difficult it is for baseball to deal with issues of integrity. Although baseball attendance did not decline during the so-called “steroid” era, that period of baseball history has left a stain on the current game, including seriously tarnishing the reputations and post-baseball careers of those persons implicated. See Wayne G. McDonnell, Jr., A Hall of Fame Quandary Involving Sportsmanship, Integrity and Character, Forbes (Jan. 4, 2013, 9:25 PM), http://www.forbes.com/sites/waynemcdonnell/2013/01/04/a-hall-of-fame-quandary-involving-sportsmanship-integrity-and-character/.

[139] Of course, a CCOC need not only apply to a MNC’s operations in the developing world. I am focusing on codes that do so apply because they represent a private regulatory enforcement function that is likely to exist in the absence of a functioning public regulatory system in many developing countries.

[140] See Jonassen, supra note 69, 42-46.

[141] Famous sweatshop scandals include the discovery by a New York Times journalist of sweatshop conditions in a factory in El Salvador where GAP clothing was made, and the National Labor Committee allegations that Kathie Lee Gifford-brand clothing was made with the use of child labor in Honduras. Kathie Lee Gifford later became an outspoken advocate against the use of child labor. See Jonassen, supra note 69, 42-46.

[142] These values are espoused by consultancy organizations such as Business for Social Responsibility. BSR, http://www.bsr.org/ (last visited Mar. 7, 2013).

[143] The movement from code to a regulatory mechanism often requires additional public pressure. For example, media scrutiny of—and subsequent consumer displeasure with—the conditions under which Apple products are made at the FoxxConn Factories in China has led Apple and FoxxConn to agree to a more intrusive self-regulatory scheme, including allowing independent monitoring firms access to the factories. See Charles Duhigg & Steven Greenhouse, Electronic Giant Vowing Reforms in China Plants, N.Y. Times (Mar. 29, 2012), http://www.nytimes.com/
2012/03/30/business/apple-supplier-in-china-pledges-changes-in-working-conditions.html?pagewanted=1.

[144] See Levi Strauss & Co., Social and Environmental Sustainability Guidebook (2010), available at http://www.levistrauss.com/sites/default/files/
librarydocument/2010/6/ses-2010-guidebook.pdf.

[145] See Nike, Inc., Code of Conduct (2010), available at http://www.nikeinc.com/system/assets/2806/Nike_Code_of_Conduct_original.pdf.

[146] See Adidas Grp., Workplace Standards (2007), available at http://www.adidas-group.com/en/sustainability/assets/workplace_standards/
English_Workplace%20Standards.pdf.

[147] See Jonassen, supra note 69, at 39-40.

[148] In fact, Levi-Strauss references ILO-equivalent standards throughout its code of conduct. See Levi Strauss & Co., Levi Strauss and Co. Global Sourcing and Operating Guidelines [hereinafter Levi Global Sourcing], available at http://www.levistrauss.com/sites/levistrauss.com/files/
librarydocument/2010/4/CitizenshipCodeOfConduct.pdf.

[149] See Jonassen, supra note 69, at 43.

[150] See Levi Global Sourcing, supra note 148.

[151] See Levi Global Sourcing, supra note 148.

[152] See Levi Global Sourcing, supra note 148.

[153] Id.

[154] Verité, Client Testimonials, http://www.verite.org/AboutUs/ClientTestimonials (last visited Apr. 12, 2012).

[155] Lisa G. Baltazar, Government Sanctions and Private Initiatives: Striking a New Balance for U.S. Enforcement of Internationally-Recognized Worker’s Rights, 29 Colum. Hum. Rts. L. Rev. 687, 719 (1998).

[156] Levi Strauss, “LS & CO. Affects Positive Change in Mauritian Labor Conditions,” available at http://www.levistrauss.com/library/lsco-affects-positive-change-mauritian-labor-conditions.

[157] Id.

[158] Id.

[159] See MLR, supra note 11.

[160] Though of course MLB has a stake in the production of star players, since such players drive interest in MLB generally.

[161] For a timeline of MLB’s response and eventual implementation of a drug testing program see Drug Policy Coverage, MLB.com, http://mlb.mlb.com/mlb/news/drug_policy.jsp?content=timeline (last visited Apr. 20, 2012).

[162] See Gillen, supra note 65, at 1085.

[163] See Wasch, supra note 25, at 107.

[164] See Baltazar, supra note 155, at 718-19 (noting that under Levi-Strauss’s guidelines, it may withdraw from countries which fail to comply with its code of conduct).

[165] See Zimmer, supra note 27, at 428.

[166] See ILAB, supra note 53, at 152.

[167] See Wasch, supra note 25, at 107.

[168] See Wasch, supra note 25, at 107.

[169] See Cmty. for Creative Non-Violence, 490 U.S. 730.

[170] See Zimmer, supra note 27, at 427.

[171] See Robert J. Liubicic, Corporate Codes of Conduct and Product Labeling Schemes: The Limits and Possibilities of Promoting International Labor Rights Through Private Initiatives, 30 Law & Pol’y Int’l Bus. 111, 152-56 (1998) (detailing indirect effects of CCOC).

[172] See Wasch, supra note 25, at 123-4.

[173] See Zimmer, supra note 27, at 421.

[174] Note the case of Adrian Beltre, who was signed at age 15, perhaps knowingly, by the Los Angeles Dodgers. See Spagnuolo, supra note 2, at 270.

[175] See Wasch, supra note 25, at 123 (“Major League Baseball will discontinue cooperation with any third-party that persists in non-compliance with our MLB Child Labor Code of Conduct.”).

[176] See Sanchez, supra note 5.

[177] Although Levi’s did withdraw before it entered into negotiations to push the Mariatas to adopt stronger anti-discrimination laws, given MLB’s position as the major employer of Dominican baseball players, it likely has more leverage to negotiate with the Dominican government without taking such a drastic measure. See Levi Strauss, “LS & CO. Affects Positive Change in Mauritian Labor Conditions,” supra note 156.

[178] See Wasch, supra note 25, at 108-9.

[179] See Gregory, supra note 1.

[180] As noted earlier, the Pittsburg Pirates, MLB’s poorest team, paid $75,000 in 2010 to run an educational program at its academy. Id.

[181] MLB.com, “MLB, MLBPA reach new five-year labor agreement,” http://mlb.mlb.com/news/article.jsp?ymd=20111122&content_id=
26025138&vkey=pr_mlb&c_id=mlb (last accessed Apr. 12, 2012) (“By December 15, 2011, the parties will form an International Talent Committee to discuss the development and acquisition of international players, including the potential inclusion of international amateur players in a draft or in multiple drafts.”).

[182] Although the current draft also has a suggested slotting system, it is not clear that teams and players feel bound by the suggested signing bonus figures.

[183] Incredibly, one commentator has argued that the current system disadvantageous players in the draft to the benefit of international free agents to such a degree that it amounts to national origin discrimination. See Daniel Hauptman, The Need for a Worldwide Draft to Level the Playing Field and Strike Out the National Origin Discrimination in Major League Baseball, 30 Loy. L.A. Ent. L. Rev. 263 (2010). In fact, some players have threatened to establish residency in another country to escape the strictures of the draft, and presumably command a higher signing value. See id. at 264. However, the bargaining power that a player in that position has is greater than a player with equal skills who grew up in a developing country.

[184] See Timothy Poydenis, The Unfair Treatment of Dominican-Born Baseball Players: How Major League Baseball Abuses the Current System and Why it Should Implement a Worldwide Draft in 2012, 18 Sports Law. J. 305 (2011); Wasch, supra note 25; Spagnuolo, supra note 2.

[185] See Wasch, supra note 25, at 108.

[186] According to the interviews conducted by Spagnuolo in 2001, players in the academies made between $600 and $700 per month, while garment workers made around $100 per month. See Spagnuolo, supra note 2, at 273.

[187] CBA, supra note 38, § 15(F).

[188] See Wasch, supra note 25, at 106 (quoting http://www.usatoday.com/sports/baseball/2004-04-13-cover-latinos_x.htm).

[189] MLR, supra note 11, § 3(a)(1)(B)(i)-(ii).

[190] Tom Weir and Blane Bachelor, Spanish-Speaking Players Get Lesson in American Life, USA Today (Apr. 4, 2004), http://www.usatoday.com/
sports/baseball/2004-04-13-cover-latinos_x.htm.

[191] See CBA, supra note 38.

[192] In 2010, over 10% (86 of 833) of players on MLB opening day rosters were from the Dominican Republic. See Gregory, supra note 1.

[193] See Zimmer, supra note 27, at 428.

[194] See Gregory, supra note 1; Fainaru, Business of Building, supra note 7.

[195] Sugar (2008). Although Sugar was a drama, not a documentary, it showed the path of one player who began his career in the Dominican academies, made it to the American minor leagues, but due to injury and lack of an adequate support system, dropped out of baseball. Unlike players who stop playing baseball while still in the Dominican Republic, after the protagonist in Sugar leaves baseball, he is left to fend for himself in the United States with no education and rudimentary English skills.

[196] David Ortiz of the Boston Red Sox and Robinson Cano of the New York Yankees, to give two prominent examples.

[197] See Michele Micheletti & Dietlind Stolle, The Politics of Consumption/The Consumption of Politics: Mobilizing Consumers to Take Responsibility for Global Social Justice, 611 Annals 157, 163-64 (2007) (noting that the global anti-sweatshop movement was made up of “more than one hundred organizations representing church groups; student groups; think tanks; policy institutes; foundations; consumer organizations; international organizations; local to global labor unions; labor-oriented groups; specific antisweatshop groups; no-sweat businesses; business investors; and international humanitarian and human rights organizations, networks, and groups.”).

[198] Commentators such as Noam Chomsky have posited that there is a real danger in the vigor with which people consume sports, in that the energy used to follow, and criticize a sports team takes up critical thinking skills and might otherwise be used to examine and criticize institutional power. See Noam Chomsky, Manufacturing Consent: Noam Chomsky and the Media (1992).

[199] Although, the institution of an international draft has been floated for many years, the latest collective bargaining agreement merely says that the issue will be revisited at the end of the current agreement, which expires at the end of 2015. See MLB.com, supra note 181.

Joshua L. Simmons*

INTRODUCTION

Despite the persistent notion that modern invention is performed by individual inventors in their garages, few would disagree that today most patentable inventive activity occurs in corporate and university settings and that most individuals who would be labeled “inventors” in the twenty-first century are employees of corporate entities.[1] In the corporate setting, if an employee creates a copyrightable work within the scope of his or her employment, the Copyright Act not only grants ownership of the work to the employer but actually considers the employer the “author” of the work.[2] By contrast, under the Patent Act, one who creates an invention is its inventor, and ownership will only pass to another, including an employer, through a written assignment.[3] In other words, unless there is an agreement to the contrary, an employer does not have any rights in an invention “which is the original conception of the employee alone.”[4]

Given the close relationship between copyright law and patent law,[5] it is puzzling that employees’ works and inventions would be treated so differently under the two disciplines. Yet, when one considers their historical foundation, it becomes clear that there were pivotal differences between the needs of the two disciplines in the nineteenth century that led to their modern formulations.[6] In particular, whereas the type of copyrightable works created in the nineteenth century transitioned from individual labors to collaborative labors among multiple individuals working together, which necessitated the collecting of rights in order to make use of the resulting copyrightable work, patentable inventions continued to be perceived during the nineteenth century as the work of individuals. Moreover, patent law developed other, more limited doctrines that provided some rights to inventors’ employers.

Today, however, most patentable inventions are invented by multiple inventors in a collaborative environment.[7] In fact between 1885 and 1950, the percentage of U.S. patents issued to corporations grew from 12% to at least 75%.[8] These numbers have only continued to increase in the past decade.[9] Moreover, the recently passed Leahy-Smith America Invents Act partially recognizes this change by permitting an “applicant for patent” to file a “substitute statement” instead of an inventor’s oath or declaration in certain circumstances.[10]

Nevertheless, patent law remains stuck in the past. The failure to modernize how patent law handles employee invention has led to a string of significant court opinions, including from the Supreme Court and the Federal Circuit, holding that employers had not received adequate assignments to their employees’ patented inventions and thus could not bring suit based thereon.[11] In order to resolve these issues and bring patent law into the twenty-first century, the Patent Act should be amended to borrow from the Copyright Act and adopt a principle similar to the work made for hire doctrine that would grant employers the rights to their employees’ inventions made within the scope of their employment.[12]

This article proceeds in four parts. Part I discusses the current state of copyright and patent law vis-à-vis employers’ rights in their employees’ intellectual labor. This part will compare copyright’s work made for hire doctrine to three patent law doctrines: the shop rights doctrine; the hired-to-invent doctrine, and the employee improvements doctrine. Part II describes the evolution of copyright law during the nineteenth century from the former regime, which vested employees with presumptive ownership of their work, to the current regime, which grants employers presumptive rights to their employees’ efforts. Part III describes patent law during the time that copyright law was changing so dramatically—including the development of the patent law doctrines described in Part I—and posits potential reasons that patent law did not make a similar move. In particular, (a) patent law’s development of the doctrines described in Part I provided similar benefits, although in the form of different rights, to those provided by copyright law’s work made for hire doctrine, and (b) the perceived nature of invention in the nineteenth century did not call for a unification and codification of those doctrines the way copyright law’s did. Finally, Part IV argues that patent law should modernize and develop an “inventions made for hire” doctrine.

I. IP AND THE EMPLOYER-EMPLOYEE RELATIONSHIP

It is well settled in the United States that copyright law and patent law treat legal title in the intellectual labor of employees differently.[13] Section A discusses the copyright law doctrine of work made for hire and its benefits for employers. Section B discusses doctrines that provide some of those benefits in patent law.

A. Copyright Law

Under the Copyright Act, title in a copyrightable work initially vests in the author or authors of a work.[14] However, “author” is a term of art with meaning beyond the creator of or “person who originates or gives existence” to a work.[15] In particular, where a “work made for hire”—another term of art—is concerned, the employer is “considered the author” unless the parties agree otherwise.[16] A work may be considered made for hire if (1) it was prepared within the scope of an employee’s employment, or (2) it is a certain type of commissioned work and the parties have so agreed previously.[17]

Whether the creator of a copyrightable work is an employee for purposes of the work made for hire doctrine is determined by looking to the common law doctrine of agency.[18] In Community for Creative Non-Violence v. Reid, the Supreme Court identified thirteen factors that it considered relevant to whether an individual was considered an employee as a matter of agency law.[19] The Supreme Court declared that “[n]o one of these factors [was] determinative,”[20] but at least one circuit has held that not all factors are created equal and some will be important in “virtually every situation” while others “will often have little or no significance.”[21] The more important factors are to be given “more weight in the analysis.”[22]

Once a work is considered made for hire, the employing or commissioning party enjoys several benefits over a work that is not considered made for hire, but rather is transferred to the employing party. First, unlike in patent law, it immediately becomes the owner of a legal right to the work.[23] In patent law, an inventor must first file an application with the United States Patent and Trademark Office (“PTO”), which is then examined by a PTO employee to determine if the alleged new invention is entitled to a patent.[24] Copyrights, on the other hand, vest immediately once an original work of authorship is fixed in a tangible medium of expression.[25] For a company to gain an ownership interest in a copyrighted work not made for hire, the interest must be negotiated for and transferred in a signed written document.[26] When a work qualifying as a work made for hire is created, however, no negotiation or written instrument is required for that specific work because, for copyright purposes, as long as agency would hold that the work’s creator was an employee working within the scope of his employment, his employer is considered the work’s author.[27]

There are two subsidiary benefits to the immediate grant to the employer of a work’s copyrights. First, no court intervention is required to transfer the rights. As will be described below, in certain cases, patent law will grant employers rights in their employee’s patents, but to vest those rights the employee must still sign a document transferring ownership to his employer. If he refuses, a court order may substitute for the transfer. Second, the work made for hire doctrine allows a grant of rights without needing to define what is being granted. Whereas when a grant of rights is negotiated, the transferor may come back to the transferee to argue about which rights were actually transferred and the scope of the intended transfer.[28]

Second, an employer holding the rights in a work made for hire may register the work in the Copyright Office in its own name.[29] This is an optional but important step, because without registration a copyright infringement action may not be initiated,[30] and generally, statutory damages are not available for infringements prior to registration.[31]

Third, the work made for hire doctrine grants employers all of the rights associated with copyright ownership. Thus, they can exclude others from using the work, and leverage that right to extract rents in exchange for a license authorizing someone else to use the work.[32] Further, employers using works made for hire are authorized to then transfer their ownership of the works’ copyrights to another party, either in whole or in part.[33]  They can also, of course, exercise any of the rights authorized under the Copyright Act itself, including creating derivative works.[34] One set of rights an employer is not granted under the Copyright Act, however, is the right to attribution and integrity granted for works of visual art.[35]

Fourth, the work made for hire doctrine also protects employers from future rights granted to authors. For example, the Copyright Act of 1976 granted authors the right to terminate transfers, but those new rights did not apply to creators of works made for hire because their employers were considered the author.[36] In addition, after the 1976 revisions, employers remained shielded from the exercise of the transfer termination provisions because no transfer is considered to have taken place under the work made for hire doctrine;[37] the employer was the work’s original “author.”

Fifth, the work made for hire doctrine grants employers certainty with regard to the duration of their copyrights. Works not made for hire subsist for the life of the author plus 70 years.[38] This means that those to whom the original author transfers must know the duration of the original author’s lifetime in order to calculate the duration of the copyrighted work’s term. Works made for hire, however, are merely granted a term of 95 years from publication or 120 years from creation, whichever expires first.[39] This time frame serves two functions. First, it simplifies the requirements of an employer to keep track of the duration of its copyrights. Second—grim though it may be—if the employee were to die within 25 years of publication or 50 years of creation, the employer would benefit from a longer copyright term than if the work were considered made for hire.[40]

Finally, the work made for hire doctrine applies to all works universally, regardless of the type of work or the employee’s level of contribution. In other words, a work created and conceptualized entirely by only one employee is treated the same as a work created by hundreds of employees, each of whom contributed minor improvements and expression to the work.

B. Patent Law

Some of the benefits described in the previous section are mirrored by certain patent law doctrines—or are irrelevant with regard to patents—but others have no patent law equivalent. Section A described eleven benefits associated with copyright law’s work made for hire doctrine: (1) grant of title without negotiation;[41] (2) grant of title without transfer/assignment; (3) grant of title without court intervention; (4) registrability in the employer’s own name; (5) exclusion of others from using the work and licensing rights in the work to others; (6) use of the work; (7) transfer of title to others; (8) protection from future rights granted to work’s creator; (9) shield from transfer termination; (10) benefits with regard to copyright term duration; and (11) universal application regardless of level of contribution.[42]

It is immediately apparent that the benefits of the termination shield and duration are not relevant to patent law because patents are granted for a set term of years—whether the base of 20 years or an extended term due to regulatory or PTO review[43]—not tied to the inventor’s lifetime. Therefore, there would be no special duration benefits should an inventor’s employer be considered an “inventor” for purposes of the Patent Act. In addition, unlike copyright transfers, which as discussed above may be terminated upon notice, patent assignments are not subject to termination.[44]

The other benefits, however, require additional consideration. The three following sections describe modern patent law doctrines that give employers some, but not all, of the benefits of copyright law’s work made for hire doctrine.

1. Employer Use and Shop Rights

One of the benefits of the work made for hire doctrine is that an employer is guaranteed the right to make use of an employee’s creative work. Employers may receive a similar benefit from patent law’s shop rights doctrine.[45] However, because patent law describes negative rights, it is a protection against infringement actions by the employee patent holder and her assigns, and not an affirmative grant of use of the patented invention.

Shop rights arise when an employee, “during his hours of employment, [and] working with his [employer’s] materials and appliances, conceives and perfects an invention for which he obtains a patent.”[46] The courts have held that in such circumstances, the employee by force of law must give his employer a nonexclusive, royalty-free right to practice the invention.[47] The doctrinal basis behind the shop right remains fuzzy,[48] as courts have described it being based on (a) a license implied in fact,[49] (b) estoppel,[50] and (c) equity and fairness.[51]

Shop rights do not have the same scope as work made for hire, however. A shop right is not an ownership interest in the patent, which means that an employer does not have either the right to exclude others by threatening to sue for infringement or the right to file a patent application.[52] Similarly, a shop right is non-exclusive, which means that the employee patent holder is free to assign rights to others by granting them a patent license. In addition, a shop right is not transferable other than with the sale of the entire appurtenant business.[53]

2. Commissioned Invention and the Hired-to-Invent Doctrine

As mentioned in section A, under copyright law a work will be considered for hire if it was made by an employee within the scope of his or her employment. Similarly, patent law’s hired-to-invent doctrine grants an employer rights to the inventions of its employees if the employee was hired to invent them.

Under this doctrine, an employee hired to solve a particular problem or to invent in a certain field will forfeit his patent rights even without a written contract.[54] Just as in the work made for hire context, courts have established a number of factors to indicate whether an inventor has been hired to invent.[55] However, unlike work made for hire, the hired-to-invent doctrine requires the employee to assign any patent obtained; it does not vest title immediately in the employer upon invention.[56] Although, failure to assign after a court order to do so may result in the order having the same effect as an assignment.[57]

At first blush, this patent law doctrine would appear to accomplish much of what the copyright law work made for hire doctrine does. However, there are differences. First, work made for hire vests title in an employer immediately. The hired-to-invent doctrine merely obligates the inventor to assign the invention to his or her employer. True, no negotiation is required after the inventive activity occurs, but until an assignment is signed, the invention’s creator continues to hold the patent on the invention—albeit in trust for his employer. Furthermore, if the invention’s creator refuses to assign his patent rights, then a court order is required. Second, the doctrine is only effective against employees who are actually hired to invent. Employees who create an invention within the scope of their employment but who were not specifically directed to do so retain their patent rights.[58] Third, unlike the work made for hire doctrine, which permits an employer to file a copyright registration in its own name, the hired-to-invent doctrine still requires the patent application to be filed in the inventor’s name, even if the employer, as assignee, files a patent application on his behalf. Finally, as the employee is still considered the “inventor” under the Patent Act, it is possible for future rights to be given to the “inventor” that would not be automatically vested in the inventor’s employer. For example, in the copyright context, when the right to terminate transfers of ownership was introduced as a right of “authors,” it did not apply to those whose works were made for hire, as their employers were considered the “authors.” Similar rights could be granted to “inventors” that would affect the assignees of the inventors’ patent rights.

3. Employer Inventions and Employee Improvements

In addition to the situation where an employer hires an employee to invent, an employer will also receive the benefit of insignificant improvements by his employees on inventions the employer has conceived of himself.[59] Under this doctrine, when an employer conceives of an invention, but receives ancillary suggestions or improvements from his employee, he retains all rights in the invention, including any employee improvements.[60] To qualify under the employee improvements doctrine, the employer must have had a “plan and preconceived design,”[61] and the improver must be an employee.[62]

The employee improvements doctrine provides a minimal step toward the work made for hire doctrine, but does not come anywhere close to providing a substitute. First, the doctrine still requires there to be an inventor. All the doctrine does is subsume improvements by another person into the inventive exercise of the employing inventor; it does not operate to grant an employing corporation rights. In addition, the improvements that are granted must be ancillary, so any benefits from the doctrine will be minimal. Thus, if the employee creates a non-ancillary invention or improvement, the employer still needs to qualify under one of the previous doctrines or negotiate an assignment. At base, the employee improvements doctrine determines whether an employee should be considered a joint inventor or not, which does not come close to achieving the same benefits of the work made for hire doctrine.

Given that patent law never developed a doctrine that defaulted patent rights to an employer the way copyright law did, one is left to wonder why. Why is it that copyright law in the nineteenth century began to apply an employer presumption? And why did the courts not feel the need to apply a similar presumption in patent cases? Part II discusses the development of the work made for hire doctrine in the nineteenth century, and Part III discusses potential reasons that a similar doctrine was not developed in patent law.

II. DEVELOPMENT OF THE WORK FOR HIRE DOCTRINE

The work made for hire doctrine predated the Copyright Act of 1976. In fact, although it was first codified in the Copyright Act of 1909,[63] Professor Catherine L. Fisk has claimed that the doctrine “neither was invented by the drafters of the 1909 Act, nor was it well recognized in the cases before 1909.”[64] Instead, between the American Civil War and the passage of the Copyright Act of 1909 the default rule in copyright cases quietly switched from employee ownership to employer ownership. Professor Fisk argues that this move was justified by “cloaking” artists in an “aura of . . . romantic genius” to argue for greater legal protection, while simultaneously “downplaying or ignoring individual creative genius so as to assert corporate ownership over those copyrighted works.”[65]

A. Antebellum

Prior to the American Civil War, the default—and essentially the rule—was that the employee author was the owner of his works.[66] In the early days of copyright, protection was of limited application. The first copyright act—the Copyright Act of 1790—only protected maps, charts, and books.[67] Among the books that received copyright protection were the books in which court decisions were reported. Thus, it was only natural for the first copyright cases concerning employment to involve books containing those decisions and the authors that authored them. In the first case involving an employed author, the author of twelve volumes reporting the caselaw of the United States Supreme Court assigned his copyrights to a publisher. The publisher then sued a subsequent case reporter for copyright infringement because he had produced a volume titled “Condensed Reports of Cases in the Supreme Court of the United States,” which included the work of the prior reporter.[68] The Supreme Court, noting that the original reporter had failed to satisfy the formality requirements, held that it could not confer common law copyright on the initial reporter. However, what is telling about the opinion is that it appears to assume that the original reporter—and not the publisher—would be entitled to the copyrights in his work, even though his status as an employee was uncertain at best.[69]

Later cases in the antebellum era involved school books,[70] theatrical works,[71] and cartography.[72] What is particularly interesting about this period of time is the courts’ clear pro-employee stance. In later decades, courts’ rhetoric would be inconsistent with the holdings of their decisions. While courts would claim to celebrate the genius and romanticism of the independent author, they would simultaneously grant first publishing houses and later employers the rights to that labor. During the antebellum nineteenth century, however, courts’ rhetoric praising the individual was consistent with the holdings of their decisions, which largely gave employees ownership of the copyrights in their works. The only cases where employers were held to have been granted copyrights in their employees’ works involved expressed contracts and cartography which, by its very nature, requires coordination among various individuals. True, smaller scale maps could be created by one person on their own, but for anything of a greater scale, coordination among various parties would be required.

B. The Nineteenth Century Postbellum

In the period during and after the American Civil War, courts began to hold that employers had been granted copyrights in their employees’ works, not by operation of contract, but based on the employment relationship. Particularly important to the discussion in Part III is that while cases originally held that the employment relationship granted an employer rights in his employees’ work by virtue of the involvement of a corporate president, later cases created the legal fiction of the company as author.[73]

In the postbellum period, like the antebellum period, the relevant cases generally involved legal publications,[74] as well as theatrical works.[75] One of the theatrical work cases is particularly important for the purposes of this article. In Keene v. Wheatley, the court ruled against the plaintiff-employer on many of her arguments, but with regard to ownership of one of her employee’s works, the court stated:

Here, [the employee], while in the general theatrical employment of the [employer], engaged in the particular office of assisting in the adaptation of this play; and made the additions in question in the course of his willing performance of this duty. [The employer] consequently became the proprietor of them as products of his intellectual exertion in a particular service in her employment.[76]

For this proposition, the court did not rely on copyright law. Instead, the court looked to patent law, and determined that since “[w]here an inventor, in the course of his experimental essays, employs an assistant who suggests, and adapts, a subordinate improvement, it is, in law, an incident, or part, of the employer’s main invention,” the plaintiff in Keene was entitled to the “literary proprietorship” of her employee’s work.[77]

In the eyes of the Keene court, the employee was merely adding minor enhancements akin to the patent doctrine of employee improvement. Yet, over time the doctrine of work made for hire found increasing judicial support and eventually became a default rule in favor of employers.[78] Over the next several years, this new doctrine was mentioned in dicta, but in no case did a court rule that an employer possessed rights over its employee by virtue of the default rule.[79]

Instead, the presumption was switched surreptitiously. In Callaghan v. Myers, for example, while holding that a court reporter-employee held the copyrights in his work instead of his government employer, the Supreme Court determined that this was the case only due to “a tacit assent by the government to his exercising such privilege,”[80] This shift in emphasis made employer ownership a presumption that was only rebutted by tacit agreements and expressed contracts.

Why did the courts make this shift? Professor Fisk posits three potential factors:

[1] Courts might have felt that a default rule of employer ownership was more likely to reflect the intent of most parties and wanted to save the parties the trouble of negotiating for employer ownership. . . . [2] [C]ourts might have begun to see employers as possessing a stronger moral claim and believed that any employee who planned to assert copyright ownership ought to be forced to disclose that intent and negotiate for it. . . . [3] [A]s changing assumptions about the nature of authorship strengthened the rhetorical force of the employer’s claim, a default rule of employer ownership might have seemed more intrinsically appealing, irrespective of whether the parties might negotiate around it.[81]

In response to the shifting sands of copyright law doctrine of the nineteenth century, one might expect that parties would have begun contracting around the default rules, but two factors may have made contracting prohibitively difficult:

First, the costs of transacting might be high when the parties have to discuss something as touchy as authorship. Employers might have been afraid to alienate employees by demanding assignment of the copyright, preferring to run the risk of litigation later. Employees may have lacked legal sophistication to realize that it was necessary to contract for copyright ownership. Second, the instability of the law may have made enforcement of any contract they did reach highly uncertain.[82]

In any case, by the nineteenth century, the work made for hire doctrine was in the wind, whether because of changes in the parties themselves, or merely the impressions of those sitting on the bench.

C. Corporate Ownership and Codification

The work made for hire doctrine was codified by Congress in 1909, but its foundations had existed prior to that time. As described in section B, the concept of authorship and ownership of copyright were shifting over the last half of the nineteenth century. However, it was not until 1885 that a court held that a corporation, and not an individual employer, held the copyrights in a work.[83] It was at this time that the legal fiction arose that a corporation could be an author. This idea makes sense when viewed one way: corporations are merely collections of individuals working toward, generally, hierarchically determined joint goals. However, it flies in the face of the entire notion of the individual romantic author.

The concept behind the expression embodied in a copyrightable work can be created by any number of different people as it moves through the corporate process. This is particularly clear today when one looks at the large corporations behind music, television, and film.[84] These corporations are made up of hundreds of thousands of employees, and even more independent contractors. To produce one blockbuster film may require hiring and coordinating thousands of individuals, each of whom may contribute to a portion of the film. Without the work made for hire doctrine, these companies would have to rely on a messy web of contracts and the employee improvements doctrine, and even then, it is unlikely that they would be assured that all the relevant rights had been secured.

By 1899, however, the courts had come to realize the need for a doctrine that allowed corporate employers to control the copyrights in the works of their employees by default. In Collier Engineer Co. v. United Correspondence Schools, a salaried employee hired “to compile, prepare, and revise . . . instruction and question papers” had moved to a new employer and prepared similar materials.[85] His former employer made a motion for a preliminary injunction, which the court denied, but in so doing determined that the employer was entitled to any copyright in the original materials.[86] This idea of protecting employers when their employees move to other employers will resurface in Part III as a justification for employer ownership of patent rights.

Later cases embraced the idea that when an employer hired individuals to produce copyrightable works, the copyrights in those works were granted to the employer.[87] In this way, by the turn of the century, copyright law and patent law had developed fairly parallel doctrines with regard to employee works and inventions. In 1909, however, the Copyright Act was revised to codify the work made for hire doctrine by adding the following language:

[T]he word ‘author’ shall include an employer in the case of works made for hire.[88]

By including employers of those that create works made for hire within the definition of the term “author,” Congress continued in the direction the courts had been heading, but went farther by creating an explicit employer presumption. Professor Fisk identifies three reasons for this change: (1) an ease in drafting the Act, (2) avoiding constitutionality challenges, and (3) ensuring that copyright ownership would vest initially in employers so they could benefit from copyright renewals.[89]

And that, ladies and gentlemen, was history. Since 1909, work made for hire has remained a mainstay of American copyright law.

Yet, despite over one hundred years of the work made for hire doctrine in copyright law, patent law remains based on the rule that only the individuals that create an invention can be considered inventors. Moreover, for an employer to claim patent rights, he must either negotiate an assignment, or rely on one of the doctrines discussed in Part I.B.: shop rights, hired-to-invent, or employee improvements. Barring one of these options, an employer holds no rights in a patent absent a written assignment. Part III will explore the patent cases of the late nineteenth century, and posit potential reasons that patent law did not take a similar route.

III. EMPLOYMENT IN PATENT LAW

As previously described, patent law never developed a doctrine that provided all of the benefits of copyright law’s now well-established work made for hire doctrine. This divergence between the two disciplines can be explained by two factors. First, inventive activity in the nineteenth century was perceived to be individualized and not to require significant coordination among individuals. Second, patent law developed the three doctrines described in Part I.B., which provided satisfactory protection to employers who wanted to continue using their employees’ inventions.

A. Antebellum

In order to understand the nature of inventive activity during the nineteenth century, one must understand that fundamental shifts were occurring in society at the time that changed both who the inventors were and what they were inventing. The United States has always been a country of inventors. In fact, both George Washington and Thomas Jefferson are credited with numerous inventions, including plows, adjustable writing desks and swivel chairs.[90] However, at the end of eighteenth century, there were “probably no more than 300 people who we would now class as scientists in the entire world,”[91] By 1800, there were about a thousand, and by 1900 there were approximately 100,000.[92] Due to the growth in the number of scientists, science began to shift from “a gentlemanly hobby, where the interests and abilities of a single individual [could] have a profound impact, to a well-populated profession, where progress depend[ed] on the work of many individuals who [were], to some extent, interchangeable,”[93]

Similarly, the number of non-scientist inventors blossomed throughout the nineteenth century leading to an increased ability to appreciate the “interplay between science and technology, particularly in the fields of electricity and engine building,” which “led to a host of new practical machines that changed communications, transportation, the home, the workplace, and the farm,”[94] For example, at the beginning of the nineteenth century, America remained a nation of farmers who used the same hand implements that had been used for centuries to harvest their crops and who would travel primarily by horse or boat.[95] In the time before the Civil War, however, non-scientist inventors made many advances, including the invention of the steamboat, farming machinery, the telegraph, and synthetic materials.[96]  Such advances were only possible due to the increased interplay between science and technology that continued to grow throughout the nineteenth century.[97] These developments also led to societal changes, including increased prosperity and the end of slavery as new equipment was developed that could perform the work better and more cheaply.[98]

Despite the democratization of science and invention in the nineteenth century, however, inventive activity continued to be considered the work of individuals. In fact, there are “no reported cases before 1843 in which an employer claimed, as against an employee, ownership of a patent because the inventor had been working for him at the time of the invention,”[99] Thus, in the nineteenth century, the general perception was that inventorship was the work of certain individuals, who were considered the great men of the time. One visual example of this mentality is Christian Schussele’s 1857 painting titled Men of Progress, which depicts Benjamin Franklin overlooking nineteen nineteenth century inventors:[100]

Figure 2: Men of Progress

Despite this public perception, however, the reality was that even these great men had assistance in creating their famous inventions. Among those depicted in Schussele’s painting is Charles Goodyear, who is remembered for his invention of vulcanized rubber in 1839.[101] He received a patent on his process in 1844,[102] and almost immediately became embroiled in patent litigation.[103] Not only was Goodyear forced to litigate against his competitors, however, but also against his own employees, one of whom attempted to patent one of Goodyear’s inventions.[104] Fortunately for Goodyear, despite recognizing a presumption in favor of the employee—who actually made the machine—the courts considered Goodyear’s employee’s activities to have been at Goodyear’s direction, and thus, they determined that it was Goodyear, and not his employee, that was the true inventor.[105]

Despite the favorable result for Goodyear, the case only underscored the presumption that employees owned their inventions, as the court continued to articulate employee-ownership as the general presumption in such cases. Thus, time and time again, courts were required to find exceptions in order to protect employers from the presumption’s consequences. For example, in 1843 the Supreme Court, in McClurg v. Kingsland, determined that a license or grant from the employee to the employer may be presumed by virtue of the fact that the employee:

was employed by the defendants . . . receiving wages from them by the week; while so employed, he claimed to have invented the improvement patented, and after unsuccessful experiments made a successful one . . . the experiments were made in the [employer’s] foundry, and wholly at their expense, while [the employee] was receiving his wages, which were increased on account of the useful result.[106]

This implied license, or shop right, prevented the assignees of the employee’s patent from bringing suit against the former employer for infringement when all the employer was doing was continuing to use the process it had been using prior to the employee’s departure.[107] The Court reached this result without requiring an assignment of the patent. Rather, the Court held that the plaintiffs took their assignment from the employee subject to his license to his former employer.[108] As such, McClurg is generally thought of as the first shop rights case.[109] It can also be seen as a fairly pro-employee case, for the employer received no rights to the invention other than the right to use it despite the fact that the employee would not have been able to make his improvement but for his employer’s time, money and equipment.[110]

During this same time period, other inventors were creating major innovations in both science and industry. For example, in 1844 Samuel Morse—also depicted in Men of Progress—connected the first intercity line between Washington and Baltimore and sent the message, “What hath God wrought!”[111] Moreover, scientists were making significant advances in electric theory, evolution, and thermodynamics.[112] Similarly, in the decade that followed, solo inventors continued to be credited with major breakthroughs in both science and industry. For example, during the 1850s, Heinrich Geissler is credited with the leaps forward that resulted in the invention of the vacuum tube.[113] Further, the 1850s saw huge advances in telecommunications technology, including Morse’s testing of the first transatlantic telegraph cable.[114] Even Abraham Lincoln took the time to consider the discoveries, inventions and improvements that resulted from America’s willingness to observe, reflect and experiment.[115]

Despite the attribution of these major advances to individual inventors, the reality was that even in the 1840s, teams of workers were working together to develop new technologies, which “somewhat undermine[s] the heroic mythology surrounding the great individualistic and entrepreneurial American inventors,”[116] The dichotomy between the myth of the sole inventor and the reality that inventive activity was being carried out by groups of individuals in many ways mirrors the shift that was occurring in copyright law at that time. However, instead of acknowledging that multiple individuals were involved in the inventive process, courts turned a blind eye to the significant contributions employees were making to their employers’ inventions and dismissed those contributions as small modifications.[117] In King v. Gedney, for example, the court disregarded the following evidence as “vague and equivocal,” and instead determined that the employer “might have” given the employee—a draftsmen and general foreman—general directions about the improvement:

[The employee] was the foreman, and directed the making the alterations in the factory. [The employer] gave him no directions in relation to those alterations; [another employee] asked him for directions during the time that he was making alternations, and his answer was, ‘I do not know anything about it; go to [the employee].’ He said it was [the employee’s] improvement, and he knew nothing about it; if it did not work it was [the employee’s] fault; [the other employee] must go to him for all instructions. [The other employee] did not hear [the employer] give directions to any of the workmen in the shop. He has seen [the employer] and [the employee] conversing together at the factory, when chalk marks were made upon the floor by [the employee] to convey to [the employer] the manner in which he was going to prosecute the work.[118]

The court determined that if the general idea was the employing inventor’s, then the employee “could only be considered as acting as [his] servant,” and held the employer to be the original and sole inventor.[119]

Thus, by crediting employers with being sole inventors, courts were able to continue to articulate the presumption that those who do the actual inventing will own the rights to their inventions. However, as employees became more and more involved with the inventive process, courts would find it increasingly difficult to rely on the employee improvements doctrine to rebut the presumption of employee ownership.[120]

B. The Nineteenth Century Postbellum

American invention did not stop during the American Civil War. In fact, the war spurred increased invention, particularly in agriculture. For example, Cyrus McCormick—another famed inventor depicted in Men of Progress—developed a reaper in 1861, which allowed northerners to increase food production “to the highest levels of surplus ever known” even though they had fewer farm hands due to the war.[121] Similarly, in the mid-1860s, scientists were making major advances in chemistry and thermodynamics.[122] Then, in 1865, George Westinghouse received his first patent for a rotary steam engine, followed by patents for railroad frogs and air brakes.[123] A few years later, a “self-taught practical innovator” by the name of Thomas Alva Edison would apply for his first patent.[124] Edison is a particularly interesting example of a nineteenth century inventor, because it is well documented that he “regularly employed not only mechanics and craftsmen but also college-trained chemists and engineers in his invention workshop,”[125]

In some ways, then, it is not surprising that the Supreme Court first recognized the employee improvements doctrine in its 1868 Agawam Co. v. Jordan opinion. In Agawam, an inventor named John Goulding hired a blacksmith, Edward Winslow, to help in his machine shop.[126] Goulding had been working on his invention and was at the point of experimentation when Winslow, having visited another factory, made a suggestion of replacing a piece of Goulding’s invention with a spool and drum.[127]  Goulding went back and forth about the value of the suggestion, but after making another modification to make the change practicable, he adopted Winslow’s suggestion.[128]

The new invention was patented and eventually assigned to the plaintiff who then sued the Agawam Woolen Company for infringement.[129] Agawam defended, in part, by arguing that it was Winslow, and not Goulding, that invented the improvements for which the patent was granted.[130] The Court held that Goulding’s claim to invention of the patent was sustained, because all that Agawam could prove was that Winslow suggested the spool and drum—an “auxiliary” part of the invention.[131] In handing another victory to an employer, however, the Court continued to recite that the general presumption is that employees hold rights to their inventions.[132]

Similarly, as discussed above, during this time employers in copyright cases began to see the presumption switch from employee ownership to employer ownership. For example, five years prior to Agawam, the influential case of Kenne v. Wheatley was decided in favor of the employer relying on an employee improvements-type argument to grant a theater proprietor the copyrights to a play adapted by her and her theatrical company.[133] Whereas in theater it was undeniable that multiple individuals were required to develop new materials and produce it for the stage, invention in the 1870s continued to be perceived as the work of individuals with minimal help from employees instructed to carryout manual labor.

Significant changes, however, were on the horizon for those industries that employed workers to design and construct their products. The “United States began to develop a single price and market system,” which led to capital intensive industries that “employed workers who owned no tools and had few skills, leading to social inequalities that created new political crises,”[134] Those inequities led to the formation of labor unions, which employed a variety of tactics to effect the status of workers in this country. “The decades from the 1870s through the early 20th century saw one disruptive strike after another and the beginning of the appeal of ideologies and reform strategies that would characterize the labor movement—agrarian reform, populism, socialism, anarchism, and progressive reformism,”[135]

Despite these changes, inventive activity in the United States soldiered on. For example, Edison—who, as discussed above, employed a variety of workers in his invention workshop[136]—had filed for patents on 21 inventions by 1871.[137] As inventive activity began to involve more complex technology, the proportion of inventions devised by solo inventors continued to decline.[138] Perhaps in recognition of these changes, the Supreme Court began to hint at a willingness to recognize employers’ ownership of patented inventions that they hired employees to create.[139]

Nevertheless, there were limits to the Court’s willingness to grant patent rights to one who employed another to invent. In Collar Co. v. Van Dusen, for example, the Supreme Court determined that the plaintiff, despite employing a set of paper-makers to create a paper collar that would be perceived as a real starched linen collar, was not entitled to a patent because only the paper-makers had invented something patentable.[140] The plaintiff had argued that the paper-makers had received inspiration and direction, but the Court determined that the paper-markers had provided the whole improvement and therefore the plaintiff had no rights to their invention under Agawam’s ancillary discoveries rule.[141]

Despite its use of the terms “employer” and “employee,” however, the Collar case is better understood as concerning, using our modern parlance, independent contractors, who, even if Collar was a modern copyright case, would be unlikely to fall within the work made for hire doctrine. Rather than inspiring and directing the paper-makers’ improvement, the patentee derived all of the improvements he attempted to patent from the paper-makers. Similarly, other courts in the 1870s held that if an employee’s invention was outside the employee’s inventive arena, the employer would receive no more than a shop right to the invention.[142]

By the 1880s, “farmers and industrial workers represented a force for political insurgency that began to coalesce into new movements that threatened to change the nature of society,”[143] These movements reflected a general anti-monopoly and big business sentiment at the turn of the century, as they began to lead to discussions of new government regulations “to control railroad rates and other large enterprises . . . to address the growing power of bankers and railroad magnates,”[144] At the same time, entrepreneur inventors, like Westinghouse, were beginning to build empires of their own from their own companies and inventions, as well as those of others.[145] These companies employed various individuals who developed patentable inventions during their employment.

During the remainder of the nineteenth century, disputes over employees’ inventions became more frequent and led to cases that further developed the shop right[146] and employee improvements doctrines.[147] The courts, however, failed to develop a mechanism for dealing with employees that were explicitly hired to invent,[148] until the hired-to-invent doctrine was formally recognized by the Supreme Court in 1924.[149] Also, the rise of the corporate form introduced additional complications,[150] such as whether a shop right could be assigned.[151] Despite these developments, however, in not one of these cases was an employing company considered an “inventor” by virtue of its employees’ activity. Rather, for a company to receive patent ownership, an employee needed to assign it his or her rights.

By the turn of the century, each and every person in the United States had been affected by the inventions of the nineteenth century. In particular, the poor were being put to work in factories using newly invented machinery and tools. Even the middle classes indirectly benefited from the benefits of the day:

For the middle classes, such as physicians, attorneys, engineers, academics, journalists, and managers, whose employment was less dependent on machinery and tools than on their education, the new technologies provided new sources of entertainment, comfort, and opportunities. By 1890, a person who worked in such a profession could come home, switch on the electric light, make a phone call, go to the refrigerator and take out a cold beer, light a factory-made cigarette with a safety match, then sit down to listen to a phonograph record while reading a newspaper with news of the day from all over the planet. It was a new world, for none of those experiences had been possible 40 years earlier, even to the wealthy.[152]

IV. IS PATENT LAW STUCK IN THE PAST?

For inventors in the twentieth century, more and more inventive activity would occur within corporate settings. However, patentable inventive activity would continue to be credited to individuals, not groups, until late into the century. In fact, the average number of inventors per patent would not begin to change dramatically until the 1970s, when a “dramatic increase in the proportion of ‘highly collaborative’ inventions” would drive the average up:[153]

Yet, despite the fact that today the “ordinary inventor is . . . a joint inventor who invents as part of a team,”[154] patent law continues to require that corporate employers receive assignments from their employees in order to effect a transfer of the ownership of the employees’ patent rights.

In Part II, several reasons behind copyright law’s move toward the work made for hire doctrine were posited: (1) courts were attempting to reflect the intent of the parties; (2) courts felt that employees were in the best position to determine ex ante whether they intended to assert copyright ownership; (3) changing notions of the nature of authorship; (4) ease of statutory drafting; (5) avoiding constitutional concerns; and (6) concern about renewal terms.

Three of these reasons simply do not apply to patent law. First, patents in the United States do not have renewal terms. Second, the copyright statute was being revised in 1909 for reasons beyond the codification of the work made for hire doctrine. The patent statute, by contrast, was not significantly revised until 1952. Without an independent push to redraft the Patent Act, the need to ease statutory drafting was absent, and constitutional concerns in granting patent rights to non-“inventors” would not need to be addressed. As for the remaining reasons for the shift in copyright law, patent law simply did not share those factors.

First, the perceived nature of inventive activity in the nineteenth century did not lend itself to an argument for the need of a doctrine like work made for hire. As discussed in Part II, copyrighted works grew in complexity over the course of the nineteenth century. While copyrighted works were originally only embodied in single author books, they steadily grew to include complicated works involving the input of the multiple creative individuals. In particular, the creation of maps and theatrical works required coordination among multiple parties to insure that works could be exploited. Once the 1909 Act was passed, that complication grew exponentially as additional works were brought under the copyright statute.

The perception of inventive activity in the nineteenth century, on the other hand, did not appear to require significant coordination among parties. Rather, credit for advances was given to individual inventors, whether or not they, like Edison, employed others in their invention workshops. Moreover, even in the nineteenth century, most patents were on incremental improvements of existing technologies, which made it even more likely that the number of individuals involved in each inventive push forward would be small. Further, even if an invention required multiple individuals to reduce it to practice, the individual credited with the invention could subsume any other inventive activity into his invention under the employee improvements doctrine.  In fact, in 1916, three-quarters of U.S. patents were issued to individuals.[155] Thu­­s, the need to coordinate among multiple individuals that existed in copyright law in the nineteenth century did not exist in patent law.[156]

Second, the existing doctrines that had developed, including the hired-to-invent doctrine, provided sufficient ex ante protection to employers. The shop rights doctrine, which was well established in the early part of the century, provided employers with a way of ensuring that their expectations were met. Unlike today where many organizations that own patent rights merely license those rights to others to use, in the nineteenth century, most companies used patent rights merely to exclude competitors while they themselves developed products to sell to consumers. Without the need to license, companies merely needed the right to use, which the shop rights doctrine provided. Moreover, as described above, when an inventor did use assistance in the process of developing his invention, the employee improvements doctrine protected him from needing to secure rights from each assistant in his workshop. As long as the inventor couldn’t be seen as deriving his invention from someone else, he could be fairly content that his rights in the invention would be secure.

Finally, by the end of the nineteenth century, employers were securing contracts with their employees that included provisions requiring the assignment of any patented inventions later developed.[157] In 1885, only 12% of U.S. patents were issued to corporations.[158] By 1950, it had grown to 75%, and by the 1980s, 84% of U.S. patents were assigned to corporations, “usually the employer of the actual inventor,”[159] In the past decade, those efforts have become increasingly successful.[160]

In fact, it will come as no surprise that the Intellectual Property Owners Association’s list of top patent owners does not include the name of a single individual.[161] Further, by the turn of the century, when an employer hired an inventor, the hired-to-invent doctrine would require the inventor to assign their rights to the employer.

Despite the protection of the existing patent law doctrines that give employers some of the benefits of the work made for hire doctrine, it is clear from Table 5 that not one doctrine captures all of the benefits from that doctrine:[162]

Moreover, as recent cases make clear, companies cannot rely on the patent law doctrines and contracts with their employees to ensure ownership of the rights to their employees’ inventions.[163] For example, the Supreme Court recently held that although an inventor working as a research fellow at Stanford University signed a Copyright and Patent Agreement that stated that he “‘agree[d] to assign’ to Stanford his ‘right, title and interest in’ inventions resulting from his employment at the University” and written assignments of rights, which Stanford used to file several patent applications, Stanford did not receive the inventor’s patent rights because he signed a Visitor’s Confidentiality Agreement that provided that he “‘will assign and do[es] hereby assign’ to Cetus his ‘right, title and interest in each of the ideas, inventions and improvements’ made ‘as a consequence of [his] access’ to Cetus” between signing the CPA and the assignments.[164] Further, many modern employers intend to license, rather than use, their employees’ inventions, which a shop right would not permit.

Similarly, in Abbott Point of Care Inc. v. Epocal Inc., Abbott filed a patent infringement suit against Epocal, a competitor in the diagnostic field, alleging infringement of patents that “cover systems and devices for testing blood samples,”[165] Epocal, however, was founded by Dr. Imants Lauks, the named inventor of the patents at issue and a former employee of Abbott’s predecessors.[166] Despite the fact that Dr. Lauks had entered into two employment agreements, one of which contained a provision requiring him to assign all of his rights to any inventions that he might conceive, the Federal Circuit determined that Abbot did not hold rights to the patents and, thus, lacked standing to bring the lawsuit.[167] The court determined that Dr. Lauks had resigned from his previous employment in 1999, and that while the consulting agreement that he entered into after his resignation stated that various provisions of Dr. Lauks’ employment agreement remained in effect, it did not address invention assignments or obligations.[168] Thus, the two patent applications Dr. Lauks filed after entering into the consulting agreement did not belong to Abbot.[169]

Additionally, despite the high assignment rate discussed above, when a patent assignment is found to be ineffective, the consequences can be extreme. This is particularly true where the employer acts on its belief that an assignment is effective and incurs costs associated with the patented technology, only to learn that they do not, in fact, hold any patent rights.

As such, it is time for patent law to come to terms with the fact that it is stuck in the past and adopt an inventions made for hire doctrine. To do so, Congress need only pass an act amending two sections of the Patent Act.  First, Congress would add a subsection (c) to 35 U.S.C. § 111 as follows:

(c) In the case of an invention made for hire, the employer is considered the inventor for purposes of this title, and, unless the parties have expressly agreed otherwise in a written instrument signed by them, owns all patents rights to the invention.

Second, Congress would add a subsection (f) to 35 U.S.C. § 100 as follows:

(f) An “invention made for hire” is an invention invented or discovered by an employee within the scope of his or her employment.

Whether an individual is an employee for purposes of the invention made for hire doctrine will be determined by looking to the same common law doctrine of agency that the Supreme Court identified in Community for Creative Non-Violence v. Reid.[170] Moreover, there is over two decades of caselaw interpreting agency doctrine in light of the Copyright Act and over a century of caselaw interpreting the work made for hire doctrine for courts to rely on in implementing this new provision.[171]

Conclusion

As this article has suggested, patent law remains stuck in the past by continuing to rely on the rhetorical device that modern invention is performed by individual inventors in their garages, when, in fact, most patentable inventive activity occurs in corporate and university settings. Moreover, contrary to popular perception, most individuals who would be labeled “inventors” in the twenty-first century are employees of a corporate entity and assign their patent rights to their employer. Nevertheless, patent law continues to require written assignments to give employers ownership of their employees’ inventions. While that formulation may have made sense when invention was credited to individuals and required little coordination among inventors, it no longer does. Rather, employers should be able to feel secure in the knowledge that any inventions invented or discovered by their employees within the scope of their employment are owned by the party that financed and supported them (i.e., their employers). As such, it is time for the Patent Act to be amended to borrow from the Copyright Act and adopt an inventions made for hire doctrine.

[75] In both Roberts v. Myers and Boucicault v. Fox, the author of a commissioned play sued the theater manager who commissioned the piece for having it performed after the author, who was also acting in the piece, had quit. Roberts v. Myers, 20 F. Cas. 898 (C.C.D. Mass. 1860) (finding the author was entitled to the copyright in the work, despite being commissioned to write the play); Boucicault v. Fox, 3 F. Cas. 977 (C.C.S.D.N.Y. 1862) (finding that only an express agreement to assign copyright in the work would be sufficient to transfer copyright ownership). In Keene v. Wheatley, the proprietor of a New York theater had been given the rights to perform Our American Cousin, and in the process, she and her company adapted the play. 14 F. Cas. 180 (C.C.E.D. Pa. 1861).

Figure 1: Our American Cousin Playbill

[76] Keene, 14 F. Cas. at 187.

[77] Id. Although the court ultimately held that the employee’s work was not copyrightable, the court did determine that equitable principles permitted the plaintiff to recover based on the employee’s giving his work to the defendants to add to their production. Id. at 188.

[78] Professor Fisk makes much of the fact that the doctrine “slipped into the cases without the usual adversary process,” because in both Keene and Lawrence, the employees did not lose the rights to their work. Fisk, supra note 64, at 43–44. In Keene, the employee had already assigned whatever he had to the theater producer defendants; if anyone was going to lose out it would have been them. Keene v. Wheatley, 14 F. Cas. 180 (C.C.E.D. Pa. 1861). In Lawrence, despite the court acknowledging a copyright interest in the employer, the parties’ express contract protected the employee. Lawrence v. Dana, 15 F. Cas. 26 (C.C.D. Mass. 1869).

[79] See Callaghan v. Myers, 128 U.S. 617 (1888); Sarony v. Burrow-Giles Lithographic Co., 17 F. 591 (C.C.S.D.N.Y. 1883); In re Gould & Co., 2 A. 886 (Conn. 1885).

[80] Callaghan, 128 U.S. at 647.

[81] Fisk, supra note 64, at 45 (emphasis added).

[82] Id. at 50 (citing Rochelle Cooper Dreyfuss, Collaborative Research: Conflicts on Authorship, Ownership, and Accountability, 53 Vand. L. Rev. 1161, 1172–79 (2000)). But see Press Publishing Co. v. Monroe, 73 F. 196 (2d Cir. 1896) (holding that a contract provided copyright to the author); Mallory v. Mackaye, 86 F. 122 (C.C.N.Y. 1898) (holding that a contract allocated copyright in a theater manager over the playwright); Carte v. Evans, 27 F. 861 (C.C.D. Mass. 1886).

[83] Schumacher v. Schwencke, 25 F. 466 (C.C.S.D.N.Y. 1885). But see Edward Thompson Co. v. Am. Law Book Co., 119 F. 217, 219 (C.C.S.D.N.Y. 1902) (“It is conceded that the question whether a corporation can be an author within the meaning of the copyright laws has never been decided.”).

[84] In Aalmuhammed v. Lee, the plaintiff was hired to work on, without a written agreement, and made “very extensive” contributions to the film Malcolm X.  202 F.3d 1227, 1229 (9th Cir. 2000). However, the Ninth Circuit held that in the same way that the person who controlled the film’s hue was not a joint author of the film, the plaintiff would not be considered one either. Id. at 1233. Instead, the “superintended” or “master mind” of the whole work—in this case Spike Lee, who had signed a work for hire agreement—would be considered the work’s author. Id. at 1233, 1235. To have held otherwise would have opened authors to claims by “research assistants, editors, and former spouses, lovers and friends,” not to mention dramaturgies, actors, cinematographers, film editors, art directors, and costume, makeup, set and sound designers. See id. at 1235–36.

[85] 94 F. 152, 153 (C.C.S.D.N.Y. 1899).

[86] Id. at 153 (“[U]nder his contract . . . the literary product of [the employee’s] work became the property of the [employer], which it was entitled to copyright, and which, when copyrighted, [the employee] would have no more right than any stranger to copy or reproduce.”). The court denied the motion because it was unclear whether the newly created pamphlets infringed because both sets of pamphlets were compilations. Id.

[87] See Edward Thompson, 119 F. at 219 (In response to the defendant’s demurrer that the plaintiff corporation was not the copyright holder, the court stated, “It sufficiently appears that complainant’s publication is the result of the intellectual labor of the editors and compilers employed by complainant.  It is unnecessary, as it might be impracticable, to set forth the names of the persons engaged in the preparation of the work.”);

[88] Copyright Act of 1909, ch. 320, § 62, 35 Stat. 1075 (amended 1976).

[89] Fisk, supra note 64, at 62 (“First, it was a matter of ease in statutory drafting (“author” is a term of art used throughout the statute). Second, it avoided constitutional doubts about a default rule of employer ownership stemming from the constitutional provision that Congress may give “authors” a copyright.  Third, and most importantly, the drafters of the revision wanted to be sure that the employer would be the initial copyright owner rather than an assignee, because only the initial owner is entitled to obtain a renewal.”) (citations omitted).

[90] Jon Noonan, Nineteenth-Century Inventors, at ix (Facts on File 1992).

[91] John Gribbin, The Scientists: A History of Science Told Through the Lives of Its Greatest Inventors 359–61 (Random House 2002) (citing Frank Greenaway, John Dalton and the Atom (Heinermann, London, 1966)).

[92] Id. “But remember that the whole population of Europe doubled, from about 100 million to about 200 million, between 1750 and 1850, and the population of Britain alone doubled between 1800 and 1850, from roughly 9 million to roughly 18 million. The number of scientists did increase as a proportion of the population, but not as dramatically as the figures for scientists alone suggested at first sight,” Id.

[93] Id. at 359.

[94] Rodney P. Carlisle, Inventions and Discoveries, Scientific American
224 (John Wiley & Sons, Inc. 2004).

[95] Noonan, supra note 90, at xi.

[96] Id. (“In 1830, there were only 23 miles of usable track in the United States, but that was soon to change. By 1850, there were 5,000 miles of track and 20 years later, 75,000 miles. Steamboats increased in size and number; new farming equipment filled the country with food; the telegraph lines grew alongside the expanding railroads; and a thousand uses were found for vulcanized rubber and other new materials.”).

[97] Carlisle, supra note 94, at 223 (“The machines were built first; then the principles that governed them were thought through. With the newly discovered principles in place, it was possible to build better machines.”).

[98] Noonan, supra note 90, at x–xi.

[99] Catherine L. Fisk, Removing the ‘Fuel of Interest’ from the ‘Fire of Genius’: Law and the Employee-Inventor, 1830–1930, 65 U. Chi. L. Rev. 1127, 1138 (1998); see also id. 1138 n.33 (explaining that it is “implausible that there were no such cases before 1843,” but there were fewer opinions written and reported at that time).

[100] Depicted left to right: William Morton; James Bogardus; Samuel Colt; Cyrus Hall McCormick; Joseph Saxton; Charles Goodyear; Peter Cooper; Jordan Mott; Joseph Henry; Eliphalet Nott; John Ericsson; Frederick Sickels; Samuel F. B. Morse; Henry Burden; Richard Hoe; Erastus Bigelow; Isaiah Jennings; Thomas Blanchard; Elias Howe.

[101] Noonan, supra note 90, at 33–34, 39 (“A sample of his rubber, composed of his most recent chemical formula, came in contact with a hot stove. The natural gum always softened in summer heat. With the extreme heat of the stove, the gum should have melted. Instead of softening, however, Goodyear’s newest rubber charred like leather. It could still stretch but it wasn’t soft or sticky! Goodyear noticed that the edge of his sample was perfectly cured and not charred. If he could find the correct temperature, he could make fully cured rubber.”).

[102] Id. at 36.

[103] Id.  (“Several companies honored licenses from Goodyear to make rubber products using his methods. Some did not. These other companies copied Goodyear’s process without paying royalty fees. Goodyear had to get involved in lawsuits to protect his rights.”).

[104] In Warner v. Goodyear, Charles Goodyear patented an invention and then Solomon C. Warner, who had been employed as a machinist for Goodyear, attempted to patent the same invention. 29 F. Cas. 256, 256 (C.C.D.C. 1846). The invention at issue was a combination for “manufacturing corrugated or shirred India-rubber goods” using “metallic calendar rollers an elastic endless apron and a stretching-frame,” Id.

[105] The patent commissioner refused Warner’s patent, and when he appealed, the court found that although an inference could be drawn for Warner because he made the machine, it was rebutted by his employment and that while still employed he “stood by and saw Mr. Goodyear apply for and obtain a patent for it without objection,” Id. at 257. Moreover, the court found a presumption in Goodyear’s favor:

from the fact that Warner made the machine for Goodyear at his request, for his benefit, and at his expense, [the presumption] is that it was made according to his directions; and the burden of proof is then on Warner to show that the machine was not according to his directions.

Id. The court went on to find that Goodyear had conducted a number of experiments and that Warner had merely reduced to practice Goodyear’s combination. Id. Furthermore, the court may have been swayed by some evidence of bad faith, as Wilson did not apply for a patent for 18 months, six months after Goodyear had obtained his patent, and had reached an agreement with another company to pay for the costs in getting the patent. Id. Cf. Collier Eng’r Co. v. United Correspondence Sch., 94 F. 152 (C.C.S.D.N.Y. 1899), discussed supra notes 85–86 and accompanying text.

[106] 42 U.S. 202, 205 (1843). Furthermore, the employee continued to work at the foundry making rollers, and although his employer declined his proposal to apply for a patent and have the employer purchase his rights,

he made no demand on theme for any compensation for using his improvement, nor gave them any notice not to use it, till, on some misunderstanding on another subject, he gave them such notice, about the time of his leaving their foundry, and after making the agreement with the plaintiffs, who owned [another] foundry . . . for an assignment to them of his right.

Id.

[107] Id. at 204. The patent had been granted on an “improvement in the mode of casting chilled rollers and other metallic cylinders and cones . . . [so that] iron rollers or cylinders could be so cast that when the metal was introduced into the mould it should cause a sw[i]rl or rotary motion, by which the flog or dross would be thrown into the centre instead of the surface of the cylinder,” Id. The improvement was to change the direction of a tube exiting a furnace and entering the cylindrical mold from a perpendicular position to an angular one. Id. at 204–05 (“The tube or tubes, or passages called gates, through which the metal to be conveyed into the moulds shall not enter the mould perpendicularly at the bottom, but slanting, or in a direction approaching to a tangent of the cylinder, or if the gates enter the moulds horizontally or nearly so, shall not enter in the direction of the axis of the cylinder, but in a tangent form, or inclining towards a tangent of the cylinder.”).

[108] Id. at 206.

[109] Interestingly, McClurg has reasserted itself in modern copyright law to establish the idea that legislative expansion of intellectual property rights does not conflict with the constitution’s requirement that copyrights and patents be only for “limited times,” See Golan v. Holder, 132 S. Ct. 873, 886–87 (2012). (“This Court again upheld Congress’ restoration of an invention to protected status in McClurg v. Kingsland . . . . There we enforced an 1839 amendment that recognized a patent on an invention despite its prior use by the inventor’s employer. Absent such dispensation, the employer’s use would have rendered the invention unpatentable, and therefore open to exploitation without the inventor’s leave.”) (citations omitted); Eldred v. Ashcroft, 537 U.S. 186, 187–88 (2003); Golan v. Ashcroft, 310 F. Supp. 2d 1215, 1219 (D. Colo. 2004) (“As explained in Eldred, the McClurg court determined that [the employee] was ‘unprotected under the law in force when the patent issued because he had allowed his [ex-]employer briefly to practice the invention before he obtained the patent. Only upon enactment, two years later, of an exemption for such allowances did the patent become valid, retroactive to the time it issued.’ The McClurg Court upheld retroactive application of the new amended laws ‘for though they may be retrospective in their operation, that is not a sound objection to their validity.’”) (citations omitted).

[110] Cf. Fuller & Johnson Mfg. Co. v. Bartlett, 31 N.W. 747, 752 (Wis. 1887) (“The mere fact that, in making the invention, an employe [sic] uses the materials of his employer, and is aided by the services and suggestions of his co-employes [sic] and employer in perfecting and bringing the same into successful use, is insufficient to preclude him from all right thereto as an inventor.”).

[111] Noonan, supra note 90, at 26.

[112] In 1841, James Joule produced papers on the relationship between electricity and head for the Philosophical Magazine and the Manchester Literary and Philosophical Society. Gribbin, supra note 91, at 384. Between 1839 and 1845, Darwin made significant advances in developing his theory of evolution. Id. at 349. In 1848 and 1849 respectively, Julius Robert von Mayer developed ideas about heat and energy into a discussion of the age of the Earth and the Sun, and William Thomson coined the term thermodynamics. Id. at 381, 383.

[113] First, Geissler invented a better kind of vacuum tube that used mercury to make airtight contact. Id. at 487. Then, he pushed the invention further and “sealed two electrodes into the evacuated glass vessel, creating a tube in which there was a permanent vacuum,” Id. at 488.

[114] Noonan, supra note 90, at 14–15, 26. In 1851, over 50 telegraph companies “started stretching wires,” and within 15 years, “almost half a million miles of lines in America, Europe, and Asia would be connected,” Id. at 23–24.

[115] Abraham Lincoln, Sole Hope of the Future (Feb. 11, 1859), in Mario M. Cuomo & Harold Holzer, Lincoln on Democracy 148, 150 (Fordham Univ. Press 2004).

[116] Gribbin, supra note 91, at 224.

[117] For example, in Wellman v. Blood, an employer attempted to patent an invention, and an interference party argued that he was not the inventor, but rather the inventor was a man who had created a drawing of the invention with a modification of his own. 29 F. Cas. 628, 629–31 (C.C.D.C. 1856) (involving improved machinery for “cleaning top cards of carding machines”). The court determined, however, that

[i]f the employer conceives the result embraced in the invention, or the general idea of a machine upon a particular principle, and in order to carry his conception into effect, it is necessary to employ manual dexterity, or even inventive skill, in the mechanical details and arrangements requisite for carrying out the original conception; in such cases the employer will be the inventor, and the servant will be a mere instrument through which he realizes his idea.

Id. at 631. It went on to decide that Wellman had conceived of the improvement first and “practically reduced it,” even though the final invention included the employee’s small modification. Id.

[118] King v. Gedney, 14 F. Cas. 526, 530 (C.C.D.C 1856) (involving improvement on washing machinery that included a four-way valve at the breach end of the tub). In King, the employer sought a patent on an improvement to a previously patented machine, his employee also sought a patent, and an interference was declared. Id. at 526. The patent commissioner decided invention priority in favor of the employee, and the employer appealed. Id. at 527.

[119] Id. at 530–31; see also Dental Vulcanite Co. v. Wetherbee, 7 F. Cas. 498, 502–03 (C.C.D. Mass. 1866); Goodyear v. Day, 10 F. Cas. 677, 677 (C.C.D.N.J. 1852); Sparkman v. Higgins, 22 F. Cas. 879, 880 (C.C.S.D.N.Y. 1846); Alden v. Dewey, 1 F. Cas. 329, 330 (C.C.D. Mass. 1840); Dixon v. Moyer, 7 F. Cas. 758, 759 (C.C.D. Pa. 1821). The court also repeated the rule stated in Wellman, supra note 117, but attributed it to Curtis on Patents. King, 14 F. Cas. at 530.

[120] Dwight B. Cheever, The Rights of Employer and Employee to Inventions Made by Either During the Relationship, 1 Mich. L. Rev. 384, 385 (1902–1903) (“[T]here is . . . no question for the courts where the employer does all the inventing and the employee does only work requiring ‘mechanical skill,” As soon, however, as the employee begins to think that his ‘mechanical skill’ has turned to inventive skill the trouble begins . . . .”).

[121] Noonan, supra note 90, at 48–49.

[122] Gribbin, supra note 91, at 382, 376–77. Moreover, in 1864, James Maxwell published his “tour de force paper, ‘A Dynamic Theory of the Electromagnetic Field,’ which summed up everything that it is possible to say about classical electricity and magnetism in a set of four equations, now known as Maxwell’s equations,” Id. at 431. These equations would be the basis for Albert Einstein’s work on the special theory of relativity. Id. at 435.

[123] Noonan, supra note 90, at 57–58, 65; see also Improvements in Rotary Steam-Engines, U.S. Patent No. 50,759 (issued Oct. 31, 1865) (see Figure 3). Railroad frogs are “used for keeping cars on the correct rails at intersections and track switches,” Noonan, supra note 90, at 57. Westinghouse’s invention was to use reversible cast steel frogs to prevent them from wearing out. Id.

Figure 3: U.S. Patent No. 50, 759

 

[124] Carlisle, supra note 94, at 224; see also Improvement in Electrographic Vote-Recorder, U.S. Patent No. 90,646 (issued Jun. 1, 1869) (see Figure 4).

Figure 4: U.S. Patent No. 90, 646

[125] Carlisle, supra note 94, at 224. Cf. Fisk, supra note 99, at 1139 (“In the late nineteenth century, research laboratories dedicated to invention and technological innovation—like Thomas Edison’s famed laboratory enclave at Menlo Park, New Jersey—were unusual”).

[126] 74 U.S. 583, 586 (1868). The invention in Agawam was a new mechanical combination for manufacturing wool and other fibrous materials using a carding machine that was fed a continuous roll. Id. at 584–86, 599–602.

[127] Id. at 587.

[128] Id.

[129] Id. at 588, 593. Interestingly, Goulding actually failed to apply for a renewal of his patent right due to “erroneous information given him by the Commissioner of Patents,” and the patent expired. Id. at 588, 594. Twenty-one years after the patent expired, Goulding persuaded Congress to pass a special act, authorizing the patents commissioner to entertain an application for extension, and the patent reissued. Id. at 588, 594; see also An Act for the Relief of John Goulding, ch. 88, 12 Stat. 904 (1862). In a previous case involving Goulding’s patent, the constitutionality of the grant was questioned, but the circuit court rejected the argument. Jordan v. Donson, 13 F. Cas. 1092, 1095–96 (C.C.E.D. Pa. 1870).

[130] Agawam, 74 U.S. at 589, 595.

[131] Agawam, 74 U.S. at 605–07. In so holding, the Court repeated over and over that while only the inventor is entitled to a patent, if he employed other persons to help and they made “valuable discoveries ancillary” to the employer’s plan, the employer who invented the original idea is regarded as the owner of them. Id. at 602–03.  Rather, the employee’s contribution would need to meet the derivation requirements to preempt the employer’s rights from vesting. Id. (citing various derivation cases, including Pitts v. Hall, 19 F. Cas. 754 (C.C.N.D.N.Y. 1851); Reed v. Cutter, 20 F. Cas. 435 (C.C.D. Mass. 1841); Alden v. Dewey, 1 F. Cas. 329 (C.C.D. Mass. 1840)).

[132] Agawam, 74 U.S. at 603 (“Persons employed . . . are entitled to their own independent inventions.”).

[133] See supra notes 75–79 and accompanying text.

[134] Carlisle, supra note 94, at 225.

[135] Id. at 226–27.

[136] See supra note 125 and accompanying text.

[137] Noonan, supra note 90, at 74. By 1872, “Edison had filed patents for 52 inventions, most of them on printing-telegraph improvements. In the next three years, Edison created inventions such as the electric pen and mimeograph for making copies of letters and the quadruplex telegraph. The quadruplex handled two messages simultaneously to and from each end of the telegraph line, making a total of four messages on a single wire,” Id.

[138] Fisk, supra note 99, at 1141 (citing B. Zorina Khan & Kenneth L. Sokoloff, “Schemes of Practical Utility”: Entrepreneurship and Innovation Among “Great Inventors” in the United States, 1790–1865, 53 J. Econ. Hist. 289, 295–301 (1993) and Naomi R. Lamoreaux & Kenneth L. Sokoloff, Inventors, Firms, and the Market for Technology in the Late Nineteenth and Early Twentieth Century United States, in Naomi R. Lamoreaux, et al., Learning by Doing in Firms, Markets, and Nations (University of Chicago Press 1999)).

[139] See United States v. Burns, 79 U.S. 246, 252 (1871) (hinting at the hired-to-invent doctrine in dicta).

[140] 90 U.S. 530, 536, 564 (1874). Andrew Evans had previously received a patent for an improvement in the creation of shirt collars, which turned out to be a flop. Id. The shirt collars were “made of parchment-paper and coated with varnish of bleached shellac,” which—according to the reporter—evidently did not look like linen, much less starched linen, became discolored over time, emitted an odor when wearers sweated, and was not amenable to the new fashion of turned down collars. Id. at 537.

So Evans employed Crane & Co. to create “something which while it was paper and could be produced cheaply should yet have such a thickness, tenacity, pliability united with strength, and have moreover that polish of surface, and that exact bluish tint which is found in the best starched linen—as distinguished from yellowness and from dead white—which would deceive even critical observers who had no opportunity of judging otherwise than by eye,” Id. Crane & Co. after laborious effort were able to create just such a collar, and after it was created, Evans assigned his patent rights to the Union Paper Collar Company and they applied for and received a reissue of the patent. Id. at 537, 539. Collar Co. then brought suit against Van Dusen.

[141] Id. at 550, 564 (“[P]ersons employed, as much as employers, are entitled to their own independent inventions, and if the suggestions communicated constitute the whole substance of the improvement the rule is otherwise, and the patent, if granted to the employer, is invalid, because the real invention or discovery belongs to the person who made the suggestions.”). The court first noted that Evans likely knew nothing about the process of manufacturing paper and that the original patent did not describe the process added in the reissue. Id. at 561. It then found that Evans “did not communicate any information to [Crane & Co.] respecting the process by which such paper could be produced, nor did he give [them] any directions upon the subject,” because without knowledge of making paper he was unable to do so. Id. at 562.

[142] See Whiting v. Graves, 3 Ban. & A. 222 (C.C.D. Mass. 1878). In Whiting, an employer hired a machinist to maintain the machines in his new dry goods factors and to make any other machinery that would be necessary, but did not include a provision in his service contract related to patents. Id. at 223. Instead, the employer would have the machinist assign his inventions prior to application for patents on them, which worked fine for the employer’s dry goods machines, but then the machinist made an improvement on sewing-machines. Id.

The court determined that while the employer would be afforded a shop right in the machinist’s inventions by virtue of his original contract, an additional assignment would be required for the employer to take legal title. Id. at 224. The court went on to hold, based on various testimony, that the employer was only entitled to a one-half interest in the patents, by virtue of an agreement to pay the patent expenses for one-half of the profits from the manufacture of the invention, and that the machinist was entitled to assign his interests to the defendants, which meant they could not infringe. Id. at 1061; see also Niagara Radiator Co. v. Meyers, 40 N.Y.S. 572, 573–76 (N.Y.S. Ct. 1896) (finding machine shop foreman not hired to invent); Connelly Mfg. Co v. Wattles, 23 A. 123, 124 (1891) (finding a shop foreman would not be hired to invent).

[143] Carlisle, supra note 94, at 226.

[144] Id.

[145] Noonan, supra note 90, at 60 (“By the 1880s, Westinghouse was involved in several enterprises. As well as companies and patents he originated on his own, he also started purchasing the companies and patents of others, too. He seemed to find opportunities everywhere.”).

[146] See Clark v. Fernoline Chem. Co., 5 N.Y.S. 190, 191 (N.Y. Sup. Ct. 1889) (In a case primarily concerned with a dispute over unpaid wages, the New York Superior Court held that although an employee had been hired as a chemical expert and chemist, his employer was only entitled to a shop right and not an assignment of any patents granted to the employee.); see also Gill v. United States, 160 U.S. 426 (1896) (holding that the patentee had acquiesced to the government’s use of his invention—a shop right); McAleer v. United States, 150 U.S. 424, 432 (1893) (finding an expressed contract permitting government use); Lane & Brodley Co. v. Locke, 150 U.S. 193, 196, 198–99 (1893) (finding implied license—or shop right—from inventor to partnership, which was incorporated while he was still working there); Solomons v. United States, 137 U.S. 342, 346–48 (1890) (finding an implied license permitting government use—a shop right).

In Dalzell v. Dueber Watch Case Manufacturing Co., an individual, who had been employed at various times within a company as an electroplater, slider and toolmaker, invented various things and applied for and was granted patents on them. 149 U.S. 315, 315–19 (1893) (the inventions involved improvement in the making of watch case cores). The employee sued the employer fro infringement, and the employer responded by seeking specific performance of an oral agreement to assign the right to obtain patents on them. Id. at 317–20. The Court held that an oral agreement for the “assignment of the right to obtain a patent for an invention” was neither within the statute of frauds nor covered by the requirements that all patent assignments be in writing. Id. at 320. However, the Court determined that the testimony was in hopeless conflict and therefore refused to afford specific performance; thus, allowing the infringement action to proceed. Id. at 326. The Court did, however, leave open the possibility that a shop right had been granted. Id. (“It is proper to add that the question whether the [employer], by virtue of the relations and transactions between it and [the employee], had the right, as by an implied license, to use [the employee’s] patents in its establishment is not presented by either of these records, but may be raised in the further proceedings upon the bill against the [employer] for an infringement.”).

[147] See Eclipse Mfg. Co. v. Adkins, 44 F. 280, 281–82 (C.C.N.D. Ill. 1890) (determining that employer who came up with the idea of putting ornamenting on radiator pipes, but had his employees create the design and build the pipes, was entitled to his patent, as the patent was on the idea, not the specific ornamentation); Streat v. White, 35 F. 426, 426, 428 (C.C.S.D.N.Y. 1888) (involving a design patent for textiles intended to be employed to create imitation “seersucker” fabrics, the court determined that because the plaintiff only had the idea of imitation seersucker, which did not constitute a novel idea, and employed a cotton goods factory manager to produce it by whatever means were necessary, he could not patent the resulting design). In Streat, the factory manager and the designer “were furnished a sample of a seersucker, and with a photographic copy of the sample, and where told to imitate it, and that the way in which the imitation was to be effected was left with the designer, who was solely responsible for a successful result, and to whom the task of finding an idea or conception of the method of imitating the crinkle was solely committed,” Id. at 428; see also Streat v. Simpson, 53 F. 358, 359 (C.C.S.D.N.Y. 1893) (finding in a subsequent infringement suit that the plaintiff “had nothing to do about designing or engraving the tools for printing the imitation, but through [the factory manager]; and that the designer and engraver were controlled by anything but the sample and photograph given to them by [the factory manager] is not made to appear”).

[148] Compare Dalzell, 149 U.S. at 320 (“[A] manufacturing corporation which has employed a skilled workman, for a state compensation, to take charge of its works, and to devote his time and services to devising and making improvements in articles there manufactured, is not entitled to a conveyance of patents obtained for inventions made by him while so employed, in the absence of express agreement to that effect.”) with Solomons, 137 U.S. at 346 (1890) (stating in dicta that “[i]f one is employed to devise or perfect an instrument, or a means for accomplishing a prescribed result, he cannot, after successfully accomplishing the work for which he was employed, plead title thereto as against his employer. That which he has been employed and paid to accomplish becomes, when accomplished, the property of his employer. Whatever rights as an individual he may have had in and to his inventive powers, and that which they are able to accomplish, he has sold in advance to his employer.”); Annin v. Wren, 44 Hun. 352, 353 (N. Y. Sup. Ct. 2d Dept. 1887) (holding that equity required a skilled draughtsman—hired by an iron truck and wheelbarrow manufacturer to develop his business—to assign his patents on improvements to the manufacturer’s wheelbarrows and trucks to the manufacturer if they were based on their joint development, because it would be unreasonable to prevent an employer from using improvements made during the course of the draughtsman’s employment). The court’s decision in Annin may have been colored by the fact that the draughtsman assigned his patent application to his brother in order to deprive the manufacturer of it. Id. at 354.

[149] See Standard Parts Co. v. Peck, 264 U.S. 52, 58–60 (1924).

[150] See Lawrence M. Friedman, A History of American Law 446–59 (Simon & Schuster 1973) (discussing the right of the corporate form at the end of the nineteenth century); see also Christopher L. Tomlins, Law, Labor, and Ideology in the Early American Republic 259 (Cambridge Univ. Press 1993) (“By midcentury, on and off the farm, it seems likely that the proportion of productively engaged Americans employed by others—about one-third in 1820—had increased to about one-half.”).

[151] It cannot. See Hapgood v. Hewitt, 119 U.S. 226 (1886). In Hapgood, a mechanical expert had been hired by a corporation as vice president, and later superintendent, to create plows and other goods, and to supervise generally the manufacturing department. Id. at 229. While in the corporation’s employ, the expert was asked with creating an iron plow similar to the company’s existing wooden ones, and he did so within the corporation’s employ, during working hours, using employees and corporate materials. Id. at 230. While he was inventing these plows, he never claimed a property ownership, but when he left he made his own, patented the improvements, and sought money from the corporation for its use of the improvements. Id. at 232. The Court held that he was not required to assign his patent to the corporation, but the corporation had received a “naked license to make and sell the patented improvement,” Id. at 233. However, the corporation had, in the meantime, dissolved and the stockholders had created a new corporation, which was its successor in interest; the Court held that the new corporation did not benefit from the shop right. Id. at 232–34.

Nevertheless, in Lane & Bodley Co. v. Locke, the Supreme Court determined that a shop right created during a partnership carried over after incorporation, because of the close affinity between the two corporate entities and because the inventor had ratified the transfer by acknowledging the incorporated entity was the successor to the partnership. 150 U.S. at 196.

[152] Carlisle, supra note 94, at 227.

[153] Dennis Crouch, The Changing Nature Inventing: Collaborative Inventing, Patent Law Blog (Patently-O) (Jul. 9, 2009, 9:28 AM), http://www.patentlyo.com/patent/2009/07/the-changing-nature-inventing-collaborative-inventing.html (“This data is derived from a sample of 750,000 patents issued from August 1971 through February 2009. All reported results are significant at the 99% confidence level.”); see also Dennis Crouch, Person(s) Skilled in the Art: Should the Now Established Model of Team-Based Inventing Impact the Obviousness Analysis?, Patent Law Blog (Patently-O) (May 17, 2011, 5:24 PM), http://www.patentlyo.com/patent/2011/05/persons-skilled-in-the-art-should-the-now-established-model-of-team-based-inventing-impact-the-obviousness-analysis.html [hereinafter Team-Based Inventing] (“In [1852], 82% of patents listed only one inventor and a mere 3% listed three or more inventors. By 2011, the statistics had inverted. Less than one-third (32%) of patents issued so far this year list just a single inventor and 43% identify three or more inventors. During this 60-year period, the average number of inventors per patent has more than doubled.”); Dennis Crouch, Cross-Border Inventors, Patent Law Blog (Patently-O) (Nov. 21, 2010, 8:06 PM), http://www.patentlyo.com/patent/2010/11/cross-border-inventors.html (“The number of inventors per patent has been steadily increasing over the past forty years. Patents issued during the past six months, have an average of 2.7 inventors per patent. In all, 68% of these patents list multiple inventors with 13% listing five or more inventors. Prior to 1990, most patents listed only one inventor.”).

[154] Team-Based Inventing, supra note 153.

[155] See Louis Galambes, The American Economy and the Reorganization of the Sources of Knowledge, in The Organization of Knowledge in Modern America, 1860–1920 269, 277 (Alexandra Oleson and John Voss eds., Johns Hopkins Univ. Press 1979).

[156] See Aalmuhammed v. Lee, 202 F. 3d 1227 (9th Cir. 2000), discussed supra note 84.

[157] Littlefield v. Perry, 88 U.S. 205 (1875) (finding agreement to assign future inventions enforceable); Hulse v. Bonsack Mach. Co., 65 F. 864, 867–68 (4th Cir. 1895) (finding pre-invention assignment contract enforceable); cf. Fisk, supra note 99, at 1191 (“At the end of the nineteenth century, the number of reported decisions enforcing employee patent assignments began steadily to increase.”). But cf. Aspinwall Mfg. Co. v. Gill, 32 F. 697, 700 (C.C.D.N.J. 1887) (“A naked assignment or agreement to assign, in gross, a man’s future labors as an author or inventor—in other words, a mortgage on a man’s brain, to bind all its future products—does not address itself favorably to our consideration.”); Eustis Mfg. Co. v. Eustis, 27 A. 439, 442–43 (N.J. Ch. 1893) (finding despite agreement that employee would give employing company “the benefit of any and all patents for cooking utensils made by or issued to him during the term of his office and employment,” company held only an exclusive license of the patents, not ownership).

[158] Noble, supra note 8.

[159] See id.; Rights of Employed Inventors: Hearing on H.R. 4732 and H.R. 6635 Before the H. Subcomm. on Courts, Civil Liberties, and the Administration of Justice, 97th Cong. 1 (1982) (remarks of Rep. Robert Kastenmeier quoting U.S. Patent Office report); see also William P. Hovell, Note, Patent Ownership: An Employer’s Rights to His Employee’s Inventions, 58 Notre Dame L. Rev. 863, 864 (1983); Robert L. Gullette, State Legislation Governing Ownership Rights in Inventions Under Employee Invention Agreements, 62 J. Pat. Off. Soc’y 732, 738–39 (1980).

[160] Crouch & Rantanen, supra note 9.

[161] Intellectual Property Owners Association, Top 300 Organizations Granted U.S. Patents in 2010, The IP Record, at 9–17 (2011).

[162] See supra Part I.B.

[163] See Stanford, 131 S. Ct. at 2192 (2011) (holding that Stanford did not hold the rights to a patent that was allegedly infringed by Roche’s HIV test kits); Abbott Point of Care Inc. v. Epocal Inc., 666 F.3d 1299, 1304 (Fed. Cir. 2012) (affirming the dismissal of Abbott complaint for lack of standing to bring suit based on blood sample testing patents); see also Banks v. Unisys Corp., 228 F.3d 1357, 1359 (Fed. Cir. 2000) (as employee did not sign employer’s “standard form for assignment of inventive rights,” fact issues precluded summary judgment determination of whether the hired-to-invent doctrine applied); Mallinckrodt Inc. v. Masimo Corp., 293 F. Supp. 2d 1102, 1106 (C.D. Cal. 2003) (employee’s release of ownership claims to product did not include release of ownership of ideas later patented by employee); cf. Teets v. Chromalloy Gas Turbine Corp., 83 F.3d 403, 409 (Fed. Cir. 1996) (reversing district court finding of employee ownership due to implied-in-fact contract to assign rights to employer). But see Preston v. Marathon Oil Co., 684 F.3d 1276, 1288–89 (Fed. Cir. 2012) (holding post-employment employee agreement that included automatic patent assignment provision with only continued employment as consideration was valid and enforceable).

[164] Stanford, 131 S. Ct. at 2192, 2199. The Supreme Court expressly did not address Roche’s “shop right” or license arguments. Id. at 2193 n.1.

[165] Abbott, 666 F.3d at 1300.

[166] Id.

[167] Id. at 1300, 1303–04.

[168] Id. at 1300.

[169] Id. at 1303.

[170] Cmty. For Creative Non-Violence v. Reid, 490 U.S. 730, 751–52 (1989).

[171] See supra Part I.A.

]]> http://jipel.law.nyu.edu/2012/11/inventions-made-for-hire/feed/ 0 http://jipel.law.nyu.edu/2012/11/post-booker-judicial-discretion/ http://jipel.law.nyu.edu/2012/11/post-booker-judicial-discretion/#comments Sun, 25 Nov 2012 00:35:09 +0000 Lizzy http://jipel.law.nyu.edu/?p=1645 By Aaron B. Rabinowitz*

I. Introduction

A. Background

B. Overview of Findings

II. Federal Sentencing Practice and Booker

A. Pre-Booker Sentencing Procedures and Practice

B. Post-Booker Sentencing Procedures and Practice

III. Analysis of Sentencing Trends for Intellectual Property Crimes

A. Methodology

B. Findings and Analysis

1. Growth in Intellectual Property Offenders Sentenced

2. Proportion of Non-Guidelines Sentences Imposed on Intellectual Property Offenders

3. Frequency of Post-Booker Deviation from Sentencing Guidelines

4. Proportion of Cases With Downward Deviations

5. Judicial Actors Responsible for Downward Deviations

i. Government-Sponsored Downward Deviations

ii. Judge-Initiated Downward Deviations

6. Downward Deviations Based on Judicial Application of Booker

IV. Implications of Post-Booker Sentencing Trends

A. Prospective Causes for Trends in Intellectual Property Sentences

B. Implications For The Sentencing Guidelines

V. Conclusion

I. INTRODUCTION

A. Background

In the wake of the Supreme Court’s 2005 watershed decision in Booker v. United States,[1] federal judges now exercise newfound discretion in imposing sentences on criminal defendants. Before Booker, judges imposed sentences according to the sentence ranges set forth in the United States Sentencing Guidelines (the “Guidelines”),[2] with outside-Guidelines sentences being imposed in only a few rare cases.[3] Under the Guidelines, a judge would apply a cross-reference table that suggested a sentence range based on the severity of the offender’s actions and the offender’s own criminal history and then, absent any special circumstances, impose a sentence within that suggested range.[4]

The Booker decision, however, brought a significant change[5] in sentencing practice by rendering the Guidelines advisory only.[6] By making the Guidelines advisory only, Booker granted sentencing judges significant control over the magnitude of sentences,[7] as judges were no longer bound to sentence according to the ranges that the Guidelines suggested.

Coincident with the Booker-catalyzed changes in federal sentencing, society has seen a significant increase in intellectual property crimes – the number of defendants sentenced under the intellectual property sentencing guidelines grew steadily by an average of 6.8% per year from 1997 to 2007. This growth in intellectual property offenders was, however, 50% faster than the overall growth rate for the total number of offenders sentenced under the Guidelines during those years. Given that individuals and corporations derive great value from their own intellectual property, a full understanding of how judges impose sentences for intellectual property crimes is critical.[8]

To better understand the judiciary’s and society’s views of intellectual property offenses, and whether the sentences actually imposed for these offenses are consistent with these views, this article presents an empirical analysis of data obtained from the United States Sentencing Commission to identify trends in sentencing for intellectual property crimes. Because Booker was decided six years ago, the number of pre- and post-Booker cases is now large enough that one can now properly assess the impact of Booker on intellectual property sentencing. The data sets included 425,597 pre-Booker and 435,415 post-Booker cases. This article extracts from the empirical analysis a number of critical hypotheses concerning judges’ views of intellectual property crimes and of the Guidelines in general.

B. Overview of Findings

As described below in more detail, this article’s empirical analysis reveals that the Booker decision has affected sentences in intellectual property crimes in a significantly different way than the decision affected sentencing decisions for general and other comparable economic crimes. These findings include: (1) sentences imposed on intellectual property offenders deviate from the advisory Guidelines in two out of every three cases; (2) prosecutors seek and judges reduce sentences for intellectual property crimes more frequently than for other comparable crimes; and (3) following the Booker decision, judges reduce sentences for intellectual property crimes seven times more frequently than they did before Booker, the frequency of which far outstrips the rate at which judges reduce sentences for other comparable crimes.

The fact that two-thirds of intellectual property crime sentences are below the Guidelines sentencing range suggests that the Guidelines range is not in harmony with the sentences that prosecutors and judges deem appropriate for these crimes. Second, the fact that judges and prosecutors reduce sentences for intellectual property crimes more frequently than they do for crimes in general or for other comparable economic crimes suggests that judicial actors believe the Guidelines sentences for intellectual property crimes are too stringent.

This article also considers changes to the current sentencing process so as to align the process more closely with the way sentences are imposed in practice. Booker-empowered judges very frequently use their discretion to impose sentences on intellectual property crimes that are outside the Guidelines. This suggests that the Guidelines scheme should be reconfigured to more accurately reflect the ways in which sentences for intellectual property crimes are imposed in practice.

II. FEDERAL SENTENCING PRACTICE AND BOOKER

To frame the issues that this article explores, this section provides a brief overview of federal sentencing practice and of the Booker decision.

A. Pre-Booker Sentencing Procedures and Practice

Under the Sentencing Reform Act,[9] Congress restricted district courts’ sentencing authority. The Act directed courts to consider a broad variety of purposes and factors before imposing sentences, including the sentencing guidelines and other “policy statements” promulgated by the United States Sentencing Commission.[10] Although the Sentencing Reform Act directed judges to consider a broad set of sentencing considerations, the Act did not grant judges much discretion in sentencing, as sentences were restricted to the ranges set forth in the Guidelines sentencing grids, and sentences were subject to a variety of standards of review on appeal.[11]

In particular, 18 U.S.C. § 3553(b) constrained a court’s sentencing discretion unless the court found valid reasons for departing from the Guidelines sentence.[12] Departures were authorized only when a court found “an aggravating or mitigating circumstance of a kind, or to a degree, not adequately taken into consideration by the Sentencing Commission in formulating the guidelines that should result in a sentence different from that described.”[13]

Because of these constraints, before Booker, “[a] court’s authority to depart from the applicable range [was] circumscribed.”[14] Thus, before a departure was permitted, “certain aspects of the case [had to be] unusual enough for it to fall outside the heartland of cases in the Guidelines.”[15]

B. Post-Booker Sentencing Procedures and Practice

Booker fundamentally changed the law of federal criminal sentencing and gave district courts newfound discretion over sentencing decisions.[16] In Booker, a five-Justice majority concluded that the system of mandatory Guidelines was unconstitutional because that system violated the Sixth Amendment’s requirement that “[o]ther than the fact of a prior conviction, any fact that increases the [maximum penalty to which a defendant may be subjected] must be submitted to a jury, and proved beyond a reasonable doubt.”[17]

A different five-Justice majority concluded that the proper remedy was not to eliminate the Guidelines entirely, or to eliminate any fact-finding related to sentencing, but to make the Guidelines “effectively advisory.”[18] Having eliminated those portions of the Sentencing Reform Act[19] that made the Guidelines mandatory, the Booker court determined that (1) district courts “must consult”[20] the now-advisory Guidelines and (2) appellate review of sentences for reasonableness would be made in light of the “numerous factors” set forth in 18 U.S.C. § 3553(a), including the applicable advisory guidelines range.[21]

Although Booker rendered the Guidelines advisory,[22] the Supreme Court later clarified that “[i]f the sentence is within the Guidelines range, the appellate court may, but is not required to, apply a presumption of reasonableness.”[23] Underscoring the importance of careful judicial fact-finding in a Guidelines-advisory system, the Supreme Court also observed that the greater a sentence deviates from the applicable guidelines, the greater the justification the judge must place on the record: “We find it uncontroversial that a major departure should be supported by a more significant justification than a minor one. After settling on the appropriate sentence, [the sentencing judge] must adequately explain the chosen sentence to allow for meaningful appellate review and to promote the perception of fair sentencing.”[24],[25]

Some have suggested that Booker‘s emphasis on judges providing specific explanations for their sentences renders federal sentencing more balanced, transparent, and proportional by (1) improving the balance between the application of structured sentencing rules and judicial discretion; (2) improving the balance between the impact of judicial and prosecutorial discretion at sentencing; (3) improving the opportunities for district judges to exercise reasoned sentencing judgment to tailor sentences to individual case circumstances; [and] (4) reordering sentencing outcomes (at least slightly) so that those defendants most deserving of reduced (or increased) sentences are getting the benefits (or detriments) of expanded judicial authority to sentence outside the Guidelines.[26]

III. ANALYSIS OF SENTENCING TRENDS FOR INTELLECTUAL PROPERTY CRIMES

A. Methodology

To identify and investigate trends specific to sentencing for intellectual property offenders, this article analyzes comprehensive, publicly available data sets from the United States Sentencing Commission covering sentences imposed from 1997 to 2011 for all crimes generally, for intellectual property crimes,[27] and for selected comparable economic crimes.[28] The economic crimes selected as comparators to intellectual property crimes[29] were (1) “Larceny, Embezzlement, and Other Forms of Theft; Offenses Involving Stolen Property; Property Damage or Destruction; Fraud and Deceit; Forgery; Offenses Involving Altered or Counterfeit Instruments Other than Counterfeit Bearer Obligations of the United States[30],” and (2) “Offenses Involving Counterfeit Bearer Obligations of the United States.”[31]

These comparator economic crimes were chosen because they, like intellectual property crimes, involve one or more elements of forgery, deceit, fraud, or counterfeiting. Forgery and counterfeiting are particularly suitable analogs to infringement of copyright or trademarks, as forgery, counterfeiting, and infringement all involve a party attempting to pass off a good or a work as having been produced by another party. Also, like intellectual property crimes, the comparator crimes do not involve an element of physical force. Although these crimes may not be precisely comparable to intellectual property crimes in all ways, they serve to illustrate the unique treatment that intellectual property offenders receive in comparison to offenders in general, and in comparison to other economic crime offenders.

B. Findings and Analysis

An analysis of sentencing trends for intellectual property crime offenders reveals several critical differences between the ways in which judges impose sentences on intellectual property offenders as compared to other offenders, including economic crime offenders.

1. Growth in Intellectual Property Offenders Sentenced

The number of defendants sentenced under an intellectual property guideline has grown 50% faster since 1997 than the number of defendants sentenced overall.[32] There are several possible explanations for this trend. First, committing an intellectual property crime, particularly copyright infringement, is not very capital-intensive, and may thus be easier to perpetrate than other crimes that require capital investment.[33] Also, unlike theft, fraud, or embezzlement, committing an intellectual property crime does not require person-to-person contact; all that is necessary to commit an intellectual property crime is to obtain a protected work or item, replicate the work or item, and then disseminate the replica. Second, as actors, both individual and corporate, find that more and more of their value is bound up in their intellectual property,[34] the owners of that intellectual property may be more keen on enforcing their rights. Whatever the cause or causes of this growth, the growth in intellectual property crimes necessitates careful review and understanding of the ways in which intellectual property offenders are punished.

2. Proportion of Non-Guidelines Sentences Imposed on Intellectual Property Offenders

A second trend that emerges from the sentencing data is that the proportion of outside-Guidelines sentences imposed for intellectual property crimes is far greater than the proportion of outside-Guidelines sentences imposed for crimes in general and for other economic crimes. The chart below illustrates this trend:

As shown in the figure above,[35] the Booker decision brought significant changes to the way intellectual property sentences are imposed. Before Booker, intellectual property offenders received outside-Guidelines sentences only about 30% of the time, which was less frequent than the 33% average for all offenders. After Booker, however, intellectual property defendants receiving outside-Guidelines sentences increased to nearly 65%. Put another way, although nearly 65% of intellectual property offenders after Booker received below-Guidelines sentences,[36] less than 40% of all offenders and of economic crime offenders received outside-Guidelines sentences after Booker.

The fact that two out of every three intellectual property offenders receives an outside-Guidelines sentence demonstrates the disconnect between the Guidelines and the way discretionary sentences are imposed. There would not be nearly so many outside-Guidelines sentences if the Guidelines were congruent with judges’ views of intellectual property crimes. Indeed, with two out of every three intellectual property offenders receiving an outside-Guidelines sentence, it appears that departing from the Guidelines has become the rule, rather than the exception. The fact that intellectual property offenders receive an outside-Guidelines sentence so much more frequently than offenders in general or economic crime offenders suggests that judges believe that intellectual property crimes are less harmful than other types of economic crimes.

While the Supreme Court in Booker was concerned with the question of the Guidelines’ constitutionality and not with whether the Guidelines were actually reflective of what judges believe the “correct” sentence should be for an intellectual property offender, the above chart illustrates that two-thirds of the time, judges do not believe that the Guidelines sentences for intellectual property offenders are appropriate. If judges are representative of the population at large, the Supreme Court was correct from a sociological perspective to render the Guidelines advisory. Mandatory Guidelines sentences would, based on the data shown above, result in two-thirds of all intellectual property defendants receiving sentences that, at least in the view of judges, are too high.

3. Frequency of Post-Booker Deviation from Sentencing Guidelines

Another trend that emerges is the different frequency with which sentencing judges apply Booker to adjust sentences in intellectual property cases relative to the frequency with which judges apply Booker in other cases. The chart below illustrates this trend:

As shown in the chart above, Booker is applied in intellectual property cases about 27% of the time.[37] This figure is significantly greater than the frequency with which judges apply Booker in all criminal cases (13%), in fraud and forgery cases (17%), and in counterfeiting cases (15%). Expressed another way, judges apply Booker to adjust sentences in intellectual property cases twice as often as they apply Booker to adjust sentences in cases in general and about 60% more frequently than they apply Booker to adjust sentences in fraud and forgery cases. This too suggests that, as compared to other types of crimes, judges believe that the Guidelines sentences for intellectual property offenders are not in alignment with the severity of the offenses.

4. Proportion of Cases With Downward Deviations

The chart below illustrates the proportion of cases from 1997 to 2011 that involved a downward deviation:[38]

As the above chart shows,[39] nearly two-thirds (i.e., well over half) of post-Booker intellectual property cases involve a downward deviation from the advisory Guidelines range.[40] This is a much larger proportion than the proportion of all cases that involve a downward deviation from the advisory Guidelines range and also much larger than the proportion of other comparable crimes cases that involve a downward deviation from the advisory Guidelines range. This trend is significant, as a sentencing regime in which two-thirds of defendants receive sentences that are below the advisory Guidelines range suggests that the judicial actors who exert influence over the sentence believe that the Guidelines-suggested sentences are unsuitable.

5. Judicial Actors Responsible for Downward Deviations

The chart above, however, presents the question of whether the increase in downward deviations after Booker is due to (1) prosecutors sponsoring more downward deviations or (2) judges initiating more downward deviations on their own. To address this question, one must compare the proportion of downward deviations due to government-sponsored deviations with the proportion of downward deviations that are based on judges exercising their post-Booker discretion.

i. Government-Sponsored Downward Deviations

The following chart shows the proportion of cases that include a government-sponsored deviation from the advisory Guidelines sentencing range:

As shown above, the proportion of cases that included a government-sponsored downward deviation changed with the 2005 Booker decision for cases in general, for intellectual property offenders, for fraud/forgery offenders, but not for counterfeiting offenders.[41] Notably, post-Booker intellectual property offenders received government-sponsored downward deviations more frequently than did offenders in general or other economic crimes offenders.

ii. Judge-Initiated Downward Deviations

An analysis of downward deviations that were not government-sponsored, however, reveals a very different trend. The following chart illustrates the evolution of downward deviations that are not government-sponsored:

As shown above,[42] the percentage of overall cases where the judge alone granted a downward deviation shows a moderate (~19%) increase after Booker. In the case of intellectual property crimes, however, the data show that the percentage of intellectual property crimes that involved a non-government-sponsored downward deviation increased by 611% after Booker. This 611% increase is about thirty-two times the increase for cases overall and is about four times the increase in judge-initiated deviations for fraud/forgery crimes and for counterfeiting crimes. This trend suggests that once the Booker decision issued, judges had a far greater need to adjust intellectual property crime sentences than they did any other kind of sentences.

The chart above also shows that judge-initiated deviations occur after Booker about twice as frequently for intellectual property offenders than for other offenders, whereas, pre-Booker, such judge-initiated deviations occurred less frequently than for crimes in general or for other economic crimes.

Several hypotheses may explain this data. First – and most importantly for purposes of this article – one may interpret the disproportionately large increase in non-government-sponsored sentence deviations for intellectual property crimes as showing that judges, on their own post-Booker initiative, believe that the Guidelines sentences for intellectual property crimes are unsuitable and disproportionately punish intellectual property defendants relative to defendants overall and relative to defendants in other, comparable economic crime cases.[43]

Second, one may hypothesize that judges believe economic crimes are disproportionately punished relative to all cases in general, as the post-Booker data show that judges reduce sentences for economic crime offenders at a higher rate than they do for offenders overall. The fact that intellectual property crimes received the fewest judge-initiated deviations before Booker and receive the most deviations after Booker further supports the hypothesis that judges believe that Guidelines intellectual property sentences are inappropriate and that judges are willing to exercise their Booker-based discretion to address this.

6. Downward Deviations Based on Judicial Application of Booker

The following graph further supports the idea that judges believe that Guidelines for intellectual property offenders are unsuitable. This graph shows the percentage of cases in which the downward deviation was based on a judge’s application of Booker at sentencing:

As shown above,[44] judges applied Booker to effect downward sentence deviations in 27% of intellectual property cases. This rate is 138% greater than the Booker application rate for all cases, 78% greater than the Booker application rate to fraud/forgery crimes, and 105% greater than the Booker application rate to counterfeiting crimes. One may interpret this trend as further evidence that judges are significantly more inclined to modify a sentence for an intellectual property crime than for crimes in general and for other comparable economic crimes, which further supports the view the judges do not believe the Guidelines sentences for intellectual property crimes are satisfactory.

IV. IMPLICATIONS OF POST-BOOKER SENTENCING TRENDS

The foregoing data illustrate several overarching trends that apply to post-Booker sentencing in general and to post-Booker sentencing of intellectual property offenders. First, the proportion of intellectual property sentences that are outside the Guidelines-recommended range has increased significantly since Booker. Second, the proportion of intellectual property sentences that are outside the Guidelines-recommended range has increased by a far greater magnitude than the outside-Guidelines sentences for cases overall and for other economic crimes. Third, judges are far more likely to apply Booker to modify a sentence in an intellectual property case than in cases overall or in another economic crime case. These findings have several implications for the sentencing scheme and also for society’s view in general of intellectual property crimes.

A. Prospective Causes for Trends in Intellectual Property Sentences

Although the data show a number of clear trends, the causes for these trends are perhaps less clear. This may be so because a number of factors are responsible for these sentencing trends.

First, as mentioned above, intellectual property crimes may be perpetrated against corporations, as opposed to individuals. Corporations are better equipped than individuals to absorb economic harm that results from the sale or other distribution of infringing goods or works, and post-Booker sentences may have taken this into account.

The sentencing trends may also be based on the fact that copyrighted and trademarked works – which are based primarily on creativity – may be originated without significant capital investment. This may be contrasted with theft of materials synthesized by a capital-intensive production processes or with the manufacture of goods that infringe a patent that is itself the result of significant research and capital investment by the patent owner.[45]

Further, unlike the theft of tangible goods, neither copyright nor trademark infringement completely deprive the owner of the use of their right.[46] Instead, the infringement reduces the value of the right instead of depriving the owner of the ability to use their right.[47] Intellectual property crimes also involve less immediate physical risk to the victim, as fraud and counterfeit crimes may, at least part of the time, be accomplished by an offender operating from a distance without ever making any physical contact with the victim.

One might also explain the trends in intellectual property sentencing on the ground that society is becoming inured to such crimes (e.g., file sharing, knock-off goods) on account of their prevalence.[48] Some have commented that “most people” no longer consider illegal downloading from the Internet a form of theft.[49] Given that societal views of copyright infringement have evolved, the sentences that judges impose may have also evolved to mirror society’s views.

B. Implications For The Sentencing Guidelines

The above-listed trends have certain implications for the Sentencing Guidelines as they presently exist, not the least of which is that the Guidelines are not in harmony with prosecutors’ and judges’ views of the harm that intellectual property crimes cause.

First, the fact that nearly two-thirds of sentences for post-Booker intellectual property cases are below the Guidelines-recommended range suggests that prosecutors (who are responsible for government-sponsored deviations) and judges (who exercise post-Booker discretion over the imposition of sentences) believe that the Guidelines-recommended sentences for intellectual property crimes are too heavy, as both government-sponsored and judge-initiated deviations are applied to intellectual property offenders more frequently than to other offenders. This is contrary to the recent recommendations by Congress and the current administration to increase the guidelines,[50] as it appears that judicial actors believe that the penalties are too strong, not too lenient. This trend in the data is contrary to the attempts of many parties to strengthen the penalties assessed for intellectual property crimes.[51]

Second, the fact that the proportion of intellectual property cases that received judge-initiated deviations increased by 611% after Booker (as opposed to far smaller increases for crimes in general and for economic crimes specifically) suggests that judges, in particular, believe that intellectual property sentences are too stringent. If judges believed otherwise, the rate at which they downwardly adjust sentences for intellectual property crimes would not be thirty-two times greater than the rate of downward adjustments for crimes generally and would not be four times greater than the rate of downward adjustments for other economic crimes. Additionally, judge-initiated deviations occurred after Booker about twice as frequently for intellectual property offenders than for other offenders, whereas, pre-Booker, such judge-initiated deviations occurred less frequently than for crimes in general or for other economic crimes. The fact that discretion-exercising judges apply sentences to intellectual property crimes in a way that is so qualitatively different from the way they impose sentences for other crimes suggests that judges take a special view of intellectual property crimes that differs from the view taken by the United States Sentencing Commission.

The divergence of views between judges and the Sentencing Commission warrants future exploration. As discussed above, intellectual property crimes are unique – the harm to the victim is frequently inchoate and difficult to quantify,[52] and understanding judges’ and prosecutors’ views of intellectual property crimes may help the United States Sentencing Commission as that body performs its ongoing review of federal sentencing statistics.

There are several approaches to curing the disharmony between the Guidelines and the sentences that judges actually impose. First, in order to honor Congress’s intent of allowing deviations only in exceptional cases,[53] the Guideline range for intellectual property crimes should be lowered so that sentences that are presently qualified as downward deviations would be within the new, reduced advisory Guidelines range. This would result in a sentencing regime in which deviations are the exception and not the rule.[54]

Second, by creating a sentencing regime in which sentences more frequently fall into a Guidelines range, defendants and prosecutors alike can better predict the offender’s final sentence. This may have implications for defendants facing a decision to either enter a plea bargain or go to trial, as the defendant may have a better sense of his or her likely sentence following trial.

In addition, adjusting the Guidelines may better align the sentences with the attitudes of those in the judicial system that actually impose the punishments, as judges and prosecutors alike seem to agree that the guideline sentences do not align with the proper punishment. While it is of course true that judges do not set the guidelines, the United States Sentencing Commission is comprised of judges, prosecutors, and other practitioners that have carefully researched sentencing issues, and adjusting the Guidelines to conform more closely to the sentences that judges actually impose would honor the Commission’s intent to have the Guidelines serve as a guidepost for the imposition of sentences.

V. CONCLUSION

There is no doubt that the Booker decision effected watershed changes on federal sentencing practices. However, Booker‘s effect on the sentencing of intellectual property offenders has been even greater than its effect on cases in general and on economic crimes specifically. The fact that judges impose non-Guidelines sentences on two out of every three intellectual property offenders illustrates that the sentences prescribed by the Guidelines by and large do not align with judges’ view of intellectual property crimes. Further, the fact that judges impose non-Guidelines sentences for intellectual property crimes far more frequently than for crimes in general or for economic crimes illustrates that judges have a unique view of intellectual property crimes that differs from their views on other crimes. The data also shows that prosecutors share this special view of intellectual property crimes, as prosecutors sponsor downward deviations more frequently for intellectual property offenders than they do for offenders in general and for economic crime offenders.

Further analysis may be useful to determine the best way to assess sentences for intellectual property offenders. But until the tension between Guidelines’ recommendations and judges’ actual sentences is resolved, prosecutors and defendants alike will continue to operate in a regime where two out of every three intellectual property offenders receives a sentence that is outside the contemplation of the United States Sentencing Commission’s Guideline, thus frustrating Congress’s overarching goal of achieving predictable, uniform sentencing.[55]

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* Adjunct Professor, Temple University School of Law, Philadelphia, PA; Attorney, Woodcock Washburn LLP, Philadelphia, PA. The views expressed in this article are the author’s only and do not necessarily reflect the views of the author’s present or past employers. Special thanks to Aliza Rabinowitz for her patience and to Ronen and Orli Rabinowitz for keeping the author on schedule.

[1] See Booker v. United States, 543 U.S. 220 (2005).

[2] U.S. Sentencing Guidelines Manual. An online edition of the Guidelines may be conveniently accessed at http://www.ussc.gov/Guidelines/2011_Guidelines/index.cfm (last visited May 13, 2012).

[3] See, e.g., Koon v. United States, 518 U.S. 81, 98 (1996) (observing, pre-Booker, that before departure was permitted, the case had to be “unusual enough for it to fall outside the heartland of cases in the Guidelines”).

[4] 18 U.S.C. § 3553(b).

[5] See, e.g., United States v. Gonzalez-Huerta, 402 F.3d 727, 737 (10th Cir. 2005) (en banc) (noting that Booker “drastically changed federal sentencing procedure”).

[6] Booker, 543 U.S. at 245.

[7] See, e.g., United States v. Mohamed, 459 F.3d 979, 987 (9th Cir. 2006) (post-Booker sentences reviewed only for reasonableness).

[8] Intellectual property crimes are unique for several reasons. First, infringement of an owner’s intellectual property (e.g., producing fake brand-name goods) may dilute the owner’s brand and render the owner’s brand less exclusive. Additional harm may result from intellectual property infringement if a user unknowingly buys an infringing good that does not meet the quality standard of the brand-name good, as the user may have a negative experience with the counterfeit good and elect not to purchase the brand-name good in the future. In another situation, a defendant may engage in pre-release piracy, where the defendant obtains and then disseminates (e.g., via the Internet) a pre-release copy of a movie before the movie is released in theaters. See United States v. Gonzalez, Criminal No. 03-153 (S.D.N.Y. Apr. 20, 2004) (defendant convicted for posting pre-release copy of The Hulk movie on the Internet). Additional information available at: http://www.justice.gov/usao/nys/pressreleases/June03/hulkplearelease.pdf.

[9] Sentencing Reform Act of 1984, Pub. L. No. 98-473, 98 Stat. 1987 (codified as amended at 18 U.S.C. §§ 3551-3586 (1985)).

[10] 18 U.S.C. § 3553(a)(4)(A), (a)(5); see also 28 U.S.C. § 994(a)(1), (a)(2).

[11] 18 U.S.C. § 3742(e).

[12] 18 U.S.C. § 3553(b)(1), (b)(2).

[13] 18 U.S.C. § 3553(b)(1); cf. U.S. Sentencing Guidelines Manual § 1B1.1 cmt. n.1(E) (2000) (defining “departure”).

[14] United States v. Butler, 954 F.2d 114, 121 (2d Cir. 1992).

[15] United States v. Thorn, 317 F.3d 107, 125 (2d Cir. 2003) (quoting Koon v. United States, 518 U.S. 81, 98 (1996)).

[16] E.g., United States v. Gonzalez-Huerta, 403 F.3d 727, 737 (10th Cir. 2005) (en banc) (describing Booker as having “drastically changed federal sentencing procedure”).

[17] Booker v. United States, 543 U.S. 220, 231 (2005) (quoting Apprendi v. New Jersey, 530 U.S. 466, 490 (2000).

[18] Id. at 245.

[19] P.L. No. 98-473, 98 Stat. 1987.

[20] Booker, 543 U.S. at 264.

[21] Id. at 261.

[22] Id. at 245.

[23] Gall v. United States, 552 U.S. 38, 51 (2007); see also, Rita v. United States, 551 U.S. 338, 347 (2007).

[24] Gall, 552 U.S. at 50.

[25] The Booker decision and its imposition of a deferential, “reasonableness” standard of review for sentences places a premium on careful, thorough sentencing proceedings: “[a] major undercurrent of the Supreme Court’s post-Booker sentencing jurisprudence is that, in an advisory guidelines system, the defendant is entitled to an interactive sentencing in which the judge listens and explains rather than merely pronouncing a sentence from on high after having done a little Guidelines math.” United States v. Wilson, 614 F.3d 219, 227 (6th Cir. 2010) (Martin, J. concurring).

[26] Douglas A. Berman, Tweaking Booker: Advisory Guidelines In The Federal System, 43 Hous. L. Rev. 341, 352 (2006); see also James G. Carr, Some Thoughts on Sentencing Post-Booker, 17 Fed. Sentencing Rep. 295, 297 (2005) (observing that from the viewpoint of sentencing judges, “[s]ince Booker, we have balance and control. Before, we had neither.”).

[27] Federal criminal law punishes only infringements of copyright and trademark rights; infringement of patent rights is not subject to criminal penalties. For an in-depth analysis of the issues associated with imposition of criminal sanctions for patent infringement, see Irina D. Manta, The Puzzle of Criminal Sanctions for Intellectual Property Infringement, 24 Harv. J. L. & Tech. 469 (2011). Professor Manta notes that imposition of criminal sanctions for patent infringement would indicate that society prizes patent rights as much as other forms of intellectual property. Id. at 494. The clear corollary is that the lack of such sanctions implies that patent rights are not as valued by society as are other forms of intellectual property.

[28] Data is available from the data and statistics section of the United States Sentencing Commission’s website, see United States Sentencing Commission Data and Statistics, http://www.ussc.gov/Data_and_Statistics/index.cfm.

[29] U.S. Sentencing Guidelines Manual § 2B5.3 citing 17 U.S.C. §§ 506(a), 1201, 1204; 18 U.S.C. §§ 2318-2320, 2511 (setting forth sentencing guidelines for IP crimes, including criminal copyright infringement, circumvention of copyright systems, and trafficking counterfeit copyrighted goods).

[30] U.S. Sentencing Guidelines Manual § 2B1.1 citing 7 U.S.C. §§ 6, 6b, 6c, 6h, 6o, 13, 23; 15 U.S.C. §§ 50, 77e, 77q, 77x, 78j, 78ff, 80b-6, 1644, 6821; 18 U.S.C. §§ 38, 225, 285-289, 471-473, 500, 510, 553(a)(1), 641, 656, 657, 659, 662, 664, 1001-1008, 1010-1014, 1016-1022, 1025, 1026, 1028, 1029, 1030(a)(4)-(5), 1031, 1037, 1040, 1341-1344, 1348, 1350, 1361, 1363, 1369, 1702, 1703 (if vandalism or malicious mischief, including destruction of mail, is involved), 1708, 1831, 1832, 1992(a)(1), (a)(5), 2113(b), 2282A, 2282B, 2291, 2312-2317, 2332b(a)(1), 2701; 19 U.S.C. § 2401f; 29 U.S.C. § 501(c); 42 U.S.C. § 1011; 49 U.S.C. §§ 14915, 30170, 46317(a), 60123(b) (setting forth sentencing guidelines for fraud and forgery crimes).

[31] U.S. Sentencing Guidelines Manual § 2B5.1 citing 18 U.S.C. §§ 470-474A, 476, 477, 500, 501, 1003 (setting forth sentencing guidelines for counterfeit crimes involving U.S. bearer obligations).

[32] U.S. Sentencing Guidelines statistics materials 1997-2011, available at http://www.ussc.gov/Research_and_Statistics/index.cfm.

[33] See David G. Post, In Search of Jefferson’s Moose: Notes on the State of Cyberspace 202 (2009) (noting “the remarkable facility with which Internet users have been able to reproduce and redistribute information of all kinds—music, text, video, etc.—whether ostensibly protected by some nation’s copyright law or now, in quantities that truly stagger the mind“) (emphasis added).

[34] According to one study, in 1978, 80% of corporate assets were tangible assets (e.g., physical assets) and the remaining 20% were intangible assets. By 1997, these had reversed, such that 73% of corporate assets were intangible assets. Kenneth E. Krosin, Management of IP Assets, AIPLA Bull. (Am. Intell. Prop. L. Ass’n), 2000 Mid-Winter Meeting Issue, at 176.

[35] The change in the proportion of outside-Guidelines sentences before Booker and after Booker was statistically significant (p < 0.01) for all cases, for IP crimes, for fraud/forgery crimes, and for counterfeiting crimes. The difference between the proportion of outside-Guidelines sentences imposed after Booker for IP crimes and the proportion of post-Booker outside-Guidelines sentences for all crimes was statistically significant (p < 0.01). The differences between outside-Guidelines sentences imposed after Booker for IP crimes and the proportion of post-Booker outside-Guidelines sentences for fraud/forgery crimes and for counterfeit crimes were also statistically significant (p < 0.01 in both cases), further underscoring that IP crimes are treated differently after Booker than are comparable economic crimes.

[36] Less than 1% of all defendants received above-Guidelines sentences.

[37] The difference between the frequency of Booker application in IP crimes and the frequency of Booker application for all crimes, or for fraud/forgery crimes, or for counterfeit crimes, was statistically significant (p < 0.01). Interestingly, the difference between the frequency of Booker application for counterfeiting crimes and for all crimes in general was not as statistically significant (p < 0.30).

[38] This chart is similar to the previous chart illustrating the proportion of cases with outside-Guidelines sentences, as more than 99% of outside-Guidelines cases involve sentences that are below the advisory Guidelines range.

[39] The difference between the pre- and post-Booker frequency of downward deviations was statistically significant (p < 0.01) for all crimes, IP crimes, fraud/forgery crimes, and counterfeiting crimes. The difference between the frequency of post-Booker downward deviations for IP crimes as compared to the frequency of post-Booker downward deviations for all crimes, fraud/forgery crimes, and counterfeiting crimes was also statistically significant (p < 0.01).

[40] As explained above, because less than 1% of all defendants received above-Guidelines sentences, the vast majority of outside-Guidelines sentences are below the advisory Guidelines range.

[41] The difference between the pre- and post-Booker frequency of government-sponsored downward deviations was statistically significant (p < 0.01) for all crimes and for fraud/forgery crimes. The difference between the pre- and post-Booker frequency of government-sponsored downward deviations was less significant for IP crimes and was unchanged for counterfeiting crimes.

[42] The difference between the pre- and post-Booker frequency of non-government-sponsored downward deviations was statistically significant (p < 0.01) for IP crimes, fraud/forgery crimes, and counterfeiting crimes, but was not as significant (p < 0.28) for crimes overall. The difference between the frequency of post-Booker downward deviations for IP crimes as compared to the frequency of post-Booker downward deviations for all crimes, fraud/forgery crimes, and counterfeiting crimes was statistically significant (p < 0.01).

[43] One may also view the modest increase in judge-initiated deviations for cases overall as showing that, in general, judges believe that the advisory Guidelines sentences are too harsh.

[44] The difference between the frequency of Booker application to effect downward sentence deviation in IP crimes and the frequency of Booker application for all crimes, fraud/forgery crimes, or counterfeit crimes was statistically significant (p < 0.01).

[45] Aside from the costs of developing a patentable product, patent applications are far more expensive than are trademark or copyright applications. In terms of average application costs, a patent application costs about $20,000, a trademark application ranges from $500 to thousands dollars, and a copyright application costs $35. Manta, supra note 27, at 495 n.178 (2011) (citations omitted).

[46] Id. at 475. (“Indeed, because IP tends to be both intangible and non-rivalrous, its infringement causes at most a reduction in value as opposed to a genuine ‘taking’ of the good. Perhaps in the criminal context such infringement would often be more akin to other property crimes than it is to theft.”)

[47] See Dowling v. United States, 473 U.S. 207, 217 (1985) (observing that “[t]he infringer invades a statutorily defined province guaranteed to the copyright holder alone . . . he does not assume physical control over the copyright; nor does he wholly deprive its owner of its use.”); see also Stuart P. Green, Op-Ed., When Stealing Isn’t Stealing, N.Y. Times Mar. 28, 2012, at A27, available at http://www.nytimes.com/2012/03/29/opinion/theft-law-in-the-21st-century.html?pagewanted=all (“If Cyber Bob illegally downloads Digital Joe’s song from the Internet, it’s crucial to recognize that, in most cases, Joe hasn’t lost anything.”).

[48] See Manta, supra note 27, at 517 (observing that (1) “given the widespread culture of file-sharing,” copyright law may be perceived as “criminalizing ‘everybody’” and (2) that the public “does not accept” the claim that the “downloading of copyright works . . . is morally wrong and deserving of criminal sanction”); Post, supra note 33 (noting the “remarkable facility with which Internet users have been able to reproduce and redistribute information of all kinds – music, text, video, etc. – whether ostensibly protected by some nation’s copyright law or now, in quantities that truly stagger the mind.”) (emphasis added).

[49] Green, supra note 47.

[50] Stop Online Piracy Act, H.R. 3261, 112th Cong. § 204; Administration’s White Paper on Intellectual Property Enforcement Legislative Recommendations 1-8 (March 2011), available at http://www.whitehouse.gov/sites/default/files/ip_white_paper.pdf.

[51] Brian P. Heneghan, The NET Act, Fair Use, and Willfulness – Is Congress Making a Scarecrow of the Law?, 1 J. High Tech. L. 27, 44 (2002) (“The Software Publishers Association even urged Judge Conaboy of the U.S. Sentencing Commission to adopt an emergency amendment to the sentencing guidelines to allow for the earliest possible implementation of the NET Act.”); Konrad Gatien, Internet Killed the Video Star: How In-House Internet Distribution of Home Video Will Affect Profit Participants, 13 Fordham Intell. Prop. Media & Ent. L. J. 909, 956 (2003) (“[to] combat international video piracy, the MPAA has set up an extra-judicial worldwide Internet enforcement group[.] This group consults with a former U.S. Department of Justice attorney who is well-versed in computer crime, and lobbies the U.S. trade representative to help "make sure trading nations are doing their part tracking down and prosecuting pirates”).

[52] See Green, supra note 47 (“If Cyber Bob illegally downloads Digital Joe’s song from the Internet, it’s crucial to recognize that, in most cases, Joe hasn’t lost anything”).

[53] E.g., United States v. Leon, 341 F.3d 928, 931 (9th Cir. 2003) (applying non-deferential, de novo standard of review to sentence that departed from Guidelines range); see also Prosecutorial Remedies and Other Tools to end the Exploitation of Children Today Act of 2003 ("PROTECT Act"), Pub. L. No. 108-21, 117 Stat. 650, 670 (2003) (changing standard of review for decisions to depart from the Guidelines to de novo).

[54] As described above, two out of every three IP offenders receive a sentence that is below the suggested Guidelines range.

[55] U.S. Sentencing Guidelines Manual, ch. 1, pt. A, introductory cmt. (2000).

 

]]> http://jipel.law.nyu.edu/2012/11/post-booker-judicial-discretion/feed/ 0 http://jipel.law.nyu.edu/2012/11/conception-and-misconception-in-joint-inventorship/ http://jipel.law.nyu.edu/2012/11/conception-and-misconception-in-joint-inventorship/#comments Sat, 24 Nov 2012 23:48:02 +0000 Lizzy http://jipel.law.nyu.edu/?p=1649 #toc .l1{padding-left: 0px;} #toc .l2{padding-left: 30px;} #toc .l3{padding-left: 60px;} #toc .l4{padding-left: 90px;} #toc .l5{padding-left: 120px;} .blkquot{margin:0 30px;}

Aaron X. Fellmeth*

Introduction

I. The Law of Invention and Inventorship

A. The Patent Law Concept of Invention

1. The Role of Conception

2. The Role of the Claims

B. Inventorship and Joint Inventorship

1. The Evolved Doctrine

2. The Distorting Effect of Claims Fixation

C. The Strong Presumption of Validity in Inventorship Analysis

II. Relinking Inventorship Analysis to Technology Policy

A. Legislative History of the 1984 Patent Law Amendments Act

B. Reconstructing Inventorship

1. Equity and Strategic Nonjoinder

2. Restoring Incentives for Collaborative Research

Conclusion

Introduction

It is an axiom of patent law that utility patents protect “inventions” only; it is a paradox of patent law that the Patent Act does not define “invention” except tautologically: “The term ‘invention ’ means invention or discovery.”[1] Given that patents are designed to reward inventors for the disclosure of their inventions,[2] it would have been helpful had the Act settled just what constitutes an invention. Alas, it does not. After 220 years of progressively developed patent statutes and jurisprudence, the concept of invention, so central and fundamental to patent law, has become one of the most misunderstood.

The Patent Act’s obscurity on this key point of law does not prevent the Act from employing the term “invention” ubiquitously. A person is entitled to a patent unless “the invention was known or used by others in this country” or the inventor “has abandoned the invention.”[3] Patentability may not be negated “by the manner in which the invention was made.”[4] A person infringes the patent by making or selling the “patented invention.”[5]

Among the mysteries emanating from uncertainty about what kinds of technologies qualify as a patentable invention, identifying the proper inventors has developed into one of the most intractable. Because the U.S. Constitution allows only “inventors” to obtain patents on their inventions,[6] we must know what an invention is before we can decide who qualifies as its inventor. The inventor himself has a self-evident interest in certainty about his or her entitlement to a patent as well.

In 2011, Congress supplemented the definitions section of the Patent Act through the Leahy-Smith America Invents Act (“AIA”), to take effect in March 2013, which defines the term “inventor” for the first time. However, that definition merely adds another point of confusion; it provides, “The term ‘inventor’ means the indiv­idual or, if a joint invention, the individuals collectively who invented or dis­cover­ed the subject matter of the invention.”[7] A definition stating that an inventor is the person who invents the invention would offer us nothing more than another tautology. However, the new amendment does not exactly do that; instead, it defines as the “inventor” the person who invents the “subject matter” of the invention.[8] It is not immediately clear how the subject matter of an invention differs meaningfully from the invention itself. Instead of resolving a difficult and core problem of law, the new definition merely adds a point of obscurity.

The intuitive way to begin resolving this paradox is to define as an “invention” whatever satisfies the legal requirements for the grant of a utility patent. The Patent Act requires that, to qualify for a utility patent, an invention must be “novel,” “non-obvious” at the time of conception (after the AIA, the “effective filing date”), and “useful.”[9] But the Act and its implementing regulations also require the fulfillment of several more conditions for a patent to issue, including a written disclosure of the invention, an oath or declaration by the applicant, and the payment of a fee.[10] Surely, not all of these requirements speak to the definition of an invention. We can hardly say that a person has failed to invent something until he has signed an oath and paid a fee to the U.S. Patent and Trademark Office.[11]

At the application stage, the doctrinal analysis for invention and inventorship is deceptively straightforward. If the application satisfies the requirements of the Patent Act and regulations, the invention will be considered whatever is described in the application, and the question of inventorship will be resolved by presumption. The PTO will not examine inventorship, but will usually accept without question the claims of the applicants that they originated the invention.[12]

The trouble typically arises when the patent is enforced or challenged in litigation.[13] In the disputing context, the definition of the invention does not normally assume a pivotal role because the focus of litigation tends toward the “claims.” Claims are statements in the patent “particularly pointing out and distinctly claiming the subject matter which the inventor or a joint inventor regards as the invention.”[14] To infringe a utility patent, the accused infringer must generally have made, used, sold, or imported a product described in one or more of the patent’s claims. If the defendant challenges the validity of the patent, the strategy is to prove the invalidity of all allegedly infringed claims.

Courts have similarly gravitated toward claims analysis to determine whether a member of a research team qualifies as an inventor. As consistently invoked by both the Supreme Court and the U.S. Court of Appeals for the Federal Circuit, the accepted patent law doctrine treats claims as if they were equivalent to the invention itself.[15] Yet, in inventorship disputes, the case for fixating on the claims is based more on pedigree than logic or policy. Claims are nearly always drafted by lawyers or patent agents after (sometimes years after) the invention was completed.[16] The claims may or may not express what the inventor conceived; they rarely express the full scope of the invention, and not infrequently capture more than what the inventor invented.[17] Despite the convenience of equating the claims with invention in infringement analysis, judicial opinions equating the two have propelled patent law down a treacherous path.

The consequences of this wayward doctrine reach into the very processes of innovation. Most modern technology research is the product of collaborations between multiple scientists and engineers, usually in large research institutions.[18] Collaborations frequently involve teams from industry and universities or government agencies joining forces to advance technology despite divergent economic interests. Joint inventorship has accordingly come to assume a critical role in technological research and development. Approximately half of all patents now list more than one inventor.[19] As Congress has long recognized,[20] the patent system best achieves its goal of encouraging technological development by facilitating rather than hindering joint invention.

To achieve this goal, inventorship doctrine needs to define its criteria with sufficient specificity to allow research teams to determine who qualifies as an inventor with some confidence. To achieve maximal efficiency and fairness, those criteria should be neither overinclusive nor underinclusive. All collaborators who contribute significantly to the conception of the invention, and only those collaborators, should qualify as inventors. The consequences for a bona fide inventor who is excluded from a patent application covering an invention to which he contributed significantly can be devastating for the omitted inventor. The financial rewards of being named an inventor may be substantial, indeed monumental, because the inventors are the presumptive owners of the patent to the invention as tenants in common.[21] In the absence of an agreement to the contrary, a joint inventor is entitled to exploit the patented invention commercially without the consent of, or owing a duty of contribution or accounting to, the other inventors.[22] In other words, exclusion from joint inventorship means that the putative inventor may lose all of the financial rewards of the invention, no matter how great that inventor’s investment of time, resources, or creativity in the invention.[23]

Recognition as a joint inventor means not only a potential share of the economic rewards, but it may have career-altering effects. A scientist or engineer may invest months or years in a research project that ultimately results in a patent. He may expend institutional funds, exhaust grants, and stake his or her reputation on the success of the project. Frequently, hiring, promotion, or tenure depends on successful completion of the project. Exclusion from the inventorship on the resulting patent denies the researcher not only his or her just financial rewards, but career recognition that may dictate his future in academia or industry.

Fixating on claims will in many cases have no effect on inventorship determinations. Frequently, a joint inventor’s contribution, if it appears anywhere in the issued patent, will be claimed expressly. But relying exclusively on claims to determine inventorship is like solving three adjacent sides of a Rubik’s Cube. From some viewpoints, the puzzle appears fully solved. But the apparent order masks a fundamental incoherence evident from other viewpoints. The full puzzle cannot be solved without twisting the ostensibly finished sides back into disorder. Inventorship doctrine suffers from the same fundamental incoherence. Fixating on the claims makes inventorship doctrine seem sound when the inventor’s contribution is recited expressis verbis in one or more claims. Other inventive contributions fall within the confused jumble of fragmentary judicial statements on the doctrine of invention. For reasons to be explained, there is no necessary correlation between the relative importance of an inventive contribution, or the effort or creativity involved in that contribution, and its expression in the claims. To deny such collaborators recognition as inventors is unfair to them, confuses basic patent doctrine, and undermines the patent law’s incentive structure.

The purpose of this article is to disaggregate the patent claims from the invention and to restore the integrity of the concepts of invention and inventorship. This restoration will require abandoning the time-honored judicial fixation on claims. Giles Rich, frequently cited by reverent courts and patent bar alike,[24] famously said, “[T]he name of the game is the claim.”[25] That phrase reflects Rich’s zealous opposition to the concept of invention[26] as well as the key role of claims in limiting the patent monopoly. But the influence of his maxim has far surpassed its meager truth. As Oliver Wendell Holmes once observed, “It is one of the misfortunes of the law that ideas become encysted in phrases and thereafter for a long time cease to provoke further analysis.”[27] Claims are operationally important to patent law, but inventors do not invent claims, they invent inventions. And, to coin a rather different maxim: The prevention of any mention of invention causes misapprehension. This article will explore the causes of the confusion; its consequences for inventors; and its resulting effect on U.S. technological development.

Part II of this article begins by summarizing the law governing invention and inventorship, and its development and interpretation by the Supreme Court and Federal Circuit. Joint inventorship receives special attention in this part because the case law in this area reveals especially well how fixating on the patent claims distorts patent law analysis more generally. Part II then relates how an idiosyncrasy in the standard of proof in patent litigation has reinforced distorting biases in inventorship analysis. Part III maps out how the broken link between inventorship doctrine and the public policy it is intended to promote can be repaired. Specifically, Part III.A analyzes the legislative history of the Patent Act provisions on joint inventorship to determine congressional intent and compares the current joint inventorship doctrine’s misdirected fixation on claims to the policy goals sought by Congress and discusses the policy consequences. Part III.B then evaluates how the question of inventorship affects the role of the patent system in technological development generally and proposes an interpretation of the Patent Act that better fulfills the goals of U.S. technology policy. Part IV concludes by summarizing the argument.

I. The Law of Invention and Inventorship

A. The Patent Law Concept of Invention

Although the 1952 Patent Act uses the term “invention” throughout, the closest the Act comes to defining the term nontautologically is in Section 101: “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”[28] This is not technically a definition, but it gives clues to one by specifying that an invention is a process or physical product that is new and useful.[29] The term “new” is almost universally interpreted as a term of art in patent law (equivalent to “novel”)[30], further defined in Section 102.[31] The term “useful” is not defined in the Act but has been construed in the case law to mean that the invention offers some immediate and practical benefit to the public.[32]

While Sections 100 and 101 provides a starting point for defining invention, they are incomplete. As suggested in Part I, there are other requirements for patentability. Procedural requirements such as the inventor’s oath or the application fee obviously do not figure in the definition of the invention itself. But there are other substantive requirements for an invention to qualify for patent protection, the most important of which is nonobviousness. Despite its omission from Section 101 of the Patent Act, nonobviousness is in some ways the keystone of the definition of invention.

The Patent Act, as amended by the America Invents Act, defines an invention as obvious:

if the differences between the claimed invention and the prior art are such that the claimed invention as a whole would have been obvious before the effective filing date of the claimed invention to a person having ordinary skill in the art to which the claimed invention pertains. . . .[33]

The nonobviousness requirement lies so close to the heart of the definition of an invention because its purpose is to clarify the historically confused, and sometimes contradictory, judicial interpretation of the constitutional requirement of “invention.”[34] A new technology that would have been obvious to an ordinary scientist or engineer at the critical date may qualify as an innovation in the colloquial sense, but it is not an invention in the patent law sense.[35]

A statutory analysis of the concept of invention might be expected to end here. Other requirements for obtaining a patent are usually considered procedural rather than substantive. The Patent Act itself classifies the novelty, utility, and nonobviousness requirements in a chapter of the Act (“Patentability of Inventions”) separate from the chapter specifying the procedural requirements (Chapter 11—“Application for Patent”). Yet, the definition of invention remains incomplete because nothing in Sections 101 to 103 obligates the inventor to understand and appreciate the significance of his own discovery.[36] An unrecognized product or process is not yet an invention at all in the patent law sense.[37]

The relevant section of the Patent Act, Section 112, is found among the procedural provisions of Chapter 11. Section 112 codifies the disclosure requirement.[38] Specifically, it requires that every patent application include a “specification” section that sets forth a full written description of the invention, “and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use” that invention.[39] Section 112 also includes the requirement that the application terminate with “claims.”[40] Between the written description and the claims, the specification is supposed to alert the public to the outward bounds of the invention that will be protected by patent, and to teach the public how to make and use the claimed part of the invention. For this reason, Section 112 is commonly thought to embody the fundamental bargain of the patent system: the inventor discloses the invention to the public in exchange for a temporary legal monopoly over making, using, selling, offering to sell, or importing the invention.[41] To that extent, the enablement provisions of Section 112 are indeed procedural and not substantive. They establish a disclosure requirement that the applicant must fulfill in order to obtain a patent, but this requirement assumes that the inventor sufficiently appreciates what he has invented and how to reproduce it. In other words, an applicant who can fulfill the requirement to describe clearly how to make and use the invention proves that he understands the invention sufficiently, and that he “actually invented the invention claimed.”[42]

1. The Role of Conception

Section 112 thus implies an uncodified but essential aspect of the definition of an invention. Invention has not occurred until the inventor appreciates that he or she has invented something useful, functioning, worthwhile. This subjective component of invention is inherent in the idea of “conception,” which is integral to establishing the moment when the invention became entitled to a patent. Conception is considered the “touchstone” of invention,[43] and has been defined as “the complete performance of the mental part of the inventive act” and “the formation in the mind of the inventor of a definite and permanent idea of the complete and operative invention, as it is hereafter to be applied in practice.”[44] Conception is incomplete unless the idea of the invention “is so clearly defined in the inventor’s mind that only ordinary skill would be necessary to reduce the invention to practice, without extensive research or experimentation.”[45] In other words, even if the inventor has a complete mental picture of the invention’s physical configuration, the invention is not “conceived” in patent law until the inventor has also determined how to make and use the invention in practice.[46] Even when conception no longer defines the date at which the inventor is entitled to a patent, conception will still be necessary, because without it the applicant will lack the information necessary to complete the Section 112 disclosure.

Therefore, while Section 112 is indeed a procedural provision, one of its other functions is to provide evidence of whether the application’s subject matter satisfies the substantive requirements of invention. As the Federal Circuit put it: “The conception analysis necessarily turns on the inventor’s ability to describe his invention with particularity. Until he can do so, he cannot prove possession of the complete mental picture of the invention.”[47] The relationship between the inventor’s understanding and the physical configuration of the invention can be illustrated through an example:

{1a}  Ira has processed several chemicals to create a novel and nonobvious compound through a complex series of steps. Ira believes the compound could prove to cure cancer, because its molecular structure is loosely related to the structures of other chemicals that have anticancer effects.

In example {1a}, Ira may be capable of fully describing how to make and use his new molecule, and so he can satisfy the procedural requisites of Section 112. However, if Ira’s belief in the molecule’s anticancer properties lacks any firm basis in science, the molecule does not satisfy the Section 101 utility requirement. Although under current law an inventor need not know with certainty or even probability that the invention will work for conception to be considered complete,[48] a mere wish or unsupported expectation does not suffice. In Hitzeman v. Rutter, the Federal Circuit held that a genetically-altered yeast intended to produce antigens having certain key size and sedimentation rates had not yet been conceived by the inventor, because the inventor had only a “hope,” not a reasonable expectation, that the yeast would perform in that manner.[49] In Scenario {1a}, then, unless Ira has some scientifically sound basis, however partial, for attributing anti-cancer properties to his molecule, there is not (yet) a patentable invention.

Consider a slight alteration of example {1a}:

{1b}  On January 30, Ilsa processes several chemicals to create a novel and nonobvious compound through a complex series of steps. At the time, she has no idea whether the chemical has any effective use. On June 1, she discovers that the new chemical is extremely effective at treating cancer. Ilsa files a patent application on the chemical.

Ilsa has clearly created the precursor to a new cancer-fighting drug, but when was it invented? On January 30 or June 1?

Example {1b} illustrates the subjective requirement of invention. A new product or process may meet the objective statutory patentability requirements (novelty, nonobviousness, and utility), but it is not a patentable “invention” until its creator appreciates the utility of the invention and understands how to reproduce it.[50] As a correlate, there have been cases in which the inventor created a new chemical substance unwittingly; the substance was not deemed to have been conceived until the inventor perceived its presence,[51] because conception has not occurred until the inventor gains the ability to describe the invention.[52] In Example {1b}, conception occurred on June 1.

Another variation illustrates a concomitant principle:

{1c} On January 30, Ian conceives of a chemical compound that he has sound scientific reason to believe will be extremely effective at treating cancer. However, he has no expertise in synthesizing this class of chemicals. On June 1, Rowena assists Ian to synthesize the compound using new insights and techniques developed specifically for the purpose.

Example {1c} is in some ways the reverse of {1b}. In {1b}, the first inventor could visualize and make the compound but did not know how to use it. In {1c}, the first inventor could visualize and knew how to use the compound, but did not know how to make it. The outcomes are equivalent; in both cases, the compound is not “invented” until June 1; in scenario {1c}, Ian and Rowena are joint inventors.[53]

The foregoing discussion, like any doctrinal restatement, gives an illusion of certainty about the law relating to invention. In practice, gray areas in the subjective prong of conception, coupled with frequent misunderstanding of the inventive process, plague the law and its application with inconsistencies. The explanation of example {1b} relies on the PTO’s or court’s ability to distinguish between sufficient and insufficient bases for attributing utility to the invention. From a scientific or engineering perspective, the question of whether an untested product or process will function as intended is not a “yes” or “no” one, but a sliding scale of probability. The Federal Circuit has adopted a murky test to determine where conception occurs on the scale between mere surmise and certainty of adequate functioning. For example, on one hand, in order to shift the burden of proof to the applicant, a PTO examiner challenging utility must produce evidence that a person having ordinary skill in the relevant art would reasonably doubt the alleged utility.[54] On the other hand, an applicant or patentee asserting the utility of a patented invention must produce at least some evidence, however inconclusive, that the invention works as intended.[55]

This leaves the PTO, which bears the burden of proving an absence of utility,[56] without much guidance. To be safe, the PTO has effectively adopted the practice of virtually never rejecting pharmaceutical inventions on utility grounds unless the allegation of utility is incredible.[57] This is partly because the PTO does not test the utility of an invention disclosed in a patent application and so must rely primarily on the applicant’s representations and the (usually very general) background knowledge of the examiner. Such an “incredibility” test is inappropriate in judicial pro­ceedings, where the party challenging the patent may introduce evidence of inutility that was unavailable to a PTO examiner. Yet, the Federal Circuit and its predecessor have endorsed an exceedingly low standard of evidence to uphold an allegation of utility, especially in the active field of pharmaceutical research.[58] Congealing the uncertainty is the jurisprudence, discussed in Part II.C, creating a strong legal presumption of validity of the patent despite a complete or nearly complete vacuum of information about whether the invention was in fact useful at the time the patent was examined and issued.

Another difficult doctrinal issue is raised in example {1b}. Suppose Ilsa did not discover the utility of the chemical; a new researcher, Ron, did. Does this not make Ron the inventor rather than Ilsa? Or does Ilsa remain the inventor? Or might they be considered joint inventors? From a logical and strictly doctrinal standpoint, the fact that conception was incomplete until Ron discovered the utility of the chemical implies that Ron is the sole inventor if he did not collaborate with Ilsa in any way, and a joint inventor with Ilsa if they did collaborate and Ron’s discovery was more than a straightforward application of well-known principles of chemistry. However, as discussed in Part II.C, Federal Circuit and Supreme Court precedents have created a basis for doubting whether courts would actually endorse this outcome.

2. The Role of the Claims

The problematic patent law conception of invention arises in part from the role of the claims in defining the invention. The claims, as noted above, are the part of the patent document that delimits the outer boundaries of the invention for which the applicant seeks protection. They are typically one sentence long and terse, if not cryptic, in their phrasing. Partly because the claims are drafted by patent lawyers or agents rather than the inventor, and partly due to the organic idiosyncrasies of language, the claims may or may not encompass all of the invention. In fact, they may encompass quite a bit more than the invention.[59] A claim may encompass subject matter that the inventor never conceived and never could conceive. There is no a priori reason why the claims will completely over­lap with the invention.

An inventor who claims less than the invention may lose some of the benefit of the invention. There are several reasons why this might happen. One is poor drafting, although the consequences of poor drafting to the hapless patentee are mitigated by the doctrine of equivalents and the possibility of broadening reissue proceedings.[60] Another possible reason is that the inventor wishes to commercially exploit only a subset of an invention’s embodiments and to dedicate the remainder to the public.[61] In that case, patent coverage narrower than the invention as a whole poses no policy problems, because it is voluntary.

In contrast, an inventor who claims more than the invention risks the overbroad claims being invalidated.[62] When the claims exceed what was enabled in the written description, they fail to honor the basic patent bargain of dis­closure of the invention in exchange for a legal monopoly over the claimed subject matter.[63] Patents with overbroad claims also fail to ensure that the inventor possessed the claimed subject matter, because there is no way to verify that the applicant did indeed invent what he cannot or will not describe. Indeed, such patents may suffer from a constitutional deficiency on the theory that Congress has no power to grant patents on subject matter the inventor did not invent.[64]

Probably the most famous example of an inventor who tried to claim far more than he invented relates to the Morse telegraph.[65] Morse, recognized as the inventor of the electro-magnetic telegraph, obtained a reissue patent with eight claims. The first seven claimed various uncontroversial components and embodiments of the electric telegraph. The eighth claim, however, covered much broader subject matter:

I do not propose to limit myself to the specific machinery or parts of machinery described in the foregoing specifications and claims; the essence of my invention being the use of the motive power of the electric or galvanic current, which I call electro-magnetism, however developed for marking or printing intelligible characters, signs, or letters, at any distances, being a new application of that power of which I claim to be the first inventor or discoverer.[66]

The Supreme Court struck the claim as overbroad, because it covered subject matter that Morse had not described in his patent “and indeed had not invented.”[67]

Professor Morse has not discovered, that the electric or galvanic current will always print at a distance, no matter what may be the form of the machinery or mechanical contrivances through which it passes. You may use electro-magnetism as a motive power, and yet not produce the described effect, that is, print at a distance intelligible marks or signs. To produce that effect, it must be combined with, and passed through, and operate upon, certain complicated and delicate machinery, adjusted and arranged upon philosophical principles, and prepared by the highest mechanical skill. And it is the high praise of Professor Morse, that he has been able, by a new combination of known powers, of which electro-magnetism is one, to discover a method by which intelligible marks or signs may be printed at a distance. And for the method or process thus discovered, he is entitled to a patent. But he has not discovered that the electro-magnetic current, used as motive power, in any other method, and with any other combination, will do as well.[68]

If the claim had been upheld, Morse could prevent another inventor who had developed an entirely different and potentially better means of using electricity to transmit information for printing at a distance (for instance, by wireless radio frequency transmitter and receiver) from practicing his patent. The Court accordingly rejected the claim.

The Morse case illustrates the interdependence of the Section 112 disclosure requirement and the concept of invention. The Court’s reasoning implied that the disclosure requirement does not only alert the public to the parameters of the protected intellectual property and teach the public how to make and use the invention, but tailors the scope of patent protection to what the inventor actually contributed to the technological field.[69] When the applicant claims more than he invented, the benefits of the patent to the public are attenuated and the possibility of a dysfunctional patent precedent arises.

Patent prosecutors are typically more concerned about underclaiming than overclaiming. The patent examiner frequently whittles down an overly aggressive claim, and those exaggerated claims that survive prosecution will benefit from a strong presumption of validity, which gives the patentee useful leverage for negotiating with licensees and competitors, even if the claims are not strictly enforceable under a proper interpretation of the claim. At worst, the patentee can obtain a nar­row­ing reissue a few years down the road to ensure the claim’s enforce­ability.[70] An overly narrow claim, in contrast, risks dedicating the un­claimed subject matter to the public for all time. It is possible to seek a broadening reissue, but only within two years after the patent is granted.[71] As a result, many patent pro­secutors tend toward aggressively claiming more than the inventor actually con­ceived, so long as the overclaiming will not court rejection by the PTO examiner.

The claims are important, but as the Federal Circuit has emphasized en banc, not all-important: “The claims . . . do not stand alone. Rather, they are part of ‘a fully integrated written instrument’” (i.e., the patent).[72] Yet, when not engaged in the narrow task of claim construction, courts have sometimes fetishized the claims as if they were the only legally material part of the patent. The importance of the claims in determining whether anticipation by prior art or patent infringe­ment has occurred has led many courts, including the Supreme Court, to use language that conflates the claims with the invention itself: the claims, they assert, “define the invention.”[73] The Federal Circuit has stated that a researcher must “conceive” of a “claim” (rather than an invention) to be an inventor,[74] and suggested that Section 116 of the Patent Act requires a coinventor to “make a contribution to the conception of the subject matter of a claim.”[75]

The Patent Act says no such thing; it formerly referred to inventions and “subject matter” rather than claims, and now refers to these and to the “claimed invention” as well. Claims may or may not coincide with the full scope of the invention or even the “claimed invention.” Oskar Liivak has defined the invention as “the set of all of the embodiments that the inventor has invented. That is, the invention is the set of embodiments conceived by the inventor in enough detail so that each of those embodiments is capable of being reduced to practice.”[76] This definition, while incomplete, has the virtue of indicating how the invention is (or at least should be) more expansive than the claims, which are “written attempts to circumscribe varying subsets of the embodiments disclosed in the specification.”[77] Liivak’s point, that the claims (and indeed the “claimed in­ven­tion” of Section 100(j)) are a subset of the invention rather than the invention itself, is well taken. Courts have on a few occasions distinguished explicitly between the aspects of the invention protected by patent and the invention as a whole. For example, in a moment of clarity, a panel of the Federal Circuit observed that “the specification teaches an invention, whereas the claims define the right to exclude.”[78] The Supreme Court has also distinguished between the two, stating that claims are “construed . . . with a view to ascertaining the in­ven­tion.”[79]

The necessity of distinguishing between the claims and the invention to which the claims pertain is also evident from the Patent Cooperation Treaty (PCT), to which the United States is a party.[80] The PCT allows inventors to file a single patent application that may result in patents in multiple countries. Under the “unity of invention” requirement, the patent application must relate to just one “invention” or a “group of inventions so linked as to form a single general inventive concept.”[81] Yet, in each state granting a patent resulting from the PCT application, the claims may differ to comply with local filing requirements.[82] A single invention could not receive the same patent protection in different countries using different claims unless the invention is something larger than the claims.

The frequent judicial and scholarly statements that claims “define” the invention, then, are misleading.[83] The invention is more than the claims; the claims limit the invention but they do not alone define it. “[I]t is fundamental that claims are to be construed in the light of the specifications and both are to be read with a view to ascertaining the invention.”[84] The written description portion of the specification “‘is always highly relevant to the claim construction analysis. Usually, it is dispositive; it is the single best guide to the meaning of a disputed term.’”[85] If the claims must always be read in light of the specification, the claims cannot “define” the invention; they merely limit the extent to which the patent protects the invention.

The Leahy-Smith America Invents Act, the relevant provisions of which take effect on March 16, 2013, suggests that Congress shares this perception of the distinction between the claims and invention. The Section 102 amendments substitute the term “invention” in the novelty provisions of the Patent Act with the term “claimed invention,”[86] which is in turn defined as “the subject matter defined by a claim in a patent or an application for a patent.”[87] From this, it appears that Congress considers the “invention” to be different from the “claimed invention.”[88]

Because the patent protects only the claimed portion of an invention from infringement, it is possible to infringe on a “claim,” but not an “invention.” By extension,[89] prior art may anticipate specific claims in a patent application without rendering the invention unpatentable. Section 102 now more clearly suggests that novelty analysis consists in determining whether specific claims are anticipated by prior art, as opposed to analyzing whether the “invention” as a whole is anticipated by prior art, because each claim stands on its own. It follows that a person who infringes any one claim infringes the patent, even if the accused product or process does not infringe any other claim.

For both anticipation and infringement purposes, then, claims do not “define” the invention in the conventional sense; they define the rough outlines of what part of the invention can overcome anticipatory prior art and accordingly what part of the invention the patent protects from infringement. This key distinction between the invention and the claims has unappreciated importance for determinations of inventorship, and especially of joint inventorship.

B. Inventorship and Joint Inventorship

1. The Evolved Doctrine

When a sole researcher conceives the entirety of an invention, she must satisfy all of the patentability requirements by herself. When the inventor fulfills these requirements, abstruse doctrinal or policy problems arise only in exceptional cases. But the image of the lone scientist confined to a laboratory for months, and ultimately emerging with a triumphant new invention has more romantic appeal than correspondence with reality. Although much government rhetoric exalts the independent inventor,[90] in modern industry, discoveries in applied science are usually a product of teamwork. Joint invention is now more common than sole invention.[91] In general, a joint invention “is the product of a collaboration between two or more persons working together to solve the problem addressed.”[92] Yet, the process of identifying whether a collaborator qualifies as a joint inventor was until very recently crude and uncertain, and even today the law remains under­developed.

Before 1984, the Patent Act’s provisions on joint inventorship were entirely procedural; they offered no guidance to the judiciary on how joint inventorship should be understood. The Act merely stated: “When an invention is made by two or more persons jointly, they shall apply for patent jointly and each sign the application and make the required oath, except as otherwise provided in this title.”[93] It then went on to explain what procedural measures could be taken if a joint inventor refused to join in the application, as well as the consequences of a non-inventor being wrongly listed as an inventor (commonly known as “misjoinder”) or an inventor being erroneously omitted (“nonjoinder”).[94]

For many years, courts struggled with the question of how to determine who was a joint inventor. Regarding the threshold of contribution required to qualify as a joint inventor, their formulated tests were frequently vague and sometimes contradictory, leading one district court judge to lament:

The exact parameters of what constitutes joint inventorship are quite difficult to define. It is one of the muddiest concepts in the muddy metaphysics of the patent law. . . . Perhaps one need not be able to point to a specific component as one’s sole idea, but one must be able to say that without his contribution to the final conception, it would have been less—less efficient, less simple, less economical, less something of benefit. . . .

. . . .

. . . . This situation does make it difficult to say . . . with real certainty, whether or not a given person “is” a joint inventor in a given case.[95]

Such guidance was indeed lean. “Less something of benefit” is rather overinclusive as a standard; it would reward routine, and indeed flatly obvious, contributions with coinventorship. Courts were plainly struggling with the doctrine. Another judge wrote:

The conception of the entire device may be due to one [inventor], but if the other makes suggestions of practical value, which assisted in working out the main idea and making it operative, or contributes an independent part of the entire invention, which is united with the parts produced by the other and creates the whole, he is a joint inventor, even though his contribution be of comparatively minor importance and merely the application of an old idea.[96]

These pronouncements were problematic not only because of their lack of guidance. The mere contribution of “an old idea” of “minor importance” is probably too low a standard, and has been at least called into doubt by Federal Circuit precedent.[97] If a joint inventor must contribute something nonobvious, then the nature of the contribution determines joint inventorship, not merely the effect of the contribution on the invention’s functioning. It would seem that a collaborator who contributed nothing more than information or designs well known in the art would not qualify as an inventor unless the application of that prior art to the problem at hand would have been nonobvious.[98] A decided improvement in the functioning of the invention is relevant to assessing the quality of the contribution but far from dispositive.

While the historical standard of joint inventorship might have seemed low, in some ways it compensated for an aberration of patent law that discouraged team research. In case after case, federal courts denied joint inventors the right to file a single patent with multiple claims on the product of their collaboration, if all inventors did not contribute to each and every claim.[99] In other words, this “all claims rule” excluded from inventorship any collaborator who did not contribute to every claim of the patent. As a leading treatise of the time put it: “Only where the same single, unitary idea of means is the product of two or more minds, working pari passu, and in communication with each other, is the conception truly joint and the result a joint invention.”[100] One nineteenth century court even held that when two researchers invent distinct parts of the same new machine, they should obtain separate patents as sole inventors on each part of the machine rather than a single patent as coinventors on the machine as a whole.[101]

In 1967, a federal trial court cleared up much of the doctrinal obscurity and tried to reverse the bias against collaborative research. Monsanto v. Kamp Co. arose from an interference proceeding before the U.S. Patent Office, predecessor to the PTO.[102] The invention in question was a specially coated plastic container for pharmaceuticals.[103] The plaintiffs challenged the designation of two defendants as joint inventors, which launched the court into an original discussion of the principles of joint invention:

A joint invention is the product of collaboration of the inventive endeavors of two or more persons working toward the same end and producing an invention by their aggregate efforts. To constitute a joint invention, it is necessary that each of the inventors work on the same subject matter and make some contribution to the inventive thought and to the final result. Each needs to perform but a part of the task if an invention emerges from all of the steps taken together. It is not necessary that the entire inventive concept should occur to each of the joint inventors, or that the two should physically work on the project together. One may take a step at one time, the other an approach at different times. One may do more of the experimental work while the other makes suggestions from time to time. The fact that each of the inventors plays a different role and that the contribution of one may not be as great as that of another, does not detract from the fact that the invention is joint, if each makes some original contribution, though partial, to the final solution of the problem.[104]

The district court decision in Kamp was (and is) cited with some frequency by other courts, including the Federal Circuit.[105]

Although Kamp stood as a beacon of thoughtful interpretation, a district court decision could not unify patent doctrine nationwide. Eventually, Congress had to clarify the standards of joint invention. This took the form of the 1984 Patent Law Amendments Act (PLAA), which added the following language to what is now Section 116(a):

Inventors may apply for a patent jointly even though (1) they did not physically work together or at the same time, (2) each did not make the same type or amount of contribution, or (3) each did not make a contribution to the subject matter of every claim of the patent.[106]

This language has not been altered since and remains the main Patent Act provision defining the conditions for joint inventorship.

The 1984 PLAA reversed the all claims rule, allowing a research team to apply for a single patent on a unitary inventive concept despite the fact that some team members may have contributed to only a single claim in a multiple claim patent. It also codified the trend advanced by the Kamp decision toward relaxing the standard of collaborative invention. It is now clear that direct interaction between or among collaborators is unnecessary. For example, consider the following scenario:

{2} Three scientists, Alpha, Beta, and Gamma, are involved in research calculated to lead to the discovery of a room-temperature superconducting material. Alpha is involved throughout the entire project, which takes a total of ten years before an invention has been conceived and is ready for patenting, but Alpha’s contribution, although of an inventive quality, is relatively minor. Quantitatively, Alpha’s contribution of effort, expertise, and creative thinking amounts to about 10% of all the effort, expertise, and creative thinking that went into the invention. Beta was involved from the beginning as well, but after nine years and six months, quit the project. Beta’s contribution was, however, over­whelming, accounting for 80% of the research effort, etc. During the last six months, Gamma became involved in the project and collaborated with Alpha to finalize the conception of the invention. Due to Gamma’s late arrival, Gamma contributed only 10% to the project. Beta and Gamma never directly communicated with one another; Gamma merely took up Beta’s almost-completed work.

In scenario {2}, a requirement of direct collaboration at the time the invention was completed would make Alpha and Gamma joint inventors, but not Beta, despite the fact that Beta individually contributed much more than the other two inventors combined. This result is not only unfair to Beta, it creates a powerful disincentive to collaborate in applied research, because, except in the rare situation that the research is certain to result in the successful development of a valuable invention in short order, a researcher’s contribution could be wasted if the researcher needs to leave the collaboration before a patentable result is produced. Many such reasons would be beyond the control of the collaborator, such as illness, financial distress during extended research, termination of employment with an employer sponsoring the research, and so forth. The PLAA establishes beyond peradventure that Beta is as much an inventor as his collaborators.

Similarly, the PLAA suggests that in assessing inventorship in scenario {1b} above, if Ron rather than Ilsa discovered the utility of Ilsa’s compound, Ron would be a coinventor. Before the PLAA, courts could deny the importance of Ron’s inventive contribution. For example, in Eli Lilly & Co. v. Premo Pharma­ceutical Laboratories, Inc., two scientists had synthesized a compound (cephalexin) in “the hope that the resulting compound would be [an] effective oral antibiotic” for certain biochemical reasons.[107] A third scientist tested the compound and found that it was indeed an effective oral antibiotic for entirely different biochemical reasons than the first two scientists had guessed. The patent on the compound, however, listed only the first two scientists as inventors. When an accused infringer challenged the validity of the patent for nonjoinder, the Third Circuit held that the third scientist’s discovery of the invention’s “nonobvious trait” did not qualify him as a joint inventor of the compound. In attempting to justify this result, the court wrote:

it is without question that the named inventors, Drs. Morin and Jackson, were the only persons who performed the synthesis that created the patented product. In the words of § 116, cephalexin was ‘made by’ the two named inventors, not by the biochemist who first noted that the organic chemists’ predictions had been realized.[108]

After the PLAA, this result even less plausible than before. A compound whose utility or nonobvious traits are unknown has not yet been “conceived” as an invention under the patent law.[109] A collaborator who makes a significant, original contribution to conception, such as by discovering utility or the nonobvious trait, is a coinventor even if his contribution was different in type (testing of the compound versus synthesis of the compound) from that of his collaborators.[110]

With regard to the level and kind of contribution required of a joint inventor, the PLAA added relatively little.[111] Instead, the newly organized Federal Circuit developed joint inventorship analysis in its jurisprudence—a jurisprudence that continues to dominate discussions of inventorship today.[112] Beginning in the early 1990s, the court decided a series of cases that delineated the basic substantive contours of joint inventorship.[113] For the most part, these did not radically depart from the main body of cases decided before the PLAA. Before the amendment, the concept of joint inventorship was rarely interpreted to require “give-and-take” between or among joint inventors. In a 1980 case, for example, a Florida district court found that when one researcher developed a prototype of the invention and passed the prototype to a second researcher, who perfected it, they were joint inventors despite the lack of any regular communication between them. “The ideas” of the first inventor “were presented daily” to the second “by the prototype, and the final result was a creation that exceeded the results of either inventor,” the court observed.[114] The court understood that, although collaboration always requires communication between the collaborators, communication can take nonverbal as well as verbal forms. There is no policy reason to prioritize verbal over nonverbal collaboration if both forms can accelerate technological development. The Federal Circuit continued this interpretation of joint inventorship law; so long as the inventors were consciously cooperating, one collaborator may simply read and build upon a report written by another, or profit from the suggestion of another at a meeting, to qualify them as joint inventors.[115]

More importantly, the Federal Circuit unified and fleshed out the kind of contribution necessary to qualify a collaborator as a joint inventor. From Pannu v. Iolab,[116] three general conditions may be deduced. First, the alleged coinventor must contribute to the conception of the invention.[117] Second, his contribution to the invention must not be insignificant in quality, when measured against the dimension of the full invention.[118] Third, the contributor must do more than merely explain to the real inventors well-known concepts or the current state of the art.[119]

The second and third conditions follow in a sense from the first. The alleged joint inventor’s contribution could not merely relate the state of the art to the collaborators, because providing well-known information “is not a contribution to conception.”[120] One does not invent merely by repeating public information or using ordinary skills; the contribution must go beyond well-known prior art. Similarly, non-technical contributions to the invention, such as suggest­ing a desirable goal of research (unless identifying that goal is technically difficult and not obvious) and providing management or financing, are not contributions to conception.[121]

The Federal Circuit has repeatedly observed that Section 116 of the Patent Act “sets no explicit lower limit on the quantum or quality of inventive contribution required for a person to qualify as a joint inventor.”[122] However, the court has interpreted Section 116 to impose a second condition on the alleged joint inventor—that his contribution must be “not insignificant in quality, when that contribution is measured against the dimension of the full invention.”[123] Where to draw the line of significance on the scale between a critical contribution and a trivial one is a tricky and highly subjective exercise. Unfortunately, the case law interpreting significance remains notably thin.

In one unpublished case, the U.S. Court of Appeals for the Fourth Circuit interpreted the significance factor to require that all joint inventors contribute to the specific aspect of the invention that made it patentable. In Levin v. Septodont, the developer of a new numbing cream to treat mouth ulcers, Dr. Kilday, was approached by a retired dentist, Dr. Levin, who had the idea of developing a numbing mouth rinse to reduce pain caused by routine dental procedures.[124] Working together, Kilday and Levin determined that the active ingredients in the rinse should be the antiseptic phenol and the anesthetic benzocaine.[125] Kilday determined the proportion of ingredients in the product.[126] However, Kilday also recognized that these ingredients could not be dissolved in an alcohol solution due to the burning sensation caused by alcohol. Kilday therefore approached Eastman Chemical to help develop a suitable suspension solution. After significant research, Eastman developed a new solution composed of a combination of polyethylene glycol and propylene glycol that solved the burning problem.[127] Eastman sought a patent on the resulting dental mouth rinse, but named only its employees, and not Kilday.[128]

Septodont sought to correct the patent by joining Kilday as a coinventor. Levin resisted on the ground that the PTO examiner had opposed the patent application as obvious until a limitation was added specifically claiming the Eastman suspension solution. The court sided with Levin, interpreting joint inventorship doctrine to require contribution to the novel and nonobvious limitations of the claim—indeed, regardless of whether a specific collaborator’s contribution appears in the claims or indeed is the defining feature of the invention.[129] In other words, the Fourth Circuit would have interpreted an inventive contribution’s “significance” in light of its novelty and nonobviousness.

Levin v. Septodont is not a precedential opinion,[130] but it illustrates a troubling misunderstanding of the concept of joint invention. The court effectively held that the collaborators who conceived the invention as a whole, determined its utility, and chose key ingredients and their proportions did not contribute significantly to conception. The problem arises from the Fourth Circuit’s dissection of the invention. The invention as a whole was novel and nonobvious—an anesthetic mouth rinse for routine dentistry—and it was conceived by Levin, Kilday, and Eastman scientists in collaboration. A collaborator’s contribution need not define the nonobvious aspect of the invention itself, so long as it satisfies the three Pannu conditions. No doubt the Eastman collaborators were inventors as well, given their contribution to an important and nonobvious aspect of the invention. Possibly their suspension solution was independently patentable, and in that case the Eastman scientists would stand alone as inventors of the solution. But the patent claimed not the solution itself but rather an “anesthetic and antiseptic mouth rinse” using a non-alcohol solution.[131] Simply put, the invention before the court would have been impossible without Levin and Kilday’s original contributions. In denying them status as coinventors, the Fourth Circuit not only deprived a valuable collaborator of the patent reward, but conferred that reward on Eastman for novel and nonobvious ideas that Eastman did not develop and probably could not have developed itself.

It is probably fair to say that any contribution adding the novel, nonobvious, or useful element to the invention is ipso facto significant. To conclude from this, however, that any other contribution is insignificant is a non sequitur. The question of what kind of contribution does qualify as significant—a question the Federal Circuit has not had occasion to answer in great detail—remains open. Presumably, such factors as whether the collaborator:

• identified or solved a problem unrecognized by the others;

• solved a problem that other collaborators could not solve;

• added a nontrivial advantage to the invention that the other collaborators did not contemplate; or

• contributed the novel, nonobvious, or useful aspect of the invention or a nontrivial part of it

would weigh heavily in favor of finding an inventive contribution “not insignificant” if directed to any functional aspect of the invention.[132] The contributor’s skill set and abilities relative to other collaborators may have some bearing on whether these criteria are satisfied. The kind and level of expertise of the collaborator, his effort expended relative to other collaborators, and the importance and originality of his insight to the advantages of the invention, would all be relevant as well.[133]

The consequences of designating too many or too few collaborators as inventors on a patent application may be trivial or (much more rarely) fatal, depending on the provable intent of the applicants. Misjoinder or nonjoinder of joint inventors is supposed to invalidate a patent if done intentionally, but an accused infringer cannot realistically be expected to produce clear and convincing evidence of the applicant’s state of mind in most cases. As a result, successfully proving misjoinder or nonjoinder usually results in a correction of inventors in order to save the patent from invalidity.[134]

2. The Distorting Effect of Claims Fixation

The joint inventorship doctrine described in Pannu v. Iolab is sound as far as it goes. It meshes with both the constitutional limitations on the congressional patent power and the language and policy purposes of the Patent Act. The problem is not in the general standard of joint inventorship, but in its implementation. The Federal Circuit has sometimes diverted the inquiry away from a fact-intensive examination of the realities of the inventive process into a rigidly formulaic test, with the regrettable result of facilitating mistaken or fraudulent nonjoinder.

The judicial decisions carrying the greatest potential to warp inventorship standards probably are not substantive, but procedural. This relates back to the manner in which courts have confused the claims with the invention. The Constitution and Patent Act refer to inventors and their inventions, but as noted, courts have frequently written the invention out of patent law and substituted the claims, so that, for example, an inventor in the Federal Circuit’s jurisprudence does not conceive an invention, but rather a “claim,”[135] and a coinventor must contribute not to the conception of the invention, but to the conception of “the subject matter of a claim.”[136]

The standard procedure developed by the Federal Circuit for evaluating joint inventorship was explained in Trovan, Ltd. v. Sokymat S.A. Irori.[137] There, the court equated inventorship analysis to infringement analysis.[138] Infringement analysis begins with a binding interpretation of the claims through a Markman hearing.[139] With the meaning of the claims established, the court then compares the accused product or process to the claims on a claim-by-claim basis; if the accused product or process literally or equivalently satisfies all the limitations of a claim, then infringement has occurred.[140]

Under Trovan, the procedure to be followed in inventorship analysis also begins with an interpretation of the claims “to determine the subject matter encompassed thereby.” The next step is “to compare the alleged contributions of each asserted coinventor with the subject matter of the properly construed claim to then determine whether the correct inventors were named.”[141] As one patent lawyer has observed, inventorship is now determined “on a claim-by-claim basis”[142] as well, despite the fact that an inventor on any one claim is considered an inventor of the entire invention (and, therefore, all of the claims).[143]

Trovan analysis, which has become the accepted procedure for evaluating disputes about inventorship, creates an aberration in the Federal Circuit’s otherwise mostly sound jurisprudence on joint inventorship. In undertaking inventorship analysis, courts now tend to fixate on whether an alleged coinventor can point to specific claims language directly attributable to that alleged coinventor’s contributions.[144] The result of fixating on claims is frequently an overly simplistic understanding of the inventive process. In Eli Lilly & Co. v. Aradigm Corp., the Federal Circuit justified its practice of ruling out some collaborators as joint inventors based on the “quality” of inventive contribution:

The line between actual contributions to conception and the remaining, more prosaic contributions to the inventive process that do not render the contributor a coinventor is sometimes a difficult one to draw. Contributions to realizing an invention may not amount to a contribution to conception . . . if they are too far removed from the real-world realization of an invention, or if they are focused solely on such realization.[145]

The first point, relating to highly abstract or indefinite contributions, is intended to weed out collaborators who merely point out the goal without contributing concrete ideas for achieving the goal. A collaborator who does nothing more than to propose that the research team develop a vaccine for HIV or a more efficient solar receptor is not an inventor even if the team succeeds in inventing the vaccine or receptor. Yet, it is quite possible to interpret the court’s language to deprive legitimate inventors of recognition for their contributions. Sometimes the most difficult and important part of the inventive process is understanding the problem to be solved. The contribution of a collaborator who merely identifies the problem may indeed be far removed from resolving it, but his work may be the foundation or even keystone of the invention.

For example, suppose a research team working for a chemical developer is trying to synthesize an effective insecticide for termites. The goal is to discover a compound to whose toxicity termites find it difficult to adapt by rapid evolution. After years of fruitless and expensive labor on this project, one team member, Carlos, observes that exposure to certain nontoxic chemicals causes the termites to avoid tree wood and preferentially consume other forms of organic matter. After running some experiments, Carlos determines that it is possible that some such chemicals are likely to resist evolutionary adaptation, although it is not clear which chemical compounds would do the trick. After communicating his findings to the team, Carlosis transferred to a different research team. However, based on Carlos’s observations, the original team reorients its entire research program and, after a few more months, invents a nontoxic compound that effectively makes lumber termite-proof. Carlos’ contribution was undoubtedly “far removed from the real-world realiza­tion” of the resulting compound; he does not even know what the compound looks like or how it was produced. Yet, to say that Carlos was not a joint inventor of the compound disserves the goals of patent law. In the scenario, Carlos’ contribution was not a mere recitation of the prior art and was integral to and necessary for the invention of the compound. If he is not considered an inventor, he has no incentive to reveal his key insight to the other members of the research team, and the policy goal of Section 116 is subverted. Moreover, he is unfairly denied a reward for a breakthrough discovery that enabled the patented invention.

The Eli Lilly court’s last point, regarding contributions solely to the “realization” of the invention, is supposed to weed out collaborators who merely performed technical steps in the reduction to practice of an invention already fully conceived.[146] The superficial appeal of this limitation is deceptive as well. The court could merely have been reciting the tautology that, if the invention was already complete, then no further contribution could be significant. If the condition is not tautological (or redundant of the other requirements of joint inventorship), then the collaborator in question must have made both a technically significant and nonobvious contribution to making or using a product invention (or performing a process invention). If the resulting idea could not be made or used (or performed) without a significant and nonobvious contribution from a third party, it has not been fully conceived yet. If the collaborator’s contribution converts an incipient concept into a mature, invented product or process, then he has satisfied the conditions of joint inventorship. Because knowledge of making and using an invention is part of the invention itself, a significant and nonobvious contribution “solely” to the “realization” (or reduction to practice) of an invention may indeed qualify the contributor as a joint inventor.[147] The necessity of the contribution for patentability strongly suggests that the invention had not yet been fully conceived. The court’s statement on this point relates once again back to its fixation on the claims; claims do not necessarily teach how to make and use the invention, so if the claims “define” the invention, then a collaborator who pains­takingly discovers how to make or use the invention properly is no inventor if the means of making or using the invention is not recited explicitly in a claim.

While the ambiguities in the Federal Circuit’s jurisprudence on joint inventorship may seem technical, their effects are magnified by the all-or-none consequences of inventorship determinations. Section 116 specifies that collaborators are not precluded from designation as inventors by the fact that they did not contribute to every claim in the patent. In Ethicon Inc. v. U.S. Surgical Corp., the Federal Circuit interpreted this provision to give every inventor who contributed to any claim in the patent equal ownership in all claims, including claims to which that inventor never contributed.[148] Despite frequent criticism of the court’s opinion,[149] the result was all but dictated by the language of Section 116 and the concept of unity of invention that underlies patent law.[150] But this policy has the unfortunate consequence of giving the most important contributor to an invention no greater rights than the least important.[151] The probable result is to dampen the incentive to engage in team research, because adding new members to a research team—especially those not obligated to assign their rights to the same employer—could result in a loss of meaningful patent rights.[152] The current jurisprudence therefore gives patent applicants a strong incentive, and no realistic disincentive, to fraudulently omit joint inventors from the patent application in order to avoid sharing the patent bounty.

C. The Strong Presumption of Validity in Inventorship Analysis

The grant of a patent by the PTO creates a presumption that the patent is correct and valid. The 1952 Patent Act provides expressly that anyone challenging the validity of a patent bears the burden of persuasion that the patent is invalid.[153] This burden originates from early patent law cases in which the U.S. Supreme Court established a general rule of deference to informed decisions of the Patent Office, most notably in Morgan v. Daniels:

Upon principle and authority, . . . it must be laid down as a rule that where the question decided in the Patent Office is one between contesting parties as to priority of invention, the decision there made must be accepted as controlling upon that question of fact in any subsequent suit between the same parties, unless the contrary is established by testimony which in character and amount carries thorough conviction.[154]

The patent applicant actually benefits from a presumption in his favor beginning at the moment the application is filed. The Federal Circuit noted that the PTO bears the burden of challenging the patent applicant’s “presumptively correct” allegations regarding the utility of the claimed invention.[155] A private party challenging an issued patent before a court bears an even heavier burden. Morgan v. Daniels has long been interpreted by the Federal Circuit and its predecessor, the Court of Customs and Patent Appeals, to mean that anyone challenging the validity of a patent must satisfy an elevated burden of proof, by supplying clear and convincing evidence of invalidity.[156] The “clear and convincing” standard of proof is nowhere to be found in the Patent Act. Its origin is instead a long line of judicial decisions holding that a government agency such as the PTO is “presumed to do its job” correctly.[157] As with other aspects of patent validity, a private party challenging a patent on grounds of misjoinder or nonjoinder bears the clear and convincing burden of persuasion.[158]

In enacting the 1952 Patent Act, Congress chose not to specify the standard of proof for parties alleging patent invalidity for reasons unknown. In the recent case Microsoft v. i4i, the Supreme Court inferred from Congress’s silence that the legislature intended to incorporate (part of) the judicially invented standard of proof into the statute.[159] Indeed, the Court asserted that it “must” presume—apparently as a canon of statutory construction—that Congress intended to continue the status quo unless the statute otherwise specifies.[160] It is doubtful that, whenever Congress fails to comment on a matter within the scope of a statute, Congress thereby automatically endorses all case law not expressly disclaimed by the statute.[161] However, the fact that Congress has overlooked numerous opportunities to change the highly visible standard of proof suggests that the clear and convincing standard generally aligns with congressional intent in this instance.

Doug Lichtman and Mark Lemley have argued against the strong presumption of validity, except with respect to a narrow category of patent challenges, on policy grounds.[162] Although the courts have never articulated a fully developed policy basis for the strong presumption, Lichtman and Lemley infer the two most likely justifications as being deference to the PTO’s expertise and a desire to strengthen patent rights in order to encourage commercialization.[163] But Lichtman and Lemley point out that the PTO does not, probably with current funding cannot, and in any event lacks sufficient motivation to, invest the resources necessary to render an authoritative determination on all questions of patentability.[164] The absence of third-party information in most cases further limits the ability of PTO examiners to assess thoroughly the validity of the patent. As for the disincentive to invest in a patent of uncertain validity, Lichtman and Lemley observe that such uncertainty exists in any case and is only one (probably minor) factor affecting commercialization.[165] To the extent that the patent’s validity has been insufficiently verified by the PTO, strengthening the presumption of validity distorts patent markets arbitrarily.

Regardless of whether this argument persuades, the justification for the strong presumption of validity fails utterly with respect to matters never considered by the PTO. The PTO relies heavily or entirely on the thoroughness, honesty, and candor of the patent applicant with regard to some patent matters. Even for those confident in the PTO’s expertise and rigor, a general presumption that the PTO does its job correctly does not justify a presumption of omniscience. Why should the mere submission of the patent application by self-interested applicants create a prima facie presumption of accuracy and truthfulness?[166] On this logic, parties have sometimes challenged the strong presumption of validity with respect to questions not examined by or raised before the PTO. In Eli Lilly & Co. v. Aradigm Corp., the plaintiff made the exceedingly narrow argument that a preponderance of evidence standard should be used “‘when there are two co-pending patent applications claiming the same subject matter’ in front of the [PTO], one of which issues as a patent allegedly omitting the inventor, and the other of which was filed by the allegedly omitted inventor.”[167] The plaintiff, in short, was not challenging the heightened burden of proof in general or even with respect to inventorship questions not considered by the PTO. Its argument was limited to the case in which an interference should have been declared but was not. The Federal Circuit rejected even that limited argument, pointing to the alleged coinventor’s “strong temptation” to misrepresent the extent of its involvement in the collaboration and the absence of any risk to its rights in its own patent application, which it could lose in an interference.[168]

Neither of the Eli Lilly court’s contentions justifies the clear and convincing evidence standard. The patent applicant seeking to exclude joint inventors has as strong a temptation to misrepresent its role in the inventive process as the alleged coinventors. The same advantages are at stake for each of them—the ability to commercialize (or suppress) the claimed invention. As for the absence of risk, this argument is simply irrelevant. If the issued patent survives challenge by the alleged coinventor, then the patentee may enjoy its patent rights without sharing them with a coinventor. The alleged coinventor will have no right to obtain a junior patent on the same subject matter, so it risks its rights either way. Moreover, the costs of a full-scale patent litigation dwarf the costs of a review or reexamination, and the alleged coinventor faces as much litigation expense as the patentee.

Notwithstanding the Eli Lilly decision, a panel of the Federal Circuit faced another, more aggressive challenge to the clear and convincing evidence standard in inventorship determinations in Vanderbilt University v. ICOS Corp.[169] Pointing to the PTO’s inability to consider the status of alleged coinventors not listed in the patent application, Vanderbilt proposed applying the normal burden of proof.[170] The court again rejected the argument, but this time noted that the plaintiff was “of course free to seek en banc reconsideration of our settled law on this issue.”[171]

Although the Federal Circuit has always rejected these challenges to the standard of proof since its creation in 1982, courts frequently expressed doubt with regard to matters not before the PTO both before and after 1952. Morgan itself required deference only to questions “decided in the Patent Office,” and not to questions never considered by the agency.[172] Since then, numerous courts have observed that the rationale for the strong presumption of validity was weakened in such circumstances,[173] and in several cases have actually given reduced deference to the PTO.[174] In KSR International Co. v. Teleflex, Inc., the Supreme Court itself joined the chorus, holding that when a matter had not been raised before the PTO, “the rationale underlying the presumption—that the PTO, in its expertise, has approved the claim—seems much diminished.”[175]

Nonetheless, the Supreme Court has recently enshrined a uniform clear and convincing evidence standard for all aspects of the issued patent. The Court in Microsoft Corp. v. i4i Ltd. declined to interpret prior cases to cast doubt on the clear and convincing evidence standard, despite seeming to recognize in the same pre-1952 cases many doubts about the logic of the clear and convincing evidence standard applied to matters unexamined by the PTO.[176] By the majority opinion’s logic, Congress should also be “presumed” to have codified these cases. Instead, the i4i Court adopted an expedient, holding that when a matter was not considered by the PTO, the PTO’s judgment “may lose significant force” and “the challenger’s burden to persuade the jury of its invalidity defense by clear and convincing evidence may be easier to sustain.”[177]

Just how the challenged part of the patent “los[ing] significant force” differs meaningfully from lowering the burden of proof is hard to comprehend. Operationally, the Court has intimated that the trial judge can, or perhaps must, notify the jury that the facts at issue were never considered by the PTO while at the same time insisting that the jury apply the clear and convincing standard of proof.[178] But the jury never bases its judgment of patent validity on an assumption of the PTO’s infallibility. The facts are presented to the jury, and the court explains its interpretation of the law, including the burden and standard of proof. The jury may be expected always to decide the question of patent validity based on the facts presented to it, regardless of whether the PTO considered the same question earlier based on different (or no) facts. The jury is not called upon to judge the PTO’s thoroughness or accuracy. If the standard of proof does not vary, neither will the jury’s judgment. How could it?

By holding that the 1952 Patent Act codified the clear and convincing evidence standard without equally codifying the case law doubting the uniform applicability of that standard, the Court has seriously undermined a key element of the patent system’s logic. The Court has at best created arbitrary doctrine favoring patent owners and at worst created an incentive for dishonest prosecution practices. The applicant controls the patent application process and decides which information to reveal to the PTO and which to withhold. The PTO, badly overburdened with applications[179] and staffed with examiners who are rarely expert in the specific technology at issue, does not always thoroughly examine such questions as novelty and nonobviousness, and never questions a superficially credible allegation of utility or inventorship. The clear and convincing evidence standard gives applicants a perverse incentive to obtain a patent fraudulently and enjoy special legal protection for their misdeeds.

Recently, the Federal Circuit managed to compound the errors of the i4i jurisprudence under the bizarre circumstances of Sciele Pharma v. Lupin Ltd.[180] The patent applicant in that case had received nonobviousness rejections on some of its claims by the PTO examiner. In response, the applicant canceled the claims, effectively creating a public record that the applicant and examiner agreed that the claims were invalid. Nevertheless, by a PTO error, the patent as ultimately issued reinstated the canceled claims.[181] The patentee, instead of seeking a certificate of correction, reexamination, or reissue to correct the error, ignored it. When the patentee attempted to assert these claims in an infringement litigation, the accused infringer attacked the claims as invalid. The claims, the defendant argued, should not benefit from the strong presumption of validity, because they were clearly invalid by public acknowledgement of both the patent applicant and PTO. Nonetheless, the Federal Circuit insisted that admittedly invalid claims should be presumed valid with the elevated standard of proof under i4i.[182] One wonders whether the next doctrinal step will be for courts to uphold as valid claims that the patentee openly admits are invalid during the litigation itself.

The consequences for joint inventors alleging unlawful nonjoinder to the patent will be especially unfor­tunate. The flaws in using an enhanced burden of proof for unexamined patent matters are multiplied in the inventorship context by two key differences between the PTO’s inventorship “determination” and any other possible challenge to the patent. First, a charge of nonjoinder or misjoinder does not usually invalidate the patent. The normal remedy is merely correction by judicial amendment of the patent.[183] The consequences of being forced to share patent rights with a coinventor are rarely as dire as the complete invalidation of the patent or its operative claims, and so justify less extraordinary protections for the patentee. Second, as noted, the PTO virtually never questions the applicant’s assertions of inventorship when examining the patent. It relies on the oath of the inventors, which must identify each inventor of the invention for which a patent is sought.[184] Patent applicants seeking to exclude a coinventor for self-serving purposes may have little compunction about misrepresenting inventorship. Because the PTO is well known not to examine inventorship, the chances of discovery are slim unless the patent is challenged in court under the enhanced burden of proof. Even if the patent is challenged, as noted, the result will not be any kind of sanction but mere correction of inventorship. There is no minimally convincing justification for applying the clear and convincing evidence standard to questions of inventorship.

What is perhaps most ironic about the strong presumption of validity of the PTO’s fictitious inventorship “determination” is that the Federal Circuit has consistently treated inventorship as a question of law rather than a question of fact. Specifically, it has called the “overall inventorship determination” a question of law, which is “premised on underlying questions of fact.”[185] The court has also observed that the “determination of whether a person is a joint inventor is fact specific, and no bright-line standard will suffice in every case.”[186]

These pronouncements suggest some confusion as to the distinction between questions of law and fact. Questions of law necessarily reference the facts that must be present to satisfy the test of legality. Whether these facts are present in any given case is, by definition, not a question of law. The question of fact in the case of joint inventorship is the alleged coinventor’s role in conceiving the invention. The manner of and degree to which a contribution enables or improves the conception of the invention, or the process of conception, are also questions of fact. Whether the facts satisfy the legal standard of significance requires an assessment of how those facts match up to the legal standard—traditionally, a matter within the province of the factfinder, not the court.[187]

The Federal Circuit is mistaken, then, in concluding that “whether a person is a joint inventor” is a question of law. The standard of law is indeed a bright line: either the alleged coinventor made a significant contribution to conception of the invention, or she did not. There is nothing in between. The pertinent question of law is typically what kind of contribution to conception is sufficiently “significant” to qualify the contributor as a joint inventor. What the court means in saying that there is no bright line, rather, is that it feels unable to articulate with great precision what is the standard of “significance” as a rule for all cases. The question of law is what the standard of significance should be, not whether any specific alleged coinventor’s contribution is significant.

In any case, given that the Federal Circuit has adopted the position that inventorship is a question of law, it follows that the appellate court should give no deference to the PTO’s decision on inventorship and should thus review challenges to inventorship under the normal preponderance of evidence standard. Appellate courts defer to lower tribunals on questions of fact only, while reviewing determinations of law de novo.[188]

II. Relinking Inventorship Analysis to Technology Policy

The previous part revealed how the dysfunction in joint inventorship law can be traced to two key doctrines. The first is the treatment of claims as if they defined the invention rather than merely limited the scope of its patent protection. The second is the strong presumption of validity for all aspects of the patent, including inventorship, in the absence of any cogent policy justification for such a presumption. Combined, these two positions threaten to warp the logic of inventorship and to undermine the incentives for collaborative research. In Part III.A, the alignment of modern inventorship doctrine with the legislative intent underlying the adoption of the 1984 amendments to Section 116 of the Patent Act will be evaluated. Part III.B follows with an analysis of the policy consequences of the current inventorship doctrine and a proposal for how to correct it to conform to legislative intent and the public policy favoring team research.

A. Legislative History of the 1984 Patent Law Amendments Act

Congress faces relatively few constitutional limitations on its ability to grant and enforce patent rights. The journals of the 1787 constitutional convention record no debate on the intellectual property clause, which appeared in the earliest drafts of the Constitution and was unanimously approved and passed. The clause empowers Congress “To promote the Progress of . . . useful Arts, by securing for limited Times to . . . Inventors the exclusive Right to their . . . Discoveries.”[189] It has long been accepted that the clause means approximately what it says; it authorizes Congress to give to inventors an “exclusive” right to practice their inventions[190] for the purpose of encouraging the development of new applied technology (the “useful Arts”). The Constitution thus seems to mandate that patent legislation be interpreted in the manner most likely to advance technology. In pursuing this goal, patents must be granted to the true inventors of the invention patented; the Constitution nowhere authorizes the grant of exclusive rights to persons other than inventors.[191] Both the first Congress and the Supreme Court accordingly interpreted the clause to require the patent reward to be directed to the true inventor of the invention for which a patent is sought.[192]

The legislative history of the 1984 PLAA tells much about its policy purposes, and these align well with the Constitution’s mandate. The PLAA began as a pair of bills introduced in the Senate and House of Representatives in 1983 “to make certain clarifications with respect to joint inventors.” The bills in each case merely provided that each inventor “need not have made a contribution to each claim contained in the application.”[193] These early drafts were intended to reverse the judicial “all claims rule,” requiring every collaborator to have contributed to every claim in a patent in order to qualify as an inventor on that patent.[194] The all claims rule forced research teams to struggle to parse out each collaborator’s contribution to each claim and to file multiple patents on closely related inventions, with a resulting risk that some patents would become prior art and preempt others by the same collaborators.

The 1983 bills were popular with the patent bar and inventing industries, but these also viewed the bills as an opportunity to codify certain other key pre-Federal Circuit judicial decisions, such as Monsanto v. Kamp.[195] The patent bar lobbied Congress through the American Intellectual Property Law Association (AIPLA) and other bar and industry organizations. On March 15, 1984, AIPLA submitted a proposed amendment to the bills specifically intended to open the door to joint inventorship in the kinds of collaboration not involving direct contact between joint inventors or an equal contribution by each. The amendment’s goals were described in testimony by AIPLA’s president:

Researchers in an organization sometimes work on one aspect of an invention, while others may work on a different aspect. Personnel are continually added to the research team, while others may leave the team. Concepts and development are often generated through brainstorming and cannot accurately be attributed to a particular inventor or inventors. The criteria for joint inventorship, as the amendments to Section 116 would state such criteria, have been judicially recognized.[196]

The main judicial recognition to which the AIPLA president referred was Monsanto v. Kamp. His testimony made clear that paragraphs (1) and (2) of the new Section 116 were adopting the criteria cited by the Kamp district court.[197] The AIPLA report to the House Subcommittee on Courts, Civil Liberties, and the Administration of Justice repeated these concerns:

A research project in today’s environment may include many inventions and some inventions may have contributions which are made by some individuals who were not involved in other aspects of the invention. It is appropriate to recognize the contribution of each individual even though the individual may not have been involved in, or may not have contributed to, all aspects of the invention.[198]

High-ranking PTO officials supported the AIPLA amendments with testimony that paralleled or duplicated the AIPLA rationales for amending Section 116.[199] In his written statement to Congress, the Commissioner of Patents echoed AIPLA’s point about the difficulty of pinpointing the source of inventive contributions during collaborative research:

Scientists or researchers in an organization often work on a particular aspect or embodiment of the invention, or on only a portion of the invention, while others work on different aspects, embodiments or portions. Scientists are continually added to a research team, while other scientists leave the team. Concepts and development plans generated through brainstorming cannot always be accurately attributed. . . . H.R. 4527 would eliminate the need for making these sometimes chancy, complex and time-consuming determinations by specifying that joint inventors need not have contributed jointly to each claim in an application. As we understand the provision, inventors would also be regarded as joint inventors whether or not they physically worked together at the same place or at the same time in developing the invention. Further, joint inventorship would not require that each inventor make the same type or amount of contribution to the invention or that each make a contribution to the subject matter of each claim of the patent.[200]

The Commissioner was mistaken in asserting that the amendment would “eliminate” the need to make a determination of inventive contribution, because, after the amendment, the applicants would still have to determine whether each collaborator listed as an inventor had made the threshold contribution to conception. The amendment would, however, create a more uniform standard and lower threshold for qualifying as a joint inventor, which would reduce the risk of nonjoinder and misjoinder.

Identical statements were made by the Commissioner of Patents before the Senate Judiciary Committee.[201] Industry representatives also testified overwhelmingly in favor of the amendments.[202] Representatives of industries in which collaborative research is extremely common if not critical to commercial success, such as industrial chemicals and pharmaceuticals, supported the bill on these grounds. The American Chemical Society’s letter of support asserted:

The proposed modification of Section 116 of 35 U.S.C. is appropriate and just, for it recognizes that much research that results in an invention is conducted on a team basis. Team members may each contribute to a significant stage of the research, but seldom does each team member contribute to each stage. The ACS supports this modification for it removes the inequity of depriving an individual of the status of joint inventor when that person was a significant contributor to an invention.[203]

In response to these suggestions, the sponsor of House Bill 4527 (Rep. Kastenmeier) let that version die in committee and introduced a new bill, H.R. 6286, in November 1984 containing AIPLA’s language verbatim.[204] In doing so, Kastenmeier also mentioned the new bill’s expected benefits to “universities and corporations which rely on team research”[205]—a purpose also reflected in the official analysis of the bill.[206] The Senate bill was similarly amended, with a parallel explanation of the purpose of the bill described as recognizing “the realities of modern team research.”[207] The report of the post-conference bill made identical references to these “realities” and made explicit that paragraphs (i) and (ii) adopted “the rationale of decisions such as Monsanto v. Kamp.”[208] The President’s statement on signing the bill into law, too, emphasized its utility for removing technical obstacles to team research.[209]

With strong industry support and minimal opposition to the bills, Congress enacted the amendment to Section 116 in the precise words proposed by AIPLA.[210] The legislative history indicates that the primary purpose of the PLAA was to codify a flexible standard of joint invention in order to encourage team research and, ultimately, efficient technological development. Congress evidently perceived no coherent policy purpose in forcing large research companies and university science and engineering laboratories to conform to arbitrary rules about which researcher may participate on a team without precluding a valid patent or at least raising the costs of patenting. Ideally, the sole determinant of research collaboration should be the most efficient use of research personnel and resources. Interfering with the research efficiency hardly advances the patent law’s purpose of fostering technological development.

With its exclusive concern the promotion of collaborative research, the PLAA amendment to Section 116 left the substantive definition of conception untouched. The amendment does confirm that different collaborators may make different types and amounts of contributions without losing their status as coinventors, and it does not limit such contributions to any specific subclass of inventive input. Beyond that, the PLAA had nothing to say about the standard of inventorship.

Yet, the Federal Circuit soon began interpreting inventorship in a manner that privileges certain kinds of inventive contributions while dismissing other, equally valuable contributions. In Ethicon v. U.S. Surgical Corp.,[211] the court’s analysis focused on whether the putative inventor’s contribution appears in the claims. The court qualified this by stating elsewhere in the case that coinventorship depends not on a contribution to the claim itself or specific language in the claim, but rather on whether the collaborator “contributed to the invention” defined and limited by a claim.[212] Nonetheless, the court in Trovan reinforced the doctrinal fixation on claims by laying out a formal procedure for determining inventorship that seemed to rigidly ignore every inventive contribution not reflected in specific claim language.[213]

As discussed, Ethicon and Trovan set forth a procedure for determining inventorship. However, the Federal Circuit has never explicitly held that an inventor’s contribution must appear expressis verbis in the claims. In both Ethicon and Trovan, the inventor had allegedly contributed specific, identifiable limitations or elements to a combination invention. In Trovan, the alleged contribution was the addition of a wire support feature to an electronic transponder. In Ethicon, the alleged contribution was the addition of a safety feature (a “detaining means”) to a surgical trocar. In both cases, the contribution was a specific physical feature integrated into the invention. Such features are almost invariably set forth explicitly in the claims, and the Federal Circuit accordingly focused on whether the alleged coinventor’s contribution was encompassed by the claims. The contribution to the claims in such cases served as a satisfactory proxy for an analysis of whether the inventor contributed to the invention itself. In neither case did the Federal Circuit repudiate the importance of contributing to the invention when that contribution was not recited explicitly in the claims. Indeed, the court has recognized that a coinventor must contribute to the conception of the “invention” rather than the claims.[214] The picture that emerges from these cases is one of a jurisprudence mired in confusion about the critical distinction between the claims and the invention.

The most problematic aspect of Trovan analysis, which has become the normal procedure for determining inventorship, is its elision of the distinction between claims and invention through the inapposite analogy of inventorship to infringement analysis. Infringement analysis is not a good parallel to inventorship analysis for several reasons. Most importantly, the two analyses serve entirely different policy purposes. Infringement analysis focuses tightly on the claims because the Patent Act’s disclosure requirements limit the scope of the patent. In the infringement context, focusing on the claims makes good sense. The claims are meant to limit the inventor’s enforcement powers. By definition, infringement means that the accused product or process has trespassed on one or more of the specific claims. It follows that infringement analysis should revolve around the claims.

However, even in the infringement context, the claims are not the only or even last word on the scope of patent protection. Courts have generally recognized that, as important as claims are to determining whether patent infringement has occurred, they do not exist in a vacuum, but rather should be interpreted in the context of the invention as a whole, as described in the specification and prosecution history.[215] Moreover, using the doctrine of equivalents, courts have expanded patent protection to encompass more of the invention than the inventor technically claimed.[216] Why should the patent owner have the right to enforce the patent against a product or process not explicitly claimed in that patent? The answer can only be that the doctrine is designed to protect the invention when the claims do not fully capture that invention. Such a theory is possible only if the invention is something greater than the claims. The theory underlying the doctrine of equivalents is precisely that the invention and the claims are different but overlapping concepts.

The need for claims relates especially to their public notice function. Claims serve the purpose of putting the public on notice of what practices the patent forbids, while the patent document as a whole also teaches the public how to practice the invention. An infringement determination is the precondition to enforcing the patent, and so focusing on the claims protects accused infringers against being subjected to damages and penalties that were unforeseeable based on the claim language. Limiting infringement actions to the claims requires the inventor, as the person with the most control over the phrasing of the patent application, to define as clearly as possible the scope of the invention so that competitors will be given fair notice of the subject matter protected by the patent.[217] Accordingly, infringement (at least, literal infringement) means intrusion on the claims by definition. If the accused infringer’s activities did not fall within the scope of the claims as reasonably interpreted, and did not equivalently infringe, the accused infringer need fear no sanctions.

In contrast, an inventorship determination is designed neither to protect the public’s expectations about which technologies they are free to use nor to maintain the patent’s value against threats by competitors. It is instead intended to encourage innovation and, in the context of Section 116 of the Patent Act, to preserve the incentives for collaboration between persons having complementary skill sets or whose research work otherwise synergizes well. Accordingly, Section 116 of the Patent Act nowhere says or implies that the inventive contribution must appear in the claims portion of the specification. Getting inventorship right encourages inventive activity by rewarding those persons who make a significant contribution to the invention and serves equity by ensuring that no collaborator free-rides off another collaborator’s important contribution. For these purposes, the appearance of a collaborator’s contribution in the claims may indicate that the collaborator is a bona fide coinventor if the contribution is significant, goes to conception, and does more than recite the state of the art. Nothing in the pre-1984 case law or the PLAA suggests the adoption of a change in the substantive standard of inventorship to exclude any collaborator whose contributions do not appear in the claims. The policy rationale for not limiting inventorship analysis to the claims is further explored in the next section.

Unfortunately, the clarity of the jurisprudence on joint inventorship has been further degraded by imprecise language in American Board of Education v. American Bioscience, Inc.,[218] where the Federal Circuit suggested that a collaborator could not be a joint inventor of a class of chemical compounds unless it “conceived” one “of the claimed compounds.”[219] These dicta do not actually reflect the trend of Federal Circuit jurisprudence on the whole. The court stated in Ethicon that each joint inventor “needs to perform only a part of the task which produces the invention,”[220] as provided in Section 116 of the Patent Act. In Fina Oil, the court was even clearer: “One need not alone conceive of the entire invention, for this would obviate the concept of joint inventorship.”[221] Imagine the probability of all joint inventors simultaneously forming identical pictures in their individual minds of the entire operative invention.

B. Reconstructing Inventorship

It will be helpful here to summarize the main points of the argument so far. Claims limit the protectable aspect of the invention; they do not “define” the invention, as courts frequently assert. Inventorship analysis cannot be analogized to infringement analysis, as the Federal Circuit has erroneously suggested in Ethicon, Trovan, and a long line of subsequent cases. It is unnecessary for a collaborator on a research team to have contributed specific language to a claim in order to qualify as a joint inventor, so long as he or she satisfies the three Pannu conditions.

These observations lead to the conclusion that a collaborator who makes a significant contribution to the conception of an invention may qualify as a coinventor without the need for Trovan analysis. More specifically, a collaborator who makes a sufficient contribution to the utility or nonobvious aspect of the invention, or to the method of making or using it, may qualify as an inventor even if his contribution does not appear in the claims. Without such contributions, there might have been no invention at all, and therefore no patent with claims to enforce. Claims limit the patentee’s enforcement powers; they do not, however, suffice to qualify the invention for patent protection. That protection is contingent on the invention’s novelty, nonobviousness, utility, and adequate disclosure. Unless the coinventors collectively satisfy all of these requirements, no patent may issue in the first place.

A uniform requirement to conduct Trovan inventorship analysis, in con­fusing the claims with the invention, undermines this dynamic. If the invention were nothing more than the claims, the analogy to infringement analysis would make sense. But the invention is different, sometimes radically different, from the claims. The resulting merging of the claims with the invention disenfranchises any coinventor whose contribution the patent applicant did not expressly describe in the claims as a limitation, no matter how important that contribution might have been. This section will discuss how a correction of the judicial understanding of “invention” can point the way toward a correction of determinations of joint inventorship. With such a correction, the incentives toward collaborative research and disincentives toward strategic nonjoinder of inventors can be restored.

1. Equity and Strategic Nonjoinder

Dan Burk and Mark Lemley have explained some practical consequences of overemphasizing the claims and ignoring the invention as a whole. As they point out, patent applicants can draft claims narrowly in order to get around objections by the examiner and to obtain a patent, and then later interpret the claims broadly in light of the specification or through the doctrine of equivalents:

The shift in focus from the invention to the claim language allows both sides to game the process. It permits—and indeed even encourages—over claiming by patentees, particularly patentees drafting or interpreting claims years after the invention itself. If the focus is on the language of my claims, not the product that I actually built or described, I can interpret the language creatively to claim, in retrospect, to own inventions that I didn’t have in mind when I wrote the patent claims.[222]

The result is to undermine the disclosure and public notice function of Section 112 of the Patent Act. The patent bar is well aware of these consequences and capitalizes on them as a matter of course. Although some patent lawyers avoid overclaiming to strengthen the patent against potential challenges, most seek to draft claims broadly by default.[223]

With regard to inventorship determinations, the focus on the claims would allow legally sophisticated researchers to exclude naïve collaborators from inventorship by drafting claims in a manner that underplays or ignores the latter’s crucial inventive contributions, without which the patent might have been unobtainable. Consider the following scenario:

{3} Three scientists, Delta, Epsilon, and Zeta, jointly begin a research project for the discovery of a flexible, bulletproof fabric. Through extensive testing, Delta and Epsilon rule out hundreds of fiber candidates and suggest several molecular and material characteristics that a bulletproof fabric would have, with clues to how one could fabricate such fibers. With this guidance in hand, Zeta successfully creates the material.

In this case, all three collaborators qualify as joint inventors on the resulting patent. The contributions of each are ex hypothesi more than mere recitations of well-known principles and are plainly significant to the invention’s novelty, nonobviousness, and utility. The Federal Circuit has accurately observed that “a person is not precluded from being a joint inventor simply because his or her contribution to a collaborative effort is experimental,”[224] so the fact that Delta and Epsilon were not involved in the final steps in inventing and crafting the patented material does not deny them joint inventor status.[225]

Yet, suppose Zeta, who is the only inventor in possession of a complete mental picture of the fabric, were to apply for a patent without crediting Delta and Epsilon as coinventors. Zeta could rely on Trovan and its progeny to support his self-identification as the sole inventor of the material. Focusing on the claims, a court would compare the inventive contributions of Delta and Epsilon to the claim language. Nothing in the claims would necessarily point to the contributions of Delta and Epsilon, especially if Zeta drafted the claims strategically. The claims would certainly not mention anything about the fiber candidates that Delta and Epsilon had so painstakingly ruled out; claims describe what the applicant regards as the invention, not what the applicant regards as irrelevant or nonfunctional. Yet, much of the inventive process is typically “negative discoveries” that winnow the paths toward the inventive goal to the smallest number possible.[226]

Nor would the claims necessarily refer to the material’s bulletproof characteristics; claims (especially in the chemical, metallurgical, and pharmaceutical arts) commonly describe an invention without reference to its utility or purpose. This information would most likely appear in the written description portion of the patent. The reason for its omission from the claims makes sense in the context of patent law, where a patent grants exclusionary rights to the patented invention used for any purpose, regardless of whether it was a purpose contemplated by the inventor. Patent applicants accordingly omit reference to the utility and other details of the invention in the claims to avoid narrowing the scope of the claims. The motivation of seeking a patent that covers unforeseen uses of, or methods of making, a patented product is logically unconnected to, and has no effect on, the determination of inventorship of that product. The utility of an invention, and the knowledge of how to make and properly use it, are essential aspects of the invention, even if they do not necessarily limit its protections.

As the only collaborator with knowledge of the material’s molecular structure and fibers, and perhaps the only one with knowledge of how to fabricate the material, then, Zeta may rely on a great deal of Federal Circuit precedent to arrive at precisely the wrong conclusion—that he is the sole inventor.[227] The effort and creativity that Zeta put into the invention may be dwarfed by those of his collaborators, but the logic of Trovan analysis, strictly applied, awards him the entire patent right anyway.

This problem does not arise as readily in patents covering mechanical devices or processes, because a coinventor will usually have contributed an identifiable physical component to a device or a step to a process. For example, in Ethicon v. U.S. Surgical Corp., the alleged coinventor of surgical trocar could point to a specific safety means limitation, incorporated into the relevant claim, that he contributed to the trocar.[228] Moreover, mechanical device patents frequently specify their utility in the claims themselves,[229] so a collaborator’s contribution to utility would survive Trovan analysis. But no great imagination is required to envision hypothetical cases posing the same problem in the mechanical engineering field. For example, a novel device invented by Iago may be obvious over the prior art until Charles discovers a nonobvious use for the device.[230] Or a novel manufacturing process invented by Ilsa may be nonfunctioning when applied to certain materials, but if Calvin discovers that the process functions well when applied to a nonobvious choice of materials, Calvin is a coinventor. The inventive contributions of Charles and Calvin rendered their respective inventions patentable, but those contributions need not appear in the claims.

The arbitrary exclusion of some inventors caused by overreliance on the claims creates special problems in materials, chemical, and pharmaceutical development. As noted, patents in these fields typically claim the compound itself with no mention of its utility. Discussion of utility is relegated to the written description portion of the patent for such inventions.[231] Claims that omit any mention of the invention’s utility, or the method of making and using it, highlight the merely partial role played by the claims as a definition of the invention. They also prevent a collaborator who discovers a compound’s utility from qualifying as an inventor under a strict Trovan analysis.

Pharmaceutical inventions illustrate this point with special aptness. In developing a new pharmaceutical invention, the scientific problem is not to create a novel compound in a vacuum. A pharmaceutical compound, once created, does not “do” anything; it has no utility outside of its target biological organism. In order for a patent covering such a compound to issue, the applicant must credibly allege that the compound has some biochemical effect on a target organism. In other words, a pharmaceutical compound is not a functioning invention until introduced into its target organism. The claims, to the extent that they merely recite some molecular structure without mention of a therapeutic utility, limit the patentable scope of the invention but cannot “define” it in any meaningful sense.

The incomplete role of the claims in “defining” pharmaceutical inventions reveals its significance clearly in any description of the inventive process. The process of conceiving and synthesizing the claimed compound is often a relatively small part of drug design. In order to complete conception of the compound through trial-and-error testing, the inventors may need to perform all of the following steps: (1) understand the biological mechanism or agent causing the disorder; (2) select or develop a target chemical molecule (“candidate”) potentially capable of treating the disorder; (3) develop an efficient method for producing the candidate on a mass scale; (4) develop or select a series of systems for screening the candidate against the biological mechanism, or an environment that simulates the mechanism; and (5) modify the candidate as needed to increase its potency; reduce toxicity, side effects, or contraindications; reduce the molecular half-life; and determine proper dosage and delivery method.[232] As a result, pharmaceutical inventions usually result from team research involving biologists, biochemists, medicinal chemists, and pharmacologists performing different tasks.

Inventors may have contributed to any of these steps. In some cases, the biological mechanism underlying the disorder to be treated may be well understood in the art, but the kind of molecule that will remedy the biological disorder will be the subject of uncertainty. In other cases, the biological mechanism will be mysterious or misunderstood, and the conception of the invention may require unique insights into the biological source of the disorder. The latter class of inventions is by far the most challenging to develop and perfect; all pharmaceutical inventions require the selection, testing, and possible modification of a bioactive compound, but not all require extensive original research into human or other animal biochemical functioning. Yet, because the claims will typically recite only the chemical structure of the molecule, an inflexible Trovan-type analysis would arbitrarily privilege the second and fifth steps over the others, despite the fact that in any given case the former may require the least effort, expertise, creativity, or other inventive contribution.[233]

2. Restoring Incentives for Collaborative Research

Claim fixation results in an inventorship analysis obviously inequitable to the excluded inventors, but it also poses a threat to collaborative research. Often, private companies seek to collaborate with university scientists and engineers to develop innovative products. For example, drug developers frequently collaborate with university biologists and chemists to discover diagnostics and treatments for persistent human diseases and disorders. University researchers are typically involved in exploring human or other animal biology or biochemistry, while the drug companies have expertise in medicinal chemistry and pharmacology. In such collaboration, Trovan analysis seems to suggest that the university researchers could never qualify as inventors if they did not contribute some specific molecular arrangement to the claimed compound. The patent incentive to collaboration with drug companies disappears.

An interesting illustration of the flaws in Trovan analysis occurred in a previously mentioned case, Board of Education ex rel. Florida State University v. American Bioscience.[234] There, FSU scientists and their post-doctoral fellow, Dr. Tao, had been experimenting with variants of paclitaxel, a naturally-occurring anticancer compound. At the FSU lab, Tao learned a “semi-synthetic” process for producing paclitaxel analogs. During this time, FSU scientists undertook a research project to develop nitro-taxols as chemo­thera­peutic radio­sensitizing taxanes. Within a relatively short time, the FSU scientists discovered that a specific compound they had synthesized, PNIP, showed promise as a radiosensitizing agent. One of the FSU scientists (Dr. Nadizadeh) had developed a “secret” method for synthesizing PNIP, of which Tao was informed.

At some point during this research, one of the FSU scientists spoke at a conference regarding the synthesis of paclitaxel. Scientists at a pharmaceutical developer, VivoRx, had attended and decided to start researching radiosensitizing agents using a variant of paclitaxel, known generically as docetaxel, as the parent structure. Soon after having begun research, VivoRx hired Tao to assist in the project, and with his help in synthesizing compounds (allegedly using Nadizadeh’s secret method of making nitro-taxols), VivoRx obtained patents on several docetaxel analogs.

In evaluating whether any FSU scientists qualified as joint inventors of the patented compounds, the Federal Circuit discounted FSU’s experimental work: “general knowledge regarding the anticipated biological properties of groups of complex chemical compounds is insufficient to confer inventorship status with respect to specifically claimed compounds.”[235] The court then observed that “invention does require conception, and there is no evidence that FSU’s inventors conceived any of the claimed compounds.”[236] With regard to the use of FSU’s methods to make the compounds, the court concluded that this was irrelevant, because the patent did not claim the method of making the compounds.[237] Specifically, FSU alleged that Tao had used Nadizadeh’s secret method to synthesize the patented compounds. To this, the court replied:

despite the fact that Nadizadeh may have developed a method of making PNIP and other taxol derivatives, the record in the present case indicates that he did not conceive the claimed compounds; only ABI’s inventors were in possession of both the structure of the claimed compounds and an operative method of making those compounds.[238]

Although the court acknowledged that conception of an invention requires disclosure of the method of making it, it held that the inventor of the method could not be a coinventor of the compounds made by his method unless he “conceive[d] of the claimed compounds” himself.[239]

The American Bioscience court’s focus on the “claimed compounds” and discounting of the (unclaimed) method of making them is symptomatic of claims fixation. Whether FSU scientists conceived of an entire claimed compound is not the pertinent question; the patented compounds were conceived by at least some of the inventors. The FSU scientists need only have contributed to the conception of the invention in some way; conception of the entire compound by any specific inventor is entirely irrelevant, as long as the research team collectively conceived the claimed compounds.

A proper analysis of inventorship would have acknowledged that the contribution of necessary background biological knowledge, useful suggestions for functional groups of the claimed compounds, and techniques for making the compounds, could all qualify the contributors as coinventors if the contributors had collaborated with the VivoRx team and satisfied the three Pannu conditions of coinventorship. Under this analysis, it is possible that some of the FSU scientists would not have qualified as joint inventors. It is also possible that some would have qualified. The court’s repeated distortion of the law of inventorship in the case did considerable mischief on the facts before it, where FSU scientists who may have contributed substantially to the VivoRx inventions were excluded from consideration as joint inventors. In effect, the Federal Circuit sanctioned what may have been the misappropriation of a university’s valuable research, gathered over the course of many years, by a private company that promptly commercialized it for its own benefit and the preemption of any benefit by the university scientists. More troubling still, the decision has had a predictably perverse effect on the development of joint inventorship doctrine. For example, it misled the district court in Vanderbilt University v. ICOS Corp. into concluding that failure of any alleged collaborator to independently conceive of the entire claimed invention negated any possibility of joint inventorship.[240]

Very recently, the Federal Circuit has retreated from the American Bioscience reasoning and partially rectified the wayward doctrine. In Falana v. Kent State University, the plaintiff, a university researcher, developed an original method of making certain compounds for use in liquid crystal displays.[241] After the plaintiff (Dr. Falana) left the university’s employment, his supervisor used Falana’s method to synthesize a compound that he patented without naming Falana as a coinventor. The university read American Bioscience to dictate that, because it had not sought to patent Falana’s method, and Falana had never conceived the patented compounds, he was not a coinventor of any compound resulting from the use of his method.

The Federal Circuit disagreed with this understanding of American Bioscience.[242] Actually, the university’s reading of the case was quite reasonable. The American Bioscience opinion was plainly dismissive of a researcher who had contributed a method of making the patented compound without conceiving of the compound itself. To get past American Bioscience without reversing itself, the court had to somehow reconcile its own holding with the fact that Dr. Falana, like Dr. Nadizadeh in American Bioscience, had never made or seen the university’s patented compounds.

To do this, the court resorted to the time-honored tactic of distinguishing the cases on the facts. In American Bioscience, Nadizadeh never actually worked with the patentee’s inventive team directly; he worked with Tao, who in turn worked with the patentee to develop the compound. In Falana, the eponymous plaintiff worked directly with the university research team, although he left before the compound was discovered. This distinction is, of course, irrelevant; the Patent Act does not require that all joint inventors work together, merely that they are exposed to each other’s work in the course of some cooperative enterprise.

The Falana court also suggested that, in American Bioscience, Nadizadeh had simply “taught skills or general methods” that merely facilitated the later invention “without more.”[243] But this too is irrelevant; the operative question is whether the skills and methods taught by the collaborator (a) contributed more than well-known principles, and (b) made a significant contribution (c) to conception. As the court itself recognized in Falana, “Where the method requires more than the exercise of ordinary skill . . . the discovery of that method is as much a contribution to the compound as the discovery of the compound itself.”[244] Problematic as the distinction between the cases may be, it is salutary that the Federal Circuit is beginning to perceive a more accurate concept of invention. The misfortune is that, in not reversing the mistakes of American Bioscience unambiguously, the court leaves standing contradictory approaches to the role of claims in determining inventorship.

Also problematical is the potential of claims-fixation to lead to an oxymoronic “inventorless invention.” A slight extension of scenario {3} demonstrates how this paradox might arise:

{4} Eta, Theta, and Iota are collaborating to discover a cure for lung cancer. Through diligent and unusually insightful research, Eta discovers a hitherto unknown biochemical mechanism that makes cancer cells susceptible to certain kinds of polypeptides. Theta invests several months into creating a series of nonobvious screening systems for testing compounds against the discovered vulnerability in cancer cells. Together, Eta and Theta propose to Iota, a medicinal chemist, the characteristics that such a compound should have. Following these instructions, Iota pulls a well-known drug compound off his shelf, modifies it into a series of novel derivative compounds using well known techniques, and runs them through Theta’s screening systems. One of the derivative compounds turns out to be a wonder drug that cures lung cancer with a very high probability in humans. Together, they seek a patent on the compound only.

Under the facts of scenario {4}, neither Eta nor Theta ever pictured in their minds the finished compound. Nor did they contribute any specific physical structure to the claimed molecule. They lacked the requisite knowledge of medicinal chemistry to do so. Neither Eta nor Theta would be coinventors under a strict Trovan analysis or the American Bioscience approach, because none of their contributions appear in the claims. Iota synthesized the patented molecule, and was the first and only collaborator to conceive it in his mind, but nothing in his contribution exceeded the state of the art of medicinal chemistry. His work was the least inventive of the three, and arguably did not rise to a contribution to conception. If the claims merely recite the molecular structure of the claimed compound, the result will be that an invention of undoubted novelty, nonobviousness, and utility, might have no inventor at all.[245] Under an expansive interpretation of Trovan, the cure for cancer described in scenario {4} could well be doctrinally unpatentable.[246] The result is diametrically opposite to any patent policy of encouraging collaborative research and the equitable sharing of its benefits.

Conclusion

The argument of this Article—that the concept of invention and inventorship has been erroneously construed as “defined” by the claims—has relied on an argument sufficiently complex to proceed in stages. First, I showed that the invention cannot be defined by the claims, because the claims do not necessarily express all the prerequisites for a patentable invention. These omitted elements include most typically utility, a method for making the invention, and a method for using the invention. Without these, no novel and nonobvious product or process has yet attained the status of an “invention” ready for patenting. Therefore, a research collaborator who contributes one or more of these aspects to an invention qualifies as a co-inventor even if his contribution does not appear in the claims. Moreover, treating the claims as defining the invention contradicts both the unity of invention rule and the rationale underlying the doctrine of equivalents. The Trovan sequence of analysis relied upon by the Federal Circuit consequently cannot be the only valid method for determining inventorship.

Second, I explained how the consequences of fixating on the claims undermined Congress’ clearly expressed intentions in amending Section 116 of the Patent Act to encourage collaborative technological research. Third, I discussed the aggravating effects of two erroneous and contradictory doctrines adopted by courts: (a) the strong presumption of validity accorded to all aspects of an issued patent, regardless of whether the PTO examined the aspect at issue, and (b) the treatment of inventorship as a question of law. Finally, I suggested how inventorship doctrine could be rectified, most generally by treating the claims as defining the outward limits of patent protection for the invention rather defining than the invention itself. Procedurally, courts should hew to Falana analysis and resort to Trovan analysis only when the alleged co-inventor’s sole contribution appears expressis verbis in the claims.

Until the Supreme Court or Federal Circuit decisively clarifies the distinction between the invention and the claims, and the role of joint inventors in the former, the law of inventorship will continue to impose unnecessary costs on collaborative research and to skew inventorship determinations in favor of legally sophisticated but unprincipled researchers to the disadvantage of their less urbane collaborators. The problems resulting from claim fixation are further aggravated by adherence to an unjustifiably strong presumption that the persons named as inventors in the patent are the true and only inventors. There is no statutory basis for a strong presumption of validity on matters unexamined by the PTO, and no cogent rationale for judicially imposing a “clear and convincing evidence” standard.

Because all coinventors have equal and nonexclusive ownership rights in the patent by default,[247] the stakes for nonjoinder are potentially very high. Absent an assignment agreement, all inventors own rights to all claims in their patent, regardless of whether they contributed to those claims in any way. The Federal Circuit’s decision in Ethicon giving inventors ownership rights to claims to which they did not contribute was perhaps inevitable given the unity of invention principle and the phrasing of Sections 116 and 262 of the Patent Act, but it had the unfortunate consequence of increasing the risks of collaborative research outside of an employment contract. Collaborations between private companies, or between research universities and private industry, stand to suffer unnecessarily.

Any adjustment of the ownership rights in a patent with multiple inventors would best be accomplished legislatively, but many of the current doctrine’s ill effects can be remedied by rectifying the wayward judicial conception of the invention. The overwrought fixation on claims and strong presumption of validity in inventorship determinations appear nowhere in the Patent Act. They are progeny of the judiciary and correctible by it. The judicial attitude toward overemphasizing claims should mirror that of Bill Cosby’s father to the young Bill: “I brought you into this world, and I can take you out.”[248]

---

* Professor, Arizona State University College of Law; J.D., Yale Law School; M.A., Yale University; B.A., University of California, Berkeley. The author thanks Dennis Karjala and Mark Lemley for helpful comments on an earlier draft of this article.

[1] 35 U.S.C. § 100(a) (2006). Half of this definition is semicircular, the other half compounds its own obscurity by failing to define a “discovery,” resulting in much confusion and misunder­standing as to the scope of patentable subject matter. See Linda J. Demaine & Aaron X. Fellmeth, Reinventing the Double Helix: A Novel and Nonobvious Conception of the Biotechnology Patent, 55 Stan. L. Rev. 303, 368-77 (2002-2003).

[2] See Grant v. Raymond, 312 U.S. 218, 241-42 (1832); Graham v. John Deere Co., 383 U.S. 1, 5-8 (1966).

[3] 35 U.S.C. § 102(a), (c) (2006). The America Invents Act substitutes the term “claimed invention” for “invention,” and defines that term in the new Section 101(j). See Leahy-Smith America Invents Act, § 3, Pub. L. 112-29, 125 Stat. 284 (codified in scattered sections of 35 U.S.C.). The implications of this change will be analyzed below.

[4] 35 U.S.C. § 103(a) (2006).

[5] 35 U.S.C. § 271(a) (2006).

[6] U.S. Const. art. I, §. 8, cl. 8; see also 35 U.S.C. § 111(a)(1) (2006) (“An application for patent shall be made, or authorized to be made, by the inventor, except as otherwise provided in this title . . . .”).

[7] America Invents Act, supra note 3, § 3, to be codified as 35 U.S.C. § 101(f).

[8] Id.

[9] 35 U.S.C. §§ 101-03 (2006). To supplement the Patent Act, it might be thought useful to look to treaties mandating standards of patent protection among state parties. The most relevant such treaty, the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights, does not define “invention,” but it does specify that to qualify for a patent, an invention must be “new, involve an inventive step, and [be] capable of industrial application.” TRIPS: Agreement on Trade-Related Aspects of Intellectual Property Rights art. 27(1), Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization [hereinafter WTO Agreement], Annex 1C, The Legal Texts: The Results of the Uruguay Round of Multilateral Trade Negotiations 320 (1999), 1869 U.N.T.S. 299 [hereinafter TRIPS Agreement]. Unfortunately, this adds nothing to our understanding of what constitutes an invention.

[10] 35 U.S.C. §§ 112, 115 (2006); 37 C.F.R. § 1.17. The TRIPS Agreement also requires a written disclosure, although it does not require all of the information provided for in the 1952 Patent Act, such as a best mode disclosure. Compare TRIPS Agreement, supra note 9, art. 29(1) with 35 U.S.C. § 112 (2006) (amended 2011).

[11] Intuitively, we might be tempted to draw a distinction between substantive and procedural requirements of patentability, with only the former qualifying as components of the definition of invention. As will be discussed, this approach would miss some core features of invention that do not clearly fall into the category of substantive criteria.

[12] The PTO’s Manual of Patent Examining Procedure does not even contemplate examination of inventorship. See Manual of Patent Examining Procedure ch. 700 (8th ed., July 2010 rev.), available at http://www.uspto.gov/web/offices/pac/mpep/index.htm [hereinafter MPEP].

[13] It may also arise in a stage of administrative review, such as in derivation proceedings conducted under 35 U.S.C. § 135, or possibly post-grant review conducted under 35 U.S.C. ch. 32.

[14] America Invents Act, supra note 3, § 118, to be codified at 35 U.S.C. § 112(b).

[15] See Phillips v. AWH Corp., 415 F.3d 1303, 1312 (Fed. Cir. 2005) (citing many Supreme Court and earlier Federal Circuit cases for the proposition that the claims measure the invention). However, one writer has rightly pointed out that excessive fixation on the claims tends to encourage patent applicants to claim more than they have enabled. Oskar Liivak, Rescuing the Invention from the Cult of the Claim, 42 Seton Hall L. Rev. 1 (2012); see also Christopher A. Cotropia, What Is the “Invention”?, 53 Wm. & Mary L. Rev. 1855 (2012) (discussing the functional advantages of defining an invention more broadly than as the claims).

[16] An example is seen in this case study of the typical process from invention to patent. Greg Myers, From Discovery to Invention: The Writing and Rewriting of Two Patents, 25 Social Studies of Science 1, 57, 69 (1995).

[17] See Robert P. Merges & Richard R. Nelson, On the Complex Economies of Patent Scope, 90 Colum. L. Rev. 839, 848 (1990) (noting that current practice permits the stretching of claims beyond what the inventor has disclosed).

[18] See George Franck, Scientific Communication — A Vanity Fair?, 286 Sci. 53, 53 (1999); Edward T. Lentz, Inventorship in Laboratory Research, in Understanding Biotechnology Law 187, 188 (Gale R. Peterson ed., 1993).

[19] See John R. Allison & Mark A. Lemley, Who’s Patenting What? An Empirical Exploration of Patent Prosecution, 53 Vand. L. Rev. 2099, 2117 (2000).

[20] See Part I.B.1, infra.

[21] 35 U.S.C. § 262 (2006); see Lawrence M. Sung, Collegiality and Collaboration in the Age of Exclusivity, 3 DePaul J. Health Care L. 411, 425 (2000).

[22] Drake v. Hall, 220 F. 905, 906 (7th Cir. 1914). The right of joint patent owners contrasts with common law rights of joint owners of other kinds of property. Tenants in common of real property, for example, have a duty of accounting for and sharing profits with other tenants. See 20 Am. Jur. 2d Cotenancy and Joint Ownership § 42 (2012). Even joint copyright owners share an undivided interest in the work. Childress v. Taylor, 945 F.2d 500, 505 (2d Cir. 1991); Weinstein v. University of Ill., 811 F.2d 1091, 1095 (7th Cir. 1987).

[23] “May” lose, because the inventor may be entitled to some compensation by prior contractual arrangement.

[24] See, e.g., Arlington Indus., Inc. v. Bridgeport Fittings, Inc., 632 F.3d 1246, 1256 n.2 (Fed. Cir. 2011); In re Hiniker Co., 150 F.3d 1362, 1369 (Fed. Cir. 1998); Hilton Davis Chem. Co. v. Warner-Jenkinson Co., 62 F.3d 1512, 1539 (Fed. Cir. 1995) (Plager, J., dissenting); Two-Way Media LLC v. America Online, Inc., 508 F. Supp. 2d 526, 528 (S.D. Tex. 2007).

[25] Giles S. Rich, The Extent of the Protection and Interpretation of Claims-American Perspectives, 21 Int’l Rev. Indus. Prop. & Copyright L., 497, 499 (1990).

[26] See, e.g., Giles S. Rich, Why and How Section 103 Came to Be, in Nonobviousness: The Ultimate Condition of Patentability 1, 201 (John F. Witherspoon ed., 1980).

[27] Hyde v. United States, 225 U.S. 347, 391 (1912) (Holmes, J., dissenting).

[28] 35 U.S.C. § 101 (2006).

[29] See In re Nuijten, 500 F.3d 1346, 1354 (Fed. Cir. 2007) (“The four categories [process, machine, manufacture, and composition of matter] together describe the exclusive reach of patentable subject matter. If a claim covers material not found in any of the four statutory categories, that claim falls outside the plainly expressed scope of § 101 even if the subject matter is otherwise new and useful.”).

[30] See S. Rep. No. 82-1979 (1952), reprinted in 1952 U.S.C.C.A.N. 2394, 2410 (“Section 102, in general, may be said to describe the statutory novelty required for patentability, and includes, in effect, an amplification and definition of ‘new’ in section 101.”). But see Demaine & Fellmeth, supra note 1, at 385-88 (arguing that the term “new” in Section 101 should be read more broadly to exclude products of nature and natural processes from patentability).

[31] 35 U.S.C. § 102 (2006).

[32] See Nelson v. Bowler, 626 F.2d 853, 856 (C.C.P.A. 1980).

[33] 35 U.S.C. § 103 (2006). Prior to the 2011 amendments, the Patent Act referred to “subject matter” rather than “claimed invention”; there is no indication that this amendment was intended to change the substantive standard of patentability.

[34] See Rich, supra note 25, at 497-99; Demaine & Fellmeth, supra note 1, at 365-67.

[35] The Patent Act applies to “inventions” and “claimed inventions” — it nowhere creates or deals with a concept of “unpatentable inventions.” However, it may be inferred that some “inventions” are unpatentable if the applicant is either not the true inventor or fails to satisfy the procedural requirements in the patent application.

[36] See Invitrogen Corp. v. Clontech Labs., Inc., 429 F.3d 1052, 1063 (Fed. Cir. 2005) (“[C]onception requires that the inventor be able to define the compound so as to distinguish it from other materials, and to describe how to obtain it . . . . In other words, conception requires that the inventor appreciate that which he has invented.”); see also Dow Chem. Co. v. Astro-Valcour, Inc., 267 F.3d 1334, 1341 (Fed. Cir. 2001) (“[T]he date of conception of a prior inventor’s invention is the date the inventor first appreciated the fact of what he made.”).

[37] A distinction should be made between an invention, the novelty of which the inventor has not yet recognized and an invention, the novelty and operative characteristics of which the inventor recognizes, but whose mode of operation the inventor does not fully understand. The latter can qualify as a patentable invention, because understanding precisely how an invention achieves its purpose is not required; this is why patent applicants may frame their claims in “means-plus-function” or “step-plus-function” format. See 35 U.S.C. § 112(f) (2013).

[38] 35 U.S.C. § 112 (2013).

[39] Id. § 112(a).

[40] Id. § 112(b)

[41] See, e.g., Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 150-51 (1989); Kewanee Oil Co. v. Bicron, 416 U.S. 470, 480-81 (1974). The value of disclosure as a basis for the patent grant has been recurrently questioned, however. See, e.g., Brenner v. Manson, 383 U.S. 519, 534 (1966) (Harlan, J., dissenting); Alan Devlin, The Misunderstood Function of Disclosure in Patent Law, 23 Harv. J.L. & Tech. 401, 403 (2010); Mark A. Lemley & Ragesh K. Tangri, Ending Patent Law’s Willfulness Game, 18 Berk. Tech. L.J. 1085, 1100-02 (2003); Rebecca S. Eisenberg, Patents and the Progress of Science: Exclusive Rights and Experimental Use, 56 U. Chi. L. Rev. 1017, 1028–29 (1989). Mark Lemley has argued that the real benefit of the patent to most inventors may be to avoid the risk of being excluded from practicing the technology at issue. Mark Lemley, The Myth of the Sole Inventor, 110 Mich. L. Rev. 709, 755 (2012).

[42] Ariad Pharms., Inc. v. Eli Lilly & Co., 598 F.3d 1336, 1351 (Fed. Cir. 2010) (en banc); see In re Wertheim, 541 F.2d 257, 263 (C.C.P.A. 1976).

[43] Burroughs Wellcome v. Barr Labs., Inc., 40 F.3d 1223, 1227 (Fed. Cir. 1994).

[44] Townsend v. Smith, 36 F.2d 292, 295 (Ct. Cust. & Pat. App. 1930); Hybritech Inc. v. Monoclonal Antibodies, Inc., 802 F.2d 1367, 1376 (Fed. Cir. 1986).

[45] Burroughs Wellcome, 40 F.3d at 1228; Hiatt v. Ziegler, 179 U.S.P.Q. 757, 763 (Bd. Pat. App. 1973). Reduction to practice means that the inventor actually creates the physical invention (if it is a product) or performs the steps of the invention (if it is a process). Alternatively, an inventor can constructively reduce an invention to practice by filing a valid patent application clearly describing how to make and use the invention. MPEP, supra note 12, § 2138.05.

[46] The Federal Circuit has held that conception requires both understanding the invention’s structure and an operative method of making it. See, e.g., Amgen, Inc. v. Chugai Pharm. Co., 927 F.2d 1200, 1206 (Fed. Cir. 1991). It would be more accurate to add that conception also requires understanding how to use the invention. The Patent Act requires that the invention be useful, 35 U.S.C. § 101. Although, as noted, the Federal Circuit interprets the Act not to require the inventor to know with confidence that the invention is useful, the Act clearly requires that the inventor disclose how to use the invention, assuming it does work. See 35 U.S.C. § 112 (2006). Therefore, conception of a product properly requires knowledge of: (1) the physical structure of the invention, (2) how to make the invention, and (3) how to use the invention. Cf. Space Systems/Loral, Inc. v. Lockheed Martin Corp., 271 F.3d 1076, 1080 (Fed. Cir. 2001) (“To be ‘ready for patenting’ the inventor must be able to prepare a patent application, that is, to provide an enabling disclosure as required by 35 U.S.C. § 112. . . . [If] the inventor himself [is] uncertain whether it could be made to work, a bare conception that has not been enabled is not a completed invention ready for patenting.”).

[47] Burroughs Wellcome, 40 F.3d at 1228.

[48] See, e.g., id. (“[A]n inventor need not know that his invention will work for conception to be complete.”); Cross v. Iizuka, 753 F.2d 1040, 1051 (Fed. Cir. 1985) (holding that in vitro testing of a potential therapeutic compound, though far from establishing actual benefit to any person, suffices to show utility).

[49] Hitzeman v. Rutter, 243 F.3d 1345 (Fed. Cir. 2001).

[50] See Silvestri v. Grant, 496 F.2d 593, 596 (Ct. Cust. & Pat. App. 1974); Invitrogen, Corp. v. Clontech Labs., Inc., 429 F.3d 1052, 1064 (Fed. Cir. 2005) (holding that establishing conception requires evidence that the inventor understood the invention to have the features that comprise the inventive subject matter at issue). Chisum has also interpreted the Supreme Court jurisprudence to hold that “discovery of a practical utility is part of the act of inventing.” Donald Chisum, Chisum on Patents § 2.02[5] (Rel. 110-9, 2007); see also Lentz, supra note 18, at 190 (“Thus, a person who conceives of or actually something, e.g., a new chemical entity, but who does not know of a use for the thing probably has not made a patentable invention and is not, therefore, an inventor unless and until a utility is discovered.”).

The European Patent Office seems to interpret the European Patent Convention’s requirement of “susceptibility to industrial application”—the parallel of the utility requirement—as integral to the concept of invention as well. See Michigan State U./Euthanasia Compositions, Eur. Pat. Off. Bd. App., Case No. T 0866/01, para. 4.6 (unrep. May 11, 2005), available at http://www.epo.org/law-practice/case-law-appeals/pdf/
t010866eu1.pdf.

[51] See, e.g., Langer v. Kaufman, 465 F.2d 915, 918 (C.C.P.A. 1972).

[52] Burroughs Wellcome, 40 F.3d at 1228.

[53] See Falana v. Kent State Univ., 669 F.3d 1349, 1358 (Fed. Cir. 2012) (holding that the putative inventor who envisioned the genus of compounds and contributed the method of making it contributes to the conception of that genus); cf. Bd. of Educ. ex rel. Bd. Of Trustees of Fla. State Univ. v. Am. Bioscience, Inc., 333 F.3d 1330, 1342 (Fed. Cir. 2003) (observing that, if some inventors conceived a chemical compound but were unable to make it without the help of another scientist, the assisting scientist might qualify as a coinventor); Fina Oil & Chem. Co. v. Ewen, 123 F.3d 1466, 1473 (Fed. Cir. 1997) (“Conception of a chemical substance requires knowledge of both the specific chemical structure of the compound and an operative method of making it.”).

[54] In re Brana, 51 F.3d 1560. 1566 (Fed. Cir. 1995).

[55] Id.; see also In re ‘318 Patent Infringement Litig., 583 F.3d 1317, 1327 (Fed. Cir. 2009) (“Thus, at the end of the day, the specification, even read in the light of the knowledge of those skilled in the art, does no more than state a hypothesis and propose testing to determine the accuracy of that hypothesis. That is not sufficient.”); Envirotech Corp. v. Al George, Inc., 730 F.2d 753, 762 (Fed. Cir. 1984) (holding that lack of utility is shown when there is a complete absence of data supporting the assertion of utility). But see Univ. of Pittsburgh v. Hedrick, 573 F.3d 1290, 1298 (Fed. Cir. 2009) (“An inventor need not know that his invention will work for conception to be complete . . . the discovery that the invention actually works is part of its reduction to practice.”).

[56] In re Bundy, 642 F.2d 430, 433 (C.C.P.A. 1981).

[57] See MPEP, supra note 12, § 2107.01.

[58] See, e.g., Brana, 51 F.3d at 1566-68 (“Usefulness in patent law, and in particular in the context of pharmaceutical inventions, necessarily includes the expectation of further research and development. The stage at which an invention in this field becomes useful is well before it is ready to be administered to humans.”); Nelson v. Bowler, 626 F.2d 853, 856 (C.C.P.A 1980) (holding that inconclusive and statistically insignificant tests of the utility of a chemical compound were sufficient to establish utility); In re Gazave, 379 F.2d 973, 978 (C.C.P.A. 1967) (“[I]n the usual case where the mode of operation alleged can be readily understood and conforms to the known laws of physics and chemistry, operativeness is not questioned, and no further evidence is required.”).

[59] Merges & Nelson, supra note 17.

[60] On reissue proceedings, see 35 U.S.C. § 251 (2006); see generally 37 C.F.R. § 1.176.

[61] Any part of the invention disclosed in the specification but not claimed is deemed dedicated to the public. See Maxwell v. J. Baker, Inc., 86 F.3d 1098, 1106 (Fed. Cir. 1996). For an interesting exploration of this issue, see generally Robert A. Migliorini, The Dedication to the Public Doctrine and Lessons for Patent Practitioners, 87 J. Pat. & Trademark Off. Soc’y 825 (2005).

[62] See O’Reilly v. Morse, 56 U.S. (15 How.) 62 (1853).

[63] See sources cited supra note 10.

[64] See U.S. Const. art. I, § 8, cl. 8.

[65] Morse, 56 U.S. (15 How.) at 62.

[66] Id. at 112.

[67] Id. at 113.

[68] Id. at 117.

[69] See id.

[70] See 35 U.S.C. § 251 (2006).

[71] Id.

[72] Phillips v. AWH Corp., 415 F.3d 1303, 1315 (Fed. Cir. 2005) (en banc) (quoting Markman v. Westview Instruments, Inc., 52 F.3d 967, 978 (Fed. Cir. 1995)); see also United States v. Adams, 383 U.S. 39, 49 (1966).

[73] See, e.g., Altoona Publix Theatres, Inc. v. American Tri-Ergon Corp., 294 U.S. 477, 487 (1935); Purdue Pharma L.P. v. Endo Pharm. Inc., 438 F.3d 1123, 1136 (Fed. Cir. 2006) (“[I]t is the claims ultimately that define the invention.”); Netscape Commc’ns Corp. v. Konrad, 295 F.3d 1315, 1323 (Fed. Cir. 2002) (“However, it is the claims that define a patented invention.”).

[74] Univ. of Pittsburgh v. Hedrick, 573 F.3d 1290, 1297-98 (Fed. Cir. 2009); see also Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456, 1460 (Fed. Cir. 1998) (“[T]he critical question for joint conception is who conceived, as that term is used in the patent law, the subject matter of the claims at issue.”) (emphasis added).

[75] Eli Lilly & Co. v. Aradigm Corp., 376 F.3d 1352, 1361-62 (Fed. Cir. 2004).

[76] See Liivak, supra note 15.

[77] Id.

[78] Univ. of Rochester v. G.D. Searle & Co., 375 F.3d 1303, 1306 (Fed. Cir. 2004).

[79] United States v. Adams, 383 U.S. 39, 49 (1966).

[80] Patent Cooperation Treaty, done on June 19, 1970, 28 U.S.T. 7645, 1160 U.N.T.S. 231, available at http://www.wipo.int/pct/en/texts/
articles/atoc.htm [hereinafter PCT].

[81] See id. arts. 2(i), 3(4)(iii), 17(3). See also Paris Convention for the Protection of Industrial Property art. 4(G), done on July 14, 1967, 21 U.S.T. 1583, 828 U.N.T.S. 305, available at http://www.wipo.int/treaties/en/ip/paris/trtdocs_wo020.html (establishing unity of invention requirement for priority patent applications).

[82] See PCT, supra note 80, art. 28.

[83] See, e.g., Sjoland v. Musland, 847 F.2d 1573, 1582 (Fed. Cir. 1988) (noting that claims define the invention); Mark J. Stewart, The Written Description Requirement of 35 U.S.C. § 112(1): The Standard After Regents of The University of California v. Eli Lilly & Co., 32 Ind. L. Rev. 537, 541 (1998-1999).

[84] Adams, 383 U.S. at 49.

[85] Phillips v. AWH Corp., 415 F.3d 1303, 1315 (Fed. Cir. 2005) (en banc) (quoting Vitronics Corp. v. Conceptronic, Inc., 90 F.3d 1576, 1582 (Fed. Cir. 1996)).

[86] America Invents Act, supra note 3, § 3, to be codified as 35 U.S.C. § 102.

[87] Id., to be codified as 35 U.S.C. § 101(i).

[88] Technically, to avoid an internal contradiction in the Patent Act, Congress should have amended Section 112 to say: “the subject matter for which the applicant seeks patent protection.” As the AIA amends the Patent Act, what the inventor “regards as his invention” is irrelevant; what matters are the aspects of the invention for which the applicant seeks and can obtain patent protection.

[89] See Peters v. Active Mfg. Co., 129 U.S. 530, 537 (1889) (“That which infringes if later anticipates if earlier.”).

[90] See Mark Janis, Patent Abolitionism, 17 Berkeley Tech. L.J. 899, 910-20 (2002) (describing governmental statements and policies paying homage to the “independent inventor”).

[91] See Stefan Wuchty, Benjamin F. Jones & Brian Uzzi, The Increasing Dominance of Teams in Production of Knowledge, 316 Science 1036, 1036-37 (2007); Dennis D. Crouch & Jason Rantenen, The Changing Nature [sic] Inventing: Collaborative Inventing, Patently-O Blog (July 9, 2009, 9:28 AM), at http://www.patentlyo.com/patent/2009/07/the-changing-nature-inventing-collaborative-inventing.html.

[92] Burroughs Wellcome Co. v. Barr Labs., Inc., 40 F.3d 1223, 1227 (Fed. Cir. 1994).

[93] Act July 19, 1952, ch. 950, § 116, 66 Stat. 792 (codified at 35 U.S.C. § 116 (1952)).

[94] Id.

[95] Mueller Brass Co. v. Reading Indus., 352 F. Supp. 1357, 1372-73 (E.D. Pa. 1972), aff’d, 487 F.2d 1395 (3d Cir. 1973). The reason for the quotation marks around “is” is unclear. See also Jamesbury Corp. v. United States, 518 F.2d 1384, 1396 (U.S. Ct. Cl. 1975) (commenting on “[t]he difficulty . . . in attempting to define a standard to be used to determine who is a joint inventor and the type of contribution that is necessary to qualify as a coinventor . . . .”).

[96] De Laski & Thropp Circular Woven Tire Co. v. Williamm R. Thropp & Sons Co., 218 F. 458, 464 (D.N.J. 1914), aff’d, 226 F. 941 (3d Cir. 1915).

[97] Cf. Hess v. Advanced Cardiovascular Sys., Inc., 106 F.3d 976, 981 (Fed. Cir. 1997).

[98] The timing of the supply of information or ideas by the collaborator determines whether it qualifies as a contribution to conception for purposes of establishing joint inventorship. Specifically, a not insignificant contribution to conception establishes joint inventorship if the contribution was not in the prior art at the time contributed. If the contribution entered the public domain later, after its contribution to the research team but before the team files a patent application, it qualifies the contributor as an inventor. As the Federal Circuit has explained: “Contributions to realizing an invention may not amount to contribution to conception if they merely explain what was ‘then state of the art.’” Eli Lilly & Co. v. Aradigm Corp., 376 F.3d 1352, 1359 (Fed. Cir. 2004) (quoting Hess, 106 F.3d, at 981)(emphasis added). The Patent Act, as amended by the AIA, provides explicitly that an invention does not necessarily sacrifice patentability merely by public exposure. See 35 U.S.C. § 102(b)(1) (2013) (requiring that disclosures by the inventor (or derived from the inventor) do not constitute a bar to patentability unless made one year prior to the effective filing date of the patent application). The same is true a fortiori for a contribution to conception of a patentable invention, because the contribution assisted in the final conception regardless of whether it later became public knowledge.

[99] For a review of the case law interpreting joint inventorship before 1984, see generally John O. Tresansky, Joint Invention, 7 AIPLA Q.J. 96 (1979).

[100] 1 William C. Robinson, The Law of Patents for Useful Inventions § 396 (1890).

[101] Worden v. Fisher, 11 F. 505, 508-09 (E.D. Mich. 1882).

[102] Monsanto Co. v. Kamp, 269 F. Supp. 818 (D.D.C. 1967).

[103] Id.

[104] Id. at 824.

[105] Cited 158 times as of this printing. See, e.g., Vanderbilt University v. Icos Corp., 601 F.3d 1297, 1302 (Fed. Cir. 2010); Hyatt v. Doll, 576 F.3d 1246, 1271 (Fed. Cir. 2009). Cited in the MPEP as well, supra note 12, § 605.07.

[106] Patent Law Amendments Act of 1984, Pub. L. 98-622, § 104, 98 Stat. 3385 (current version at 35 U.S.C. § 116 (2006)).

[107] Eli Lilly & Co. v. Premo Pharma. Labs., Inc., 630 F.2d 120, 135 (3d Cir. 1980).

[108] Id.

[109] See supra text accompanying note 45.

[110] This is a point well explained by Edward Lentz:

[A] person who conceives of or actually makes something, e.g., a new chemical entity, but who does not know of a use for the thing probably has not made a patentable invention and is not, therefore, an inventor unless and until a utility is discovered. At that time, a patentable invention will have been made and the person who conceived of the utility is probably a joint inventor with the person who conceived the thing.

In some cases, the novelty of an invention is not appreciated by the person who conceives of the invention but rather is discovered subsequently. In these cases, conception of the invention is not complete until the novelty is appreciated.

Lentz, supra note 18, at 190.

[111] Cf. Burroughs Wellcome Co. v. Barr Labs., Inc., 40 F.3d 1223, 1227 (Fed. Cir. 1994) (“The statute does not set forth the minimum quality or quantity of contribution required for joint inventorship.”).

[112] In the 2011 America Invents Act, Congress adopted the first formal definition of a “joint inventor” or “coinventor,” meaning “any 1 of the individuals who invented or discovered the subject matter of a joint invention.” 35 U.S.C. § 100(g) (2012). As with the definition of “inventor,” this amendment does little beyond present a tautology and the mysterious additional concept of “subject matter” of an invention.

[113] Kimberly-Clark Corp. v. Procter & Gamble Distrib. Co., 973 F.2d 911 (Fed. Cir. 1992).

[114] Clairol Inc. v. Save-Way Indus., 210 U.S.P.Q. 459, 465 (S.D. Fla. 1980).

[115] Kimberly-Clark Corp., 973 F.2d at 915-17; see also Arbitron, Inc. v. Kiefl, No. 09-CV-04013, 2010 U.S. Dist. LEXIS 83597, at *16-17 (S.D.N.Y., Aug. 13, 2010) (holding that one scientist who reviewed and built on a report about another’s discovery collaborated sufficiently to qualify as joint inventors).

[116] Pannu v. Iolab Corp., 155 F.3d 1344 (Fed. Cir. 1998)..

[117] Id. at 1351.

[118] Id.

[119] Id.

[120] Eli Lilly & Co. v. Aradigm Corp., 376 F.3d 1352, 1362 (Fed. Cir. 2004); Pannu, 155 F.3d at 1351.

[121] See generally Robert W. Harris, Conceptual Specificity as a Factor in Determination of Inventorship, 67 J. Pat. & Trademark Off. Soc’y 315 (1985) (discussing the kinds of contributions to invention that do not rise to the level of contributions to conception due to lack of sufficient specificity).

[122] Fina Oil & Chem. Co. v. Ewen, 123 F.3d 1466, 1473 (Fed. Cir. 1997); Aradigm Corp., 376 F.3d at 1358.

[123] Fina Oil & Chem., 123 F.3d at 1473; Pannu, 155 F.3d at 1351.

[124] Levin v. Septodont, Inc., 34 Fed. Appx. 65 (4th Cir. 2002).

[125] Id. at 67.

[126] Id. at 70.

[127] Id. at 67.

[128] Id.

[129] Id. at 71-73.

[130] Id. at 67. Aside from the fact that the opinion was not selected for publication, the Fourth Circuit cannot bind the Federal Circuit. Normally, this issue would have been decided by the Federal Circuit, but the case was not primarily an infringement action, but rather a breach of contract action. 28 U.S.C. § 1295(a)(1) (2006) (noting that the Federal Circuit shall have exclusive jurisdiction from the appeal of a final decision of a district court in any civil action arising under, or in any civil action in which a party has asserted a compulsory counterclaim arising under, any Act of Congress relating to patents or plant variety protection.)

[131] U.S. Patent No. 5,547,657 (filed Oct. 11, 1994).

[132] The patent laws of most countries, like that of the United States, are underdeveloped in defining who qualifies as a joint inventor. For example, Canadian, German, and Japanese patent laws are all vague on the concept of joint inventorship. See, e.g., Motorkettensäge Case, Fed. Ct. Just. (Bundesgerichtshof) Decision of June 20, 1979 (Fed. Rep. of Ger.) (contributions that have not influenced the overall success of the invention or solved any significant problem do not support coinventorship). However, some offer more guidance than others. The first three of the factors listed in the text are used by Australian courts in determining the “material effect” of the collaborator’s contribution. See Row Weeder Pty., Ltd. v Nielsen, (1997) 39 IPR 400 (Austl.).

[133] Cf., e.g., Rhone-Poulenc Agro, S.A. v. Monsanto Co., 445 F. Supp. 2d 531, 548 (M.D.N.C. 2006) (expertise); Ethicon Inc. v. U.S. Surgical Corp., 135 F.3d 1456, 1460 (Fed. Cir. 1998) (skills possessed by one inventor and not the other).

[134] 35 U.S.C. §§ 116, 256 (2006); see Pannu v. Iolab Corp., 155 F.3d 1344, 1350 (Fed. Cir. 1998); MCV, Inc. v. King-Seeley Thermos Co., 870 F.2d 1568, 1570 (Fed. Cir. 1989).

[135] Univ. of Pittsburgh v. Hedrick, 573 F.3d 1290, 1298 (Fed. Cir. 2009).

[136] Eli Lilly & Co. v. Aradigm Corp., 376 F.3d 1352, 1361-62 (Fed. Cir. 2004).

[137] Trovan, Ltd. v. Sokymat S.A., Irori, 299 F.3d 1292, 1301-02 (Fed. Cir. 2002).

[138] Id.

[139] Markman v. Westview Instruments, Inc., 517 U.S. 370, 372 (1996).

[140] Trovan, 299 F.3d at 1302.

[141] Id.

[142] George M. Sirilla, How the Federal Circuit Clarified the “Muddy Concept” of Joint Inventorship, 91 J. Pat. & Trademark Off. Soc’y 509, 509 (2009).

[143] Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456, 1460 (Fed. Cir. 1998).

[144] See, e.g., Bd. of Educ. ex rel. Bd. of Trustees of Fla. State Univ. v. Am. Bioscience, Inc., 333 F.3d 1330, 1339 (Fed. Cir. 2003); Ethicon, 135 F.3d at 1463 (“[T]his court must determine what Choi’s contribution was and then construe the claim language to determine if Choi’s contribution found its way into the defined invention.”) (emphasis added).

[145] Eli Lilly & Co. v. Aradigm Corp., 376 F.3d 1352, 1359 (Fed. Cir. 2004) (citations omitted).

[146] See Ethicon, 135 F.3d at 1460 (“[O]ne does not qualify as a joint inventor by merely assisting the actual inventor after conception of the claimed invention.”).

[147] The Federal Circuit very recently affirmed this point with respect to “making” the invention in Falana v. Kent State University, 669 F.3d 1349, 1358 (Fed. Cir. 2012)

[148] Ethicon, 135 F.3d 1456.

[149] See, e.g., id. at 1469 (Newman, J., dissenting); Gregory N. Mandel, Left-Brain versus Right-Brain: Competing Conceptions of Creativity in Intellectual Property Law, 44 U.C. Davis L. Rev. 283, 294-95 (2010).

[150] 37 C.F.R. §§ 1.475(a), 1.499 (2011). U.S. law on this subject reflects the requirements of important international patent treaties. See PCT, supra note 80, arts. 2(i), 3(4)(iii), 17(3); Patent Cooperation Treaty Regs. Rule 13.1 (“The international application shall relate to one invention only or to a group of inventions so linked as to form a single general inventive concept (“requirement of unity of invention”)); Paris Convention for the Protection of Industrial Property, supra note 81, art. 4(G).

[151] Gregory Mandel has proposed giving proportional rights to joint inventors who made contributions of varying levels to the invention. Mandel, supra note 149, at 353. In principle, such a rule could mitigate the problem to a degree, but suggesting the adoption of equitable apportionment methods is much easier in the abstract than operationalizing the concept. Judgments about the relative creativity of different collaborators’ inventive contributions would be a highly subjective exercise even with perfect information. In practice, it would be impossible due to the frequent inability to differentiate the source of inventive contributions in collaborative research and the temptation of any given collaborator to “remember” that another’s contribution was actually his own. After all, the main purpose of the modern Section 116 of the Patent Act is to eschew nice parsing of inventive contributions among coinventors.

Moreover, not all inventive contributions are creative; some may take the form of perceptive observations of a helpful phenomenon by a prepared mind, or simply by systematic experimentation. Such contributions may qualify as inventive regardless of the absence of creativity. See 35 U.S.C. § 103(a). How is a court to weigh, on minimal objective evidence, the incomparable values of one collaborator’s creative insight against another’s tireless experimentation? Apportionment is, in short, sound in theory but not a practical solution to the problem of skewed inventorship rewards.

[152] See Mandel, supra note 149, at 347.

[153] 35 U.S.C. § 282(1) (2006).

[154] Morgan v. Daniels, 153 U.S. 120, 121, 125 (1894).

[155] In re Brana, 51 F.3d 1560, 1566 (Fed. Cir. 1995).

[156] See Nartron Corp. v. Schukra U.S.A., Inc., 558 F.3d 1352, 1356 (Fed. Cir. 2009).

[157] Am. Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350, 1359 (Fed. Cir. 1984); see also Radio Corp. of Am. v. Radio Eng’g Labs., Inc., 293 U.S. 1, 2 (1934).

[158] Eli Lilly & Co. v. Aradigm Corp., 376 F.3d 1352, 1358 (Fed. Cir. 2004); Fina Oil & Chem. Co. v. Ewen, 123 F.3d 1466, 1472 (Fed. Cir. 1997).

[159] Microsoft Corp. v. i4i Ltd. P’ship, 131 S.Ct. 2238, 98 U.S.P.Q.2d 1857, 1862 (2011).

[160] Id., 98 U.S.P.Q.2d at 1863.

[161] Only Justice Thomas declined to read Section 282 as implicitly incorporating the judicially developed standard of proof. Id. at 1868 (Thomas, J., concurring).

[162] Doug Lichtman & Mark A. Lemley, Rethinking Patent Law’s Presumption of Validity, 60 Stan. L. Rev. 45 (2007).

[163] Id. at 52-53.

[164] Id. at 53-55. Lemley and Sampat’s empirical research indicates that the PTO effectively weeds out a small but significant percentage of applications. See generally Mark A. Lemley & Bhaven Sampat, Is the Patent Office a Rubber Stamp?, 58 Emory L.J. 181 (2008) (evaluating the PTO’s patent rejection rate and finding it at 15%-20%).

[165] Lichtman & Lemley, supra note 162, at 52-53.

[166] See Brown v. Edeler, 110 F.2d 858, 861 (C.C.P.A. 1940) (finding that a duly executed joint application is prima facie evidence of joint inventorship); Van Otteren v. Hafner, 278 F.2d 738, 741 (C.C.P.A. 1960) (finding that a duly executed joint application is prima facie evidence of joint inventorship).

[167] Eli Lilly & Co. v. Aradigm Corp., 376 F.3d 1352, 1364 (Fed. Cir. 2004).

[168] Id. at 1366-67.

[169] Vanderbilt Univ. v. ICOS Corp., 601 F.3d 1297 (Fed. Cir. 2010).

[170] Id. at 1305.

[171] Id. n.3.

[172] Morgan v. Daniels, 153 U.S. 120, 125 (1894).

[173] See Microsoft, 98 U.S.P.Q.2d at 1866 (collecting cases).

[174] See, e.g., Mfg. Research Corp. v. Graybar Elec. Co., 679 F.2d 1355, 1360-61 (11th Cir. 1982); NDM Corp. v. Hayes Prods., Inc., 641 F.2d 1274, 1277 (9th Cir. 1981); Lee Blacksmith, Inc. v. Lindsay Bros., Inc., 605 F.2d 341, 342-43 (7th Cir. 1979).

[175] KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 426 (2007).

[176] Microsoft, 98 U.S.P.Q.2d at 1865-66.

[177] Id. at 1866.

[178] Id.

[179] See Mark A. Lemley, Can the Patent Office Be Fixed?, in Rules for Growth 367 (Robert Litan ed., 2011); Allison & Lemley, supra note 19 at 2118–19.

[180] 684 F.3d 1253 (Fed. Cir. 2012).

[181] Id. at 1256-57.

[182] Id. at 1260-61.

[183] See 35 U.S.C. §§ 116, 256.

[184] 35 U.S.C. § 115; 37 C.F.R. § 1.63(a)(2).

[185] See Eli Lilly & Co. v. Aradigm Corp., 376 F.3d 1352, 1362 (Fed. Cir. 2004).

[186] Fina Oil & Chem. Co. v. Ewen, 123 F.3d 1466, 1473 (Fed. Cir. 1997). Specifically, as one court observed, “[t]he findings relating to joint inventorship issues such as conception and inventive contributions are dependent upon an understanding of the scientific problem or problems the parties were trying to resolve.” Rhone-Poulenc Agro, S.A. v. Monsanto Co., 445 F. Supp. 2d 531, 535 (M.D.N.C. 2006).

[187] Judge Rader offered a similar objection to the Federal Circuit’s treatment of experimental use as a question of law. See Lough v. Brunswick Corp., 103 F.3d 1517, 1532-33 (Fed. Cir. 1997) (Rader, J., dissenting from the denial of rehearing en banc) (“With factual considerations dictating the outcome of the underlying analysis, logic relegates the standard of review to the factual realm as well. . . . Frankly the proposition that experimental use—a judge-made doctrine without any express basis in the Patent Act—is a question of law is absurd on its face. It is hard to imagine how case law decisions made by judges to resolve unique factual cases on a fact-driven issue could create questions of law.”). His reasoning applies a fortiori to the issue of inventorship. On the disputed standard of review of mixed questions of law and fact, see generally Evan Tsen Lee, Principled Decision Making and the Proper Role of Federal Appellate Curts: The Mixed Questions Conflict, 64 S. Cal. L. Rev. 235 (1991).

[188] See Hybritech Inc. v. Monoclonal Antibodies, Inc., 802 F.2d 1367, 1376 (Fed. Cir. 1986).

[189] U.S. Const. art. I, § 8, cl. 8.

[190] On the seemingly odd choice of the word “Discoveries,” see Demaine & Fellmeth, supra note 1, at 367-74.

[191] This is not to say that the Constitution forbids Congress to allow inventors to assign their rights to others, of course.

[192] See An Act to Promote the Progress of Useful Arts (Patent Act of 1790), ch. 7, sec. 1, 1 Stat. 109 (Apr. 10, 1790); Grant v. Raymond, 31 U.S. (6 Pet.) 218, 242 (1832) (“[The patent] is the reward stipulated for the advantages derived by the public for the exertions of the individual [inventor], and is intended as a stimulus to those exertions.”).

[193] H.R. 4527, 98th Cong. (1983); S.B. 1535, 98th Cong., 1983 Cong. Rec. S9006.

[194] See, e.g., In re Sarett, 327 F.2d 1005, 1010, n.7 (Ct. Cust. & Pat. App. 1964).

[195] Congress established the U.S. Court of Appeals for the Federal Circuit in 1982 in order to centralize appeals for patent cases. Before 1982, the U.S. Court of Customs and Patent Appeals handled all appeals from administrative actions by the PTO, but appeals arising from infringement litigation were decided by the various circuit courts. The Federal Circuit was designed to remedy the lack of uniformity in patent doctrine arising from this fracturing of authority. See generally The U.S. Judicial Conf. Comm. On The Bicentennial Of The Constitution Of The U.S., The United States Court Of Appeals For The Federal Circuit: A History 1982-1990 (1991) (describing advent of the Federal Circuit); Daniel J. Meador, Origin of the Federal Circuit: A Personal Account, 41 Am. U.L. Rev. 581 (1992) (same).

[196] Statement of Bernarr R. Pravel, President, Am. Intel. Prop. L. Ass’n, before the House Subcommittee on Courts, Civil Liberties, and the Administration of Justice (June 13, 1984), in Innovation and Patent Law Reform (Mar. 28, Apr. 26, & June 6, 27, 1984), 98th Cong., 2d Sess., Pt. 3, Serial No. 105, at 2690, 2719 [hereinafter “Innovation and Patent Law Reform Hearings”].

[197] Id. at 2735-36.

[198] Id. at 2737.

[199] Testimony Of Gerald J. Mossinghoff, Assist. Sec’y & Comm’r of Pats. & Trademarks, Accompanied by Donald Quigg, Dep’y Asst. Sec’y & Dep’y Comm’r of Pats. & Trademarks, & Rene D. Tegtmeyer, Asst. Comm’r for Pats. (Mar. 28, 1984), in Innovation and Patent Law Reform Hearings, supra note 196, at 2, 7.

[200] Statement of Gerald J. Mossinghoff, in id. at 28-29.

[201] See Patent Law Improvements Act, Hearing before the Subcomm. on Patents, Copyrights and Trademarks of the Comm. on the Judiciary, U.S. Senate, 98th Cong., 2d Sess., on S.1535 and S. 1841 (Apr. 3, 1984), Serial No. J-98-107, at 18, 32-34 (Mossinghoff), 70 (AIPLA) [hereinafter “Senate Judiciary Comm. PLAA Hearings”].

[202] E.g., 130 Cong. Rec. 28,075 (1984) (statement of Rep. Moorhead); see W. Fritz Fasse, The Muddy Metaphysics of Joint Inventorship: Cleaning Up After the 1984 Amendments to 35 U.S.C. § 116, 5 Harv. J.L. & Tech. 153, 175 (1992).

[203] Letter from Warren D. Niederhauser, Pres.-Elect, Am. Chem. Soc’y, to Robert W. Kastenmeier, Chair, House Subcomm. on Cts., Civ. Libs., & the Admin. of Just. (Apr. 20, 1984), in Senate Judiciary Comm. PLAA Hearings, supra note 202, at 2617.

[204] H.R. 6286 (1984).

[205] 1984 Cong. Rec. 28073 (Oct. 1, 1984) (statement of Rep. Kastenmeier).

[206] Section-by-Section Analysis of H.R. 6286, Patent Law Amendments Act of 1984, 130 Cong. Rec. 10525-29 (1984), reprinted in 1984 U.S.C.C.A.N. 5827, 5833.

[207] S. Rep. No. 998-663, 98th Cong., 2d Sess. (Oct. 5, 1984), at 8.

[208] 1984 U.S.C.C.A.N. 5827, 5834-35.

[209] President’s Statement on Signing H.R. 6268 into Law, 20 Weekly Comp. Pres. Doc. 1818 (Nov. 9, 1984).

[210] See Innovation and Patent Law Reform Hearings, supra note 196, at 2720 (introducing the amendment to Section 116 of the Patent Act as adopted by Congress).

[211] In Ethicon v. U.S. Surgical Corp., the court wrote that it must construe the claim language to determine whether the putative coinventor’s contribution “found its way into the defined invention.” Ethicon Co. v. U.S. Surgical Corp., 135 F.3d 1456, 1463 (Fed. Cir. 1998).

[212] Id. at 1461-63.

[213] Trovan, Ltd. V. Sokymat S.A. Irori, 299 F.3d 1292 (Fed. Cir. 2002). See, e.g., Eli Lilly & Co. v. Aradigm Corp., 376 F.3d 1352, 1361-62 (Fed. Cir. 2004) (“[T]he law requires only that a coinventor make a contribution to the conception of the subject matter of a claim.”) (emphasis added).

[214] Bd. of Educ. ex rel. Bd. of Trustees of Fla. State Univ. v. Am. Bioscience, Inc., 333 F.3d 1330, 1337 (Fed. Cir. 2003) (“[E]ach joint inventor must generally contribute to the conception of the invention.”) (emphasis added).

[215] See, e.g., United States v. Adams, 383 U.S. 39, 49 (1966); Phillips v. AWH Corp., 415 F.3d 1303, 1315 (Fed. Cir. 2005) (en banc); Retractable Techns., Inc. v. Becton, Dickinson & Co., 653 F.3d 1296, 1303 (Fed. Cir. 2011), reh’g en banc denied, 659 F.3d 1369 (Fed. Cir. 2011). But cf. id. at 1312-13 (Rader, J., dissenting in part) (cautioning against importing limitations on claims from unclear language in the written description).

[216] See Graver Tank & Mfg. Co. v. Linde Air Prod. Co., 339 U.S. 605 (1950).

[217] See Gen. Elec. Co. v. Wabash Appliance Corp., 304 U.S. 364, 369 (1938); Hoganas AB v. Dresser Indus., 9 F.3d 948, 951 (Fed. Cir. 1993).

[218] Bd. of Educ., 333 F.3d 1330 (Fed. Cir. 2003).

[219] Id. at 1340-41.

[220] Ethicon, Inc. v. United States Surgical Corp., 135 F.3d 1456, 1460 (Fed. Cir. 1998).

[221] Fina Oil & Chem. Co. v. Ewen, 123 F.3d 1466, 1472 (Fed. Cir. 1997); see also Rhone-Poulenc Agro, S.A. v. Monsanto Co., 445 F. Supp. 2d 531, 549 (M.D.N.C. 2006) (“[N]either the statute nor the cases relating to joint inventorship requires the simultaneous presence or awareness of all who have contributed significantly toward conception when the last piece of the conception puzzle slips into place.”); Regents of the Univ. of Mich. v. Bristol-Myers Squibb Co., 301 F. Supp. 2d 633, 642 (E.D. Mich. 2003) (“[A] joint inventor need not have had the definite and permanent conception of the full invention – otherwise, he would be the sole inventor.”); Tavory v. NTP, Inc., 297 F. Appx. 976, 979, 2008 WL 4710761, **4 (Fed. Cir., Oct. 27, 2008) (unpub.) (“[N]o individual coinventor need have a ‘definite and permanent idea of the complete and operative invention’ so long as all of the coinventors collectively satisfy that requirement.”).

[222] Dan L. Burk & Mark A. Lemley, Fence Post or Sign Posts? Rethinking Patent Claim Construction, 157 U. Pa. L. Rev. 1743, 1762 (2009).

[223] See, e.g., Thalia V. Warnement & Troy E. Grabow, Drafting the Patent Specification, Am. Intell. Prop. L. Ass’n, Practical Patent Prosecution Training For New Lawyers, Aug. 2008, at http://www.aipla.org/learningcenter/library/papers/bootcamps/08patentbootcamp/
Documents/Grabow-paper.pdf; Rajiv Sarathy, Broad Patents Can Be Both Lucrative and Expensive, Perkins Coie Patent Law Insights, Nov. 21, 2009, at http://www.patentlawinsights.com/tags/broad-claims/.

[224] Fina Oil & Chem. Co. v. Ewen, 123 F.3d 1466, 1473 (Fed. Cir. 1997); see Burroughs Wellcome Co. v. Barr Labs., Inc., 40 F.3d 1223, 1229 (Fed. Cir. 1994).

[225] A few district courts have misread the Patent Act to allow courts to exclude as joint inventors collaborators who left the research team after the experimental stage. See, e.g., Huang v. California Inst. of Tech., 72 U.S.P.Q.2d 1161, 1177 (C.D. Cal. 2004) (“To judge the significance of an alleged joint inventor’s contribution to the complete invention, a court may consider whether the alleged joint inventor was able at the relevant time period to understand and articulate the inventive team’s final operative embodiments.”). This misses the entire point of the 1984 amendment to Section 116, which was based the desire to grant equal reward to early stage team members, as the Kamp decision upon which the amendment was based indicated. See Monsanto Co. v. Kamp, 269 F. Supp. 818 (D.D.C. 1967).

[226] See Sean B. Seymore, The Null Patent, 53 Wm. & Mary L. Rev. 2041 (2012).

[227] This scenario is not merely fanciful. A federal district court recently misinterpreted the law of joint inventorship in just such a manner in Vanderbilt Univ. v. ICOS Corp., 594 F. Supp. 2d 482 (D. Del. 2009), aff’d, 601 F.3d 1297 (Fed. Cir. 2010). Relying on Burroughs Wellcome and American Bioscience, the district court held that university researchers who had collaborated with a drug company to identify and test a series of pharmaceuticals could not be joint inventors because none of the university scientists had “conceived the ‘specific chemical structure of the compound’ claimed.” Id. at 505. Although the court recognized that the university researchers must have made a valuable contribution to the discovery of the patented compounds and found the drug company’s denial of benefit from the university “troubling,” it could find no basis in law for treating the university scientists as joint inventors even if they contributed the very scaffolding of the drug. Id. at 505-07.

Judge Clevenger, writing for a panel of the Federal Circuit, corrected this error by pointing out that every coinventor need not individually conceive the final and entire invention; someone in the “inventorship team” need merely conceive the complete and final invention. Vanderbilt Univ. v. ICOS Corp., 601 F.3d 1297, 1306-07 (Fed. Cir. 2010). Yet, relying on the facts on record which were tainted by the trial court’s misunderstanding of the law, the Federal Circuit affirmed the district court opinion despite the absence of a sufficiently developed record based on a proper interpretation of the law, id. at 1307-08, an unfortunate choice, as Judge Dyk pointed out in dissent, id. at 1310 (Dyk, J., dissenting in part). This outcome results mainly from a jurisprudential problem already discussed—the Federal Circuit treating inventorship as a question of law rather than a question of fact.

[228] Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456, 1463 (Fed. Cir. 1998).

[229] E.g., U.S. Pat. No. 7,975,315 (July 5, 2011) (“The present invention relates to an atomic force microscope . . . .”); U.S. Pat. No. 7,947,218 (May 24, 2011) (“The present invention relates to a portable cooling device . . . that provides air flow, and a shroud . . . at an article . . . .”).

[230] Many device patents do omit any mention of utility from the claims. See, e.g., U.S. Pat. No. 7,947,349 (May 24, 2011) (“The invention relates to a moulded piece forming a negative mould . . . .”).

[231] See, e.g., U.S. Pat. No. 7,973,166 (July 5, 2011) (claim 1); U.S. Pat. No. 6,740,654 (May 25, 2004) (claims 1-20); U.S. Pat. No. 5,972,658 (Oct. 26, 1999) (claims 1-8); U.S. Pat. No. 4,024,272 (May 17, 1977) (claims 1-9, 12-20). European practice is consonant. See Mobil Oil/Friction Reducing Additive, Eur. Pat. Off. Bd. App. Case No. G 0002/88, para. 5 (Dec. 11, 1989), [1990] E.P.O.R. 73 (“The discovered use of [a] compound or composition will normally be described in the patent, but may not be expressly claimed.”).

[232] See generally Shayne Cox Gad, Introduction: Drug Discovery in the 21st Century, in Drug Discovery Handbook 1, 1-7 (Shayne C. God ed., 2005). In rational drug design, the use of computer modeling may eliminate the need for and reduce reliance on some of these steps. See generally Ulf Madsen, Povl Krogsgaard-Larsen & Tommy Liljefors, Textbook of Drug Design and Discovery (2002).

[233] For example, the fifth step typically requires repeated recourse to the system developed in step 4, in order to verify that the modifications of the molecule perform the function desired in an acceptable manner. In any given case, the inventors may be able to use a prior art, off-the-shelf assay system to test and modify a nonobvious compound, or they may have to develop a nonobvious system for testing and modifying a prior art compound. Either step may constitute a valid contribution to conception.

[234] Bd. of Educ. ex rel. Bd. Of Trustees of Fla. State Univ. v. Am. Bioscience, Inc., 333 F.3d 1330 (Fed. Cir. 2003).

[235] Id. at 1340.

[236] Id. (emphasis added). Throughout this portion of the opinion, the court repeated and elaborated on the mistaken conclusion that the FSU scientists had to conceive the entire compounds to be joint inventors. Id. at 1340-42.

[237] Id. at 1341.

[238] Id. at 1342.

[239] Id.

[240] Vanderbilt Univ. v. ICOS Corp., 594 F. Supp. 2d 482, 504-06 (D. Del. 2009), aff’d, 601 F.3d 1297 (Fed. Cir. 2010).

[241] Falana v. Kent State Univ., 669 F.3d 1349, 1358 (Fed. Cir. 2012)

[242] Id. at 1357.

[243] Id. at 1358.

[244] Id..

[245] But see William R. Thropp & Sons Co. v. De Laski & Thropp Circular Woven Tire Co., 226 F. 941, 949 (3d Cir. 1915) (“One may conceive a general or imperfect outline of an entirely novel thing, which, without the conception of another developing it and giving it body, might never amount to invention; but if the conceptions of one supplement and complement the conceptions of the other, the result might be invention and therefore joint invention.”).

[246] In practice, a court might stretch the law to cover this case through the judicial fiction that Eta and Theta “conceived” the compound by producing all the information required to lead a person having ordinary skill in the art to the compound. However, Trovan analysis in no way sanctions such an interpretation of inventorship, which illustrates again how Trovan crams inventorship analysis into a Procrustean bed. Trovan, Ltd. v. Sokymat S.A., Irori, 299 F.3d 1292, 1302 (Fed. Cir. 2002).

[247] See supra text accompanying notes 144-146.

[248] Bill Cosby: Himself (20th Century Fox 1983).

]]> http://jipel.law.nyu.edu/2012/11/conception-and-misconception-in-joint-inventorship/feed/ 0 http://jipel.law.nyu.edu/2012/11/copyright-conspiracy/ http://jipel.law.nyu.edu/2012/11/copyright-conspiracy/#comments Fri, 23 Nov 2012 21:55:04 +0000 Lizzy http://jipel.law.nyu.edu/?p=1652 Sean M. Flaim*

Introduction

I. The Copyright Alert System

A. A Brief History of Online Infringement

B. The Development of the Graduated Response System

C. U.S. Graduated Response: The Copyright Alert System

1. Creation of the Center for Copyright Information

2. Identifying Infringing Content

3. Copyright Alert Program

4. Due Process Under the Copyright Alert System

II. Antitrust

A. Brief Overview of Antitrust Law

B. The Relationship Between Antitrust Law and Copyright

C. Private Enforcement and Group Boycotts

1. Early Boycott Cases – Per Se Liability

2. Per Se Liability to Rule of Reason

III. Application of Antitrust Law to the Copyright Alert System

A. What Is the Restraint at Issue?

1. Horizontal, Vertical, or Hybrid Agreement?

2. Concerted Refusal to Deal and/or Group Boycott

B. Do the Parties Possess Market Power?

1. Product Market

2. Geographic Market

C. What Are the Anticompetitive Aspects of the Copyright Alert System?

1. Consumer Welfare

2. Governance Provisions

D. What Are the Pro-Competitive Justifications Offered?

1. Societal Costs of Copyright Infringement

2. Network Congestion

3. Copyright Alert System Benefits Consumers

4. Section 512(i) of the Digital Millennium Copyright Act

E. The Copyright Alert System Fails the Rule of Reason

IV. Recommendations for Improvement

A. Congressional Action

B. The Department of Justice and the Federal Trade Commission

Conclusion

INTRODUCTION

On July 7, 2011, leaders of the content industries and Internet Service Providers (“ISPs”) announced they had reached a landmark agreement for implementing a system of “Copyright Alerts.”[1] The highly anticipated[2] system represents the latest line of defense by the content industries against the economic problems associated with online infringement.[3] While the media has generally responded positively,[4] consumer and civil liberties groups were quick to raise concerns[5] with the new agreement between content owners and ISPs who had been up to now grudging partners in the battle against online infringement.[6]

The new system purports to offer a standard “best practices” framework designed to enable ISPs to effectively alert their individual customers of accusations of online infringement.[7] Studies suggest that Internet users who are educated about copyright infringement and its potential consequences will quickly take steps to ensure that their connection is not used for further infringement.[8] By implementing a system of increasingly severe warnings directed to users accused of online infringement, the parties hope to encourage consumers to confine their online activities to legal ones.[9]

The concept of a graduated response system is not new. Originally developed overseas, many commentators believed it was only a matter of time until some sort of graduated response system made its way to the United States.[10] The topic has already received serious attention from American legal scholars, who have examined the potential interaction of a graduated response system with § 512 of the Digital Millennium Copyright Act (“DMCA”),[11] common carriage,[12] the First Amendment,[13] fair use,[14] and consumer protection.[15]

However, adoption of the Copyright Alert system faces another legal hurdle—one that has elicited little discussion in both the media and from academia.[16] As both a horizontal and vertical agreement between companies who are otherwise competitors, the proposed system may amount to violation of § 1 of the Sherman Antitrust Act.[17] The Sherman Act proscribes private actors from entering into any contract, combination, or conspiracy in restraint of trade.[18] By joining together to combat piracy through private enforcement, the conduct of content owners and ISPs may have crossed the line from a legitimate to an illicit combination in restraint of trade.[19] The antitrust laws are complex, however, and navigating their intricacies remains an ever-challenging goal for many American technology companies.[20]

This article analyzes the new Copyright Alert System from the perspective of antitrust law. Part I discusses the evolution of graduated response, first by recounting the history of online copyright infringement, and then by discussing the development of graduated response systems abroad. It concludes with the salient points of the U.S. graduated response, the Copyright Alert System. Part II shifts the focus to antitrust law, briefly explaining antitrust law and its relationship to copyright law. Next, because the Copyright Alert System most closely resembles a concerted refusal to deal, the evolution of the Supreme Court’s doctrine on this form of collusive self-help is explored. Part III then seeks to apply the principles of antitrust law provided in Part II to the Copyright Alert System through a Rule of Reason analysis. The article concludes from this analysis that the system raises significant anticompetitive concerns. The relationship of the parties to each other and the substance of their agreement are discussed first, followed by a discussion of market power. Then, both the potential anticompetitive and pro-competitive effects of the announced agreement are discussed in detail. Finally, because the system has some beneficial elements, Part IV discusses several suggestions for improving the announced system to make sure that it clears any hurdles that antitrust law may place in its path.

I. THE COPYRIGHT ALERT SYSTEM

A. A Brief History of Online Infringement

The Copyright Alert System is only the most recent stage in the evolution of content owners’ efforts to protect the value of their works in the face of advancing digital technology. Since the beginning of the Internet, the challenge of adapting copyright law to the information era has been well known. As early as 1993, courts had begun to grapple with complaints of online copyright infringement, while academics were similarly beginning to discuss the ability of the Internet to facilitate copyright infringement.[21] The application of copyright law to the Internet, however, was in a state of flux prior to 1998,[22] when Congress passed the Digital Millennium Copyright Act (DMCA).[23]

Signed into law on October 28, 1998, the DMCA was the first legislative enactment specifically designed to clarify the application of copyright law to the Internet. The Act was passed as a response to the adoption by the United States of the 1996 World Intellectual Property Organization (WIPO) Copyright Treaty,[24] which required its members to implement increased intellectual property protection for digital works. Title II of the DMCA, the Online Copyright Infringement Liability Limitation Act,[25] enacted a set of “safe-harbors,” through which ISPs could limit exposure to secondary liability for copyright infringement.[26] Qualifying ISPs were specifically immunized from secondary liability for the action of their customers or their automated systems, provided they had no actual or constructive knowledge of the infringement, implemented a “repeat infringer” policy, and responded to requests from copyright holders to remove works that were deemed to be infringing.[27]

In enacting the DMCA, Congress failed to anticipate the creation in January 1999 of Napster.[28] The effect of the new file-sharing service was to shift the source of online copyright infringement from the centralized online systems controlled by ISPs to users residing in the periphery.[29] Within a year, over 25 million people used Napster software to download music files from the Internet, the vast majority of which were infringing.[30] The Recording Industry Association of America (“RIAA”) responded rapidly, filing suit against Napster in December 1999.[31] The United States Court of Appeals for the Ninth Circuit upheld the RIAA’s request for a preliminary injunction, holding that Napster, by providing a central repository for the file names, was both contributorily and vicariously liable for the copyright infringement of its users.[32]

Unfortunately, the Whac-A-Mole game had just begun for content owners. No sooner than Napster was vanquished, were other technological tools released that did not rely on the central repository of file names, the key factor to the Ninth Circuit’s determination of liability.[33] These software tools either distributed the indexing of files to certain users’ computers or used completely decentralized searches to retrieve file information.[34] Content owners responded by filing lawsuits[35] against the providers of these various tools, but the genie had been let out of the bottle. It was the users of these tools who now posed the greatest threat to the content owners’ business model.

Realizing this, content owners aimed their fight at consumers. In September 2003, the RIAA filed the first of 382 lawsuits against individual users for copyright infringement.[36] By February 2004, this number rose to over 2,000.[37] Whether or not these suits reduced file sharing was—and still is—unknown,[38] but the lawsuits were nonetheless roundly condemned by the public.[39] Confronted with this public relations fiasco, content owners changed direction once more, this time toward cooperation with ISPs, and they officially ended the litigation campaign in 2008.[40] Content owners are now firmly invested in what they see as the next promising solution for resolving the problem of online infringement—the graduated response system.[41]

B. The Development of the Graduated Response System

It is no coincidence that, in 2007, content owners were already actively attempting to establish the first graduated response system in Europe. That year the French government announced an agreement—the Olivennes or Elysée agreement—between ISPs and the film and music industries.[42] This agreement later led to the projet de loi favorisant la diffusion et la protection de la création sur internet (“bill to support the diffusion and protection of creation on the internet”), introduced to the French parliament in June 2008.[43] The bill would ultimately create Loi HADOPI, an agency tasked with supervision over the implementation of the law.[44]

The procedural framework was as follows: HADOPI would receive complaints from content owners regarding online infringement.[45] In turn, it would send two warnings to an Internet user regarding infringement by email or registered letter, the second more seriously worded (“graduated”) than the first.[46] On the third accusation of infringement, or “third-strike,” Internet users could either pay a monetary settlement, have their Internet connection suspended for three months to a year, or have a subpoena issued against them.[47]

The bill was fiercely criticized by citizen’s advocacy groups such as UFC Que Choisir and La Quadrature Du Net, who argued “[t]his text is contrary to European law, whether in the field of human rights or free competition. It denies the social, economical and technical realities and demonstrates a serious lack of reflection concerning digital technology and related issues.”[48] Opposition notwithstanding, the bill was approved by the French parliament and became law in 2009.[49] Notably, in response to a ruling by the French constitutional court that the original law was invalid, the bill’s passage became contingent on the additional protection of judicial review prior to account suspension.[50]

France was not the only European government confronted with rising demands of content owners for the adoption of graduated response systems. In late 2008, the United Kingdom telecom regulator (OFCOM), working at the behest of the UK government, came to an agreement with six of the largest ISPs to implement such a system.[51] The UK plan, however, did not go as far as the French system in pushing for the suspension of Internet service and instead resorted to sanctions (such as speed throttling and content filtering) in response to allegations of infringement.[52]

In February 2009, Irish broadband provider Eircom agreed as part of a settlement with content owners to implement a gradual response system and to disconnect Internet users accused of infringement after three offenses.[53] Ireland remains the only country to have implemented a graduated response system through means other than legislative enactment.

Some European states firmly rejected graduated response measures. The Secretary of Justice for Germany stated that such a system was not “a fitting model for Germany or even Europe.”[54] Denmark[55] and Spain[56] also rejected a graduated response system. However, the example spread elsewhere worldwide, and in April 2009, South Korea passed its own version.[57] Stricter than the French system, user accounts in South Korea are suspended after the first accusation.[58] Taiwan has also followed suit.[59]

In April 2010, the United Kingdom signed the Digital Economy Act into law.[60] The Act implemented much of what had previously been a voluntary system and specifically gave OFCOM the authority to promulgate rules for punitive actions against repeat offenders, including service suspension.[61] New Zealand followed the U.K. in April 2011, passing the Copyright (Infringing File Sharing) Amendment Act 2011.[62] Purportedly, Australia, Brazil, Hong Kong, and Japan are also monitoring the success of these measures in other countries with an eye toward implementing their own graduated response systems in the future.[63]

To date, content owners continue to press for countries throughout the world to adopt graduated response systems into law. For a short period of time, graduated response was a component of the Anti-Counterfeiting Trade Agreement.[64] This addition, however, proved to be contentious, and the enforceable provisions regarding graduated response were excised from the final treaty.[65] More recently, content owners have been applying pressure on the Australian government to implement a graduated response law.[66] Such efforts continue to be pushed even in light of a May 2011 report by the Human Rights Council of the United Nations declaring graduated response to be a violation of the International Covenant on Civil and Political Rights.[67]

No other country at this time appears to be considering such legislation. As a result, further implementation throughout the world of graduated response systems will likely come from private agreements between ISPs and content owners.

C. U.S. Graduated Response: The Copyright Alert System

With no graduated response legislation in the United States proposed yet, content owners have turned to an alternative: private negotiation with domestic ISPs.[68] After several years of talks, in 2011, various ISPs and content owners finally announced the creation of the United States graduated response system.[69] Reportedly, the Obama Administration was actively involved behind the scenes in the negotiations and is highly supportive of the announced agreement.[70]

In their Memorandum of Understanding, the parties agreed to a comprehensive graduated response system, including the creation of a private governing body, the development of technical measures to identify online infringement and act on it, the creation of a comprehensive framework for informing and punishing consumers accused of copyright infringement, and the establishment of a due process system for those consumers accused of infringement who wish to challenge their punishment.

1. Creation of the Center for Copyright Information

The Memorandum of Understanding (“Memorandum”) between ISPs and content owners was finalized for signature by the parties on July 6, 2011.[71] The Motion Picture Association of America (“MPAA”) and RIAA represented the interests of content owners. A number of the individual members of both the MPAA and RIAA, including most of the major movie studios and record labels, are also signatories to various parts of the Memorandum. Sixteen ISPs are signatories to the agreement, including Verizon, Comcast, Time Warner Cable, AT&T, and SBC Internet Services. Together, these various ISPs represent more than 60% of the overall ISP market as of August 2011.[72]

According to the recitals, online copyright infringement “imposes substantial costs on copyright holders and the economy each year.”[73] The Memorandum further notes that online infringement may also increase network congestion, impacting individuals’ legitimate use of the Internet. Recognizing that government plays an important role in enforcing copyright law, the Memorandum asserts that the viral nature of the Internet necessitates alternative solutions to the problem of online infringement:

Such efforts must respect the legitimate interests of speech, in accessing legitimate content, and in being able to challenge the accuracy of allegations of Online Infringement. This work should include an educational component because evidence suggests that most informed consumers will choose lawful services and not engage in Online Infringement. This work also should include the development of solutions that are reasonably necessary to effectuate the rights that are granted by copyright without unduly hampering the legitimate distribution of copyrighted works online or impairing the legitimate rights and interests of consumers and ISPs. Such efforts serve not only the shared interests of creators and distributors of creative works, but also the interests of Internet users who benefit from constructive measures aimed at education and deterrence in lieu of litigation with its attendant costs and legal risk.[74]

The Memorandum establishes the Center for Copyright Information (“CCI”) to oversee the operation of the Copyright Alert system.[75] The CCI is directed by a six-member executive committee, with three members designated by each of the content owner representatives and participating ISPs. An executive director is chosen by a majority of the committee. A three member advisory board is also created, with one member appointed by each side, and the third member selected by the two designees. The advisory board is intended to represent subject matter expertise in both copyright and ISP technology, as well as the interests of consumers. The CCI is tasked with developing an educational program regarding online infringement, legitimate means for obtaining digital works—either online or elsewhere—and technical means that enable consumers to secure their networks to avoid providing others with a means for engaging in online infringement.[76]

2. Identifying Infringing Content

The Memorandum requires content owner representatives to create various methods of identifying peer-to-peer online infringement. Interestingly, the Memorandum specifies that content owners should focus their major efforts on identifying instances of peer-to-peer activity where the files consist of unauthorized copyrighted works in complete or substantially complete form and avoid identification of de minimis infringement, probably so as to focus on the worst infringers and reduce the amount of work performed by ISPs.[77] ISPs are tasked with developing technical measures that identify consumers tied to specific IP addresses and allow ISPs to keep a record of repeat alleged infringers.[78] They are further required to develop the technical means to implement a graduated response system.

The CCI is required to retain independent experts to evaluate each of these proposed technical measures.[79] The evaluations are confidential, and only general descriptions of each party’s technical implementations are available to the other parties of the Memorandum. In addition, a content owner may not issue notices of alleged infringement to ISPs until its particular methodology for identifying peer-to-peer infringement has been reviewed by an independent expert and deemed sufficiently reliable at identifying illegal downloading.[80]

The Memorandum also requires ISPs to amend their Acceptable Use Policies and Terms of Service to reflect that copyright infringement by a consumer violates these policies.[81] The policies must further authorize ISPs to implement Mitigation Measures, as defined below, against repeat infringers. These changes are in addition to any pre-existing policies an ISP may have already implemented under § 512 of the DMCA. Indeed, the Memorandum includes an explicit disclaimer that the ISP’s § 512 repeat infringer policy is neither part of, nor enforceable under, the Memorandum.[82]

3. Copyright Alert Program

Under the Memorandum, each ISP is required to create a graduated response system, referred to as the Copyright Alert Program.[83] Copyright Alerts are a series of notices and/or remedial measures directed to an ISP customer in response to the receipt of an allegation of infringement by a content owner. The program is designed to follow a four-step escalation procedure over a series of up to six alerts given to consumers.

First is the Initial Educational Step.[84] Upon receipt of notice from a content provider, an ISP is required to notify their customer of the allegation of infringement and advise the customer that infringement is illegal and that the customer is responsible for all users of their account. The notice should also direct the customer to legitimate alternatives for obtaining the content. Further, ISPs are required to warn the customer that continued infringement might result in the application of Mitigation Measures. Customers are to be advised that prior to the implementation of a Mitigation Measure, they will have an opportunity to seek a due process review. The Memorandum permits, but does not require, an ISP to repeat the Initial Educational Step a second time.

Second is the Acknowledgement Step.[85] The notice will require the customer to acknowledge receipt of the Copyright Alert and agree to cease any infringing conduct, although it will be worded in such a way that the customer will not be required to admit any infringement. The notice will also inform the customer that the ISP will respond to any lawful process made by a content provider or government agency requesting the customer’s identity. The ISP will require the acknowledgement through the redirection of the customer’s Web browser to a “landing page,” or via a “pop-up” notice within the browser.[86] An ISP will deliver at least two Acknowledgement Step notices before escalating to the next level.

Mitigation Measures are the third level of escalation.[87] Mitigation Measures require that the customer acknowledge receipt of a notice that sets forth the specific measure the ISP will apply and, further, gives the customer the opportunity to seek review through a dispute resolution system. If the customer does not dispute the notice within ten business or fourteen calendar days, the ISP will implement various physical measures, which include temporarily stepping-down a customer’s Internet service to a slower speed, temporarily redirecting the customer’s Web browser to a landing page that will require the customer to contact the ISP or complete a meaningful education program on copyright infringement, or implementing other similar restrictions that the ISP deems equivalent. ISPs are not required to disable a customer’s access to voice over IP, email, multichannel video programming, or security/home-health monitoring services. An ISP is allowed to waive implementation of this first active step if they direct their customer to a “final warning” notice.

The final level of escalation is the Post Mitigation Measures step.[88] As with the Mitigation Measures step, the ISP will give notice of the alleged infringement, informing the customer of his or her opportunity to seek review. If the customer does not seek review, the ISP will implement one of the physical measures described above. In addition, an ISP may at any time take action under its DMCA § 512 repeat infringer policy. An ISP is not required to continue sending notices during the Post Mitigation Measures period, but must continue to track and report the receipt of infringement allegations for use in any lawsuit initiated by the content provider.

A customer is provided a seven-day grace period between the issuance of each Copyright Alert to allow the customer to abate any ongoing online infringement.[89] If multiple copyright notices are received simultaneously, an ISP is only required to issue a single Copyright Alert within that seven-day period. Further, the content owners are allowed to allocate among themselves the number of ISP notices they are entitled to send in a one-month period.[90] ISPs may cease processing notices temporarily if the number of notices overwhelms the ISPs capability to reasonably respond.[91] If twelve months pass between the receipt of allegations of infringement against a specific customer, the ISP will reset the counter of alerts received by the customer back to the beginning.[92]

4. Due Process Under the Copyright Alert System

A customer is not entitled to challenge the content provider’s notice of infringement prior to the Mitigation Measures step.[93] At that time, the current Copyright Alert and all prior alerts received against that customer leading up to the Mitigation Measures alert become subject to a due process challenge.[94] In order to initiate a challenge, the customer must pay a filing fee of thirty-five dollars, unless they qualify for a hardship waiver.[95] This fee is refundable in the case of a favorable decision. Reviews are to be performed by lawyers chosen by a panel of neutrals. The agreement is silent on the mechanics of the due process proceedings, leaving much of the system to be fleshed out in the future. For example, there is no indication that a customer has any right to appear in person for a hearing to challenge accusations of infringement, or to obtain any information from the content owners or ISPs regarding the alleged infringement by way of limited discovery.

The substance of a customer’s challenge to the notice of infringement is limited to six grounds.[96] First, the customer may claim their account was misidentified as one engaged in infringement.[97] The content owner’s method of identifying infringing IP addresses is entitled to a rebuttable presumption of correctness. Second, a customer may claim their account was used in an unauthorized manner by someone who is not a member or invitee of their household.[98] Under this defense, a customer is given only one chance to secure an open wireless router against unauthorized use. Third, a customer may assert they had the permission of the content owner, which must be supported by documentary evidence.[99] Fourth, a customer may assert fair use, which is examined “under prevailing principles of copyright law” as determined by an independent expert.[100] Fifth, a customer can assert that the file at issue is not the alleged copyrighted work.[101] However, there is a rebuttable presumption that the content owner has correctly identified the work. Finally, a customer may assert that the work in question was first published prior to 1923.[102]

II. ANTITRUST

Before analyzing the Copyright Alert System as a potential antitrust violation, brief introductions to antitrust law and its relationship to copyright are in order. Antitrust law is a complex subject, relating the ever-evolving field of economic theory to the practicalities of the law’s ability to correct market failures. An overview of antitrust law is followed by a discussion of its relationship to copyright law. Finally, because the enforcement provisions of the Copyright Alert System most closely resemble a group boycott, a variety of self-help enforcement, the development of the antitrust doctrine regarding boycotts is applied to the case at hand.

A. Brief Overview of Antitrust Law

Antitrust law—or competition law—is generally concerned with promoting and maintaining competition through the regulation of exclusionary business conduct. Competition is said to enhance the efficiency of the marketplace and benefit society as a whole.[103] Without competition, cartels of firms, or single firms known as monopolists, are able to extract rents from consumers by restricting the output of goods or services and raising prices to supracompetitive levels.[104] Monopolistic behavior results in economic waste to society, or “deadweight loss,” as wealth is transferred from consumers to monopolists.[105]

In the United States, the Sherman Act[106] and the Clayton Act[107] are the two main statutes that implement antitrust law. Section 1 of the Sherman Act provides that “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.”[108] The Supreme Court has held since 1911 that the scope of the law only extends to unreasonable restraints of trade, as all contracts can be considered restraints of trade to some degree.[109]

The Sherman Act owes its existence to the rise of large trusts such as the Standard Oil Company in the late nineteenth century.[110] These entities arose even though the common law at that time forbade such combinations in restraint of trade.[111] While a person injured by such a combination had standing to sue for relief under the common law, there was no effective enforcement mechanism through which the government could intervene.[112] Congress passed the Act in 1890, with strong public support. The Sherman Act, among other provisions, enabled the Attorney General to sue to enjoin anticompetitive behavior.[113] Legislators declared that the purpose of the Act was to statutorily enact what had already been a matter of common law.[114] The subsequent judicial interpretation of the Act has also followed a common law-like trajectory, leading some to consider the Sherman Act to be the enabling legislation of the federal common law of competition.[115]

Over the years, the objectives of antitrust enforcement have evolved.[116] Originally, the goals of the antitrust laws were viewed as most effectively furthered through the shielding of small businesses from being underpriced and put out of business, or even bought out, by larger competitors.[117] More recently, the law has been interpreted to protect the welfare of individual consumers, aiming to keep prices as low—and the supply of goods and consumer choice as high—as possible.[118] Thus, the law has shifted its focus from aiding competitors to focusing directly on the process of competition.[119]

The antitrust laws recognize both per se, or rule-based violations of the statutes, as well as an intermediate standard called the Rule of Reason.[120] Per se antitrust offenses are those practices that the Supreme Court has deemed are without any social value, such as direct price fixing between horizontal competitors.[121] The administrative advantage of a strict rule in these circumstances provides both government and private industry bright line guidance on what are not allowable practices.[122] For those types of anti-competitive behavior that may also have significant pro-competitive benefits, courts examine the conduct under a standard known as the Rule of Reason.[123] In a Rule of Reason analysis, courts first look to see if the group accused of improper conduct has market power, or the power to lower output or raise prices without significant market response.[124] If market power exists, courts then review the anticompetitive effects of the challenged practice and balance them against any pro-competitive justifications offered for the conduct.[125]

B. The Relationship Between Antitrust Law and Copyright

At first glance, antitrust law and copyright appear to conflict with each other. In fact, they literally do. Antitrust law seeks to limit the rent seeking that monopoly power allows.[126] Copyright law, on the other hand, seeks to reward authors with a government-granted monopoly so that the author may obtain rents in excess of what their product would otherwise provide.[127]

However, the underlying purpose of both laws—correcting market failures—gives the two more in common than a superficial view of either would indicate.[128] In the case of copyright, the existence of a market failure comes from the very nature of copyrighted expression. While the initial costs of creating a single unit of copyrighted material may be quite high, the marginal cost of creating each additional unit after the first is negligible.[129] That is, each additional unit of copyrighted material created after the first costs only the minimal time and material needed to create a duplicate—which in the case of digital content is de minimis. Faced with this fact, the government grants to the author the power to exclude others from reproducing a copyrighted good to prevent other producers or customers from free-riding off the copyright owner’s initial capital investment. A copyright thus allows the author to earn a fair (or even excessive) return on their investment.[130] As noted by antitrust and intellectual property scholars, “[l]imited exclusive rights have long been seen as desirable and useful rewards for the inventors and creators[,]” and serve as a way to increase their incentives to continue to innovate.[131]

Antitrust law also concerns itself with innovation.[132] Some theorists have surmised that small companies may be more likely to innovate than larger companies with higher market share because the latter must also devote resources to preserve their existing market power.[133] According to the mainstream view though, the pressure to innovate is a direct result of competition, as each competitor seeks to create newer, more desirable products, or lower their own marginal costs of production of goods in an attempt to increase profits and better satisfy consumer needs.[134] Seen in this light, antitrust law, by maintaining the competitive environment, partially serves the same purpose as copyright law – to provide an environment in which innovation can flourish.

C. Private Enforcement and Group Boycotts

One aspect of antitrust law that is especially relevant to the Copyright Alert System is its concern with self-regulation, self-help, and methods of ‘private enforcement’ by industry participants through the use of mandatory boycotts. A mandatory boycott is an agreement by competitors to refuse to deal with a particular party, usually intended to punish that party for violating rules set forth by the private entities. Over the years, the Supreme Court has looked askance at private industry efforts to create private enforcement mechanisms, especially those that mirror powers traditionally within the domain of the state. The enforcement of intellectual property rights is one such power.

1. Early Boycott Cases – Per Se Liability

The Supreme Court first analyzed a group boycott under the Sherman Act in 1914 in E. States Retail Lumber Dealers’ Ass’n v. United States.[135] A group of lumber retailers had banded together for the purpose of boycotting wholesalers who sold directly to consumers.[136] The dealers argued that such behavior fell within the exclusive right of the dealers to trade with their consumers in the retail market.[137] The Court noted that, although every retailer individually had the right to stop trading with the wholesalers, combining in a group to do so constituted a conspiracy in restraint of trade.[138] Noting again that Congress had the sole right to regulate interstate commerce and that it had exercised this right by banning agreements of this nature, the Court held the boycott illegal under the Sherman Act.[139]

Later, in the 1930s, manufacturers of textiles and garments formed the Fashion Originators’ Guild of America (FOGA) in order to combat ‘style piracy’—the practice of copying garment patterns and designs created by other manufacturers—claiming that style piracy constituted a form of free-riding on the manufacturers’ design innovations.[140] FOGA operated to protect fashion firms by boycotting any seller who sold pirated garments.[141] FOGA even maintained a system of secret shoppers to enforce their policy. If a retailer was found to have violated the policy, there was an “elaborate system of trial and appellate tribunals” to determine whether a retailer deserved punishment.[142]

Upon discovering this system, the Federal Trade Commission brought an enforcement action under the antitrust laws and found FOGA to have violated Section 3 of the Clayton Act.[143] On appeal, the Supreme Court noted that “the combination is in reality an extra-governmental agency, which prescribes rules for the regulation and restraint of interstate commerce, and provides extra-judicial tribunals for determination and punishment of violations, and thus ‘trenches upon the power of the national legislature and violates the [antitrust laws.]‘”[144] Objecting to the seizure of government-like authority by private industry, the Court found this agreement constituted a per se violation of the antitrust laws.[145]

Four years later, the Supreme Court reaffirmed the Fashion Originators’ Guild of America ruling in Associated Press v. United States.[146] The individual newspaper members of the Associated Press were required by the by-laws of their agreement to refuse to sell news to non-members and allowed current members to block potential new members from joining the group.[147] The Justice Department sued, arguing that the by-laws represented an illegal restraint of trade.[148] Discussing the by-law provisions in elaborate detail, the Court noted that they “tied the hands of all of its numerous publishers, to the extent that they could not and did not sell any part of their news so that it could reach any of their non-member competitors.”[149] Citing Fashion Originators’ Guild, the Court also held the AP by-laws, like the lumber dealers’ boycott before it, “trenches upon the power of the national legislature,” finding a per se violation of the Sherman Act.[150]

2. Per Se Liability to Rule of Reason

In keeping with general trends in its antitrust jurisprudence, the Supreme Court has softened the per se approach to group boycotts since the middle of the last century. For example, in 1978, a professional association’s canon of ethics prohibited its members from participating in competitive bidding, which effectively constituted a type of group boycott.[151] In response to a suit brought by the federal government, the association claimed that it was justified, as firms that bid over price would cut corners on cost, producing shoddy engineering and endangering public safety.[152] Applying the Rule of Reason due to the unique justification offered, the Supreme Court nevertheless held that an economic restraint of trade cannot be justified by non-economic justifications such as health, safety, or welfare.[153]

Less than a decade later, the Supreme Court once again set its sights on group boycotts. Northwest Wholesale Stationers was a purchasing cooperative comprised of retail office supply stores.[154] As in Associated Press, the cooperative had by-laws that restricted its members from certain forms of competition.[155] Pacific Stationary and Printing Co. was accused of violating the by-laws and summarily expelled from membership.[156] Pacific brought a private cause of action against Northwest and won in the lower courts on the basis that it had been denied procedural safeguards in its termination and thus was entitled to a per se finding of anticompetitive conduct.[157] The Supreme Court rejected the per se analysis, subjecting the case instead to the Rule of Reason.[158] Noting that self-regulation was sometimes an essential policy for businesses, the court held that procedural safeguards were only important when Congress had “sanctioned and protected self-regulative activity.”[159] Consequently, the Court determined that Pacific had neither alleged nor proved that Northwest had market power, a prerequisite to a finding of antitrust liability under the Rule of Reason.[160]

The last major boycott case to reach the Supreme Court was decided just a year after Pacific Stationary. Indiana dentists had teamed together using their professional organization and refused to submit dental x-rays from patients to insurers on the basis that oversight by the insurers threatened the dentists’ professional independence.[161] The Federal Trade Commission brought an enforcement action alleging this practice to be an unfair method of competition.[162] In its opinion, the Supreme Court noted that the refusal to provide the x-rays was similar to a group boycott, historically a per se violation of the antitrust laws.[163] The Court declined, however, to find a per se violation for this self-regulative conduct and analyzed it under the Rule of Reason.[164]

Responding to the argument by the dentists that supplying x-rays to insurers violated the law of the State of Indiana, the Court held “[t]hat a particular practice may be unlawful is not, in itself, a sufficient justification for collusion among competitors to prevent it. Anticompetitive collusion among private actors, even when its goal is consistent with state policy, acquires antitrust immunity only when it is actively supervised by the State.”[165]

While the Supreme Court has generally softened its approach toward self-help in the form of a concerted refusal to deal or group boycott from a per se violation to conduct examined under the Rule of Reason, courts and enforcement agencies continue to carefully scrutinize such arrangements.[166] Although commentators have noted the benefits of private regulation,[167] the case law makes clear that both fair procedures and government supervision are essential to a finding of compliance with the Sherman Act for entities that contemplate disciplining a market participant via a coordinated boycott.[168]

III. APPLICATION OF ANTITRUST LAW TO THE COPYRIGHT ALERT SYSTEM

As discussed infra Part II, a core concern of antitrust law is with agreements between competitors that seek to restrict individuals who may receive service from the cartel. While such coordinated behavior was traditionally viewed as a per se violation of the law, more recently it has been analyzed under the Rule of Reason.[169] In this section, I apply the Rule of Reason to the Copyright Alert System. In Part III.A, the restraints imposed by the Memorandum of Understanding are analyzed with attention to both the relationship of the parties to each other and the substance of the parties’ agreement. In Part III.B, the market power of the parties is explored, including both the product and geographic markets. Next, in Part III.C, the potentially anticompetitive effects of the agreement on consumer welfare and governance of the parties is examined. Finally, in Part III.D, the likely pro-competitive justifications, including the economic costs of copyright infringement, network management, the potential benefit to consumers, and the possible sanction of the system by the DMCA, is discussed and critiqued.

A. What Is the Restraint at Issue?

The first step in the Rule of Reason analysis performed here is to analyze the restraint of trade that the parties have agreed to implement. When analyzing a restraint, there are two important subsidiary questions. First, what is the nature of the relationship between the parties to the agreement? Second, what is the substantive nature of the restraint of trade itself?

1. Horizontal, Vertical, or Hybrid Agreement?

Because the Memorandum of Understanding brings together both content owners and ISPs in an agreement, it can be characterized as both a vertical agreement between the content owners and each ISP, as well as a horizontal agreement amongst the content owners and amongst the ISPs, respectively. The majority of the agreement contains duties owed by individual ISPs to content owners as a group—a vertical arrangement. However, the agreement also contains significant horizontal aspects. For example, the Memorandum specifically contains provisions that limit the ability of the content owners to submit Copyright Alerts to ISPs without express collusion among each other.[170] These provisions constitute a horizontal arrangement between competitors at the same level of the distribution chain. ISPs, on the other hand, seem to have few responsibilities to coordinate with other ISPs. Only the general requirements of what the Alert System mandates of the ISPs are dictated; the specific technical mechanism for doing so is left to the individual companies. On the other hand, ISPs constitute fifty percent of the governing body of the coalition, and therefore have a great deal of control over the process itself and the conduct of other ISPs. Thus, it appears that the arrangement is most similar to a vertical agreement between content owners and each individual ISP, although the Memorandum retains some significant horizontal aspects between each of the ISPs.

This distinction is important because vertical agreements are generally subject to less stringent antitrust oversight than horizontal ones.[171] Agreements between competitors at the same level of distribution to restrain trade have received the most stringent antitrust enforcement scrutiny over the years.[172] Horizontal price fixing, for example, remains one of the few per se varieties of antitrust enforcement which has not been relaxed by the Supreme Court since the middle of the last century.[173] Purely vertical agreements, such as those between a manufacturer and a reseller, on the other hand, have generally been allowed greater leeway by enforcers, and courts generally subject such agreements to a less exacting Rule of Reason scrutiny.[174]

Each party owes duties to the others. Those between content owners are marked by express restrictions between various content owners on how many notices each is entitled to send, such that they must consult with each other to set ‘quotas.’[175] Certain content owner signatories to the agreement are not permitted to send any copyright notices.[176] Both the content owners and ISPs jointly govern the program’s day-to-day activities. ISPs are required to have their customers adopt a uniform set of conditions under the ISPs’ Acceptable Use Policies and Terms of Service. Mandatory information sharing provisions also enable parties to police each other for compliance with the agreement.[177] Such provisions are essential given the incentives normally faced by cartel members to defect from an agreement to gain competitive advantage.

2. Concerted Refusal to Deal and/or Group Boycott

The substantive restraint of trade agreed to by the parties most closely resembles a concerted refusal to deal or group boycott. However, it differs from many group boycotts previously analyzed by courts in one significant way. Whereas group boycotts in the past tended to focus on competitors teaming up to boycott other industry participants, the Copyright Alert System focuses directly on consumers. It prescribes a series of both innocuous as well as punitive actions that ISPs must take against their customers.[178] Starting with the Initial Education Step, ISPs are required to send a warning to their customers. Next, the Acknowledgement Step requires that ISPs divert their customers from Internet browsing, either through a browser pop-up or by redirecting their customers to a landing page without the explicit permission of the customer other than their general agreement to the ISP’s Terms of Service.

At the Mitigation Measures step, a customer is subjected to not only a browser redirect, but also a variety of additional physical measures, including possibly a temporary step-down in service— effectively a restriction on output.[179] Any customer objecting to such treatment by the ISP must pay $35 to initiate a challenge against the infringement action under the “due process” provisions of the Copyright Alert System.[180] The due process proceedings are officiated by a nongovernmental body—an Administering Organization that is selec