[R]efusing to Provide Live Entertainment Events to a Venue Owner, or Providing Live Entertainment Events to a Venue Owner on less favorable terms, for the purpose of punishing or disciplining a Venue Owner because the Venue Owner has contracted or is contemplating contracting with a company other than Defendants for Primary Ticketing Services. The term “Retaliate” does not mean pursuing a more advantageous deal with a competing Venue Owner.It is readily apparent that this definition may be subject to multiple interpretations, with the inquiry into a retaliatory action resting on a determination of the firm’s motives. The firm is considerably better positioned than the agency to know or obtain knowledge as to the motivation driving a particular business decision. This inherent informational disadvantage leaves the agency in the uncomfortable and ineffective position of deferring to the firm’s proffered explanation for engaging in the behavior in question. Even a marginally clever company can understand this flaw and manipulate evidence to support a permissible motive. When the proscribed behavior is vague and motive-dependent, this type of remedy does mere lip service to actual behavioral modification. The firewall provisions of the consent order present another significant flaw with behavioral remedies: countervailing incentives. Although the DOJ prohibited LNE’s ticketing service from sharing sensitive promotional and consumer data with LNE’s promotional arm, the company’s profit-maximizing incentives run counter to this firewall. Hence, LNE will consistently be confronted with opportunities to misuse the firewalled information. The firm is thereby incentivized to subvert the restrictions and avoid detection; such behavior is illegal, socially inefficient and, more importantly, undermines the effectiveness of the firewall provision. Inconsistent incentives have a similar effect on the aforementioned anti-retaliation provisions, which require LNE to forego the full exertion of its vertical integration leverage. In effect, LNE is directed to “leave money on the table,” which will only encourage the company to exploit the vague boundaries of the consent order and find ways to circumvent the restrictions. Behavioral remedies also carry significant costs to implement. Conduct restrictions must be monitored, interpreted, and enforced at the expense of the DOJ. This expense may be substantial and will draw resources from the agency’s total budget. In 2010, the Federal Energy Regulatory Commission (“FERC”) and Federal Communications Commission (“FCC”) each spent close to 15% on oversight and enforcement expenses. The DOJ also has to develop an expertise in regulatory oversight and the appropriate accompanying structure, requiring institutional changes and associated personnel costs. When behavioral remedies are compared with traditional regulation, additional enforcement challenges come to light. Where traditional regulators such as the FERC or the FCC have broader powers to restrict a firm’s conduct, the procedural and control rights of the DOJ are limited to ensuring compliance with consent orders. The DOJ is also limited to ex post intervention for a limited term, rather than being afforded ex ante authority. Finally, behavioral remedies enhance the risk of agency capture, through increased interactions between the large firm and the government enforcers. LNE will have strong incentives to lobby agencies and legislative bodies for certain types of behavioral restraints that allow the firm to pursue its natural profit-maximizing tendencies. The ineffective consent order constraining LNE in this case may be a good example of this sort of lobbying at work. LNE had considerably more lobbying resources than any of its competitors and the Final Judgment employed a then-novel enforcement strategy that, as I have explained, was largely ineffective in restraining LNE’s conduct. The DOJ has its own interests in effective enforcement, but in the end the agency is a political entity.  Vertically integrated firms like Ticketmaster and Live Nation stood ready to replace record companies in providing these services, capable of signing artists to lucrative 360 deals. Thus it seemed inevitable that Ticketmaster and Live Nation would become each other’s chief competitor, lowering prices for consumers, spurring innovation and generating efficiencies. Now, as a single firm, such benefits remain unrealized and LNE stands alone in its capabilities. The merger of Ticketmaster and Live Nation had an undeniable impact on the live music industry. Artists and competing service providers would all likely be better off had the DOJ prevented the merger and forced the firms to compete. Now it is up to the market to recognize the trends set by LNE and take advantage of a reconfigured landscape. Competitors in primary ticketing should take advantage of new technology to establish a reputation for reliability with new clients and eventually erode LNE’s dominance in the market. Other entities in the music industry, such as record labels, should follow LNE’s lead in creating full-service packages that center on live performances. The concert industry provides fertile ground for profitable competition in this new market and enterprising challengers would be wise to seize this opportunity.
Handle with Care: The Evolving Actual Malice Standard and Why Journalists Should Think Twice before Relying on Internet Sources
Professions of good faith will be unlikely to prove persuasive, for example, where a story is fabricated by the defendant, is the product of his imagination, or is based wholly on an unverified anonymous telephone call. Nor will they be likely to prevail when the publisher’s allegations are so inherently improbable that only a reckless man would have put them in circulation. Likewise, recklessness may be found where there are obvious reasons to doubt the veracity of the informant or the accuracy of his reports.Similarly, the 1989 Harte-Hanks v. Connaughton decision defined actual malice as occurring when a defendant made the false publication with a high degree of awareness of probable falsity. One of the biggest obstacles to plaintiff victories in defamation suits is the subjectivity of the standard. According to St. Amant, the defendant must have “in fact entertained serious doubts.” Likewise, Gertz described actual malice as having “subjective awareness of probable falsity.” While the court in St. Amant conceded that such subjectivity might appear to put “a premium on ignorance,” the use of the recklessness standard and requirement of subjective belief were actually the most effective measures to protect First Amendment values and promote the public interest. While the three types of circumstantial evidence that indicate recklessness are indeed important, the subjective belief requirement remains a prerequisite to a finding of actual malice. For example, in 1984 the court in Bose Corp v. Consumers Union distinguished a finding of actual malice from a finding of falsity, stating that even when the information disseminated was found to be false, it did not necessarily follow that the disseminator knew it was false. Similarly, the First Circuit used the subjectivity requirement to justify the lower court’s holding in Levesque v. Doocy, refusing to impute serious doubts to news commentators even though the commentators/anchors were relying on an Internet source that the court pointed out was ridiculous. Another wrinkle in the analysis is whether the defendant’s statement was an asserted fact (which is actionable) or if it was simply an opinion (which is generally not actionable). It is possible, though, to sue for defamation based on a hybrid opinion that includes both elements of fact and opinion. According to Milkovich v. Lorain Journal Co., statements of opinion can be actionable if they imply a provably false fact, whereas the First Amendment protects pure opinions. Furthermore, in Gross v. New York Times Co., the New York Court of Appeals explained that a statement of opinion could be actionable if it implied a basis in facts that are not disclosed to the reader or listener. However, the court also held that a statement of opinion is not actionable when accompanied by a recitation of the facts upon which it is based or when it does not imply the existence of undisclosed underlying facts. In spite of the actual malice line of cases, recent cases pose challenges for the courts hearing them, as they bring up novel issues of journalistic practice and technologies that did not exist when courts first articulated defamation law. Increasingly, it appears that the old guidelines are inadequate to address these new problems. Whether or not the courts or legislators will fashion new tools remains unknown.  With each outlet racing to be the first to post breaking news, a premium is placed on speed at the expense of accuracy. The 24-hour news cycle, which began with CNN’s coverage of the Gulf War in 1991, has transformed both the quality of news and the format in which it is presented. Editors must now make on-the-spot decisions about whether to publish or send a story back for additional fact-checking. Previously, such decisions were made with a comfortable next-day or next-week deadline. As a result, more opinions, sometimes masquerading as facts or interpreted as facts, are part of the collective consciousness of news. This development is leading courts to reevaluate the role of media and the professional responsibility of journalists, particularly on the Internet.  Similarly, a federal court in California addressing personal websites and Internet discussion groups held that, “[i]n this context, readers are less likely to view statements as assertions of fact.” In Too Much Media, LLC v. Hale, the New Jersey Supreme Court distinguished online message boards from other information sources on the Internet because of the lack of editorial oversight. New Jersey’s high court explained that hyperbole, exaggeration, and a “looser, more relaxed communications style” promote an environment in which the border between fact and opinion is blurred, and commenters should not be taken at their word. In fact, as discussed in Obsidian Finance Group, just the name of a website can be enough to alert the reader that he should be skeptical of what he finds therein. For example, a site such as www.romneyexposed.com can indicate a one-sided opinion. Such rulings seem to make the consumers responsible for determining what is an untrustworthy source. The distinction between fact and opinion becomes especially confusing when writers make claims supposedly based on research, but expressed as statements that are deemed too informal to be trustworthy. For example, in Too Much Media v. Hale, the defendant wrote many posts on message boards that cited extensive research she had conducted on the pornography industry, including interviews with participants and her congressional representatives and studying websites and information in the mainstream media. Based on her purported research, the defendant made accusations in these posts regarding a security breach that released identifying information of adult website subscribers and singled out specific individuals as responsible for the breach and subsequent cover-up. The court rejected Hale’s argument that she should benefit from the New Jersey shield law, which requires a “sufficient relationship or connection to the ‘news media,’” holding that as a mere writer of posts on a message board, she did not have a strong enough relationship to the media. Even if the writer claims to have done research, the medium of the message—in this case, an online forum—should make consumers skeptical of such claims. Most importantly, consumers should attempt to differentiate pure opinion from opinion purporting to be fact. This distinction is important because, as discussed in Part I, pure opinion is not actionable under defamation law, while opinion masquerading as fact can be actionable. The dividing line between fact and opinion is especially fuzzy in the context of blogs, web forums, and other unedited content. For example, in Obsidian Financial Group, a blogger used the website “obsidianfinancesucks.com” to accuse members of Obsidian of violating bankruptcy laws. As the court noted, the hostile tenor of the comments suggested that the blogger had a personal vendetta against the targets of her accusations and the vitriolic language she used invited further comment and debate. Such biased content “undermine[s] the reader’s expectations that defendant’s statements are to be understood as assertions of provable fact.” Thus, even if a defendant includes statements that imply provable assertions, the statements “lose the ability to be characterized and understood as assertions of fact when the content and context of the surrounding statements are considered.” Regarding the actual malice standard, the problem with opinions is that the protection for republishing them grossly expands the First Amendment freedom of speech principles at the heart of Times v. Sullivan—there is no actual malice when a writer republishes something he believes is opinion, since by definition he has no reason to doubt the facts therein since he does not realize that there are even facts there, thinking he is simply restating another’s beliefs. Because the actual malice standard’s heavy-handed exclusion of opinion from defamation shows no signs of revision in the foreseeable future, such instances of over-protection where journalists republish what they believe to be purely opinion ends up distributing false or misleading information to the public, thereby undermining journalistic responsibility.  The Redmond ruling shielded defendant bloggers from defamation charges, in part because their piece had cited to a multitude of other Internet sources. The court reached this result even though the bloggers had not verified the sources’ accuracy before citing to them. Gawker’s Gizmodo blog published a post on plaintiff Scott Redmond’s business ventures, including Peep Wireless Telephony Company, entitled Smoke & Mirrors: The Greatest Scam in Tech. The article questioned whether or not Redmond’s inventions actually did what they promised. The piece went on to note that Redmond had a pattern of getting funding for projects that never materialized. The writers provided links to websites that described now-defunct past projects of Redmond’s. The court stated that providing the links made the article “transparent” because it cited to many Internet sources: Having ready access to the same facts as the authors, readers were put in a position to draw their own conclusions about Redmond and his ventures and technologies. As shown by the comments posted, many readers did view these sources, and not all of them agreed with the authors’ views. Statements are generally considered to be nonactionable opinion when the facts supporting the opinion are disclosed. The court’s statement raises two key issues. First, it can be argued that the skeptical tone of Redmond’s post and the questions the authors raised might, by themselves, qualify the authors’ assertions as opinions. Yet, the court’s declaration that revealing the facts behind the opinions rendered the opinions nonactionable means the court viewed the other Internet sources as facts. This leads to the second issue of whether the Gross court was using the proper definition of facts; perhaps Redmond did not disclose facts at all, and instead merely cited other unverified articles. Notwithstanding Redmond, the judicial position of distrusting Internet sources suggests that journalists should be on notice that courts will begin considering their use of online sources in determining the presence of actual malice. Essentially, courts are ruling that everyone should be skeptical of Internet sources that have not undergone significant editing. Hence, one would expect that it should be easier to find actual malice, using a defendant’s reliance on Internet sources as circumstantial evidence of recklessness and subjective doubts. However, such circumstantial evidence may be rebutted by evidence of diligent fact-checking.  During the storm, Tripathi’s Tweets were retweeted on Twitter more than six hundred times, heightening anxiety during the disaster. Unfortunately, several news outlets including CNN and the National Weather Service (“NWS”) picked up the Tweets. Reporting them as news, CNN and the NWS gave the Tweets a legitimacy they had not had when they were merely posts on Twitter. CNN and the NWS’s decision to republish implied editorial oversight and a degree of fact-checking. While it was reported that law enforcement officials were pursuing action against Tripathi, claiming that he endangered the public by stirring hysteria without a proper foundation, currently no action is being taken against the news outlets for furthering the spread of false information even though their actions seem to constitute a much graver lapse of judgment as the public places tremendous trust in the media. Immediately following the December 2012 Sandy Hook Elementary School shooting in Newtown, Connecticut, police found Ryan Lanza’s ID card at the scene of the shooting. Citing Connecticut law enforcement officials, early reports identified Ryan Lanza as the shooter. These reports sparked a veritable witch-hunt that spread to many other news organizations. By 5pm that day, Ryan Lanza’s Facebook profile picture had been shared more than fourteen thousand times, and websites such as Slate and The Huffington Post displayed a screenshot and provided links to the profile. Ryan Lanza received countless messages from Facebook users vilifying him, and people listed as his Facebook friends were harangued for being connected to the suspected shooter. When it turned out that the initial reports had mistakenly identified Ryan Lanza instead of his brother Adam, the media was quick to issue retractions and expose CNN as the source of the inaccurate reporting. CNN defended itself by noting that it had continued to report new information as it developed, and the information had come from law enforcement officials. Still, as Washington Post writer Eric Wemple points out, while it is difficult to do rapid fact-checking of police statements, other outlets that were heavily covering the Sandy Hook story did not simply take the police’s word for it and directly report, choosing instead to report with a citation to CNN. In an apparently unique attempt to fact-check, among the reporting outlets, at approximately 3pm a former Jersey Journal reporter said he had spoken with Ryan Lanza earlier in the day and that Ryan denied his involvement. Unfortunately, by that point Ryan Lanza’s reputation had already been subject to hours of damage. The summer before, ABC News had been the culprit, due to its coverage of the July movie theater shooting in Aurora, Colorado. After federal law enforcement officials released the name of the shooter, James Holmes, to media outlets, ABC reporter Brian Ross speculated, on air, that an Aurora man named Jim Holmes who had a page on the Colorado Tea Party website was the suspect. In fact, Jim Holmes was a 52-year-old father and former law enforcement officer, and was not the actual shooter, who was a 24-year-old. In ABC’s apology, the network acknowledged its error in “disseminating . . . information before it was properly vetted.” According to Wemple, by reporting this unverified story, Ross committed a serious “journalistic felony.” As Wemple explains, “[y]ou can speculate on air about Mitt Romney’s motives for not releasing his tax returns; you can speculate on air about whether the heat wave will pass; [but] you cannot speculate on air about the identity of an alleged mass murderer.” The consequences for the other Jim Holmes could have been disastrous. Apart from allegations of political bias, many criticized ABC for not adequately checking its facts. Fortunately for ABC, Jim Holmes did not bring an action for defamation against the network, and as I will discuss, under the current state of defamation law, he probably would not have been successful anyway. Thus far, the courts have only heard a handful of cases brought against news outlets for irresponsibly reporting information found on the Internet without first conducting proper fact-checks. However, the recent case Levesque v. Doocy illustrates how the subjective belief requirement of the actual malice standard can sink a plaintiff’s case even when the news outlet did not properly fact-check their sources, in some cases reporting information that on its face alone is plainly ridiculous. At issue in Levesque was an incident that occurred in a middle school cafeteria in Maine. A student put a bag containing ham on a table where some Muslim students were eating lunch. After the Muslim students became upset and reported the incident to the school administration, the offending student was suspended for ten days and the incident was reported to local police as a hate crime. Plaintiff Leon Levesque, the superintendent of the school district, gave an interview to a local paper, the Lewiston Sun Journal, and was quoted as saying that the incident was being taken seriously: “All our students should feel welcome and safe in our schools.” Upon seeing this article, freelance writer Nicholas Plagman wrote a parody piece that was mostly true but changed some of the facts and quotes to mock what he saw as an excessive emphasis on political correctness. The ham became a ham sandwich and Plagman fabricated quotes by Levesque including, “[t]hese children have got to learn that ham is not a toy, and that there are consequences for being nonchalant about where you put your sandwich” and “[a]ll our students should feel welcome in our schools, knowing that they are safe from attacks with ham, bacon, porkchops, or any other delicious meat that comes from pigs.” The website Associated Content published the piece, which falsely cited the Associated Press as a source. On April 24, 2011, Fox and Friends, a daily morning television show hosted by defendants Steve Doocy and Brian Kilmeade, included a segment on the Plagman article, which they did not realize was a fabrication. A Fox News researcher had done a web search on the incident to confirm certain facts reported in the Plagman piece such as the existence of the school. The researcher found the local news article and confirmed that the Sun Journal was legitimate. After the news bit was passed on to the hosts, Doocy used Google News to find both the Plagman and Sun Journal articles as well as a Boston Globe article, sourced to the Associated Press, confirming the general facts of the incident. The hosts appeared on the show that morning speaking derisively of Levesque’s involvement in the ham incident. Doocy and Kilmeade attempted to interview Levesque on-air, leaving two messages at his office at 8AM. Levesque, who did not return the calls, sued for defamation and false light invasion of privacy. The crux of the case was the actual malice inquiry. Although the district court found that the defendants had conducted very limited research on the Internet before broadcasting, the First Circuit emphasized that “[a]ctual malice then is measured neither by reasonably prudent conduct nor an industry’s professional standards; rather, it is wholly subjective.” Levesque pointed to both the defendants’ failure to adequately check the outrageous quotes in the Plagman article as well as their statements during the broadcast that they hoped they weren’t being “duped,” as evidence of reckless disregard for the truth. The court disagreed:
It is true that a more deliberate consideration of the Plagman article should have caused reasonable skepticism about the source and that the defendants were careless in relying on it, but this is an indication of negligence, not actual malice, and Superintendent Levesque faces the heavy burden of providing evidence that the defendants recognized the carelessness with which they were proceeding.Thus the court recognized that despite the absurdity of the defendants’ actions, because they did not actually entertain serious doubts, their conduct did not amount to reckless disregard of the truth and therefore was not actual malice, however professionally irresponsible their behavior may have been.  While this appears to be the Gross designation of facts making opinions unactionable, courts’ view of Internet sources as dubious casts doubt on whether Internet sources can be treated as “facts.” In Redmond, some of the “facts” the bloggers relied on were websites and online promotional material posted by the plaintiff himself (and thus were more likely to be actual facts than if the bloggers had only read third-party accounts of the plaintiff’s work). But the court’s reasoning does not seem to rely on the quality of the facts; it wrote that the blog post was “transparent,” holding that citing sources (the “facts”) made the piece unactionable. The court did not say what would result if the piece had cited to sources that were less favorable to the plaintiff’s work. For example, what would have been the result if the bloggers had cited to a website such as Obsidianfinancesucks.com? The court in Obsidian Financial indicated that the very name of the website, as well as the personal tone of its criticism, should put the reader on alert that this was a possibly biased source. Would this qualify as citing to a fact under Redmond? The uncertainty of what ought to be treated as a fact should encourage a heightened fact-checking standard when using Internet sources. Arguably, forming an opinion based on Obsidianfinancesucks.com when that source should obviously be subject to further investigation is not a journalistic practice that should be automatically shielded from a defamation action. At the very least, the source should not be cited baldly without any couching to indicate its potential bias. It is one thing to report that such allegations exist, but it is another to use them as support for one’s own argument. For example, a reporter for the New York Times would not use a person screaming conspiracy theories on a street corner to support an article she was writing on possible corrupt bank practices. The existence of Obsidianfinancesucks.com gives it a guise of respectability, albeit thin, because it is written down in some form. But it is important to remember that it is not much harder to obtain a domain name than it is to shout theories on the street. When sources report information quickly, basing their information on unchecked sources that subsequent news outlets republish without checking the sources themselves, an additional difficulty arises. Should there be a heightened standard to investigate even when a supposedly reliable outlet reports first? The more these incidents happen with a specific outlet, such as CNN’s reporting the Hurricane Sandy Twitter rumors and the incorrect name of the Newtown shooter, the more other publications should be on notice that they need to check the facts behind what CNN reports before putting the information under their own names and exacerbating the problem. Most likely, CNN trusting the Twitter reports would fall under the previous discussion of the Obsidian hypothetical, since courts would likely hold that Twitter, as a journalistic source, should be viewed skeptically like a website with a name such as Obsidianfinancesucks.com, since there is no editorial oversight of Tweets. Other news outlets certainly have a reasonable belief that CNN is trustworthy because it has historically been a mostly accurate, dependable news source. Still, the frequency with which established news organizations are now stumbling should put other outlets on notice. Perhaps even more significantly, the rapidity with which information can spread online means that reputations can be destroyed within moments and may even endanger people’s lives. By naming the wrong suspect in the Aurora shooting, Brian Ross could have instigated a vigilante justice lynch mob. The same could have happened to Ryan Lanza, and indeed there was a huge backlash online. With such high stakes, a heightened standard of fact-checking, even when the information comes from other news outlets, should be encouraged as industry practice. As such, the current subjective belief standard is too forgiving. The defendant’s victory in Levesque signified a victory for the stringent subjective belief standard that is unsettling. By relieving the defendant of liability for beliefs that when examined are clearly ridiculous simply because he subjectively held them, stretches the desire to protect journalistic freedom too far. Where it is absurd for defendants to believe they were reporting the truth or that the underlying facts could be relied upon, their actions should rise to the level of recklessness. At the very least, such defendants ought to be punished more severely than merely having to issue a retraction. Such a revision in the subjective belief standard might amount to courts viewing the use of Internet sources, when unverified, as circumstantial evidence of the defendant possessing serious doubts as to their sources.  In defending the often-harsh results of the subjective belief requirement, the Supreme Court in St. Amant balanced the interest of plaintiffs in achieving justice against society’s interest in protecting the press, emphasizing the importance of furthering First Amendment values: “[T]o insure the ascertainment and publication of the truth about public affairs, it is essential that the First Amendment protect some erroneous publications as well as true ones.” These cases push back against tightening the actual malice standard. One factor that might impact a court’s decision of whether to view a writer’s use of Internet sources as a reason to impute doubts to them is whether society, as a whole, believes what is read on the Internet. According to a Pew Research Center study, twenty-nine percent of Americans believe that news organizations get the facts straight, and forty-two percent of Americans use the Internet as their primary news source. While a significant part of society may be aware that they should not trust everything they read on the Internet, not every reader is savvy enough to know that what he reads on a blog, or even on CNN.com, may not have been verified. It may be possible for the unreliable nature of Internet sources to be integrated into defamation law in the category of “dubious sources.” Some courts have said that a journalist’s reliance on such untrustworthy sources may support a finding of actual malice, while St. Amant states, “recklessness may be found where there are obvious reasons to doubt the veracity of the informant or the accuracy of his reports.” Similarly, in Foretich v. American Broadcasting Companies, the district court stated, “[a] broadcaster’s complete reliance on dubious sources can support a finding of actual malice.” Likewise, in Bentley v. Bunton, the court laid out the requirements for finding actual malice based on unprofessional reporting:
The defendant’s state of mind can—indeed, must usually—be proved by circumstantial evidence. A lack of care or an injurious motive in making a statement is not alone proof of actual malice, but care and motive are factors to be considered. An understandable misinterpretation of ambiguous facts does not show actual malice, but inherently improbable assertions and statements made on information that is obviously dubious may show actual malice. A failure to investigate fully is not evidence of actual malice; a purposeful avoidance of the truth is.Given the receptiveness of courts to treat at least some sources as dubious, it seems probable that they would consider use of dubious Internet sources as circumstantial evidence of recklessness.  can buy a mouthpiece to the world. Blogs are even more accessible as they are free on most platforms. Additionally, commenting on message boards and articles published by other news sources is free, though one might have to first register with the website. Admittedly, people who utilize these channels to disseminate information are at the extreme end of the spectrum of types of journalists. They are not usually subject to any editorial scrutiny and despite their lack of affiliation with an established news organization, their words have power and are often the subjects of defamation suits. The New Jersey Supreme Court discussed this phenomenon in Too Much Media:
[S]elf-appointed journalists or entities with little track record … claim the [shield law] privilege require[s] more scrutiny … The popularity of the Internet has resulted in millions of bloggers who have no connection to traditional media. Any of them, as well as anyone with a Facebook account, could try to assert the privilege.The question is whether traditional defamation standards are enough to encourage professionalism among these writers whose voices are disproportionately loud compared to the legitimacy of their messages. When respected news outlets rely on sources like these, the problem is compounded. One solution would require bloggers and anonymous disseminators of information to show that what they publish has been vetted by others in the form of acknowledgements attached to their pieces. Both Obsidian Financial Group, LLC and John Dougherty’s Reformulating Shield Laws to Protect Digital Journalism in an Evolving Media World, suggest that this vetting process is necessary to encourage accurate reporting. Digital authors could provide proof of editorial oversight in the form of a colleague, co-contributor, or traditional editor, or there could be an area for comments to enable crowd-sourcing. In Wiki Authorship, Social Media, and the Curatorial Audience, Jon Garon encourages the development of citizen journalism and new media, while emphasizing that only those who maintain standards of accuracy, attribution, impartiality, and integrity will survive. Unfortunately, due to lack of resources or the fact that most bloggers work alone and are not sponsored by a larger organization, it may be difficult for informal journalists to provide such assurances of editorial oversight to their readers. Still where possible, bloggers would be well advised to strive for standards of accuracy.  The Associated Press followed suit, citing an unnamed law enforcement official. While many other news outlets hurried to republish the material and announce the arrests, some remained skeptical and attempted to verify the reports before getting on the bandwagon. NBC and CBS, citing their own sources, reported that no arrest had been made and held firm to this line despite numerous reports to the contrary. Their refusal to publish unverified news was rewarded when the FBI released a statement that refuted arrest reports and asked for better fact-checking:
Contrary to widespread reporting, there have been no arrests made in connection with the Boston Marathon attack. Over the past day and a half, there have been a number of press reports based on information from unofficial sources that has been inaccurate. Since these stories often have unintended consequences, we ask the media, particularly at this early stage of the investigation, to exercise caution and attempt to verify information through appropriate official channels before reporting.Based on the case law and trend of unreliability of Internet sources, the following is a list of basic tips to guide journalists and other writers faced with the task of searching for truth on the World Wide Web:
• When evaluating a website’s trustworthiness, do not overlook the name of the site. Obsidianfinancesucks.com, a site that obviously has a strong opinion, should be met with more skepticism than a well-established news organization known for impartial reporting such as nytimes.com. • Check the website for evidence of editorial oversight. A one-man blogging operation should be viewed differently than a site known for the rigor of its editorial process. In the same vein, a Tweet, even by a professional journalist, usually does not undergo a second look from an editor or colleague. • Be aware of a website’s record for accuracy. If a website is known to have frequent slip-ups, it is not wise to take its reporting at face value. • When republishing what other well-respected news organizations have reported, it is advisable to corroborate the facts before putting one’s own imprimatur on the news. NBC’s reluctance to republish news that an arrest had been made in Boston, based on its own sources’ insistence that no arrest had been made, provides a perfect illustration. Furthermore, in the digital age in which we live, accounts and websites of even the most respected institutions can be hacked, allowing for the spread of misinformation. Where possible, it is always preferable to speak with live people to confirm or deny a story or fact, rather than relying solely on an unconfirmed Internet report. • Keep in mind that there are many joke news sites, most of which do not make it obvious that their content is tongue-in-cheek. For example, The Duffel Blog posts satirical content about the U.S. Military, but its name is less recognized than other sites like The Onion. As a result of an article published therein, in the fall of 2012 Senator Mitch McConnell’s office sent a letter to the Pentagon complaining about the Department of Defense offering veterans’ benefits to prisoners at Guantanamo Bay. The Army veteran who created the site told the Wall Street Journal, “Incidents like this only illustrate a serious problem with our education system [.] … Apparently, they aren’t teaching skepticism or critical thinking in some parts of the country anymore.”
* Kimberly Chow is a 2014 J.D. candidate at NYU School of Law. Her academic and professional interests lie in traditional media law and its intersection with new technologies and forms of expression. She received a B.A. in History from Yale University in 2009. She would like to thank Barton Beebe, Lynn Oberlander, David McCraw, and the JIPEL editorial team for their thoughtful comments and editing.
Irrespective of how a domain name is classified, we agree with Umbro that a domain name registrant acquires the contractual right to use a unique domain name for a specified period of time. However, that contractual right is inextricably bound to the domain name services that NSI provides. In other words, whatever contractual rights the judgment debtor has in the domain names at issue in this appeal, those rights do not exist separate and apart from NSI’s services that make the domain names operational Internet addresses. Therefore, we conclude that “a domain name registration is the product of a contract for services between the registrar and registrant.” . . . A contract for services is not “a liability” as that term is used in [the enforcement of judgments statute] and hence is not subject to garnishment.In its decision, the Virginia Supreme Court expressed concern that allowing garnishment of a domain name services contract would open the door to garnishment of practically any services contract (e.g., prepaid services for satellite television) as well as garnishment of corporate names. The Court recognized that somet jurisdictions had allowed jurisdiction over property including telephone numbers that are products of services contracts, but disagreed with those holdings. The court distinguished contract rights for a sum of money due under a contract (which might be garnishable) from a contract for the performance of the service. The Court refused to allow the judgment creditor to “step into the shoes” of the judgment debtor. Two dissenting Justices, including the Chief Justice, wrote, “[b]ecause NSI has received everything required to give the judgment debtor the exclusive right to use the domain names registered, the contractual right, a valuable asset, is the intangible personal property in which the judgment debtor has a possessory interest.” Such intangible personal property, they believed, was subject to garnishment under the relevant statute. It should be noted that because the Virginia Supreme Court rendered its decision prior to establishment by ICANN of rules that largely standardize obligations of domain name registrars and registrants, the Court was not addressing the same type of “regulated contract” to which domain name registrants are subject today. This might have influenced its reasoning about the contingent nature of the services Network Solutions would be performing. A California State appellate court decided in Palacio Del Mar Homeowners Ass’n v. McMahon that “[d] In Palacio Del Mar, the principal rationale of the California Court of Appeal was that domain names should not be considered the equivalent of tangible property, citing with supporting Ninth Circuit precedent, as discussed below, that domain names are “intangible property.” Domain name registration agreements are not by any means the only type of contract that is regulated, and that may not be cancelable absent certain conditions. The situation of domain names is not dissimilar from some other forms of intellectual property, such as the patent. Once a patent is registered with the national patent office, that office may not cancel (for example, invalidate) the patent absent some defect or dereliction on the part of the patent holder. Indeed, the patent only exists because it is granted by the patent office. But, the granted patent is regulated by rules superior to those of the patent office that are established by the national legislature. It is because of these superior rules that the patent is often referred to as a form of property, even though it is only a form of legislated “temporary property” because it is defined by a term of years. It expires. A domain name effectively has an indefinite duration and is durable. This is more characteristic of property than of typical contract rights. In this respect, a domain name might alternatively be considered some form of “legislated property” in that its operational life depends on the train of legislation from the establishment of ICANN through establishment of registries and registrars, and the registrant’s act of requesting registration. But, it remains that the rights and obligations of the domain name registrant are expressly defined by contract with the registrar, and are not a direct product of legislation.  As discussed earlier, a domain name may share characteristics with one or more forms of intellectual property (e.g., a trademark or trade name), but not in all cases. In that regard, some domain names may be intellectual property because they share attributes of recognized forms, e.g. the trademark, others not. That, however, is a different question than whether domain names are considered “intellectual property” as a class.  is important both because of its basic holding, and also because of the facts that distinguish it from those that today are generally operative with respect to domain names. The case involved a domain name, “sex.com,” registered and subject to fraud in 1994. This was prior to the establishment of ICANN rules regarding activities of registries, registrars and registrants, including ICANN’s rules regarding the contract rights of registrants. The registry, Network Solutions, was accused, inter alia, of breaching an implied contract with the initial registrant and true owner of the subject domain name when it allowed a fraudulent transfer. The Ninth Circuit found that there was no contract or contract right, express or implied, between the registrant and Network Solutions primarily on grounds of lack of consideration. The court went on to consider whether domain names as a class “are a species of property” by applying a three-part test: is a domain name (1) an interest capable of precise definition, (2) capable of exclusive possession or control, and (3) with a legitimate claim to exclusivity? It compared domain names to corporate stock and plots of land, finding they are precisely defined. It found that registrants control the location to which domain names direct Internet users. It determined that registrants have a legitimate claim to exclusivity because the act of registration excludes others from registering the same domain name. In a concise and straightforward manner, the Ninth Circuit found that domain names as a class are intangible property. The Ninth Circuit thereupon rejected a distinction drawn by the lower district court between types of intangible property. In doing so, it conceptually declined to follow a proposal by the Restatement (Second) of Torts § 242 (1965) to differentiate between intangibles “merged” in a document and those that are not. It read the leading California Supreme Court decision and subsequent lower court and federal precedent to reject such a requirement. Nonetheless, the Ninth Circuit said that it did not need to “settle the issue once and for all” in this particular case because, “Assuming arguendo that California retains some vestigial merger requirement [with a document] The Ninth Circuit found that the distributed electronic database (i.e. the Domain Name System, or DNS) that associates domain names with particular computers is “a document (or perhaps more accurately a collection of documents)”, albeit an electronic one. The Court rejected arguments from Network Solutions that because DNS records may be stored in more than one place, the DNS is not a document, and that the DNS is not a document because it is refreshed every twelve hours. The Court held that Network Solutions should be open to liability for the tort of conversion of intangible property because it gave away the rightful owner’s domain name, whether or not it did so negligently (saying “the common law does not stand idle while people give away the property of others”). In a subsequent case, Office Depot v. Zuccarini, the Ninth Circuit affirmed that domain names are intangible property under California law, subject to a writ of execution, for purposes of establishing quasi in rem jurisdiction over property as a predicate to having it used to satisfy a money judgment. The Court determined that for purposes of asserting quasi in rem jurisdiction domain names are located where the registry is located as well as (in self-acknowledged dictum) where the relevant registrar is located. In other words, domain names can be seized and executed against as intangible property for the purpose of satisfying a money judgment.  The allegation of the trustee in bankruptcy was that a party claiming adverse ownership had unlawfully converted the domain name from its true owner who was the subject of the bankruptcy. In a lengthy factual finding the court determined that the bankrupt party owned the domain name, and prepared to consider whether certain defendants had unlawfully converted the asset. Before doing so, it needed to determine whether a domain name is property capable of conversion. The court rejected the contract right approach of the Virginia Supreme Court in Umbro, because that court applied Virginia state law, and the bankruptcy court was obligated to apply Utah law. For similar reasons, the bankruptcy court rejected reliance on Kremen because the Ninth Circuit had applied California law, and because it accepted that Utah would not follow Kremen, though in fact the state courts of Utah had not reached that question or made such a decision. Instead, the bankruptcy court followed the reasoning of a federal court case applying Utah law, Margae, Inc. v. Clear Link Techs., LLC, that considered conversion of webpages and other intellectual property (not domain names). The Margae court relied on precedent from the Utah Supreme Court addressing the characteristics of computer software that it held to be “tangible personal property” for purposes of applying a state sales tax. The bankruptcy court in In re Paige concluded:
Based on the reasoning in Margae, which the Court elects to follow, the Court determines that like web pages and software, domain names can be perceived by the senses and access to them can be physically restricted by the use of passwords and other security measures. In fact, the reason that the Plaintiffs cannot access the Domain Name at this point is because [the defendant] has “locked out” or physically restricted their access by changing the username and password. Moreover, unlike a mere idea that can only be stored in a person’s mind, domain names can and do have a physical presence on a computer drive. Accordingly, the Court concludes that like web pages and software, the Domain Name at issue is a type of tangible property that is capable of conversion.On the question of perception by the senses, if this court was correct, then “light” would presumably constitute “tangible” property because it is perceived by the senses. It is hard to accept the idea that because something can be perceived (e.g., a movie on a screen) it is therefore tangible. The fact that access to an electronically encoded alphanumeric string can be restricted by a password or other security device may be a factor in characterizing the domain name as “property,” but that does not make it “tangible.” Access to an online science database may be restricted by a password, but that does not make it physical or tangible property. It may be that courts are somewhat more reluctant to treat “intangible property” as assets that can be blocked, transferred, restricted, etc. because of concerns about whether such intangible assets are capable of “possession” and “control.” Additionally, it may be that certain statutes address personal property in a way that might seem to exclude intangible property. But, if these concerns are present, it may be preferable to revise the way the rules are framed than to attempt to characterize something that is electronic and cannot be touched by a human as “tangible.” “Perceivable” and “tangible” are different concepts.  In their two-fold nature, domain names seem to be relatively unique. Typical “intellectual property” is not a creation of contract. Trademarks are registered by a trademark office, but their use is governed legislatively, and not by a contract between the trademark office and the trademark owner. Unregistered trademarks may arise on the basis of use, and be recognized by judicial authorities, but they are not creations of contract. Trade names may arise on the basis of use, and also may be registered with local authorities. But, trade names are not created or regulated by a contract. Much the same is true for patents. Patents are granted by a patent office, and registered with that office. Patents are the subject of extensive legislation. But, they are also not created by contract (though they are subject to payment of renewal fees). As discussed earlier, domain names share characteristics with forms of intellectual property, and might constitute their own type or class. But that is not something yet accorded by statute. And, since U.S. law does not provide a general catch-all form of intellectual property protection, it would be premature to suggest that the courts use the concept of “intellectual property” as something distinct from contract rights and intangible property. Because domain names overlap with trademarks and trade names, careful consideration would need to be accorded to defining this new form of IP. Bearing that in mind, the introduction by ICANN of open registration of top-level identifiers may accelerate interest in establishing a new form of protection. Given the level of investments being made in new domain name rollouts, the entities relying on those domain names may consider that the additional layer of protection would be useful.  Although the express characterization by the Ninth Circuit was novel, the result in in the case was consistent with customary administrative panel practice under the UDRP, and for this reason the decision may not have attracted significant attention. In GoPets, the initial domain name registration was undertaken prior to the acquisition of trademark rights by the complaining party that sought a finding of abusive domain name registration and use, first before a UDRP panel. The UDRP panelist, consistent with long-standing precedent on this issue, decided that the initial registration could not have been undertaken in bad faith within the meaning of Paragraph 4(b) of the UDRP because the initial registrant/respondent could not have intended to abuse trademark rights that did not exist at the time of registration. Subsequently, the initial registrant transferred the disputed domain name to a related party/family member. By that time, the complaining party had established trademark rights. The complaining party sought relief in the federal courts under the ACPA, arguing that the related-party transfer constituted a “new registration” within the meaning of the ACPA so that the prior rights of the initial domain name registrant were extinguished. Again consistent with the preponderance of UDRP panel practice, the Ninth Circuit decided that the related party transfer undertaken by the initial domain name registrant did not constitute a new registration within the meaning of the ACPA. UDRP panelists have generally not regarded related party transfers as new registrations because there are a substantial number of good faith business reasons why holders of registrations may want to transfer registration to a related entity, and depriving the domain name owner of its pre-existing registration rights in such circumstances ordinarily would be unfair. To illustrate, imagine that an individual in 2003 registered the domain name “facebook.com” and was using that to host a high school yearbook website. The Facebook social media website of 2013 did not exist in 2003, and there was no service mark associated with it. The social media company registered FACEBOOK at the USPTO in 2010. Under long-standing UDRP panel practice, the social media company could not successfully pursue a claim for abusive domain name registration and use against the individual 2003 registrant of “facebook.com” because the initial registrant could not have undertaken its registration in bad faith when no adverse trademark rights existed. It is now 2013. Imagine that the individual registrant from 2003 has formed a limited liability company (LLC) through which to operate his/her high school yearbook website. The domain name registration from 2003 is transferred into the name of the LLC, but nothing about the high school yearbook website changes. Should this now allow the Facebook social media company to successfully pursue a claim for abusive domain name registration and use? The answer from UDRP panelists generally has been “no.” From the standpoint of UDRP precedent, there was nothing about the result reached by the Ninth Circuit in GoPets out of line with the way the case would ordinarily have been decided under the UDRP. However, the express reasoning of the Court raised an issue. The Ninth Circuit said:
[T]he text of § 1125(d)(1) considered in isolation does not answer the question whether “registration” includes re-registration. Looking at ACPA in light of traditional property law, however, we conclude that Congress meant “registration” to refer only to the initial registration. It is undisputed that Edward Hise could have retained all of his rights to gopets.com indefinitely if he had maintained the registration of the domain name in his own name. We see no basis in ACPA to conclude that a right that belongs to an initial registrant of a currently registered domain name is lost when that name is transferred to another owner. The general rule is that a property owner may sell all of the rights he holds in property. GoPets Ltd.’s proposed rule would make rights to many domain names effectively inalienable, whether the alienation is by gift, inheritance, sale, or other form of transfer. Nothing in the text or structure of the statute indicates that Congress intended that rights in domain names should be inalienable. We therefore hold that Digital Overture’s re-registration of gopets.com was not a registration within the meaning of § 1125(d)(1). Because Edward Hise registered gopets.com in 1999, long before GoPets Ltd. registered its service mark, Digital Overture’s re-registration and continued ownership of gopets.com does not violate § 1125(d)(1).Recall that the facts of GoPets involved a related party transfer. The Ninth Circuit did not allude to this factor in the reasoning quoted above. It plainly stated that domain names constitute property, subject to traditional property law, and that the rights of domain name owners are “alienable” or transferable. While the Court noted that it was engaged in statutory interpretation of the ACPA, it did not provide further guidance as to how the property characteristic of domain names might influence results in contexts different than the related party transaction undertaken in GoPets.  The initial registration took place prior to the complaining party’s establishment of trademark rights, but the purchase and reregistration by an unrelated party took place after the establishment of trademark rights. In holding that the purchaser/transferee could not have registered the domain name in bad faith under the ACPA, the Arizona District Court said:
Defendant argues that GoPets is distinguishable, because in GoPets Hise transferred the domain name to an entity he co-owned, and here Lurie purchased airfx.com from an unrelated third party. According to defendant, the purpose of the ACPA will be undermined if a cybersquatter who purchases a domain name in bad faith is immune from liability simply because the domain name he purchased existed before a mark was distinctive. Nothing in the language of GoPets indicates that it should be read as narrowly as defendant suggests. GoPets did not distinguish between transfers of a domain name to related parties and other kinds of domain name transfers. To the contrary, GoPets broadly reasoned that if an original owner’s rights associated with a domain name were lost upon transfer to “another owner,” the rights to many domain names would become “effectively inalienable,” a result the intention of which was not reflected in either the structure or the text of the ACPA. Id. at *4 [citation omitted].The District Court went on to hold that the issue whether the domain name holder registered in bad faith was determined at the time of the initial registration by an unrelated third party when the complaining party had not yet established trademark rights. In AirFX.com the District Court departed from general UDRP panel practice that has treated the acquisition of a domain name by a party unrelated to the previous registrant as a new registration within the meaning of the UDRP. The circumstances existing at the time of that new registration govern whether the new holder has undertaken the registration in bad faith. UDRP panels have not generally treated domain names as freely alienable property carrying the pre-existing interests of prior registrants through to unrelated transferees. Following the reasoning of the Arizona District Court, derived from seemingly unambiguous language of the Ninth Circuit, might result in a significant change to panel practice under the UDRP, unless there is some difference between the ACPA and UDRP that would provide a basis for distinguishing the way the same terms should be interpreted.  Employing very similar reasoning, these panels rejected the GoPets approach, finding that transfers between unrelated parties constitute new registrations. Both panels relied on the contractual relationship between the domain name registrant-transferee and the registrar, and the representations made at the time of modification of registrant data or registrar change. In the decision post-dating AirFX.com, this author (sitting as sole panelist) said:
As other UDRP panels have also done in cases such as Twitter, Inc. v. Geigo, Inc, WIPO Case No. D2011-1210, this Panel will continue to follow the general approach of WIPO UDRP panelists and consider that the transfer of a domain name to an unrelated third party constitutes a new registration for purposes of assessing bad faith. Although the Panel recognizes that domain names have attributes of intangible property, the rights of the domain name registration holder are contractual in nature and subject to the terms and conditions of a registration agreement. When an unrelated third party changes registrant data and/or re-registers with a new registrar, that party is accepting representations and warranties under the registration agreement as of the date of the change. These effectively include that the new registration is being undertaken in good faith (see paragraph 2 of the Policy). With the greatest deference owed to the national courts, this Panel observes that the Ninth Circuit Court of Appeals decision in GoPets v. Hise was interpreting the ACPA, not the Policy. The precise holding addressed the situation of related party transfers and in that regard was consistent with general WIPO UDRP panel practice under the Policy. The language used by the Ninth Circuit can also be read more broadly, as the Arizona District Court did in AIRFX.com v. AirFx LLC. But, again, that court was interpreting the ACPA. Given the significant differences in the legislative history and the language of the ACPA and the Policy, this Panel is not inclined to extrapolate from the apparent ACPA-related development in the Ninth Circuit, noting that there is at least some disagreement among the Circuits regarding interpretation of the term “registration” as it is used in the ACPA. While administrative panels under the Policy tend to look to the law of the country of the parties when they are within the same country, the Policy is a set of rules that operates within its own unique context. The UDRP incorporates generally accepted principles of trademark law, without representing a linear application, to the extent that this would even be possible in its international setting. For example, in order to provide safeguards for registrants, a UDRP transfer requires bad faith on behalf of the registrant, going in this respect beyond conventional trademark law. In this connection, the Panel further notes the mutual jurisdiction provisions which enable party recourse to national courts. The Panel observes that it will assess the bad faith element as of the time Respondent by its own account acquired the disputed domain name . . . . [Footnotes renumbered from original] The statutory language of the ACPA clearly establishes this predicate (and it has been confirmed by court decision). UDRP panelists have applied the logic that a domain name registrant cannot act in bad faith by taking unfair advantage of trademark rights that do not exist. There is a perhaps subtle distinction between ACPA jurisprudence and the prevalent UDRP panel approach regarding post-registration evidence of bad faith. Under the ACPA, if the predicate of a pre-existing conflicting trademark is met, the court may determine that the domain name was registered and used in bad faith based on conduct subsequent to registration. From the perspective of most UDRP panelists, on the other hand, while the prior existence of trademark rights is a predicate to finding bad faith, it is not the end of the inquiry with respect to bad faith which must exist at the time of domain name registration. Additional factors concerning the intent of the registrant remain to be assessed under Paragraph 4(b) as of the time of registration. For example, if on registration a domain name registrant commences operation of a legitimate web-based business, but later on engages in conduct that might appear to take unfair advantage of a trademark owner, the subsequent conduct is generally not the basis for a finding of bad faith registration and use. Bad faith “registration” entails bad faith at the time of registration. The distinction between ACPA jurisprudence and UDRP panelist jurisprudence on this timing issue is referred to as “perhaps-subtle” because there are contexts under the UDRP in which after-the-fact conduct can be used as evidence of intent at the time of registration. The language of paragraph 4(b) of the UDRP suggests that. But, there are limits to how far after-the-fact conduct can be stretched to determine intent at the time of registration. A link back to the initial registration is needed. To be clear, however, under both the ACPA and UDRP there must be a conflicting trademark in existence at the time of registration for bad faith to be found.  The decision by the Ninth Circuit in GoPets did not flow from any express statutory requirement. The court was interpreting an otherwise undefined term in the ACPA, that is, “registration” (as used in the phrase “at the time of registration”). It decided that the term “registration” was addressed to the initial or creation registration of a domain name, and not to a subsequent registration by an unrelated transferee because of the transferor’s property interest in the domain name. That interpretative approach did not take into account the contract accepted upon acquisition of the domain name by the transferee, which contract incorporates a proviso that the transferee not registering the domain name in bad faith. Other than articulating an interest in an apparent supra-sanctity of property rights, the Ninth Circuit did not explain why the new registrant/transferee of a domain name that conflicts with an existing trademark and evidences other bad faith elements should be subject to different contractual treatment than the “creation” registrant. It appears that under the Ninth Circuit’s rationale, the owner of a domain name registration that has risen in value because a third party has developed trademark rights in the same or a substantially similar term is encouraged to take advantage of that newly established trademark-based value through sale of the domain name. It can be argued that no enterprise starting a business and developing a valuable trademark should do so without first securing the corresponding domain name, and that an enterprise that does so should be subject to paying whatever the market dictates to acquire the domain name after-the-fact. And, it may be that the Ninth Circuit was engaged in a conscious exercise in risk allocation, adjudging the enterprise developing a new trademark in a better position to assess its own domain name-related situation than the holder of the creation registration. The Ninth Circuit may have intended to send a message that no one should develop a business name or trademark without having first secured the relevant Internet address. The value to the creation-owner of the domain name in such circumstance may well be serendipitous. It may just have happened to register a term or string that someone later developed into a valuable brand. Just as likely, the registered term (i.e. domain name) may be held by a firm that registers domain names speculatively in the expectation that some percentage of those names will eventually acquire a value as a consequence of the development of third-party trademark rights. The Ninth Circuit approach in GoPets (as applied by the District Court in AirFX.com) encourages the speculative registration business model by immunizing transfers of previously created domain names from scrutiny. If transposed to the UDRP, because domain names created prior to the existence of trademark rights may never be attacked as abusive, transferees would never be subject to comparatively fast and efficient dispute settlement proceedings. Only traditional trademark infringement proceedings would remain in the trademark owner’s arsenal, but typically at substantial expense. Because the registration of a domain name is typically very inexpensive (in the range of US$10 or less), the Ninth Circuit’s reason for elevating the interests of the creation registrant over that of the subsequent trademark owner is not clear. If the creation-owner and the transferee are engaged in a good-faith enterprise, and this has value, it should be protected under the UDRP (as well as under the ACPA) at the time of the new registration (as discussed below). The creation-owner may lose the serendipitous benefit of a sale and transfer to a transferee without legitimate interests in the domain name, or that is acting in bad faith, but it is not apparent why such benefit should be superior to the interests of the owner of a newly developed trademark.  Assume that the transferor initially registered the disputed domain name when there was no adverse trademark, and thus had been insulated from a finding of abusive domain name registration and use. If the unrelated transferee acquires the domain name when there is an existing adverse trademark, under the ACPA and UDRP it would have met the predicate or but for condition for a finding of bad faith. However, the fact that there is an existing adverse trademark does not mean that the unrelated purchaser/transferee is engaging an abusive domain name registration and use. Although the assessment criteria under the ACPA and UDRP may be somewhat different, the complaining party/trademark owner must still demonstrate—in terminology of the UDRP—that the new registrant lacks rights or legitimate interests in the disputed domain name, and has otherwise registered the domain name in bad faith. The brief discussion of the assessment criteria that follows is based on the terms of the UDRP and administrative panel precedent, but the statutory assessment criteria used to determine bad faith under the ACPA are substantially similar.  Similarly, four of the nine factors used to assess bad faith intent under the ACPA are directed toward establishing the legitimate interests of the domain name registrant, and there is a general defense for registering based upon reasonable belief regarding lawfulness. Up until now, there has not been significant issue within UDRP jurisprudence arising from an inability of third-party transferees of domain names initially registered prior to existence of trademark rights to establish rights in the transferred domain names. This is probably because transferees with legitimate interests in those domain names have been able to establish that before the panels. But, it may be that administrative panelists need to be particularly watchful in cases of such transfers, especially when the transferee is acquiring some type of ongoing enterprise that has a substantial commercial value.  In such case, the registrant/transferor of an ongoing business (and domain name) would likely have a priority right under traditional trademark law principles to continue using its domain name because it was using the relevant term earlier than the trademark owner. The disputed domain name registrant should be able to establish its rights or legitimate interests under paragraph 4(c)(i) and/or (ii) of the UDRP. Under the ACPA, there is a similar assessment factor as in UDRP paragraph 4(c)(i), which should yield a comparable result. In such circumstances, the subsequent transfer of the domain name to a new business owner should not affect the rights or legitimate interests in the domain name since, inter alia, the business has been commonly known by the domain name and/or there has been a prior good-faith offering of goods or services. If the initial domain name registrant-transferor establishes an online business subsequent to the acquisition by the trademark owner of rights (such as evidenced by registration), the issues with respect to a third-party transferee of the domain name may be more contestable. Traditional trademark infringement analysis may again factor in. An analysis of rights or legitimate interests may turn on whether the initial domain name registrant/transferor is operating in the same class or line of business as the trademark owner, and might assess evidence regarding whether the initial registrant/transferor was aware of the trademark owner when it began to operate its online business. If the initial registrant-transferor and the transferee are in different national jurisdictions than the trademark owner, this might well influence an assessment of the extent of knowledge (and intent). It is important to note that the individual factors listed in paragraph 4(c) of the UDRP as potentially establishing rights or legitimate interests are expressly non-exhaustive. A panel may consider whatever evidence or factors it considers appropriate to jurisprudential analysis of the rights or legitimate interests of a third-party transferee of a disputed domain name. A panel may determine that the issues are sufficiently close that the complaining party has not carried its burden of persuasion, and that a federal court may be a more appropriate forum for a full domain name/trademark infringement proceeding, with more extensive submissions of evidence, testimony, etc.  Opening up a broad statutory scheme for a minor change not infrequently serves as a prelude to a larger scale exercise in legislative revision. The law of unintended consequences is always at work. This article is not encouraging amendment of the ACPA for purposes of addressing what is a comparatively modest issue. Perhaps more important, the ACPA is invoked much less frequently than the UDRP. UDRP panelists are not obligated to follow jurisprudential developments under the ACPA, or to take into account the language of the ACPA. As a practical matter, UDRP panelists can maintain their current practice more or less irrespective of how jurisprudence in the Ninth Circuit develops. The UDRP is not explicitly tied to any national jurisdiction, and less to any particular Court of Appeals of the United States. Nonetheless, UDRP panelists pay attention to such jurisprudence, and there are good reasons to seek an approximation of the rules, if for no other reason than to provide more legal certainty to domain name registrants.  A domain name may infringe a trademark, and a website incorporating a domain name may infringe a trademark, whether or not the domain name was acquired in good faith or bad, and whether the domain name owner or its predecessor at some time in the past had rights or legitimate interests in that domain name. A domain name owner may escape an order of transfer or cancellation under the UDRP, or a finding of abusive conduct under the ACPA, yet still face a claim for trademark infringement on grounds outside those found in these two legal mechanisms. In that regard, one should not over-emphasize the role of the UDRP and ACPA. Trademark owners can protect their valuable identifiers—assuming they have legitimate causes of action—against infringers more or less irrespective of the “container” in which the infringing item is placed.
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[L]imitsitself to tangible property that can be “levied upon by taking it into custody” (or tangible, “documentary evidence of title” to property or a debt). . . . Domain name registration supplies the intangible “contractual right to use a unique domain name for a specified period of time.” . . . Even if this right constitutes property, it cannot be “taken into custody.”Palacio, 95 Cal. Rptr. 3d at 448-49 (citations omitted). In this regard, the California Court of Appeals appeared to set a limit on the extent to which the database referred to by the Kremen court constituted a document for purposes of serving as a proxy for property. Presumably, the electronic database is not sufficiently tangible to be taken into custody.
Panels have tended to the view that formal changes in registration data are not necessarily deemed to constitute a new registration where evidence clearly establishes an unbroken chain of underlying ownership by a single entity or within a genuine conglomerate, and it is clear that any change in WhoIs registrant data is not being made to conceal an underlying owner’s identity for the purpose of frustrating assessment of liability in relation to registration or use of the domain name.WIPO Overview 2.0, para. 3.7.
[W]e conclude that the language of the statute does not limit the word “registration” to the narrow concept of “creation registration.” . . . We hold that the word “registration” includes a new contract at a different registrar and to a different registrant. . . . To conclude otherwise would permit the domain names of living persons to be sold and purchased without the living persons’ consent, ad infinitum, so long as the name was first registered before the effective date of the Act. We do not believe that this is the correct construction of the Anti-cybersquatting Act.Schmideiny, 319 F.3d at 583 (citations omitted). Note, however, that (as discussed and distinguished by the Ninth Circuit in GoPets) the decision in Schmidheiny v. Weber (1) addressed a claim under the living persons names provisions of the ACPA, (2) the domain name at issue had been registered before the effective date of the ACPA, and (3) this otherwise insulated it under those provisions. Unlike the trademark protective provisions of the ACPA, living person‘s name protection is not predicated on a pre-existing trademark. Had the disputed domain name in Schmidheiny v. Weber been registered after the effective date of the ACPA, it would have been subject to liability as abusive irrespective of whether a subsequent transfer was considered a new registration. The Ninth Circuit suggested this would eliminate the Third Circuit‘s cause for concern, though it did not explain how that might eliminate concerns raised by its own GoPets decision. GoPets, 657 F.3d at 1031.
As we noted in our order, GoPets is squarely on point in this matter, and there is nothing it its language indicating that it should be read as narrowly as defendant suggested in its briefs. . . . Defendant should have withdrawn its ACPA counterclaim once it discovered that the original registration date of airfx.com preceded the registration of the AirFX mark.Id. at *2. Clearly, the District Court has not had “second thoughts.”
The words “initial” and “creation” appear nowhere in § 1129, and Congress did not add an exception for “non-creation registrations” in § 1129(1)(B) . . . . The District Court’s rationale that “if Congress chose to treat re-registrations as registrations, it could have used words appropriate to impart that definition,” is not a sufficient reason for courts to infer the word “initial.” Instead, we conclude that the language of the statute does not limit the word “registration” to the narrow concept of “creation registration.” See Sweger v. Chesney, 294 F.3d 506, 516 (3d Cir.2002 [sic]) (holding that if the language of a statute is plain, we need look no further to ascertain the intent of Congress). . . . We hold that the word “registration” includes a new contract at a different registrar and to a different registrant. In this case, with respect to Famology.com—that occurs after the effective date of the Anti-cybersquatting Act. To conclude otherwise would permit the domain names of living persons to be sold and purchased without the living persons’ consent, ad infinitum, so long as the name was first registered before the effective date of the Act. We do not believe that this is the correct construction of the Anti-cybersquatting Act. We are therefore satisfied that Famology.com, Inc. engaged in a “registration” that is covered by the Anti-cybersquatting Act . . . .319 F.3d at 582-83. The Panel in the present proceeding further notes that although Respondent in this proceeding is situated within the Ninth Circuit, Complainant is situated within the Sixth Circuit.
Consensus view: Generally speaking, although a trademark can form a basis for a UDRP action under the first element irrespective of its date [see further paragraph 1.4 above], when a domain name is registered by the respondent before the complainant’s relied-upon trademark right is shown to have been first established (whether on a registered or unregistered basis), the registration of the domain name would not have been in bad faith because the registrant could not have contemplated the complainant’s then non-existent right.There has been a minority view expressed by certain WIPO panels. As stated by the WIPO Overview 2.0, id.,
Irrespective of whether the domain name was registered before the relevant trademark was registered or acquired, a small number of panels have begun to consider the effect of the requirement of paragraph 2 of the UDRP, which states: “By applying to register a domain name, or by asking us to maintain or renew a domain name registration, you hereby represent and warrant to us that . . . (d) you will not knowingly use the domain name in violation of any applicable laws or regulations. It is your responsibility to determine whether your domain name registration infringes or violates someone else’s rights.” Some panels have regarded this as a warranty at the time of registration that the domain name will not be used in bad faith, finding that, by breaching such warranty, use in bad faith may render the registration in bad faith. Other panels have looked at the totality of the circumstances in assessing “registration and use in bad faith,” as a unitary concept, given that some of the circumstances listed as evidence of bad faith registration and use in paragraph 4(b) of the UDRP appear to discuss only use and not registration. Still other panels that have considered these approaches have instead reaffirmed the “literal” interpretation of bad faith registration and bad faith use regardless of paragraphs 2 or 4(b) of the UDRP. This is a developing area of UDRP jurisprudence.Proponents of a minority approach taken, for example, inCity Views Limited v. Moniker Privacy ServiceslXander, Jeduyu, ALGEBRALlVE, WIPO Case No. D2009-0643, <mummygold.com>, read the conjunctive “and” out of “has been registered and is being used in bad faith”. Decisions by such panelists might not be directly influenced by GoPets/AIRFX.COM because there apparently is no need to find bad faith registration. Whether the complainant holds a trademark at the time of registration is presumably not determinative; an unrelated transferee is subject to the same “use” rules as the initial registrant. Application of this approach, of course, would not resolve a conflict with the ACPA, since the ACPA imposes the condition that a trademark exist at the time of initial domain name registration.
To prevail on its ACPA claim, GoPets Ltd. must show (1) registration of a domain name, (2) that was “identical or confusingly similar to” a mark that was distinctive at the time of registration, and (3) “bad faith intent” at the time of registration. See 15 U.S.C. § 1125(d)(1). [emphasis added]
2. Your Representations. By applying to register a domain name, or by asking us to maintain or renew a domain name registration, you hereby represent and warrant to us that (a) the statements that you made in your Registration Agreement are complete and accurate; (b) to your knowledge, the registration of the domain name will not infringe upon or otherwise violate the rights of any third party; (c) you are not registering the domain name for an unlawful purpose; and (d) you will not knowingly use the domain name in violation of any applicable laws or regulations. It is your responsibility to determine whether your domain name registration infringes or violates someone else’s rights.
a. Applicable Disputes. You are required to submit to a mandatory administrative proceeding in the event that a third party (a “complainant”) asserts to the applicable Provider, in compliance with the Rules of Procedure, that (i) your domain name is identical or confusingly similar to a trademark or service mark in which the complainant has rights; and (ii) you have no rights or legitimate interests in respect of the domain name; and (iii) your domain name has been registered and is being used in bad faith.In the administrative proceeding, the complainant must prove that each of these three elements are present. Paragraph 4(c) of the UDRP provides:
Any of the following circumstances, in particular but without limitation, if found by the Panel to be proved based on its evaluation of all evidence presented, shall demonstrate your rights or legitimate interests to the domain name for purposes of Paragraph 4(a)(ii): (i) before any notice to you of the dispute, your use of, or demonstrable preparations to use, the domain name or a name corresponding to the domain name in connection with a bona fide offering of goods or services; or (ii) you (as an individual, business, or other organization) have been commonly known by the domain name, even if you have acquired no trademark or service mark rights; or (iii) you are making a legitimate noncommercial or fair use of the domain name, without intent for commercial gain to misleadingly divert consumers or to tarnish the trademark or service mark at issue.
In determining whether a person has a bad faith intent . . . a court may consider factors such as, but not limited to— (I) the trademark or other intellectual property rights of the person, if any, in the domain name; (II) the extent to which the domain name consists of the legal name of the person or a name that is otherwise commonly used to identify that person; (III) the person’s prior use, if any, of the domain name in connection with the bona fide offering of any goods or services; (IV) the person’s bona fide noncommercial or fair use of the mark in a site accessible under the domain name;Also, 15 USC §1125 (d)(1)(B)(ii), provides:
Bad faith intent . . . shall not be found in any case in which the court determines that the person believed and had reasonable grounds to believe that the use of the domain name was a fair use or otherwise lawful.The ACPA does not expressly allocate the burden of proof regarding rights and legitimate interests as does paragraph 4(a) of the UDRP.
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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.  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.  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.  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.  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).  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”).  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/.  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.  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.  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.  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/.  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).  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.  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).  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).  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).  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”).  Von Hippel, supra note 11, at 313.  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).  Ackermann, supra note 3, at 204.  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.”).  Ayass & Serrano, supra note 18, at 71.  Id. at 72.  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).  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.  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”).  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).  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.  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).  Mangan, supra note 28, at 40.  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).  Tim William, Demand Chain Management Theory: Constraints and Development from Global Aerospace Supply Webs, 20 J. Operations Mgmt. 691, 691 (2002).  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).  See Jason Dedrick et al., The Distribution of Value in the Mobile Supply Chain, 35 Telecomm. Pol’y 505, 507 (2011).  Julian Dent, Distribution Channels: Understanding & Managing Channels to Market 11-12 (2d. ed. 2011).  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).  Stallman, supra note 7.  See generally Ackermann, supra note 3, at 194.  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).  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.  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).  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.  Katz, supra note 7, at 46.  Shahar & White, supra note 30, at 966-70 (discussing how OEMs in the automotive industry erected barriers to negotiations of standard form agreements).  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.  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).  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).  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”).  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.  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).  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).  See Juergen Neumann et al., OHANDA Label for Open Source Hardware, OHANDA, http://www.ohanda.org/brief (last visited Mar. 29, 2013).  Ian Gibson et al., Additive Manufacturing Technologies: Rapid Prototyping to Direct Digital Manufacturing 34 (2009).  Id.  Chua et al., supra note 8, at 10; Gibson et al., supra note 52, at 4.  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.  See Adrian Bowyer, RepRap GPL License: Distributing and Copying RepRap, RepRap (Dec. 14, 2006), http://reprap.org/wiki/ RepRapGPLLicence.  Anderson, supra note 3, at 94.  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).  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).  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.  Chua et al., supra note 8, at 220.  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).  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).  Gibson, supra note 52, at 295 (describing the use of additive manufacturing technology to combine materials).  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.”)  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).  Materials Comparison Sheet, Shapeways, http://www.shapeways.com/materials/material-options (last visited Apr. 2, 2013).  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).  Thingiverse, http://www.thingiverse.com (last visited Mar. 28, 2013).  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).  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.  Id. at 301.  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.  Id. at 338.  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).  Bre Pettis et al., Getting Started with MakerBot 65 (2012) (describing the limited possibilities available for modifying STL files).  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).  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).  See Pivot Point Int’l v. Charlene Prods., 372 F.3d. 913, 921 (7th Cir. 2004).  Id.  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.  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).  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).  17 U.S.C. § 106(1) (2012) (granting an exclusive right of reproduction to the copyright holder).  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] (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.  17 U.S.C. § 106(2) (2012) (setting forth copyright holder’s exclusive right to prepare derivative works).  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.  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.  TDPL, § 2.  See supra text accompanying notes 83-87.  TDPL, § 3.2.  TDPL, § 3.3(a).  TDPL, §§ 3.1, 3.3(b).  See Gibson, supra note 52, at 56 (discussing software that can imprint identification information on printed articles).  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.  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.  TDPL, § 1.6  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.  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.  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.  Id.  TDPL, § 1.4  TDPL, § 3.3.  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.  See supra text accompanying notes 63-65(detailing the comparative advantage of three-dimensional printing in producing certain articles and materials).  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”).  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.  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).  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).  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”).  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.”).  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).  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).  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).  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).  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.  See generally Eli Greenbaum, Open Source Semiconductor Core Licensing, 25 Harv. J.L. & Tech. 131 (2011).  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”).  TDPL, § 1.3.  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.  TDPL, § 3.7.  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.  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).  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.  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/.  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.  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.  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.  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).  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.
“[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.”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. 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. 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. 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. Conversely, copyright would be more valuable to artists who develop art for the broader community or who seek to commercialize their work. 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.  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. For example, the owners of a wall that had a Banksy piece affixed to it were able to sell their wall for $200,000. 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, and the same could have been done in the United States. 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.
2. Claims against Third Parties to Protect the Integrity of the Work and to Prevent Destruction of the WorkGraffiti artists could still enforce their VARA rights against third parties who have no rights in the physical property. 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. 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. 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. 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. 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.” 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.” In graffiti art, this requirement was met in one case where the work was “a community work that exhibits the concerns of the community.” The accepted work was a mural containing anti-drug, anti-alcohol and anti-smoking messages. 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. However, works by less-famous artists may have more difficulty meeting the recognized stature standard. This uncertainty is of real concern to artists who must embark on extensive legal research before litigation.  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,” 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. But even if that is the case, graffiti artists should still have the option to be losers.
(1) a painting, drawing, print, or sculpture, existing in a single copy, in a limited edition of 200 copies or fewer that are signed and consecutively numbered by the author, or, in the case of a sculpture, in multiple cast, carved, or fabricated sculptures of 200 or fewer that are consecutively numbered by the author and bear the signature or other identifying mark of the author; or (2) a still photographic image produced for exhibition purposes only, existing in a single copy that is signed by the author, or in a limited edition of 200 copies or fewer that are signed and consecutively numbered by the author.A work of visual art does not include–
(i) any poster, map, globe, chart, technical drawing, diagram, model, applied art, motion picture or other audiovisual work, book, magazine, newspaper, periodical, data base, electronic information service, electronic publication, or similar publication;
(ii) any merchandising item or advertising, promotional, descriptive, covering, or packaging material or container;
(iii) any portion or part of any item described in clause (i) or (ii);
(B) any work made for hire; or
(C) any work not subject to copyright protection under this title.
The Recent DOJ and FTC Policy Suggestions for Standard Setting Organizations – The Way out of Standard-Essential Patent Hold-Up
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.Here, B is holding up A by expropriating the return of his investment that cannot be recovered (so-called sunk costs). Economists and intuition suggest that, once incurred, sunk costs should not influence a firm’s subsequent economic decisions. 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.” 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. The pro-competitive benefits of standards are unanimously accepted. Notwithstanding, standardization carries some potentially anticompetitive baggage because it reduces competition to provide consumers with more choice. Standardization processes usually take place in private standard setting organizations, in which competing firms participate as members in a standard’s adoption. For a number of reasons, the existence of SSOs is a conspicuous matter from the point of view of antitrust law. First, they provide a communication forum amongst competitors that arguably facilitates collusion. 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. 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. Nonetheless, the general desirability of standardization has led to widespread acceptance of SSOs. 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 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. 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. On the other hand, a lax IPR policy can raise serious anticompetitive concerns attracting the attention of antitrust agencies. 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.  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.  Disclosure requirements are not at all new and can vary greatly in their scope and determinateness. Essentially, they require some sort of publication of patents possibly tangential to the technology area of the standard.  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” which is only lifted after the “fundamental transformation” of the market has taken place. In other words, while different technologies competed for inclusion before standardization, now competition for substitution is restricted as lock-in and network effects make redesign costly and unprofitable. Moreover, patent law may even incentivize opportunism. A particularly egregious example of this is the divisional application procedure. 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). Alas, patent law considers the effective filing date of this type of subsequent application to be that of the parent application. To understand how a divisional application can be misused in the standardization process, consider the following:
Example 3: 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. The USPTO will now demand the “application to be restricted to one of the inventions.” 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.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.” Granted, “the new claims must find adequate support in the original application.” 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. Such conduct has also been the subject of antitrust litigation. In Rambus Inc. v. FTC 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.” 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. If the FTC could not prove the former, it had only proven deceptive behavior, which in itself did not constitute an antitrust violation. 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.” 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. 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 and has been mentioned by scholars as a tool to mitigate hold-up. 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. The question of concern here is: does the policy suggestion address the contentious issues?   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.” However, while a pure disclosure rule certainly is helpful in some cases, it falls short of effectively countervailing patent hold-up. Most SSOs have adopted disclosure rules in their patent policies. 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? For example, could SSOs require disclosure of maximum royalty rates and most restrictive licensing terms? Is a rule that establishes joint negotiation on licensing terms by SSO members or the SSO itself permissible? 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. 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.  and dynamic efficiency. It is argued that joint negotiation rules could lead to a loss in allocative efficiency resulting from monopsony power on behalf of the licensees. Standard monopsonist models assume a static deadweight loss as the result of a decrease in demand below competitive levels. Yet, Farrell et al. claim that such concerns are not relevant to IP licenses as supply curves in these markets are flat. This is also true for the marginal cost curve of intellectual property, which equals zero. 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. 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.” 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. 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. 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. Gregory Sidak claims joint negotiation results in dynamic inefficiencies as soon as it pressures royalty rates to equal marginal cost. 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. The defendants in Sony Electronics, Inc. v. Soundview Technologies, Inc. challenged this view. 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.” 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. 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. 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.  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. 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. 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. Essentially, price competition could ensue before firms are locked into the standard. On the other hand, anticompetitive effects are conceivable. 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. 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. 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.  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. 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.  Thus, the suggestion proposes a choice rule. Cross-licensing agreements involve two firms that license a number of their respective patents to each other. 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.  This phenomenon occurs when a downstream firm 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. 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?Economists call the underlying problem here the “Cournot complements” effect. Each patent holder can disregard negative externalities that the royalty rate it charges imposes on the cumulative royalty rate paid by the manufacturer. 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. In effect, these circumstances describe the “individual hold-up problem”: the effects of hold-up are exacerbated the more patents the standard encumbers. Cross-licenses are a market-driven mechanism that can reduce the effects of royalty stacking. 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. 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. 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. 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. The result is an expansion of its downstream market share to the detriment of its competitors. 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. 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. 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.  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.   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.  This remedial measure is essential to upholding the exclusive nature of the patent. However, a court can also issue damages calculated by lost profits of the patentee or, in absence thereof, a “reasonable royalty.” 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. 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”. 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.” 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.” Other studies have reached similar conclusions. 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. Moreover, to a standard, a single patent is typically only one of many contributions. 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. 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. 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. 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”. 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. 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. 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.” 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. 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. 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. This is a matter of “economics of improvement.” 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.” 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. Particularly, firms that have committed to RAND terms face significant difficulties in this respect, given that they have already committed to license.  It has jurisdiction over matters relating to Section 337 of the Tariff Act of 1930. Plaintiffs can obtain exclusion orders if they can show that the downstream product infringes “a valid and enforceable United States patent”. 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”. Unsurprisingly, plaintiffs have increasingly chosen the ITC as their venue of choice for patent infringement claims. 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. Four of these patents were subject to RAND commitments MMI had made. 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. 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.” 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, 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.” Microsoft in turn contested that the offered rate of 2.25% on the end price was a sham, unreasonable offer. The ITC conceded that the rate offered by MMI “could not possibly have been accepted by Microsoft” and was thereby misleading. 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.” 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.  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. 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. 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. 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.  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. 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.
* 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.  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).  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).  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).  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).  Id. at 3.  For literature arguing the contrary, see Cotter, supra note 2, at 1152 n.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).  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.  Péter Cserne, Duress, in 6 Contract Law and Economics 57, 68 (Gerrit De Geest ed., 2d ed. 2011).  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).  Robert S. Pindyck & Daniel L. Rubinfield, Microeconomics, 231-32 (8th ed. 2013).  Id.; Carlton & Perloff, supra note 7, at 29.  Mark A. Lemley, Intellectual Property Rights and Standard-Setting Organizations, 90 Cal. L. Rev. 1889, 1896 (2002).  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).  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.  Lemley, supra note 13, at 1900.  Hovenkamp et. al., supra note 15, at § 35.1 (stating that standards might also be adopted de facto or by government action).  Id. at § 35.2.  Id.  Id.  Id.  See Lemley, supra note 13, at 1900.  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).  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)).  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.”).  See Bekkers & Updegrove, supra note 23, at 4.  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.”).  Wayland, supra note 4,at 5; see Hesse, supra note 3, at 10.  See Bekkers & Updegrove, supra note 23, at 48-49.  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).  Miller, supra note 25, at 366-67 (citing John Rawls, Theory of Justice 136-142 (1971)).  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.  “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).  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.  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).  See 35 U.S.C. § 121 (2006).  See Mueller, supra note 30, at 55-56; Lester Horwitz, Patent Office Rules and Practice 201.06 (8d ed., 2003).  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).  See Areeda & Hovenkamp, supra note 38, at ¶ 712b.  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.”).  A so-called “restriction requirement,” 35 U.S.C. § 121 (2005).  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).  Kingsdown Med. Consultants, Ltd. v. Hollister Inc., 863 F2d 867, 874 (Fed Cir 1988); Areeda & Hovenkamp, supra note 38 at ¶ 712a n.7.  Areeda & Hovenkamp, supra note 38 at ¶ 712n n.7.  Areeda & Hovenkamp, supra note 38 at ¶ 712b.  See Rambus Inc. v. F.T.C., 522 F.3d 456 (D.C. Cir. 2008); Areeda & Hovenkamp, supra note 38 at ¶ 712b.  Areeda & Hovenkamp, supra note 38 at ¶ 712b.  Rambus Inc., 522 F.3d at 462; Areeda & Hovenkamp, supra note 38 at ¶ 712b.  Rambus Inc., 522 F.3d at 464; Areeda & Hovenkamp, supra note 38 at ¶ 712b.  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.  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.”).  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.  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).  See Farrell et al., supra note 8 at 609.  For a variety of possible disclosure and licensing rules in IPR policies, see generally Bekkers & Updegrove, supra note 23.  Sew, e.g., ETSI Rules of Procedure § 6.4 (2008), available at http://www.etsi.org/WebSite/document/Legal/ETSI_IPR-Policy.pdf.  NFC Forum, Inc. Intellectual Property Rights, 1 (2004), available at http://www.nfc-forum.org/join/join_thanks/NFC_Forum_IPR_POLICY.pdf.  Bekkers & Updegrove, supra note 23, at 98.  Lemley, supra note 13, at 1904.  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.  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.  E.g., Cotter, supra note 2, at 1202; Farrel et al., supra note 8, at 632.  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).  “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.  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).  For a good explanation of monopsony power and monopsonist buyers, see Pindyck & Rubinfield, supra note 11, at 385.  Sidak, supra note 65 at 142; see Cotter, supra note 2, at 1202 n.282.  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.”).  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.  Greene, supra note 69, at ¶ 31.  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.  Greene, supra note 69, at ¶ 31.  See Cotter, supra note 2, at 1202-1203.  For ex ante group negotiations, see, e.g., U.S. Dep’t of Justice & Fed. Trade Comm’n, supra note 63, at 52.  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.  Sidak, supra note 65, at 157.  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.  Sony Elecs., Inc. v. Soundview Tech., Inc., 157 F. Supp. 2d 180, 185 (D. Conn. 2001).  Id. at 186.  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).  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.”).  See Bekkers & Updegrove, supra note 23, at 94.  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).  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.  Bekkers & Updegrove, supra note 23, at 95.  For a full study, see Blind et al., supra note 83.  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.  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).  Wayland, supra note 4, at 9.  Mark A. Lemley, Ten Things to Do About Patent Hold-up of Standards, 47 B.C. L. Rev. 149, 157 (2007).  Lemley, supra note 13, at 1959.  Wayland, supra note 4, at 9.  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.  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).  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.  Lemley & Shapiro, supra note 94, at 1993.  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).  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.  Geradin et al., supra note 97, at 145-46.  Lemley & Shapiro, supra note 94 at 1993; Geradin et al., supra note 97, at 146.  Lemley & Shapiro, supra note 94, at 2011; Geradin et al. supra note 97, at 154.  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.  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.  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).  Schmidt, supra note 103, at 6.  Krattenmaker & Salopp, supra note 104, at 230.  Rubinfield & Maness, supra note 23,at 87; Krattenmaker & Salopp, supra note 104, at 230.  Krattenmaker & Salopp, supra note 104, at 234-42.  See Farrell et al., supra note 8, at 638.  See id.  Hesse, supra note 3, at 11.  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.  35 U.S.C. § 283 (2005).  Mueller, supra note 30, at 482.  35 U.S.C. § 284 (2005).  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.  eBay Inc. v MercExchange, L.L.C., 547 U.S. 388, 393-94 (2006); see also Cotter, supra note 2, at 1174.  eBay, 547 U.S. at 391.  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).  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).  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”).  Farrell et al., supra note 8, at 638.  Shapiro, supra note 112, at 289.  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).  Shapiro, supra note 112, at 289, 296-97 (reflecting strong value of the patented feature, versus a lower rate for a relatively weak patent).  Id. at 308.  Elhauge, supra note 112, at 541.  Id.  Id.  Id. at 542.  Id.  Cotter, supra note 2, at 1168.  Id.  Id. at 1164.  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.  Id.  Id.  19 U.S.C. § 1337 (2006).  19 U.S.C. § 1337(a)(1)(B)(i), (d)(1).  19 U.S.C. § 1337(d)(1).  Brill, supra note 135, at 5.  Certain Gaming & Entm’t Consoles, Related Software, & Components Thereof, Inv. No. 337-TA-752 at *2-4.  Id. at *159.  Id. at *162.  Id. at *163.  A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1041 (Fed. Cir. 1992) (“ The actor, who usually must have knowledge of the true facts, communicates something in a misleading way, either by words, conduct or silence.  The other relies upon that communication.  And the other would be harmed materially if the actor is later permitted to assert any claim inconsistent with his earlier conduct.”).  Certain Gaming & Entm’t Consoles, Related Software, & Components Thereof, Inv. No. 337-TA-752,at *167.  Id.  Id. at *168.  Id. at *170.  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.  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.”).  See Shapiro, supra note 112, at 308 (proposing courts grant stays pending redesign).  Hesse, supra note 3, at 10; Wayland, supra note 4, at 9.  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).  Steve Lohr, Widening Scrutiny of Google’s Smartphone Patents, N.Y. Times, Oct. 9, 2012, at B1.  Shapiro, supra note 102, at 126.
Part of the Team: Building Closer Relationships Between MLB Teams and Independent Agents in the Dominican Republic through an MLB Code of Conduct
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.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. 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. Because the investment in most Dominican players is small, teams are more concerned with finding a diamond in the rough than developing talent. Consequently, only about two percent of academy players ever make it to the American major league system. 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. By comparison, the per capita GDP in the Dominican Republic is $8,300, and 34.4% of the country lives below the poverty line. 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. The pressure to succeed may also lead to the use of performance-enhancing drugs. Such drugs both exacerbate the risk of immediate injury and can contribute to life-long health problems. 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, although some camps have partnered with local schools. A few camps provide educational facilities on site. 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. 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. A buscón is 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. The player receives a signing bonus; the buscón takes a percentage cut; and the relationship is severed. 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. These children may drop out of school and enter the custody of the buscón. Instead of completing compulsory education, which in the Dominican Republic is 8 years, 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, 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. 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. 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. 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 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, 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, 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. 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.  As described by Gary Gereffi, globalized supply chains may be divided into two types – “producer-driven” and “buyer-driven” global commodity chains:
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.In a buyer-driven commodity chain, companies often receive goods or services from many low-level suppliers, or through an intermediary. 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. 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. 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. Typically, even if an MNC would like to do so, lead firms have a difficult time policing the bottom rungs of their supply chain. 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. 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, 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. Finally, as noted earlier, MLB’s presence in the Dominican Republic is responsible for the development of the independent academy system. 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. 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. 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, 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 . . . .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. 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, 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. 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. 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. 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. 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. 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. 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. Agents of the teams must scout the players represented by a buscón and come to an agreement with both the player and the buscón. 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. 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.  Both the United States and the Dominican Republic are members of the ILO. Countries that ratify any given convention are obligated to make the convention a part of their national law. However, in addition to voluntary ratification, in 1998 the ILO adopted the “Declaration of Fundamental Principles and Rights at Work.” 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.” 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.”  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, education, and health and safety. Both the United States and the Dominican Republic have ratified the Convention without reservation. The UN Committee on the Rights of the Child oversees compliance with the Convention. The countries that have ratified the Convention are required to prepare reports documenting their compliance. 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.  to which the Dominican Republic is a signatory. The fundamental convention sets the minimum age for employment at 15. 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 (13 for light work). The Dominican Republic ratified under the exemption. 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. 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. 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.  and the UN Declaration of Human Rights (Article 26) 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. 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. 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. Although the Dominican Republic requires nine years of compulsory education, it is clear that most children do not receive the required level. 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.  Although the Dominican Republic has ratified some health and safety standards for particularly dangerous employment sectors, such as construction, it has not ratified broader, cross-industry standards. 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. 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. 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.” 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, the treatment of young baseball players in the Dominican Republic surely violates Article 32.  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. 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. 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. 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. 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. 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. 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. Although the ATCA has been used to prosecute torts “in violation of the law of nations,” the state of the law is in flux. 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. 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. 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, 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.  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. 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, 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. Over time, some corporations have also seen CCOC as a means to achieve other business ends, such as efficiency and retention of employees 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.  Companies such as Levi Strauss, Nike, and Reebok 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. Under either type of code, many CCOC incorporate labor standards as set out by the ILO “Declaration of Fundamental Principles and Rights at Work.” 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. Levi’s dealings with contractors in countries across the globe are governed by the two-part “global sourcing and operating guidelines.” 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. 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). The TOE covers wages and benefits, working hours, child labor, prison and other kinds of forced labor, discrimination, and disciplinary practices. Levi Strauss works with the third party, non-profit monitoring organization, Verité, to ensure that its suppliers comply with the code of conduct. In some instances, Levi Strauss has withdrawn from countries for violations of the TOE. 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. 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. 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.  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, 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. 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. 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 5th grade. 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. 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. 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.  However, most children drop out after the fifth grade. 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, 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. 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. 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. 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.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. 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. 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. 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. 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. 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 SchoolsEven 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 or have on-site educational facilities. Given the relatively low cost to the teams, 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.  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. 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. 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. 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. Likewise, players in the official MLB academies make a wage that is many times higher than the prevailing factory wages. 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.  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. 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. 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. 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. 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, 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. 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. The plight of Dominican players was even documented in the feature film Sugar. 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. 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, 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. 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. 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.
* 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.  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.  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.  See Gregory, supra note 1.  Id.  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.  See Gregory, supra note 1.  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].  See Gregory, supra note 1.  See Spagnuolo, supra note 2, at 275.  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).  See Major League Rules, available at http://bizofbaseball.com/docs/MajorLeagueRules-2008.pdf [hereinafter MLR].  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.”).  Id. § 4(a).  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/.  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.”).  Id. § 3(a)(2)(A).  Id. § 3(a)(3)(B)-(E).  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.  MLR, supra note 11, § 3(a)(1)(B)(i).  Id. § 3(a)(1)(B)(ii).  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-a-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.”).  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).  See Teams by Affiliation, MILB.com, http://www.milb.com/milb/info/affiliations.jsp.  See Sanchez, supra note 5.  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).  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.”).  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).  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.).  See Spagnuolo, supra note 2, at 270.  Id.  See Gregory, supra note 1.  Id.  Id.  See Spagnuolo, supra note 2, at 272-73.  See id., at 271 (referring to this method of signing Dominican players as the “Boatload Mentality”).  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.”).  See Gregory, supra note 1.  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.  See Gregory, supra note 1.  CIA, The World Factbook, https://www.cia.gov/library/publications/the-world-factbook/geos/dr.html.  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.  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).  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].  See Sanchez, supra note 5.  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.  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”).  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).  See Gregory, supra note 1; Fainaru, Business of Building, supra note 7.  See Gregory, supra note 1; Fainaru, Business of Building, supra note 7.  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).  Fainaru, Business of Building, supra note 7.  Fainaru, Business of Building, supra note 7.  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].  See Santo Domingo Office Mission Statement, MLB.comDR, http://mlb.mlb.com/dr/santo_domingo.jsp.  See Wasch, supra note 25.  See Fainaru, Injecting Hope, supra note 43.  See Gregory, supra note 1.  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.  Id.  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).  Spagnulo, supra note 2, at 278 (“Remittances from family members in the United States are one of the largest contributors to the Dominican economy.”).  “‘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.  Id.  Id.  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).  Id.  Id.  Id.  See Gillen, supra note 65 and 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.  See Gereffi, supra note 62.  See id.  See Ruck, supra note 10.  Id.  See Gereffi, supra note 62.  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.  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.  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).  See Gregory, supra, note 1.  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).  See Fainaru, Business of Building, supra note 7.  Id.  See Cmty. for Creative Non-Violence, 490 U.S. 730.  See Gregory, supra, note 1.  As noted above, this can include the use of steroids. See Fainaru, Injecting Hope, supra note 43.  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.”).  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.  See Fainaru, Business of Building, supra note 7.  See Gereffi, supra note 62.  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.”).  Constitution of the International Labour Organisation, available at http://www.ilo.org/ilolex/english/constq.htm (last visited Apr. 13, 2012) [hereinafter ILO].  Alphabetical List of ILO Member Countries, http://www.ilo.org/public/english/standards/relm/country.htm (last visited Apr. 13, 2012).  See ILO, supra note 90, 19 ¶ 5(d).  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).  Id. ¶ 2 (emphasis added).  Id.  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.  Id. at Article 32.  Id. at Article 28.  Id. at Article 32.  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.  Monitoring the Fulfilment of States Obligations, UNICEF, http://www.unicef.org/crc/index_30210.html (last updated Nov. 5, 2005).  Id.  Id.  Convention Concerning Minimum Age for Admission to Employment, June 26, 1973, 1015 U.N.T.S. 297 [hereinafter Minimum Age Convention].  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].  Minimum Age Convention, supra note 104, art. 2, no. 3, at 300.  Id. at art. 2, no. 4.  Id. at art. 7, no. 1, at 302.  Ratifications C138, supra note 105.  See Zimmer, supra note 27, at 421 and text accompanying note 128.  See Fainaru, Business of Building, supra note 7; Gregory, supra note 1.  See UN Convention of the Rights of the Child, supra note 96, art. 28, at 53.  Universal Declaration of Human Rights, G.A. Res. 217 (III) A, art. 26, U.N. Doc. A/RES/217(III) (Dec. 10, 1948).  See id.; United Nations Convention of the Rights of the Child, supra note 96, art. 28, at 53.  See Fainaru, Business of Building, supra note 7.  See Gregory, supra note 1.  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).  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).  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).  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).  See Guevara & Fidler, supra note 42, at 123-24.  See Fainaru, Injecting Hope, supra note 43.  See U.N. Convention of the Rights of the Child, supra note 96, art. 32, at 54.  See Fainaru, Injecting Hope, supra note 43; Guevara & Fidler, supra note 42, at 123-24.  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).  See Zimmer, supra note 27.  See Ruck, supra note 10.  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).  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)).  See Wasch, supra note 25, at 101.  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).  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.”).  28 U.S.C. § 1350 (2006).  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).  See Collingsworth, supra note 132, at 197.  See Collingsworth, supra note 132, at 185-95.  See Wasch, supra note 25, at 123.  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/.  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.  See Jonassen, supra note 69, 42-46.  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.  These values are espoused by consultancy organizations such as Business for Social Responsibility. BSR, http://www.bsr.org/ (last visited Mar. 7, 2013).  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.  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.  See Nike, Inc., Code of Conduct (2010), available at http://www.nikeinc.com/system/assets/2806/Nike_Code_of_Conduct_original.pdf.  See Adidas Grp., Workplace Standards (2007), available at http://www.adidas-group.com/en/sustainability/assets/workplace_standards/ English_Workplace%20Standards.pdf.  See Jonassen, supra note 69, at 39-40.  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.  See Jonassen, supra note 69, at 43.  See Levi Global Sourcing, supra note 148.  See Levi Global Sourcing, supra note 148.  See Levi Global Sourcing, supra note 148.  Id.  Verité, Client Testimonials, http://www.verite.org/AboutUs/ClientTestimonials (last visited Apr. 12, 2012).  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).  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.  Id.  Id.  See MLR, supra note 11.  Though of course MLB has a stake in the production of star players, since such players drive interest in MLB generally.  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).  See Gillen, supra note 65, at 1085.  See Wasch, supra note 25, at 107.  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).  See Zimmer, supra note 27, at 428.  See ILAB, supra note 53, at 152.  See Wasch, supra note 25, at 107.  See Wasch, supra note 25, at 107.  See Cmty. for Creative Non-Violence, 490 U.S. 730.  See Zimmer, supra note 27, at 427.  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).  See Wasch, supra note 25, at 123-4.  See Zimmer, supra note 27, at 421.  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.  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.”).  See Sanchez, supra note 5.  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.  See Wasch, supra note 25, at 108-9.  See Gregory, supra note 1.  As noted earlier, the Pittsburg Pirates, MLB’s poorest team, paid $75,000 in 2010 to run an educational program at its academy. Id.  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.”).  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.  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.  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.  See Wasch, supra note 25, at 108.  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.  CBA, supra note 38, § 15(F).  See Wasch, supra note 25, at 106 (quoting http://www.usatoday.com/sports/baseball/2004-04-13-cover-latinos_x.htm).  MLR, supra note 11, § 3(a)(1)(B)(i)-(ii).  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.  See CBA, supra note 38.  In 2010, over 10% (86 of 833) of players on MLB opening day rosters were from the Dominican Republic. See Gregory, supra note 1.  See Zimmer, supra note 27, at 428.  See Gregory, supra note 1; Fainaru, Business of Building, supra note 7.  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.  David Ortiz of the Boston Red Sox and Robinson Cano of the New York Yankees, to give two prominent examples.  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.”).  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).  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.
|Table 1: Work Made For Hire Benefits|
|No Assignment from Employee|
|No Court Intervention|
|Exclusion and Licensing|
|Transfer to Others|
|Protection from Future Rights|
|Table2: Work Made For Hire v. Shop Rights|
|No Assignment from Employee||✓|
|No Court Intervention||✓|
|Exclusion and Licensing|
|Transfer to Others|
|Protection from Future Rights|
|Table3: Work Made For Hire v. Hired-to-Invent|
|No Assignment from Employee|
|No Court Intervention|
|Exclusion and Licensing||✓|
|Transfer to Others||✓|
|Protection from Future Rights|
|Table4: Work Made For Hire v. Employee Improvements|
|No Assignment from Employee||✓|
|No Court Intervention||✓|
|Exclusion and Licensing||✓|
|Transfer to Others||✓|
|Protection from Future Rights|
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.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. 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. 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. 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,” 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:
 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. . . .  [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. . . .  [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.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.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.  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. 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. 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. 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. 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.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. 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.  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,” By 1800, there were about a thousand, and by 1900 there were approximately 100,000. 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.” 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,” 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. 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. Such advances were only possible due to the increased interplay between science and technology that continued to grow throughout the nineteenth century. 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. 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,” 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: 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. He received a patent on his process in 1844, and almost immediately became embroiled in patent litigation. 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. 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. 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.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. 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. As such, McClurg is generally thought of as the first shop rights case. 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. 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!” Moreover, scientists were making significant advances in electric theory, evolution, and thermodynamics. 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. Further, the 1850s saw huge advances in telecommunications technology, including Morse’s testing of the first transatlantic telegraph cable. Even Abraham Lincoln took the time to consider the discoveries, inventions and improvements that resulted from America’s willingness to observe, reflect and experiment. 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,” 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. 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.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. 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.  Similarly, in the mid-1860s, scientists were making major advances in chemistry and thermodynamics. Then, in 1865, George Westinghouse received his first patent for a rotary steam engine, followed by patents for railroad frogs and air brakes. A few years later, a “self-taught practical innovator” by the name of Thomas Alva Edison would apply for his first patent. 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,” 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. 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. 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. The new invention was patented and eventually assigned to the plaintiff who then sued the Agawam Woolen Company for infringement. Agawam defended, in part, by arguing that it was Winslow, and not Goulding, that invented the improvements for which the patent was granted. 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. 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. 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. 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,” 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.” 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—had filed for patents on 21 inventions by 1871. As inventive activity began to involve more complex technology, the proportion of inventions devised by solo inventors continued to decline. 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. 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. 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. 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. 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,” 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,” 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. 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 and employee improvements doctrines. The courts, however, failed to develop a mechanism for dealing with employees that were explicitly hired to invent, until the hired-to-invent doctrine was formally recognized by the Supreme Court in 1924. Also, the rise of the corporate form introduced additional complications, such as whether a shop right could be assigned. 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. Yet, despite the fact that today the “ordinary inventor is . . . a joint inventor who invents as part of a team,” 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. Thus, the need to coordinate among multiple individuals that existed in copyright law in the nineteenth century did not exist in patent law. 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. In 1885, only 12% of U.S. patents were issued to corporations. 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,” In the past decade, those efforts have become increasingly successful. 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. 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:
|Table 5: Work Made For Hire Benefits v. Patent Doctrines|
|Shop Rights||Hired-to-Invent||Employee Improv.|
|No Assignment from Employee||✓||✓|
|No Court Intervention||✓||✓|
|Exclusion and Licensing||✓||✓|
|Transfer to Others||✓||✓|
|Protection from Future Rights|
(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. 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.
(1) a work prepared by an employee within the scope of his or her employment; or (2) a work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.”).For example, comic book authors generally are required to sign agreements establishing that their work is commissioned as a work made for hire. See Joshua L. Simmons, Catwoman or the Kingpin: Potential Reasons Comic Book Publishers Do Not Enforce Their Copyrights Against Comic Book Infringers, 33 Colum. J.L. & Arts 267, 272 (2010) (describing comic book work made for hire agreements and caselaw).
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.
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.
[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.