Law School Outline - Legal Theory of IP - Kobayashi

Legal & Economic Theory of IP: Outline Disclaimer: These notes and outlines are provided asis without any warranty as to their correctness, completeness, or quality. They are not meant to be a substitute for your own efforts. You may copy and forward this document as long as you do not alter its contents. 12/16/2006 Revision 0.1 Author: Philip Larson Legal & Economic Theory of IP: Outline Table of Contents 1. BANKRUPTCY LAW: OUTLINE .................................................................................. 3 1.1 INTRODUCTION.................................................................................................... 3 Philip Larson Page 2 Legal & Economic Theory of IP: Outline 1. LEGAL & ECONOMIC THEORY OF IP: OUTLINE 1.1 INTRODUCTION A. **Demsetz, H., "Toward a Theory of Property Rights", 57 Am. Econ. Rev. 347(1966) a. Primary function of property rights is to internalize externalities b. Property Rights emerge to internalize externalities when the gains of internalization become larger than the cost of internalization. c. Property rights emerged in fur trade in the forests but NOT in the hunting on the plains, where the costs were too high. d. Property rights arise when it is economic to internalize the benefits and costs of the externalities. e. Right to exclude reduces the cost of negotiation. B. **Easterbrook, F. H. "Insider Trading, Secret Agents, Evidentiary Privileges, and the Production of Information, 1981 Sup. Ct. Rev. 309 (1982). a. The value of information is in its use in transactions with third parties. C. **Landes and Posner, Chapter 1, 12, 15. D. **P. Newman, JUDGE PAULINE NEWMAN LUNCHEON SPEECH TO ABA IPL SECTION, 48 PTCJ 277 a. Labor theory of Property: athose who have labored in the creation of property are entitled to own the things they create. b. Property Theory: the right to exclude others is the essence of property. c. Social Welfare Theory: intellectual property is not about property rights, it is about social value. d. Monopoly Theory: intellectual property is a form of economic monopoly. e. Investment Incentive: intellectual property is about creating an environment that supports private investment in technological innovation. f. Rent Seeking Theory: Rent is a situation in which the return exceeds the opportunity cost. g. Reward E. **International News Service v. Associated Press, 248 U.S. 215 (1918). (Merges, et al., pp. 836-848). a. Defendant engaged in the systematic practice of taking the bodies of news stories from bulletin boards and early editions of complainant's newspapers and selling them as its own. Complainant sued, seeking, among other things, to enjoin defendant from engaging in such activity. The trial court decided to withhold the injunction in anticipation of the appeal. The appellate court, however, issued the injunction and thus restrained defendant from taking or gainfully using any of complainant's news until its commercial value as news had passed away. Emphasizing the competitive relationship between the parties, the Supreme Court concluded that, although it involved misappropriation rather than misrepresentation, defendant's strategy amounted to unfair competition in business. Refusing to create a more specific injunction, the court affirmed the decree of the appellate court. b. Held: unfair business practice to steal the news. D had a property right. c. INS v. AP i. “Doctrine of Misappropriation” ii. Facts: Two competing news companies were in the business of reporting on World War I in the US. Their business hinged on getting fast and accurate reports published. The Associated Press had many expensive arrangements with overseas reporters to gather news reports from the field. International News Service gained access to the APs news through bribery, news bulletin boards and early editions. INS would rewrite the news and publish it as their own. The AP brought an action against INS for copyright infringement. iii. Issue: Can you copyright facts? Once this information is made public, iv. Held: No. This case upholds common law rule that there is no copyright in facts. You can only copyright expressions. The court struggled with distinguishing interference with business practices from interference with intellectual property rights. AP said this was unfair competition, a violation of copyright, etc. v. Argument: there is a quasi-property right. Now we call it “hot news”…You have protection of facts, which theoretically aren’t covered by copyright law. This is under Swift v. Tyson, prior to Erie, so the US Supreme Court is applying state law and they come up with this concept of a quasi-property right. 1. Concurrence: Holmes said this was unfair competition, the solution to which is attribution. They have to deal with the reverse passing off issue. When you pass off someone else’s Philip Larson Page 3 Legal & Economic Theory of IP: Outline product as your own, that is reverse passing off. Holmes says it is okay as long as you give AP credit. Does this deal with the free-riding problem? 2. What are the objections? You have a news reputation of ill repute that is a free-rider. Why not treat this as traditional misappropriation and breach of K. There is good evidence that INS were no good free-riders. 3. Is misappropriation alive today? There is no copyright to news/facts. You can’t copyright an unoriginal database of phone numbers and addresses. If someone wanted to bring a claim of misappropriation under state law, could that particular action survive preemption? What is the primary principal behind INS? What is the general economic principal behind INS? i. Free-riding – it is a theory of intellectual property based on free-riding, misappropriation, etc. d. e. F. **Epstein, R. A. "International News Service v. Associated Press: Custom and Law as Sources of Property Rights in News," 78 Va. L. Rev. 85 (1992). [PDF version available at http://www.heinonline.org]. G. **Posner, R. A. "Misappropriation: A Dirge", 40 Hou. L. Rev. 621 (2003). a. Thesis: we do not need a theory of misappropriation. It does not help in IP law. b. Missappropriation in IP: this is the name of a doctrine growing out of the INS case. Additionally, it is a principal that rationalizes IP as a whole. c. Missappropriation, if interpreted as “free riding”, cannot be the unifying principal for the entire law of IP. Some free-riding is good. There is a use/creation tradeoff. Missappropriation fails d. Use/Creation: if the upfront cost of creating IP is high, if there is free copying the creator may not be able to recover the costs of creation. There will be no incentive to create. However, there is incentive to have IP in the public domain from which other inventors and authors can borrow freely. i. Free-riding on IP is not always a bad thing, making the definition of “misappropriation” difficult. e. Use vs. Creation: creation needs to be incented. However, you also want wide dissemination to the extent it is a public good. Therefore, we want some degree of protection to encourage creation, but we don’t want it to be too strong because they come at a cost of dissemination (inadequate dissemination of the idea). This is the use vs. creation tension that exists in IP that doesn’t really exist in real property. i. Public goods should be widely used. So you have this tradeoff. This suggests that limits in property rights (limited times for patents, limits in scope, hurdles up front, ability to lose trademarks if they are generic, abandonment, etc.). There are limits, some of which you don’t see regarding real physical property. Use/creation tradeoff suggests there is an optimal set of rules, which of course implies there should be limits. H. Whetan v. Peters: Facts: the third reporter of SC decisions compiled them carefully with annotations. Peters, his successor, in addition to publishing the current volumes, went through Whetan’s books and published an abridged edition that just had the cases. This destroyed the market for Whetan’s original editions. Issue: Can you copyright text of court opinions? a. Rule: Judicial decisions are not copyrightable. They are public domain and thus “commons” available for all to use w/o a license. Neither are statutes. b. Transaction costs justification: The transaction costs of obtaining licenses for the myriad of lawyers, litigants, judges and law professors who make copies of judicial decisions would be immense. c. Economic justification: If you are going to force people to be bound by law, it doesn’t make sense to have a property right or a monopoly in the content of the law. Access is incredibly important as is use. d. I. **Harold Demsetz, The Private Production of Public Goods, 8 J. L. & Econ. 293 (1970). J. **Ronald Coase, The Lighthouse in Economics, 17 J. L. & Econ. 357 (1974). **Fiest Publications v. Rural Telephone Service, 499 U.S. 340 (1991)). Merges, et al., pp. 378-386) a. Facts: Respondent sued petitioner for copyright infringement because petitioner had used information contained in its white pages in the compilation of its own directory. The court reversed a grant of summary judgment in favor of respondent because the selection, coordination, and arrangement of respondent's white pages did not satisfy the minimum constitutional standards for copyright protection. Specifically, the court found that respondent's white pages, which contained only factual information, i.e., phone numbers, addresses, and names listed in alphabetical order, lacked the requisite originality because respondent had not selected, coordinated, or arranged the uncopyrightable facts in any original way. b. Questions: Does Feist preclude copyright protection in databases? Database owners, like in ProCD, are turning to contract law to protect the database since they can’t in copyright. K. **ProCD v. Zeidenberg, 86 F.3d 1447 (7th Cir 1996) (Merges, et al., pp. 848-55). Philip Larson Page 4 Legal & Economic Theory of IP: Outline Facts: Appellant included a shrink-wrap license in its packaged software. Appellant also chose to discriminate in its pricing of the software between commercial and non-commercial users. Appellee purchased a consumer package of the software, but chose to ignore the license restricting its use to non-commercial purposes. Seeking to enforce the license, appellant filed for an injunction. The trial court denied the injunction, holding that the license was ineffectual because the terms did not appear on the outside of the package. On appeal, the court held that the license was to be treated as an ordinary contract accompanying the sale of products. While the terms of the license were included within the package, its terms afforded the purchaser an opportunity to review the product and its terms before being bound. Since the license agreement was a two-party contract, it was not equivalent to the rights of copyright. b. Main Point: Investors and creators can use contract law to protect some intellectual property. Companies dissatisfied with IP law can create their own private IP rights through K. Some argue that contracts affording copyright-like protections are preempted by federal law. L. ProCD v Zeidenberg – had a CD that had the equivalent of 3000 phone books. It was simply a compilation of business entities. ProCD stripped out facts from…Here, there was a violation of contract. Why Zeidenberg v. ProCD controversial if this is simply a K case? The reporter, Ray Nimmer, modeled UCITA on this private K license regime embodied in ProCD. The report favorably cites Easterbrook’s decision. How many states have passed uniform laws that would cover things like this? Two (MD and VA). Four or five states passed Anti-UCITA acts. a. How many had subscriptions with AOL? If you had a problem with AOL, there was a choice of forum and choice of law clause in it? You have to go to VA. And you have to adjudicate under the laws of VA. b. There is certainly a business justification for not exposing AOL to small claims in courts all over the US. If there is agreement on this, why should the courts not enforce them? c. The debate over ProCD is a rehash of the concept of Contracts of Adhesion. Yeah, but there are efficiency reasons for certain types of contracts. On the other hand, people don’t like having to read these licenses. Transaction costs are small, but over many transactions, people aren’t willing to do it. They rely on form contracts that generally aren’t anticonsumer. In a competitive market, you wouldn’t want terms that benefit you less than they harm the consumer. d. Second argument why this is controversial: He could have returned it. Under UCITA, if you open it and find the terms unacceptable, you could return it. e. Third argument why not to enforce these license agreements? ProCD has created something that under Feist, the underlying facts, aren’t copyrightable. Zeidenberg’s lawyer suggests that they could argue that since ProCD can’t copyright the material, they created a vast K/license scheme that mimicked copyright law. § 301 says you can’t have state laws that give rights similar to copyright. Is this one? Well, the terms only apply to you, not the rest of the world. f. Should you be free to create Ks to protect intellectual property outside of standard IP law like copyright, patent, and trademark law? Could you say I have a K just between you and me and you agree to abide by all the titles of Section 17, except 107, 106, etc. Would this be enforceable? g. Should we allow those who product public goods to appropriate the gain? To some extent, sure. If it is in the public domain, some people say you can’t appropriate it. Kobayashi says this is silly because extracting it from the public domain and putting it in some form is of value to the public. This does not take things out of the public domain because anyone else could do this as well. Moreover, it creates a valuable service so why not let them charge. ProCD can charge. But they can’t sell it at two prices. Just figure out a price. Or, if you say that ProCD can’t enforce the restrictions on the license with Zeidenberg, its basically the same thing. They won’t offer both licenses, they will simply offer one option. What is the effect of having a rule that you can’t enforce certain contract clauses? Price discrimination. ProCD is engaging in price discrimination. Third degree price discrimination is charging people with different prices if they have different demands. A commercial user may have heavy demand so you charge him a lot. Price discrimination actually increases use while allowing the seller to get more money. Therefore, Easterbrook says that if you say you can’t charge separate prices, the final price will be somewhere in the middle. The commercial licensees will benefit, and the general public for the most part won’t use the product. Therefore, inability to price discriminate in some cases reduces social welfare. Also, in some situations you want the rents to go to the people who have created the useful information. From a public policy standpoint, there doesn’t seem to be a good reason to not uphold the K clauses. i. Carve-out exceptions: there are two common state law carve-outs. One is K. Two is tradesecrets. While these look like they are providing protections where federal law says they can’t (§ 301)… h. M. **Specht v. Netscape Comm. Corp. 306 F.3d 17 (2d Cir 2002). (Merges et al., pp. 856-864). a. Philip Larson Page 5 Legal & Economic Theory of IP: Outline Facts: The internet users downloaded two free software programs from defendants' websites to enable internet browsing. One program, a "plug-in" that enhanced the other program's browsing capabilities, allegedly transmitted private information about the internet users' online activities to defendants without the internet users' knowledge. Defendants sought to compel arbitration of the action pursuant to the arbitration clause contained in the software licensing agreements. On appeal of the district court's denial of the motion, the court determined that a reasonably prudent internet user would not have known or learned of the existence of the license terms before responding to defendants' invitation to download free software, and therefore defendants did not provide reasonable notice of the license terms. The license agreements were located on a submerged screen that the user would have needed to scroll through in order to read the full agreement and arbitration clause. As a consequence, the internet users' act of downloading the software did not unambiguously manifest assent to the arbitration provision in the license terms. **Mericoid Corp. v. Mid-Contintent Investment Co., 320 U.S. 661 (1944). a. Facts: When respondent sued petitioner for contributory infringement of a combination patent issued for a domestic heating system, petitioner argued that respondent should be barred from relief because it was seeking to extend the grant of the patent to unpatented devices, namely, a combustion stoker switch that was an element of the combination patent embodied in the patented article but that was itself unpatented. Petitioner also counterclaimed, alleging that respondent and its exclusive licensee under the patent conspired to expand the monopoly of the patent in violation of antitrust laws. The Supreme Court reversed an appellate judgment holding that petitioner was guilty of contributory infringement under the Leeds rule, which provided that one who sold an unpatented part of a combination patent for use in the assembled machine could be guilty of contributory infringement. The Court determined that the patent was employed to protect the market for a device on which no patent had been granted. Further, the Court held that the Leeds rule no longer prevailed against the defense that a combination patent was being used to protect an unpatented part from competition. **Stigler, A Note on Block Booking, reprinted in The Organization of Industry, University of Chicago Press (1968). (check course materials section). **Dawson Chemical Co. v. Rohm & Hass Co., 448 U.S. 176 (1980). a. Facts: The court affirmed a holding that respondent patentee did not engage in patent misuse, either by its method of selling propanil, an herbicide, or by its refusal to license others to sell that commodity. Respondent had sued for contributory infringement alleging that petitioner manufactured and sold propanil, a nonstaple good which had no commercial use other than in respondent's invention. Petitioner urged that respondent misused its patent by improperly tying the sale of propanil, an unpatented item, and authorization to practice the patented process. The court concluded that 35 U.S.C.S. § 271 effectively conferred upon a patentee, as a lawful adjunct of its patent rights, a limited power to exclude others from competition in nonstaple goods used only in the invention. A patentee could sell a nonstaple article himself while enjoining others from marketing that same good without his authorization. Therefore, respondent's refusal to license petitioner to produce propanil did not constitute patent misuse. The power to demand royalties for the privilege of selling the nonstaple item implied that a patentee could control the nonstaple market. b. **Brulotte v. Thys Co., 379 U.S. 29 (1964). a. Facts: The licensees purchased machines from the owner and entered into licensing agreements that required the payment of royalties. The owner brought suit when the licensees refused to make royalty payments accruing both before and after the expiration of the patents. After the trial court's judgment in favor of the owner was affirmed by the state supreme court, the licensees were granted a writ of certiorari. They argued that the owner's extension of the licensing agreements beyond the expiration date of the patents was an unlawful misuse of the patents in violation of U.S. Const. art. I, § 8. On certiorari review, the United States Supreme Court agreed and stated that a patent conferred an exclusive right to the patentee to make, sell, and use the invention for 17 years, but those rights became public property thereafter. In reversing the judgment, the Court concluded that any projection of the patent monopoly after the patent expired was unlawful per se and unenforceable and that a patentee's use of a royalty agreement which projected beyond the expiration date of the patent would thwart the free market which Congress visualized for the post-expiration period. **Scheiber v. Dolby Labs, 293 F.3d 1014 (7th Cir. 2002). a. Facts: To settle a patent infringement claim, plaintiff patent holder licensed his patents to defendants. Subsequently, the infringer later refused to pay royalties on any patent after it expired, as provided for in the agreement. The patent holder sued to enforce the licensing agreement. The United States District Court for the Southern District of Indiana, Indianapolis Division, granted summary judgment to defendants, and the patent holder appealed. On review, the court found that it was bound to follow a Supreme Court decision, holding that a. N. O. P. Q. R. Philip Larson Page 6 Legal & Economic Theory of IP: Outline a patent owner could not enforce a contract for the payment of patent royalties beyond the expiration date of the patent. The court found that it had no authority to overrule the Supreme Court decision no matter how dubious its reasoning was, or even how out of touch with the Supreme Court's current thinking the decision seemed. If a precedent of the Supreme Court had direct application in a case, yet appeared to rest on reasons rejected in some other line of decisions, the court of appeals had to follow the case which directly controlled, leaving to the Supreme Court the prerogative of overruling its own decisions. Also, the court found that 35 U.S.C.S. § 271(d)(5) was inapplicable to the case, as it merely limited defenses to infringement suits. Further, applying the doctrine of unclean hands would have fatally undermined the policy of refusing enforcement to contracts for the payment of patent royalties after expiration of the patent. **Landes and Posner, Chapter 2, 4. Harper and Row v. The Nation, 471 US 539 (1985) a. Facts: Nation used 300-400 words from Harper and Row’s unpublished work. Court held that the subject matter violated copyright and was not protected under fair use. The unpublished nature of book was a key factor that negated the defense of fair use. The court found that four statutory factors relevant to determining whether the use was fair were not satisfied. Respondents use had the intended purpose of supplanting copyright holder's commercially valuable right of first publication. The use infringed upon the copyright holder's interest in confidentiality and creative control. Respondents took what was essentially the heart of the book and copied much of it verbatim. Finally, the use of copyrighted material had an actual effect on the market for first rights to publish excerpts from the book. b. Held: violated copyright and was not fair use. Lotus v. Borland, 49 F.3d 807 (1995) a. Facts: Borland copied the words of Lotus’ menu command in its spreadsheet program. Lotus filed for copyright infringement. Court said the plaintiff's menu command hierarchy was uncopyrightable subject matter. The court held that the menu was not copyrightable because it was a method of operation and, therefore, was foreclosed from copyright protection by 17 U.S.C.S. § 102(b). **American Geophysical Union v. Texaco, 60 F.3d 913 (2d Cir. 1994) a. Facts: Defendant sought review, as an interlocutory appeal under 28 U.S.C.S. § 1292(b), of the decision rejecting defendant's fair use defense to copyright infringement, premised on the holding that defendant's copying of plaintiffs' copyrighted works was not fair use. The court determined, in applying the four factor fair use assessment set out in 17 U.S.C.S. § 107, that defendant's use of plaintiffs' copyrighted works was not fair use because its purpose in using plaintiffs' works was a product of a systematic institutional policy of multiplying the number of available copies; the amount and substantiality of the use of plaintiffs' works was extensive and was motivated by establishing a personal library for defendant's employee; and in considering the reasonable potential market for or value of the copyrighted works, plaintiffs had demonstrated substantial harm to the value of plaintiffs' copyrights through defendant's copying. Accordingly the order rejecting defendant's fair use defense to copyright infringement was affirmed. b. Held: We therefore agree with the District Court's conclusion that Texaco's photocopying of eight particular articles from the Journal of Catalysis was not fair use. **Princeton University Press v. Michigan Document Services, 99 F. 3d 1381 (6th Cir 1996). a. Facts: Appellees brought a copyright infringement claim against defendant for excerpting portions of copyrighted works without permission. Appellant was a commercial copyshop, which reproduced substantial segments of copyrighted works of scholarship and bound the works into "coursepacks." The coursepacks were sold to students for use in fulfilling class reading assignments. Finding that the fair use doctrine did not obviate the need to obtain permission to reproduce the works and that the infringement was willful, the trial court granted appellees summary judgment. The court held that appellant's use of the works was a commercial use, in that it sought to profit from its sales to the students. Because appellant did not pay license fees to the copyright holders, his use was an unfair exploitation of the monopoly privilege that belonged to the owners of the copyright. b. Held: The court affirmed the grant of summary judgment because appellant's reproduction and sale of the copyrighted works without permission did not constitute fair use under the Copyright Act. **Liebowitz, Copying and Indirect Appropriability: Photocopying of Journals, 93 JPE 945 (1985), available online at www.jstor.org. a. § 107 four factor test: i. Purpose and character of use – for commercial or non-profit use? Why is the commercial use more likely to be condemned as fair use? AC reversed because it made this factor the dispositive one. Whether this harm is positive (such that it benefits the copyright owner). SC in Two Live Crew case S. T. U. V. W. X. Philip Larson Page 7 Legal & Economic Theory of IP: Outline was correct that P has to show that there was a negative effect on its copyrighted work. For economists, this is a poor proxy or shortcut for factor #4. 1. Transformative or reproductive (mere copying)? Customary in the industry? Transformative would be using to adding creativity, but this seems to conflict w/ the copyright owner’s rights to control derivative works. If something is customary use, it doesn’t affect the market because customary use is already priced in. Customary use can go either way as to find fair use. ii. Nature of copyrighted work – published or unpublished? Fictional or nonfictional? Some courts have suggested the published/unpublished be a factor. There is a privacy concern. A property right includes a right to exclude people from doing something w/ my copyright. If you can’t keep the unpublished works private, you’re less likely to write it. iii. Amount and substantiality – as seen in Harper and Row, only a small amount was taken. But still it is more like factor #4 from an econ view – it looks like an economic analysis of damages. iv. Effect of use on actual or potential market of copyrighted work – substituting for the original or harm to its market Y. Landes and Posner, Chapter 6 Z. Campbell v. Acuff Rose Music, Inc. 510 U.S. 569 (1994) a. Facts: Acuff-Rose Music, Inc. sued 2 Live Crew and their record company, claiming that 2 Live Crew's song "Pretty Woman" infringed Acuff-Rose's copyright in Roy Orbison's "Oh, Pretty Woman." The District Court granted summary judgment for 2 Live Crew, holding that its song was a parody that made fair use of the original song. In reversing, the Court of Appeals held that the commercial nature of the parody rendered it presumptively unfair. b. Analysis: a rap music group, were sued by respondent, the corporate owner of an original rock ballad, for copyright infringement. Petitioners claimed the song was a parody entitled to fair use protection under the Copyright Act of 1976, 17 U.S.C.S. § 107. The court below found the commercial purpose of petitioner's parody had prevented it from being a fair use. That judgment was reversed on appeal because the Court found it was error for the court below to have concluded that the commercial nature of petitioners' parody had rendered it presumptively unfair. The Court held that no such evidentiary presumption was available to address either § 107(1), the character and purpose of the use, or § 107(4), market harm, in determining whether tranformative use, such as parody, was a fair one. The Court held that a parody's commercial character, which tended to weigh against a finding of fair use, was only one element that should be weighed in a fair use enquiry. Therefore, the court below was found to have given insufficient consideration to the nature of the parody under the fair use factors as set forth in § 107 in weighing the degree of copying. c. AA. Landes and Posner, Chapter 5 BB. Salinger v. Random House, 811 F.2d 90 (1987). a. Facts: Plaintiff, in his action alleging copyright infringement, appealed the order denying his motion for a preliminary injunction against defendants. Defendants had sought to publish a biography about plaintiff utilizing unpublished letters written and copyrighted by plaintiff. Plaintiff appealed from the district court order that denied his motion for a preliminary injunction. Defendants contended that the copyrights were subject to the fair use doctrine, and thus were not infringed. The court found that the purpose of the use was outweighed by the nature of the work so that the unpublished works were entitled to greater protection; defendants' extensive use of quotes and paraphrasing tracked the original so closely as to constitute infringement, and impairment of the market was likely. The court held that the copyrighted materials were protected for the term of the copyright, and that right prevailed over a claim of fair use under ordinary circumstances. The court reversed and remanded with directions to issue a preliminary injunction. b. CC. New Era Publications v. Henry Holt & Co. 873 F. 2d 576 (2d Cir. 1989) a. Facts: Plaintiff held a license to certain copyrights that were bequeathed to the Church of Scientology by its founder. Defendant reproduced many of the founder's published and unpublished writings in a biography that was published about the founder of the Church of Scientology. The district court held that the use of the unpublished material could not be held to pass the "fair use" test, and therefore, found that the book to some degree infringed upon plaintiff's copyrighted material, in violation of the Copyright Act. However, the district court limited plaintiff's remedy to damages, due to its unconscionable delay in seeking an injunction, as it would be economically unfeasible to require defendant to delete the infringing material and republish the book. On Philip Larson Page 8 Legal & Economic Theory of IP: Outline appeal, the court agreed with the district court's decision and held that laches was the sole bar to injunctive relief. DD. Landes and Posner, Chapter 7 EE. Two Pesos, Inc. v. Taco Cabana, 505 U.S. 763 (1992). (Merges, et al, pp 648-660). a. Facts: Respondent had several restaurants with a certain theme. Several years later petitioner opened up his chain of restaurants copying the same theme of respondent. Respondent filed suit against petitioner for trade dress infringement. At trial, the jury found that respondent's trade dress was inherently distinctive, but that the trade dress had not acquired a secondary meaning. The appellate court correctly rejected the argument raised by petitioner, the alleged trade dress infringer, that a finding of no secondary meaning contradicted a finding of inherent distinctiveness. The court held that proof of secondary meaning was not required to prevail on a claim under 15 U.S.C.S. § 1125(a), where the trade dress at issue was inherently distinctive. Specifically, there was no persuasive reason to apply to trade dress a general requirement of secondary meaning which would be at odds with the principles generally applicable to infringement suits under 15 U.S.C.S. § 1125(a). Moreover, adding a secondary meaning requirement could have anticompetitive effects, creating particular burdens on the startup of small companies. b. Issue: whether inherently distinctive trade dress was protectible under § 43(a) without a showing that it had acquired secondary meaning. c. Held: trade dress could be protected if distinct, without a showing of secondary meaning. FF. Qualitex Co. v. Jacobsen, 514 U.S. 159 (1995). (Merges, et al., pp 626-32. a. Facts: Petitioner sought review of a judgment that set aside a judgment that respondent infringed on petitioner's trademark, in violation of 15 U.S.C.S. § 1114(1), premised on a holding that a trademark could not be obtained for a color alone. The court held that a color, to the extent it met the ordinary requirements to register a trademark, was registerable. The court also held a color could satisfy the part of the statutory definition of a trademark, which required a person to "use" or "intend to use" the mark to identify and distinguish his or her goods, including a unique product, from those manufactured or sold by others and to indicate the source of the goods, even if that source was unknown, 15 U.S.C.S. § 1127. The court held, however, that to the extent that a color was functional, the mark would have to be examined to determine if its use as a mark would permit one competitor to interfere with legitimate competition. Accordingly, the judgment that held petitioner could not register a color as a trademark was reversed. b. Held: a color can satisfy the definition of a trademark. In so far as it is functional, it can’t be trademarked. Also, if there were only a few colors that would work, they could not be trademarked if it would interfere with competition. GG. The Murphy Door Bed Co v. Interior Sleep Systems, Inc., 874 F.2d 95 (2d Cir. 1989) (Merges, et al., pp 770-780. a. Facts: Plaintiff invented and manufactured a bed that, when not in use, could be concealed in a wall closet and used the term "Murphy bed" as its trademark. Defendants entered into a distributorship agreement with plaintiff, which plaintiff terminated for defendants' delinquency of payment. Defendants continued to regularly advertise "Murphy beds," and passed off defendants' product as plaintiff's beds. Plaintiff brought action against defendants, alleging trademark infringement, unfair competition and breach of contract. The court held that defendants had satisfied their burden of proving that the term "Murphy bed" was generic, since a substantial majority of the public viewed the term as a standard description of that type of bed. Furthermore, no law supported trademark infringement claim for a generic term. Defendants were liable for unfair competition and breach of contract, since defendants intentionally represented defendants' product as plaintiff's bed, and continued to use plaintiff's name after termination of agreement. b. Held: The court affirmed the finding of defendants' breach of contract, but reversed on the trademark infringement claim since the term at issue was a generic term. HH. TrafFix Devices Inc., v Marketing Displays, 532 U.S. 23 (2001) (Merges, et al., pp. 780-790). a. Facts: Upon expiration of respondent's patents for a dual-spring mechanism to permit signs to withstand strong winds, petitioner copied the design and marketed its own sign stands. Respondent alleged that its mechanism acquired secondary meaning such that consumers associated the look of the dual-spring design with respondent, and that petitioner thus infringed respondent's trade dress. The United States Supreme Court held that any acquired secondary meaning was irrelevant, since trade dress protection was precluded by respondent's failure to sustain its burden of demonstrating that its design was not functional. Both the disclosure of the dual-spring design in the claims of the expired patents and respondent's prior patent infringement litigation indicated that the design provided a unique and useful mechanism to resist the force of the wind. Respondent's trade dress Philip Larson Page 9 Legal & Economic Theory of IP: Outline claim was thus precluded, since trade dress protection only extended to product features which were not functional. b. Held: Judgment was reversed. Regardless of acquired secondary meaning, respondent's trade dress infringement claim was precluded, since its patent claims and prior patent infringement litigation concerning its dual-spring sign stand design indicated that the design was functional. II. **Midler v. Ford Motor Co., 849 F.2d 460 (9th Cir. 1988) (Merges, et al., pp. 883-890) a. Facts: Defendant company and defendant agency advertised automobiles with a series of television commercials. Different popular songs of the 1970s were sung on each commercial, and the agency tried to get the original artists to sing them. Where it failed, the agency had the songs sung by "sound alikes." The agency requested that plaintiff sing the song, which she refused. The "sound alike" imitated plaintiff to the best of her ability. After the commercial was aired, plaintiff and the "sound alike" were told by a number of people that it sounded exactly like plaintiff. Neither plaintiff's name nor her picture was used in the commercial, and the agency had a license from the copyright holder to use the song. The district court believed there was no legal principle preventing imitation of plaintiff's voice and granted summary judgment in favor of defendants. On appeal, the court reversed, holding plaintiff's distinctive voice was protected from appropriation. b. Held: The court reversed the trial court's order of summary judgment dismissing plaintiff's action. When a distinctive voice is widely known and is deliberately imitated in order to sell a product, the sellers have appropriated what is not theirs and have committed a tort in California. The D made a profit in selling their product by appropriating part of her identity JJ. **White v. Samsung Electronics America, Inc., 989 F.2d 1512 (9th Cir. 1993) (Merges, et al., pp. 890-899). a. Facts: Samsung ran an advertisement with a robot version of Vanna White standing next to a wheel of fortune set. Vanna sued for a breach of her right to publicity. Court held in favor of Vanna. Strong dissent argued that there should be a parody exception to the right to publicity. There would be no confusing the robot for Vanna. Preventing anyone from “evoking” an image of famous people for commercial reasons is a vioalation of first amendment rights. b. Held: in CA, no parody exception to right of publicity. Overexposure can decrease the value of the right. Vanna is rent-seeking and Samsung is arguably diminishing the rent she is capable of capitalizing on. c. Issues: should confusion be an element of infringing a right to publicity? In Bette Midler, there was confusion. Here there was not. d. Rent Seeking: Grady’s theory is one to prevent rent dissipation. Rent is a valuable social commodity. Rent dissipation is when it is destroyed. For example, if there is a rent to land and you get rid of it and the commons come in and kill it, that is a problem. i. Rent dissipation: when someone takes the rent and try to capitalize the rent and dissipate it. How do they do that according to Grady? How does the right of publicity stop some activity that would dissipate rent? Overexposure – in economics there is the tree-growing problem. When do you cut it? You don’t cut it when it is young, you don’t cut it when it is 100 years old because your investors will be dead. For a songwriter, there is an optimal rate of playing and exposing yourself. If you overexpose yourself, the total value over your career will fall. E.g. Ford commercials will make people sick of Bette Midler and reduce the value of her publicity. Rent dissipation is another reason to have property. It is a traditional reason of having property. You want to be able to control use in order to maximize the property’s value. Therefore, there is at least an economic reason for doing this. KK. **M. Grady, "A Postive Economic Theory of the Right to Publicity,: 1 UCLA Ent. L. Rev. 97 (1994) LL. **Merges, et al., pp. 449-453. MM. **Landes and Posner, Chapter 8. NN. **Eldred v. Ashcroft, 537 U.S. 186 (2003) a. Facts: Under the CTEA, Congress enlarged the duration of copyrights by 20 years in order to, inter alia, harmonize the baseline United States copyright term with the term adopted by the European Union. Petitioners argued that the CTEA violated the "limited times" prescription of the Copyright Clause. As to the First Amendment, petitioners contended that the CTEA was a content-neutral regulation of speech that failed inspection under the heightened judicial scrutiny appropriate for such regulations. The Court determined that the CTEA was constitutional. The CTEA's extension of existing copyrights did not exceed Congress' power under the Copyright Clause. The Court rejected petitioners' arguments that (1) the extension was a congressional attempt to evade or override the "limited times" constraint, (2) Congress could not extend an existing copyright absent new consideration from the author, and (3) the extensions should have been subject to Philip Larson Page 10 Legal & Economic Theory of IP: Outline heightened judicial review. The Court also rejected petitioners' argument that the CTEA violated the First Amendment. b. Landes and Posner would rather have infinite renewal system – this brings back formalities in registration. This would be probably unconstitutiona OO. ** Liebowitz, Stan J. and Margolis, Stephen E., "Seventeen Famous Economists Weigh in on Copyright: The Role of Theory, Empirics, and Network Effects" (December 2003). Avaiable at http://ssrn.com/abstract=488085 PP. **Brief of George Akerlof et al., in support of the petitioners in Eldred v. Ashcroft, available at: http://cyber.law.harvard.edu/openlaw/eldredvashcroft/supct/amici/economists.pdf QQ. DuPont v. Christopher, 431 F.2d 1012 (5th Cir. 1970) (Merges, et al., pp. 62-66). a. Facts: Defendant photographers were hired by an unknown third party to take aerial photographs of new construction at plaintiff company's plant. Plaintiff subsequently filed suit against defendants, and alleged defendants had wrongfully obtained photographs revealing plaintiff's trade secrets, which they then sold to the undisclosed third party. The court held that plaintiff had a valid cause of action to prohibit defendants from improperly discovering its trade secret. The court further concluded that aerial photography, from whatever altitude, was an improper method of discovering the trade secrets exposed during construction of plaintiff's plant. Accordingly, the decision of the trial court was affirmed, and the case remanded for proceedings on the merits b. Held: The decision of the trial court that plaintiff company had stated a claim for the misappropriation of its trade secrets was affirmed, where aerial photography was considered an improper method of discovering trade secrets. RR. Kewanee Oil v. Bicron, 416 U.S. 470 (1974) (Merges, et al., pp. 929-33) a. Facts: Petitioner was a leading manufacturer of a type of synthetic crystal, which was useful in the detection of ionizing radiation. The individual respondents were former employees of petitioner, who formed or later joined respondent corporation. Before termination with petitioner, respondents executed, as a condition of employment, at least one agreement each requiring them not to disclose confidential information or trade secrets obtained as employees of petitioner. Reversing the appeals court determination of preemption by federal patent law, the United States Supreme Court held that federal patent law did not preempt Ohio state trade secret law. The two systems, the court explained, were not in conflict. They offered different degrees of protection to inventors and others. The Court noted that matter, once in the public domain, was not incompatible with the existence of trade secret protection. Trade secret law encouraged invention in areas where patent law did not reach. To preempt or do away with Ohio trade secret law would have deprived society of discoveries not protected by trade secret law. b. Held: Ohio trade secret law was not preempted by the federal patent law, as they offered different degrees of protection and were not in conflict. SS. W. L. Gore & Associates v. Garlock, Inc., 721 F.2d 1540 (Fed Cir 1983). a. Facts: Appellant obtained two patents for the process of improving synthetic material. Appellant sued for infringement of process claims on first patent and, in a separate action, infringement of product claims of second patent. b. Held: court affirmed findings that two of patent one's claims were invalid because of anticipation and obviousness TT. Warner-Lambert v. Reynolds, 280 F.2d. 197 (2d. Cir. 1960) (Merges, et al., pp. 101-104). a. Facts: P sued saying he no longer was obligated to make periodic payments to Ds based on its manufacture or sale of “Listerine”. P makes and sells Listerine. The trade secret is now a matter of public knowledge. Nevertheless, the contract is valid. b. Held: one who acquires a trade secret by K takes the risk that there will later be disclosure to the public. UU. **Landes and Posner, Chapter 13. VV. **Landes and Posner, Chapter 11 WW. **Hilton Davis v. Warner-Jenkinson, 62 F.3d 1512 (1997) (concurring opinion by Judge Newman at 1529-36). a. Facts: Plaintiff sued defendant for patent infringement. The district court found that plaintiff's patent was valid and that defendant infringed under the doctrine of equivalents. On appeal, the court affirmed, holding that the application of the doctrine of equivalents rested on the substantiality of the differences between the claimed and accused products or processes, assessed according to an objective standard. The court held that the district court's function-way-result instruction correctly guided the jury to consider the relevant evidence. The court held further that substantial evidence supported the jury finding of infringement and that the question of Philip Larson Page 11 Legal & Economic Theory of IP: Outline infringement, whether literal or by equivalents, was a question of fact for the jury if properly demanded. The court held that prosecution history estoppel did not preclude application of the doctrine of equivalents in the case. Doctrine of Equivalents: Under the doctrine of equivalents, a product or process that does not literally infringe upon the express terms of a patent claim may nonetheless be found to infringe if there is "equivalence" between the elements of the accused product or process and the claimed elements of the patented invention. b. XX. YY. Festo v.Shoketsu Kinzoku Kogyo Kabushiki Co. 535 U.S. 722 (2002). a. Facts: The competitor's device did not fall within the literal claims of the patents, but the patentee argued it was so similar that it infringed under the doctrine of equivalents. The United States Supreme Court held that prosecution history estoppel arose when an amendment was made to secure the patent and it narrowed the patent's scope. If a § 112 amendment was truly cosmetic, then it would not narrow the patent's scope or raise an estoppel. If a § 112 amendment was necessary and narrowed the patent's scope -- even if only for a better description -- estoppel could apply. The patentee had the burden of proving that an amendment was not made for a reason that would give rise to estoppel, and also had the burden of showing that the amendment did not surrender the particular equivalent in question. As the amendments were made for a reason relating to patentability, the question was not whether estoppel applied but what territory the amendments surrendered. Estoppel did not effect a complete bar. The question remained whether the patentee could show that the narrowing amendments did not surrender the equivalents at issue. ZZ. **Schlicher, Measuring Patent Damages by the Market Value of Inventions - The Grain Processing, Rite Hite, and Aro Rules, 82 J. Patent & Trademark Off. Soc'y 503 (2000). AAA. **Grain Processing Corp. v. American Maize-Products Co., 185 F.3d. 1341 (Fed Cir. 1990). a. Facts: The district court denied plaintiff lost profits for defendant's infringement of a patent and instead awarded plaintiff a three percent royalty on defendant's infringing sales. The district court found that defendant proved that a non-infringing substitute was available, though not on the market or for sale, during the period of infringement. Further, this substitute was acceptable to all purchasers of the infringing product and defendant thus rebutted the inference of "but for" causation for plaintiff's alleged lost sales. The district court concluded that plaintiff did not have a patent on D.E. 10 maltodextrins, the economically significant product, and therefore could not recover lost profits damages. Plaintiff appealed. The court affirmed the judgment of the district court and held that defendant proved that Process IV was available and that Process IV Lo-Dex 10 was an acceptable substitute for the claimed invention. The district court did not clearly err in finding that Process IV Lo-Dex 10 was an available alternative throughout the accounting period. Thus, absent infringing Lo-Dex 10, plaintiff would have sold no more and no less product than it actually did. b. Held: The court affirmed the decision below that denied plaintiff lost profits, but instead awarded a threepercent royalty on defendant's infringing sales. The court concluded that the district court did not err in considering an alternative not on the market during the period of infringement, nor did it clearly err in determining that the alternative was available, acceptable, and precluded any lost profits. c. Note: Patent damages should award patent owners the market values or economic benefits of the inventions that they were unable to capture due to infringement – measuring damages by lost profit and reasonable royalty BBB. **Rite Hite v. Kelley Co., 56 F.3d 1538 (Fed Cir 1995). a. Facts: Defendant was a company that produced vehicle restraints similar to those produced by plaintiff. Plaintiff brought a suit for patent infringement. Plaintiff distributed its product through wholly-owned sales organizations and through independent distributors. The independent distributors intervened as exclusive licensees entitled to lost retail profits. The trial court found in favor of plaintiff and the independent distributors. Defendant appealed, claiming that the trial court incorrectly determined damages. Plaintiffs appealed the trial court's award of simple interest and refusal to award lost retail profits. The court affirmed in part, vacated in part, and remanded, holding that lost sales were compensable where foreseeable. Defendant was not liable for damages associated with a non-patented device sold with the patented product where the two did not function together to create one result and could be used independently. Judgment interest was properly calculated and lost profits denied where distributors' license lacked the right to exclude others under the patent. b. Held: holding that where lost profits of patentee were reasonably foreseeable, lost profits were compensable. Damages associated with non-patented product were not awardable where a device was subject to independent use. CCC. **State Industries v. Mor-Flo, Inc., 883 F. 2d. 1573 (Fed. Cir. 1988). a. Facts: Appellants challenged a judgment of the lower court awarding actual damages and royalties in a patent infringement action. Cross-appellant challenged the reasonableness of a royalty, the failure to find willful Philip Larson Page 12 Legal & Economic Theory of IP: Outline infringement, and the denial of enhanced damages and attorney's fees. The court affirmed the judgment but vacated and remanded for a redetermination on the issues of willful infringement and enhanced damages. The court found that the lower court did not abuse its discretion in applying an award of incremental profits for lost profits and did not abuse its discretion in its award of royalties. The court applied a four-prong test and determined that cross-appellant had marketing and manufacturing capabilities to meet its market share of the demand, and it could have sold its market share anywhere. The court found that the lower court's finding on nonwillfulness was inconsistent with its finding that appellant should have known of the infringement. Therefore, the court vacated and remanded the finding of nonwillfulness. b. Rule: The measure of damages is an amount which will compensate the patent owner for the pecuniary loss sustained because of the infringement. But the floor for a damage award is no less than a reasonable royalty, and the award may be split between lost profits as actual damages to the extent they are proven and a reasonable royalty for the remainder. c. Test: A standard way of proving lost profits, is for the patent owner to prove: (1) demand for the patented product, (2) absence of acceptable noninfringing substitutes, (3) his manufacturing and marketing capability to exploit the demand, and (4) the amount of the profit he would have made. DDD. Landes and Posner, Chapter 14 EEE. ITW v. Independent Ink, 126 S. Ct. 1281 (2006). a. Facts: The patent holder manufactures and markets printing systems that include three relevant components: (1) a patented piezoelectric impulse ink jet printhead; (2) a patented ink container, consisting of a bottle and valved cap, which attaches to the printhead; and (3) specially designed, but unpatented, ink. Their customers agreed that they would purchase their ink exclusively from the patent holder, and that neither they nor their customers will refill the patented containers with ink of any kind. The ink manufacturer developed an ink with the same chemical composition as the ink sold by the holder. The Court held that in all cases involving a tying arrangement, the plaintiff must prove that the defendant has market power in the tying product. While some such arrangements were still unlawful, such as those that were the product of a true monopoly or a marketwide conspiracy, that conclusion had to have been supported by proof of power in the relevant market rather than by a mere presumption thereof. The court recognized that many tying arrangements, even those involving patents and requirements ties, were fully consistent with a free, competitive market. b. Held: The judgment was vacated, and the case was remanded to allow the ink manufacturer an opportunity to offer evidence defining the relevant market or proving that the patent holder possessed power within it. FFF. Brief of the United States in Independent Ink v. Illinois Tool Works, 2005 WL1864093 GGG. Brief of Sullivan, Nalebuff and Ayres in Independent Ink v. Illinois Tool Works, 2005 WL2427646 HHH. Benjamin Klein and John Wiley, 70 ANTITR L J 599 III. Sears, Roebuck & Co. v. Stiffel Company, 376 U.S. 225 (1964). a. Facts: The manufacturer claimed that the retailer had violated the state's unfair competition law by selling lamps identical to those designed by the manufacturer. Although the lamps were not patented under federal law, the district court enjoined the retailer from selling the lamps and ordered it to pay damages to the manufacturer. The appellate court affirmed, but on certiorari review, the court reversed the appellate court. The court held that because federal law was the supreme law on the subject of copyrights and patents, the states were precluded from providing more protection to nonpateneted articles. The court further held that because the lamps were not protected under federal patent law, the state could not preclude others, such as the retailer, from selling the lamps. Finally, the court held that the mere inability of the public to tell two identical articles apart was not enough to support an injunction against copying or an award of damages for copying that which the federal patent laws permitted to be copied. b. Held: When state law touches upon the area of federal patent and copyright statutes, the federal policy may not be set at naught or its benefits denied by the state law, even if the state law is enacted in the exercise of otherwise undoubted state power. JJJ. **Bonito Boats, Inc., v. Thunder Craft Boats, Inc., 489 U.S. 141 (1989). a. Facts: Petitioner developed and marketed a fiberglass boat hull. No patent application was filed to protect the utilitarian or design aspects of the hull. The hull was successful and an interstate market developed for the hull's trade. Six years after the hull had been made publicly available, Fla. Stat. § 559.94 (1987) was enacted, which made it unlawful for anyone to duplicate for the purpose of sale the process used by another hull manufacturer without written permission from that person. Petitioner sued respondent alleging that respondent violated the statute by using the same molding process petitioner used to manufacture respondent's hull. In a divided opinion, the state supreme court concluded that the statute impermissibly interfered with federal patent law and dismissed petitioner's complaint. Petitioner appealed. The court held that by offering patent-like protection for Philip Larson Page 13 Legal & Economic Theory of IP: Outline ideas deemed unprotected under the federal scheme, the statute conflicted with the federal policy favoring free competition in ideas which did not merit patent protection. As a result, the statute was preempted by the Eleventh Amendment, and the judgment in favor of respondent was affirmed. b. Held: The judgment in favor of respondent was affirmed because the statute under which petitioner sued was federally preempted KKK. Goldstein v. California, 412 U.S. 546 (1973). a. Facts: Petitioners were convicted for violating state penal law by pirating recordings that were protected under state copyright law. The Court upheld the convictions, finding that the states did not relinquish all control of copyright matters to the federal government and that uniformity was not required for successful implementation of copyright laws. The Supremacy Clause did not preempt state regulation because the federal copyright law did not so occupy the field of copyright as to infer preemption. The State had exercised a power that it had retained under the Constitution, and the challenged statute, as applied in this case, did not intrude into an area that Congress had yet pre-empted. b. Held: petitioners could be prosecuted under state copyright statutes because the statutes were not unconstitutional and were not preempted by federal law LLL. John S. Wiley, "Bonito Boats: Uninformed by Mandatory Federal Innovation, 1989 Sup. Ct. Rev. 283 (1989). MMM. Aronson v. Quick Point Pencil, 440 U.S. 257 (1979). a. Facts: After designing a keyholder and applying for a patent to protect its design, the designer negotiated a contract with a company for the manufacture and sale of the keyholder. Petitioner licensor appealed from a judgment of the United States Court of Appeals for the Eighth Circuit, which held that respondent licensee was relieved of royalty obligations when petitioner's efforts to obtain the contemplated patent proved unsuccessful. Petitioner challenged the judgment because the licensing contract provided for an alternative agreement in the event that a patent was denied. Federal patent law was not a barrier to enforce petitioner's contract with respondent for the payment of royalties because the parties had expressly agreed to an alternative royalty fee schedule in the event that the patent was denied. The appellate court agreed with respondent and held that since the parties contracted with reference to a pending patent application, petitioner was estopped from denying that patent law principles governed the contract. If federal patent law principles were applicable, respondent was not liable for the payment of royalties. The United States Supreme Court reversed because in the contract the parties provided for express provisions for royalties if the patent was not issued. The enforcement of the agreement did not withdraw any ideas from the public domain and did not discourage anyone from seeking a patent. The court determined that federal patent law was not a barrier to a contract where respondent agreed to pay royalties to be the first in the market. NNN. **TrafFix Devices v. Marketing Displays, Inc., 532 U.S. 23 (2001). a. Facts: Upon expiration of respondent's patents for a dual-spring mechanism to permit signs to withstand strong winds, petitioner copied the design and marketed its own sign stands. Respondent alleged that its mechanism acquired secondary meaning such that consumers associated the look of the dual-spring design with respondent, and that petitioner thus infringed respondent's trade dress. The United States Supreme Court held that any acquired secondary meaning was irrelevant, since trade dress protection was precluded by respondent's failure to sustain its burden of demonstrating that its design was not functional. Both the disclosure of the dual-spring design in the claims of the expired patents and respondent's prior patent infringement litigation indicated that the design provided a unique and useful mechanism to resist the force of the wind. Respondent's trade dress claim was thus precluded, since trade dress protection only extended to product features which were not functional. b. Held: Judgment was reversed. Regardless of acquired secondary meaning, respondent's trade dress infringement claim was precluded, since its patent claims and prior patent infringement litigation concerning its dual-spring sign stand design indicated that the design was functional. OOO. **Datstar v. 20th Century Fox, 539 U.S. 23 (2003) a. Facts: Respondent owners of rights in a book sued petitioner producer of a video copy of a television series in the public domain which was based on the book, alleging that the producer violated § 43(a) of the Lanham Act. The owners contended that the producer marketed the video as its own product, without acknowledging reliance on the original television series, and thus falsely designated the origin of the video in violation of § 1125(a). The producer maintained that its designation of itself as the origin of the physical video product was entirely accurate. The United States Supreme Court held that no false designation of origin was shown since the phrase "origin of goods," as used in § 1125(a) did not connote the person or entity which originated the ideas contained in the video, and instead referred only to the producer's tangible video product. It was of no consequence to Philip Larson Page 14 Legal & Economic Theory of IP: Outline consumers whether the producer was the source of the ideas in the video, and the ideas presented by the producer's communicative product were protected, if at all, through the exclusive protections of copyright. Further, § 1125(a) was intended to protect consumers from misleading designations of origin, not to protect creativity or originality, and determining the actual originators of the ideas expressed in the book and the television series would pose serious practical problems. Held: The judgment finding that the producer falsely designated the origin of its video was reversed, and the case was remanded for further proceedings. b. Philip Larson Page 15