The patent troll problem, widely exposed by NPR in 2011, has long infuriated real companies and the tech sector. And now people in high places are starting to notice.

This week, a young woman told President Obama in a Google Hangout that she and other entrepreneurs live in fear of patent trolls and asked if he planned to continue patent reform. In response, the president made his boldest statement to date on the issue:

“The folks that you’re talking about are a classic example; they don’t actually produce anything themselves. They’re just trying to essentially leverage and hijack somebody else’s idea and see if they can extort some money out of them.”

It looks like common sense has come even to the highest halls of power (see interview and transcript here via Patent Progress). The question now is whether President Obama will actually take charge and do something about the patent plague that is sucking money out of the most innovative sector of the economy.

In the past, the president has proved adept at throwing sops to his fans and fundraisers in the tech sector without doing much to help them. In 2011, for instance, he signed the America Invents Act, which was a milquetoast measure to fix the worst elements of the patent system. While the law made it easier to challenge bad patents, it didn’t reign in absurd jury verdicts or overly broad patents that enable the trolls in the first place.

It’s time for the president to try again. To do so, he will first need to get around the specific concerns of the pharmaceutical industry, which has blocked previous patent reform efforts; as Judge Richard Posner has noted, drug makers are among the few who may need the monopoly power of a patent in order to recoup their investments. This is not the case for software and tech where a first-mover advantage provides an adequate head start and technology rapidly becomes obsolete.

As for addressing the trolls, law professor Brian Love has proposed a very sensible solution. Love, a protege of IP godfather Mark Lemley, suggests changing the patent fee structure to create disincentives for hoarding the obsolete patents that trolls typically use to torment their targets. The advantage here is that this is something Obama can do directly. Meanwhile, in Congress, the president can push for legislation to eliminate billion dollar jury verdicts.

Finally, the president can also tap his executive power to increase antitrust scrutiny of giant patent trolls like Intellectual Ventures for imposing what is, essentially, a startup tax across the tech sector. If the Obama administration even attempted to impose such a tax, the political cost would be enormous; there’s no reason the private sector should get away with the same thing.

Enough talk. It’s time to act, Mr. President.

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That’s why it’s a relief to see a new group enter the debate. In the last six months, a growing number of figures on the political right have been taking aim at our broken copyright system and offering some very sensible solutions.

The arrival of these conservative reformers, who join longtime liberal copyright critics, means the U.S. may at last get to have an honest debate over the best way to compensate content creators.

The current mess

It’s worth recalling just why the copyright system is so troubled in the first place and and who is responsible. For starters, note that U.S. copyright has ballooned from its original term of 28 years to the life of the author plus 70 years — meaning a young novelist or songwriter’s work is now likely to stay locked up until the year 2143 or beyond.

There is no justification for these absurd copyright terms other than as a form of corporate welfare to the entertainment industry. The Constitution’s rationale for copyright in the first place is to “promote .. useful Arts.”  It’s inconceivable that an artist will not pick up her pen unless she is promised 100+ years of copyright protection.

While the terms are a problem, copyright enforcement is a mess too. This is partly because Congress gave copyright owners a very big stick that lets them seek $150,000 every time someone takes their content without permission — even if the infringement led to zero economic loss. The chance to impose such big penalties for a trifling offense has led to a spate of abusive lawsuits by copyright trolls who target bloggers or file mass “John Doe” complaints intended to embarrass gay porn viewers.

Despite all this, copyright infringement still remains widespread. Call it “sharing” or call it “theft” — however you describe it, people keep helping themselves to content without offering a dime to the writers, musicians or film makers who made it.

To justify this behavior, pirates point to the mendacity of the entertainment industry to say, in effect, that content owners have it coming to them.  There is some validity to this (especially as the industry often shortchanges the artists it purports to stand for) but it doesn’t address the underlying issue: how should we pay content creators? If we agree on having a copyright system in the first place, it needs to work in a way that allows writers, musicians and photographers to make a living.

Right now, what we have instead is a copyright system that is unfriendly not only to consumers but often to individual creators as well. While big companies can flex legal muscles to chase copyright violators, the law doesn’t offer authors a simply way to seek payment when someone blatantly rips them off.

Unfortunately, for now, the debate over how to fix copyright remains dominated by industry lobbyists on one side and piracy apologists on the other. The result is an unhealthy stalemate in which those who propose a middle ground risk being labeled as a thief by the industry or as a stooge by its critics.

The conservative case for copyright

The copyright debate is not entirely controlled by the ideologues, of course. In the last decade, scholars and journalists (Lawrence Lessig, Bill Patry, Cory Doctorow and Mike Masnick to name a few) have made eloquent arguments about reforming the law.

The problem is that these copyright critics come from the same world; they’re all liberals with ties to Silicon Valley. This has made it easy for the entertainment industry to caricature them and for Washington to ignore them.

Now, though, the case for copyright reform is being made by figures on the right as well. Last fall, the famous judge and law-and-economics scholar Richard Posner declared copyright terms to be too long and warned that poorly defined fair-use rules can have “very damaging effects on creativity.”

This conservative critique heated up significantly in January when a Republican memo in the House attacked over-reaching copyright laws as an assault on laissez-faire capitalism. The entertainment industry soon stepped in to smother the memo and get its author fired but the memo’s contents are still resonating.

In late January, the American Conservative published a lengthy feature on “crony copyright” that repeated the memo’s economic arguments and also reported that the Tea Party and the Heritage Foundation are taking a growing interest in IP reform. Since then, the right-wing Washington Times printed an op-ed criticizing the White House for trying to use copyright to control public domain photographs.

So what does all this mean? The significance is that copyright reformers have powerful new allies and fresh intellectual ammunition. While the left has relied on cultural arguments to attack the copyright system, the right makes a compelling case based on economics.

Chance for a grand bargain

This conservative conversion to copyright reform comes at a crucial time. The rise of sites like Twitter and Tumblr mean it’s easier than ever to share images, music and movies. In this context, copyright that lasts more than a hundred years makes even less sense and the opportunity for abusive lawsuits is even greater.

The emergence of a combined liberal and conservative case against the current copyright system offers the chance to reach a grand bargain. Specifically, there is now an opportunity to create shorter copyright terms and to fix the enforcement regime so that it doesn’t permit content owners to wield a $150,000 hammer over every infraction. In return, a more balanced copyright law would help to undercut many of the moral justifications that lead people to turn to piracy in the first place.

(Image by Viorel Sima of Shutterstock)

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Background

The jury in Apple-Samsung confronted hundreds of questions, some of them on topics obscure enough to make an intellectual property lawyer blanche — design patents, patent exhaustion and so on. Yet, they were done in less than three days. As Abovethelaw editor, Elie Mystal, mused “It would take me more than three days to understand all the terms in the verdict! Much less come to a legally binding decision on all of these separate issues. Did you guys just flip a coin?”

A more damning criticism came from the popular Groklaw site which pointed out a series of basic errors by the jury: a decision to award $2 million for a patent that Samsung hadn’t infringed in the first place; a decision to assign damages based on punishment, not compensation.

This type of slapdash decision-making lends support to Judge Richard Posner and others who argue that it’s time to end jury trials in patent cases. Here are three more reasons Apple v Samsung should not have gone before a jury:

Reason 1: Jurors can be influenced by brand loyalty

Let’s remember that the jurors who decided the case were not Blind Justice but consumers who are influenced by brands.

That influence can be considerable. According to Robert Kozinets, a marketing professor at York University, “brand communities” that emerge around products like Apple’s are supplanting religions or neighborhoods as a source of personal identity. He says that Apple today has greater ideological power than many countries.

“That identification with Apple will lead to community and a sense of loyalty. It also leads to a sense of empowerment that can lead people to step up and protect it because they know there are so many others like them.”

There’s nothing wrong, of course, with defending Apple (or Google or Microsoft). The problem is that brand loyalty can interfere with patent policy. When asked to decide a patent case, juries are likely to go with emotion over evidence — deciding a case based on brand loyalty rather than the law at hand.

In the case of Apple-Samsung, the trial was about a beloved American brand versus a foreign competitor. Not only that, but the trial took place in Silicon Valley, right in the heart of Apple land. This was like asking Boston Red Sox fans to judge the conduct of the New York Yankees.

In this climate, it’s no wonder that the jury appears to have made their decision based on a desire to “send a message” to Samsung rather than parsing harder technical questions about whether Apple’s rectangle and “bounce-back” patents should have existed in the first place.

Reason 2: Juries are too easily swayed by “he’s a copycat”

During the trial, Apple offered an easy-to-follow narrative that is familiar to anyone who has been in grade school: “That’s my idea. He took it and pretended it was his.” Samsung on the other hand had to explain why, even though Apple had patents, it was not infringing and that the patents were not actually valid patents and so on. One story is crisp and clean, the other is furtive and guilty-sounding. Guess which story has more punch in the hands of a trial lawyer?

In the words of Posner: “patent plaintiffs tend to request trial by jury because they believe that jurors tend to favor patentees, believing that they must be worthy inventors defending the fruits of their invention against copycats.”

Unfortunately, these simple narratives distort what patents are all about. Patents are not primarily about stopping copycats (that’s why we have trademarks) but are instead a form of industrial policy based on 20-year monopolies. If the policy is effective, it produces more innovation. If the patent policy is not effective, it creates monopolies that harm competitors and consumers. In Apple-Samsung, there’s a good chance we’re doing the latter; we may regard Apple as an innovator and Samsung as a copycat — but that doesn’t mean it’s a good idea to award Apple sweeping monopolies that may raise prices and stunt the smartphone market.

Patents are as complex as other industrial policies like subsidies or regulatory regimes. When disputes arise, they should be put before an expert tribunal rather than a jury that is easily swayed by schoolyard “copycat” narratives.

Reason 3: Jury trials over patents are a waste of money

Apple and Samsung will spend  from $20 million to $500 million in legal fees, according to sources surveyed by the Wall Street Journal. While the companies would have blown a bundle no matter what, the jury presence added millions to the tab. This figure doesn’t even take account of the costs to the federal justice system or to the jurors and their employers. And for what? To respond to questions likely beyond their capacity and that will, in any case, be picked apart on appeal.

There’s a faster, cheaper and more efficient way to handle this. As Judge Posner proposes, it makes sense to stuff future patent disputes into a corner of the US Patent and Trademark Office.

Juries are not responsible for all that ails the patent system. But getting rid of them would be a useful step.

(Image by Junial Enterprises via Shutterstock)

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In his ruling (PDF, via Eric Goldman), Posner wrote:

“myVidster is giving web surfers addresses where they can find entertainment. By listing plays and giving the name and address of the theaters where they are being performed, the New Yorker is not performing them. It is not “transmitting or communicating” them… myVidster doesn’t touch the data stream, which flows directly from one computer to another, neither being owned or operated by myVidster.”

The video bookmarking site isn’t off the hook completely: Posner found that a previously offered caching feature could still make the site liable; apparently, myVidster used to allow paying members to store copies of videos on its own servers.

However, there are some good news for end users in this court decision as well. Posner found that merely watching a stream of an illegally uploaded video isn’t copyright infringement either:

“But as long as the visitor makes no copy of the copyrighted video that he is watching, he is not violating the copyright owner’s exclusive right… His bypassing Flava’s pay wall by viewing the uploaded copy is equivalent to stealing a copyrighted book from a bookstore and reading it. That is a bad thing to do (in either case) but it is not copyright infringement.”

myVidster’s court case had gotten a lot of interest earlier this year when the Motion Picture Association of America (MPAA) sided with the porn studio, and Facebook and Google filed amicus letters for myVidster.

Image courtesy of Flickr user Tex Texin.

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An outspoken Chicago judge has dismissed Apple’s patent claims against Motorola “with prejudice,” meaning they can’t be argued again before that court. Apple can appeal the case to a higher court, but the decision is a blow to its hopes of arguing that Motorola–now owned by Google–infringed on patents held by Apple for key smartphone technologies with its embrace of Google’s Android software.

Judge Richard Posner had already signaled his distaste for the Apple-Motorola case, viewed as one of the key disputes in the late Apple CEO Steve Jobs’ war against Android, Google’s smartphone operating system. Earlier in June he opined that the case was “silly,” in that it would impose more costs on the public than any perceived infringement on Motorola’s part would have caused. He agreed to allow Apple to argue its case one last time, but it doesn’t seem that he was swayed by those last-minute arguments.

Basically, Posner ruled that Apple couldn’t prove that the company had been harmed by anything Motorola had done. As a common sense argument, this holds water: Apple is currently the most valuable company in the world thanks to the runaway success of the iPhone and the iPad, while Motorola is a barely profitable smartphone company that was quite grateful to be rescued from dire straits by Google’s desire for Android patent protection.

Going further, however, Posner ruled that neither company was entitled to injunctive relief against the other: something that is the crux of every patent case.

A key passage:

In fact neither party is entitled to an injunction. Neither hasshown that damages would not be an adequate remedy. True,neither has presented sufficient evidence of damages to with-stand summary judgment—but that is not because damages areimpossible to calculate with reasonable certainty and are there-fore an inadequate remedy; it’s because the parties have failedto present enough evidence to create a triable issue. They had an adequate legal remedy but failed to make a prima facie case ofhow much money, by way of such remedy, they are entitled to. That was a simple failure of proof.

Posner appeared to draw on the Supreme Court’s ruling in the eBay vs. MercExchange dispute in making his decision to throw out the case, which can be appealed. The short version: seeking an injunction against a product you believe infringes your patents deserves a much higher burden of proof that presented in this case.

A compulsory license with ongoing royalty is likely to be asuperior remedy in a case like this because of the frequent dis-proportion between harm to the patentee from infringementand harm to the infringer and to the public from an injunction, a factor emphasized in Justice Kennedy’s concurring opinion in eBay Inc. v. MercExchange, L.L.C. in which he pointed out that “when the patented invention is but a small component of the product the companies seek to produce and the threat of an injunction is employed simply for undueleverage in negotiations, legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest.” He could have been describing this case. Three Justices joined his opinion, and no Justice expressed disagreement with it

The court’s ruling is embedded below.

Judge Poser dismisses Apple-Motorola complaint

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In his remarkable ruling, U.S. Circuit Judge Richard Posner stated that there was no point in holding a trial because it was apparent that neither side could show they had been harmed by the other’s patent infringement. He said he was inclined to dismiss the case with prejudice — meaning the parties can’t come back to fight over the same patents — and that he would enter a more formal opinion confirming this next week.

The order is extraordinary not only for what it said but for who wrote it. For the unfamiliar, Richard Posner is a legend in legal and academic circles and possesses a resume that makes the typical Supreme Court Justice look like a slouch. He teaches at the University of Chicago and ordinarily sits on the influential 7th Circuit Court of Appeals but, in an unusual development, was assigned to a lower court last December to hear the Google-Apple patent case.

The case is just one of many patent disputes tying the legal system in knots as large companies tangle not only in court but at the International Trade Commission in an effort to ban each others’ products from the market. Critics say the patent system, which awards 20-year monopolies, has run amok thanks to a flood of questionable patents for software, business methods, emoticons and even one for “swinging on a swing.”

In a series of earlier rulings in the Apple case, Posner didn’t mince words as he used plain language to beat up the over-reaching arguments of both sides:

This week, Posner also lashed at the patent system in a blog he shares with economist Gary Becker. In a post about the declining strength of American institutions, he concluded:

The institutional structure of the United States is under stress. We might be in dangerous economic straits if the dollar were not the principal international reserve currency and the eurozone in deep fiscal trouble. We have a huge public debt, dangerously neglected infrastructure, a greatly overextended system of criminal punishment, a seeming inability to come to grips with grave environmental problems such as global warming, a very costly but inadequate educational system, unsound immigration policies, an embarrassing obesity epidemic, an excessively costly health care system, a possible rise in structural unemployment, fiscal crises in state and local governments, a screwed-up tax system, a dysfunctional patent system, and growing economic inequality that may soon create serious social tensions. Our capitalist system needs a lot of work to achieve proper capitalist goals.

Posner’s decision to descend from the 7th Circuit to oversee the Google-Apple trial suggests he wished to step in and do something directly about the patent system. (Ordinarily, Posner would never hear a patent case as all patent appeals are sent to the DC-based Court of Appeals for the Federal Circuit; that court has maintained an ideological bias in favor of patent owners despite repeated rebuffs by the Supreme Court).

The backlash against the misuse of patents is coming not just from Posner and the Supreme Court but other federal judges as well. Judge James Robart blasted Motorola and Microsoft in Seattle last week, noting that ”The court is well aware that it is being played as a pawn in a global industry-wide business negotiation.”

It’s unclear how Apple and Google will respond to Posner’s surprise pounding of them. Both companies have so far said nothing and may be waiting for the other shoe to drop via Posner’s formal opinion expected next week. The judge wrote yesterday that he may change his mind but the overall tenor of the first opinion suggests this is unlikely. You can decide for yourself here:

Posner Order
(Image via University of Chicago)

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