Introduction to the United States Legal System and U.S. Intellectual Property Law

1. Introduction to the United States Legal System and U.S. Intellectual Property Law Dennis S. Karjala Jack E. Brown Professor of Law Sandra Day O’Connor College of Law Arizona State University dennis.karjala@asu.edu

2. Course Information • Reading Assignments • http://homepages.law.asu.edu/~dkarjala/SlovakiaClasses/IntroUSLegalSystem&IP.htm • Course Materials • http://homepages.law.asu.edu/~dkarjala/SlovakiaClasses/CourseMaterialsBratislavaF-08.html • Course Outline (.doc) • Available from Reading Assignments and Course Materials pages

3. Civil Law versus Common Law • See the Wikipedia entry for “property”: • In Armory v. Delamirie, a chimney sweep's boy found a jewel encrusted with precious stones. He took it to a goldsmith to have it valued. The goldsmith's apprentice looked at it, sneakily removed the stones, told the boy it was worth three halfpence and that he would buy it. The boy said he would prefer the jewel back, so the apprentice gave it to him, but without the stones. The boy sued the goldsmith for his apprentice's attempt to cheat him. Lord Chief Justice Pratt ruled that even though the boy could not be said to own the jewel, he should be considered the rightful keeper until the original owner is found. In fact the apprentice and the boy both had a right of possession in the jewel (a technical concept, meaning evidence that something could belong to someone), but the boy's possessory interest was considered better, because it could be shown to be first in time. Physical possession is nine tenths of the law, but not all.

4. Civil Law versus Common Law • Still from Wikipedia: • This case is used to support the view of property in common law jurisdictions, that the person who can show the best claim to a piece of property, against any contesting party, is the owner. • By contrast, the classic civil law approach to property, propounded by Friedrich Carl von Savigny, is that it is a right good against the world. Obligations, like contracts and torts are conceptualised as rights good between individuals.

5. Civil Law versus Common Law • Is there really such a difference between civil law and common law legal systems? • How would a judge in a civil law country handle the problem of Armory v. Delamirie, assuming there is no statute governing “found property”? • How would people react if a court held that the apprentice could keep the jewels? • How does anyone prove “ownership” of personal property? • If you take your coat to be cleaned and lose the receipt, should the cleaner be able to keep your coat? • The real legal problem in this case is not who owns the coat – almost a metaphysical question – but who, as between the apprentice and the boy, gets to keep the jewels

6. Federal statutes adopted by Congress (and signed by the President) and international treaties approved by the President and confirmed by the Senate Regulations of federal administrative agencies (Securities & Exchange Commission, Food & Drug Adminstration, etc.) State constitutions Statutes adopted by state legislature and regulations adopted by state administrative agencies Municipal ordinances adopted by cities and towns (zoning, traffic rules, etc.) Overall Structure of U.S. Legal SystemUNITED STATES CONSTITUTION

7. Federal courts interpret and apply federal statutes and regulations and consider the constitutionality of both state and federal legislation and regulations Federal courts can also apply state law in disputes involving parties from different states State courts interpret and apply the laws of their state only – their rulings have no legal application outside the boundaries of their state State courts can also interpret and apply most federal statutes and regulations when they otherwise have jurisdiction (patent and copyright are a major exception) State courts can also consider the constitutionality of both state and federal legislation Two Court Systems

8. The Federal Court System • Cases in federal courts originate in federal district courts • There is at least one federal district court in every state, and some large states have three or four • Most cases are litigated before a single judge, possibly with a jury making decisions on factual questions • Appeals from district court decisions go to one of twelve federal circuit courts of appeal • Appeals go before three-judge panels of the courts of appeal • Important cases may be reargued “en banc,” where all the members of the court of appeal participate in the decision • Appeals of patent cases go exclusively to a specialized patent court, called the “Court of Appeals for the Federal Circuit” • The ultimate federal judicial authority in the U.S. is the United States Supreme Court (Supreme Court of the United States, or “SCOTUS” for short)

9. The Supreme Court (SCOTUS) • Appeal to SCOTUS is available only by a so-called “writ of certiorari,” a process by which the appealing party gives reasons why SCOTUS should decide the case (such as conflict with law of other circuits or an important principle of constitutional law) • SCOTUS hears appeals from the federal circuit courts of appeal or from final decisions of state courts if a matter of constitutional law is involved • SCOTUS hears only about 250 cases each year • A majority of the participating Justices (usually five out of nine) is necessary to win the case

10. Federal Supremacy • Any state law that conflicts with a validly adopted federal law, an international treaty, or the Constitution is invalid • Article VI of the Constitution says • This Constitution, and the laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby, anything in the Constitution or laws of any State to the contrary notwithstanding • Under Article I, Section 8, of the Constitution, Congress has the power to do such things as collect taxes, regulate commerce among the states and foreign countries, coin money, establish federal courts, declare war, and to raise and support armies and navies

11. Law Practice in the U.S. • Each state has its own “bar,” which consists of those people who have passed the exam (called the “bar exam”) to become lawyers • Some states have reciprocity with other states, so that if you pass one state’s bar exam, you can become a member of the bar (and therefore practice law) in the other state • Many states do not have any reciprocity, however, such as California and Arizona • Law practice is largely divided up into • Litigation • Business counseling and transactions • Many lawyers are specialists in fields like taxation, securities regulation and corporate law, intellectual property law, insurance law, and so forth

12. Why Property Rights? • Tangible property is a zero-sum game • Use by one person means that no one else can use it at the same time • Much personal property is “consumable,” in that, once consumed, it is gone forever • Tragedy of the commons • Without property rights, there is less incentive to put property to its most valued uses • The standard example is a grazing field – if anyone can graze animals there anytime, it will be “overgrazed” • Future uses are discounted in favor of present uses • Higher valuing users cannot negotiate for exclusive use

13. Why Rights in Information? • Information is NOT a zero-sum game • If one person knows how to drive a car, he can still drive even if others learn to do so (until it gets too crowded on the streets) • Thomas Jefferson said, of ideas: • “[N]o one possess the less because everyone possesses the whole of it. He who receives an idea from me receives [it] without lessening [me], as he who lights his [candle] at mine receives light without darkening me.” • Once a song or a movie has been created, anyone can sing it or watch it without taking away from the ability of others to do the same

14. Economic Efficiency • Once information is created, it is economically inefficient to give property rights in it (in contrast to the case of tangible property) • In efficient, competitive markets, the price of goods necessarily falls to the marginal cost of producing them • The marginal cost of reproducing information is zero, or at least very low compared to the cost of creating it in the first place • Recognizing property rights in information – that is, the right to exclude others from using the information – allows the IPR (intellectual property right) holder to charge a price exceeding marginal cost • This “monopoly” pricing results in a “deadweight loss” associated with any monopoly

15. Why Do We Recognize IPRs? • Natural rights? • John Locke argued that property rights arise “naturally” from the act of creation • This makes good sense for tangible property, like tables (which is what Locke was thinking about) • But does it work for intangible property, like ideas and information? • Reward for creativity – fairness • Should creators be allowed to control what they create? • Why, and if so, to what extent? • Should creators be able to control every use? • Should IPRs extend in perpetuity, like rights in tangible property? • The reward-for-creativity argument does not explain how to determine the appropriate limits on IPRs

16. Creation Incentives • Most IP has the character that it is costly to create initially but easy and often inexpensive to copy • Would no one write books, produce films, or invent new machines without IPR protection? • SCOTUS Justice Stephen Breyer argued in 1970 (as professor at Harvard) that most books would likely get written even without copyright rights, with employers, patrons and government filling most of the gap. Stephen Breyer, The Uneasy Case for Copyright: A Study of Copyright in Books, Photocopies, and Computer Programs, 84 Harv. L. Rev. 281 (1970) • Many inventions from ancient history (the wheel, use of fire, agricultural methods and crops) came without the incentive of patent rights

17. Creation Incentives • A basic assumption of IPR systems is that we will get less of socially desirable information-based goods without the incentive that arises from affording exclusive rights • Copying was always cheaper than creating the original • In the digital age, copying and even redistributing is essentially without cost at all • So, we recognize IPRs in order to provide an incentive to create socially desirable works • We want to limit the strength and length of these rights to what is necessary to supply the incentive • If IPRs become too strong they can act as a disincentive to others who wish to build on existing works • Too strong IPRs can also result in an over-production of “creativity” goods over other goods that may be even more desirable

18. Value of the Public Domain • IPRs thus give an incentive to create desirable works • Progress in both arts and technology, however, moves incrementally, with current creators building on what has been passed down to them from their predecessors • Inventions can be improved (think how automobiles have improved over the past 100 years) • Works of literature can spark new creativity (think “Romeo and Juliet” leading to “West Side Story”) • Imagine what the world would be like if IPRs were perpetual • Somebody would be collecting royalties whenever anyone used a wheel • James Joyce would have had to negotiate with the heirs of Homer in order to write “Ulysses” • Most of Shakespeare’s plays likely would never have been written (he stole from many sources)

19. Drawing the Balance • In creating and enforcing IPRs, then, we must carefully balance the need for creation incentives versus the need for later creators to build on past creations • We must resist the temptation to analogize information to tangible property • Information is not a zero-sum game • Protection of information is economically inefficient, but for the need for creation incentives • Notions of “fairness” or “natural rights,” while highly emotive, should not play much, if any, role in analyzing either the existence or the scope of IPRs

20. Intellectual Property Law • Patent • Protects “nonobvious” technological advances • Copyright • Protects the “expression” contained in artistic, literary, and musical works • Trademark • Protects investment in names or symbols signifying the origin of goods or services • Trade Secret • Protects unpublished information valuable to a business • Rights of Publicity • Protects the right to use the names or images of famous people in commercial advertising

21. Patent Versus Copyright • These two venerable statutes seek to accomplish the same end: Protect the fruits of intellectual creativity for the purpose of encouraging the production of intellectual works • They go about their tasks, however, in very different ways

22. Patent • Patents issue only upon formal application and after examination by a skilled examiner for “novelty” and “nonobviousness” • Patent requires a complete specification of the invention • The scope of patent protection is defined and narrowly limited by the claims • The term of patent protection is 20 years (from filing)

23. Copyright • Copyright arises automatically upon fixation • The scope of copyright protection is defined by the vague idea/expression dichotomy • Copyright infringement is determined by the equally vague “substantial similarity” standard • The term of copyright protection endures for 70 after the death of the author (or 95 years for so-called “works made for hire”) – in other words, the term is practically perpetual

24. Why These Differences? • There MUST be something in the nature of “patent subject matter” that distinguishes it from “copyright subject matter” that justifies such radically different treatment • Statements like “Patent protects technology” or “Patent protects function” were enough to distinguish the art, music, and literature that were the traditional subject matter of copyright • Even before computer programs, however, the old case of Baker v. Selden shows the importance of distinguishing between the two types of subject matter

25. Baker v. Selden • This case involved the copyright in a book by Selden on bookkeeping • Selden’s book described a new system of double-entry bookkeeping that allowed presenting the results of any given time period on a single sheet (or two facing sheets) • Selden included some sample forms in his book to show how to use his new system • Baker wrote a book describing a similar system, and included in his book forms that were similar to those in Selden’s book • We can see the forms here

26. Baker v. Selden • What happened in this case? • Selden wrote his book • The book included an “introductory essay” explaining Selden’s system • It appended some blank forms to illustrate how to use Selden’s system • Selden “took the requisite steps” to get a copyright (today he would not have to do anything, but he would have to register the copyright before he could bring suit against Baker) • Baker published his book, and Selden sued Baker • Baker’s book did not copy Selden’s explanatory language • Baker’s example forms used a “similar plan” and got to the same results but with a different arrangement of columns and headings • Selden won in the district court and in the court of appeal

27. Baker v. Selden • The Court frames the issue as whether Selden is entitled to exclusive rights to his new bookkeeping system • The evidence introduced by Selden at trial, too, was aimed at showing that Baker’s book explained the same system as Selden’s • Baker argued that no one could use the system without using essentially similar forms • The Court says, “the question is, whether the exclusive property in a system of book-keeping can be claimed, under the law or copyright, by means of a book in which that system is explained” • The Court did not question that Selden had a copyright in his book • The question is, what in the book does that copyright protect – just the literal language, close paraphrases, the overall explanatory structure, or even the system the book describes • In other words, the problem is the scope of copyright protection

28. Baker v. Selden • The Court concedes that a book describing a new system can be very valuable, but there is a distinction between the book and the “art” (i.e., system) it is intended to illustrate • A book describing a new medicine, a new tool (like a plow or watch), or a new method of painting (like perspective) would be protected by copyright, but the copyright would NOT cover the methods described in the book • “The copyright of the book, if not pirated from other works, would be valid without regard to the novelty, or want of novelty, of its subject-matter. The novelty of the art or thing described or explained has nothing to do with the validity of the copyright. To give to the author of the book an exclusive property in the art described therein, when no examination of its novelty has ever been officially made, would be a surprise and a fraud upon the public. That is the province of letters-patent, not of copyright. The claim to an invention or discovery of an art or manufacture must be subjected to the examination of the Patent Office before an exclusive right therein can be obtained; and it can only be secured by a patent from the government.”

29. Baker v. Selden • The Court then gives several examples, again using medicine, perspective, and mathematics • It distinguishes, however, “ornamental designs” that are addressed to the taste: • In these, “their form is their essence” • Rules and methods have applications and uses • Note the definition of a “useful article” in the Copyright Act: • A “useful article” is an article having an intrinsic utilitarian function that is not merely to portray the appearance of the article or to convey information. An article that is normally a part of a useful article is considered a “useful article”. • Copyright in a book describing useful methods and systems covers only their statement, not the methods themselves

30. Baker v. Selden • No one ever thought that copyright in a book picturing a new tool, like a plow, would protect against manufacture of a similar plow • For that, everyone agrees you need a patent • What was different here? • Here, the “tools” were themselves pictures – diagrams or lined charts • Pictures are usually protected by copyright as “graphic works” • The Court says this is a distinction without a difference • Tools are tools, and to protect them with IPRs, you need a patent • But note that the Court distinguishes Drury v. Ewing, which involved published patterns for cutting dresses • The Court says that the copyright there cannot prevent someone from cutting dresses in the way shown • But how does Ewing show how to cut such dresses without using similar pictures?

31. Baker v. Selden • Note that much of what the Court says about the forms used in Selden’s system applies to computer programs • In Baker, the forms themselves were tools, even though they were also graphic works • Computer programs, too, are tools for achieving results on a computer, even though they also meet the definition of a “literary work” under copyright • The holding of Baker v. Selden is now codified in section 102(b) of the Copyright Act: • In 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.

32. Intellectual Property Law • United States ConstitutionArticle I, Section 8, clause 8 • The Congress shall have power • To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries • This is the basis for federal patent and copyright law • Federal trademark law is based on Congress’s power under the interstate commerce clause • Trade secret law and rights of publicity are still largely matters solely of state law

33. 28 U.S.C. § 1338(a) The district courts shall have original jurisdiction of any civil action arising under any Act of Congress relating to patents, plant variety protection, copyrights and trademarks. Such jurisdiction shall be exclusive of the courts of the states in patent, plant variety protection and copyright cases.

34. United States ConstitutionEleventh Amendment • The judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by citizens of another state, or by citizens or subjects of any foreign state.

35. What Does Copyright Protect? • Section 102(a): “Copyright protection subsists, in accordance with this title, in original works of authorship fixed in any tangible medium of expression . . . .” • What is “original” and what constitutes a “work of authorship” • The Bleistein case addresses the first question, and the Feist case addresses the second.

36. Bleistein v. Donaldson Lithograph • The plaintiff had created some advertising signs for a circus, and defendant copied them. • What happened in the lower courts? • Both the district court and the court of appeals held for the defendant • The reason was that mere advertising signs (commercial art) was not protected by copyright • Until this case, this view was generally accepted by U.S. courts • As Justice Harlan says in dissent, a work must have some “intrinsic value” connected to the “fine arts” in order to be protected by copyright • The SCOTUS majority, however, overturns this past history and concludes that “originality” means simply the personal stamp of the creator – something that arises from the creator’s mind rather than being copied from something else

37. Bleistein v. Donaldson Lithograph • The Court points out that dictionaries are protected by copyright and that even a very simple picture has more “originality” than a dictionary • Thus, the standard for “originality” is quite low • What about the fact that the pictures were created simply as advertisements – does copyright protected commercial advertising? • Justice Holmes says it’s both difficult and dangerous for judges to try to distinguish between “fine art” and “mere advertising” • Think of Toulouse-Lautrec’s advertising posters for the Moulin Rouge • The quote beginning “It would be a dangerous undertaking . . .” is very famous

38. Bleistein v. Donaldson Lithograph • There are other “quotable quotes” in this decision, but one must use care • For example, Justice Holmes says that drawing from life (that is, drawing a real person, plant, or building) can still result in an “original work of authorship” because each contains the author’s personal reaction to the subject • Copyright in one portrait of, say, Oscar Wilde, does not stop a second author from also drawing Oscar Wilde: “Others are free to copy the original. They are not free to copy the copy.” • That does not necessarily mean, however, that a second artist can re-create the same realistic composition or pose and then simply draw from that

39. Ansel Adams, “Autumn Moon”

40. Kisch v. Ammirati Photos

41. Substantial Similarity in Photos

42. Bleistein v. Donaldson Lithograph • After Bleistein U.S. courts stopped looking for “artistic” qualities and began asking simply, did the purported author create the work in question using his or her own intellectual processes or was the work copied from something else? • A photograph of a piece of chocolate cake, used on the packaging for a frozen cake product, was held protected by copyright • The instructions for how to use a hair care product were held protected as a “literary work” • Compilations of facts, like telephone books, were held to be protected because they were the result of the creator’s industrious efforts – his or her “sweat of the brow” • Thus, “originality” meant not just the product of intellectual (mental) effort but also the result of mere physical effort

43. Compilations • Should compilations of facts be protected and, if so, should they be protected by copyright? • Before computers, things like trigonometric and logarithmic tables were very valuable, as were telephone books, detailed historical records, and compilations of scientific data • Often, it is quite expensive to collect the data, but it is easy to copy the data once someone else has collected them • Without copyright protection, would useful compilations be created? • Some, like telephone books, were required by law (because telephone companies had a monopoly) • Other compilations, like government data, is collected by the government in the ordinary course of business • Much scientific data is collected with a view to publishing it for free use by others – that is the nature of science

44. Feist v. Rural Telephone • Here, Rural was the telephone company for several counties in Kansas and, as required by law, published a telephone directory listing its customers in alphabetical order by name and telephone number • Feist wanted to created an “area wide” telephone directory that would cover the service areas of several independent telephone companies • Feist licensed the listings from ten other telephone companies, but Rural refused to license • Feist then went ahead and used Rural’s listings, anyway, and Rural sued for copyright infringement

45. Feist v. Rural Telephone • Up to this case, courts had uniformly upheld copyright protection of telephone books • SCOTUS notes that the Copyright Act expressly includes “compilations” as copyright subject matter • It notes, however, that copyright does not, and should not, protect facts (on the ground that facts have an independent existence and are not “created” by an author but rather only “discovered” by him or her) • The Court even says that the originality requirement for copyright is constitutional (although the intellectual property clause does not even use the words “patent” or “copyright,” let alone the term “original”) • The link is the term “author” – only “authors” can get copyrights and facts do not involve “authorship”

46. Feist v. Rural Telephone • First, is it true that “facts” do not have authors? • It is a fact that the name of one of James Joyce’s books is “Ulysses,” but isn’t Joyce the author of that name? • Model statutes or estimates of value of, say, used cars, are facts but they are created by people. See Justin Hughes, Created Facts and the Flawed Ontology of Copyright Law, 83 Notre Dame L. Rev. 43 (2007) • Second, what is a “fact”? • Is the distance from earth to the nearest double star a “fact”? • What if ten different scientific teams attempt to measure such a distance and come up with ten different results? • Are all ten results “facts”? • Are the incorrect results nonfacts that are protected by copyright?

47. Feist v. Rural Telephone • So, if facts are not protected, what if anything about a compilation is protected by the copyright? • Feist looks to the statutory definition of “compilation” and concludes that there can be authorship in the “selection, coordination, or arrangement” of the materials in the compilation • In order to qualify as an “original work of authorship,” the compilation must show at least some minimal creativity (authorship) in selecting, arranging, or coordinating the compilation’s contents • The classic example is “100 Best Restaurants of Bratislava,” which can show “creativity” in the selection (and independently in the description of each restaurant in a literary work) • A compilation copyright is infringed, not by taking its factual content, but by copying its creative selection or arrangement • Telephone book white pages do not qualify under this standard

48. Compilations • Consider electronic databases, like Westlaw and Lexis for legal materials • There is no “selection” of their contents, because every decided case is included • Databases do not have any visible “arrangement” • Yet, if the contents must be entered manually, it can be quite expensive and time consuming, especially in checking for accuracy • Once the contents are stored in electronic form, anyone with access can copy the contents very rapidly • Feist leaves a potential “market failure” with respect to such databases

49. What is a “Copy”? • Under section 106(1) the copyright owner has the exclusive right “to reproduce the copyrighted work in copies” • Under section 101, • “Copies” are material objects, other than phonorecords, in which a work is fixed by any method now known or later developed, and from which the work can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device. The term “copies” includes the material object, other than a phonorecord, in which the work is first fixed. • A work is “fixed” in a tangible medium of expression when its embodiment in a copy or phonorecord, by or under the authority of the author, is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration. • A work is “created” when it is fixed in a copy or phonorecord for the first time

50. Copies • An ordinary book, sheet music, photographic reproductions of paintings are obviously “copies” under this definition • A photographic “negative” (in the old, pre-digital days when photography involved film) is a “copy” of the photo because the photo can be reproduced from it • How about a digital version, on floppy disk or hard drive, of the text of “Harry Potter and the Philosopher’s Stone”? • The full text can be perceived by using a computer to reproduce it on the screen or to print it on paper • Therefore, the digital version is a “copy” • How about a live, improvised jazz session? • It’s not “fixed” anywhere and is therefore not protected by federal copyright in the US. (Many countries do not require “fixation”.)