Transnational Law Blog

Do You Really Own That E-Book?

"Control At A Distance" is a very interesting article over at Balkinization about Amazon.com using the internet to delete copies of George Orwell's books 1984 and Animal Farm from various people's Kindles after learning that the publisher did not want to grant the rights to Kindle. Jack Balkin cleverly points out that "the irony of deleting a book about Big Brother watching you was lost on both the publisher and Amazon.com." He also makes the following commentary:

"For centuries, we have understood, or rather believed, that owning books came with certain rights, including the right to keep what we purchase and to use it, mark it up, and sell it in any way we like. We were free to purchase books and keep them in our homes, without telling anybody what we were reading, or indeed, what page we had last looked at. Amazon's Kindle system upends all of these expectations. Amazon knows what books you have on your Kindle, and, in theory, it can even know the book you are currently reading, and even the last page you've read on each of the books you own. It can delete books, add books, or modify books, all without your permission. It can change features of the Kindle at will. In upending our assumptions about our freedoms to read books in private and use them as we see fit, Amazon threatens many of the basic freedoms to read we have come to expect in a physical world. If we want to preserve these freedoms, we will have to reform copyright law and privacy law to control the new intermediaries who can control us at a distance."

I just want to add that any reforms will have to have an eye to transnational reform as electronic copies of anything obviously transcend national boundaries. What that will look like exactly is rather fuzzy. I doubt treaties like TRIPS or normal international trade organizations will be able to truly regulate/enforce electronic IP rights. This kind of property will have to protect itself; technology will be designed to protect technology similar to how it is now. There could even be an aspect of marketing, like introducing e-book readers that promise to protect your e-books from intrusive powers like Amazon.com.  

Recommended Reading: Experience Not Logic

The Experience Not Logic blog is informative and a pleasure to read.  The blog is primarily devoted to discussing legal and cultural issues concerning China.  Its name is derived from an 1881 Oliver Wendell Holmes, Jr., quote, in which he said, "The life of the law has not been logic; it has been experience."  About that quote, the blog's author, Will Lewis, wrote, "Each time I read a US court decision, Holmes' quote flashes through my mind.  In China, the rule is the same, but the experience is different. Here's to broadening the experience..."

Experience Not Logic features a variety of posts, discussing a broad range of issues from patent reform in the US to model arbitration clauses.  The posts are well-researched and Lewis writes with a hint of amused sarcasm reminiscent of Hunter S. Thompson, making his posts on fairly boring legal stuff actually readable and surprisingly fun.  Some of the opening lines from a post on corporate social responsibility are a perfect example:

Critics of capitalism have long clung to the idea that the inherent competition leads to conflict, and conflict in capitalism reinforces the unfortunate Hobbesean conclusion that man's life is "solitary, poor, nasty, brutish, and short." And then CSR, the classic liberal's wet dream, comes and spoils the party by showing the world that soaring profits can go hand in hand with doing good.

We really appreciate the fact that Mr. Lewis is a law student-- he is a 2L at the University of San Diego-- and he is publishing an excellent blog. Keep up the good work! We'll be reading!

Proposed Bill Would Make the USA a First-to-File Patent System

A new bill in Congress could bring the US in line with the patent systems of other countries. If the Patent Reform Act of 2007 passes, then the US will cease to be a first-to-invent patent system and will become a first-to-file system like most of the other countries in the world.

Joanne Irene Gabrynowicz of the Res Communis blog gave the following summary of the differences between the two patent systems in a post entitled, Filing First, Not Inventing, May Be More Important For Securing Space Intellectual Property:

When it comes to recognizing a creator’s right to a patent, most of the world has adopted the “first-to-file” rule. This means that the person or entity that files the patent first, is granted the patent without having to prove that they were the first to actually invent it. It was, as a former law school professor of mine used to say, “a race to the patent office door.” On the other hand, the United States has abided by the “first-to-invent” rule. This means that the patent applicant has to prove that it was he/she/it that was the first to invent the patentable item by being the first to reduce the patent’s underlying idea to a practice. Generally speaking, the first-to-file rule appeals to those who value efficiency in the often long patenting process. While those who value equity are proponents of the first-to-invent rule which seeks to reward the labor of the inventor.

Her post is an excellent read, and it briefly points out some of the implications the passage of this bill could have on space law and the general US practice of IP.

It seems to me that switching from a first-to-invent to a first-to-file patent system is like the US switching to the metric system. However, switching patent systems could have far greater implications than merely streamlining the systems between countries. It becomes a question of who should be rewarded? The first to invent or the first to get his patent to the trademark office? Apparently, the rest of the world appreciates efficiency over equity.

A Recent Survey Could Mean Even Better Enforcement of IP Laws in China

An article by the Financial Times entitled, Chinese Consumers Prefer Own Products, discusses the implications of a recent McKinsey survey that concludes most Chinese consumers trust domestic brands more than foreign ones and also shows that Chinese consumers are increasingly confident about the quality of products made in their country.

The Financial Times touts this survey as  a "stark warning for multinational companies about nationalist sentiment in China’s booming market." However, we think the Financial Times fails to see that if this survey is true, then we will see an even greater downturn in intellectual property piracy in China, which is good news for foreign investors. One of the primary concerns of foreign investors in China is IP protection, and we have said in the past that the Chinese will become more vigilant in the enforcement of IP laws as they increasingly produce more homegrown products. The fact that most Chinese consumers prefer their own products means that the Chinese are producing their own products and the Chinese people are proud of these products. Consequently, they will be less likely to permit the piracy of these products, which will also require protecting foreign IP.

US-Based Web Host Shuts Down Influential Blog

Hosting Matters, a Florida based web-hosting provider, has recently decided to terminate Hossein Derakhshan's influential website on the basis of a defamation allegation by Mehdi Khalaji, an Iranian fellow at the Washington Institute for the Near East Policy, a neo-conservative think-tank because of alleged Khalaji's support for the Iran Freedom Initiative, a concerted effort for regime change in Iran. In its own words, Hosting Matters decided to terminate Hossein's hosting account even though: "we do not have the time, interest, or resources to invest in continually dealing with his complaints and to review your site." Prior to terminating Hossein's account, Hosting Matters had asked Hossein not only to remove the allegedly defamatory post, but ALL posts relating to Khaliji and to "refrain from mentioning this person in any form on the site you host within this network."

The drastic nature of the request is coupled by the following: The post needs to be removed immediately and the entire site rebuilt so that no references remain in any archives or category listings. In addition, any other references you have to this individual are to be removed. Whether you archive them or not is entirely up to you. Such postings cannot, however, remain within this network.

The following assessment by Host Matters is scary. It creates the unfortunate precedent of allowing large media figures to shut down speech by apparently harassing a web host for a week. Moreover, Hosting Matters is most likely immune from liability even if Hossein committed defamation. Section 230 of the Communications Decency Act (CDA) says that "No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider." This federal law preempts any state laws to the contrary: "[n]o cause of action may be brought and no liability may be imposed under any State or local law that is inconsistent with this section." The problem here, though, isn't so much about the Hosting Matters liability against Khalaji, but rather whether it can be held liable by Derakhshan. Immediately, it seems clear that Hosting Matters' request is probably unconstitutionally overbroad in its request to remove all reference to Khaliji, even supposedly non-defamatory ones and possibly a prior restraint on speech by preventing Hossein to discuss any matters relating to Khaliji in the future. The problem is that the First Amendment does not apply to private actors, unless the private entity is exercising traditional state functionsif there is excessive interference and cooperation by the state, or if the relevant State constitution allows such suit. As stated by the Supreme Court in Lloyd Corp. v. Tanner, 407 U.S. 551 (1972):

"property does not "lose its private character merely because the public is generally invited to use it for designated purposes," and that "[t]he essentially private character of a store and its privately owned abutting property does not change by virtue of being large or clustered with other stores in a modern shopping center."

A State law to the contrary, however, could create a private cause of action. As noted by the Supreme Court in Pruneyard Shopping Center v. Robins, 447 U.S. 74 (1980):

"Our reasoning in Lloyd, however, does not ex proprio vigore limit the authority of the State to exercise its police power or its sovereign right to adopt in its own Constitution individual liberties more expansive than those conferred by the Federal Constitution."

In fact, there has been significant efforts by state supreme courts to circumvent the Supreme Court's narrow view of the state action requirement. The New Jersey Supreme Court interpreted the free-speech provisions of their state constitution as extending to private owners of shopping malls as well as to state action in New Jersey Coalition Against War in the Middle East v. J.M.B. Realty Corp., 650 A.2d 757 (1994). In Block v. Westminster Mall Company, 819 P.2d 55 (1991), the Colorado Supreme Court found sufficient entanglement with the government to support a finding of state action on the part of a mall and commercial retail center. Moreover, in Block v. Westminster Mall Company, 819 P.2d 55 (1991), the Colorado Supreme Court found sufficient entanglement with the government to support a finding of state action on the part of a mall and commercial retail center. However, the majority of State courts have not given such flexible interpretation to the state action requirement. Comforting, at least for Hossein, is that there are at least two trial courts in Florida, which appear to adopt a Pruneyard approach, allowing freedom of speech claims against private entities: Reason '84: The Committee for Citizens' Rights in Actions v. University Square Associates, Ltd., No. 84-9473 (Fla.Ct., 13th Jud. Cir., Hillsborough County, Fla., June 28, 1984): Reason '84: The Committee for Citizens' Rights in Civil Actions v. Albertson's, Inc., No. 84-7750 (Fla. Cir. Ct., 4th Jud. Cir., Duval County, Fla., July 2, 1984). Even assuming a flexible approach to the state action requirement applies, there is the larger question as to whether internet hosting accounts resemble shopping malls and should be constrained by the First Amendment or equivalent speech protection found in state constitutions. Central to the California court's opinion in Pruneyad and also the Supreme Court in Logan Valley Plaza, is the fact that "shopping center serves as the community business block." Because shopping malls had become the functional equivalent of a business district, shopping malls could not discriminate based on speech. I'm not going to comment on whether hosting accounts are equivalent to shopping malls, but I think an argument can be made. Shopping malls are large forums which give space to businesses to sell their product. Web hosts are companies that provide space on a server they own for use by their clients as well as providing Internet connectivity, typically in a data center. Underlying these legal arguments, however, is the plain fact that Hosting Matters' actions are disturbing. Shutting down a blog and seeking to control its contents, even though it is legally permissible, is not an action ANY service provider should be committing. Its enough that all bloggers and activists take notice and petition against their action.

Transnational Scope of U.S. Patent Law?

On October 27, the Supreme Court for the United States (SCotUS) agreed to review a patent infringement suit, filed by AT&T against Microsoft.  The undisputed facts are illustrated in the picture above (respectfully copied from Patently-O.)  Microsoft generated a software code in the US for its infamous Windows operating system, which included a code for synthetic speech technology patented by AT&T.  Microsoft then produced software from that code in the US and abroad.  That software produced and sold in the US, Microsoft has admitted, infringed AT&T's patent no. 32,580 (the '580 patent.)  But that software produced and sold abroad presents the issue in this case, likely to be argued in February of '07 according to SCotUS Blog.

The questions presented in Microsoft's petition for cert. read:

In certain circumstances, Section 271(f) of the Patent Act prohibits the "suppl[y] . . . from the United States . . . [of] all or substantial portion of the components of a patented invention . . . in such manner as to actively induce the combination of such components outside of the United States," as well as the "suppl[y] . . . from the United States [of] any component of a patented invention that is especially made or especially adapted for use in the invention."  35 U.S.C. 271(f)(1) and (2).  For purposes of that statute, the questions presented are:

1. Whether software object code can be a component of a patented invention; and, if so,
2. Whether copies of software object code are "supplie[d]" from the United States when those copies are created overseas by replicating a separate master version supplied from the United States.

In other words, does following the treasure map above lead one to infringement?

WIPO: Worldwide Patenting Report

Patent Infringement Updates reports:

A report released by the World Intellectual Property Organization (WIPO) on Monday, October 16, 2006, shows that the patent system is an integral part of increasing global economic activity, with the increase in patent filings closely mirroring economic growth around the world. The WIPO Patent Report 2006 shows that companies are increasingly using the intellectual property (IP) system to protect their investments in new markets. The report reveals that a total of 5.4 million patents were in force worldwide in 2004, the last year for which complete statistics are available.

Patent Infringement Updates also notes, "In only 20 years [of protecting intellectual property rights], China has become the 4th largest patent office in the world (by number of patent applications filed) and patent filings by Chinese residents grew more than five-fold between 1995 and 2004 to reach 65,786." 

Here's the whole report from WIPO.  More analysis is available from Patent Infringement Updates by following the above link.

Advice From Starbucks About IP Protection in China

China Law Blog recently did a post entitled “Protecting Your Intellectual Property in China—The Starbucks Perspective”. The post recounts advice Kim Teraberry, Director and Corporate Counsel at Starbucks, presented as part of a two day conference held by the US Patent and Trademark Office.

The post opened with a piece of advice that can’t be said enough: register your trademarks early! Moreover, a company should not assume that their Roman script mark will protect them against a Chinese character version. Thus, a company should consider registering a translation and a transliteration of their company name. When choosing a Chinese mark, Teraberry said that a company should consider marketing objectives, multiple dialects, traditional and simplified characters, and trademark clearance.

In a comment on the post, IP Dragon emphasized that there are a variety of dialects in China and a company that wants to take advantage of the Cantonese speaking market, which includes Hong Kong, should take into consideration the Cantonese pronunciation of their company and product as well as the Mandarin pronunciation. Furthermore, places such as Hong Kong use traditional characters; consequently, a company should also consider registering their trademarks in traditional characters as well as simplified.

Dan Harris of China Law Blog strongly suggested that a foreign company that expects to do right by its trademarks in China must retain professionals fluent in both Chinese and English that are familiar with both cultures. Harris said, “I am often asked by small companies if it is worth it to do all that is necessary to protect their name and brands in China. My response is that if their name and/or brands are their most valuable assets, then they really have no choice but to do what it takes to protect them.”

I enthusiastically join Harris’s opinion.