Tuesday, March 27, 2018

Oracle v. Google: A billion dollar case rises from the dead

This morning, the Federal Circuit Court of Appeals revived the long-running case of Oracle America, Inc. v. Google LLC. in a 56-page ruling.  The ruling is particularly important to programmers, as it holds that Google's copying of the declaring code and structure, sequence, and organization ("SSO")* of an Oracle-owned Application Programming Interface, or "API", is not fair use as a matter of law.  The Court went on to suggest that this liability could have been avoided had Google developed its own APIs -- APIs that would mimic those of Oracle in function, concluding that:
allowing Google to commercially exploit Oracle’s work will not advance the purposes of copyright in this case. Although Google could have furthered copyright’s goals of promoting creative expression and innovation by developing its own APIs, or by licensing Oracle’s APIs for use in developing a new platform, it chose to copy Oracle’s creative efforts instead. There is nothing fair about taking a copyrighted work verbatim and using it for the same purpose and function as the original in a competing platform.
In important cases, entities not involved in the litigation often file "amicus curiae", or "friend of the court" briefs.  Four full pages -- over 7 % -- of this decision is simply a list of amici. Reviewing the Amici list shows just how important this decision is for the future of interoperability and software. These include such entities as the Motion Picture Association of America, the Screen Actors Guild, the American Federation of Television and Radio Artists, the Recording Industry Association of America, associations of press and other photographers, and Business Software Alliance, the Computer & Communications Industry Association, the Electronic Frontier Foundation, Mozilla, Microsoft, Red Hat, HP, Linus Torvalds (creator of Linux), Vinton Cerf (one of the creators of the internet), Steve Wozniak (Apple Co-Founder) and GitHub.

Given the importance of the case to one of the engines of the American economy, the chance of the Supreme Court granting review is a good deal higher than the average case.  At the same time, given the dollar amount of damages sought in this case (potentially measured in the billions, with a "b"), there is a compelling reason to believe that Google will seek to settle after this decision.  Copyright lawyers hoping for new guidance on the "fair use" copyright defense are likely hoping for a Supreme Court review and published opinion.

Understanding the case involves examining something that even lawyers find overly technical:  The procedural history.  A copyright verdict requires three determinations by the Court: (a) copyright violation; (b) no fair use defense; and (c) what the financial damages are. After a jury trial in the United States District Court for the Northern District of California (the federal trial court in the Bay Area), the jury found that Google infringed Oracle's copyrights in the Java Standard Edition platform, but was unable to reach a verdict on the "fair use" defense.**  The trial court overturned the jury's verdict, finding that the API packages were not copyrightable as a matter of law.  In a 2014 case, the Federal Circuit Court of Appeals reversed, holding that the declaring code and the SSO of the Java API packages are entitled to copyright protection.  The jury verdict of copyright infringement was reinstated, and the case was "remanded", or sent back, to the trial court for a trial on Google's fair use defense.  Google attempted to appeal that decision to the Supreme Court, but the Supreme Court refused to hear the appeal.  On remand, the jury found that Google's use fell under the "fair use" exemption to copyright law.  Today's case reversed that finding and remanded to the trial court.  If the Supreme Court does not overturn today's ruling, the case will go back for a third verdict, this time on damages, making it one of the few cases to have each of the three copyright determinations made by a different jury, at least two of which were reviewed in separate appeals.

Today's decision was not concerned with whether copyright infringement took place -- that was determined in the prior appeal.  It was also unconcerned with damages -- that will be determined on remand.  Rather, today's decision addressed only the "fair use" defense.

The most fun way to understand fair use is to watch the EFF's video of Disney® characters explaining it.  The United States Copyright Office has a quick summary of the elements comprising fair use.  As there is no copyright in original United States government works, we are able to copy this summary here:

Fair use is a legal doctrine that promotes freedom of expression by permitting the unlicensed use of copyright-protected works in certain circumstances. Section 107 of the Copyright Act provides the statutory framework for determining whether something is a fair use and identifies certain types of uses—such as criticism, comment, news reporting, teaching, scholarship, and research—as examples of activities that may qualify as fair use.  Section 107 calls for consideration of the following four factors in evaluating a question of fair use:
  • Purpose and character of the use, including whether the use is of a commercial nature or is for nonprofit educational purposes:  Courts look at how the party claiming fair use is using the copyrighted work, and are more likely to find that nonprofit educational and noncommercial uses are fair.  This does not mean, however, that all nonprofit education and noncommercial uses are fair and all commercial uses are not fair; instead, courts will balance the purpose and character of the use against the other factors below.  Additionally, “transformative” uses are more likely to be considered fair.  Transformative uses are those that add something new, with a further purpose or different character, and do not substitute for the original use of the work.
  • Nature of the copyrighted work:  This factor analyzes the degree to which the work that was used relates to copyright’s purpose of encouraging creative expression. Thus, using a more creative or imaginative work (such as a novel, movie, or song) is less likely to support a claim of a fair use than using a factual work (such as a technical article or news item). In addition, use of an unpublished work is less likely to be considered fair.
  • Amount and substantiality of the portion used in relation to the copyrighted work as a whole:  Under this factor, courts look at both the quantity and quality of the copyrighted material that was used. If the use includes a large portion of the copyrighted work, fair use is less likely to be found; if the use employs only a small amount of copyrighted material, fair use is more likely. That said, some courts have found use of an entire work to be fair under certain circumstances. And in other contexts, using even a small amount of a copyrighted work was determined not to be fair because the selection was an important part—or the “heart”—of the work.
  • Effect of the use upon the potential market for or value of the copyrighted work:  Here, courts review whether, and to what extent, the unlicensed use harms the existing or future market for the copyright owner’s original work. In assessing this factor, courts consider whether the use is hurting the current market for the original work (for example, by displacing sales of the original) and/or whether the use could cause substantial harm if it were to become widespread.
In addition to the above, other factors may also be considered by a court in weighing a fair use question, depending upon the circumstances. Courts evaluate fair use claims on a case-by-case basis, and the outcome of any given case depends on a fact-specific inquiry. This means that there is no formula to ensure that a predetermined percentage or amount of a work—or specific number of words, lines, pages, copies—may be used without permission.  

Before applying these factors, it is important to understand what copying is at issue.  The Java APIs "allow programmers to use the prewritten code to build certain functions into their own programs rather than write their own code to perform those functions from scratch.  They are shortcuts. ... The prewritten programs are organized into packages, classes, and methods.  Specifically, an API package is a collection of classes and each class contains methods and other elements.  Each method performs a specific function, sparing a programmer the need to write Java code from scratch to perform that function."  Slip opinion page 8 (internal quotation marks omitted).

The basic infringement alleged stems from Google's desire to make programming for its Android operating system easier by importing API structures and functions.  This avoids programmers having to do much, if any, work to port a Java program written for another Java platform to the Android platform.  Google had difficulty writing its own APIs providing the same function and rules of use as the Oracle APIs, failed to reach an agreement with Oracle on a license fee to use the APIs, and elected to simply copy 11,500 lines of code from Oracle and the SSO of the Java API packages.  In what can best be described as a risky strategy, Google appears to have intentionally copied the materials in hopes that a fair use defense would prevail in an infringement suit.  Unless the Supreme Court grants review, Google's strategy appears to have failed.
BLOG EXTRA;  This is a good spot to discuss the relationship patents, copyrights, and trademarks.  Patents protect function while copyrights protect the actual way a thing has been expressed.  One may infringe a copyright without infringing a patent (which seems to have happened in today's case).  Because the function of the code is not protected, Google could presumably have written its own APIs and avoided copyright liability.  The opposite is also possible:  Google could have copied far less code, enabling a fair use defense, but if the code it copied was responsible for performing a patented function, Google would have avoided copyright liability while creating patent liability.  At this point, we can bring in a trademark issue -- had Google copied neither the code nor infringed a patent, but displayed on the Android boot screen "Oracle's Java", it could face a trademark suit.
The fair use defense is found in Section 107 of the Copyright Act, and requires a case-by-case determination as to whether a particular use is fair.  Of interest is that "in balancing the four statutory factors [set out in Section 107 as factors in determining fair use], courts consider 'whether the copyright law's goal of 'promot[ing] the Progress of Science and useful Arts' ... would be better served by allowing the use than by preventing it." Slip. Opinion 18.  This is a reflection of the fact that the founding fathers believed intellectual property so important that they included it in the text of the constitution.  As a result, changes to the statute and judicial interpretations of the statute are measured against the constitutional goals and limitations.

The Court goes on to explain that fair use is an "affirmative defense", which means that the burden of proving fair use falls to the alleged infringer.

In analyzing the fair use factors, the Court first addressed the purpose and charater of the use, finding that (a) the character of the use was commercial, weighing against a finding of fair use; (b) moving the code to the new context of Android on mobile, or a mere change in format, in a context where the copyright was verbatim, for an identical function and purpose and without changes to the expressive content or message, did not rise to the level of transformative use; and (c) The purpose and character prong in this case must conform to a Ninth Circuit holding that "one who acts in bad faith should be barred from invoking the equitable defense of fair use."  Today's case went on to hold that "while bad faith may weigh against fair use, a copyist's good faith cannot weigh in favor of fair use."  The Court determined that even if Google did not operate in bad faith, "the highly commercial and non-transformative nature" of the use weigh against a finding of fair use."***

The second factor, the nature of the copyrighted work, "turns on whether the work is informational or creative," as factual works are more likely to fall under fair use.  The Court goes on to hold that the Copyright Act, as amended in 1980, "unambiguously extended copyright protection to computer programs."****

The third factor, the amount and substantiality of the portion used in the context of the copyrighted work, seemed to turn on Google's decision to copy 11,330 more lines of code than the 170 lines minimally required to write in Java.  Even though there were millions of lines of code that were not copied, the court found that "no reasonable jury could conclude that what was copied was qualitatively insignificant, particularly when the material copied was important to the creation of the Android platform."  The Court found the third factor was either neutral or weighed against fair use.

The fourth factor, the effect on the potential market, was identified as "undoubtedly the single most important element of fair use" (Slip. Cp. 48, quoting the US Supreme Court).  The Court also applied the Ninth Circuit holding that likely market harm can be presumed where a use is commercial and not transformative.***  The Court held that the fourth factor weighs heavily against fair use.

Balancing the four factors, the Court found that there was no fair use as a matter of law, substituting its determination for that of the jury.

Perhaps in recognition of the widespread chilling effect this holding will have on development of interoperable computer systems and code, the Court adds that they "do not conclude a fair use defense could never be sustained in an action involving the copyright of computer code." (Slip Op. 54).

It is hard to overstate the importance of APIs to computer programming.  It is likely that some form of legislative fix or judicial clarification will be forthcoming.  Given the money available to the litigants, it is also very likely that a spirited effort will be made to get the matter before the U.S. Supreme Court.  While we await the next developments in this case and on the subject of APIs, however, it is more critical than ever to clear API copying with counsel before copying them.

It is also possible -- perhaps likely, given GitHub's participation as Amici -- that the various open source licenses will be modified to directly address copying APIs in light of this case.  When seeking legal advice, it is important that your lawyer be very familiar with copyright law and open source licensing.

* The court's decision will be confusing to many programmers who understand an SSO to mean "single sign-on" -- by far the more common use of the initials "SSO".  The Court defines "SSO" as instead meaning "structure, sequence, and organization".  The single sign-on process is generally something companies complete to provide the back end for, as it makes it far more difficult to stop using the service that provides the back end.  It is likely for this reason that Facebook®, Google®, Amazon®, and others often provide free or largely low-cost access to single sign-on.   It is important to note that while we think it unlikely that we will see a copyright case involving simply using single sign-on, readers of this article should retain a lawyer to review their use of single sign-on to ensure the absence of copyright and patent issues.
** As one might expect in a case between two tech giants, patent claims were also raised.  However, the jury found no patent infringement, and that finding was not reviewed in today's case.  Copyright cases are normally heard in the regional Circuit Court where the trial court is located.  However, because there were patent claims brought in the case -- even though the appeal concerned copyright claims only -- the Federal Circuit had exclusive jurisdiction.  Without the patent claims, the case would have been heard by the Ninth Circuit Court of Appeals.
*** Much as the Supreme Court has done with patent eligibility and obviousness, the Federal Circuit has incorporated one of the prongs of the fair use test into another of the prongs.  In this case, it uses the second prong -- whether a work is transformative -- to determine the third prong, the purpose and character of use.  So too does it collapse the first factor into the fourth factor, effect on the potential market.
**** The original "bargain" of copyright and patent law was that a time-limited exclusive monopoly would be granted to the inventor or author in exchange for teaching others how to practice the invention or for making the work available to the public at the end of the copyright period.  Today's case hinted at the overlap between patents and copyrights, holding that "reasonable jurors could have concluded that functional considerations were both substantial and important [and based] on that assumed factual finding ... factor two favors a finding of fair use."  Of course, intellectual property protection for function is available via the patent system, not the copyright system.  At the same time, copyright can extend to compiled, computer-readable object code that performs functions.  The IP ecosystem may thus protect a specific implementation of function via copyright and patent.

Thursday, March 22, 2018

Songwriters Collect Big Against Music Streaming Services

After a massive dispute, streaming services will now be required to pay more for the music they play. The Copyright Royalty Board ruled to increase royalty payments to songwriters and music publishers from music streaming companies by 43.8 percent (they go into effect for interactive streaming and limited download services for the years 2018-2022). This jump is the biggest rate increase to date. This decision will require streaming services to pay 15.1 percent of their revenue to songwriters and publishers (up from 10.5 percent). 

The action involved songwriters and music publishers against five large technology companies, who were seeking to reduce the low rate of royalties they currently pay to songwriters for using their music on their streaming services. The ruling affects only the mechanical license, which includes albums, CDs and downloads. The ruling also instigates a late fee, which means streaming companies must pay their royalty rates on time or face an 18 percent interest fee annually. Before this legislation, artists and record labels were left to create their own deals with streaming services, and oftentimes, they were limited by a content cost cap or a low percentage. 
This decision was largely influenced by upcoming federal legislation known as the Music Modernization Act, which seeks to overhaul the digital mechanical licensing process.

Tuesday, March 13, 2018

Patent Tuesdays and Application Thursdays: Understanding Patent Office Publications

The bargain envisioned in the United States Constitution is that inventors disclose how to practice an invention, making the knowledge available to the world, in exchange for a time-limited monopoly.  Such a disclosure would be useless if it were not made available to the public.  Similarly, it is common for people reviewing an issued patent to ignore the "prosecution history" -- even though the prosecution history often lays out weaknesses in the claims or, more frequently, involves concessions made by the inventor as part of getting the patent issued.
For example, a claim that says "We do X in conjunction with widgets A, B, and C" may have as part of the prosecution history a document where the inventor's lawyer states something like "in order to overcome the cited art, we clarify in these claims that X must be directly done using widgets A, B, and C".  Such a statement would limit or eliminate the ability to argue that "in conjunction with" does not require direct use, so the claim covers any device that involves A, B and C where C is present but X is done without C's direct use.
This kind of limiting effect of the prosecution history is sometimes referred to as "prosecution estoppel", but leaving aside the Latin words and legalize really means "you can't say the claims mean one thing during prosecution of the patent and a different thing after issuance".

To find patents, applications, prosecution history, and the name of the current owners, one needs only an internet connected device.

To find issued patents, we can search the original source at the US Patent and Trademark Office ("USPTO") by visiting http://patft.uspto.gov/netahtml/PTO/search-bool.html.  New patents issue at midnight Eastern time every Tuesday (so Monday night at 9 pm on the West Coast).  It is not unusual to have data mining operations hitting the USPTO's servers hard right after patent issuance happens so you may need to be patient in trying to do that search.  The other source for issued patents is https://patents.google.com/, a site that allows you to search for patents that are several weeks to several months old or older.  Of course, Google's site allows you to download an actual image of the issued patent whereas the USPTO's site requires you to download it page by page (and let's be serious, nobody is downloading a 50 page patent that way).  There are services that allow you to do so, though, such as https://www.pat2pdf.org/, a site that allows downloads as soon as the patent issues.

Similar resources exist for pending applications.  Patent applications are published at midnight Eastern time on Thursday (9 pm Wednesday night on the West Coast).  The USPTO has a search facility at http://appft.uspto.gov/netahtml/PTO/search-bool.html.  If you don't need the most up to date list of patent applications, you can use https://patents.google.com/.  Note that the same issues exist regarding how busy the servers get right after publication happens.

If you know how to program PERL, I've included source code at the end of the article that allows you to perform your own conversion of a patent or patent application into a single PDF.

To find the owner of a patent or patent  application, one can access the patent assignments database.  There are a lot of legal terms related to assignments ("bonafide purchaser for value", anyone?), but the basic things to remember are:

(1) The USPTO has errors in the assignments database. Some of these are data entry or other errors by the USPTO.  Others are errors by lawyers for other inventors in entering data.  Either way, you'll want to review the underlying assignment documents before buying or licensing a patent.

(2) Assignments should be recorded.  If an assignment is not recorded, the last recorded owner of the patent (or if no assignment is recorded, the inventor or applicant) can be (pretty) safely assumed to have the right to sell or license the patent unless the buyer or licensee knows that there has been another assignment that wasn't recorded.  Assignments that happen but aren't recorded can create what is known in the art as "a horrible mess that can and probably does cost a fortune to straighten out, and sometimes can't be straightened out".

(3) Assignment obligations are subject to state law.  What this means is that if the statute of limitations on a written contract is 6 years and you have a contract that says "I agree that I will assign my patent to you", you have only until the statute of limitations runs out to compel such an assignment.  After that passes, you are out of luck.  See Stanford v Roche, 563 U.S. 776 (2011) or the discussion about it on Patently-O.  Prior to the Stanford case it was pretty common to see contract language that said "I agree I will assign ...".  After the Stanford case, contracts were rewritten across many industries to say "I shall and hereby do assign ...".  It is quite possible that companies have tried to circumvent this case (or simply are unaware of it), leading them to record a contract where an assignment is promised.  Such a filing is unlikely to create an effective assignment.  The bottom line is you should probably have a lawyer look at the assignment history of the patent before assuming that you know the identity of the current owner.

Finally, we come to the file wrapper.  After navigating a somewhat annoying CAPTCHA, https://portal.uspto.gov/pair/PublicPair allows you to search for the prosecution history of patents and pending patents.

Let's walk through the prosecution history for a drug patent.  One application number in that family is 07/882,988.  We visit https://portal.uspto.gov/pair/PublicPair and search for that application number:

When you hit search, you may discover one of the dirty secrets about the US patent office: They are using some very outdated technology and just can't keep up with demand for access to prosecution histories.  As a result, you may get an error message saying it isn't available for that application, that it is too busy, that there is a database error, etc.  These error messages are almost always transient and resolve within minutes (sometimes) or hours.

Having run the search (and been lucky enough that the system returned data instead of an error), we get this result:

The fields on the "Application Data" tab are pretty self-explanatory.

We next hit the "Transaction History" tab. 

Transaction history tells you (almost) everything that has happened during the life of the application.  In this case, we can see that there was FDA involvement, the issue notification was sent 8/31/1993, the patent term extension certificate issued 7/11/2002, etc.

A list is fine, but how do we find the referenced documents?  Easy -- we hit the "Image File Wrapper" tab.  If we hit checkbox next to the "PDF" button and then hit the PDF button, it will generate a single PDF with the entire prosecution history in it.  You can download the history in a single file this way.

Critically, you should note that the status on the "Application Data" tab, the most recent status in the "Transaction History" tab and the latest in the "Image File Wrapper" tab sometimes don't match.  It is not uncommon, for example, to see "Issue Notification" on the transaction history tab, a "-" in the status field on the "Application Data" tab, and no reference to an issue notification in the Image File Wrapper tab.  Since issue notices are handed down on Wednesdays, this is a reproducible bug (although it manifests in situations other than issue notices as well).  It is important to review all three tabs to be sure you know the actual status of the patent application.

To find if there are other applications or issued patents in the family, we hit the "Continuity Data" tab.

From that tab, we can see that the issued patent has two children and an abandoned (non-patented) parent.  Why was the parent abandoned?  Perhaps the examiner cited a reference in that application that can be used to invalidate some of the claims in the children.  Perhaps the company hoped to get a different examiner.  To figure out what is really going on, you will need to review the prosecution history of the parent and children applications.

The "Foreign Priority" tab often does not appear as there is no foreign priority claim.  If there is one, it can be found under that tab (although again, read the file wrapper as there is no guarantee that the data on foreign priority was entered correctly).

The "Fees" tab takes you to the maintenance fee page.  The "Published Documents" tab takes you to the text-formatted published applications or patents (the same ones we showed you how to find earlier in the article).

"Address & Attorney/Agent" is self-explanatory.

The "Assignments" tab is another way to approach finding assignments.

Finally, the "Display References" tab is where publications referenced in the file history can be found (but they can often also be found in the Image File Wrapper tab).

In no way is this an endorsement of trying to work your way through a legal decision on patents yourself.  Enforcing, purchasing, licensing, challenging or otherwise interacting with patents is complex and a lawyer's help is well worth the investment.  Reading the file history, however, is a great way to make sure your time with the lawyer is spent productively.

PERL code to convert patent applications or issued patents to a PDF (written on Windows, not tested on Linux or Mac):

use strict;

use LWP::UserAgent;
use PDF::API2;
use List::Util qw( reduce );
unless (-d "C:\\cgi\\tmp") {
system("md C:\\cgi\\tmp")

my($username)=getlogin || getpwuid($<);


unless (length($patnum)>2) {
print "Enter patent number:";

$patnum=~ s/\,//g;
unless ( ($patnum=~ m/^\d\d\d\d\d\d\d$/) || ($patnum=~ m/^\d\d\d\d\d\d\d\d$/) ) {
print "$patnum is not a patent number";
print "looking at patent $patnum\n";
$urlbase=~ s/7777777/$patnum/g;
if ($result=~m/^error/i) {
print "Error on try of $urlbase\nGot $result";
$result=~ m/\<embed src\=\"(http\:\/\/pdfpiw.uspto.gov\/\d\d\/\d\d\d\/\d\d\d\/)1.pdf"/i;
print "Found $base\n";
while($going > 0) {
my($path)=$basepath . "$patnum" . "_" . $going . ".pdf";
my($base2)=$base . $going . ".pdf";
print $base2 . "\n";
if ($result2=~ m/^error/i) {
if ($going==1) {
print "Got $result2 on trying $base2";
} else {
print "writing $path\n";
print OUT $result2;


# Given two pdfs and a page number, appends the given page of the second pdf to the first pdf
sub append_page_to_pdf {
    my ( $pdf1, $pdf2, $pg ) = @_;
    $pdf1->importpage( $pdf2, $pg );

# Given two pdfs, appends the second to the first.  Closes pdf2
sub merge_2_pdfs {
    my ($pdf1, $pdf2) = @_;
    map &append_page_to_pdf( $pdf1, $pdf2, $_ ), 1..$pdf2->pages;
    return $pdf1;

# does what it says
sub open_pdf {
    my $file = $_[0];
    my $pdf = PDF::API2->open( $file );
    print "Opened pdf ( $file )\n";
    return $pdf;

# reduces merge_2_pdfs over an array of pdfs
sub merge_pdfs {
    my @files = @_;
    my $starting_filename = shift @files;
    my $start_pdf = &open_pdf( $starting_filename );
    my $final_pdf = reduce { &merge_2_pdfs( $a, &open_pdf( $b ) ) } $start_pdf, @files;
    return $final_pdf;

# Get the arguments ie save_name, file1, file2, file3, ...
my $save_name="C:\\users\\" . $username . "\\desktop\\" . "patent" . $patnum . ".pdf";
print "saving to $save_name\n";
my $save = &merge_pdfs( @files );
$save->saveas( $save_name );


sub grab {
# create a UserAgent
my ($agent_name)="PPMOD-Agent/LWP";
$agent_name="Mozilla/4.0 (compatible; MSIE 6.0; Windows NT 5.1; SV1; AskTB5.6";
my ($ua) = LWP::UserAgent->new($agent_name);

# and a request object
my ($request) = HTTP::Request->new(GET => $url);
#add an Accept header
$request->header(Accept => 'text/html');
$request->header(Accept => '*/*');

#make the request and print the result
my ($response) = $ua->request($request);

if ($response->is_success) {
return (($response->content));
} else {
return ( "Error: " . $response->status_line . "\n" );

Wednesday, March 7, 2018

The Benefits of Licensing Agreements for IP Owners

          There are generally two ways to exploit the value of intellectual property rights: use the property yourself or transfer the rights to someone else to use.  A transfer of rights – whether in the form of an assignment or license – is often an attractive option for IP owners since it is not always possible or practical for an owner to put their intellectual property to use themselves. 

If a total and unrestricted transfer is made of the rights, then the transfer is referred to as an “assignment” or “sale.”  If fewer than all the rights are transferred, then the transfer is called a “license.”  In an IP licensing agreement, the owner of intellectual property (licensor) grants permission for another (licensee) to use the property, subject to the terms of the agreement.  In exchange for permission to use the IP, the licensee pays the licensor an agreed amount of money, typically in the form of a royalty.  A licensing agreement can have tremendous benefits for licensors. 
For one, licensing to an already established company can allow an IP owner to avoid the manufacturing, marketing, and distribution costs associated with getting their IP into the market.  Additionally, licensing to an already established company may allow a licensor to penetrate the market much sooner.  The reality is that many IP owners have valuable ideas but either lack the methods, resources, or know-how to build their IP into a profitable business, or decide to remain exclusively a creator or inventor.  The utility of licensing is that it allows a licensor to partner with a licensee to monetize the licensor’s IP in a way that would not be possible if the licensor had to do everything on their own.  
Unlike an assignment or sale, a licensing agreement can be structured to allow for the return of the rights should the deal fail to live up to the licensor’s expectations.  Major advantages of a license also include the ability to split rights geographically (wherein a licensee's rights are limited to a specific region) and the ability to split rights temporally (e.g., granting an exclusive license for 5 years after which the license becomes non-exclusive).  Also, a license allows an IP owner to grant rights to multiple licensors, whereas an assignment transfers the rights to a single party subject to any existing licenses.  Finally, an IP owner who enters into an assignment gives up all rights to any future profit derived from the IP, subject to any profit sharing or royalty provisions.
While licensing agreements have many advantages, a poorly drafted one can lead to unexpected troubles.  Moreover, because IP licensing agreements tend to be complex documents, many important components are routinely overlooked by inexperienced drafters.  An article on some of the most overlooked components in IP licensing agreements is forthcoming. 
Authored by Brandon Hamparzoomian

Thursday, March 1, 2018

Quick Look: Fair Use Does Not Allow News Clipping Services to Send Ten Minute Long Videos to Customers

This is a Second Circuit opinion, so it does not directly cover California.  However, it will be persuasive when the Ninth Circuit, which covers California, addresses similar issues.  In short, the case is titled Fox News v. TVEyes, Inc., and holds that while it is fair use to allow searching of copyrighted material, actually providing a significant amount of that material (in this case, 10 minute long clips) is copyright infringement.

From the text of the case:
This appeal shares features with our decision in Authors Guild v. Google,
Inc., 804 F.3d 202 (2d Cir. 2015) (“Google Books”).    That case held that Google’s
creation of a text‐searchable database of millions of books (including books under
copyright) was a fair use because Google’s service was “transformative” and
because integral features protected the rights of copyright holders.    However, we
cautioned that the case “test[ed] the boundaries of fair use.”    Google Books, 804
F.3d at 206.    
We conclude that defendant TVEyes has exceeded those bounds. 
TVEyes’s re‐distribution of Fox’s audiovisual content serves a
transformative purpose in that it enables TVEyes’s clients to isolate from the vast
corpus of Fox’s content the material that is responsive to their interests, and to
access that material in a convenient manner.    But because that re‐distribution
makes available virtually all of Fox’s copyrighted audiovisual content‐‐including
all of the Fox content that TVEyes’s clients wish to see and hear‐‐and because it
deprives Fox of revenue that properly belongs to the copyright holder, TVEyes has
failed to show that the product it offers to its clients can be justified as a fair use

The bottom line is that fair use is complicated, and simply hoping you're ok or that you won't be noticed is no substitute for a proper review and analysis by skilled copyright counsel.

It also raises the question of whether a service that has been around for decades -- namely newspaper clipping  -- is copyright infringement.  Those typically function by searching major newspapers for specific terms, such as a name.  When articles are found, they are copied and sent to the client.  It strikes me that an astute copyright holding newspaper could make good money bringing such suits, taking advantage of the large statutory damages available for infringement.