Source: https://lawtheories.com/
Timestamp: 2019-04-20 10:17:23+00:00

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Law Theories – A (mostly) IP law blog.
A (mostly) IP law blog.
August 16, 2017 August 17, 2017 Devlin HartlineComments are off for this post.
In July of 2016, a criminal complaint was filed in the Northern District of Illinois alleging that Artem Vaulin of the Ukraine was the mastermind behind the popular torrent site, Kickass Torrents (KAT). At the time, KAT was one of the largest pirate sites in the world, with an estimated 50 million unique visitors each month. The complaint charged Vaulin with several crimes, including criminal copyright infringement. The district court issued an arrest warrant for Vaulin and a seizure warrant for the various KAT domain names. Less than two weeks later, Vaulin was arrested in Poland and the KAT website was under the government’s control.
The government then secured an indictment charging Vaulin with sixteen counts, including eleven counts of aiding and abetting criminal copyright infringement for distributing pre-release movies, including The Butler, Deadpool, and X-Men: Apocalypse. There was also one aiding and abetting criminal copyright infringement count for reproducing and distributing “at least ten copies . . . of one or more copyrighted works which had a total retail value of more than $2,500” during “the 180 days leading up to and including July 8, 2016[.]” Two months after the indictment was handed down, Vaulin filed a memorandum in support of his motion to dismiss that made a rather extraordinary claim: Aiding and abetting criminal copyright infringement is not a crime.
The twelve aiding and abetting criminal copyright infringement counts in the indictment all point to Section 2 of Title 18, the federal aiding and abetting statute. Section 2(a) provides: “Whoever commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal.” The idea behind Section 2(a) is simple: Those who help or encourage another to commit a federal crime, with the intent to aid in its commission, are guilty just as if they had committed the crime themselves. The statute does not create a separate crime; it instead permits someone to be convicted of a crime even if that person did not commit all of the acts constituting the elements of the crime. The indictment charged Vaulin with aiding and abetting because his KAT website merely provided torrent files that helped others to directly commit criminal copyright infringement.
The government’s brief in response to Vaulin’s motion to dismiss pointed out this obvious flaw: “And make no mistake, § 2 applies to all violations of the criminal code.” It noted that no court had ever held that aiding and abetting criminal copyright infringement is not a crime, even though “scores of defendants” had been charged and found guilty of that very crime. The government then rebutted the only plausible argument that aiding and abetting criminal copyright infringement is not a crime—despite the fact that Vaulin had not bothered to make it. Under the Copyright Act of 1909, Congress expressly included language criminalizing aiding and abetting criminal copyright infringement. That language was removed in the Copyright Act of 1976, and the argument is that Congress thus decriminalized the act of aiding and abetting criminal copyright infringement.
At first blush, this argument makes some sense. Indeed, one district court suggested in dicta over two decades ago that “Congress revamped the Copyright Act by eliminating the crime of aiding and abetting copyright infringement.” And one scholar recently posited that “the Copyright Act of 1976 eliminated the provisions for aiding and abetting introduced in 1909[.]” Notably, neither the district court nor the scholar mentioned the federal aiding and abetting statute—Section 2(a)—and explained why it would not apply to criminal copyright infringement. Nor did they explain why nothing in the legislative history indicates that Congress intended to make criminal copyright infringement the one-and-only federal crime that people can aid and abet with impunity.
In context, the argument makes no sense. Why would Congress want to decriminalize aiding and abetting criminal copyright infringement, thus making it different from every other federal crime? And why would it make such a drastic change, reversing almost seven decades of precedent, yet say nothing in the legislative history? The trend since copyright infringement was first criminalized one century ago has been to expand both the conduct that constitutes criminal infringement and its sanctions. In the four decades since the 1976 Act was enacted, Congress has systematically enlarged the law of criminal copyright infringement. Why would Congress work so diligently to broaden criminal copyright infringement while at the same time make it the only crime in the entire U.S. Code that one can aid and abet without liability?
Vaulin’s self-serving—and ultimately losing—argument that the crime of aiding and abetting criminal copyright infringement disappeared four decades ago despite nobody noticing until now aside, this case raises some interesting questions. The simple fact is that there is very little case law applying criminal copyright law in the internet context, much less cases turning on an aiding and abetting theory. However, what is uninteresting is the fact that aiding and abetting criminal copyright infringement is a crime. It is absurd to think that criminal copyright infringement is the one crime that Congress wants people to be free to aid and abet.
 The indictment specified that each count is “[i]n violation of Title 17, United States Code, Section 506(a)(1)(C) and Title 18, United States Code, Sections 2319(d)(1) and 2.” Section 506(a)(1)(C) makes criminal “willfully” infringing a copyright if committed “by the distribution of a work being prepared for commercial distribution, by making it available on a computer network accessible to members of the public, if such person knew or should have known that the work was intended for commercial distribution.” Section 2319(d)(1) establishes the crime as a felony, punishable by up to three years imprisonment and a fine.
 The indictment specified that this count is “[i]n violation of Title 17, United States Code, Section 506(a)(1)(A) and Title 18, United States Code, Sections 2319(b)(1) and 2.” Section 506(a)(1)(A) makes criminal “willfully” infringing a copyright if committed “for purposes of commercial advantage or private financial gain[.]” Section 2319(b)(1) establishes the crime as a felony, punishable by up to five years imprisonment and a fine.
 United States v. Pino-Perez, 870 F.2d 1230, 1233 (7th Cir. 1989).
 United States v. LaMacchia, 871 F. Supp. 535, 539 (D. Mass. 1994).
 Irina D. Manta, The Puzzle of Criminal Sanctions for Intellectual Property Infringement, 24 Harv. J.L. & Tech. 469, 481 (2011); see also Mary Jane Saunders, Criminal Copyright Infringement and the Copyright Felony Act, 71 Denv. U. L. Rev. 671, 674 (1994) (“The 1976 general revision to the Copyright Act continued the offense of criminal copyright infringement, but eliminated the crime of aiding and abetting infringement.”).
 See, e.g., Piracy and Counterfeiting Amendments Act of 1982, Pub. L. No. 97-180, 96 Stat. 91 (1982); Sentencing Reform Act of 1984, Pub. L. No. 98-473, 98 Stat. 1987 (1984); Copyright Felony Act of 1992, Pub. L. No. 102-561, 106 Stat. 4233 (1992); Anticounterfeiting Consumer Protection Act of 1996, Pub. L. No. 104-153, 110 Stat. 1386 (1996); No Electronic Theft (NET) Act of 1997, Pub. L. No. 105-147, 111 Stat. 2678 (1997); Digital Theft Deterrence and Copyright Damages Improvement Act of 1999, Pub. L. No. 106-160, 113 Stat. 1774 (1999); Artists’ Rights and Theft Prevention (ART) Act of 2005, Pub. L. No. 109-9, 119 Stat. 218 (2005); Prioritizing Resources and Organization for Intellectual Property (PRO IP) Act of 2008, Pub. L. No 110-403, 122 Stat. 4256 (2008).
 See, e.g., 5 Nimmer on Copyright § 15.01[A] (2017) (“Persons who knowingly and willfully aid or abet copyright infringement are subject to the same criminal penalties as apply to the principal.”); Benton Martin & Jeremiah Newhall, Criminal Copyright Enforcement Against Filesharing Services, 15 N.C. J. L. & Tech. 101, 108 (2013) (“Aiding and abetting criminal copyright remains a crime under § 2(a).”); James Lincoln Young, Criminal Copyright Infringement and a Step Beyond: 17 U .S.C. § 506 (1976), 60 Neb. L. Rev. 114, 124 (1981) (“The continued inclusion of such a provision in the new section 506(a) would have been merely superfluous[.]”); Note, The Criminalization of Copyright Infringement in the Digital Era, 112 Harv. L. Rev. 1705, 1722 n.39 (1999) (“The new Act removed references to aider and abettor liability. However, because such liability was still possible under the general provision treating aiders and abettors of any federal criminal offense as principals, this change appears to be simply a removal of surplusage.”).
August 16, 2017 August 16, 2017 Devlin HartlineComments are off for this post.
On August 14, 2017, the Regulatory Transparency Project of the Federalist Society published a new white paper, Crippling the Innovation Economy: Regulatory Overreach at the Patent Office. This white paper examines how an administrative tribunal created in 2011—the Patent Trial and Appeal Board (PTAB)—has become “a prime example regulatory overreach.” Several CPIP scholars are members of the Intellectual Property Working Group in the Regulatory Transparency Project that produced the white paper, including Professors Adam Mossoff, Kristen Osenga, Erika Lietzan, and Mark Schultz, and several are listed as co-authors.
Among the sweeping changes to the U.S. patent system included in the America Invents Act (AIA) was the creation of the PTAB, a new administrative body within the U.S. Patent and Trademark Office (USPTO). The PTAB hears petitions challenging already-issued patents as defective. Anyone can file a petition to have a patent declared invalid. The original idea was that this would help to weed out “bad patents,” i.e., patents that should not have been issued in the first place.
The white paper briefly discusses the history and purpose of the U.S. patent system and describes the PTAB and how it operates. The substance of the white paper details extensively the procedural and substantive problems in how the PTAB has failed to respect both the basic requirements of the rule of law and the rights of patent owners. The concern is that this undermines the stable and effective platform that patent rights provide as the engine of the innovation economy.
To read the white paper, please click here.
April 19, 2017 Devlin HartlineComments are off for this post.
The hardest things are often the most important things. That’s one of the implicit justifications for the intellectual property system. If we want people to do the hard and important work of researching, developing, and commercializing game-changing innovations, then we need to secure the fruits of their labor with property rights.
In her forthcoming paper, The Drug Innovation Paradox, Professor Erika Lietzan of the University of Missouri School of Law gives reason to question whether our IP and regulatory system is properly encouraging pharmaceutical innovators to work on the most important, and hardest, questions.
This paper, produced while Prof. Lietzan was a CPIP Edison Innovation Fellow, considers a paradox. Some of the biggest health challenges, the most important things, are indeed the hardest things. Therapies for diseases such as multiple sclerosis and Alzheimer’s demand research, development, and testing that takes longer. Unfortunately, the longer something takes to develop, the shorter the term of exclusivity under the IP system, and thus the less secure the investment.
The drug innovation paradox is that the hardest and most important cures are often the ones most poorly supported by our IP system.
Combining several different data sources for the first time, Prof. Lietzan presents comprehensive statistical findings that bring the extent of the drug innovation paradox into focus. The implications for innovation policy are profound, especially if we wish to see groundbreaking new therapies that are inherently more difficult to develop.
Incentives are particularly important in the pharmaceutical industry, where the average cost of developing an approved new medicine is over two billion dollars. Drugmakers would hardly invest so much without the promise of exclusivity once the medicine goes to market. However, the period of exclusivity—the incentive—we give to drugmakers depends upon how long it takes them to bring a new medicine to the market. The more time they spend on developing a new medicine, the less reward they receive for their troubles by way of a shorter patent term.
In the United States, it takes 3.5 years on average for a patent to issue, and in many industries, patent owners thus might expect to enjoy around 16.5 years of clear market exclusivity. However, things are very different in the pharmaceutical industry, where the safety and efficacy of a new drug has to be proven before it can be marketed. Years of preclinical testing and clinical trials run down the patent term clock while a drugmaker awaits approval. Congress has instituted measures to restore a portion of the time lost, but the fact remains that longer development programs result in shorter periods of exclusivity.
Pouring over the data going back to 1984, Prof. Lietzan examines the variables that play a role in perpetuating the drug innovation paradox. Critically, she notes that many of the factors that consistently lead to longer development programs—including the drug, disease, and endpoints to be met—are simply beyond a drugmaker’s control. Of course, it is impossible to say for certain what drugs were never invented because the incentives were not there. But the data does give us an accurate sense of how many years spent in development are lost when the patent expires.
It is important to note that this lengthy testing period represents only one part of a development program, and the preclinical testing period has to be taken into account as well. Prof. Lietzan estimates that the average preclinical testing period for new drugs is 5.61 years. It is easy to see how the majority of the patent term for drugs that fall into certain therapeutic categories may be gone before the drug even enters the market.
The danger of the drug innovation paradox is that we may be under-incentivizing pharmaceutical research and development for drugs that are inherently more difficult to develop. The next great breakthrough treatment for difficult-to-treat diseases like cancer or multiple sclerosis may never be developed unless the incentives are there to reward drugmakers for taking the risk to develop the treatments in the first place. The data collected by Prof. Lietzan shows us just how time-consuming these endeavors can be, and they suggest that we should break the paradox if we hope to have even greater drug innovation.
CPIP is pleased to once again have Prof. Lietzan as a CPIP Edison Innovation Fellow for 2017 – 2018. We look forward to supporting more of her groundbreaking work on this difficult, but absolutely important, issue.
 Erika F. Lietzan, The Drug Innovation Paradox, 83 Mo. L. Rev. ___ (2018), available at https://papers.ssrn.com/abstract_id=2948604.
 See Joseph A. DiMasi et al., Innovation in the Pharmaceutical Industry: New Estimates of R&D Costs, 47 J. Health Econ. 20 (2016) (estimating average total pre-approval cost of approved new compound at $2.558 billion in 2013 dollars), available at https://www.ncbi.nlm.nih.gov/pubmed/26928437.
 See Mark Schultz & Kevin Madigan, The Long Wait for Innovation: The Global Patent Pendency Problem (Ctr. for the Prot. of Intell. Prop. Oct. 2016), available at https://sls.gmu.edu/cpip/wp-content/uploads/sites/31/2016/10/Schultz-Madigan-The-Long-Wait-for-Innovation-The-Global-Patent-Pendency-Problem.pdf.
March 28, 2017 March 29, 2017 Devlin HartlineComments are off for this post.
Last August, I wrote about CloudFlare’s “desperate new strategy” to protect MP3Skull, a notorious pirate site that was sued by various recording companies for copyright infringement. CloudFlare offers content delivery networking, web optimization, and other performance services for websites. The plaintiffs easily obtained a permanent injunction against MP3Skull when it didn’t even bother to respond to the suit. However, that didn’t stop MP3Skull from opening up shop under several new top-level domains using CloudFlare’s services. When the plaintiffs sent a copy of the injunction to CloudFlare and asked it stop servicing the sites, CloudFlare put up a fight.
CloudFlare has a history of supporting pirate sites. After Grooveshark was found liable for willful copyright infringement and shut down, CloudFlare was there to lend a helping hand to the copycat sites that later sprung up. The plaintiffs obtained a restraining order against the new sites, and they asked CloudFlare to not provide them with services. CloudFlare balked at the suggestion, arguing in the district court that it was not in cahoots with the enjoined defendants. The district court held that, under Rule 65, CloudFlare was indeed bound by the injunction against the copycat sites. By providing the copycats with numerous services, CloudFlare was in “active concert or participation” with the defendants.
Just as CloudFlare took the low-road with Grooveshark, it again decided to stand up for adjudicated pirates with MP3Skull. Once confronted with the injunction against MP3Skull, CloudFlare tried a new strategy. Instead of arguing that it wasn’t acting in concert with the enjoined defendants, it argued that it couldn’t be enjoined because of the DMCA. In particular, CloudFlare contended that since Section 512(j) controls injunctions against internet service providers, and since that standard was not applied here, it was not bound by the injunction. As I mentioned in my last post, this argument is ridiculous for one simple reason: CloudFlare is not being enjoined.
Judge Cooke agreed with CloudFlare that “Section 512 outlines rules for copyright infringement-related injunctions involving online service providers[.]” But she disagreed that Section 512(j) has anything to do with whether CloudFlare was bound by the injunction against MP3Skull under Rule 65. She noted that Section 512 “does not blunt a court’s power to enforce a permanent injunction involving non-parties such as CloudFlare that may be ‘in active concert or participation’ with Defendants.” Indeed, Judge Cooke stated that “[e]very injunction . . . automatically forbids non-parties” from aiding and abetting enjoined defendants.
This is clearly the correct result. The standards that apply when enjoining a service provider under Sections 512 have no applicability to the general rule that it’s contemptuous to aid and abet a defendant that has already been enjoined. Again, CloudFlare was not the party enjoined—only MP3Skull was enjoined. And even though Section 512(j) would apply if CloudFlare were being enjoined, that’s irrelevant to the issue of whether CloudFlare, or any other non-party, is bound by the injunction against MP3Skull.
Despite this huge loss for CloudFlare, Judge Cooke left open the possibility that it could continue its mission to protect the MP3Skull defendants. Since the parties did not brief the issue of whether CloudFlare is in “active concert or participation” with the defendants, Judge Cooke found that due process requires her to give CloudFlare a chance to argue that it is not. Given its past conduct, it seems likely that CloudFlare will vigorously argue that the services it provides don’t actually help its customers to do anything. Of course, given the Grooveshark defeat on this same issue, I don’t think Judge Cooke will waste too many pages rejecting CloudFlare’s next desperate attempt to protect pirate sites.
March 10, 2017 Devlin HartlineComments are off for this post.
On March 8, 2017, CPIP Scholars Adam Mossoff, Devlin Hartline, Chris Holman, Sean O’Connor, Kristen Osenga, & Mark Schultz joined an amicus brief in TC Heartland v. Kraft Foods. CPIP Scholars worked with USD Law’s Ted Sichelman to organize, write, and file the brief. The case focuses on whether patent owners may sue corporate defendants in any judicial district where the court has personal jurisdiction over the defendant, which is the default rule in federal cases.
Concerned about the allegedly abusive behavior of certain firms suing in the Eastern District of Texas, some would like to severely restrict where all patent owners may sue. The amici note that, even if the Supreme Court restricts venue choices as these people would like, patent lawsuits would not be equitably distributed as a result. A recent study showed that 60% of all patent cases would still be concentrated in 5 of the 94 judicial districts. Furthermore, instead of concentrating in one district—the Eastern District of Texas—cases would primarily concentrate in two districts—the Northern District of California and the District of Delaware.
As the amici argue: “No plausible argument can be made—and Petitioner and its amici have not offered an argument—that shifting cases from one district to two districts would result in a meaningful distribution of patent cases among the ninety-four federal district courts.” The amici note that concerns about “forum shopping” are overblown since patentees are just doing what all federal plaintiffs do—choosing “the forum that gives it the best opportunity for success.” Since “corporate defendants are generally subject in any civil complaint to venue in any district in which personal jurisdiction lies,” the amici suggest that the same rule should apply in patent cases.
To read the amicus brief, please click here.

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