The Classic 25% Rule and the Art of Intellectual Property Licensing

By: Robert Goldscheider

Fifty years ago, Robert Goldscheider helped pioneer the use of a methodology known as “the 25% Rule,” a tool for determining reasonable royalties in intellectual property licensing negotiations. The Rule holds that licensees of intellectual property normally deserve the lion’s share of the profit because they usually bear the bulk of the business risk associated with bringing the intellectual property to market. Experts familiar with the art of intellectual property licensing frequently rely on the 25% Rule to rationally determine reasonable royalties in litigation and transactional settings.

The Rule’s prominence has been accompanied by unfortunate misunderstandings about its form and substance. It is not, as some suggest, intended to be a simple shortcut to determine patent royalties. Rather, it was developed as, and remains, a meticulous methodology inspired by significant private transactions and ultimately refined by brilliant judicial interpretation. As such, it is inappropriate to condescendingly diminish it to a mere “rule of thumb.” When properly understood and applied, the Classic 25% Rule is an effective discipline that achieves the high standards of reliability demanded by the U.S. Supreme Court in the Daubert.

Cite: 2011 Duke L. & Tech. Rev. 006

Posted in Patents & Technology

Speaking of Music and the Counterpoint of Copyright: Addressing Legal Concerns in Making Oral History Available to the Public

By: Jeremy J. Beck & Libby Van Cleve

Oral history provides society with voices and memories of people and communities experiencing events of the past first-hand. Such history is created through interviews; an interview, however, like any other type of intellectual property—once in a fixed form—is subject to copyright law. In order to make oral history available to the public, it is critically important that individuals generating and acquiring oral history materials clearly understand relevant aspects of copyright law. The varied nature of how one may create, use, and acquire oral history materials can present new, surprising, and sometimes baffling legal scenarios that challenge the experience of even the most skilled curators.

This iBrief presents and discusses two real-world scenarios that raise various issues related to oral history and copyright law. These scenarios were encountered by curators at Yale University’s Oral History of American Music archive (OHAM), the preeminent organization dedicated to the collection and preservation of recorded memoirs of the creative musicians of our time. The legal concerns raised and discussed throughout this iBrief may be familiar to other stewards of oral history materials and will be worthwhile for all archivists and their counsel to consider when reviewing their practices and policies.

Cite: 2011 Duke L. & Tech. Rev. 005

Posted in Copyrights & Trademarks

Non­–Per Se Treatment of Buyer Price-Fixing in Intellectual Property Settings

By: Hillary Greene

The ability of intellectual property owners to earn monopoly rents and the inability of horizontal competitors to price fix legally are two propositions that are often taken as givens.  This iBrief challenges the wholesale adoption of either proposition within the context of buyer price-fixing in intellectual property markets.  More specifically, it examines antitrust law’s role in protecting patent holders’ rents through its condemnation of otherwise ostensibly efficient buyer price fixing. Using basic economic analysis, this iBrief refines the legal standards applicable at this point of intersection between antitrust and patent law.  In particular, the author recommends the limited abandonment of per se condemnation of buyer price-fixing within pure intellectual property contexts.  As an alternative, a coarse screen which accounts for both price and innovation effects is proposed. This recommendation represents one example of how antitrust law can better account for the complicated and imperfectly understood effects of the patent system on social welfare.

Cite: 2011 Duke L. & Tech. Rev. 004

Posted in Patents & Technology

The Invisible Power of MacHines Revisiting the Proposed Flash Order Ban in the Wake of the Flash Crash

By: Austin J. Sandler

Technological innovation continues to make trading and markets more efficient, generally benefitting market participants and the investing public. But flash trading, a practice that evolved from high-frequency trading, benefits only a select few sophisticated traders and institutions with the resources necessary to view and respond to flashed orders. This practice undermines the basic principles of fairness and transparency in securities regulation, exacerbates information asymmetries and harms investor confidence. This iBrief revisits the Securities and Exchange Commission’s proposed ban on the controversial practice of “flash trading” and urges the Securities and Exchange Commission and the Commodity Futures Trading Commission to implement the ban across the securities and futures markets. Banning flash trading will not impact high-frequency trading or other advantageous innovative trading practices, and will benefit all market participants by making prices and liquidity more transparent. In the wake of the May 6, 2010 “flash crash” and the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, now is an opportune time for the Securities and Exchange Commission and Commodity Futures Trading Commission to implement the ban.

Cite: 2011 Duke L. & Tech. Rev. 003

Posted in eCommerce

Sherley v. Sebelius: Stem Cells and the Uneasy Interplay Between the Federal Bench and the Lab Bench

By: Ryan P. O’Quinn

After Barack Obama’s election to the presidency, he promised that one of his top priorities in office would be to relieve the restrictions initiated by President George W. Bush on federal funding of embryonic stem cell research. President Obama followed through on his promise, but the celebrations in the nation’s research labs were short-lived. Anti-abortion advocates and other scientists working in the field that would allegedly be out-competed in the federal funding arena brought a legal challenge to the new government position. The struggle culminated in August 2010 with a federal district court issuing a preliminary injunction to halt the new funding initiative. Although the government successfully appealed for a stay on the injunction pending arguments in the Court of Appeals, the decision has paralyzed research in the field. This iBrief argues that the injunction was wrongly granted, predicts how higher courts might treat the case, and suggests that the proper forum for addressing this controversy lies within the scientific community, not the judiciary.

Cite: 2011 Duke L. & Tech. Rev. 002

Posted in Health & Biotechnology

The Attorney–Client Privilege and Discovery of Electronically-Stored Information

By: Adjoa Linzy

The attorney-client privilege is the most sacred and important privilege in our legal system. Despite being at the center of daily practice, the privilege still remains a mystery for many lawyers. This is primarily because the privilege is not absolute, and there are certain actions or non-actions that may waive it. The application of the privilege is further complicated by electronic discovery, which has both benefits and drawbacks. On one hand, it has made the practice of law more efficient. On the other hand, it has made it easier to inadvertently waive the attorney-client privilege in response to a discovery request. This iBrief examines attorney-client privilege issues that may arise during e-discovery, and provides practical guidelines for attorneys responding to e-discovery requests.

Cite: 2011 Duke L. & Tech. Rev. 001

Posted in eDiscovery

Applying Copyright Abandonment in the Digital Age

By: Matthew W. Turetzky

Copyright law protects orphan and parented works equally–but it shouldn’t. Consequently, current law unnecessarily restrains public access to works that authors have not exercised dominion over for decades. This problem has come to the fore in the Google Books settlement, which critics argue will give Google a de facto monopoly over orphan works. But this criticism implicates an obvious question: Why are orphan works protected by copyright law in the first place? If orphan works were in the public domain, then no one would worry about Google’s supposed “monopoly” because Google’s competitors would be free to copy the works without facing class action lawsuits. To address these concerns, I propose a new equitable defense to copyright infringement: the orphan theory of abandonment.

Cite: 2010 Duke L. & Tech. Rev. 019

Posted in Copyrights & Trademarks

Limitation of Sales Warranties as an Alternative to Intellectual Property Rights: An Empirical Analysis of IPhone Warranties’ Deterrent Impact on Consumers

By: Marc L. Roark

Apple’s success with the Apple iPhone has brought with it certain problems. Its success has engendered a community that has attempted to circumvent Apple’s exclusive service agreement with AT&T. Unfortunately for Apple (and similarly situated manufacturers), intellectual property law allows consumers to alter their products so as to circumvent relationships that manufacturers may have with others. The patent and copyright law first sale doctrine allows consumers to manipulate a product after it is purchased. As a result, manufacturers are increasingly turning to alternatives to intellectual property to secure control over the device after the sale. One such alternative is the exclusion of warranty under Article 2 of the Uniform Commercial Code. This iBrief considers whether limitation of warranties have the deterrence effect manufacturers desire. Said differently, it considers whether manufacturers can use warranty limitations to prevent consumers from using their products in an unauthorized manner. The iBrief presents a behavioral model based on the Triandis model of planned behavior and enhances the model by accounting for likely and unlikely benefits and detriments. The model suggests that participants weigh the probability and magnitude of the detriment against the probability and magnitude of the beneficial impact when making the decision to engage in technological piracy. This model, considered with other empirical evidence, suggests that Apple’s warranty could be a stronger deterrent for consumers than civil liability. The iBrief concludes that manufacturers can better protect their post-sale expectation of profits by raising consumer awareness of their warranty’s quality and by raising awareness of the consequences for using the product in a way that is outside the terms of the consumers’ authorized use.

Cite: 2010 Duke L. & Tech. Rev. 018

Posted in Patents & Technology

Standards × Patents ÷ Antitrust = ∞: The Inadequacy of Antitrust to Address Patent Ambush

By: Jonathan Hillel

“Patent ambush” describes certain rent-seeking behavior by the owner of patent rights to a technology that is essential to an industry standard. Two cases, Qualcomm and Rambus, represent attempts of the Third and D.C. Circuits, respectively, to address patent ambushes using federal antitrust statutes. In both cases, antitrust law proves inadequate to the task. Under Qualcomm, licensees gain too much power to extort undervalued royalty rates from patent holders who have disclosed their rights during standard-setting. Under Rambus, coupled with the dearth of other options to combat patent ambushes, non-disclosing patent holders are given free reign over standardized markets, to the detriment of end-users. This iBrief argues that the flaws in each rule inhere from a fundamental inadequacy of antitrust law to address patent ambush.

Cite: 2010 Duke L. & Tech. Rev. 017

Posted in Patents & Technology

The Rise of Computerized High Frequency Trading: Use and Controversy

By: Michael J. McGowan

Over the last decade, there has been a dramatic shift in how securities are traded in the capital markets. Utilizing supercomputers and complex algorithms that pick up on breaking news, company/stock/economic information and price and volume movements, many institutions now make trades in a matter of microseconds, through a practice known as high frequency trading. Today, high frequency traders have virtually phased out the “dinosaur” floor-traders and average investors of the past. With the recent attempted robbery of one of these high frequency trading platforms from Goldman Sachs this past summer, this “rise of the machines” has become front page news, generating vast controversy and discourse over this largely secretive and ultra-lucrative practice. Because of this phenomenon, those of us on Main Street are faced with a variety of questions: What exactly is high frequency trading? How does it work? How long has this been going on for? Should it be banned or curtailed? What is the end-game, and how will this shape the future of securities trading and its regulation? This iBrief explores the answers to these questions.

Cite: 2010 Duke L. & Tech. Rev. 016

Posted in eCommerce

Private Ordering and Orphan Works: Our Least Worst Hope?

By: Keith Porcaro

The political capture of copyright law by industry groups has inadvertently led to orphan works problems arising in less organized industries, such as publishing. Google Book Search (GBS) is a prime example of how private ordering can circumvent legislative inefficiencies. Digital technologies such as GBS can open up a new business model for publishers and other content industries, centered around aggregated rights holdings. However, the economic inertia that private ordering represents may pose a threat to the knowledge-oriented goals of copyright law.

Cite: 2010 Duke L. & Tech. Rev. 015

Posted in Copyrights & Trademarks

Privacy Expectations and Protections for Teachers in the Internet Age

By: Emily H. Fulmer

Public school teachers have little opportunity for redress if they are dismissed for their activities on social networking websites. With the exception of inappropriate communication with students, a school district should not be able to consider a public educator’s use of a social networking website for disciplinary or employment decisions. Insisting that the law conform to twenty-first century social norms, this iBrief argues that the law should protect teachers’ speech on popular social networking websites like Facebook and MySpace.

Cite: 2010 Duke L. & Tech. Rev. 014

Posted in Media & Communications

Keeping the LEDs on and the Electric Motors Running: Clean Tech in Court After Ebay

By: Eric Lane

The recent rise of non-practicing patentees (NPPs) in the clean technology space comes at a time when the international community is debating the role of intellectual property rights in the deployment and implementation of technologies to combat climate change. While the impact of intellectual property rights on the deployment of clean technology has been studied, less attention has been given to the role intellectual property regimes play in maintaining the operation of those technologies already deployed in the fight against global warming. This iBrief focuses on clean technologies that have already achieved substantial market penetration and observes that recent trends in patent law are, to a large extent, allowing those technologies to continue working to reduce carbon emissions. Specifically, the course correction in the law of patent injunctions brought about by eBay v. MercExchange and the endorsement of court-imposed ongoing royalty payments in Paice v. Toyota demonstrate an important shift in patent law that is tempering the impact of clean tech NPPs in Title 35 infringement actions in federal courts. However, these trends have caused a tactical adjustment by clean tech NPPs—namely, filing suits in the U.S. International Trade Commission (ITC), where the remedy of an exclusion order is available. These ITC cases could adversely affect implemented clean technologies.

Cite: 2010 Duke L. & Tech. Rev. 013

Posted in Patents & Technology

Disloyal Computer Use and the Computer Fraud and Abuse Act: Narrowing the Scope

By: Greg Pollaro

Congress drafted the Computer Fraud and Abuse Act (CFAA) to protect government interest computers from malicious attacks by hackers. As computer use has expanded in the years since its enactment, the CFAA has similarly expanded to cover a number of computer-related activities. This iBrief discusses the extension of the CFAA into the employer/employee context, suggests that this goes beyond the Act’s express purpose, compares the different approaches taken by the circuit courts in applying the CFAA to disloyal computer use by employees, and argues that the more recent approach taken by the Ninth Circuit provides a better model for determining if and when the CFAA should apply to employees.

Cite: 2010 Duke L. & Tech. Rev. 012

Posted in CyberCrime

Who Owns the Virtual Items?

By: Leah Shen

Do you WoW? Because millions of people around the world do! Due to this increased traffic, virtual wealth amassed in MMORPGs are intersecting in our real world in unexpected ways. Virtual goods have real-life values and are traded in real-life markets. However, the market for trading in virtual items is highly inefficient because society has not created property rights for virtual items. This lack of regulation has a detrimental effect not just the market for virtual items, but actually the market for MMORPGs. Assuming we want to promote the production of MMORPGs as a market, society requires a set of distinct property rules to decrease the inefficiencies in the virtual market. In creating these regulation, we may be able to take cues from intellectual property laws, as many of the problems surrounding virtual goods are akin to intellectual property.

Cite: 2010 Duke L. & Tech. Rev. 011

Posted in Media & Communications

Chatter, Clatter, and Blinks: Defective Car Alerts and the Role of Technological Advances in Design Defect/failure to Warn Cases

By: James Forrest McKell Jr.

Car owners are familiar with the warning lights on the dashboard and the beeping sound reminding them to use their seatbelt. But, neither the legislature nor courts have concretely defined the legal nature of these alerts. This iBrief will analyze when a deficient alert becomes a defective product tort claim and determine the appropriate theory under which such claims should be brought.

Cite: 2010 Duke L. & Tech. Rev. 010

Posted in Copyrights & Trademarks

The Class Defense: Why Dispersed Intellectual Property Defendants Need Procedural Protections

By: Jonathan Reich

The intersection of antitrust and intellectual property circumscribes two century-long debates. The first pertains to questions about how antitrust law and intellectual property law interact, and the second pertains to questions about how parties can exploit property rights, including intellectual property rights, to exclude competitors. This iBrief finesses these questions and turns to practical considerations about how innovation and intellectual property can impinge antitrust enforcement. This iBrief develops two propositions. First, although collaborative research and development has often been and remains unwittingly misunderstood, what is understood about it is consistent with the long- standing observation that antitrust has rarely interfered with collaborative ventures. Second, shifting focus from “intellectual property rights” to “uncertain property rights” makes it easier to understand what innovation and intellectual property imply for enforcement processes. Both intellectual property and tangible assets imply the same processes, but the boundaries of intellectual properties may be uncertain and may, in turn, allow parties to game enforcement processes in ways that would not be feasible in antitrust matters that principally feature tangible assets. Even so, uncertain property rights might not frustrate enforcement processes as the antitrust authorities may yet be able to factor parties’ strategic behaviors into the design of antitrust remedies.

Cite: 2010 Duke L. & Tech. Rev. 009

Posted in Copyrights & Trademarks

The Anonymous Poster: How to Protect Internet Users’ Privacy and Prevent Abuse

By: Scott Ness

The threat of anonymous Internet posting to individual privacy has been met with congressional and judicial indecisiveness. Part of the problem stems from the inherent conflict between punishing those who disrespect one’s privacy by placing a burden on the individual websites and continuing to support the Internet’s development. Additionally, assigning traditional tort liability is problematic as the defendant enjoys an expectation of privacy as well, creating difficulty in securing the necessary information to proceed with legal action. One solution to resolving invasion of privacy disputes involves a uniform identification verification program that ensures user confidentiality while promoting accountability for malicious behavior.

Cite: 2010 Duke L. & Tech. Rev. 008

Posted in Media & Communications

Substantially Justified? The U.S. Government’s Use of Name-Check Technologies in Naturalization Procedures

By: H. Jin Cho

The U.S. Citizenship and Immigration Services relies upon the Federal Bureau of Investigation to administer the National Name Check Program, which conducts background checks on applicants for naturalization. Backlogs have led to long delays for aspiring citizens and significant legal problems for the government.

This iBrief examines the First Circuit’s ruling in Aronov v. Napolitano that an eighteen-month delay in adjudicating a naturalization application was substantially justified. While the government’s inefficiency can be explained partly by an understaffed bureaucracy, overwhelming evidence suggests that these problems are exacerbated by a technological infrastructure that is ill-equipped to handle the scope of the backlog. This iBrief argues that the government should be held liable for its failures; and that long-overdue technological improvements should be implemented to prevent these issues from recurring in the future.

Cite: 2010 Duke L. & Tech. Rev. 007

Posted in CyberCrime

Juvenile Justice, Sullivan, and Graham: How the Supreme Court’s Decision Will Change the Neuroscience Debate

By: Johanna Cooper Jennings

Over the past twenty years, neuroscientists have discovered that brain maturation continues through an individual’s mid-twenties. The United States Supreme Court cited this research to support its abolition of the juvenile death penalty in Roper v. Simmons. Now the Court is faced with two cases that challenge the constitutionality of sentencing juveniles to life imprisonment without parole. Many believe these studies indicate that juveniles are both less culpable for their actions and more likely to reform; therefore, life in prison for juveniles is disproportionate, cruel, and unusual. However, others caution against the use of these studies in deciding issues of juvenile justice. This iBrief summarizes the cases currently before the Court, presents the arguments for and against the use of neuroscience in the juvenile justice debate, and analyzes the impact these cases will have on the future of neuroscience’s role in juvenile justice.

Cite: 2010 Duke L. & Tech. Rev. 006

Posted in Health & Biotechnology

In Re Bilski and the “Machine-or-Transformation” Test: Receding Boundaries for Patent Eligible Subject Matter

By: Matthew Moore

In order for a hopeful applicant to be granted a patent over his invention, his application must satisfy several procedural and substantive requirements. Among the substantive hurdles that an applicant must clear is the mandate that patents only be issued to applications claiming statutory subject matter within the meaning of §101 of the Patent Act. However, the Court of Appeals for the Federal Circuit (Federal Circuit) has not construed that Section consistently over the years. Since that court’s formation in 1982, it has espoused two tests for statutory subject matter, and each time has substantially abrogated, if not overruled, the prior formulation. Most recently, the Federal Circuit has handed down the “machine-or-transformation” test in an attempt to redraft the limits of patent eligibility based on subject matter. This iBrief will explore the significant changes that this new test has brought to the patentability doctrine.

Cite: 2010 Duke L. & Tech. Rev. 005

Posted in Patents & Technology

The Impacts of the Chinese Anti-Monopoly Law on IP Commercialization in China & General Strategies for Technology-Driven Companies and Future Regulators

By: Yijun Tian

After thirteen years of discussion and three revisions, China’s Anti-Monopoly Law (AML) was promulgated on August 30, 2007 and has come into effect on August 1, 2008. It is the first anti-monopoly law in China and has been viewed as an “economic constitution” and a “milestone of the country’s efforts in promoting a fair competition market and cracking down on monopoly activities.” However, the wording of some provisions of the AML, including the sections dealing with Intellectual Property (IP) protection, is not very clear. And juridical interpretations and more specific implementing regulations on the AML have not yet appeared. This has led to a lot of uncertainty for the operations of foreign enterprises, particularly IP related enterprises in China. This iBrief will provide an overview of possible impacts of the AML on the IP protection and commercialization in China. First, it will provide a brief overview of the AML, including both major compliments and criticism. Second, it will examine both opportunities and potential legal risks of foreign IP holders and investors when operating in China, particularly focusing on the impacts of Article 55, the IP-related provision. Thirdly, it will provide some practical suggestions and strategies for foreign IP holders and technology-driven companies to operate in China, such as some useful defenses for potential IP lawsuits. Finally, it will provide some suggestions for future interpretation and implementation of Article 55 in the AML by drawing on lessons from the experiences of the United States and the European Union.

Cite: 2010 Duke L. & Tech. Rev. 004

Posted in International

Cyber Warfare and the Crime of Aggression: The Need for Individual Accountability on Tomorrow’s Battlefield

By: Jonathan A. Ophardt

As cyberspace matures, the international system faces a new challenge in confronting the use of force. Non-State actors continue to grow in importance, gaining the skill and the expertise necessary to wage asymmetric warfare using non-traditional weaponry that can create devastating real-world consequences. The international legal system must adapt to this battleground and provide workable mechanisms to hold aggressive actors accountable for their actions. The International Criminal Court–the only criminal tribunal in the world with global reach–holds significant promise in addressing this threat. The Assembly of State Parties should construct the definition of aggression to include these emerging challenges. By structuring the definition to confront the challenges of cyberspace–specifically non-State actors, the disaggregation of warfare, and new conceptions of territoriality–the International Criminal Court can become a viable framework of accountability for the wars of the twenty-first century.

Cite: 2010 Duke L. & Tech. Rev. 003

Posted in CyberCrime

Online Fantasy Sports Litigation and the Need for a Federal Right of Publicity Statute

By: Risa J. Weaver

The right of publicity is currently a jumble of state common law and state statutes, but the online fantasy sports industry crosses state lines with ease. Having witnessed the great revenue potential of online fantasy sports, professional sports leagues are trying to strong-arm independent fantasy sports providers out of the business by using the right of publicity to assert property interests in the statistics generated by professional players, and used by fantasy sports providers to run their online games. The first such attempt–by Major League Baseball–failed. However, the state law nature of the right of publicity prevents any single court opinion from binding the industry or other jurisdictions. The National Football League is attempting to achieve a more favorable result in a different jurisdiction. If successful, other professional sports leagues will be encouraged to litigate the issue, and Major League Baseball might even attempt to re-litigate its position in other states. This free-for-all could result in different rules for different sports in different states, which would not only be untenable for the online fantasy sports providers, but a violation of the Constitution as well. A cohesive federal right of publicity statute would (1) bring uniformity to the doctrine, (2) give federal courts (where these actions are being brought) a federal law to apply instead of allowing them to continue muddying the application of state laws, (3) directly address First Amendment concerns, and (4) solve the dormant commerce clause violation alluded to above.

Cite: 2010 Duke L. & Tech. Rev. 002

Posted in eCommerce

Antitrust, Innovation, and Uncertain Property Rights: Some Practical Considerations

By: Dean V. Williamson

The intersection of antitrust and intellectual property circumscribes two century-long debates. The first pertains to questions about how antitrust law and intellectual property law interact, and the second pertains to questions about how parties can exploit property rights, including intellectual property rights, to exclude competitors. This iBrief finesses these questions and turns to practical considerations about how innovation and intellectual property can impinge antitrust enforcement. This iBrief develops two propositions. First, although collaborative research and development has often been and remains unwittingly misunderstood, what is understood about it is consistent with the long- standing observation that antitrust has rarely interfered with collaborative ventures. Second, shifting focus from “intellectual property rights” to “uncertain property rights” makes it easier to understand what innovation and intellectual property imply for enforcement processes. Both intellectual property and tangible assets imply the same processes, but the boundaries of intellectual properties may be uncertain and may, in turn, allow parties to game enforcement processes in ways that would not be feasible in antitrust matters that principally feature tangible assets. Even so, uncertain property rights might not frustrate enforcement processes as the antitrust authorities may yet be able to factor parties’ strategic behaviors into the design of antitrust remedies.

Cite: 2010 Duke L. & Tech. Rev. 001

Posted in Patents & Technology