Traditionally, the Chinese media was the “eyes and ears” of the Party so they are often more powerful than the institutions or individuals that they cover.¹ The recent rapid commercialization of the Chinese news media has caused a growth in defamation litigation.² These suits are mostly brought by the government, the Communist Party entities, the corporations and ordinary citizens.³ The media loses a majority of these cases showing that the courts are able to challenge the media’s authority and influence.⁴ The courts’ willingness to rule against powerful entities is an important step for it to exert itself and become a more powerful branch of the government.

The media is an important weapon that lawyers can employ to help publicize their cases and in some situations, inform the public about the violations of certain laws by their local governments.⁵ The media is a strong channel where the facts and truths can be disseminated to the public. Cases that are not originally politically sensitive can be transformed into one of concern for Party officials when they receive extensive media coverage.⁶

The 2002 “black whistle” case, where the media had reported that some soccer referees were accepting money to affect the outcome of games, is a typical example of this. The media was critical of a lack of legal actions against these referees. As a result, the Supreme Court’s Procuratorates issued a notice stating that the case should be under the criminal code that “governs the acceptance of bribes by employees of companies or commercial enterprises.”⁷ A Beijing district court found the referee “guilty of corruption by a state official,” a more serious crime that wasn’t even alleged. The court implicitly rejected the Procuratorate’s interpretation of the criminal law.⁸ The media pressure played a major role in forcing the Procuratorate to act,⁹ but the court had the final say in interpreting the law, establishing their power in the government.

The media is also an important channel of communication amongst the scattered courts throughout China. When some courts are willing to expand its role, the media is an integral part in disseminating the news to courts in other parts of the country. An example is in education litigation, where courts have expanded their role with recent development.¹⁰

Traditionally, education institutions were seen as social service organizations and outside the jurisdiction of the courts. The development in this area is due to the Chinese courts’ willingness to take a creative approach in interpreting and implementing the law.¹¹ The media has favored the student plaintiffs and has played an important role in transmitting the new legal norms developed by the courts to new plaintiffs and to other judges.¹² Without the media, the students and judges from other parts of the country would not know what the new legal trends are in education litigation.

The media is instrumental in allowing the Chinese courts to exert themselves in order to play a stronger role in the Chinese government. The Chinese courts are able to challenge the politically powerful media without directly clashing heads with the government. The media allows the courts to see what other Chinese courts have done to expand their roles. The media can also generate a lot of publicity so that the courts can rule fairly and not base their decisions on political pressure.
________________________________________________________

¹ Benjamin L. Liebman, Innovation through Intimidation: An Empirical Account of Defamation Litigation in China, 47 HARVARD INT’L L.J. 33, 47 (2006).
² Id. at 46.
³ Id. at 34.
⁴ Id. at 35.
⁵ Eva Pils, Asking the Tiger for His Skin: Rights Activism in China, 30 FORDHAM INT’L L.J. 1209, 1224 (2007); see also Jerome Alan Cohen, Law: China Trips Up Its Barefoot Lawyers, FAR EASTERN ECONOMIC REVIEW, Nov. 18 2005, at 17.
⁶ Benjamin L. Liebman, Watchdog or Demagogue? The Media in the Chinese Legal System, 105 COLUM. L. REV. 1, 80 (2005).
⁷ Id. at 73-75.
⁸ Id. at 77.
⁹ Id. at 79.
¹⁰ Thomas E. Kellogg, “Courageous Explorers”?: Education Litigation and Judicial Innovation in China, 20 HARV. HUM. RTS. J. 141 (2007).
¹¹ Kellogg, supra note 11, at 153.
¹² Id. at 142.

On October 13, 2008, the McCain-Palin Presidential Campaign sent Youtube a letter requesting it change its policies regarding Digital Millennium Copyright Act² (“DMCA”) challenges to content hosted on its website.³ Specifically, Youtube’s policy is to automatically remove video content from its website for a period of 10-14 days upon the filing of a DMCA violation allegation.

Youtube removed multiple political ads which the McCain-Palin Campaign had posted on its website after media outlets filed complaints alleging the campaign violated the DMCA by using their footage without permission.⁴ McCain-Palin argued that their use of the footage, often footage of themselves appearing on news broadcasts, falls squarely within the fair use exemption of the DMCA,⁵ and that Youtube’s policy of automatically suspending content after a DMCA violation complaint chilled their Constitutionally protected speech. The letter argued that time is of the essence in a political campaign such that 10 days can have a substantial impact on the success of the candidates on Election Day.

On October 14, Youtube’s counsel responded to the McCain-Palin campaign stating that they simply did not have the ability to operate in any other manner.⁶ The letter states:

“Your suggestion that we limit our reviews and fair use analysis to ‘political candidates and campaigns” attempts to address our scale issue, but it does not address the information problem mentioned above. The fact remains that we do not know who owns what content included in user uploaded videos, who uploaded those videos or what authorization the uploader may or may not have to use the content. Moreover, while we agree with you that the U.S. Presidential election-related content is invaluable and worthy of the highest level of protection, there is a lot of other content on our global site that our users around the world find to be equally important, including, by way of example only, political campaigns from around the globe at all levels of government, human rights movements, and other important voices. We try to be careful not to favor one category of content on our site over others, and to treat all of our users fairly, regardless of whether they are an individual, a large corporation or a candidate for public office.”⁷

The letter then stated that “[t]he real problem here is individuals and entities that abuse the DMCA takedown process;” YouTube then requested that McCain work with the company to solve the problems the DMCA presents to content providers by “strengthening the fair use doctrine, so that intermediaries like us can rely on this important doctrine with a measure of business certainty.”⁸

While the DMCA provides standing to sue based on clearly false takedown notices, litigation takes time that political campaigns don’t have. Youtube users posting political content don’t have incentive to spend the money on litigation because whatever event has inspired them–be it an election or a congressional vote –will likely be concluded by the time litigation concludes.⁹

Another option is for political campaigns to form contracts with media outlets prior to appearing on film that make clear the campaign is allowed to use footage without restriction. This is indeed what CNN agreed to in hosting the Youtube debates.¹⁰ While this is possible for high profile campaigns, like those of politicians running for President or positions in the Senate, campaigns with less money or for politicians running for local office are at the mercy of the media outlets. It is unlikely a media outlet like NBC will bother with signing a contract with a congressional district candidate from Queens because the candidate needs NBC more than it needs an interview with him or her to score ratings. For these smaller, less popular campaigns, the fair use exemption is the only bargaining chip they have to rely on.

While Youtube’s goal of treating all users fairly by not favoring one form of content over another’s is admirable,¹¹ it cannot justify the disparate impact its policy has on uploaders of political content. While a 10-14 day takedown of a home video clip that contains a song owned by a large record company won’t affect that family in the long run, the 10-14 day suspension of a political ad that uses footage of a candidate on a local television program will delay the spread of that candidate’s message and could change the course of an election.

While Youtube maintains it would be a hardship to police all its hosted content, there are ways for it to minimize the potential harm to campaigns. Youtube already requires a person to create an account before uploading content onto its server. It would be easy for Youtube to create a specific class of account for uploaders of political content, which could be exempt from its current takedown policy. For these users, there could be a requirement that they provide some background on the political issues or situation they are addressing, which would help to solve Youtube’s claimed “information” problem.12 When a challenge is made to any content uploaded by these accounts, Youtube could prioritize settling that matter. Additionally, Youtube could impose penalties for anyone falsely signing up for any such special account, such as permanent suspension or any other number of options. None of these would require much more effort than Youtube already puts into policing its website, and it would not require waiting for Congress to strengthen the fair use exemption.

__________________________________________________________________
¹ See Lessig Blog, Free Debates: CNN Has Announced It Will Free the Debates, May 5, 2007.

² 112 Stat. 2860 (1998).

³ Letter to Youtube from McCain-Palin Campaign, October 13, 2008.

⁴ Id.

⁵ The fair use exemption is codified at 17 U.S.C. §§ 107. It states that fair uses of a copyrighted work, “including…purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright.”

⁶ See Youtube Response Letter to Senator McCain, October 14, 2008.

⁷ Id.

⁸ Id.

⁹ Of course, there are other benefits to litigation. E.g., MoveOn.org and Brave New Films, with the help of the Electronic Frontier Foundation, filed a lawsuit against Viacom for making a false DMCA violation challenge resulting in the removal of their content from Youtube. (You can read the complaint here.) The lawsuit was dismissed when Viacom, in response, offered to change its company policy to require manual review of every video targeted as a potential DMCA violation, and setting up a website and email “hotline” as well as promising a review of any complaint within one business day and a reinstatement if the takedown was indeed in error. Electronic Frontier Foundation, “MoveOn, Brave New Films v. Viacom.” However, this does little to help when spreading one’s message is a time sensitive matter.

¹⁰ See supra, note 1.

¹¹ See supra, note 7, and accompanying text.

¹² Id.

[8:01] Reto Hilty (from the Max Planck institute) – Legislators tend to understand what happened yesterday and THEN intervenes. Instead we should observe market behavior and adapt to that. Right now, the EU is trying to pass a copyright extension. There are about 10 academic surveys saying that the extension would be bad for the economy and that the US system is different enough that it can’t be easily analogized. On the internet we try different approches that can coexists.
1) Open approach (free content)
2) Property approach (pay content)
Task of the legislature is not to choose one of these. It should instead simply create an environment where both approaches can coexist. So a legislature can’t just give more and more rights, but must also consider where rights should be limited. The open approach can often be a benefit to the property approach.

Moderator: Would argue that the open approach also benefits from the property approach.

[8:07] Shira Perlmutter: Not all rightsholders are multinational corporations. Many are mom and pop shops, or single proprietors.
1) Need a reasonable and understandable rule framework: We have a “pretty good” rights system in most countries. Right now we have a sustainable system vs. an optimal system. “There is no perfect balance.” We will always be adjusting and recalibrating the law. Recalibration is tougher the more dramatically that thing. Unless copyright can be enforced on the internet, then even the best copyright system in the world won’t help.
Efficient multiterritory licensing structures are needed.
2) Availability of legitimate offerings. Over the last 5 years there’s been an explosion of legit offerings. Many models. A la carte downloads (itunes); Subscription services; ad supported; music access (bundled with a device/service)

How are these connected? These new models will never get off the ground unless we can effectively enforce rights in some way.

Tilman Luder: Bifurcations between entertainment and science/research sector. EU copyright paradigm is based on protected against freeriding. In the US there is a countervailing concern of encouraging creativity etc. In the science/research sector, sustainability is more important, since we don’t want to lock up information. But normal exploitation of a movie is different from normal exploitation of a scientific paper (three step test is different in different contexts).

[8:17] Jerome Reichman: We do want to protect Europe’s comparative advantage in knowledge based economic activities. But we need to think about the INPUTS as well. We need to “open the locks” or we risk giving away comparative advantage in science to other countries.
EU perspective – maybe the old US private use doctrine should be adapted for Europe to create a non commercial use market. Bounded by contractural limitations defending the interests of professional content creators.

Use liability rules to compensate professional content creators when their works are infringed. Better than a property rule in that you more often actually get money for your IP and you don’t stop creative amateur use.

[8:24] Moderator – You are global copyright czar for one day. What would you do?
Andrew Bridges: End rule utilitarianism and go to act utilitarianism. “We can’t do that because of the Bern convention!”. Either something is a good law or not. Shouldn’t matter what prior treaties.

[5:42] Edward Nodder: Talking about UK and comparison to patent law around Europe. Prelim injunctions (PIs) are VERY important to patent holders. Ex. Pharma industry does a LOT of PI litigation. Many disputes are won or lost on the PI and nothing else. If you get the injunction, you survive, if not, the market collapses and you are done. PI situations are very muddled across the EU. No standards.

Ex parte PI; Inter Partes PI; Time to inter parte decisions, Quid Pro Quo for PI – the standards for these issues are completely different in different EU countries. Ex. <7 days for PI in UK, vs. almost 7 months in Italy.

ECPC is a great opportunity to harmonized EU patent law. The long goal: unified patent litigation system as the US. The benefit is that it would be a combined patent market as large as the US. A single court would lead to a similar level of research, case development etc, as in the US system. Helps EU patent based industries. What test would be applied by ECPC in granting a PI?

Takeaway: When working on a unified EU patent system (ECPC) don’t forget to think about how PIs will be implemented.

[5:52] (Gonzolo to George Badenoch):
1) How important is PI?
Answer: PIs can be be very important. But eBay case was correctly decided. When you give an injunction, you are fixing a value on the future use of patent. Often when you don’t grant an injunction, you undervalue the future of the patent. But sometimes when you grant it, you OVERvalue its future use.
Balance of hardships in eBay case is there so that you don’t make a $20 patent worth $1M.

Justice Flyod: The only reason we need PIs is that the Law is slow to react, so you need an immediate fix while the law works out who’s at fault. Worried that putting robust PI rules in the EU patent system would allow most cases to be bogged down unless the procedure was very quick and reserved for cases with REAL urgency.

Marleen: Fast PIs could be fine, but why not use “Accelerated Proceedings on the Merits”? (i.e., decision within the year) Also, re:harmonization – she would favor it for clients, but there are situations where interests at stake are so high that clients lose in one jurisdiction but can hedge their losses by winning in another.

Moderator: Not clear from JD to JD whether a PI is an ordinary or extraordinary measure.

George Badenoch: There are cases where if you don’t do an immediate PI, then the alleged infringer could get established/build a factory. Doesn’t think that PIs are abused much in the US these days.

Public Health Service Act Compared to the Food, Drug, and Cosmetic Act

The regulation of biological products is unique from small-molecule drugs. Most biologics are not regulated as drugs under the Food, Drug, and Cosmetic Act (FDCA), but are instead licensed under § 351 of the Public Health Service Act (PHSA) and then evaluated by the Center of Biologics Evaluation and Research (CBER).⁵ Under the PHSA, each biologic must secure a license, which validates the product as safe and pure.⁶ The PHSA does not contain a provision for follow-on biologic approval.

The FDCA has decided to regulate a small number of biologics, such as insulin and human growth hormone (HGH).⁷ Despite there not being any clear explanation as to why only these biologics are regulated by the FDCA, such regulation is encompassed under the FDCA. The FDCA’s definition of a “drug” includes “articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in man.”⁸ Thus, this language suggests that the FDCA’s regulation encompasses biological materials.

The Hatch-Waxman Act

The Hatch-Waxman Act was passed in 1984 to balance the competing interests of generic pharmaceutical companies and brand-name pharmaceutical companies. To promote competition with the brand-name drug manufacturers, the generic pharmaceutical companies need to gain immediate approval for selling the follow-on drug. Thus, these companies required a reduced process for drug approval and accelerated patent litigation process.⁹ Meanwhile, brand-name pharmaceutical companies must preserve their profit margins to be able to afford research and development of drugs.¹⁰

To balance the competing interests of the brand-name and generic pharmaceutical companies, the Hatch-Waxman Act permits the filing and evaluation of “Abbreviated New Drug Applications” (ANDAs). By securing an ANDA, a company is permitted to generate a generic version of a patented drug.¹¹ The company needs to prove that the drug is safe and effective to secure an ANDA; to do this, the applicant merely needs to submit experimental proof that the brand-name drug and the replicated generic are equivalent.¹²

An ANDA certifies one of four possibilities: 1) the drug has not been patented; 2) that the patent has expired; 3) the date on which the patent will expire and the generic will not be sold on the market until after that date; and 4) the patent is not infringed or is invalid.¹³ If the ANDA is filed under the circumstance that the patent is not infringed or is invalid, the applicant must give notice to the patent holder that it has filed an ANDA. The patent holder is notified under these conditions because filing the ANDA constitutes literal infringement.¹⁴ Thus, the ANDA’s processing is suspended for both parties to litigate the allegation of invalidity and/or non-infringement.

The patent-holder has forty-five days to file suit for infringement, and during this period, the ANDA’s approval is suspended.¹⁵ If the patent-holder chooses to file suit, the ANDA will not be processed for the duration of thirty months in order to permit litigation between the parties.¹⁶ The brand-name pharmaceutical companies could win patent term extensions and market exclusivity provisions, while the generic company could win 180 days of market exclusivity for the generic equivalent of the drug.¹⁷ Thus, while ANDAs give the generic companies the ability to quickly begin marketing and selling a bioequivalent product, the brand-name companies enjoy the notice requirement with the possibilities of term extensions and market exclusivity.

Hatch-Waxman Act Application to Generic Biologics

Legislation has been attempting to apply the Hatch-Waxman Act to biologics. Biologics are complex proteins that are manufactured within cells (in vivo), not in test tubes (in vitro). Filing an ANDA through section 505(j) of the Hatch-Waxman Act is one of the two ways in which a biologic could be approved, but is not the most sought-after methodology. The more commonly used section of the Hatch-Waxman Act is section 505(b)(2) of the Food, Drug, and Cosmetic Act (FDCA). Some examples of generic biologics that have enjoyed approval through use of this section are recombinant follitropin beta (Follistim®), recombinant human glucogon (GlucaGen®), and human growth hormone (Omnitrope). Section 505(b)(2) is essentially a hybrid between a new drug application (NDA) and an ANDA, as applicants are permitted to rely on the experimentation conducted by a third party, including the innovative manufacturer, to show the safety of their own products.¹⁸ The applicant need not perform many of the trials himself if he proves the “relevance and applicability” of any previous clinical findings.¹⁹ Thus, the applicant can evade much of the cost associated with seeking FDA approval of a new drug, and sometimes a new biologic.

The FDA is hesitant to approve more complex biological therapies under 505(b)(2). Therefore, the use of this pathway within the Hatch-Waxman Act is limited. Use of this provision would require biologics to gain approval as new drugs under the FDCA or the Hatch-Waxman provision extend to biologics approved under the Public Health Service Act (PHSA). However, this is unlikely, as the FDA has recently stated, “there is no abbreviated approval pathway… for produce products licensed under section 351 of the PHSA.”²⁰ Thus, section 505(b)(2) is not a practical pathway to pursue to gain generic approval of biologics.

An Overview of Regulating Biologics

Because of the chemical differences between small-molecule drugs and biological compounds, several problems arise when trying to apply the Hatch-Waxman provisions to biological compounds. As described earlier, biologic compounds are larger and more complex than the small-molecule drugs, requiring a more sophisticated and regulated methodology of production. Because of the intricacies in producing sensitive biologics, small changes in production could have severe and far-reaching consequences in a patient’s health.²¹

Besides the health concerns associated with taking generic forms of biologic compounds, there are general concerns about the impact of biologic legislation on United States patent law.²² “First, if it is impossible to synthesize an identical compound the effect could be to preclude patentability on the grounds of ‘enablement.’”²³ The patent-holders, the brand-name pharmaceutical companies, must not be permitted to argue the conflicting ideas that their product is enabled and yet it is impossible to replicate due to the nature of production.²⁴ Second, patentability is questioned because many biologics are compounds already produced in vivo, in every living person. Thus, while the process of generating large quantities of any biologic can be novel, the biological compound may not meet the patentability requirement of novelty.²⁵ The legislators must consider these problems before they assume that the parameters set in place by the Hatch-Waxman Act, written for competition of small-molecule drugs, will directly apply to biologics.

Can Trade Secrets and Biologic Equivalence Coexist?

Innovator and generic pharmaceutical companies have agreed that there is a need for follow-on biologics, however, the exclusivity period has been the difficult parameter to agree upon. Generic companies favor shorter periods of exclusivity, approximately seven years, while innovative pharmaceutical companies support bills providing 12-14 years of exclusivity.

There were three congressional bills that were introduced in 2007 that began a thoughtful discussion regarding generic biologics. These bills amend section 351 of the PHSA to establish a route for approval of an abbreviated biological product application for products that contain the same or similar active ingredients as previously licensed biological products.²⁶

The Access to Life-Saving Medicine Act, H.R. 1038, was introduced Feb. 14, 2007 by Henry Waxman and stipulated that the biosimilar and reference must have the same mechanism of action for the same condition of use, but did not mention the provisions for data and market exclusivity. The Patent Protection and Innovative Biologic Medicines Act, H.R. 1956, was introduced April 19, 2007 by Jay Inslee and stated that biosimilar and reference material must merely show comparative results in health-related assays for the same dosage. H.R. 1956 took a bold move and provided twelve years of data exclusivity and just two years of market exclusivity. The Biologics Price Competition Innovation Act, S. 1695, was introduced on June 26, 2007 as a bipartisan effort guided by Ted Kennedy and Orin Hatch, suggesting that the biosimilar and reference must have the identical route of administration, dosage form, and strength, as well as utilizing the same mechanism of action for the same condition of use. S. 1695, additionally called for four years of data exclusivity and eight years of market exclusivity. H.R. 5629, the Pathway for Biosimilars Act would have provided four years of data exclusivity and eight years of market exclusivity. None of these bills were passed in the 110th Congress.

A Teva-funded study (Teva is a leading company that specializes in follow-on drugs) suggested that an exclusivity period of seven years would be “sufficient for maintaining strong incentives to innovate while fostering a competitive marketplace.”²⁷ Teva also questioned the need for exclusivity provisions that would add an additional 7-12 years of protection.²⁸ However, innovator companies have been supportive of bills that provide 12-14 years of exclusivity.²⁹ Thus, these studies illustrate the disconnect between innovative and generic companies regarding exclusivity periods.

A passable bill should adequately compensate generic manufacturers by providing some exclusivity for biologic products.³⁰ All of the proposed Congressional bills have had their drawbacks, either having too much exclusivity (H.R. 1038 and S. 1695) or not having any (H.R. 1956). Until there is a thoughtful negotiation between both of these stances, the innovative pharmaceutical companies will enjoy a market without competition from follow-on biologics. Considering that both innovative and generic pharmaceutical companies have the identical interest of gross revenue, it is encouraging that a thoughtful discussion has already ensued via the 110th Congress.

Brand-Name Perspective: Impossibility of Duplication and the Question of Patentability

Although the patent protection is available for biologics in may circumstances, there may be a limited scope of protection.³¹ Legal principles may restrict the availability of patent rights because the proteins are naturally-occurring macromolecules.³² The 110th Congress reviewed legislation that would permit an expedited marketing approval pathway. The Access to Life-Saving Medicine Act, H.R. 1038 and S. 623, would permit the Secretary of Health and Human Service to monitor what studies were needed to establish comparability.³³ Comparable biologics would be required to maintain the same chemical reaction, the same mechanism of performing this reaction, as well as the same dosage form, strength, etc. As discussed above, while the identical chemical reaction and mechanism for reaction would be relatively easy to prove, the same dosage form and strength could be very tricky to establish. If all of these parameters were to be met, then the generic form of the brand-name biologic would be deemed “interchangeable.” An interchangeable product would be required to produce the same clinical results as the brand-name innovative drug.³⁴

There is a formidable lobby against approval of follow-on biologics. This lobby strongly asserts the impossibility of replicating a brand-name pharmaceutical’s work exactly, due to technological limitations. The crux of this argument lies in health and safety, advocating against an accelerated approval process for follow-on biologics. These pharmaceutical companies assert that an end product is unpredictable, even by guidance through patent disclosures, including deposited biological samples.³⁵

While the safety and health of patients is a strong aspect of this argument, it undercuts the patentability of the biologic. Enablement is a fundamental step in securing patentability. If it is impossible to replicate the patented invention, then this serves as a prima facie case against the invention due to nonenablement. Is this a fair catch-22? If brand-name pharmaceuticals were unable to be patented, companies would instead use the power of trade secrets to insulate them from competition. If this movement occurred, then it would drive down the amount of information available to any pharmaceutical company regarding any type of technique. Because of this, it would be unlikely that competitors would be able to manufacture follow-on biologics. Additionally, reverse-engineering would be near impossible, so trade secrets would be a workable way to protect such intellectual property.

A major flaw with reversing the patentability for innovations that are very difficult to reproduce is that the innovators no longer have the protection of a patent. Losing the availability of patent rights could very likely be a large disincentive to continue structuring pharmaceutical companies and their goods as is. The rights of patents extend from literal infringement through the doctrine of equivalence (DOE). The DOE is only available to patented products, not to those covered via trade secret. The DOE allows a court to hold a party liable for patent infringement for an equivalent to the claimed invention.³⁶

An underlying priority must be to promote continued research and development in the fields of biotechnology. Thus, American patents must be strong and reliable, protecting the intellectual property that they breed. If American patents are not as strong as foreign patents or if there is significant inquiry as to how American patents will be interpreted, inventors will quickly lose incentive to continue filing in the United States. Thus, protecting innovation by approving patents for biologics is mandatory for continued industry and research growth.³⁷

In addition to enablement for patent eligibility, novelty is also required. To be novel, a minimum of one limitation of the claimed invention must be anticipated by prior art. Diamond v. Chakrabarty is a landmark Supreme Court case that allowed biotechnology innovation to fall within the scope of statutorily patentable inventions.³⁸ The Court allowed a living organism to be patentable as long as it was not naturally-occurring. In this way, discoverable matter is not patentable, while inventions are patentable. This principle extends to the biological therapies that would be encompassed by the Biologics Act, if the legislation passes.

“Deducing the steps required to purify and produce insulin, for example, took considerable work by some of the top scientists in the field.”³⁹ The example of insulin highlights why patent protection is so important for biological research, as it took almost 20 years for Eli Lilly to purify insulin and successfully obtain approval to market its this therapy.⁴⁰ Now, if the leaders within Eli Lilly knew that ultimately their purified insulin would never be granted patent protection, would they have still invested almost two decades of research in this field? Additionally, would Eli Lilly still pursue purification of naturally occurring biological proteins while knowing that patent rights were abbreviated; thus, engaging generics to replicate the purification process and compete with their 20 years of hard work and effort?

A final issue that needs to be addressed is an unconstitutional taking without just compensation.⁴¹ If pharmaceutical companies manufacturing generics are permitted to take and use the discoveries of innovative pharmaceuticals, it is a strong argument for an unconstitutional taking. Being that huge amounts of money are invested by brand-name pharmaceuticals for research and development, there needs to be some reasonable compensation for the discoveries.

The Biologics Act attempts to mold the Hatch-Waxman Act into a vehicle previously encompassing tiny, simple drugs into an extension for large, complex biological molecules. However, the question remains whether it would be beneficial to apply biosimilars to the established Hatch-Waxman process of approval and generic manufacture. The Biologics Act seeks further requirements to be satisfied by the generic biologics manufacturer, such as extensive clinical studies, which will increase the biosimilar’s costs and decrease the margin between the price of the innovative biologic and the follow-on generic.

An additional concern, besides higher manufacturing costs and decreased profits, is the actual market for biologics. Unlike small-molecule drugs, biologics function in one biochemical process, which translates to a smaller population of people who need them. So, a lingering question is whether there is a significantly sized market for each generic biologic. Because of these concerns, it is unclear whether the follow-on biologic market will be as competitive as the generic small-molecule market.

_______________________________________________________________________

¹ Regulation of Biological Products, 42 U.S.C. § 262(i) (2004).

² Kathleen R. Kelleher, FDA Approval of Generic Biologics: Finding a Regulatory Pathway,14 MICH. TELECOMM. TECH. L. REV. 245, 247 (2007).

³ Gregory Roumeliotis, FDA Under Pressure to “Open the Floodgates” for Biogenerics (2006), http://www.in-pharmatechnologist.com/news/ng.asp?n=69925-fda-biogenerics-insulin-hgh-omnitrope; supra note 2.

⁴ Meredith Wadman, Copycats Gear up to Dog Biotech Brands, NATURE, OCT. 5, 2006, at 496; supra note 2.

⁵ 42 U.S.C. § 262 (2007).

⁶ Id.

⁷ Kathleen R. Kelleher, FDA Approval of Generic Biologics: Finding a Regulatory Pathway,14 MICH. TELECOMM. TECH. L. REV. 245, 249 (2007).

⁸ Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 321(g)(1)(B) (2004).

⁹ A. Taylor Corbitt, The Pharmaceutical Frontier: Extending Generic Possibilities to Biologic Therapies in the Biologics Price Competition and Innovation Act of 2007, 18 DEPAUL J. ART TECH. & INTELL. PROP. L. 365, 372 (2008).

¹⁰ Id.

¹¹ Id.

¹² Id.

¹³ Gerald J. Mossinghoff, Overview of the Hatch-Waxman Act and Its Impact on the Drug Development Process, 54 FOOD & DRUG L.J. 187, 189 (1999).

¹⁴ Id.

¹⁵ A. Taylor Corbitt, The Pharmaceutical Frontier: Extending Generic Possibilities to Biologic Therapies in the Biologics Price Competition and Innovation Act of 2007, 18 DEPAUL J. ART TECH. & INTELL. PROP. L. 365, 373.

¹⁶ Id.

¹⁷ Id.

¹⁸ Kathleen R. Kelleher, FDA Approval of Generic Biologics: Finding a regulatory Pathway, 14 Mich. Telecomm. Tech. L. Rev. 245, 250.

¹⁹ Id.

²⁰ See Omnitrope Questions and Answers, http://www.fda.gov/cder/drug/infopage/somatropin/qa.htm (last visited April 4, 2009).

²¹ A. Taylor Corbitt, The Pharmaceutical Frontier: Extending Generic Possibilities to Biologic Therapies in the Biologics Price Competition and Innovation Act of 2007, 18 DePaul J. Art Tech. & Intell. Prop. L 365, 367-68.

²² Id. at 367.

²³ Id.

²⁴ Id. at 367-68.

²⁵ Id. at 368.

²⁶ H.R. 1038, 110th Cong. (2007); H.R. 1956, 110th Cong. (2007); S. 1695, 110th Cong. (2007); H.R. 5629, 110th Cong. (2008).

²⁷ Patent Docs: Biotech & Pharma Patent Law & News Blog: Follow-on Biologics Debate Continues, http://www.patentdocs.org/2009/01/top-stories-of-2008-9-to-6.html (last visited April 5, 2009).

²⁸ Id.

²⁹ Id.

³⁰ Kathleen R. Kelleher, FDA Approval of Generic Biologics: Finding a regulatory Pathway, 14 MICH. TELECOMM. TECH. L. REV. 245, 262.

³¹ Follow-On Biologics: Intellectual Property and Innovation Issues, Policy Archive, March 2007 available at http://hdl.handle.net/10207/3161 (last visited on April 5, 2009).

³² Id.

³³ Id.

³⁴ Id.

³⁵ The Law of Biologic Medicine: Hearing Before the S. Comm. on the Judiciary, 108th Cong. (2004) (statement of Dr. William Hancock, chair of Bioanalytical Chemistry, Northeastern University).

³⁶ Royal Typewriter Co. v. Remington Rand, Inc., 168 F.2d 691, 692 (2d Cir. 1948).

³⁷ A. Taylor Corbitt, The Pharmaceutical Frontier: Extending Generic Possibilities to Biologic Therapies in the Biologics Price Competition and Innovation Act of 2007, 18 DEPAUL J. ART TECH. & INTELL. PROP. L. 365, 400.

³⁸ Diamond v. Chakrabarty 447 U.S. 303, 315-16 (1980).

³⁹ A. Taylor Corbitt, The Pharmaceutical Frontier: Extending Generic Possibilities to Biologic Therapies in the Biologics Price Competition and Innovation Act of 2007, 18 DEPAUL J. ART. TECH. & INTELL. PROP. L. 365, 402.

⁴⁰ Id.

⁴¹ Id. at 402-03.

Branding is a key element to the Second Life concept. One user who is an advertising executive in New York noted that the “real draw” of Second Life is the “creative driven process” of developing, marketing and selling one’s own brand in the virtual world. Second Life blogs abound and the site has even created its own version of Wikipedia, where users have lauded the site as “a new platform for creative and entrepreneurial expression” that might otherwise be unavailable due to real world spatial or financial constraints.⁵ Real world owners of valuable marks such as Reebok, Lacoste and BMW have also penetrated the Second Life market by setting up shop in the virtual world. One user described that the virtual stores where these goods are sold usually allow users to customize the established mark owner’s goods within the owner’s established parameters, the equivalent of mail ordering customized M&M candies. The site also provides incentives to create new designs as opposed to buying existing brands, since the creation of one’s own design costs more time than money. The principal financial investment comes in the form of acquiring retail space with virtual dollars to make the product available to other users in Second Life.

Despite the incentives for creativity as opposed to infringement, users frequently confuse the line between “real world inspired” creations and virtually infringing use. As one practitioner noted, “[infringement]…is easy to achieve on Second Life.”³ A quick perusal of Second Life blogs such as Fashion Planet shows that virtual designers are often drawn to the same pitfalls as real life designers who take looks they see on the runway and, after making small changes, market them as their own. One user on Fashion Life copied a dress worn by a contestant on American Idol, making one barely noticeable change and customizing the look with accessories purchased from other virtual merchants. The infringement may be done virtually, but it creates potentially harmful outcomes for real intellectual property owners.

Linden Lab is clearly cognizant of the value of trademarked material and, perhaps to attenuate itself from potentially infringing use, decided in 2003 to give users “copyright and other intellectual property rights with respect to the Content [they] create in Second Life,” as embodied in section 3.2 of the current Linden Lab TOSA. According to users on Fashion Life, the program features “allow creators to label work as their own, flag it with the level of copy permissions they want to assert over their work, e.g., all-rights reserved or freely modifiable and transferable,” enabling users to “start their virtual brand with confidence.” Apparently there is even a Patent and Trademark Office in Second Life⁴, enabling users to virtually secure and enforce trademark protection for their virtual creations without looking to real world laws and remedies.

But the grant comes with the proviso that Linden Lab has a perpetual non-exclusive and royalty-free license to use content created on the site and that users are responsible for “understanding all copyright, patent, trademark, trade secret and other intellectual property or other laws that may apply to [their] content.”⁵ By giving users greater control over the content they create in Second Life and making the responsibilities that come with that control explicit, Linden Lab may be less likely to be found contributorily or vicariously liable if named a defendant in a copyright or trademark infringement suit.

Bringing a trademark or copyright action for infringing use in the virtual world may seem unlikely, but in at least one case, the courts have entered judgment in favor of Second Life content creators. In January of 2008, a consent of judgment was entered in the Eastern District of New York, whereby defendant Thomas Simon (aka Avatar “Rase Kenzo”) paid $525 in damages “for profits made through unauthorized use of the plaintiffs’ intellectual property via ‘unauthorized copying and distribution of plaintiffs’ merchandise’” in Second Life. As Virtually Blind, a blog covering legal news, issues, and events impacting virtual worlds, reported, “[t]hough the judgment will not have as significant a precedential value as a contested decision on the merits would have had… the judgment [stands] as the first formal, if tentative, recognition of virtual property by a U.S. court.”

As litigation of trademark and copyright disputes involving more well known ISPs such as YouTube and EBay proliferate, it is worth keeping an eye on practices in the virtual community. Virtual IP infringement may be the new frontier in soft IP.

_______________________________________________________________

¹ § 4.3 of the Linden Lab Terms of Service Agreement.
² 105 H.R. 2281 (Oct. 28, 1998)
³ Mark A. Armitage, Virtual Trademark Infringement in A Virtual World?, Vol. 1, No. 4 of LANDSLIDE (March/April 2009).
⁴ Id.
⁵ § 3.2 of the Linden Lab Terms of Service Agreement.

The legality of wireless squatting is governed by federal statute 10 U.S.C. § 1030, which covers “[f]raud and related activity in connection with computers.”² Section 1030(a)(2)(C) makes it a crime to “intentionally access a computer without authorization or exceeds authorization access, and thereby obtains — information from any protected computer.”³ Under Section 1030(a)(5)(B), one doesn’t even have to obtain information, rather, the squatter just needs to “intentionally access a protected computer without authorization, and as a result of such conduct, recklessly cause damage.”⁴

The statute has a very low threshold; a squatter need only cause “damage affecting 10 or more protected computers during any 1-year period,” to meet the statutory minimum.⁵ Certainly, damage affecting ten people sounds like a lot of harm, but when the statute defines damage as broadly as “any impairment to the integrity or availability of data, a program, a system, or information,”⁶ it seems evident that simply accessing a network and using its bandwidth affects the “integrity of the system.”

State statutes also struggle with establishing the clear legal bounds of wireless squatting. First, as is problematic with the federal statute,⁷ each state takes a different approach to the mens rea requirement.⁸ On one hand, Utah has no mens rea requirement, making wireless squatting a culpable offense regardless of whether the offender knew that they had accessed a network, nor whether they knew that their access was unauthorized.⁹ At the other end of the spectrum, New Hampshire requires that the offender both know that they have accessed a system, and know that they were not authorized to do so.¹⁰

Additionally, each state has their own interpretation of the term “authorization.”¹¹ Colorado requires the express consent of the owner,¹² New Jersey looks at whether a “reasonable person would believe that the act was authorized,”¹³ while Tennessee allows for implicit authorization.¹⁴ The states that require express authorization don’t adequately address the problem, as there is no way for a network provider to expressly authorize access on their system when the squatter is picking up the wireless signal over a thousand feet away.

Matthew Bierlein offers a proposal that clarifies these ambiguous terms while delicately striking a balance between the interests of those Wi-Fi users who believe that the Internet should be open to everyone and those users who want to protect their own wireless networks.¹⁵ In pertinent part, Bierlein’s model statute clearly dictates the mens rea of “knowingly”, and applies it exclusively to the term “access” in the phrase “accesses without authorization.” Thus, in order to be convicted, the state must prove that the squatter knew they were accessing the network, but the state does not also need to show that the squatter knew their access was unauthorized. More importantly, Bierlein would adopt the former New York stance towards authorization; a lack of security on the network implies that the squatter is authorized to gain access.¹⁶

Under the former New York Penal Code Rule 156.05, the network provider must take affirmative steps to protect their own system.¹⁷ In the absence of these steps, the squatter could assume implied authorization to access this network.¹⁸ However, this New York law left a number of questions unanswered.¹⁹ Bierlein diverges from the New York rule, stating that “the model statute . . . allows the principal to rebut (subject to a [clear and convincing] standard) the presumption created by the lack of security.”²⁰ Thus, if the network user accesses a network where they should have known their access was forbidden, then the state may still establish a lack of authorization, subject to a clear and convincing evidentiary standard.

Bierlein’s model statute offers a considerable improvement to the fifty variations that each state adopts towards this problem. However, technology is already adapting faster than the state legislatures. Companies like Verizon and Sprint already offer EVDO cards, which allow a user to connect their laptop to their cell phone provider’s phone network.²¹ Additionally, WiMax is a new form of technology with the potential to allow for entire cities to be covered in wireless internet.²² Of course, these technologies will come at a price to the user, but they do address a root cause for wireless squatting: not being able to access any other wireless signal.

Ultimately, the current mess of the multitude of wireless squatting laws leaves the vast majority of computer users unsure as to whether their actions are illegal. If the legislatures want the wireless squatter to “stand up” and refrain from such actions, then they ought to draft a uniform statute that offers clearer guidance on the law.
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¹ Ben Worthen, Getting Away with Wi-Fi Squatting, THE WALL STREET JOURNAL, Apr. 18, 2008.

² 18 U.S.C. 1030 (2008).

³ 18 U.S.C. § 1030(a)(2)(C). Note that computer is defined as “an electronic, magnetic, optical, electrochemical, or other high speed data processing device performing logical, arithmetic, or storage functions, and includes any data storage facility or communications facility directly related to or operating in conjunction with such device…” 18 U.S.C. § 1030(e)(1) (emphasis added). Thus, wireless routers fall within the statutes definition of “computer”.

⁴ 18 U.S.C. § 1030(a)(5)(B).

⁵ 18 U.S.C. § 1030(c)(4)(A)(i)(VI).

⁶ 18 U.S.C. § 1030(e)(8).

⁷ “It is unclear whether the [mens rea] language applies solely to the word ‘access’ or if it extends to encompass the whole phrase ‘access a computer without authorization.’” Matthew Bierlein, Note, Policing the Wireless World: Access Liability in the Open Wi-Fi Era, 67 OHIO ST. L.J. 1123, 1134 (2006).

⁸ See id. at 1138-41. Mens Rea is the “state of mind that the prosecution, to secure a conviction, must prove that a defendant had when committing a crime.” BLACK’S LAW DICTIONARY 1006 (8th ed. 2004).

⁹ UTAH CODE ANN. 1953 § 76-6-703(1) (West 2008).

¹⁰ N.H. REV. STAT. § 638:17 (West 2008).

¹¹ See Bierlein, supra note 7, at 1141-43.

¹² COLO. REV. STAT. § 18-5.5-101(1) (2005).

¹³ NJ STAT. ANN. § 2C:20-23(Q) (West 2009).

¹⁴ TENN. CODE ANN. § 39-14-601(2) (West 2008).

¹⁵ Bierlein, supra note 7, at 1178-85.

¹⁶ Bierlein, supra note 7, at 1178-80.

¹⁷ N.Y. PENAL LAW § 156.05 (McKinney 2004) (amended 2006). The statute now reads, “[a] person is guilty of unauthorized use of a computer when he or she knowingly uses, causes to be used, or accesses a computer, computer service, or computer network without authorization.”?N.Y. PENAL LAW § 156.05 (McKinney 2008).

¹⁸ See id.

¹⁹ See Mark Rasch, WiFi High Crimes, SECURITYFOCUS, May 3, 2004. In discussing the New York State law, Rasch poses the questions, “If the door is open, I can come in. But what if it’s not open, but is unlocked? Or if it is locked, but locked poorly? Can I still come in?” Id.

²⁰ Bierlein, supra note 7, at 1182 n.276.

²¹ What is EVDO, EVDOINFO.COM, Feb. 12, 2005.

²² Ben Worthen, Wi-Fi Squatting and You, THE WALL STREET JOURNAL, Aug. 22, 2007.

The right of publicity is a generally recognized property right of well-known individuals to control the unlawful appropriation of their identities by commercial entities.³ According to the Third Restatement of Unfair Competition, “One who appropriates the commercial value of a person’s identity by using without consent the person’s name, likeness, or other indicia of identity for purposes of trade is subject to liability,”⁴ The right of publicity has been recognized by twenty-five states.⁵

In CBC, the Eighth Circuit, following Supreme Court precedent established in Zacchini v. Scripps-Howard Broadcasting Co.,⁶ balanced the competing interests of MLB Player’s rights of publicity against the high public informational interest inherent in First Amendment rights.  In Zacchini, a reporter for Scripps-Howard filmed Hugo Zacchini perform at the Geauga County Fair.  Zacchini’s act consisted of shooting himself from a cannon into a net 200 feet away. Zacchini asked the reporter not to film his performance, but he did so, and Howard-Scripps broadcast the act in its entirety during the eleven o’clock news.  As a result, Zacchini brought suit against Scripps-Howard alleging that their broadcast commercialized the film of his act, and thereby unlawfully appropriated his professional property.

Justice White, writing for a six-justice majority, stated that the right of publicity be balanced against First Amendment interest in dissemination of news and information.⁷ The Court recognized that the right of publicity creates economic incentives by providing the faculty to protect the product of individual creativity and skill.⁸ Economic value of performance exists only because of the ability to assert exclusive control over it.⁹ Therefore, infringement upon publicity rights constitutes unjust enrichment that threatens one’s “ability to earn a living as an entertainer.”¹⁰

The C.B.C. court proceeded to cite two California cases involving denials of baseball right of publicity claims.  In Gionfriddo v. Major League Baseball, the California Appellate Division rejected a group of retired players’ claim that MLB violated their right of publicity when it rebroadcast games without authorization, which they played in, over the Internet. The Court reasoned that “[t]he recitation and discussion of factual data concerning the athletic performance of these plaintiffs commands a substantial public interest, and, therefore, is a form of expression due substantial constitutional protection.”¹¹

Furthermore, in Cardtoons, L.C. v. Major League Players Association,¹² the Tenth Circuit held that a parody baseball card producer did not violate MLB player’s rights of publicity since “[s]peech that entertains, like speech that informs, is protected by the First Amendment because ‘[t]he line between the informing and the entertaining is too elusive for the protection of that basic right.’”¹³

Using these precedents, the Eighth Circuit’s analysis followed the trend in pointing out the glaring fact that baseball statistics are “all readily available in the public domain, and it would be strange law that a person would not have a first amendment right to use information that is available to everyone.”¹⁴ Subsequently, the Court denied the MLB Player’s right of publicity claim by dismissing their economic interests: “[B]y providing right of publicity to individuals. . . . states seek to promote . . . the right . . . to reap the rewards of his or her endeavors and an individual’s right to earn a living. . . . But major league baseball players are rewarded, and handsomely, too, for their participation in games and can earn additional large sums from endorsements and sponsorship agreements.”¹⁵ The Court is thus implicating that state interests in individual intellectual property rights should fluctuate depending on their relative value to the owner. Additionally, the suggestion that baseball players have only a token use for licensing fees is debatable, and particularly unsuitable to the current NFL Players case given that contracts are not guaranteed in the NFL Collective Bargaining Agreement.

The C.B.C. decision is difficult to reconcile with earlier cases that rejected commercial manufacturer’s assertion that they could freely use celebrities and athlete’s identities in their products while the same exact information was also published in newspapers. Specifically, in Uhlaender v. Hundricksen,¹⁶ the Court enjoined a private manufacturer of baseball parlor/table games from using Major League Baseball Player’s identity and statistical information.¹⁷ The Court held that the players possessed a right of publicity because a “celebrity must be considered to have invested his years of practice and competition in a public personality which eventually may reach marketable status. That identity, embodied in his name, likeness, statistics and other personal characteristics, is the fruit of his labors and is a type of property.”¹⁸

Additionally, in Palmer v. Schonhorn Enterprises, Inc.,¹⁹ the Court held that the manufacturer of a paper-board box golf game violated the property rights of Arnold Palmer, a famous professional golfer, because it contained a “Profile and Playing Chart” with a short profile of his playing career.²⁰ Thus, it is confusing as to why online fantasy sports do not require players licensing agreements, while video and board games do.

Online fantasy sports has a huge market impact.  According to a 2008 survey conducted by the Fantasy Sports Trade Association, 29.9 million active users spend $800 million dollars directly on fantasy sports products, and use $3 billion dollars worth of related products.  Fantasy sports total market impact is estimated to be $4.48 billion dollars.

Most Major League Baseball Players do not make enough money to afford losing licensing fees.  Major League Baseball’s player’s minimum salary is $390,000.  In addition, although the average MLB player’s career is 5.6 years, one in five of all position players play only a single season in the majors, while less than half of the players remain in the league long enough to play five seasons.

The situation for NFL Players is worse.  Their minimum rookie salary is $193,000 while the average career lasts 3.5 seasons.  In addition, the generally violent nature of football along with the recent revelation of long-term brain injuries among retired players indicates that professional football athletes will have severe difficulties maintaining steady employment once their athletic career ends.²¹ Therefore, it will be interesting to see if the new litigation takes these discrepancies between baseball and football careers into account when ruling on NFL Player’s publicity rights.
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¹ 505 F.3d 818 (8th Cir. 2007).

² Florida’s statute against unauthorized publication of name or likeness, FLA. STAT. §540.08 (2009), provides stronger protection for the misappropriation of athletes and celebrities identities for commercial purposes than Missouri Law, which the 8th Circuit used in the CBC v. MLB dispute. See also http://amlawdaily.typepad.com/amlawdaily/2008/10/who-owns-sports.html.

³ 63C Am. Jur. 2d Property § 6.

⁴ Restatement (Third) Of Unfair Competition § 46 (1995).

⁵ Thomas McCarthy, The Right of Publicity and Privacy § 6:1.

⁶ 433 U.S. 562 (1977).

⁷ See Id. at 574–5 (“It is evident, and there is no claim here to the contrary, that petitioner’s state-law right of publicity would not serve to prevent respondent from reporting the newsworthy facts about petitioner’s act. Wherever the line in particular situations is to be drawn between media reports that are protected and those that are not, we are quite sure that the First and Fourteenth Amendments do not immunize the media when they broadcast a performer’s entire act without his consent.”); Gionfriddo v. Major League Baseball, 94 Cal. App. 4th 400, 409 (2002).

⁸ Zacchini at 574–5.

⁹ Id. at 575.

¹⁰ Id.

¹¹ Gionfriddo at 411.

¹² 95 F.3d 959 (1996).

¹³ Id. at 969 (quoting Winters v. New York, 333 U.S. 507, 510 (1948)).

¹⁴ C.B.C. at 823.

¹⁵ Id. at 824.

¹⁶ 316 F. Supp. 1282 (D. Minn. 1970).

¹⁷ Id. at 1283.

¹⁸ Id. at 1282.

¹⁹ 96 N.J. Super. 72 (N.J. Super. Ct. Ch. Div. 1967).

²⁰ Id. at 74, 79–80.

²¹ See Bryan Lipsky, Note, Dealing with the NFL’s Concussion Problems of Yesterday, Today, and Tomorrow, 18 Fordham Intell. Prop. Media & Ent. L.J. 959 (2008).

On first glance it is difficult not to be anything but in favor of copyright term extension. The Commission’s literature discusses the moral right of an artist to earn money from their talent for a longer period of time. An impact study executed by the Commission states that the proposal would give performers, on average, an additional income of between 150 – 2000 Euros ($197- $2632 as of March 2009).

The proposal also contains a ‘use it or lose it’ clause to be included in contracts between performers and and their record companies . This mechanism allows performers to get their rights back in sound recordings if the producer choses not to market them, thus avoiding the ‘locking up’ of recordings deemed commercially unmarketable. Record companies will also have to set up a fund into which they have to pay 20% of their revenues earned during the extended period. This revenue stream is to go directly towards helping session musicians.

In theory, this would appear to be a positive change. The UK is an example of a Member State with a current level of copyright protection for sound recordings of 50 years, from the date of the recording. After 50 years, the recording enters the public domain. According to the New Musical Express (NME), the Beatles back catalog of recordings will start to expire in 2013. In light of this, a number of high profile recording artists including Sir Paul McCartney and Roger Daltrey have signed an open letter (orchestrated by the British Phonographic Institute (BPI)) to the Times Newspaper in support of term extension. The BPI, who represent the UK’s major music labels, believe that copyright extension concerns ‘fairness’ for the artists. The British Culture Minister reiterated this by stating that there is “a moral case for performers benefitting from their work throughout their entire lifetime. We must ensure that any extension delivers maximum benefit to performers and musicians. That’s the test of any model as we go forward.”

However, in analyzing the background for proposing the directive, the Commission has not been intellectually honest in their pursuit of balancing consumer and creator interests. The directive goes against evidence from previous studies, including a study by Professor Hugenholtz of the Institute for Information Law (IviR) on which the Commission signed off. Hugenholtz, along with a number of other European academics, signed a letter published in the Times newspaper declaring the proposal as good only for, “record companies, aging rock stars or increasingly, artists’ estates. It does nothing for innovation and creativity.” The Commission should have addressed the conclusions from these studies in their proposal which would have given more transparency into their decision making process. From an outside perspective it is difficult not to presume that powerful lobbying by record companies has shaped their decision to go ahead with the proposal.

Critics also point to the fairytale aspect of extension that the Commission is painting. For Hogge, of the Open Rights Group, the Commission’s description of the proposal having a sole aim of benefitting the musician is illusory. Critics also believe extension negatively impacts innovation. For example, in watching fan-made videos available on sites like You Tube, it is clear music fans use sound recordings without a thought to their copyright . The fact that a sound recording is not in the public domain does not deter remixers and music fans from using a musical recording.

At the heart of the debate is the question of who actually benefits from term extension of copyright. Record companies are the owners of the copyright in the recordings. It is in the interest of a record company who pays for the recordings to be able to exploit the musical recording for the longest period possible. However, is 50 years not a sufficient period of time to exploit a recording?

Helga Trupel (German Green Party MEP) believes that the directive is out to benefit the ‘Big Four’ record companies (Warner Brothers, Universal, BMG and Sony). They own the largest back catalogs of the recordings and dominate the industry: “The ghost of the Big Four is behind all recommendations we have at the moment.” Kretschmer anticipates extra profits for record companies between 44- 843 million euros ($57.9 million – $1.1 billion as of March 2009) per year and that the session fund detailed by the Commission will fall within the 400% tax bracket. Consequently session musicians will not receive such a high benefit as the Commission has alluded to. The Commission believes that extra revenue will be used by the record companies to invest in new talent, however according to a study by Helberger only 2% of net revenues of major record companies are spent annually on A & R. It is difficult to believe that a term extension would change this trend when the industry has of late been naturally conservative in signing new acts. The industry appears to be, in this insecure environment, concentrating on established artists and not investing in new talent.

Established artists who have more bargaining power to control the copyright of their recordings would be in more of a position to benefit from an extension. However, this minority of star recording artists should not be the turning point of the debate. I agree with the legal commentator Nate Anderson who suggests the answer to ensuring performers earn from their talent is in not in extending copyright, but in addressing “unreasonably exploitative contracts during the existing term.” What is of benefit to the industry as a whole and in line with the stated objective of the proposal is  honoring the rights of all recording musicians, not record companies and a few star acts.

The case was United States v. Dove.¹ It marked the first time that a jury in the United States found a defendant guilty of felony file sharing.  But when the RIAA sought restitution, things went south.  Attempting to sound reasonable, the RIAA offered to seek restitution only for the twenty most downloaded albums from Dove’s computer.  They then took those 6,528 transfers and multiplied them by the average wholesale price in 2005 ($7.22) to reach a “reasonable” $47,132.16 in damages.  The problem with the way the RIAA calculated its losses simply comes down to supply and demand: the cheaper things are, the more people will buy them.  You can see this at your local supermarket on free sample day.  Most everyone will take a free sample, because it is free.  However, should the store start charging for these delectable morsels, many fewer people would take them.

In the same way, Judge Jones reasoned that just because people would download a song or album for free, doesn’t mean that these people would have otherwise bought the album.  Most of these people in fact only downloaded the albums from Dove because they had no intention of otherwise buying them.

The RIAA was able to seek restitution under the Mandatory Victim’s Restitution Act of 1996.  This allows the victim of a  “an offense against property under [title 18],” § 3663A(c)(1)(A)(ii), in which (2) ‘an identifiable victim or victims has suffered a . . . pecuniary loss,’ § 3663A(c)(1)(B), and (3) the court has not found that the number of identifiable victims or the complexity of determining causation or the amount of the victims’ losses would make restitution impracticable, § 3663A(c)(3).” In laying out its theory of restitution all the RIAA did was claim that their damages were equal to the number of shared copies multiplied by the wholesale price per copy.

To support its case, the RIAA and the government cited United States v. Martin,² United States v. Milstein,³ and United States v. Chay.⁴ Judge Jones recognized differences in each of the theories presented in those cases that kept them from being applied to Dove.  In Martin and Milstein, the issue was a counterfeit product that was sold at a profit by the offender.  In those cases there is a clear deferment of payment from the copyright holder to the offender, although Judge Jones noted that, in the case of United States v. Hudson,⁵ which involved the same activity as Martin, there is some question as to whether or not a customer who bought $86,000 of counterfeit product would have paid the full mark up of $321,000 for the authentic product; this issue was never reached on appeal, however.  Even in Milstein, which involved selling foreign pharmaceuticals as another brand, the court held the restitution amount was proper because it was the amount the offender would have paid for the actual product to re-sell.

Chay also fails the test because that case, like the others, involved an offender selling an illegal or counterfeit copy of an existing good for personal profit.  But, Judge Jones ruled, because Dove did not sell anything and no attempt was made to put a monetary value on any gain he did make, the same theory of restitution does not apply.

Jones does find that the restitution scheme offered by the RIAA in Dove is similar to the scheme proposed in United States v. Chalupnik,⁶ which was rejected.  Chalupnik noted that the customers had different, legal options, available to them other than purchasing the product at full retail price.  In Chalupnik, it was to buy used CDs from another source; in Dove, Judge Jones points out that the downloaders could buy individual songs online, rent movies, borrow CDs and DVDs from the library, or done without the album entirely.

Judge Jones points out the flaws in the RIAA’s case best:

“The government finds RIAA’s estimated losses reasonable because it calculates loss based on only 20 of the 183 albums in the Elite Torrents tracker database, but there is no suggested logical basis for making the calculation based on 20 albums as opposed to 1 or 100 albums. There is no allegation, for instance, that people who downloaded those first 20 albums would have been more likely to pay the full purchase price for those albums had they not been available on the Elite Torrents network. RIAA does not aver that 6,528 out of the 17,281 total downloads from Dove’s server accurately represents the number of lost sales to RIAA’s members.”

It is possible that RIAA requests $47,000 because Dove’s services are worth $77,768.82 to RIAA, the difference between the full amount of economic loss RIAA claims ($124,768.82) and the amount it is willing to accept if Dove agrees to participate in a public service announcement ($47,000). But RIAA does not offer this explanation. Nor does RIAA adequately prove that its members’ total actual losses were $124,768.82. RIAA only proves that the first 20 of the 183 total albums on Dove’s server are held by record labels that are RIAA members; there is no such proof as to the remaining 163 albums. Also, RIAA uses $7.22, the average wholesale price of a digital album in 2005, to calculate its loss, but it is unclear whether member copyright holders would receive the full $7.22 as profit or only a portion of that amount. Further, if the reason RIAA decreases its request from the alleged total economic losses of $124,768.82 to $47,000 is because Dove’s services are worth $77,768.82, RIAA’s request problematically assumes that every illegal download resulted in a lost sale. On the other hand, if the value of Dove’s services is not the basis for RIAA’s “conservative” $ 47,000 request, RIAA has essentially requested an arbitrary amount.”
Judge Jones’ ruling comes as another challenge to an organization whose courtroom bullying and steamrolling is no longer being quietly acquiesced to.  With the new requirement that the RIAA prove actual losses and not simply create fictitious numbers that represent the number of sales they wish they had, the fact that more evidentiary issues are appearing with the RIAA’s methods, and that more consumers are standing up for their own digital ownership and privacy rights, the RIAA’s legal battles are proving more costly than ever.
One wonders if the RIAA actually researches how many sales are actually being lost due to internet piracy, if they will realize their millions of dollars in restrictive-DRM research and relentless legal war against their consumers has cost them more in lost revenue and public perception than any piracy ever has.
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¹ 585 F. Supp. 2d 865 (W. Dist. VA. 2008).

² 64 F. App’x. 129 (10th Cir. 2003).

³ 481 F.3d 132 (2d Cir. 2007).

⁴ 281 F.3d 682 (7th Cir. 2002).

⁵ 483 F.3d 707 (10th Cir. 2007).

⁶ 514 F.3d 748 (8th Cir. 2008).