The renegotiation of the North American Free Trade Agreement (NAFTA) may be receiving most of the spotlight in trade news these days, but the current U.S. Administration has also set ambitious goals for trade outside of NAFTA in 2018. Last July, U.S. Trade Representative Lighthizer announced that the U.S. would begin discussions with the Republic of Korea regarding changes to the U.S.-Korea Free Trade Agreement (KORUS). The talks continued on January 5 following Korea’s completion of domestic negotiating procedures in late December.
In the last weeks of December, five amicus briefs were submitted in support of Arista in its ongoing copyright infringement litigation with Cisco. The briefs provide a strong basis for the Federal Circuit to affirm the jury verdict in favor of Arista.
As previously discussed in DisCo, Arista and Cisco are competitors in the network switch market. In the operating system that controls its switches, Arista replicated roughly 500 Command Line Interface (CLI) commands of the over 15,000 CLI commands Cisco employed in its operating system. Each command consists of between two and four words. Cisco controls over 80% of the network switch market, and Arista, a newer entrant, used the Cisco commands it believed network engineers would expect to find in any switch.
Cisco sued for patent and copyright infringement. The patent claims were dismissed at an early stage of the litigation. Cisco argued to the jury that Arista infringed the copyright in the compilation of the 500 commands. In December 2016, the jury found in favor of Arista on the grounds of scenes a faire—a venerable doctrine under which courts deny protection to expression that is standard, stock or common to a particular topic or that necessarily follows from a common theme or setting. In May 2017, the district court rejected Cisco’s motion for a judgment as a matter of law, finding that substantial evidence had been introduced at trial to support the jury’s scenes a faire verdict.
Cisco appealed to the Federal Circuit, which has jurisdiction over the appeal because of Cisco’s patent claim, even though Cisco is not appealing that dismissal. In its brief, Cisco relied heavily on the Federal Circuit’s 2014 decision in Oracle v. Google, a case that is now back before the Federal Circuit. Cisco argued that its compilation of commands reflected great creativity and originality, and was not constrained by industry standards. In its brief opposing Cisco’s appeal, Arista listed the extensive evidence presented to the jury concerning the constraints operating on Cisco as it assembled the commands in its CLI. Arista also provided several alternative grounds for affirming the decision below, many of which were elaborated on in the amicus briefs.MORE »
In a non-precedential summary order on December 19, the Second Circuit affirmed a decision interpreting the BMI consent decree, which governs Broadcast Music International, a performance rights organization (“PRO”) that gathers music rights together to be packaged in a single blanket license. The details of the music battle and its implications are discussed in my previous posts [1, 2, 3, 4]. The affirmance means that BMI can not only fractionally license, it can do so under the consent decree as it is currently drafted. This decision will be terrible for the music industry, enabling new forms of market power that could be abused by license holders to increase prices.
The danger of false analogies in software copyright cases was readily apparent in last Thursday’s oral argument in Oracle v. Google. (A recap of the oral argument can be found here.)
False analogies have long been a problem in software copyright cases. Computer programs are considered literary works under the Copyright Act. In 1986, the U.S. Court of Appeals for the Third Circuit in Whelan v. Jaslow noted this classification of computer programs as literary works, and observed that “one can violate the copyright of a play or a book by copying its plot or plot devices.” Analogizing computer programs to plays or books resulted in the Third Circuit granting overly broad protection to Whelan’s computer program. In essence, the court found only one unprotectable idea in Whelan’s program: its basic purpose, the efficient management of a dental laboratory. The court considered all other aspects of the program, including its structure, sequence, and organization, to be protectable.
Later courts recognized the flaw in this analogy. In 1992, the Second Circuit in Computer Associates v. Altai acknowledged the “essentially utilitarian nature of a computer program.” Thus, “compared to aesthetic works, computer programs hover even more closely to the elusive boundary line described in Section 102(b)” of the Copyright Act. On this basis, the Altai court developed the nuanced abstraction-filtration-comparison methodology for separating idea from expression in computer programs. The court looked at program elements at each level of abstraction, starting with the program’s ultimate function and ending with its code, to determine whether the element’s inclusion was dictated by considerations of efficiency; was required by factors external to the program, such as mechanical specifications or compatibility requirements; or was taken from the public domain.
The Ninth Circuit in Sega v. Accolade agreed with Altai. When discussing the second fair use factor, the nature of the work used, the Sega court noted that this factor “reflects the fact that not all copyrighted works are entitled to the same level of protection.” The court observed that “to the extent a work is functional or factual, it may be copied,” and that “works of fiction receive greater protection than works that have strong factual elements, such as historical or biographical works, or works that have strong functional elements, such as accounting text books.” Computer programs, the Sega court said, “are, in essence, utilitarian articles—articles that accomplish tasks.” Accordingly, “they contain many logical, structural and visual display elements that are dictated by the function to be performed, by considerations of efficiency, or by external factors such as compatibility requirements and industry demands.”
Similarly, in 2000, the Ninth Circuit in Sony v. Connectix accorded computer programs “a lower degree of protection than more traditional works” when applying the second fair use factor. Indeed, the Federal Circuit in its discussion of fair use in its prior decision in this case recognized that “some works are closer to the core of intended copyright protection than others.”
Nonetheless, throughout this litigation, Oracle has repeatedly analogized the Java API to traditional literary works, such as the Harry Potter novels. In the briefs on appeal, Oracle and its amici relied on fair use cases dealing with a wide variety of traditional works, including songs, biographies, television broadcasts, unpublished letters, and photographs. And in the oral argument, right from the beginning, Oracle’s counsel analogized Google’s use to a film producer taking the most recognizable features of an author’s short story and adapting them to a film. Unfortunately, this analogy stuck, and the judges kept returning to it throughout their questioning.
(Cross-post on Patent Progress.)
Qualcomm’s been busy over the past few months. Defending against accusations of anti-competitive conduct from competition authorities in the US and elsewhere around the world, trying to acquire NXP Semiconductors, fending off an acquisition attempt from Broadcom, and—most recently—filing yet another round of new lawsuits to try to force Apple to pay higher-than-FRAND rates for their patents.
Patent Progress has covered Qualcomm’s anti-competitive conduct in the past , but the proposed mergers would increase Qualcomm’s ability to suppress competition and provide them with the ability to do so in new markets. That could be a particular problem in growing markets like the Internet of Things and automotive computing.
As Jon previewed on Monday, today the Court of Appeals for the Federal Circuit held the latest round of oral arguments in the long-running Oracle v. Google case. Readers will recall Oracle appealed after a jury, presided over by Judge Alsup, found Google’s use of Java APIs in Android to be fair use. This appeal, therefore, urges the Federal Circuit to second-guess the jury’s fair use determination.
Oracle’s arguments generally tracked its primary and reply brief, which argue that Google should not have been able to prevail on a fair use defense as a matter of law, calling for a new trial. Similarly, Google’s arguments followed from its opposition brief, which argued that the jury’s interpretation of the fair use defense was reasonable.
Oral argument focused considerably on the fact that the jury’s verdict which Oracle seeks to overturn was “a black box.” In a fateful decision, Oracle and Google agreed to present the jury with a verdict form that simply asked it to assess liability, rather than, for example, a specialized breakdown of the various elements of the fair use decision. Thus, the jury’s decision can only be evaluated in its entirety. As Judge Plager commented to Oracle’s counsel, “we can fantasize about what the jury did as well as you can.”
This Thursday, the U.S. Court of Appeals for the Federal Circuit (CAFC) will hold oral arguments in the fair use phase of the long running litigation between Oracle and Google concerning Google’s replication of some elements of the Java application programming interfaces (APIs) in the Android API. This post will review how we got to this point and anticipate some of the misleading arguments Oracle probably will make in its effort to overturn the jury’s fair use verdict.
On Friday afternoon, the United States Trade Representative (USTR) released updated objectives for the renegotiation of the North American Free Trade Agreement (NAFTA). Widely anticipated by industry and the trade community, the new objectives provide an overview of U.S. priorities for the agreement five negotiation rounds in. Under the Trade Priorities and Accountability Act of 2015, USTR must “regularly update” the public on U.S. objectives following the start of negotiations. Prior to Friday’s release, USTR had not yet fulfilled this obligation with respect to NAFTA, and Senator Ron Wyden recently pressed USTR to comply with this aspect.
After concerning reports about the removal of critical safe harbors for online intermediaries in the earlier rounds and a lack of clear commitments in the original set of priorities released in July, USTR’s commitment to modernizing the agreement to better reflect the digital economy was questionable. These updated objectives represent significant progress on digital trade priorities and shed necessary light on the ongoing process, but the objectives still fall short with respect to ensuring liability protections for intermediaries for third party content paralleled in U.S. law.
Copyright limitations and exceptions like fair use and fair dealing positively contribute to economic growth and innovation and are relied upon by a diverse representation of industries. Numerous studies (including but not limited to    ) continue to drive this point home, most recently with a forthcoming study, previewed this week, by the Program on Information Justice and Intellectual Property (PIJIP) that concluded “open” fair use-type laws benefit innovation, creativity, and foreign direct investment.
The study (full report on file with author), The User Rights Database: Measuring the Impact of Copyright Balance, compiled and evaluated a database of middle income and high income countries’ changes to copyright limitations and exceptions from 1970 to 2016. The report observed that the “openness” of a country’s copyright regime is positively related to economic development and creativity within the country. “Openness” refers to copyright limitations and exceptions that apply to any kind of work, by any kind of user, for any purpose. This was represented on a scale from 0-3, where a score of 0 represented that a law had no element of “openness” and a score of 3 represented that the law “clearly” had elements of “openness” (for example, a quotation right that was open for any type of user, to any work, for any purpose).
Based on the results (illustrated in the charts above taken from the report), U.S. firms operating abroad reported higher income, an increase in total sales, and an increase in value added in host countries with more “open” copyright practices. Internet services and software publishers also specifically benefitted. The data shows these industries that rely on copyright limitations and exceptions reported higher revenues in countries with more “open” limitations. A particularly illuminating data point of the report showed that a one-unit increase in the “openness” score is associated with a 50%-70% increase in revenue, even controlling for firm size, country wealth, country size, and time.
Digital goods and services have become an integral component to international trade. According to the U.S. International Trade Commission, digital trade added up to 2.4 million U.S. jobs and $710 billion per year to U.S. GDP. However, under the guise of promoting domestic innovation, national security, and privacy protections, countries are increasingly adopting discriminatory policies that disadvantage U.S. technology companies in particular and pose significant barriers to cross-border delivery of Internet services.
This matters because the growth of U.S. technology firms — and the success of U.S. small businesses that use these firms to reach global audiences — depends on access to markets where digital barriers are on the rise. It also matters because U.S. firms are in fierce competition with foreign firms for access to over 3.7 billion Internet users across the world. One key data point shows the changing global dynamic: in 2014, nine out of the top ten global Internet companies were made in the United States. Today, only six of those leading brands are U.S.-based.
On Wednesday, CCIA submitted comments to the Office of the United States Trade Representative in preparation for the 2018 National Trade Estimates Report (NTE). The NTE is a tool used by USTR to compile and identify barriers to trade around the world. Our comments identified six prominent barriers to digital trade: (1) data and infrastructure localization mandates, (2) filtering and blocking, (3) inappropriate legal liability for online intermediaries, (4) imbalanced copyright and link taxes, (5) “backdoor” access to secure technologies, and (6) undue restrictions on “over-the-top” services including rich interaction applications.