Last fall, the 2nd Circuit appeals court gave a clear and convincing win to Google in the long-running Authors Guild case against Google's book scanning program. And, really, the decision was a massive win for the public, in that it was a strong defense of fair use (even in commercial settings). But, of course, the still clueless Authors Guild -- which doesn't seem to actually represent the interests of most authors (many of whom have found Google Books to be a profoundly useful tool) -- decided to ask the Supreme Court to overturn the case.
That request has now been rejected. As is standard with the Supreme Court, no reason is given:
If you can't read that, it just says that the petition for cert is denied and that Justice Kagan "took no part in the consideration." I'm not exactly sure why Kagan abstained -- I thought perhaps she had weighed in on earlier rounds of the case as Solicitor General, but can't find anything.
Either way, this is a very good thing. The excellent 2nd Circuit ruling stands. And while it technically only applies to cases in that circuit, it will most likely influence cases elsewhere. Also, the Supreme Court has a long, and unfortunate, history of coming up with nutty decisions in big copyright cases.
This decision was handed down by the Supreme Court more than a week ago, but it's worth reporting. Late last year, the Court decided to take a look at an issue related to asset forfeiture and the implications it has for the Sixth Amendment.
In this case, the defendant, Sila Luis, argued that the government's seizure of her assets -- pre-conviction -- denied her the right to defend herself fully against its charges. She could still use an attorney, but it would have to be one appointed to her or one willing to work for deferred compensation (in the hopes that assets would eventually be returned).
The problem here isn't a small one. The government has the power to seize assets pre-conviction using nothing more than a grand jury's indictment as the basis. This is done to provide some sort of assurance that the accused can compensate those wronged (as well as pay any fines, fees, etc. associated with the conviction) when the trial is concluded.
But this assumes the government will win its case, even before it heads to trial. And, by freezing/seizing funds, the government can increase the chances of a decision in its favor by limiting the defendant's choice of representation.
The government doesn't mind playing with a stacked deck and it justifies this hobbling of defendants by pointing out that earned cash is almost impossible to separate from cash acquired through criminal means. It's correct, of course, but it makes this assertion before a verdict has been reached -- presuming both the defendant and their money to be guilty.
The government -- along with the dissenting justices -- argue that allowing defendants to pay for representation out of funds on hand will only encourage criminals to spend ill-gotten gains faster in hopes of denying sought retribution while availing itself of the most expensive defense lawyers they can afford. While there undoubtedly is a chance something like that will happen, the alternative -- seriously diminishing defendants' representation options -- is pretty much a violation of their Sixth Amendment rights.
The Supreme Court -- in a 5-3 decision -- noted that the seizure of untainted assets is a violation of Sixth Amendment rights when it prevents defendants from seeking the best possible representation. It's somewhat of a limited win, as it relies on the specifics of this case, where seized assets were deemed by the government to be "untainted." That didn't stop it from seizing them, though, as it was holding them for expected future repatriation when Luis was found guilty. That it did so before even going to trial is where the problem lies.
[T]he nature of the competing interests argues against this kind of court order. On the one side we find, as we have previously explained, a Sixth Amendment right to assistance of counsel that is a fundamental constituent of due process of law. And that right includes “the right to be represented by an otherwise qualified attorney whom that defendant can afford to hire.” The order at issue in this case would seriously undermine that constitutional right.
On the other side we find interests that include the Government’s contingent interest in securing its punishment of choice (namely, criminal forfeiture) as well as the victims’ interest in securing restitution (notably, from funds belonging to the defendant, not the victims). While these interests are important, to deny the Government the order it requests will not inevitably undermine them, for, at least sometimes, the defendant may possess other assets—say, “tainted” property—that might be used for forfeitures and restitution.. Nor do the interests in obtaining payment of a criminal forfeiture or restitution order enjoy constitutional protection. Rather, despite their importance, compared to the right to counsel of choice, these interests would seem to lie somewhat further from the heart of a fair, effective criminal justice system.
It seems to be a very obvious conclusion. As legal blog Grand Jury Target points out, the point at which the assets are seized is far in advance of the guilty verdict the government believes it will obtain.
There is a very real and very important difference between seizing assets that are tainted and assets that are not tainted when the seizure happens before trial: At that point, the government has proven nothing. It has merely run the false “gauntlet” of a grand jury. Before a fact-finder has heard the case, the defendant should have every opportunity to hire her counsel of choice to defend against the indictment.
On Wednesday, the Supreme Court did a thing that my every instinct tells me that the Supreme Court shouldn't have to do. But apparently, the United States, a country with a Bill of Rights that you can buy at the gift shoppe on your way out, needed clarification on the subject of whether or not you can pauperize a criminal defendant as a way of making sure this person's Sixth Amendment right to counsel is a sad and tattered joke.
The dissenting opinions seem to believe a sad and tattered joke is better than the alternative: criminal defendants blowing through "guilty money" while socking away the legit stuff in order to mount a better defense in the future. The dissent envisions a world where the government wins every case, so it makes no difference whether it seizes the money pre- or post-conviction, just so long as no one accused of anything avails themselves of the best defense possible.
We wrote last year about a copyright dispute between DC Comics and guy by the name of Mark Towle, who had been custom producing Batmobiles for Batman fans. Mike's analysis in that post is wonderfully detailed and you should read it if you want a deep dive into the specifics of how the court ruled, but I will summarize it here for you as well. The 9th Circuit ruled that the Batmobile was deserving of the same copyright protections as other fictional characters, despite it being a depiction of an inanimate object, and it completely ignored the entire expression/idea dichotomy that is supposed to govern copyright law. That dichotomy can be explained as giving copyright protection to specific expressions of an idea without protecting the idea itself. For instance, the depiction of HAL the homicidal computer in 2001 A Space Odyssey may be covered under copyright, but the idea of a homicidal artificial intelligence is not.
Yet, despite the Batmobile's ever-changing appearance and functionality, and despite its expression in comic and film form not being identical to custom real-life productions by a car enthusiast, the court ruled against Towle and essentially claimed the very idea of the Batmobile was deserving of copyright protection. The last remaining opportunity to have the courts specifically weigh the idea/expression dichotomy in this case would have been the Supreme Court, but SCOTUS has apparently declined to take the case up.
The Supreme Court is staying out of a copyright dispute involving a California man who produced replicas of the Batmobile for car-collecting fans of the caped crusader. The justices on Monday let stand a lower court ruling that said the Batmobile's bat-like appearance and high-tech gadgets make it a character that can't be duplicated without permission from DC Comics, the copyright holder.
It's cases like this in which the Supreme Court refuses to weigh in that allows courts like the 9th Circuit to seemingly specialize in wacky copyright and intellectual property rulings. One hopes that other cases in other circuits will raise similar issues enough that SCOTUS decides to step in at a later date, rather than let this be the last word on this issue. I would have thought that a court ruling that fails to even mention the idea/expression dichotomy would have been one that SCOTUS would have found ripe for comment, but apparently not. All hail the Batmobile, a character on par with Batman himself, apparently.
The deeper you dive into the various DOJ filings to try to use the All Writs Act to force Apple to hack into encrypted iPhones, the more and more dishonest they seem. We already covered some of the misleading claims in the DOJ's latest filing in NY, including pointing to a 2012 case as evidence that the All Writs Act can be used to force Apple to break into a phone, when the actual ruling in that case said only that Apple had standing to oppose an All Writs Act order.
However, buried in an excellent article by Sarah Jeong at Vice's Motherboard
about that same filing, there's another interesting tidbit that seems worth exploring: in both the NY and California cases, the DOJ has repeatedly pointed to a so-called "three factor test" under United States v. New York Telephone Co., which is the key case that established that it's acceptable, under the All Writs Act, for the FBI to force a telephone company to install and use a "pen register" device on telephone lines (to track who they call). In the original motion for the order in the San Bernardino case, here's the DOJ's argument on page 14 and 15 of that document:
In New York Telephone Co., the Supreme Court considered three
factors in concluding that the issuance of the All Writs Act order
to the phone company was appropriate. First, it found that the
phone company was not "so far removed from the underlying
controversy that its assistance could not be permissibly compelled."
... Second, it concluded that the order did not place an
undue burden on the phone company.... Third, it
determined that the assistance of the company was necessary to
achieve the purpose of the warrant.... Each of these factors
supports issuance of the order directed to Apple in this case.
The DOJ repeated this paragraph verbatim in its motion to compel (on page 15) and again (verbatim) in the filing in NY (page 38).
The magistrate judge in NY, James Orenstein, accepted this three factors test, and used it to argue that the DOJ's application actually failed to meet the requisite factors (starting right on page 1):
In addition, applicable case law requires me to consider three factors in deciding whether to issue an order under the AWA: the closeness of Apple's relationship to the underlying criminal conduct and government investigation; the burden the requested order would impose on Apple; and the necessity of imposing such a burden on Apple. As explained below, after reviewing the facts in the record and the parties' arguments, I conclude that none of those factors justifies imposing on Apple the obligation to assist the government's investigation against its will.
There's just one problem in all of this -- as highlighted in Jeong's article linked above, and discussed in more detail by Orin Kerr last month: there is no three factors test in the US v. NY Telephone case. As Jeong summarizes:
You could argue it’s three factors, or maybe four, or even five. The point is, NY Telephone isn’t as easy to apply as the government makes it out to be. Everyone in the Apple case is playing in uncharted waters.
Kerr notes that the paragraph in the Supreme Court's ruling, far from laying out a "three factor test" appears to be "frustratingly murky."
The tricky part of New York Telephone is that the Court left the actual test for what the AWA allows frustratingly murky. The Court was comparatively clear about one essential limit on a Court’s power under the AWA: “We agree that the power of federal courts to impose duties upon third parties is not without limits; unreasonable burdens may not be imposed.” Okay. But the rest of what the Court says is really unclear.
Here are the key paragraphs from the Supreme Court ruling:
Turning to the facts of this case, we do not think that the Company was a third party so far removed from the underlying controversy that its assistance could not be permissibly compelled. A United States District Court found that there was probable cause to believe that the Company’s facilities were being employed to facilitate a criminal enterprise on a continuing basis. For the Company, with this knowledge, to refuse to supply the meager assistance required by the FBI in its efforts to put an end to this venture threatened obstruction of an investigation which would determine whether the Company’s facilities were being lawfully used. Moreover, it can hardly be contended that the Company, a highly regulated public utility with a duty to serve the public, had a substantial interest in not providing assistance. Certainly the use of pen registers is by no means offensive to it. The Company concedes that it regularly employs such devices without court order for the purposes of checking billing operations, detecting fraud, and preventing violations of law. It also agreed to supply the FBI with all the information required to install its own pen registers. Nor was the District Court’s order in any way burdensome. The order provided that the Company be fully reimbursed at prevailing rates, and compliance with it required minimal effort on the part of the Company and no disruption to its operations.
Finally, we note, as the Court of Appeals recognized, that without the Company's assistance there is no conceivable way in which the surveillance authorized by the District Court could have been successfully accomplished. The FBI, after an exhaustive search, was unable to find a location where it could install its own pen registers without tipping off the targets of the investigation. The provision of a leased line by the Company was essential to the fulfillment of the purpose— to learn the identities of those connected with the gambling operation—for which the pen register order had been issued.
So yeah, it mentions the three things the DOJ keeps insisting are the "three factor test" (if the third party is not "so far removed," if there is no "undue burden" and if the assistance was deemed "necessary"). But there's a hell of a lot of other stuff in there as well, including the fact that in that case, NY Telephone was "a highly regulated public utility." So that seems like a relevant "fourth" factor that weighs against the DOJ (and they conveniently skip over).
And, as Kerr notes, unlike basically any judicial "test," this one fails to lay out any of the ground rules:
The paragraph above is pretty confusing. It begins with the idea that the AWA doesn’t apply to someone “so far removed” from the controversy; then turns to the need for the phone company’s help; then talks about what is “offensive” to the company; and then covers the burden to the phone company, focusing on how much it cost the business and interfered with it. But the paragraph doesn’t link these ideas or say how they relate to one another. It doesn’t say what the standard is for each idea or how much weight to give it.
In other words, this was just a way for the Court to get the case off the docket, not to set a "test" that would be applied 40 years later. Kerr later expands:
We’re mostly left with the uncertainty of the New York Telephone case itself. Beyond the “unreasonable burden” test, it’s not clear what to make of the other matters that the court mentions. Are they all just factors in a grand multi-factor test? Are they actually parts of the undue burden standard, just not explicitly labeled that way? Are they parts of what makes the order “appropriate”?
Once you figure that out — if you can — there’s the uncertainty about what each mentioned standard means.
Kerr then spends a lot of time noting that even with the actual establishment of the "unreasonable burden" test, there are no actual details or explanations to go with it and you can come up with a wide variety of possible interpretations that would lead to very different results. In short, there's no big "test" developed here, and despite nearly four decades, there's no evidence that anyone else has really made use of this "test" to determine the ground rules for it.
Either way, it seems clear that the DOJ keeps making some pretty direct claims in its filings that are based on either direct misreadings of things, or deliberately misleading the courts about these things. That seems like a dangerous game to play.
This isn't a huge surprise, but this morning the Supreme Court refused to hear Apple's appeal of its loss in the case brought by the Justice Department for engaging in price fixing on ebooks with the big book publishers. During the course of the case and appeals, Apple worked out a settlement, agreeing to pay $450 million -- but only after the appeals process was exhausted. And, that's now happened. As with basically all appeals rejected by the Supreme Court, the court gave no reason. It just denied cert. Meanwhile, even as Apple has now lost the case, it did still succeed in forcing the price of many ebooks much, much higher.
A few weeks ago, Donald Trump's spokesperson claimed that he had "single-handedly brought back free speech." It was an odd thing to say for a variety of reasons. First, the US has really strong free speech protections and they haven't gone away (even if there are some threats to them). That is, free speech doesn't need to be "brought back" because it's already here. Second, Trump himself, just a few weeks earlier was quoted deliberately mocking free speech, claiming that people who support it are "foolish people." And then, of course, there's the fact that Trump has a very, very long and detailed history of both threatening to sue, and actually suing, over the speech of others. As Walter Olson noted:
Donald Trump has been filing and threatening lawsuits to shut up critics and adversaries over the whole course of his career. He dragged reporter Tim O’Brien through years of litigation over a relatively favorable Trump biography that assigned a lower valuation to his net worth than he thought it should have. He sued the Chicago Tribune’s architecture critic over a piece arguing that a planned Trump skyscraper in lower Manhattan would be “one of the silliest things” that could be built in the city. He used the threat of litigation to get an investment firm to fire an analyst who correctly predicted that the Taj Mahal casino would not be a financial success. He sued comedian Bill Maher over a joke.
That first case is instructive. I highly recommend reading the details. O'Brien wrote a biography of Trump which was mostly favorable to Trump, but which briefly mentioned that he might only be worth hundreds of millions of dollars, rather than billions, and Trump sued him over that claim. And as that link notes, Trump didn't just lose, he was "humiliated" by the courts. Incredibly, Trump still seems to insist that he "won" the case by basically redefining having the case totally tossed out of the courts as winning:
@julesmattsson Wrong, totally proved my case but didn't get damages because the libel laws in this Country suck!
And that leaves out plenty of other threats, such as threatening to sue Rosie O'Donnell for mocking him, threatening to sue competitor Ted Cruz for challenging his political views or actually suing Univision claiming that because its President of Programming posted an Instagram picture showing Trump next to Charleston, South Carolina, shooter Dylann Roof, with the text "No comments," that was somehow "defamatory." That lawsuit was just settled a few weeks ago, which is interesting because, as John Oliver recently noted, Trump insists he refuses to settle lawsuits.
Anyway, last Friday Trump made even more news, saying that if he wins he's planning to "open up" libel laws to make it even easier to sue. Given his statement in the Tweet above about how he won... except for what libel laws actually say, it's not surprising that he wants to change such laws.
Here are the key points. After talking about how he hates the Washington Post, and thinks Jeff Bezos just bought it for political influence, he notes:
If I become President, oh, are they going to have problems. They're going to have such problems.
... One of the things I'm going to do if I win, and I hope we do and we're certainly leading. I'm going to open up our libel laws so when they write purposely negative and horrible and false articles, we can sue them and win lots of money. We're going to open up those libel laws. So when The New York Times writes a hit piece which is a total disgrace or when The Washington Post, which is there for other reasons, writes a hit piece, we can sue them and win money instead of having no chance of winning because they're totally protected.
.... So we're going to open up those libel laws, folks, and we're going to have people sue you like you've never got sued before...
That last line is said pointing to the media. Trump followed that up by extolling the virtues of libel law in the UK, which is famous for how horrible they are and how they're abused to silence speech around the globe.
Well, in England, I can tell you, it's very much different and very much easier. I think it's very unfair when the New York Times can write a story that they know is false, that they virtually told me they know it's false, and I say, why don't you pull the story, and they say, we're not going to do that, because they can't basically be sued. And you can't be sued because can you say anything you want, and that's not fair.
Of course, as Politifact noted, Trump is flat out wrong (shocker there) in saying that the NY Times can't be sued if it knowingly publishes a false story. That is, in fact, the standard necessary for defamation in this country.
Many others rushed in to point out something that seemed even more fundamental, which is that libel law is based entirely on state, rather than federal, statutes leading some, like Mathew Ingram at Fortune, to claim that Trump really can't do much to carry out those threats. Indeed, many commentators are treating Trump's confusion over the difference between state and federal laws (and his apparent confusion over key First Amendment precedents that would mean even if it were a federal issue, he couldn't just change the law the way he wanted to) as yet another example of Trump being ridiculously clueless on policy matters he's discussing.
And, of course, it is true that Trump appears to not understand NY Times v. Sullivan, one of the most important cases on the intersection of defamation and the First Amendment, which found that for public figures there is tremendous leeway in allowing speech, such that it is only defamatory if statements are not only false, but made with "actual malice." Trump, obviously, doesn't like this, but seems to think you can just "open up" the law, ignoring that the issue is not the law, but the 1st Amendment of the Constitution and First Amendment precedent.
That said, this is not a situation where you can just wave this off and say, "Oh, clueless Trump, he can't really impact free speech like that." As Marc Randazza explains in a CNN story, Trump can actually still create tremendous damage to the First Amendment if he were to become President. First off, you may have noticed that there's a vacancy on the Supreme Court, and a Senate insisting it won't look at any nominees until the next President comes into office. If that's the case, then it's entirely possible Trump could appoint someone willing to overturn NYT v. Sullivan. That might be difficult to do with the rest of the court, but it's not impossible.
On top of that, though, there are federal laws related to defamation that Trump could harm. For years we've talked about the importance of anti-SLAPP laws, which allow people sued for defamation, where it's clearly designed to just shut them up, to get those lawsuits tossed quickly and (often) to get their legal fees paid for. People who file SLAPP (Strategic Lawsuits Against Public Participation) hate these laws, and Trump appears to be a serial SLAPP filer. And, as we've been discussing, there's an ongoing push for a federal anti-SLAPP law that may have some real momentum. Yet, if that law actually passes Congress under a President Trump, it seems pretty obvious that it will be vetoed.
So, yes, it's easy to just mock Trump as clueless on this particular subject, and to note that it's not nearly as easy as he seems to think to just "open up" libel laws. But don't be fooled: if he were to become President, rather than "bringing free speech back," he will have plenty of power to create a serious chill on free speech in this country.
We conclude that the officers in this case reasonably exercised a bona fide community caretaker function when they searched Matalonis's home. The officers therefore were not required to obtain a warrant prior to conducting the search in question, and the evidence of marijuana production they obtained should not be suppressed. Because the search was lawful under the community caretaker doctrine, we need not determine whether the search was also justified as a protective sweep.
The evidence of a marijuana grow operation was behind a locked door. Although Matalonis invited them into the house, he did not agree to a search of this locked room. Other paraphernalia in the house led officers to believe there might be illegal substances on the premises, but uncovered nothing else during the cursory search of the house to determine whether any more victims/perpetrators of the violent act that brought them there in the first place might be on the premises.
According to the majority opinion, the blood found on the locked door justified the warrantless search of the room. As it states, the search may not have been wholly justified in hindsight, but the court isn't here to second-guess officers' actions in circumstances such as these.
It is obvious to all, in hindsight, that Matalonis's home did not in fact contain a "member of the public . . . in need of assistance." But that is not the question before us today. Instead, we must decide whether, "under the circumstances as they existed at the time of the police conduct, [the officers were] engaged in a bona fide community caretaker function." Therefore, we are concerned with the extent of the officers' knowledge at the time they conducted the search, not after.
Hindsight is how the Fourth Amendment is served. If the court refuses to second-guess officers' actions, then there's no reason for it to preside over cases like this at all. It may as well dismiss motions to suppress or civil rights lawsuits out of hand if it's not interested in applying hindsight. Courts are avenues of redress, something that only exists after the fact. With this rationale, the court limits itself to accepting whatever justification officers give for their actions and will apparently base other decisions on the subjective statements of law enforcement rather than the more objective stance the court is supposed to be taking.
As the dissent points out, the discoveries made during the caretaking sweep may have generated probable cause for a search, but probable cause is what officers are supposed to take to judges to obtain warrants -- not to excuse warrantless searches after officers told Matalonis to unlock the door or they'd "kick it down."
On the second floor, in plain view, a police officer did see marijuana and a variety of drug paraphernalia——pipes and other smoking utensils, a small silver grinder, and a ceramic water bong. The officer also encountered a locked door with a few droplets of blood scattered on the door. The officer smelled a strong odor of marijuana coming through the door and heard a fan running behind the door.
The date was January 15; the time was after 3:00 a.m. A reasonable person could infer that a fan is not normally operating at such a date and time merely for purposes of comfortable climate control.
In my view, the officer's observations on the second floor, followed by Charles's refusal to give consent to open the locked door, provided ample probable cause for a search warrant for the locked room to search for drugs. Conversely, the officers would have been hard pressed to make a case for a search warrant to find a body in some condition behind the door. Officers had already accounted for other known occupants of the house, including a basement tenant.
The majority decided not to discuss the other justification given for the warrantless search of the locked room: that it was a protective sweep. This works out better for Wisconsin law enforcement because the officers' actions undercut their stated "need" to perform a protective sweep. Matalonis was questioned by officers and asked to sit in the living room until the sweep had been performed. But despite the allegations of violence, the presence of blood in many open areas of the house and Matalonis' inconsistent statements on the night's event and the number of people present in the house, officers never once placed him in cuffs or otherwise restrained him to ensure their safety.
At any point after the caretaking function had been concluded, officers could have taken Matalonis into custody and acquired a search warrant for the locked room. They had evidence an act of violence had occurred on the premises as well as the drug paraphernalia. But officers decided they had a right to search the room then and there. Instead of the suppression of evidence the appeals court recommended, Wisconsin citizens can now be subjected to bogus warrantless searches under the "community caretaking" function. As long as the function is justified, so apparently is any search of any area that can't be immediately viewed during a sweep of a residence. What should have resulted in a search warrant instead presented itself as a threat to "kick a door down," and the state's Supreme Court says that sort of thing is perfectly OK.
Intellectual property: if you fail to block competition with one kind, apparently you can try, try again with another kind -- and eventually you'll end up in the Court of Appeals for the Federal Circuit, who will mess everything up and kill off the competition. Printer company Lexmark has been at war with alternative suppliers of ink for well over a decade. As you may be aware, printer ink is sold at a ridiculously high markup, such that one estimate (from over a decade ago) noted that in order to fill an Olympic-sized swimming pool with printer ink, it would cost you $5.9 billion (yes, with a "b") at the checkout counter of your local office-supply retailer. The printer makers have notably taken a "give away cheap crappy printers at a low cost, and make it up in seriously overpricing the ink" strategy to their businesses. This kind of thing works great until someone tries to step in and sell competing ink.
The various printer companies have tried all sorts of tricks to fight back against this, with Lexmark being one of the most aggressive (though, others, including HP and Epson, have been fairly aggressive as well). Back in the early 2000s, Lexmark started out by arguing that replacement inkjet cartridges violated copyright law. Their claim rested on the idea that resellers were "circumventing" the technological protection measures that Lexmark placed on its ink cartridges, and thus were violating Section 1201 of the DMCA, which made it copyright infringement to "circumvent" technological protection measures. While a lower court agreed, the Sixth Circuit appeals court overturned the ruling, and smacked Lexamark around a bit for abusing the DMCA -- properly noting the ridiculous end result that would occur if it bought Lexmark's argument:
"If we were to adopt Lexmark's reading of the statute, manufacturers could potentially create monopolies for replacement parts simply by using similar, but more creative, lock-out codes. Automobile manufacturers, for example, could control the entire market of replacement parts for their vehicles by including lock-out chips. Congress did not intend to allow the DMCA to be used offensively in this manner, but rather only sought to reach those who circumvented protective measures "for the purpose" of pirating works protected by the copyright statute."
That case, somewhat surprisingly, did not end there. The reseller that it had sued originally, Static Control Components (SCC), then countersued Lexmark, arguing that Lexmark violated trademark law when it basically sent a letter to every SCC customer it could find, telling them that SCC had broken the law. That case then made its way through the courts, and just about two years ago, the Supreme Court ruled against Lexmark again, and basically rewrote the rules for who could sue over a "false advertising" trademark claim by effectively throwing out all previous tests.
In that case, Lexmark didn't technically use trademark law to try to stop SCC, but very well may have abused trademark law to scare off SCC's customers.
And, of course, there was still a third option. While Lexmark had also used patent claims against SCC, the jury in the case ruled against Lexmark as well, even saying that Lexmark had misused its patents. However, Lexmark was also suing other ink sellers for patent infringement as well, and suing in the courts and using the ITC loophole as well. Basically, Lexmark will use and abuse any and all tools at its disposal to stop competition in ink sellers.
In this case, the key issue was basically over patent "exhaustion" and the question of if you first allowed for a sale overseas, could that product then be refurbished and resold back in the US. If this sounds familiar, you may remember that the Supreme Court ruled a few years ago in the Kirtsaeng case that you can resell goods you bought outside the US back in the US and it doesn't violate copyright law. However, CAFC in this case basically says "Sure, but that's not true with patents."
Kirtsaeng is a copyright case
holding that 17 U.S.C. § 109(a) entitles owners of copyrighted
articles to take certain acts “without the authority”
of the copyright holder. There is no counterpart to
that provision in the Patent Act, under which a foreign
sale is properly treated as neither conclusively nor even
presumptively exhausting the U.S. patentee’s rights in
the United States.
Of course, there are other cases, mainly the well-known Quanta v. LG case that said that "exhaustion" applies to patents as well, and once you've sold a product, you can no longer use patent law to block future sales. But here, the court spends a lot of time trying to distinguish the differences between the Quanta case and this case -- basically saying that there is no exhaustion when there's a limited license, rather than a direct sale.
And the crux of its reasoning: "if we rule otherwise, that would really upset pharmaceutical companies who want to charge cheaper rates overseas and don't want to see those cheap drugs resold back in the US." Basically, there are neat business models that would be upset by geographical arbitrage:
At the same time, the conduct challenged here can
have benefits. Lexmark’s Return Program provides
customers an immediate up-front benefit: a choice between
two options, one offering them a lower price in
exchange for the single-use/no-resale limitation. And a
company in Lexmark’s position could have a plausible
legitimate interest in not having strangers modify its
products and introduce them into the market with the
quality of modifications (including ink refills) not subject
to Lexmark’s control: lower quality of remanufactured
cartridges could harm Lexmark’s reputation.... A medical supplier in
Mallinckrodt’s position plausibly may have similar reason
to believe that reuse, when not under its own control,
carries a significant risk of poor or even medically harmful
performance, to the detriment of its customers and its
own reputation. Such interests are hardly unrelated to
the interests protected by the patent law—the interests
both of those who benefit from inventions and of those
who make risky investments to arrive at and commercialize
inventions.
Of course, that was the same argument that publishers made in the Kirtsaeng case, and the Supreme Court rejected it, so it seems like there's at least a decent chance that should SCOTUS take this up on appeal, it may be yet another opportunity to smack CAFC around for getting things totally backwards (now becoming something of an annual tradition at SCOTUS).
There is a dissent from Judge Dyk (with Judge Hughes) that suggests that the majority's decision here does not make sense in following Supreme Court precedent -- and recognizing that the majority has just set up CAFC for yet another smackdown. The dissent notes a long line of cases saying that patent exhaustion is a thing and finds it troubling that the ruling ignores all that, and suggests SCOTUS won't particularly like CAFC ignoring it all.
The majority’s justifications for refusing to follow Supreme
Court authority establishing the exhaustion rule
misconceive our role as a subordinate court.
First, the majority characterizes the statement of the
exhaustion rule in the Supreme Court cases as mere
dictum because in those cases there was either no restriction
imposed or the restriction would otherwise
violate the antitrust laws. But the cases impose no such
qualification on the rule announced. The Supreme Court
has repeatedly advised the courts of appeals that our task
is to follow the rules proclaimed by the Court, and not to
attempt to distinguish Supreme Court cases on their facts...
Not surprisingly, Impression Products has suggested it will appeal to the Supreme Court, so this case is far from over. However, once again, we see how companies will use intellectual property law however they can to try to block out competition.
Matthew Braga at Motherboard reports the Canadian Supreme Court has laid down some guidelines for law enforcement's access to "tower dumps" -- call records containing every phone that accessed towers during a specified period of time. While it doesn't direct law enforcement to seek warrants, it does at least provide more restrictive guidance for collection of these data dumps, which the court originally found to be so broad as to be unconstitutional.
In his ruling, Justice John Sproat defined seven "guidelines" that law enforcement, justices, and telecommunications companies would be able to refer to when faced with future production orders for tower dump data. The guidelines recommend that such requests...
Be tailored for minimal intrusion into subscribers' privacy.
Explain why specific cell towers and the dates and times specified are relevant to the investigation.
Justify the types of records requested.
Offer any additional details that might help a telecom company narrow their search and return fewer records.
Request "a report based on specific data instead of a request for the underlying data itself"
Or, if a report will not suffice, justify why the underlying data is required.
Request manageable amounts of data that can be "meaningfully reviewed."
The new approach stems from the overly-broad nature of a request made by the Peel Regional Police, which was challenged by a service provider. During the agency's investigation of a jewelry store robbery, it requested dumps from 21 towers, covering more than 43,000 phone records. (The requested information was ultimately never handed over to the police.)
While the new guidance is useful and will hopefully deter future expansive data requests (and is one step further than US courts have taken), it doesn't specifically address minimization of "non-hit" data, nor does it set a time limit for data prevention. While one Canadian privacy law (PIPEDA - Personal Information Protection and Electronic Data Act) sets limits for "organizations," law enforcement agencies do not fall under the law's definition. The court's instructions admit as much, noting the guidelines it suggests reside in a legislative black hole.
This will now sit uncomfortably within the patchwork of privacy protections granted by the Canadian court. Law enforcement must now seek warrants to obtain subscriber information from ISPs -- something it used to be able to obtain with five minutes of self-generated paperwork. That's a good step forward, but the same court has also ruled that law enforcement can search arrestees' cell phones without a warrant -- devices that contain much more information than could be obtained from an ISP or cell phone provider. Its rationale for this decision? Drugs are bad, therefore warrantless searches.
Cellphones are the bread and butter of the drug trade, the majority said in a 4-3 ruling. It said police have been given the “extraordinary power” to do warrantless searches during an arrest, under common-law rules developed by judges over centuries, because of the importance of prompt police investigations.
This moves Canada slightly ahead of the US in terms of limits on the acquisition of third party records, but behind it in terms of cell phone contents. The guidelines are a welcome addition, but the court is still a fair distance away from a coherent view on privacy expectations.
Back in October, the 2nd Circuit appeals court issued a really wonderful fair use win on the long-running (and somewhat ridiculous) lawsuit that the Authors Guild had filed against Google Books. The decision -- written by Judge Pierre Leval, who has long been a key player on issues of fair use -- was decisive and clear. It capped a ridiculously long process, in which the Authors Guild lost at every stage, wasting the money of its members. The ruling was quite clear that Google Books was transformative and did not compete with the original works. It also highlighted how it benefited the public. A key part of the ruling:
The ultimate goal of copyright is to expand public knowledge and understanding, which copyright seeks to achieve by giving potential creators exclusive control over copying of their
works, thus giving them a financial incentive to create informative, intellectually enriching
works for public consumption. This objective is clearly reflected in the Constitution’s
empowerment of Congress “To promote the Progress of Science . . . by securing for limited
Times to Authors . . . the exclusive Right to their respective Writings.” U.S. Const., Art. I, 7sect; 8,
cl. 8) (emphasis added). Thus, while authors are undoubtedly important intended beneficiaries
of copyright, the ultimate, primary intended beneficiary is the public, whose access to knowledge
copyright seeks to advance by providing rewards for authorship.
We noted at the time that it was likely that the Authors Guild would ask the Supreme Court to rehear the case -- and according to the Washington Post, that is exactly what's happening. The filing claims that this is a massive and unprecedented expansion of fair use, and wants the Supreme Court to fix things:
This case represents an unprecedented judicial expansion of the fair-use doctrine that threatens copyright protection in the digital age. The decision below authorizing mass copying, distribution, and display of unaltered content conflicts with this Court’s decisions and the Copyright Act itself. This case also presents important issues on which the circuits are split, highlighting the need for this Court to act.
As we noted in our post about the original ruling, it's not clear that there's really a circuit split here, no matter what the Authors Guild wants to claim. The Authors Guild tries to manufacture a circuit split by arguing that multiple other courts have said the "transformative use" test requires "new creative expression" but it seems to be making that up. Yes, that's one form of transformative use, but not the only one.
The Supreme Court rejects most petitions to hear cases, so it wouldn't surprise me if it turns this one down as well. That would be the best overall result. The 2nd Circuit ruling is clear and concise -- and given the Supreme Court's history on copyright issues, there's a half-decent chance that even if it came to the right overall decision, the justices would muck it up in some way in the process. Either way, if the Supreme Court does take the case, this will be a key one to follow.
