The (Purple) Reign of Fair Use: Certiorari Granted for Warhol’s Portrait of Prince

By: Erika Hammer

Amongst several IP-focused cases this year having requested review by the Supreme Court, the high court has recently granted certiorari for a case involving copyright, fair use, and some famous individuals: artist Andy Warhol and musician Prince. The case focuses on whether a work is “transformative” under fair use, a major defense to copyright infringement. Notably, fair use is considered to be one of the most important exceptions to copyright law’s general monopoly grant of intelelctual property rights to authors of original works, as well as a major cornerstone for promoting artistic expression, access to knowledge, and dissemination of ideas. 

The case, Andy Warhol Foundation v. Goldsmith, arises from a set of portraits created by Andy Warhol, whose pieces often draw from preexisting works (e.g., a Marilyn Monroe photograph or a can of Campbell’s soup). The specific pieces at issue are portraits of Prince based on a Vanity Fair photograph taken by Lynn Goldsmith. The petition for certiorari describes how Warhol, via silkscreen printing, “cropped the image to remove Prince’s torso, resized it, altered the angle of Prince’s face, and changed tones, lighting, and detail” as well as “added layers of bright and unnatural colors, conspicuous hand-drawn outlines and line screens, and stark black shading that exaggerated Prince’s features.” 

Post-litigation, the district court granted the Andy Warhol Foundation summary judgment in favor of its fair use defense, deeming the use “transformative” for communicating a different meaning and message from the original Goldsmith work. However, the Second Circuit reversed, despite acknowledging that the two artists’ pieces represented different messages. It stated, “while the cumulative effect of those alterations may change the Goldsmith Photograph in ways that give a different impression of its subject, the Goldsmith Photograph remains the recognizable foundation upon which the Prince Series is built.” 

As the Andy Warhol Foundation argued in its petition for certiorari, the Second Circuit’s analysis focuses on the visual resemblances between the works. The Foundation further opines that this decision is creating a circuit split and highlights that the Ninth Circuit has held that a work of art is “transformative” when it portrays a different meaning or message from the original source. 

This case is significant not only because of the famous individuals involved, but also because it involves one of the most crucial doctrines in modern copyright law. Fair use, which is set forth in 17 U.S.C § 107, is the most wide-ranging limitation on copyright protection that attempts to promote the expression of artistic works. Fair use is also grounded in the goals of promoting common culture and enabling technological advancement. As such, highly creative works like Andy Warhol’s would appear to be exactly the kind of follow-on creativity that fair use is intended to not only protect, but to promote. 

Even if a work is highly creative, it must be examined under four factors used in determining whether there is a qualified fair use defense. These four factors include: (1) the purpose and character of the use, including whether the use is of a commercial nature or is for nonprofit, educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market. The Second Circuit found that each of these factors weighed in favor of Goldsmith.

Under the first factor, the more transformative a use is, the more likely said use is deemed to be fair. A foundational fair use case, Campbell v. Acuff Rose, emphasized transformative use as a critical factor. Transformative use is often seen as adding new, creative expression or changing the purpose or character of the copyrighted work. The more transformative a use is, the less significant the other fair use factors will be in the analysis. Typically, if a court finds transformative use under the first factor, that factor tends to strongly influence the inquiry into the rest of the fair use factors. 

With transformative use being such a crucial factor in fair use, which is of itself a crucial doctrine in copyright law, it comes as no surprise that the Supreme Court granted certiorari in this case. Despite the fact that Andy Warhol’s artwork appears to transform Prince’s depiction “from a vulnerable, uncomfortable person to an iconic, larger-than-life figure,” as described by the district court, this paradigm of the transformative nature of the work did not pass muster in the Second Circuit. 

In contrast, other prior Second Circuit cases that have been seminal in the “transformative” aspect of fair use have allowed use of the defense even when the original work is still a “recognizable foundation” to the subsequent piece at issue. Graham v. Dorling Kindersley held that a Grateful Dead biography that used copyrighted, original posters was fair use because they served a different purpose, despite the entirety of the original work being used in the follow-on biography. However, in opposition to certiorari, Goldsmith argues that the Warhol silkscreens shared the same purpose as Goldsmith’s copyrighted photograph, as well as the same essential artistic elements.

How the Supreme Court comes out on this decision – whether a different message or meaning is sufficient for transformation under fair use despite facial similarities – will be very important in copyright jurisprudence and the scope of fair use. 

Narrower Patent Means CRISPR Victory for Broad Institute

By: Smitha Gundavajhala

On February 28, 2022, the US Patent and Trademark Office (USPTO) handed down a ruling in one of the most bitterly fought patent turf wars in biotechnology: the battle over the use of CRISPR-Cas9 in humans. The two major groups that were vying for recognition were the Broad Institute, consisting of researchers from Harvard, and MIT and CVC, consisting of researchers from UC Berkeley, the University of Vienna, and Emmanuelle Charpentier. 

CRISPR-Cas9 is a revolutionary gene editing tool that has implications for healthcare, agriculture, and more. CRISPRs are DNA sequences with proteins that act like scissors. Originally derived from bacterial genomes, CRISPR technology has since been extended to apply to eukaryotes, which are multicellular organisms. Examples of eukaryotes include plants, animals, and humans. As one might imagine, the latest evolution in CRISPR technology is immensely lucrative. The technology could be used to prevent viral infections and chronic conditions in humans, as well as to genetically modify produce to carry more nutrients.  Both Broad Institute and CVC stood to lose a great deal in their hard-fought dispute about the CRISPR-Cas 9 patent.

The dispute between these parties was complicated by timelines, the change in US patent law, and the contradictory decisions of different jurisdictions across the world. Jennifer Doudna of UC Berkeley was the first to file a patent application in 2012, a few months before Feng Zhang and the Broad Institute filed their patent application. However, prior to 2013, the USPTO’s rules were different: the agency awarded patents to the entity that was the “first to invent,” rather than the entity that was “first to file.” 

Thus, when Doudna asked USPTO to declare an “interference” between the two patents in 2015, the office had to consider which group was the first to invent by “reducing the concept to practice.” CVC argued that Broad Institute’s patent for gene editing in eukaryotes was a mere extension of CVC’s seminal work on CRISPR-Cas9. In 2017, the Patent Trial and Appeal Board (PTAB) ruled that Broad Institute’s patents were not derived from CVC’s patents. In 2019, PTAB again declined to declare an interference regarding claims to CRISPR-Cas9 technology used in eukaryotes, and confirmed that the Broad Institute’s patents were properly issued.

Ultimately, Doudna’s patent application did not explicitly address CRISPR-Cas9 applications for eukaryotes, and Zhang’s patent application did. Thus, Zhang and the Broad Institute were determined to be the “first to invent” CRISPR-Cas9 gene editing for humans. This year’s USPTO decision represents potential losses of billions in licensing revenue for UC Berkeley and priority of invention for Broad Institute.

However, this turf war is far from over and recognition of the Broad Institute’s and CVC’s patents varies across jurisdictions. Currently, CVC maintains fundamental CRISPR-Cas9 patents in over 80 jurisdictions, including China, Japan, and the European Union. CVC and the Broad Institute also face challenges in other countries: South Korea’s ToolGen and Germany’s Sigma Aldrich still have open interference motions with the Broad Institute. From the looks of it, the international fight for CRISPR-Cas9 patent recognition won’t be over any time soon, even while the dust has seemingly settled in the United States.

“Adpocalypse”

By: Carl Rustad

Youtube Hate Preachers Share Screen With Household Names.” “Google’s Youtube has Continued Showing Brands’ Ads With Racist and Other Objectionable Videos.” These are the headlines Google faced in March 2017, as ads for Google’s advertising partners allegedly appeared alongside hateful or inappropriate Youtube videos. Within days, high-profile advertisers including Wal-mart, Pepsico, General Motors, AT&T, Dish, and Starbucks all pulled their ads from the platform

Google responded to these allegations by “implementing broader demonetization policies around videos that are perceived to be hateful or inflammatory” and “strengthen[ing] advertiser controls for video and display ads.” Using algorithms, Youtube “automatically weed[s] out inappropriate content,” sorting each uploaded video into categories purportedly reflecting their desirability to advertisers. Advertisers can exclude videos from categories like “tragedy and conflict,” “sensitive social issues,” “sexually suggestive content,” “sensational and shocking,” and “profanity and rough language.” Clearly these options reach far more content than the originally-complained-of hate speech. Videos determined inappropriate for advertisers are “demonetized,” meaning ads will not appear on them, they are deprioritized in search, and content creators will not receive any ad revenue from the video. The resulting drop in ad revenue is referred to as “Adpocalypse.”

As a result of these efforts, Youtube claimed “many advertisers have resumed their media campaigns on Youtube,” but also acknowledged that content creators faced “revenue fluctuations” due to demonetization and promised to provide “more detail around advertiser-friendly guidelines.”  Meanwhile, some content creators on the platform claimed to see an initial 80 percent drop in ad revenue due to demonetization, leveling off to a “40, 50, 60 percent drop” as videos were deemed not suitable for all advertisers. Prominent vlogger Vlogbrothers opined “[demonetization] has really squeezed creators who are making content that’s maybe good, but not, like, super-happy-family-fun-time stuff.”

Private Platforms Provide Strong Extralegal IP Protections

Adpocalypse demonstrates both the interest and the power that companies have in protecting their brands on private platforms. Brands are already entitled to certain legal protections. A trademark holder is protected against damaging associations in several scenarios, including when unauthorized use of their trademark causes confusion as to the source or sponsorship of a product, or tarnishes the brand by association with “unsavory” ideas. See AMF, Inc. v. Sleekcraft Boats; Louis Vuitton Malletier S.A. v. Haute Diggity Dog, LLC. On the other hand, there is no trademark infringement when the trademark is being used to describe a product or talk about a competitor’s product. See KP Permanent Make-Up Inc. v. Lasting Impression I, Inc. These are considered “fair uses” of a trademark.

But the companies on Youtube, of course, do not have to point to their carefully balanced intellectual property rights in order to control their representation on the platform. They can simply refuse to advertise on a platform if it tends to associate their brand with any less-than-ideal content. This is not a new phenomenon. Media has long catered to advertisers, with media scholar C. Edwin Baker claiming “the greatest threat of censorship in this country comes not from the government, but from advertisers . . . .” As online platforms mediate a steadily increasing amount of our time, advertiser censorship may become correspondingly more pervasive and omnipresent. With algorithmic and computing advances, such censorship can be systematically extended to hosted individual speech as seen in Adpocalypse.  

Real Time Content Moderation: The Future of Advertising? 

Adpocalypse concerned advertisers’ association with undesirable uploaded videos, which are scanned for content and demonetized and search deprioritized if they are deemed unsuitable for advertisers. This hawkish breed of moderation is enabled by advances in automated decision making. Over 500 hours of content are uploaded to Youtube every minute; each video must be scanned and categorized as safe or unsafe for advertisers. 

Platforms are now facing pressure to provide real time moderation to prevent violations of their terms of service by censoring disinformation, incitations of violence, and other abuses. Facebook Horizons already includes real time moderation features  allowing it to instantly deplatform or censor abusive–as determined by Facebook alone–virtual reality users. The advantages of such a system are obvious. Hate speech, harassment, and other universally-condemned behavior can be taken offline before it happens. Unfortunately, the concerns real time moderation raises are just as obvious. 

Platforms will continue to compete for ad revenue. As Adpocalypse demonstrates, online platforms are not simply censoring hate speech; they are beginning to censor anything not “advertiser-friendly”. Allowing fine control over the spaces in which advertisers’ products appear, not just how their ads appear, is a profitable course of action. One easily foreseeable use of real time moderation is to limit the visibility of advertiser-unfriendly speech in VR chat. But there is no reason to believe the technology will be confined to such transparent and simplistic uses. Facebook already sells sophisticated and hyper-targeted ads. Plus, US advertisers are willing to pay about $250 billion a year to control what consumers associate with their products. The market is there.

Given the impending capability and incentives for online platforms to moderate speech and the environment of speech in real time, it is time to take a hard look at the role of advertisers in platform censorship. While the First Amendment does not apply to private platforms, consumers should demand transparency from platforms about how speech is moderated and hold them accountable when moderation technology is abused to accommodate advertisers. 

NFTs: Coming Soon to a Patent Portfolio Near You?

By: Hannah Avery

At this point the craze surrounding NFTs is far from breaking news. NFTs (“non-fungible tokens”) have been created for everything from the “Disaster Girl” meme to the world’s first tweet. They have been the subject of numerous articles, publications, and blogs, including this blog by the Washington Journal of Law, Technology, and the Arts’ Associate Editor-in-Chief Joanna Mirsch, discussing video game-related NFTs. Despite NFTs’ widespread popularity, early “NFT craze” trends seemed at odds with established American intellectual property rights, with many works being minted as NFTs without the consent of the original creator. At the very least, ownership of NFTs was widely regarded as independent of ownership of the underlying intellectual property rights. But… what if they weren’t?

While the sale of an NFT by itself does not automatically confer the underlying IP rights, the use of self-executing contracts in conjunction with the sale of an NFT can. This is the exact type of transaction that IBM was betting on when it teamed up with IPwe to create a platform for block-chain-enabled IP transactions. The IBM/IPwe platform transfers patent rights by building a smart contract with standardized terms into the token. The patent owner is able to set the terms of that contract, including what information is public and what is not. With this big bet on patent NFTs by IBM, the launch of IPwe’s secure licensing & selling capabilities, and the first sale of a patent and the related patent rights as an NFT in April 2021, many forward-looking patent-holders may be wondering whether they should convert their patent portfolios to NFTs.

Unsurprisingly, the press release for the IBM-IPwe partnership touts a number of benefits of blockchain-based IP transactions including increased transparency, reduced transaction costs, and greatly improved capacity for patent-holders to manage, value, and transfer their IP assets. Additionally, blockchain-based patent transactions could help to prevent future SEP licensing disputes and/or to simplify their resolution. However, there are also a number of potential risks which could dissuade those who would otherwise be early-adopters.

Increased transparency of ownership

Since the introduction of blockchain technology, one of its most praised features has been the unique ability to create an indisputable record of a series of transactions. As applied to patent rights, this feature would allow users to track the ownership of patent NFTs and the transactions associated with patent license NFTs. This tracking mechanism would provide clarity of ownership of the patent rights. According to IPwe’s Chief IP Officer Cheryl Milone Cowles, “distributed network verification . . . provides the confidence of transacting with a clear current title and history.” While such assurance is undoubtedly appealing to potential investors, it may be too good to be true… at least for now. Given the nature of this technology and the current case law governing patent ownership disputes, situations could arise where a legal approach or remedy would be unclear. Some experts have raised concerns including: whether an owner of a patent whose NFT was stolen through a ransomware attack would be able to reestablish ownership through the legal system; whether a court would recognize transfer of a patent via NFT absent a more standard, written assignment; and, if courts do prove willing to recognize such an assignment via an NFT sale, what evidence will be considered sufficient to demonstrate ownership. Such uncertainties could easily lead to unfavorable, or simply unsatisfying,  outcomes for purchasers.

Cost-reduction

Historically, the costs of obtaining, maintaining, and licensing IP have been high. Therefore, the promise of a platform that could lower those costs, as IPwe claims, would be welcome news to many players in the IP space. While the technology behind the platform may be complicated, the theory of potential cost-savings is simple — the smart contracts included in token sales, as discussed above, would replace the current process of IP sales and licensing that is laden with attorneys fees, paperwork, and onerous contract negotiations. Such savings would be embraced by any organization accustomed to shouldering the burden, but it has the potential to be game-changing for small and medium-sized companies who may have previously been reluctant to engage in IP-related transactions because of current prohibitive costs.

Portfolio management

While tokenizing IP assets may interfere with a company’s existing portfolio management strategies, such disruption of existing strategies could also reap rewards for the first movers in this space. For example, the potential for easy resale of an IP asset could increase the value of that asset at the time of the initial sale. Or, standard essential patent holders could also utilize smart contracts to avoid expensive litigation while capturing licensing fees with each sale or resale. The possibilities are endless.

* * *

All in all, tokenizing patent assets may reduce the costs associated with patent licensing and streamline portfolio reporting. However, early adopters of this approach will have to navigate uncertain legal areas regarding the ownership of their tokenized IP rights. In our information-based economy, adopters could be risking some of their most valuable assets in their effort to become an industry leader. Is it worth the risk?

So You Want to Invalidate a Patent? The PTAB May Be Your Friend!

By: Mark Stepanyuk

Challenging the validity of a patent versus patent infringement

If you have a patent and you think somebody is infringing on that patent, you may be able to sue them for patent infringement. Alternatively, if you think somebody has an inadequate patent, you can prospectively challenge its validity. Although historically these two causes of action have largely overlapped, they are very much distinct. This blog post is about the rise of a relatively new mechanism for challenging patent validity in the United States.

What is the PTAB?

The Patent Trial and Appeal Board (PTAB) was formed in 2012 as part of the Leahy-Smith America Invents Act (probably most known for changing the U.S. Patent system from “first-to-invent” to “first-to-file.”) The PTAB replaced the Board of Patent Appeals and Interferences at the U.S. Patent and Trademark Office (USPTO). In general, PTAB handles appeals and conducts trials. Appeals proceedings mostly involve cases where applicants wish to review the examiner’s decisions regarding their patents or claims (such as rejections). 

PTAB trials, on the other hand, are where the magic happens in challenging patent validity. The PTAB’s trial division handles proceedings such as Inter-Partes Reviews (IPR) and Post Grant Reviews. They also used to handle Covered Business Method reviews, which was historically the second most popular proceeding, but that program sunsetted and ended in September 2020. The vast majority of trial petitions filed at the PTAB are IPR’s (which accounted for about 93% of PTAB trial proceedings in 2021.) 

How do you actually challenge patent validity?

If you’re a business competing with someone who holds a patent that you think is inadequate or you are worried that what you are doing may infringe on their patent, you can attempt to invalidate their patent(s) or claim(s). Generally speaking, this can be done by bringing a case either to Federal District Court or to the PTAB (also in some circumstances, you can go to the Court of Federal Claims or the International Trade Commission.) Sometimes parties also choose to bring their case to multiple courts, although there are notable limits. Each choice has its own set of requirements, costs, and benefits. For instance, filing in Federal District Court requires a “case or controversy.” At the PTAB, there is no such requirement. However, there is a petition phase and a trial phase. Not all petitions become instituted and make it to the trial phase, though parties may file multiple petitions (there are differences between institution rates by “petition” and “patent.”) Also notably, the USPTO has been cracking down on “serial petitioners” (i.e., parties filing multiple petitions targeting the same patent.) 

Why have PTAB trials gained traction as a tool to challenge patent validity?

In the last decade, initiating PTAB trials has become a viable strategy for some businesses seeking to invalidate or weaken the patent portfolios of their competitors. There are many reasons for this. First, the average cost of filing and prosecuting a PTAB trial proceeding (IPR) is averaging far less than doing so in Federal District Court. If the expected value of initiating an IPR proceeding exceeds its cost, the firm is more likely to undertake the proceeding. Second, it’s easier to invalidate a patent at the PTAB than in Federal District Court. The presumption that a patent is valid does not exist in the PTAB and challengers only need to show by a “preponderance of the evidence” that claims are unpatentable to invalidate. Whereas in Federal District Court, challengers need to overcome the much higher standard of “clear and convincing evidence” to invalidate the patent, due to the jurisdictional presumption that the patent is valid. Third, there has been broader claim construction at the PTAB which has led to increased invalidation under Section 103 (non-obviousness) because it allowed for more prior art to be considered – although now the PTAB uses the Phillips standard for claim construction (the same as in Federal District Courts.) Fourth, standing is not required to initiate a PTAB trial proceeding. In the case of IPRs, any third party that has not already filed and has not been served with a complaint alleging patent infringement more than one year prior may initiate the proceeding. Most other PTAB trial rules and standards can be found here. For these reasons and likely others, it’s become a relatively more popular tool in handling patent disputes for patentees and non-patent holders alike. 

The PTAB has been controversial since its inception as part of the AIA in 2012

The constitutionality of the PTAB has been challenged on multiple occasions and in each case it has been upheld. In Oil States Energy Services, the Supreme Court held that Congress has significant latitude to assign adjudication of public rights to entities other than Article III Courts (i.e., the PTAB). The closest constitutional challenge to the PTAB was probably in United States v. Arthrex. In that case, the Supreme Court held that the PTAB’s structure was unconstitutional (by violating the Appointments Clause in which Administrative Patent Judges were not appointed “principal officers”), but this was easily remedied by having the Director review final decisions at the PTAB. Other controversy stems from disparate economic consequences of PTAB trials. Many inventors that are patent-holders are not fans of this emergent mechanism to challenge patent invalidity. These inventors complain that the PTAB has turned into a predatory regime with a bias against unsophisticated patentees. Ultimately, they argue that PTAB trials have become an anti-competitive tool for large companies to bully or threaten start-ups. One inventor argues that in part due to repeatedly filed petitions, patents that have been subject to a PTAB final written decision have an 84% invalidation rate.

The goal of patent law and the way forward

The administrative tradeoff between expeditiousness and thoroughness in the U.S. patent law system has been evident from the time of the “Commissioners for the Promotion of Useful Arts.” In an early letter, Thomas Jefferson wrote, “[of the law of granting and refusing patents] I saw with what slow progress a system of general rules could be matured.” Indeed, the America Invents Act was yet another iteration aiming at maturity. Congress’s goals for the PTAB part of the America Invents Act was: to create a faster and less costly alternative to Article III court-based patent litigation; to sweep away low hanging fruit (weed out patents that probably should not have been issued in the first place); and to lighten the dockets of federal district courts, which have been overwhelmed with Non-Practicing Entity (i.e., “patent troll”) suits. To a significant extent, many of these goals were achieved, and pretty much any bright-line rule is bound to discriminate against edge cases. This is why we have general rules and specific rules, and specific rules are more easily changeable. 

As the specific rules within the PTAB will continue to evolve, many disagree about the direction and pace of change. Here’s a paper that argues for more specific reforms likely to be addressed within the USPTO. The authors argue that the current benefits of PTAB proceedings do not necessarily outweigh its costs and point out inefficiencies. They call for more changes to deal with “uncertain estoppel litigation rules” (i.e., serial IPR petitioners, and other costs associated with doubling-up.) Other arguments call for more drastic reform such as repealing the PTAB

Since its inception in the United States in 2012, the PTAB has risen in popularity as a tool to challenge the validity of patents. Despite parties being able to challenge patent validity in other forums, the PTAB’s advantages have made it an economically viable candidate for many patentees and non-patent holders alike. Although it has been the subject of controversy, the PTAB and the U.S. patent law system more generally will continue to mature and be shaped by American jurisprudence. As for now, exposure to the filter of the PTAB will continue to be part of the patent bargain between an inventor and society.