Innovation Policy Post

Monday, June 28 was the day the U.S. Supreme Court was to decide the patent case of the century, Bilski v. Kappos, and bring clarity to the debacle of the 1998 State Street Bank decision. In State Street, the Court of Appeals for the Federal Circuit (which hears all patent appeals) had upended centuries of tradition that assumed that patents were for technology and a hundred years of judge-made law that explicitly excluded “methods of doing business.” That decision also appeared to abolish all limits on software patents, fueling a land rush in patenting that helped create the backlog of 1,200,000 applications the Patent and Trademark Office faces today.

State Street created an instant constituency for business method patents that wasn’t there before. Before State Street, everybody knew that business methods were not patentable. It was understood and accepted. It was rarely litigated.

Under State Street, Bilski would have gotten his patent for a risk-hedging scheme for energy costs – no questions asked. But it has become clear that business method patents – which might have seemed like a great idea in those go-go years – are deeply problematic. They are hard to evaluate for novelty and inventiveness, often sweepingly broad in scope, difficult to interpret, and very controversial. (Would we really want just one airline offering frequent flyer miles?) By abolishing the well-established and uncontroversial business method exclusion, State Street radically extended jurisdiction of the patent system to cover not only business practices such one-click ordering and tax avoidance strategies, but an apparently limitless range of human activities, such as athletic moves and playing with cats. Perhaps the largest professional land grab in modern history...

Today a federal judge in New York granted YouTube’s motion for summary judgment in the closely-watched Viacom v. YouTube copyright case.

Viacom sued YouTube for copyright infringement over the appearance of video clips on YouTube over which Viacom claimed the copyright. (It was later revealed that many of those clips were secretly uploaded by dozens of Viacom marketers.) YouTube argued that it was protected by the Digital Millennium Copyright Act’s safe harbors. Generally, those safe harbors, enacted in 1998, limit remedies against online services so long as they respond to “takedown requests” – that is, expeditiously disable access to allegedly infringing content when a copyright holder complains that particular content available on the service infringes its rights.

YouTube complied with thousands of Viacom takedown requests, but Viacom nevertheless argued the safe harbor shouldn’t apply to YouTube, since it had “generalized” knowledge of online infringement. The court rejected Viacom’s argument, pointing out that YouTube removes numerous clips at Viacom’s request, including 100,000 within one business day, consistent with the DMCA.

This decision shows that the DMCA safe harbors are working, and that Congress struck the proper balance, by providing robust protection for creators who think their copyrights are infringed, while still allowing platforms for expression to flourish online.

As today’s decision notes, it is nearly impossible for platforms that host user-created content to differentiate between authorized and unauthorized content, and infringing content and non-infringing content. People are sometimes surprised to learn that due to our lack of copyright ‘formalities’, there’s nowhere to look to determine with any certainty who has rights to what. Only rightsholders know that, and thus only rightsholders know what to take down. The DMCA’s Solomon-like compromise, therefore, was to assign to rightsholders the burden of coming forward with a specific complaint about infringement, and to assign to ISPs and online services the burden of responding to that complaint. Today’s decision reflects exactly that result.