Intellectual Property Law and Copyrights, Property Ownership, Differential Pricing and the First Sale Doctrine in Law and Capitalism

The landmark copyright case Kirtsaeng v. Wiley will be argued today at the United States Supreme Court. Joe Mullin at Ars Technica has a nice write-up at How a Supreme Court ruling may stop you from reselling just about anything.

This is a non-political issue so that we expect a unanimous Supreme Court decision -- with the ratio decidendi in the opinion to run something like this:

"Differential pricing is a luxury of capitalism afforded to sellers of goods and services in the United States and all over the world. In fact, our antitrust law generally prohibits price-fixing among competitors in the offer of sale of any given product [Apple and consorts to the contrary]. Sellers engaging in potentially lucrative practices such as differential pricing in different markets must also be prepared to suffer the risks that such differential pricing encompasses, among these being the likelihood that someone could buy a given product cheaper HERE and sell it more expensively THERE. That, in fact, is the ESSENCE of the capitalist market system, and always has been.

In terms of the copyright law, the Constitution was not drafted to provide special privileges or advantages to authors in the manufacture or sale of their products, whether in domestic or foreign markets, but ONLY to protect their sole right to exploit their works, which has been interpreted by the courts to mean that the law will protect authors from unlawful copying by others, so that authors can sell their works themselves.

How they sell them is their choice, which is a question of authors' individual talents or those of their publishers, advertisers and marketers. But once sold, they are sold, and the deal has been done. The compensatory copyright rights are extinguished for the work sold because the author has been compensated for that particular work. Period. End of story.

That is all a part of how capitalism functions. Choices and results.

Authors who choose not to sell their works at ONE uniform price, but to engage in potentially more profitable or otherwise more desirable differential pricing in local, regional or world markets, can hardly expect the law and the courts to finance the risks involved in such a choice. Courts are not the handmaidens of traders or hawkers of wares. Moreover, the public via the legal system should not have to pay the bill to guarantee the success of marketing choices. That is outside the scope of copyright law.

If a copyright holder sells a copy of his or her copyrighted work in ANY form at ANY price in ANY place, it is considered sold, and, under the first sale doctrine, unless otherwise prohibited by law, it can be sold again to ANYONE at ANY price ANYWHERE. Our capitalist system tolerates nothing more and nothing less."

Nebraska Business Hall of Fame Inducts Bob Milligan and Cynthia Hardin Milligan 2012

Robert and Cynthia Hardin Milligan were inducted into the Nebraska Business Hall of Fame 2012 and it is well worthwhile to see the video below.

Bob graduated from the University of Nebraska one year before I did and Cynthia and I went to school together in Lincoln, Nebraska in our younger days.

They are both quite a success story and have some very positive things to say about the USA and Nebraska.

See the links Bob Milligan at NU (also at the U.S. Chamber of Commerce) and Cynthia Hardin Milligan (see also Cynthia H. Milligan at the Wikipedia).

American Homes, Elites, Wealth, Plundered Federal Lands and a Polarized Society of Haves and Have Nots

Wealth and land in America are greatly misunderstood topics in a country in which the federal government used to own almost all of the land and today owns 643 million acres of a total of 2.27 billion U.S. acres.

There are 36 million unmortgaged owner-occupied American homes (Bloomberg News 2012), and 68.4 mortgaged homes, which we count to the ownership of the banks and financial institutions. The average national median home lot size is 12,632 square feet or about 1/3 of an acre. 36 million homes x 1/3 of an acre = 12 million acres.

That is less than the 25 biggest landowners in America, who own 20 million acres, i.e. the 25 biggest landowners in America own more land than all American unmortgaged homeowners put together.

Even if we were to include ALL occupied homes, even the mortgaged ones, we would get only 38 million acres. And if we take all homes, including also those not occupied, a total of 132.6 millions homes, the median lot size gives us a total of only 44 million acres.

American homeowners -- and this is the inflated TOTAL -- thus own at best 2% of the land of the USA, and if we use unmortgaged owner-occupied homes as the standard, they own 1/2 of 1% of the total land of the USA. The federal and State governments own somewhere between 42 and 48%, so that 50% of the land of the USA -- the best land for agricultural and economic use, which is mostly East of the Rockies -- is owned by vested private interests.

We were brought to this issue by an article by Ross Douthat at the New York Times on Our Revolting Elites and Romney's famous 47% comment, which shows the extent of the current polarization of wealth, income and politics in the United States.

Jonathat Haidt and Marc J. Hetherington at the New York Times blog Campaign Stops in Look How Far We've Come Apart note, for example, that Congress is so polarized today that it is mathematically impossible to get any worse.

They suggest that polarization may be reduced in coming decades, which we doubt as long as current inequalities of wealth and income continue. People do not part willingly with what they "have", even if they have wealth far in excess of what they sensibly need. So how can "change" be accomplished? History provides sobering lessons to the greedy.

In the United States, only the Civil War led to an abandonment of formal slavery and the economic system affiliated with it (there is still a lot of informal slavery around).

In Europe, two world wars in the past century deposed many of the ruling elites of the Continent, most significantly in Germany and Russia, making way for change and new developments, and even there, you have new ruling elites in spite of the overthrow of the older elites. It is an endless process true to the old saying that "The King is dead. Long live the [new] King."

In some countries, the ruling elites have been retained, and the nobility in the United Kingdom is one example. Robert Home of Anglia Law School writes in Land ownership in the United Kingdom: Trends, preferences and future challenges:

"Unlike much of continental Europe, the UK has experienced little major redistribution of land ownership since the dissolution of the monasteries in the 16th century, apart from the temporary growth of state land ownership in the 20th century, some of which was reversed during the 1980's."

That was the vested system of ownership, rights and privileges that led to the founding of America by the colonists.

Americans -- immigrants all -- wanted to escape that system.

America thus presents a special case, since almost all U.S. land was initially owned by the federal government, i.e. by the people as a whole, and not by the wealthy vested interests we find as owners today. See History of Land Ownership in the United States. Indeed, even today almost half of all U.S. land is owned by federal or local governments, i.e. by the people.

Robert J. Smith (President, Center for Private Conservation & Senior Adjunct Scholar Competitive Enterprise Institute, Washington, D.C.; Speech to the Eighth Annual Conference on Private Property Rights, PRFA, Albany, N.Y. , October 23, 2004) wrote in Landownership in America that America has the most socialistic form of land ownership on the planet.

The specific statistics are misleading, however, as follows.

Of 2.27 total billion acres in the USA, the federal government owns 643.2 million acres, of which about 1/3 are in Alaska, leaving about 400 million acres or about 20% of all land in the continental United States. Of that land, almost all of that land is in the western part of the United States (mountains, desert).

For example, the federal government owns ca. 83% of Nevada and ca. 44% of California. The best land agriculturally and economically was in the the East and -- because of various government land grants over the years -- much land was gifted into private ownership through various Congressional acts (i.e. the people's land was largely given away by Congress), e.g.

• 94 million acres to the railroads
• 328 million acres were given away to States by virtue of Statehood (e.g. to schools , "land grant" colleges, etc.)
• 591 million acres were given away to private ownership for settlement of land (cheap purchases, homesteading and a lot simply by fraud).
• In modern times a lot of Alaskan land previously owned was also simply given away to Alaska and to the Native Americans.
  
  Rightly or wrongly - it was YOUR money, and it was a massive amount of wealth that was simply gifted, for political reasons, to State and private owners, by your elected representatives in Congress. YOU elected them.

People in America today who rant and rave about the involvement of the federal government in their modern affairs simply have little or incomplete knowledge of American history.

If the federal government had not given away half the land it once owned to private interests over the years, we, the people, would own almost everything, rather than this ownership being in the hands of the wealthy elites who control that land now and want to take all the spoils.

How much does an average American now own in terms of private land? VIRTUALLY NOTHING. Indeed, when we consider how much land an average American owns, we begin to understand the extent to which the country has been plundered and sold out to private interests over the years.

Let us look at the ca. 1.3 billion privately owned acres in the United States. Who owns that land?

We find that there are 132.6 million U.S. homes of which 18.5 million were vacant in the first quarter of 2012, according to Bloomberg News on April 30, 2012, i.e. 114 million homes. We presume the vacant homes are largely owned by banks. According to the Bureau of Census, 31.6% (36 million homes) of owner occupied homes had no mortgage, while the remainder of 68.4% (78 million) were mortgaged, i.e. essentially still owned by banks.

The average national median home lot size is 12,632 square feet or about 1/3 of an acre. 36 million homes x 1/3 of an acre = 12 million acres. Even if we were to include ALL occupied homes, even the mortgaged ones, we would get 38 million acres. And if we take all homes, including also those not occupied, a total of 132.6 million homes, the median lot size gives us a total of 44 million acres for American homes.

American homeowners -- and this is the TOTAL -- thus own at best 2% of the land of the USA, and if we use unmortgaged owner-occupied homes as the standard, they own 1/2 of 1% of the total land of the USA. The federal and State governments own somewhere between 42 and 48%, so that 50% of the land of the USA is owned by vested private interests, a small minority composed of the wealthiest individuals and corporations.

These are surely the same people who are complaining about taxes.

Trademarks, Trade Dress and Ownership

"[W]hat appear to be private disputes among hucksters almost invariably touch the public welfare. We shall therefore be concerned to ask, when courts protect trade symbols, whether their decisions further public as well as private goals. -- Ralph Brown Jr.

"The world has changed quite a bit since Ralph brown wrote his 1948 article. Trademark law and trademark economics have both made significant strides in the last fifty years, but unfortunately they don't seem to be marching in lockstep. Rather, the law has broken stride with economic thinking in dangerous ways. I don't think Brown would approve of the ways trademark law has changed in the last fifty years, but perhaps he would recognize them. He wrote:

"In an acquisitive society, the drive for monopoly advantage is a very powerful pressure. Unchecked, it would no doubt patent the wheel, copyright the alphabet, and register the sun and moon as trade-marks."

We seem to be moving down that road. Unless we are careful, we may end up in a world in which every thing, every idea, and every word is owned. And we will all be the poorer for it."

-- Mark. A. Lemley (William H. Neukom Professor of Law, Stanford Law School, Stanford University), The Modern Lanham Act and the Death of Common Sense, Yale Law Journal, Vol. 108, p. 1687, 1999

One of the most perverse, ill-based and -- in our opinion -- perhaps even unconstitutional laws in the field of law is the "trade dress" standard as found in the U.S. Federal Trademark Act of 1946, also known as the Lanham Act.

The Lanham Act by its very nature extends monopolistic product protection beyond the limitations otherwise provided by patent laws and the patent provision of the United States Constitution.

Section 43(a) of the Lanham Act provides as follows via text posted to the Wikipedia:

"Under section 43(a) of the Lanham Act, a product's trade dress can be protected without formal registration with the PTO.^[8] In relevant part, section 43(a) states the following:

"Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which

(A) is likely to cause confusion, or to cause mistake, or to deceive [...] as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or

(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities,

shall be liable in a civil action by any person who believes that he or she is likely to be damaged by such an act."^[9]

This statute allows the owner of a particular trade dress ("container for goods") to sue an infringer (a person or entity who illegally copies that trade dress) for violating section 43(a) without registering that trade dress with any formal agency or system (unlike the registration and application requirements for enforcing other forms of intellectual property, such as patents). It is commonly seen as providing “federal common law” protection for trade dress (and trademarks).^[10]"

Such an over-broad blanket provision appears to us to be unconstitutional on its face because it wrongly expands the limited protection given to products by the patent clause of the U.S. Constitution, without which provision there is no "original" basis (that statement is directed to the "originalists" on the U.S. Supreme Court) to grant this kind of special protection to commercial enterprises and their products, i.e. beyond what the Constitution provides.

Indeed, the basics of the Lanham Act provision can be traced back to ancient medieval guilds that were established to gain, maintain and expand the monopoly power of merchants with respect to their products.

Little has changed since then as "merchant" monopolies have gotten worse than ever, which can be seen via the resulting and egregious wealth and income inequality in the USA.

The Lanham Act is generally not used to protect companies or consumers from actually "confusing" brands and products, but rather to further monopolies and conveniently get rid of possible competition.

The Lanham Act wrongly gives protection -- without the requirement of any kind of lawful, controlled and checked registration whatsoever (!) -- to elements of product and packaging design and appearance that otherwise would not be entitled to patent protection since features such as size, color, combinations of color, shape, packaging in general, and even the selling "atmosphere" or "look and feel" of a product would be barred from such protection because they relate to natural physical viz. geometric features not invented or discovered by the seller. Moreover, natural features are foreseen by prior art and are obvious to boot.

The grant of protection to the simple use of natural features of our world thus works as a severely limiting roadblock to innovation and competition.

Just imagine a painter claiming a particular "color" as his "trade dress".
Just imagine hundreds of painters claiming their particular "color" as their proprietary "trade dress".
Just imagine thousand of painters claiming their particular "color" as their proprietary "trade dress".
It would not be long before no new painter could paint anymore because all of the colors had been taken.
It is a terrible scenario, but corresponds well to the modern tech world and to erroneous judicial decisionmaking in the past.

The ill-conceived provisions of the Lanham Act and the unwise judicial interpretations of that act are leading us into a "trademark Armageddon".

Representing the extreme of this "trademark" example we find a greedy monopolist such as the commercial Apple firm arguing in court via "trade dress" rationales that it ALONE should be the ONLY company permitted to sell black-colored rectangular tablets viz. mobile phones with rounded corners and having a frame (bezel) holding the framed electronic display.

You think we are joking? Not at all. 
Take a look at all the Apple claims in the Samsung trial via The Verge.

Apple calls its phone or tablet designs (or non-designs) "minimalist" art because they are essentially purely geometric in form and have few unique identifying man-made features. Rather there is more or less an ABSENCE of specific designs of any kind. One "steals" primarily God-made geometry.

The upshot of the ridiculousness of the Lanham Act provisions is that a detailed and uniquely well-identifiable design by its uniqueness marks off very little IP trademark viz. "trade dress" territory, whereby an alleged "minimalist" design, due to the very fact that it is hopelessly generic, is amply found in prior art and is usually patently obvious, tries to mark off great swaths of IP territory as proprietary to one company.

This shows that the Lanham Act "trade dress" provision is extremely bad legislation, accompanied, as it has been, by really terrible judicial opinions. See the cases in George D. Royster, Halloran & Sage LLP, Protecting Business Assets Under the Lanham Act. Cynthia Clarke Weber, Trade Dress Basics. Robert J. Yarbrough, Protection of Trade Dress.

Mark A. Lemley had it right in his title
in The Modern Lanham Act and the Death of Common Sense.
That is where the law currently finds itself.  Make sure you read that article.

European Countries Protect Private Property Better by Law than in the Americas

Living in Germany, one sometimes gets the impression that people in the Americas think that private property rights do not count for much in Europe.

Wrong.

Mark Wilke has the story at the Vancouver Sun in Europe beats Canada on private property rights.