The IP ADR Blog

The Road to Somewhere

Rob Reaugh — Wed, 04 May 2011 07:31:14 -0800

Prof. Michael Moffit, in last Friday's Indisputably blog, posted a piece about a mediated settlement between former Governor of Florida, Charlie Crist, and Talking Heads leader, David Byrne over the unauthorized use of the song “Road to Nowhere” in an election ad. He picked up on an April 12, 2011 post by Martha Neil in the ABA Journal.

The mediated settlement, although largely confidential, included an undertaking by Charlie Crist to apologize in public. The above video posted on YouTube (on the very same day as when the parties settled!) is the result. When I looked it up on You Tube on April 30, 2011, it had been seen close to 109,000 times.

The case is of interest to us as supporters of ADR in IP disputes, as it involves the infringement of an intellectual property, -- in this case the copyright(s) in the song “Road to Nowhere”. Ironically, a video of the song (just an illustrated copy of the CD) is the suggested selection once you are through viewing Charlie Crist’s apology.

David Byrne filed his lawsuit on May 24, 2010, and presto, we have a solution on April 11, 2011, just 10 months and 2 weeks later. This shows the power of mediation, when you do it as early as you can. Both parties gained: David would not have gotten an apology in a lawsuit, as that is not one of the remedies available to a court of law, and both parties saved a ton of money (probably literally!)

It also illustrates what is for me a new form of apology: public, and using the new media vehicle of a You Tube video. Prof. Peter Robinson teaches a separate course on apology at the Straus Institute, but I don’t think it includes this modern form the apology can take!

Mediators, take note. This is a new tool in your toolbox. Take the road to somewhere!

Los Angeles, April 30, 2011

-EvG

Negotiations 101 - By Speaker John Boehner

Rob Reaugh — Tue, 12 Apr 2011 17:50:12 -0800

Speaker John Boehner showed his opponents how to negotiate. He used three standard but sophisticated techniques that those who are schooled in negotiations will recognize immediately.

The first one concerned the opening offer. If you want around $40-50 billion in cuts, be the first to open, and open the bidding high, just outside the “insult zone”. If I recall correctly, the Obama administration had indicated they wanted around $10-11 billion in reductions for this limited time period of 5 ½ months. So Boehner started the bidding at $61 billion. That meant a “gap” of $50 billion, which could end him up at $36 billion if each side was going to give in at the same rate. It did not matter that the $61 billion was arbitrary, they were able to justify it sufficiently to make it credible.

When negotiations got difficult, Boehner (prematurely in my opinion) indicated he would settle for $31 billion after he had gotten the first $10 billion to allow the democrats more time, for a total of $41 billion.

When he achieved the $31 billion without the dems putting up much of a fight, he changed the parameters of the negotiation and actually INCREASED his demand, from $31 billion to $40, -- plus the $10 he already had in his pocket, of course.

And lo and behold, instead of the democrats telling him “no way”, they actually were willing to sit down and negotiate further, and Boehner got himself an additional $8.5 billion in cuts! For a total of $48.5 billion, an awesome $12.5 billion more than the $36 billion I suppose he was shooting for at the outset.

How did he do that?

The answer is that he created an issue that the Republicans don’t care much about one way or the other, but the Democrats do: “Planned Parenthood.” The plan worked fantastically well: the first step toward this plan was to make the target look bad, by doing a so-called investigation into Planned Parenthood by which they were able to make it look “bad”. Once the Republicans had succeeded in making Planned Parenthood look bad, it legitimized the position he could now credibly take that Republicans felt very strongly about deyiung any further funding to Planned Parenthood. (Of course, they still did not care one way or the other.)

This phantom issue became a major lever to force the Democrats into making more concessions, even if Boehner had to keep up the charade until the very end. When he knew he had milked the issue for all it was worth, he gave in on the Planned Parenthood phantom until the deadline was upon them.

So what are the lessons? First, control the rhetoric of the negotiations by issuing as strong a demand as you feel you can get away with. Second, create a fake issue that basically has little or no value for yourself but conceding it will be of great value to your opponent. Third, once you have reached agreement easily without having conceded on the fake issue, up your demand and extract additional concessions. And fourth, don’t concede on the fake issue until the very last moment.

And where were Obama and the Democrats? They allow time and time again to let their opponents define the issue. They often have no idea they are being played. They do not initiate with far-reaching demands. Instead, they make concessions before the negotiations have even started.

Conclusion: the Dems can take some lessons from the experts, -- including Speaker John Boehner.

- EvG

An Interview with Bruce Patton

Eric van Ginkel — Wed, 16 Feb 2011 10:39:47 -0800

Eric van Ginkel and Bruce Patton, Tijdshrift Conflicthantering (Conflict Management Magazine) October 2010.

In October of this year, Eric van Ginkel had an opportunity sit down with Bruce Patton, co-author of the books "Difficult Conversations" and "Getting to Yes", Distinguished Fellow of the Harvard Negotiation Project and Partner of Vantage Partners. If you would like to see the unabridged interview including an interesting story about Camp David, please click here.

EvG: This issue of Tijdschrift Conflicthantering is devoted to the subject of
mediation as a profession. Generally, in the Netherlands, mediations are
conducted without attorneys present, even in litigated cases. Do you know
whether this practice exists in other countries? Or is this unique to the
Netherlands?

BP: It varies by country and by context. In the United States, in a commercial
context mediations have lawyers present, although not always. But in family
mediation and small claims mediation, it is quite rare to have attorneys at the table.
Elsewhere it depends. Also, the United States has many more lawyers doing
mediations than most other countries.

EvG: It is striking to see for example how often psychologists become
mediators in other countries, whereas that is quite rare in the United States.
How has mediation developed as a profession in the United States?

BP: Mediation has developed in several completely unrelated paths, is my
observation. There is peer mediation in schools, where kids are trained to mediate,
that has been incredibly successful. It started out as a violence management and
reduction program.
Then there is small claims and community mediation, which I think partly grew
out of legal training. We started a small claims student mediation program at Harvard,
back in 1979. It also grew out of the community dispute resolution programs, such as
the one started by Bill Lincoln and such folks [1].
I think commercial mediation was driven in significant part by Endispute,
whose founders decided to make a business out of this. Then there was the Center
for Public Resources, which created their list of high-profile folks [2]. I think much of
commercial dispute resolution has evolved, because it made money for somebody. In
places like Florida, Minnesota and Michigan, where they have passed some semimandatory
mediation requirements, lawyers looking for a new business or more
satisfying work thought to themselves, “I can do good and make money at this.” And
JAMS, which Endispute and the Bates/Edwards Group merged into, has a lot of
retired judges who are making money as mediators [3]. Unfortunately, they are not
in many cases doing something that you can really call high-quality mediation, except
by the most extended definition.

EvG: What do you mean by that?

BP: Well, there is a lively debate about styles of mediation and what mediators
ought to be doing, with so-called transformative mediation on one end, and
evaluative and directive mediation on the other. Even years ago I remember there
was a study in New Hampshire of mediation being done mostly by retired judges who
encouraged the parties to address them as ‘Your Honor’, and whose methodology
was similar to what I think is still a common strategy in commercial mediation. It is
basically positional mediation, trying to hammer people into making concessions until
they meet somewhere in the middle. It’s not very creative. It may be better for people
than litigation, but it does not leave people feeling very good.

EvG: Yes, I tend to agree with you, but generally that type of settlement
assistance is much in demand, at least here in California.

BP: It is, and not just in California. But you have to believe, even when the parties
don’t have an ongoing relationship, that there are many missed opportunities for
more creative solutions. I remember a commercial litigation that Professor Roger
Fisher and I were asked to mediate. It was four days before trial. The parties were
enmeshed in a private antitrust action in California. The plaintiff was a former
franchisee of the defendant. He claimed that the defendant had violated the franchise
agreement by opening stores in competition with him, and he was suing for more
than $1 million. Each of the parties had already spent about $1 million in legal fees.
They were anticipating $350,000 as the cost of a three and one-half week trial each.
And their decision-tree litigation analysis was nonexistent. In fact, I use this story as a
teaching tool to show students why they need to know at least the rudiments of
decision analysis. We asked the defendant how much they were willing to offer. They
responded, “$350,000, because that’s what we think the trial will cost us.” “Wow!”, we
said, “so you anticipate a 100 percent chance of success?” “No, no, we didn’t say
that.” “Well, that’s what it sounds like, since you are not allocating any cost to the risk
of having to pay a judgment.” The defendant then admitted that they thought they
had a 30 to 35 percent chance of losing.
So we asked what they would have to pay if they lost, and they said probably
only symbolic damages of $1. “But even if the damages are only $1, wouldn’t you
have to pay their legal fees?” “Well, yes.” “And how much do you think their legal fees
have been? Is there a reason to assume they were any lower than yours?” The
defendant had to admit that was not very likely. “So that could cost you 35 percent of
another $1,350,000, including plaintiff’s cost of going to trial.”
“And what if the damages turn out to be more than $1? What if the plaintiff
wins $1 million?” The defendant’s counsel conceded that there would also be treble
damages to pay. “So maybe there is a 5 percent chance of having to pay $4.35
million?” At that point the defendant’s lawyer – from a very prestigious New York law
firm – blurted out, “So that is how you do it, first you multiply and then you add!”
Then we went to the other side, also represented by a very prestigious law
firm. With the client in the room, we asked the plaintiff’s lawyer what he thought his
chances of success were. “Oh, we have a very good case”, he responded, which is
what the client had heard. So we asked him, “What do you mean by that? Is that 90
percent?” “Oh, I never put odds on that. In fact I believe that is not appropriate.” “But
what does it mean?”, we insisted. “25, 50, 75 percent?” The lawyer responded, “As
the former chair of the ABA Ethics committee, putting a percentage on the likelihood
of success would be unethical [4]! My client is as qualified as I am to say what a
jury will do.” So we asked, “Suppose this case was tried before a judge instead of a
jury, and the judge understood everything you argued and everything the other side
argued, then as an expert on the law, what would you think your chances of success
would be?” The lawyer hemmed and hawed, and then finally said, “Well, at least 50
percent.” The plaintiff’s jaw bounced off the floor! It had never crossed his mind that
that was what ‘very good’ meant.
In the end, Roger asked, “What could the defendant do for you other than
paying you money? What else do they have that you might want?” “Well,” the plaintiff
said, “their product would be nice.” Roger said, “You mean you used to sell their
product, and you wouldn’t mind selling it again?” “Yes”, the plaintiff responded.
“That’s interesting,” Roger said, “I thought the defendant was competing with you?”
The plaintiff replied, “Oh, yes, they were, but their stores went bankrupt.”
So these parties set up their own structured settlement, which enabled the
plaintiff to obtain the defendant’s products at a highly reduced price. Both parties
were very happy with the result. The plaintiff was a really good franchisee and the
defendant’s stores had gone bankrupt. But it took unusual confidence, even
chutzpah, for Roger to ask the question that opened up this possibility! And yet, as
he suspected, there was a creative solution waiting to be found. I think too often
mediators aren’t helping parties look for and find such solutions.

EvG: In September a new edition of your (co-written) book Difficult
Conversations will be published. The first edition, dated 1999, became quite
popular in the United States and around the world [5]. What are ‘difficult
conversations’? And why are they important in both personal and business
settings?

BP: We defined difficult conversations as anything you find difficult to talk about.
When we started down this path, we were actually thinking we could do a study of
what were the ten hardest things to talk about. We had that as a working title. It
caused the Psychiatry Department at Massachusetts General Hospital to have me
over immediately for a talk, because, as it turned out, they wanted to know what were
the ten hardest things to talk about! Unfortunately, by that point we had figured out
that it was entirely idiosyncratic. What is difficult for one person is not for another.
What makes a conversation difficult has to do with your own history and the way you
construct the world, how you feel about yourself and yourself in relationship to others.
Not necessarily the topic of the conversation.
Difficult conversations are important because people worry – rightly – about
the consequences. In most cases, whatever the subject is, people are worried that if
they have the conversation it may damage the relationship, it may in fact make the
situation worse because the other side won’t react well, or it may put you at risk as
the other side may attack you or may seek to get retribution even for raising the
subject or for trying to deal with it. So people end up being very concerned about the
potential consequences. And it turns out that their concerns are justified. Those kinds
of consequences often do happen if they have the conversations they are imagining.
What is somewhat less apparent to people, but equally true, is that you get
most of the same consequences eventually even if you don’t have the conversation.
Because the problem doesn’t go away, and every time you see the person you think
about the fact that you haven’t raised it and they are doing it again, and what kind of
a wimp am I that I cannot deal with this. So if you continue not to raise it you start to
avoid the person. And lo and behold, the relationship withers.
I remember a young woman who wanted to talk about her former boyfriend in
an exercise we were doing. She told us that they had had these conflicts over various
kinds of things, but she always said to herself, “It is not that important to me, and it
seems important to him, so we will just do what he wants.” So they always did what
he wanted. And then he left. She couldn’t understand why he left, because they
always did what he wanted. I remember the psychiatrist turned to face her and said,
“Well, of course he left. You cannot have a relationship with only one person in it!”
In business, the problem is that we live in an environment where conflict is a
growth industry. To deal with competitive pressures that are unprecedented,
businesses are doing two things that promote conflict: one is to grow. To eke out
maximum economies of scale, and not be bullied by competitors, businesses in every
appropriate industry are growing to the largest size possible, which in most cases is
global. Just to have enough market share and clout to survive. Second, to be
adaptive and responsive, and to stay out in front, these companies have to be fleet of
foot, so typically they have to flatten the hierarchy. So you get global businesses with
flatter hierarchies, which means essentially that they have more people who think in
more diverse ways thinking they ought to have more of a say in the decision making.
That is a recipe for conflict.
To appreciate just how important difficult conversations are to business,
consider how many management fads have come and gone, such as re-engineering
the corporation, total quality management, you name it. They come with these
persuasive studies showing enormous value at stake. Yet after huge investment,
they always seem to peter out with a whimper, at which point people look around
saying, “Well, that didn’t work!” And only a tiny fraction of the potential value gets
achieved.
It’s not because the value isn’t there. In our view, the problem is that in every
case implementation requires people with a lot at stake and very different views
about what is the best way to implement the initiative, to reach agreement. That’s a
difficult conversation! Their job may be at stake, or their status, and they disagree
about what to do, usually for good reasons, because each has important and relevant
insights. But they don’t know how to have that conversation productively, so they end
up either having it unproductively or not having it.
So all these incredible potential value drivers break down at the
implementation phase. And in the end, not much changes.

EvG: In your book, you indicate that within any difficult encounter, there are
usually three distinct conversations present. Can you talk a little bit about
that?

BP: Well, if you compare how people deal constructively with conflict with what
happens if they don’t, we found that whatever the topic is that someone finds difficult,
they get into difficulty by acting in a certain way. Yet from the individuals’ point of
view, they don’t see themselves as acting differently. They think they are acting
appropriately in response to the situation.
As observers, we can see that when our colleagues are having a difficult
interaction, they behave differently than they usually behave. The rest of the time
they are productive.
But when we are the protagonist, we don’t realize that our behavior has
changed. We just see ourselves responding appropriately to the other party and don’t
see any interactive effect. But it is there.
When we dug into why people’s behavior changes into these patterns that are
predictably unproductive, we found that behavior is driven by your thoughts. And we
found that in people’s heads, in their internal voice, they are talking to themselves
about the conversation they are having.

EvG: Is that so-called ‘self-talk’?

BP: Yes, it is self-talk, and it’s always there. We found there were three categories
of thoughts that people were having. And that there were characteristic patterns that
were unproductive and characteristic patterns that were much more productive in
each of them. They correlated very closely with what kind of behaviors and what kind
of outcomes you were getting out of conversations.
The first category is all about the story. “What is going on here? What’s the
story? Who caused this to happen? Who is responsible for this? Who should do what
about it? Why did this happen?”
The second category is about identity. “What does it say about me that this
has happened? Are they accusing me of being a bad person, or a bad manager?”
And the third category is about feelings. What to do with the strong feelings that
perceived threats to my identity often produce. “I am feeling really angry. Should I let
him have it or should I try and stifle it?” Or, “They are crying! My God, what do I do?”

EvG: You talk about outcome. There seems to be a gap between the typical
outcome of a difficult conversation and what people would like the outcome to
be, what should be possible as an outcome. In November you are coming to
Amsterdam to conduct a workshop. Does your upcoming workshop touch on
this issue, this gap?

BP: Yes, absolutely. And not only the gap, which is generally a huge gap. The real
dilemma that people face is that they will get the bad outcome they fear, whether
they have the conversation or not – if they go into it thinking the way we typically do
when we are in a difficult conversation. We tend to want to change the other person.
That may or may not be possible, but it certainly won’t happen until we change
ourselves and change the stance from which we approach the conversation. That is
something we definitely will talk a lot about and practice in the workshop.
There are two things you need to be able to do to get more productive
outcomes, and to make yourself more comfortable in difficult conversations.
The first one is to recognize when your thoughts have the characteristics of
toxic waste. You know that if you say them they are likely to be provocative, and you
know that if you don’t say them they are likely to be corrosive inside of you. When I
ask people, they say, “Yes, I can tell when my thoughts are toxic.”
The second thing you need to be able to do is to talk to yourself. I ask people
to think of a time when they were on the edge of doing something unproductive and
when they were able to persuade themselves to take a deep breath and think of
another way to go forward. Everybody has examples of that, so we know we can talk
to ourselves. And that is what it takes.
What we talk about in the workshop is: all right, what do you say to yourself?
What are the things to watch out for? And we take a look at where the toxicity comes
from. And what kind of shift you need to make in your thinking that doesn’t take
anything away from the importance of what you have to say. Because if you are
upset, you have something that needs to be shared and is valuable. But it is like
radioactive gold. You need to get rid of the radioactivity so that people can use the
gold.
So we take a look at the theory. It is simple, and easy to see it in other people.
The challenge is to be aware of it when you do it yourself. We take a look at the ways
in which we put radioactivity on our stuff, such that whatever we say we are going to
get in trouble if we are starting from that point. The shifts we can make are relatively
subtle in some ways, but they can have a huge, huge impact.

EvG: So is it fair to say that the common trap that makes a conversation
difficult is that we are all self-obsessed?

BP: I wouldn’t put it that way. I would say that if we are trapped by anything it is the
fact that we have eyes in front of our head. So for us, the problem is always out
there. If we are watching two colleagues that are in trouble, we understand that they
are both part of the problem. But if we are one of the two colleagues that everybody
is watching, there is a tendency, since our eyes are in front of our head, to see only
the other person as the problem and not to be able to appreciate what we might be
doing, what we might be contributing. It doesn’t even mean that we are to blame,
because often people get in trouble by doing things that are in no way blameworthy.
They are just different, and they intersect badly.
Take time, for example. Some people get really bent out of shape if you are
two minutes late. They feel it is disrespectful, that their time is worth more than that.
Half the world feels that way. But the other half feels that you can’t possibly know
when a meeting is going to start until it starts.

EvG: So how can we stop the blame game? What are some of the techniques
that we can use?

BP: The first step is the realization that when anything serious goes wrong,
especially in an organization or within a relationship, there are always multiple
contributions. Not necessarily blameworthy ones. But multiple things that everybody
did or didn’t do that helped things come out as they did.
Take for example a company that made the strategic decision to build a new
plant, because they thought they needed to be bigger in order to bully the market.
And they built this new plant at a cost of a billion dollars, and it lost money. And the
company continues to lose money. So they fire the plant manager and put in another
one. And then they fire that one and put in their best plant manager, and it still loses
money. They are about to fire that guy.
Then they decide to hire a consultant, who points out that the market price in
that industry is determined by supply and demand. The company built the largest
plant on earth, so it substantially increased supply, and therefore the market price
went down. When comparing the company’s production costs with those of its
competitors, the consultant finds that the company is not the low-cost supplier. In
fact, the company is a medium to high-cost supplier. And the company was barely
breaking even when it started to build this plant. In sum, the consultant points out,
“So you built a new plant, you lowered the market price, and it is below your cost of
production: you killed yourself!”
In the meantime, the person who had proposed building the new plant has
been promoted to CEO. You look at that situation and say, “Whom do you blame?”
And you know, if you have lived a corporate life, that if you start to play the blame
game, it’ll be like musical chairs. “Somebody is going to get squashed, let’s make
sure it is not me.” And everybody starts thinking, “Not me, not me!” It does not matter
who gets squashed. You can fire the CEO, the plant manager, it does not matter. It is
not going to increase your confidence in that company. It is not going to take away
any of the dysfunction of the company.
Instead, you can ask a different question: “Who contributed in some way, by
action or inaction, that you can imagine if they had done something different the
outcome might have been different? And let us list all of the people who might have
done something.” There must have been a ton of people who had their doubts about
that strategy. But then why didn’t they express them? Undoubtedly, there were those
who made it uncomfortable for people who said things like that. So everybody who
made it difficult to raise doubts also contributed. As did the Board of Directors that
approved that strategy, and promoted the guy whose idea it was, and the auditors
who reviewed it. Obviously, there were a lot of people involved, and a lot of things
would have to change to fix that company.
When things go wrong in a complex system, it is the result of multiple failures.
If your goal is to fix it, you need to ask a different question than who is to blame:
“How did we collectively do something stupid without realizing it?” It did not seem
stupid at the time.

EvG: So would it be correct to say that it involves an analysis of the causes
rather than linking them to the particular behaviors of people?

BP: Yes. You are looking for multiple causes. And the truth is that if you have a
real screw-up in your company, they are easy to get rid of. You get in trouble when
smart people do things that appear stupid in retrospect. Then you know you have a
systemic failure. And those are the conversations where we tend to waste an
immense amount of time figuring out who is to blame.
Or take another example. A strategic alliance. Things always go wrong. You
know, something gets delivered late, or it takes longer. You can kill an alliance and
all its potential value if the reaction, which you know will be the reaction of executives
at some level or another, is, “Whose fault is it? Make them pay for it!” You can literally
fall into a black hole arguing about that. And it is inevitable that you will have a whole
string of these kinds of mishaps.
An alliance works reliably only if the people at the interface are competent
enough and confident enough that when these kinds of things happen, they stop and
say, “Let’s figure out how we got into this situation without worrying about blame. And
what do we need to do to fix it?” When executives come down and say, “You make
them pay for this!”, the good relationship managers reply, “You know what? We will
make sure that costs are allocated fairly.” “Oh, but this is going to screw up my
numbers for this quarter!” “Well, if that is the way it comes down, I am sorry about
that. But let’s see what we can do, because I guarantee you your numbers will be a
lot worse next quarter if we don’t handle this right.” And that is what it takes.
In any kind of complex relationship, whether a strategic supplier relationship or
a strategic alliance, if you don’t handle the inevitable flood of conflict that pops up
every single day in a sensible side-by-side approach of let’s figure it out, let’s fix it,
you will never reap the benefit of complex relationships. They will die. And yes,
indeed, if somebody should pay, then let’s figure it out fairly on the merits.
You could say that businesses have spent the 90’s and now most of the
2000’s trying to deal with competitive pressure by doing cost cutting and other lowhanging
fruit kind of things to make themselves more productive. Yet I know very few
people who work in organizations where they say, “This is a place that is perfectly
run.” Anybody in a large organization is thinking about all the ways that are crazy
about the place.
For the next ten or twenty or fifty years the really hard work is going to be to
figure out how we make conflict within our organization not a cost center or a
potential killer, but actually an engine of innovation and a competitive advantage.
Because conflict inevitably means there is something we are missing, there is an
opportunity for getting ahead of the curve faster than our competitors by seeing
something coming. The question we should be focusing on is, “How do we make
managing conflict routine, low-cost, and safe enough for people to take it in stride?”
Because the measure of a good relationship is the degree of conflict you can
take in stride, whether it is a personal marriage or a business relationship. There is
always conflict and in a bad relationship it blows up, and in a good relationship you
take it in stride. We have to make dealing productively with difficult conversations a
routine core competency.

EvG: I like the comparison you make between a marriage and an employment
relationship in business. Somewhere in the mid to late 80’s, the commitment of
companies towards their employees shifted dramatically, and it became a
much looser relationship in which it was acceptable to let people go if the color
of their hair was no longer attractive enough. I believe that is part of the
problem that you are signalling, and one of the reasons why these
conversations have become more and more difficult.

BP: I believe that too. It dates back to the moment when personnel became
‘human resources’. A lot of people seem to like the term ‘human resources’. I like
‘personnel’ or ‘people’ myself. The expression ‘human resources’ dates from a time
when there was a dominant metaphor for organizations that took hold in academia
and in the business world of ‘organizations as machines’. It not a very good metaphor
in many different ways.

EvG: What is new in the new edition of Difficult Conversations coming out in
September 2010?

BP: We answered ten questions that extend the ideas into different areas that
people find challenging. For example, how do you deal with conversations that are
going on by e-mail, or over the phone? How is that different? There is a lot of
research about how that is different and what to do about it. Also how do you take
account of different cultural contexts and expectations?
And, what do I do when I know that I’m stuck in my identity? I keep having the
same bad conversations. Afterwards I can figure out exactly how I got triggered and
why I did what I did, but I cannot seem to change it. I keep doing this thing that gets
me in trouble. So where do I go from here? In other words, it is a number of
questions that we get asked a lot, so we know they are of interest. It adds up to
almost 60 pages of new material added as a new section at the end of the book.

EvG: When are you coming to Amsterdam?

BP: On November 10 and 11, I am putting on a two-day Difficult Conversations
Workshop for business leaders, and the night before I am doing a three and one-half
hour session for the general public. That will be broader in its applicability. It is an
overview for people who are unable to take the full two-day workshop.

EvG: Bruce, I want to thank you for this interview. I wish you much success
with the new edition of Difficult Conversations and with your workshops in the
Netherlands.

-End-

End Notes
1. Bruce Patton is a co-founder of the Harvard Negotiation Project, and as Deputy Director of
HNP led it from 1979 until 2009. He is still Distinguished Fellow of the HNP. He is also a
founder and partner of Vantage Partners, where his work focuses on negotiation and
relationship management in supplier, alliance, outsourcing, and merger contexts; managing
internal executive teams or cross-matrix conflict; and on negotiation advice and capacity
building. Bruce is also a founder and Board member emeritus of the nonprofit Conflict
Management Group (now part of Mercy Corps). His many publications include GETTING TO
YES: NEGOTIATING AGREEMENT WITHOUT GIVING IN (with Roger Fisher and William Ury) and
DIFFICULT CONVERSATIONS: HOW TO DISCUSS WHAT MATTERS MOST (with Douglas Stone and
Sheila Heen).

_____

End notes

1. Bill Lincoln is the Executive Director of the Conflict Resolution, Research and Resource
Institute, Inc. (CRI), see www.cri.cc. Bill’s early experiences include direct intervention in riots
within adult correctional institutions, public school desegregation crisis and Native American
affairs. His work began in 1967 when he spontaneously mediated a racial disturbance in
Rochester, New York. He played a leading role in community mediation in the 1970s and
1980s.
2. Now called the International Institute for Conflict Prevention & Resolution, see www.cpradr.org
3. Formerly an acronym for Judicial Arbitration and Mediation Services, JAMS is the world’s
largest for-profit dispute resolution provider. Especially initially most of its neutrals have been
retired judges. In 1994, San Francisco-based Bates/Edwards merged with Boston-based
Endispute, which in the same year merged with JAMS.
4. Formally called the Committee on Ethics and Professional Responsibility of the American Bar
Association.
5. D. Stone, B. Patton and S. Heen, Difficult Conversations, How to Discuss What Matters Most
(with a foreword by Roger Fisher), Viking/Penguin Books, 1999; second edition 2010. The
(sold out) Dutch version appeared in June 1999 under the title Moeilijke Gesprekken,
Handleiding voor het voeren van gesprekken waar je als een berg tegenop ziet, Spectrum,
1999.

-EvG

Hewlett-Packard v. Hurd - A Challenge to California's Delicate Employer/Employee Balance... or Just a Face-Saving Money Grab?

Michael D. Young — Thu, 23 Sep 2010 16:16:11 -0800

What was that all about?

On September 7, 2010, Hewlett-Packard sues its former CEO and current Oracle chief Mark Hurd in a California lawsuit that most practitioners here agree is untenable under current California law. (See here and here for just a few of the head scratchings.) In the complaint, HP seeks to enjoin its former head honcho from working for a competitor relying on what appears to be the discredited inevitable disclosure doctrine.

It is a lawsuit poised to challenge the very balance of power between employers and employees in California. At issue is whether a California employer can find a creative way to make a non-compete actually stick in this State. The facts are perfect –- a high ranking official whose head is brimming with HP trade secrets, including high level corporate strategies, is ousted for alleged indiscretions and soon finds himself at the helm of arch rival Oracle. How can Hurd possibly do his job steering the strategic course of HP’s key nemesis without HP’s secrets bouncing around in his head like a superball causing havoc with Hurd’s synapses? On top of these great facts, the lawyers for each side are top notch, and they come equipped (presumably) with a legal war chest capable of funding a spritely battle.

And what a battle we have in store for ourselves! In this corner, we have the venerable Business and Professions Code Section 16600, 138 years old and still going strong, knocking down non-competes left and right, raising employee mobility onto a pedestal few other doctrines can share. Will 16600 once again wipe away those upstart efforts to curtail employee mobility, even at the highest levels of the corporate world, even where trade secrets are at risk (but without evidence of any actual or threatened trade secret disclosures), even when billions of dollars are at stake (fine, this may be a slight exaggeration)?

And in this corner, we have California’s paternal statutory trade secret protections – the esteemed California Uniform Trade Secrets Act (affectionately known as CUTSA), supported by decades of unmistakable case law, providing California employers with the ammunition they need to keep their secrets secret. And just about everything qualifies as a secret here, including the make of the boss’ toothpaste. (O.k., not really.)

These two important public policies have done battle before: The interests of employee mobility v. the interests in protecting company secrets. (See here.) This time, will the CUTSA be strong enough to encroach into the non-compete world (if even slightly) and allow for a pre-emptive strike! Taking a page from the pre-cogs in Philip K. Dick’s Minority Report, can an employer prevent the disclosure of trade secrets before it happens? (I was going to make an oracle reference, but I could hear the groans already.) When you know –- you just know –- that those trade secrets are going to be used –- the former employee is going to have to access those secrets in his brain in order to do his new job at the rival -– in other words, the misuse is inevitable, won’t the CUTSA provide some protection?

Inevitable disclosure has not found a happy audience yet in California. In fact, poor Flir Systems, Inc. got tagged for $1.6 million in sanctions just for trying to press inevitable disclosure in a California court. (See here for the blog on that interesting case.) But that doesn’t mean that the inevitable disclosure doctrine is inherently wrong. After all, what is the law if not a big wad of PlayDoh in the hands of the Supreme Court, capable of being molded into new shapes as changes in society demand? Maybe society now looks like HP –- a high tech company needing to protect its secrets of the highest order. Maybe those interests now demand the application of the inevitable disclosure doctrine even at the very slight expense of employee mobility.

So let’s find out already. The lawsuit is two weeks old, I’ve got my tub of popcorn handy, my feet are up on the seatback in front of me. LET THE BATTLE BEGIN!

Round One would be predictable. Try as it might to argue it was seeking something other than application of the rejected inevitable disclosure doctrine, HP can’t avoid the fact that it is seeking an injunction preventing Hurd from taking over as Oracle’s chief; and that the basis for this attempted non-compete is the risk that Hurd will use HP’s secrets when he runs the arch rival. (See here for a copy of HP's complaint in the aciton.) Presumably HP tried mightily –- and unsuccessfully –- to find evidence of some actual or threatened misuse of HP’s secrets by Hurd which would unquestionably support an injunction. But lacking such evidence, HP will lose Round One because the law is clear – today – that inevitable disclosure is not applicable here in California. (See Whyte v. Schlage Lock Co. (2002) 101 Cal.App.4th 1443, 1462 [125 Cal.Rptr.2d 277].) Absent actual or threatened misuse of trade secrets, one cannot enjoin an employee from working for a competitor based on a future theoretical misappropriation. HP’s case should be thrown out right smack on its demurrer.

Round Two would likely be the same. The Appellate Court would rely on the same judicial opinions discrediting the doctrine, and the trial court’s order would be upheld.

Which leads to Round Three, the Supreme Court. And here it would get interesting. Here, the competing policies could be addressed, argued, massaged, and squished like that handful of PlayDoh. Here, we could see if “society” is ready for a new rule. Is CUTSA ready to grow up and stand toe-to-toe with 16600?

How fun would this be?

Well, we may never know. HP and Hurd had to go and selfishly ruin everything.

A mere two weeks after the case was filed, 14 lousy days after California trade secret and restrictive covenant aficionados had their hearts set for a battle of epic proportions, a fortnight after HP declared war on Hurd and Oracle claiming its trade secrets were going to be used and abused by its arch rival ... the parties kissed and made up. Apparently, it was nothing a little money couldn’t fix. According to news reports, HP gave up its fight after Hurd returned about $13 million worth of HP stock.

What happened to the secrets? Presumably, Hurd still has those in his brain. Presumably, Hurd is still going to run Oracle. Presumably, if HP’s complaint is to be believed, Hurd can’t run Oracle without trading on HP’s secrets. What does the return of $13 million in stock have to do with protecting those priceless crown jewels?

Was it simply that HP and Oracle actually learned something from the decade-long Great Legal War down south between Barbie and Bratz – that even the winner of that one (assuming there ever is a winner) is already a loser? The only question is who will lose more by the time the thing is said and done. (If ever a legal dispute cried out for an alternative method of dispute resolution, it is that one!)

Or was this dispute never really about secrets at all? HP is being attacked left and right for its handling of the Mark Hurd fiasco: The employment termination following disputed allegations of sexual harassment and expense report improprieties, followed by an unbelievable golden parachute, followed by the slap in the face when Hurd took the Oracle job, followed by the near stockholder revolt and lawsuits. Maybe HP was just looking for a face saving way out of the fracas.

But maybe I’m looking at this too selfishly. If you look at it another way…when was the last time you heard of a company recovering $13 million in settlement a mere two weeks after filing what is by all appearance a meritless lawsuit? Not bad for a few day’s work.

I’ll have some comments about the employment agreement HP attached to its complaint – it’s a creative example of how one California employer tried to get as much non-compete protection as possible under existing law. But first, I need to figure out what to do with all this popcorn.

-MY

Eric van Ginkel is presenting at the 83rd Meeting of the California State Bar Association!

Eric van Ginkel — Sun, 19 Sep 2010 23:22:04 -0800

Mediator, Arbitrator and Adjunct Professor Eric van Ginkel will be presenting at the 83rd Annual Meeting of The State Bar of California, on September 24 (Panel 40) from 8-10 am!

Eric will be a member of the panel called "Mediation: Prepare, Present and Produce the Best Results for Your Clients"!

This two-hour session will include a live mediation and will provide litigators and other mediation participants an essential "to do" list for getting excellent results from your negotiations and settlement conferences. Roughly 97% of cases settle, so it is important to know best practices for pre-mediation preparation (such as choosing a mediator, deciding whether the case is "ripe" for settlement), managing client expectations, negotiation tactics, and preparing your mediation briefs.

Eric explored many of these topics in his most recent article Mediation Advocacy: Preparing for Successful Mediations, which you can find on his website www.businessadr.com. Join him this Friday morning and receive 1.5 Hrs. CLE and 0.5 Hour Legal Ethics while you improve your negotiation techniques!

For the full schedule of presenters, please see 40 Lit here.

Can Media Owners Save Themselves By Blaming Others?

Mary Zachar — Fri, 13 Aug 2010 06:59:59 -0800

Ken Cloke in his book Mediating Dangerously asks: how can we transform conflict so other options emerge that do not require winners and losers? As mediators, we are asked to guide people through conflicts, shedding light so they can see and as a result move towards more creative and productive ways to conduct their personal and business affairs. As I blog on another litigation scheme designed to “save” a right’s based culture by monetizing infringement, what appears is just another version of lawyers fomenting schemes, and an industry grasping for rescue rather than creating new ways of serving its consumer.

Infringement => $$$

Here’s the newest copyright scheme to monetize infringement. David Kravets’ July 22 blog post over at Wired.com reports that Righthaven LLC, a Las Vegas company associated with Review-Journal owner Stephens Media LLC, as represented by lawyer-entrepreneur Steve Gibson, has executed a new litigation strategy designed to save “ the media world’s financial crisis.” Gibson, predicting that millions of additional infringements will yield revenue as his business plan expands in scope to capture the massive online infringements of media clients’ rights in their content, is optimistic:

Gibson’s vision is to monetize news content on the back-end, by scouring the internet for infringing copies of his client’s articles, then suing and relying on the harsh penalties in the Copyright Act — up to $150,000 for a single infringement — to compel quick settlements. Since Righthaven’s formation in March, the company has filed at least 80 federal lawsuits against website operators and individual bloggers who’ve re-posted articles from the Las Vegas Review-Journal, his first client. Borrowing a page from patent trolls, the CEO of fledgling Las Vegas-based Righthaven has begun buying out the copyrights to newspaper content for the sole purpose of suing blogs and websites that re-post those articles without permission. And he says he’s making money. We believe it’s the best solution out there,” Gibson says. “Media companies’ assets are very much their copyrights. These companies need to understand and appreciate that those assets have value more than merely the present advertising revenues.”

It appears that the scheme is in service to online-media owners against those who re-post or excerpt their content – websites and bloggers, not wholesale aggregators. Because the law with respect to online excerpting of media content is based mainly on Fair Use which is explicated on a case-by-case basis, uncertainty in the strength of the claims exists. There is no clear admission in these cases of copyright infringement (as may arguably exist with illegal filesharing of entertainment media) even though there may be use of another’s content without permission. The law is not entirely in the content owner’s favor. The Copyright Office website cautions:

The distinction between fair use and infringement may be unclear and not easily defined. There is no specific number of words, lines, or notes that may safely be taken without permission. Acknowledging the source of the copyrighted material does not substitute for obtaining permission. The 1961 Report of the Register of Copyrights on the General Revision of the U.S. Copyright Law cites examples of activities that courts have regarded as fair use: “quotation of excerpts in a review or criticism for purposes of illustration or comment; quotation of short passages in a scholarly or technical work, for illustration or clarification of the author’s observations; use in a parody of some of the content of the work parodied; summary of an address or article, with brief quotations, in a news report; reproduction by a library of a portion of a work to replace part of a damaged copy; reproduction by a teacher or student of a small part of a work to illustrate a lesson; reproduction of a work in legislative or judicial proceedings or reports; incidental and fortuitous reproduction, in a newsreel or broadcast, of a work located in the scene of an event being reported.”

Instead of asking what are users’ expectations in the digital culture and how might publishers and authors meet them and adapt, content owners are asserting rights rather than interests, ignoring that the very business model from which these content owners derive their rights is based on two pillars of constitutional dimension, free speech and copyright, both equally designed to serve the consumer market and also anchored in democratic ideals. In commodifying its copyrights to monetize infringement, media owners and their attorneys seem to overlook the vitality of digital content and the fact that digital content also acts as a vehicle through which individuals “speak” – communicate – in exercise of their 1st Amendment rights.

Can this strategy lead to Self-Censorship?

Unlike a song or film copied and distributed online through filesharing, Righthaven brings complaints for posting in many cases excerpts of articles even though linked to the complete article with attribution - news content shared on sites not to consume as entertainment, but as information, not for its expression, but rather its currency. The chilling effect of this new litigation strategy is that it is designed to impose self-censorship, sending a message to potential infringers unable to bear the costs of litigation, that they dare not exercise their rights to repost excerpts of content, which in many cases would otherwise be fair use, one of the copyright safeguards to preservation of free speech.

Copyright and 1st Amendment coexist because, as our Supreme Court articulated in Eldred v. Ashcroft, “copyright’s built-in free speech safeguards are generally adequate to address any conflict with free speech rights.” If linking to and reposting excerpts of online content is our cultural currency –and linking and attribution the tool which allows the flow of information and communication - what might an industry which is itself built on free speech and fair use do to address copyright infringement? Is the result of a litigation strategy designed to lock up online content the preservation of a market monopoly, or is it that plus a monopoly over our cultural currency?

Media owners have an exalted status with respect to content (e.g. “hot news” as reported by Mike Masnick and Kevin Smith), and are treated more deferentially than other speakers. First Amendment and free speech are the driving force of media law. To assert as Gibson does that copyright is a media company’s core asset is to see 1st Amendment and copyright as separate rather than as twin pillars supporting the industry. When it sues its own consumer, and will even sue its content’s interviewee who has reposted, a dysfunction arises.

Copyright, a limited monopoly, cannot and does not lock up facts, opinions, ideas, or unprotectible content, and media companies’ attempt to monetize online infringement risks disrupting the twin pillars on which it bases its own survival. Online content cannot be treated as a static commodity - the digitization of information and its use on the web is not static but rather like search engines, a pointer to a flow of ever changing content transforming its static nature to process, movement creating more content, educating more consumers, transforming yesterday’s news to today’s pointer.

Freedom of speech depends on a vast public domain. Most consumers see excerpting and linking as essential to dialog in today’s marketplace. A new Facebook Page "stop the LVRJ/RIGHTHAVEN witch hunt! (may have to be logged in to FB to see it) is an online dialog about Righthaven, resulting in a black list of its media clients. Is this the way to save media from its financial crisis? Where is the bigger view which sees the creativity in mutually beneficial indexes and roadmaps?

The internet has completely changed the outcome of a copyright holders’ right to prohibit and restrict copying and distribution of copyrighted works for essentially non-commercial purposes. Assertion of these rights is based on the assumption that the use of copyrighted content is static. Robert Chender’s July 11 Contemplative Law post asks: what if the legal framework under which we assert legal rights is based on an incorrect assumption and yet is constitutionally permissible? Media owners might ask themselves this same question. The digital “free” culture has proven that a right’s based assumption no longer serves the consumer who uses content to communicate, dialog, connect, and create new uses of content. If an industry fails to serve its consumer, how can that be a means out of a financial crisis? Rather than using new technology to entrap users, technology could be used to discover ways to enhance the uses, capture new value and generate a more vital marketplace – actually, the goal of both copyright and the 1st Amendment. Wouldn’t that be cool?

Citizen’s Media law project has posted a copy of one of the complaints here. Additional links to complaints offered here.

How can we learn more about this?

Here are two great articles by Steve Green with the Las Vegas Sun, updating issues involved in this strategy to save the media, from August 9 and August 4.

As these articles suggest, one of the issues to emerge in this dispute is the implication of the DMCA take down provisions with respect to third party content and the

essential step some websites and bloggers may have skipped in order to fall under the safe-harbor provisions (e.g., registering designated agent with the Copyright Office). Note also that Professor Eric Johnson at Blog Law Blog is tracking this story and provides good updates as well as the back-story on the Righthaven cases. There is also an interesting podcast here by Robert Ambrogli on the extent that a blogger can use content of a news story without attribution.

-MZ

Speaker Eric van Ginkel is presenting at the Annual ABA Conference on Friday August 6th!

Rob Reaugh — Mon, 02 Aug 2010 07:29:12 -0800

Greetings IP ADR Blog readers!

Mediator, Arbitrator and Adjunct Professor of Alternative Dispute Resolution at the Straus Institute for Dispute Resolution will be a panelist at the Annual ABA Conference on Friday August 6 from 4-5 p.m. The panel discussion entitled "Maximize Your Success with Court-Connected ADR" will focus on how litigators can settle at the point of maximum benefit for their client!

Most IP cases settle--but often it is late in the litigation process after the money runs out. This panel will help litigators prepare for each type of ADR session and help them settle successfully, discuss pitfalls to avoid and provide advice for choosing the best ADR procedure for a particular case. The discussion will be moderated by Suzanne Nusbaum of Los Gatos, CA and takes place on the 4th Floor at the Intercontinental, San Francisco at 888 Howard Street, San Francisco, CA.

-RR

Eating Pie and Trade Secret Theft - What's the Use?

Michael D. Young — Fri, 16 Jul 2010 07:00:00 -0800

It is not often a case hits upon two of our favorite topics: Trade secrets and pie. But when it does, mmmmmmmm, it’s good to be an attorney.

And for this reason, we are grateful to Justice Rushing who provided us with a little of both in his recent opinion in Silvaco Data Systems v. Intel Corp. (Calif 6th App. Dist., April 29, 2010), Case No. H032895.

Silvaco is a relatively standard trade secret case in the computer software world … with a twist.

It starts with the alleged theft of source code – that’s the computer language that mere humans can understand and write. This human-drafted source code is later fed into a machine (a compiler) to produce “object code” (or “target code”), which is the nearly indecipherable gobbledygook that can be executed by the computer itself. (Yes, I know this is a slight oversimplification, but I’m a lawyer dammit.)

Source Code Theft

Silvaco, the plaintiff in the case, alleged that a competitor (CSI) stole its human-drafted source code and used it to create a competitive software product. Silvaco eventually obtained an injunction against the competitor. But that’s not the interesting part. The good part – the pie – comes next.

After obtaining the injunction, Silvaco sued Intel. Why? Because Intel had purchased and was using the software that CSI had created from Silvaco’s source code. The software did not actually contain the source code, but it was using executable, machine-readable code that had been derived (via the compiler) from the source code. Silvaco claimed that by using the software, Intel was “using” its trade secret source code, and hence was in violation of California’s Uniform Trade Secret Act (CUTSA).

Intel begged to differ and filed for summary judgment. Of the many arguments set out in the briefs, one was simply that Intel hadn’t “misappropriated” Silvaco’s trade secret source code. Under CUTSA, to “misappropriate” a trade secret, one must either “acquire,” “disclose,” or “use” the secret.

Silvaco argued that Intel “used” the source code when it ran the software since even though the software was executing the object code, the object code was based on the stolen source code. This is not a wholly frivolous argument.

The Court and Pie

But the court wouldn’t hear of it. Instead, in granting Intel’s motion, the court decided to talk pies and pie recipes. When one bakes a pie from a recipe, he is clearly “using” the recipe, noted the court (to which most bakers would, I presume, agree). But what about the blogger who eats the pie? Is he “using” the recipe? Or just enjoying the fruits (or chocolate creams) of the end product? Mmmmmm.

The court held that the eater of the pie is simply a happy diner…even if he knows the baker stole the pie recipe in the first place. He is not a “user” of the recipe itself:

“One who bakes a pie from a recipe certainly engages in the 'use' of the latter; but one who eats the pie does not, by virtue of that act alone, make 'use' of the recipe in any ordinary sense, and this is true even if the baker is accused of stealing the recipe from a competitor, and the diner knows of that accusation.”

The court also employed a “stop watch” analogy, though the imagery is much less delectable: the coach who “uses” a stopwatch, according to the court, cannot be said to be “using” the trade secrets that went into manufacturing the stopwatch.

Finally, the court looked to “public policy” to support its conclusion – if a software user (like you, for instance) were considered to be “using” the underlying source code that was used to generate the object code that was running the software, then every software user (like you, for instance) could be liable for trade secret misappropriation if it later turned out that the software manufacturer utilized purloined source code. (Did you follow that?) If software end users like you and me are at risk of trade secret misappropriation for using software based on stolen source code, “this risk,” according to the Court, “could be expected to inhibit software sales and discourage innovation to an extent far beyond the intentions and purpose of CUTSA.”

Is the Court Right?

From a logical perspective, is the court right? Can’t it reasonably be argued that a software user does in fact “use” the underlying source code that allowed the software to be developed? Doesn’t the pie eater “use” the recipe when he or she eats the pie? The court relies on the dictionary definition of “use” to support its interpretation, but doesn’t this definition still beg the question:

“As it appears in the act, the noun 'use' is surely intended in the ordinary sense, i.e., '[t]he act of employing a thing for any (esp. a profitable) purpose; the fact, state, or condition of being so employed; utilization or employment for or with some aim or purpose, application or conversion to some (esp. good or useful) end.' (19 Oxford English Dict. (2d ed. 1989), p. 350, italics added.)"

It seems to me that “use” is more of a continuum than a bright line, like proximate cause. The pie eater is “using” the recipe, but not as much as the baker “used” the recipe. The personal trainer who is getting paid to help the pie eater lose weight is also “using” the recipe, as is the personal trainer’s tanning salon (hey, you’ve got to look good in that business). At some point, though, you’ve got to cut off “use” just as the courts have to cut off proximate cause. The use of “public policy” to help define where that cut-off should be certainly seems to make sense.

Personally, if it means I can bite into that lemon meringue without fear of being sued, I’m all in favor of it. So’s my trainer.

-MY

California's Trade Secret Disclosure Statute Doesn't Apply in Federal Court - or Maybe it Does

Michael D. Young — Wed, 14 Jul 2010 07:00:00 -0800

It's been a little while since I have posted on matters relating to the IP ADR Blog, but perhaps I can start with California’s special take on trade secrets, one of my favorite subjects. In particular, recall the state statute requiring plaintiffs to identify their trade secrets “with reasonable particularity” before discovery can be commenced. (California Code of Civil Procedure Section 2019.210.) I blogged about this earlier when Sylvester Stallone’s low carb chocolate pudding kindly added to our understanding of the parameters of the trade secret designation statute. Well, the statute is in the legal news again.

This time, the question is whether CCP 2019.210 applies to trade secret cases in federal court. One would think this would be a relatively easy issue – pick one, yes or no, and let’s get on with it. But apparently that would take the fun out of it. Instead, California’s district courts have had a tough time making up their minds on this one…and it’s causing we trade secret practitioners some consternation.

The latest to try his hand at this one is Judge Moskowitz in the Southern District of California, who believes he has sorted it all out for us in his recent opinion in Hilderman v. Enea Teksci, Inc. (USDC SD CA 2010) No. 05cv1049, 2010 WL 143440.

CCP 2019.210 Review

A little background first (with apologies to fellow TSGs who know this already).

Recall that CCP 2019.210 requires a plaintiff to describe his trade secrets “with reasonable particularity” before he can commence discovery. The rule certainly seems reasonable enough:

“Before a defendant is compelled to respond to a complaint based upon claimed misappropriation or misuse of a trade secret and to embark on discovery which may be both prolonged and expensive, the complainant should describe the subject matter of the trade secret with sufficient particularity to separate it from matters of general knowledge in the trade or of special knowledge of those persons who are skilled in the trade, and to permit the defendant to ascertain at least the boundaries within which the secret lies.”

Diodes, Inc. v. Franzen (1968) 260 Cal.App.2d 244, 253, 67 Cal.Rptr. 19.

The purpose of the disclosure rule is also noble enough: (a) help the court shape discovery; and (b) provide the defendant with sufficient notice of what he is alleged to have stolen so he can develop a defense.

So what can go wrong with this? Plenty.

Does 2019.210 Apply to Federal Cases?

In the Hilderman case, the counterclaimant, apparently just assuming that 2019.210 applied in the federal action, served a trade secret disclosure on the counter-defendants identifying the trade secrets at issue as (a) employee contact information; (b) customer information; and (c) some kind of “processes and checklists.” Discovery and litigation thereupon proceeded and the cased steamrolled forward.

However, just before trial, it appears that the counterclaimant may have been trying to pull a fast one – it wanted to present evidence of additional allegedly stolen trade secrets, including pricing information, vendor leads, and employee leads. Naturally enough the counter-defendants cried foul, moving to exclude this evidence on the grounds that it had not been disclosed pursuant to 2019.210. Not a bad argument – since it wasn’t disclosed, the party didn’t know these alleged secrets were part of the case, and hence did not undertake appropriate discovery regarding them. One cannot blame the counter-defendants for feeling sandbagged.

Judge Barry Moskowitz of the Southern District of California surprised everyone by ruling that the counter-defendants' argument lacked merit, not because they weren’t sandbagged, but because Section 2019.210 doesn’t apply to federal court actions to begin with.

The Court first noted that while the 9th Circuit has so far been silent on this issue, “[t]he district courts have reached different conclusions.” Nonetheless, with appropriate “due respect” for its sister courts who obviously got it all wrong, the Hilderman court held that 2019.210 conflicted with FRCP 26. (Rule 26 requires certain initial disclosures by parties in all federal cases, and serves as the gatekeeper for the initiation of discovery.) It would be unseemly, after all, for a little state court rule like 2019.210 to impact the initiation of discovery in big federal court when there is a perfectly good federal rule on the books doing the same thing.

Now this would seem to be a good thing for the counterclaimant who was hoping to have no limits on the alleged trade secrets it could assert at trial as having been misappropriated. On the other hand, is it fair to the counter-defendants, having relied on the now non-mandatory 2019.210 disclosures, to have to defend against new alleged trade secret thefts without having had a chance to prepare a defense? Talk about your surprise at trial.

Fairness

Well, that wasn’t a hat rack sitting behind the bench. Judge Moskowitz was all over the fairness argument, and had that one covered without the need for 2019.210:

"Accordingly, the Court holds that § 2019.210 does not apply to federal actions. The Court's holding does not, however, give [the counter-claimant] free reign to try trade secret claims that were not disclosed in its “Trade Secret Disclosure.” As discussed at the hearing, as a matter of fairness, Counter-Defendants must have been given fair notice of [couner-claimant’s] trade secret claims, whether in the “Trade Secret Disclosure” or other discovery responses. If Counter-Defendants were not given fair warning of certain trade secret claims, [counter-claimant] may be barred from presenting these claims at trial."

In other words, defendants are entitled to notice of the trade secrets at issue, even in federal court. And whether that notice comes by way of a potentially non-mandatory 2019.210 disclosure, or an interrogatory response, it doesn’t really matter. So long as the defense is given “fair warning” of the trade secret claims, all is good. At least in Judge Moskowitz’s court.

What does all this mean? Well, it continues the debate over whether 2019.210 applies to federal trade secret cases. The money now seems to be favoring “inapplicable.” Nonetheless, if you find yourself as a defendant in a federal trade secret claim, cover yourself. Whether there is a 2019.210 disclosure or not, make sure your interrogatories at least ask for an itemized statement of each and every trade secret at issue.

-MY

New ADR Services for TV-format related Disputes

Eric van Ginkel — Mon, 12 Jul 2010 07:00:00 -0800

Jordi Masdevall, Senior Information Technology Attorney at Baker & McKenzie’s Barcelona office reports that the World Intellectual Property Organization’s Arbitration and Mediation Center, in cooperation with the “Format Recognition and Protection Association” (FRAPA), now provides ADR services in disputes relating to television formats.

These disputes may concern allegations of format plagiarism or the unauthorized copying of TV formats, such as those used for game, reality or talent shows and sitcoms. Programs using these formats are often remade in different markets using local parties.

The agreement between WIPO and FRAPA provides that WIPO will take on the latter’s existing mediation activity and will administer TV format-related disputes filed under the WIPO Mediation and Expedited Arbitration Rules for Film and Media.

The Film and Media Rules were adopted in December 2009, and are specifically tailored to the specific characteristics of disputes arising in the film and media sectors. They foresee appointment of a specialist from a dedicated international WIPO Panel of film and media mediators, arbitrators and experts. The WIPO Center and FRAPA also envisage providing specialized training and information sessions on format dispute resolution.

The undersigned, though not (yet) a member of this particular panel, is a mediator and arbitrator for WIPO.

-EvG

"Spam-igation": A New Lever for Settlement?

Mary Zachar — Fri, 18 Jun 2010 12:16:59 -0800

The Google Book Settlement (GBS) raised the question of whether filing a class action can be an acceptable lever for obtaining IP licensing; that question remains a topic of concern with scholars and Amici continuing the dialog. See, Grimmelmann’s Big View of the GBS here.

Recently the US Copyright Group under the banner of SAVECINEMA.ORG launched a new IP strategy targeting thousands of unidentified anonymous independent Internet Users who allegedly without authorization downloaded and shared protected film.

All the claims are represented by the same counsel, with the same construct - inconvenient forum, anonymous Does. The most recent, brought by Voltage Pictures for infringement of Best Picture-winner The Hurt Locker, names 5,000 Doe defendants. As of June, 2010, seven suits, against 14,583 Does, have been filed in the District of Columbia. Nat Anderson at Arts Technica Law & Disorder in his March 31, 2010, post figured out how the strategy works (and thanks to him for sharing EFF’s “spam-igation” tag); as he explains:

“The tech comes from GuardaLey, a company registered in England and Wales. According to a declaration from GuardaLey's Director of Data Services, Patrick Achache, the company identifies BitTorrent users sharing Far Cry in two ways. First, it simply searches P2P networks for Far Cry, then connects to the swarms and logs the IP addresses of those sharing the file—not subtle, but it works. Second, it reviews ‘server logs obtained from P2P networks to determine the users who were offering the files of this copyrighted movie.’ Just a second—it does what now? How did GuardaLey get access to P2P server logs? The company doesn't say; perhaps it runs its own honeypot trackers in order to obtain IP addresses. In any event, the company ends up with IP addresses of users with bits of some file called "Far Cry." It then downloads the bits of the picture it can get and logs the file metadata. From the IP address, it figures out which ISP is responsible and e-mails them, asking the ISP to retain all logs on the IP address in question at the time in question. Next, Achache must verify the content in the file. ‘I or one of my assistants have watched a DVD or VHS copy of the motion picture provided by Plaintiff,’ he writes. The team then accesses the downloaded files and confirms ‘that they contain a substantial portion of the motion picture identified in the Complaint.’ That's when the lawyers take over, filing federal cases against Does and seeking the court's permission to send subpoenas to the ISPs. If allowed, the ISPs would then turn over subscriber information belonging to the user who was assigned the IP address at the time in question. Defendants are apparently then given a chance to settle; if not, the case could proceed as a named lawsuit.”

The strategy could not get traction without use of the legal “Doe defendant” fiction, a common and legitimately useful tool in litigation when the true identity of all of the culpable defendants is unknown; when used with online “anonymous” defendants, linked by software identifying their location and identity, and against whom, after filing suit and using court process to identify, a threat is made to settle or else, a whole other picture is presented. These individual defendants, residing all over the country, must either defend civil actions brought in Washington, DC, or pay as demanded to make the case go away. As constructed, use of the “Doe defendant” allegation is the first lever in this new business model because without the sweep of this net, mass litigation against defendants could not proceed – each individual defendant would need to be named and sued in a jurisdiction within which minimum contacts exist.

As reported by Nate Anderson on June 1, 2010:

“The model couldn't be simpler: find an indie filmmaker; convince the production company to let you sue individual ‘John Does’ for no charge; send out subpoenas to reveal each Doe's identity; demand that each person pay $1,500 to $2,500 to make the lawsuit go away; set up a website to accept checks and credit cards; split the revenue with the filmmaker.”

To shed a different light on this issue, consider the June 13, 2010 post at Torrent Freak, a recent interview of independent film director Sam Bozzo, who claims that if you make a good film, having it leaked to BitTorrent can only help. It's only bad if your film isn't very good:

“In a nutshell, I believe the only films that are hurt by torrent sharing are mediocre and bad films. In contrast, the good films of any genre only benefit from file-sharing. Due to this, I feel the current file-sharing trend is a catalyst for a true evolution in filmmaking...”

What can be distilled from this new approach is that plaintiff independent film companies and their counsel have resorted to self-help in an advertising campaign to Save Cinema, claiming that unless their settlement demands to identified defendants of between $1,500 -$2,500 are met, anyone who tries to defend the case in court could end up paying $150,000 in statutory damages, plaintiff’s costs, and on the front end - even more foreboding – their own attorneys fees to defend them in federal court. This type of puffing and bravado is not new to litigation – but what is new is that it arises in an Internet milieu, via lawyers’ web-based solicitation of clients, from a data base of anonymous IP addresses, identified by a software program which links the address to one film’s filesharing, and then from that data base a really massive Doe population is created upon which one single federal copyright infringement suit is filed. Once filed, the court process via subpoenas directed at the ISP is engaged, and once the real party defendants are identified, demand letters are sent and the leverage of being named and forced to defend in an inconvenient forum becomes the power under the lever – well, let’s now call it a club, not a lever, since it is now a weapon threatening enough to cause most folks to pay up irrespective of their rights, a good faith defense, or their ultimate culpability.

Plaintiffs have now served ISPs with over 14,000 subpoenas attempting to gain the identity of anonymous users of BitTorrent for which they have matched unauthorized downloads. Unlike some servers who made voluntary disclosure of their users, Time Warner has moved to quash, and in an unlikely alliance, the EFF, Public Citizen and the ACLU have joined Time Warner in this effort. The EFF’s articulated position is that "These are organizations that are formed for the purpose of suing, and they view the legal system as a system for making money and then use it to fund additional lawsuits."

Dunlap, Grubb, & Weaver, through lead partner Thomas Dunlap, describes in its law firm blog that it is the firm behind the US Copyright Group’s stated mission of demanding payment through “settlement offers” from all those it has identified as illegally downloading protected films. On the US Copyright Group’s website, it states that it will end illegal filesharing by collecting more in settlement than the content is worth, which research suggests will end film piracy: is this method of extracting settlement abuse of process? In a 1972 California Supreme Court case, Barquis v. Merchants Collection Association of Oakland, Justice Tobriner, writing for a unanimous Court, held that if a collection agency willfully and knowingly filed actions in an improper county pursuant to statutorily inadequate pleadings for the ulterior purpose of impairing defendants' rights to defend the suits in order to coerce inequitable settlements and default judgments, such strategy constituted ‘abuse of process'; that if the plaintiff was threatening to continue such practice in the future, the same could be enjoined either as a continuing mass tort against which legal remedies were inadequate or as an ‘unlawful business practice’ constituting unfair competition. Litigation strategies can go amok when reviewed in light of all of the circumstances, including statements by the parties and web-based advertising soliciting clients and making claims of what they intend to accomplish by filing suit.

Here is the underbelly of a mass litigation strategy (see also the EFF Amicus Brief in support of Time Warner’s Motion to Quash for a thorough review of the law):

Alleged violation of civil litigation safeguards designed to protect due process rights of individuals, including not having to defend in an inconvenient forum and improper joinder which jeopardizes the right to a meaningful defense (FRCP 20 & 21);
Violation of precedent set forth in the RIAA cases with respect to the privacy rights of anonymous Internet users;
Disregard for FR 11 pleading standards based on failure to conduct an evaluation of facts and law as applied to each individual defendant, and each alleged disparate incidence;

Does this settlement strategy give rise to a scheme which constitutes abuse of process (with settlement demands already being dubbed “extortion letters”)? Are there also possible violations of professional ethics with respect to claims made in attorney advertising designed to solicit clients, and will groups asserting these strategies face possible unfair competition claims from lawyers who do not adopt an “unlawful” strategy and therefore are at a disadvantage as they compete for clients using only lawful means? U.S. District Judge Rosemary M. Collyer of the District of Columbia has already chafed at the practice brought before her in the Motions to Quash. (A recent 12b Motion brought by Voltage in a case where it is the defendant demonstrates that it agrees that having to defend an action in an inconvenient forum is grounds to dismiss. )

With relaxed lawyer advertising now commonplace (but still regulated by applicable state bar rules), the US Copyright Group has created a website as an entrepreneurial marketing tool actively recruiting plaintiffs, and then using the threat and specter of protracted expensive federal court litigation against defendants as a lever for immediate settlement. Just as with the GBS, there may be other concerns which must be addressed as this business model is held up as a way to monetize infringement by use of court process. We are familiar with rightsholders’ trade groups championing their cause, as in the GBS and RIAA, but who is the US Copyright Group? Its web ad does not identify its principals. And finally, does resort to a business model monetizing that which the rightsholders’ claim they want to prevent solve the file-sharing infringement problem, or is there a Bigger View that will, as with the GBS, eventually be addressed by the courts, as well as interested parties and policy groups?

And with accusations that law-wholesaling intentionally and rather blatantly ignores both procedural and substantive rights of individual defendants, and when using the imprimatur of a federal court may constitute abuse of process, this new strategy may not survive – more will be revealed as the cases come under judicial review. While critics of the GBS may find some similarity between the class action lever and these class defendants, certification of the class itself conflates legal issues through legitimate litigation practices, where most folks are represented and their rights and interests acknowledged. GBS’s structural flaws– among which was the opt-out aspect which neglected unrepresented orphan works - and the lack of any representative for the public interest – may not be inherently insurmountable once additional interests are given a seat at the table.

Ray Dowd’sCopyright Litigation Blog June 6, 2010 post, demonstrates that there are consequences to copyright infringement litigation positions, tactics, strategies and most of all schemes, and that even when a right’s holder believes that the net catching the infringers is safe and will not harm, it may not be acceptable to the traditions of fair play we rely on in a legal system where everyone has an interest to protect. Ray comments on the 9th Circuit’s recent slam against an attorney, sanctioning on its own motion pursuant to 28 U.S.C. §1927, and in an earlier post on the 7th Circuit‘s similar result, slamming an attorney for bringing a copyright infringement action which the court found lacked merit. I think anyone who practices before the federal courts is aware of Rule 11’s stringent requirements, and the courts’ inherent power to sanction under §1927. What seems to be true is that these new strategies to address IP infringement cannot be viewed out of context. There is a Bigger View. Will be interesting to see where these new “levers” lead and whether this recent trend can in fact “Save Cinema.” For a view of the actual paper trail involved in the US Copyright Group’s strategy, here is a link to some of the documents.

-MZ

The US Supreme Court takes on Consumer Arbitration Issue

Eric van Ginkel — Mon, 07 Jun 2010 08:00:00 -0800

In February 2002, Vincent and Liza Concepcion entered into a cellphone agreement with AT&T Mobility. They had been attracted by AT&T’s promotion of free cellphones when committing to a two-year contract. Then the Concepcions were presented with a bill for $30.22 in sales tax for the two phones.

I remember how surprised I was when this “free” cellphone resulted in a bill for sales tax. Besides thinking it could be an illegal tie-in, I let it go. Sometimes I think that Apple violates antitrust laws as well by compelling iPhone users to take out an AT&T contract. I know, it has become quite the norm these days, to tie a particular model cellphone to a particular carrier. Shouldn’t that be illegal?

Anyway, after some years had passed, the Concepcions did not take this charge for sales tax lying down, arguing that when you promote a “free” cellphone, it should be free, and not be subject to sales tax for the full price of the phone if bought separately. To do otherwise would be “fraudulent”.

Obviously, bringing an individual suit for $30.22 did not seem like the viable thing to do. So in March 2006 they and three other persons (Jennifer Laster et al.), whose claims were consolidated with theirs, decided to bring a class action against AT&T in the Southern District of California. But, under their adhesion contract with AT&T (“take it or leave it”), the plaintiffs were confronted with an arbitration clause that – you guessed it - included a class action waiver clause.

On a side note, I wonder whether the right to a class action can be waived at all. To my knowledge this question has never been raised in California. The modern class action device was derived from a common law concept called virtual representation, which meant that “a person who was not a party to an action was deemed to have been virtually represented, and thus bound by the judgment, if his or her interests had received adequate representation by a party. See, e.g., Bernhard v. Wall, (1921) 184 Cal. 612, 629.” Arias v. Superior Court, 46 Cal.4th 969, 988-989 (2009). Don’t these origins of the class action sound very much like something parties cannot waive? I found one recent report where a court held that you cannot validly waive the right to bring a class action against a car dealership in South Carolina under its Dealers Act, as it is explicitly against public policy.

Almost five years after the Concepcions had entered into their cellphone contract (but 3 months before they filed suit), AT&T amended the arbitration agreement and added what they called a “premium payment” equal to the maximum claim that may be brought in your county’s small claims court. In California, that maximum claim is $7,500. AT&T would pay this amount if the arbitrator awarded in favor of the consumer an amount greater than AT&T’s last written settlement offer before the arbitrator was selected.

I don’t quite understand how AT&T thought this would change the class action waiver from being substantively unconscionable under California law to one that is substantively “conscionable”. Both the District Court and the Ninth Circuit did not think it changed anything either, when they had to decide on the validity of the clause upon AT&T’s motion to compel arbitration. Laster v. AT&T Mobility LLC, 584 F.3d 849 (9th Cir. 2009).

As the Ninth Circuit explained, AT&T would simply offer to pay the face value of the claim before the arbitrator was selected and thus avoid having to pay the $7,500. “Thus, the maximum gain to a consumer for the hassle of arbitrating a $30.22 dispute is still just $30.22.” Laster, 584 F.3d at 855.

The validity of an arbitration agreement is decided by the court rather than the arbitrator, in accordance with Section 2 of the Federal Arbitration Act (“FAA”). Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U. S. 395 (1967); Buckeye Check Cashing, Inc. v. Cardegna, 546 U. S. 440 (2006); Preston v. Ferrer, 552 U.S. 346 (2008). Only when the validity of the entire contract is challenged, is the arbitrator competent to decide the issue. This distinction stems from the wording of Section 2 (as interpreted in Prima Paint), which provides that arbitration clauses “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” In order for a court to be able to decide on a motion to compel arbitration pursuant to Section 3, it needs to decide on the validity of the arbitration clause under Section 2.

Following the California Supreme Court’s decision in Discover Bank v. Superior Court, 36 Cal.4th 148 (2005), the Ninth Circuit Court of Appeals analyzed the validity of the class action waiver. Generally, under California law, in order to be valid, an agreement must be able to withstand both a procedural and a substantive “conscionability” test. Adhesion contracts are held to be procedurally unconscionable.

....

Arbitration clauses in adhesion contracts are not automatically held to be substantively unconscionable. Class action waivers are, at least when small amounts of money per consumer are involved. Excluding the class action vehicle deprives plaintiffs of an effective remedy, as it is not worth any plaintiff’s trouble to arbitrate a claim of even a few hundred dollars. “And the class-action device saves the resources of both the courts and the parties by permitting an issue potentially affecting every [person similarly situated] to be litigated in an economical fashion under [Federal] Rule 23.” Califano v. Yamasaki, 442 US 682, 701 (1979). See also Judge Werdegar’s concurring opinion in Arias v. Superior Court, 46 Cal.4th 969, 988 (2009). Excluding class actions affords the company virtual immunity from lawsuits aimed at redressing its misbehavior, thus avoiding the very reason that the class action procedure was developed.

As the California Supreme Court said in Discover,

“Fully aware that few customers will go to the time and trouble of suing in small claims court, Discover has instead sought to create for itself virtual immunity from class or representative actions despite their potential merit, while suffering no similar detriment to its own rights. [¶] ... The clause is not only harsh and unfair to Discover customers who might be owed a relatively small sum of money, but it also serves as a disincentive for Discover to avoid the type of conduct that might lead to class action litigation in the first place. By imposing this clause on its customers, Discover has essentially granted itself a license to push the boundaries of good business practices to their furthest limits, fully aware that relatively few, if any, customers will seek legal remedies, and that any remedies obtained will only pertain to that single customer without collateral estoppel effect.” Discover Bank v. Sup. Ct., 36 Cal.4th at 159-160.

Following the Discover analysis, both the District Court and the Ninth Circuit Court of Appeals found AT&T’s class action waiver to be both procedurally and substantively unconscionable, and denied AT&T’s motion to compel arbitration.

On May 24, 2010, upon AT&T’s petition, the United States Supreme Court granted certiorari. AT&T’s principal argument is that federal law, in the form of the FAA, pre-empts state law that bars agreements to arbitrate on an individual basis. The California courts and the Ninth Circuit have consistently held that the rule declaring class action waivers unconscionable applies not only to arbitration clauses, but also to clauses barring class actions in the courts, and that the unconscionability tests as they apply to class action waivers are merely a “refinement” of a “general sliding scale approach” to unconscionability under general contact law.

In response to that argument, AT&T points to Preston v. Ferrer, 552 U.S. 346 (2008), in which the Supreme Court held that the FAA preempted a California law requiring the exhaustion of an administrative procedure for certain disputes, even though that requirement applied to both judicial and arbitral proceedings. Pet.Cert. at 5. The Ninth Circuit dismissed that argument by distinguishing Preston, as there the validity of the whole contract was challenged rather than just the arbitration clause, while plaintiffs in this case are challenging the arbitration clause.

Given the pro-business leanings of the Court’s majority, this promises to be a very interesting case!

In its Petition for Certiorari, AT&T’s “Question presented” makes an awkward assumption:

“Whether the Federal Arbitration Act preempts States from conditioning the enforcement of an arbitration agreement on the availability of particular procedures--here, class-wide arbitration—when those procedures are not necessary to ensure that the parties to the arbitration agreement are able to vindicate their claims.” Pet.Cert. at i.

As you can see, AT&T assumes that you don’t need class actions or class arbitrations, as individual arbitrations are just as capable of enabling consumers to vindicate their claims!

AT&T goes on to argue that:

“Class-wide arbitration affords none of the benefits of traditional, individual arbitration--it is at least as burdensome, expensive, and time-consuming as litigation--while multiplying the risks enormously because judicial review is so limited. For that reason, hundreds of millions of arbitration agreements require that arbitration proceed on an individual basis.” Pet.Cert. at 2.

AT&T seems to imply that since class arbitration affords none of the benefits of individual arbitration, class actions (whether in court or in arbitration) should be excluded altogether!

AT&T also appears to argue that California law does not declare the exclusion of class arbitration in consumer adhesion contracts unconscionable because the consumer will not bother pursuing a small claim (in this case $30.22 for two phones), but rather:

“not because it precluded the Concepcions from vindicating their own claims, but because it precluded them from serving as the agents for the vindication of claims of third parties.” Pet.Cert. at 3.

In my opinion, it is not entirely unlikely that the Supreme Court will overturn the Ninth Circuit, declaring class action waivers in consumer arbitration agreements to be valid as a matter of federal law. Such a decision would likely give new life to the proposed Arbitration Fairness Act, a bill currently (pending in both a house and a senate version) that appears to be stalled in committee which basically seeks to change arbitrability of consumer contracts.

Stay tuned!

-EvG

A USPTO Ombudsman Pilot Program, Now That's Using ADR in IP! Or is it?

Eric van Ginkel — Mon, 31 May 2010 23:03:54 -0800

On April 6th of this year, the Patent and Trademark Office announced its new Ombudsman Pilot Program for patent examinations. David Kappos, the USPTO’s Director, states in his blog entry of May 12, 2010 that the program was established to assist in meeting the Agency’s priority to improve relations with its stakeholders.

Sounds good, doesn’t it? Admittedly, it is refreshing to see that the PTO is responsive to complaints from patent attorneys. Patent practitioners and applicants alike have often been frustrated with the process. Director Kappos gives examples such as when the examination process has stalled, or where applicants are unsure of the appropriate person to contact for assistance. Or where attorneys need assistance getting connected with the right person to help them resolve a particular issue. In other words, he says, the program is intended as a “pressure relief valve”.

This is all very laudable, but is this really the job for an ombudsman, Mr. Kappos? I always thought an ombudsman was there to resolve disputes you might have with an agency, not just a sophisticated receptionist who can connect you with the right person.

Maybe this person ought to be called a Facilitator rather than an Ombudsman. Yes, I hear you wonder: “Isn’t an ombudsman a facilitator?” Yes, all mediators and ombudsmen are facilitators, but not all facilitators are mediators or ombudsmen. The online Merriam-Webster dictionary defines ombudsman as “a government official (as in Sweden or New Zealand) appointed to receive and investigate complaints made by individuals against abuses or capricious acts of public officials.” That is not, at least not at the moment, what the USPTO’s ombudsman is supposed to do.

The USPTO’s webpage dedicated to the Pilot Program describes its purpose as:

“enhanc[ing] the USPTO’s ability to assist applicants and/or their representatives with issues that arise during patent application prosecution. More specifically, when there is a breakdown in the normal prosecution process, the Ombudsman Pilot Program can assist in getting the process back on track.”

The “official” purpose sounds more meaningful, and even somewhat at odds with what Director Kappos describes. I can see that such an Ombudsman could be useful if the normal prosecution process has stalled or even broken down completely, and nobody seems to know why. But when you read on, the details are pretty much the same as what Director Kappos describes. So, back to “Facilitator”?

According to the aforementioned website, the Ombudsman Pilot Program is not intended to circumvent normal communication between applicants and examiners or Supervisory Patent Examiners (SPEs). Applicants are encouraged to continue to use established customer service offices throughout the USPTO for information on other related topics. But wait, SPEs also function as ombudsman representatives!

The Program is running across all Technology Centers, using TC ombudsman representatives who are Supervisory Patent Examiners (SPEs) and Quality Assurance Specialists (QASs) prepared to field questions and concerns from the public and work with the appropriate PTO employees (SPEs, Directors, Petitions contacts, etc.) to facilitate responses. The ombudsman representative will help ensure that the applicant's issues are addressed quickly – usually within five business days. The ombudsman representative will also ensure confidentiality when requested by the applicant or applicant's representative.

The good news is that this Pilot Program provides an additional tool in helping to move the patent application process along. Presumably, another set of eyes can look at the situation and inquire why the process is stalled. I hope the staff members who are expected to play a role in the Pilot Program will get adequate training to use mediation-derived techniques that they can use in dealing both with the applicant and their colleagues who have been assigned to the matter.

Note, however, that the Ombudsman Program is not designed to deal directly with the merits of the application. An answer to a “FAQ” summarizes it nicely:

“When you have a question about a specific application in prosecution and have been unable to find the correct person to assist you or have been unable to obtain assistance from the examiner or SPE to whom the application is assigned, then the Ombudsman Pilot Program is the venue to use. If your question is a general question and not associated with a particular pending patent application, then the Ombudsman Pilot Program is not the appropriate program to use. The Ombudsman Pilot Program is not meant to be a universal assistance center but rather a place to get prosecution assistance when you have exhausted normal channels in the Technology Center (TC).”

The Pilot Program is scheduled to run for a year. After that, the Notice in the Federal Register indicates that the USPTO may extend it with “appropriate modifications based on feedback from the participants, the effectiveness of the pilot program and the availability of resources.”

To use the program, you need to complete a form on the PTO website, which you will find by scrolling down all the way. This form requests basic information, such as name, e-mail address and telephone number. You submit this information directly from this webpage, whereupon someone will call you within one business day.

So, patent applicants, let the USPTO know how this program is working for you, and whether or not you would like to add certain tasks to the Ombudsman, such as receiving and investigating complaints, and acting as an intermediary to help resolve them. Under the form just described, you will find the e-mail address you can use to give feedback, questions or comments!

-EvG

Threats, Bullying and Big: "Once You Are Big You Are Not Cute Anymore"

Mary Zachar — Tue, 25 May 2010 20:24:24 -0800

In reading the NYT this past Sunday, I pondered the article by Brad Stone, targeting Google’s “monopoly” in online search and advertising, posing the question: Sure It’s Big. But is That Bad?

Increasing governmental antitrust scrutiny of search giant Google’s practices, which target Google’s favoring of its own properties, begs the question of whether Big is Evil and can we trust Big – the same issue raised in the Google Book Settlement - is Big itself inherently Evil and what can Big do to be otherwise?

Distinguished trademark lawyer and blogger Paul Reidl in his April 17, 2010, IP Alley post Counterfeiting, Civility, and IP Backlash impliedly asks the same question about Big Law as he ponders the IP Backlash. Paul’s recent description of Big Law bullying in a trademark dispute with allegedly counterfeit goods is an example of the shadow side of power which fuels the IP backwash and disempowers all brand owners who rightfully seek to police their marks and retain consumer confidence as well as respect within their own markets. As Paul confirms, the target of the dispute may be innocent and the dispute itself of Big Law’s own making. Here’s what happened to Paul and his client:

“The demand letter from Big Law was a typical Strum und Drang letter sent on behalf of Big Corporate America. Roberto Duran would have said “no mas” immediately on receipt. And, in fact, the recipient immediately did. He was a trader with several small retail outlets. He had bought the goods from a regular supplier who had been selling them to his competitors; the supplier had bought them from a web site. It sure looked legitimate, which made me wonder: how the heck was he to know if these were counterfeit if, in fact, they were? When he saw competitors and a web site selling the same product the assumption that they were legitimate was certainly a reasonable one. His first inkling that there was a problem occurred several days before he received the letter when someone (presumably the Big Law investigator) bought one of the goods from him, told him that it was counterfeit, and that he was going to jail unless he stopped selling them.”

As Paul points out, the key issue was never fully investigated by the Big Law accuser:

“… whether in fact the goods were counterfeit or were they simply being sold by an unauthorized retailer? Since I knew that the trademark owner sold only through authorized retailers, this was not a small point because if the goods were genuine then the recipient of the demand letter had a perfect right to sell them. The trademark owner’s gripe would then be with the person who breached their contract and sold the goods outside the authorized channels, not with my retailer.”

When Paul questioned counsel about this key issue, more bullying ensued.

“I was told that was not relevant; didn’t I know that the trademark owner was a huge company and that this was a famous brand? Didn’t I know that counterfeiting was criminal and that Big Law could crush my client? Didn’t I know that they were entitled to damages, enhanced damages, attorneys’ fees, and first born children? When I mentioned the investigator’s comments about criminal activity, I was scoffed at: that did not happen, your client is a liar.”

Paul’s experience is noteworthy because in this case, Big Law was meeting true empowerment in a trademark lawyer of Paul’s experience, depth and integrity – coupled with what appears to have been an innocent client. Concluding that the surrender occurred at the outset and the ensuing attack by Big Law pointless, what was Big Law’s objective?

The chilling effects of market power can be reframed when we ask – what is Power? Does Power mean strength and control? Does it mean being forceful, dominant, a winner, a tyrant?

Power has two sides – one which can destroy, and one which can create positive change. The real problem with how we define power is that if we limit our view to seeing it as control, then we must always fight for that control for fear that we will lose Power if we lose control. When we expand our understanding of Power to include the positive, empowered qualities of power, such as knowledge, communication, resources, authenticity, patience, insight, influence, growth and ultimately choice, we can see a larger view and can collaborate without losing anything. When we power with, rather than power over, we open up our empowerment as a healthy tool for accomplishing collective goals.

So, what is Power in the IP world?

Can we expand its definition to include the positive qualities that empowerment brings to a community, a market place, or in Google’s case, even a universe like the internet? And how can we as attorneys and mediators entrusted with IP matters empower our clients and ourselves as we navigate and lead by example? Puts a new spin on anti-trust, with emphasis on the word “trust.” Lots to contemplate as we view Big and Evil, metaphors which themselves portend a certain mindset before we even investigate the facts to see whether the larger collective goals can be met through a collaborative perspective.

Special thanks to Fleet Maull and Kate Crisp for their efforts to empower healthy leadership in all venues through their “Path of Freedom Facilitator Training”, which was the inspiration for the power with concept rather than the narrow and limiting view of power over as in control.

-MZ

The Gap: Being What You Know and Being Who You Are

Mary Zachar — Sun, 23 May 2010 22:36:10 -0800

Cultivating Qualities of Being

Introduced here in my first post as having a “contemplative law practice,” a few friends politely inquired – what is a “contemplative law practice,” and what does that have to do with IP or mediation? So I have been contemplating and in this post, with the help of a few other contemplative lawyers, try to bring it all together – IP, mediation and meditation.

In my experience, they are all connected...

Mediation

Vicki Pynchon previously blogged here about an article by Danny Ciraco entitled "Forget the Mechanics and Bring in the Gardeners: an Exploration of Mediation in Intellectual Property Disputes". Ciraco’s article, written over a decade ago, blazed the trail for the modern view (recently articulated by Google General Counsel William Patry as quoted in my March post) that IP is all about “relationships.” Juxtaposing the court system as a machine, and mediation as an organism, Ciraco believed in the flexibility of mediation of IP disputes:

“By describing mediation as an organism we will be able to see its potential to effectively deal with IP disputes. In particular, we will look at mediation's flexibility, its cost-effectiveness, its sensitivity to time, its effectiveness in dealing with highly technical and complex issues, its respect for confidentiality, and its effectiveness to deal with internationally complicated disputes -- all of which will illustrate mediation's organic design.”

Comparing mediators to gardeners evokes the cultivation of process rather than contraction by judgment. Viewing IP as interests, not stand-alone rights, is the mediator perspective. Copyright provides a good example. A grant of a limited monopoly, essential safety valves are built into the copyright system which impact the rights holder’s relations with others – limited duration, first sale, idea/expression, fair use, and public domain – relationships with borders and edges which create an interdependent system of interests. Without the safety valves, we could not tolerate copyright at all. So when working with copyright issues, our view is always dependent on seeing the relationships, not just positions. Copyright law is in one sense built on a mediator’s perspective. The expanse of IP itself – copyright, patent, trademark, right of publicity, trade secrets – is interdependent and often must be unbundled as we recognize that one right cannot be co-opted by another.

Meditation

Contemplative practice relates in the same reflective manner, supporting a view which opens up the process to encompass all of the interests awaiting recognition. One of the ways this open view can be cultivated is by a meditation practice. From a meditator’s perspective, contemplative practice follows “bare attention” gained in meditation to engaged attention on values cultivated by a mindfulness practice. If we as an individual can develop a direct relationship with who we are, instead of using conditioned beliefs to feel right and make others wrong, then we can be open, flexible and kind with others without feeling that we’re losing something in the process. Grounding ourselves in self-awareness and self-reflection, we bring this presence to mediation, bringing peace into the room. Basic goodness, compassion, empathy, and equanimity serve as attitudes developed in a mindfulness practice.

Integration into a Contemplative Practice

Mediation, by looking at what is and opening awareness to all of the interests, has a commonality with meditation practice. We see what is, and then work with it. By having many tools to work with, we are not limited to only one view. Flexible, we can be gardeners cultivating peace. If the parties can go back into the system healthier, with a fresh awareness of their role in the system and how to better navigate to avoid future disputes, then we as mediators with a meditator’s perspective have contributed to a community of artists, inventors, creators, consumers, and distributors and in this contribution, have enlarged and enriched the collective as well as our own personal practice. This is how I personally benefit from integrating a legal and mediation practice with my personal meditation practice – resulting in a contemplative law practice. It is the engagement with others and the benefits of serving in a community which lifts my practice off the cushion and into the world in which I have trained and developed legal skills to help others.

Robert Chender, an attorney and meditator in NYC, with his own blog Contemplative Law, serves as an example of how we can integrate what we know with who we are. With a sophisticated legal practice in Manhattan at Seward & Kissel, and as the Director of the New York City Bar Association Contemplative Lawyers Group, as well as offering CLE programs for lawyers, law students and judges, Robert embodies the meditative approach as he balances being a leader in both realms – as a lawyer and meditator. Whether working with lawyers, partners, clients, or training others in meditation, his practice informs and transforms his relationships. Robert recently shared with me how his training with Chogyam Trungpa Rinpoche, helped him in his goal of applying his meditation practice in all aspects of his life: his teacher didn’t just teach him how to meditate, he also taught him how to shift his view, how to contemplate and apply his practice out in the world to serve himself and others. I asked Robert to add his own reflections here to address the busy IP lawyers and mediators who follow this blog. Here is what he said:

“As lawyers we’re continually asked for help, by clients and colleagues, and indeed that’s what we’re paid for. However, it may be best to help in a way that’s quite different than the ostensible request – for example, if a client wants to litigate because he feels personally wronged, it may be possible to examine the situation and work out a solution in which both parties can put aside their grievances and avoid a prolonged and expensive fight. This is of course true for both counsel and mediators. The main question is how we do that – the training that’s required to be skillful in mediation (whether formal or informal) is very different than the training we received in law school, and requires an examination of what our assumptions are about what we’re trying to accomplish. Some attorneys relish a fight, and want to dole out punishment to the other side – but that’s not looking at what I think should be the larger goal of attorneys, which is to create peace and facilitate people’s livelihoods, one client at a time. Training our minds, through meditation or otherwise, is a helpful and perhaps key prerequisite to accomplishing this goal.”

In 2008, I was introduced to two other leaders in the contemplative law movement, Charlie Halpern, founding dean of City University of New York Law School and now teaching contemplative practices at BOALT, and Doug Chermak, a Bay Area environmental lawyer, when I attended an annual retreat in northern California held by the Center for Contemplative Mind in Society, led also by Zen priest Norman Fischer. The Shambhala Sun magazine recently interviewed Robert, Charlie and Doug (May 2010 issue), heralding their contribution to mindfulness for lawyers. Doug described a “meditative perspective” as helping lawyers cultivate insight into the challenges so they are “not cut off from who they are as a core human being.” My experience as a participant at the 2008 retreat, attended by judges, law professors and students, big firm partners and every type of lawyer in between, was that lawyers, young and old, are dedicated to their professional practice and duties to their clients, but also long for a way to navigate within the conflux of emotions and ethical challenges experienced within the profession. Our challenge is to find our seat so we can navigate in the profession amidst the very real challenges of earning a living, supporting partners and employees at the office, and families and communities at home.

Applying Robert’s Shambhala “art of living” approach, we are challenged to shift our view when our conditioned, reactive responses arise – for instance, in an IP dispute where we instinctively see infringement of a client’s legal rights as a battle cry - and instead give attention as well to their relationships. In shifting our view, we can add value to a client’s cause by leading with a mediator’s and meditator’s perspective, adding value to our own life as well. At law schools, law firms, courts and everywhere lawyers and mediators apply their art, this shift in view is happening now.

In addition to Robert Chender’s blog Contemplative Law , you can follow Stephanie West Allen, author of the weblog Idealawg, which is dedicated to all things related to contemplative law and mindfulness and has a wonderful list of resources for your practice. You can also follow and join Cutting Edge Law, the active internet community for mediators and contemplative practice.

The Contemplative Mind in Society website is also a great resource for contemplative practice and hosts podcasts from past law retreats, and where you can also sign up to receive news on upcoming law retreats, including one expected this fall at BOALT featuring Charlie, Doug and Robert; J. Patton Hyman’s 2007 article on lawyers and mindfulness is a also great introduction to mindfulness and meditation for lawyers.

Finally, we hope you have already added the June 10-12 Pepperdine’s Straus Institute’s Summer Skills Conference to your calendar, where you can learn more about mediation and mindfulness when Len Riskin and Rachel Wohl present Mindfulness for Conflict Resolvers: Lawyers, Mediators, Negotiators, Judges, Arbitrators & Managers.

-MZ

She Negotiates Blawg Review #263

Victoria Pynchon — Tue, 04 May 2010 07:47:43 -0800

She’s She Negotiates, the newest blawg on the block, taking the baton from The Public Intellectual’s brilliant Blawg Review #262, and getting ready to host Blawg Review #263 for Mother’s Day 2010

She negotiates Blawg Review.

In addition to celebrating mothers, we’ll be celebrating all women who negotiate (do you know any who don’t?) posting Blawg Review #263 on all of She Negotiates' pages – She Networks, She Resolves, She Succeeds and She Transforms, as well as on the She Negotiates posting page.

So if you’re a legal blogger and you have Blawg Review envy, now’s your big chance. Join She Negotiates to Power Her Dreams (it’s free!) and leave your link at the group “Blawg Review #263.”

The first woman legal blogger who joins She Negotiates to Power Her Dreams and leaves a May 3-week post beginning with the words, she negotiates, she succeeds, she networks, she resolves or she transforms will win a free ticket to the Negotiation for Women Workshop at the Pasadena Women’s City Club on June 10 (7-10 p.m.) with attorney-mediator, arbitrator and negotiation trainer Victoria Pynchon and east-coast business negotiation guru John Tinghitella.

The second woman legal blogger will win a free autographed copy of the book (due out in the very late Spring) A is for A**hole, the Grownups’ ABC’s of Conflict Resolution.

The third woman legal blogger will win a reduced priced month-long online personally tutored She Negotiates! Workshop at Craving Balance ($175 for a course costing $375). As with the last workshop Victoria Pynchon taught with life-balance coach and trainer Lisa Gates, they guarantee that any woman fully participating in the course will make back its cost within thirty days of taking it or her money back!

So get ready to celebrate the woman who negotiate, network, resolve, succeed, and transform with a nod to mom for Blawg Review #263!

What if a patent settlement agreement risks being illegal?

Eric van Ginkel — Thu, 22 Apr 2010 23:59:00 -0800

Several weeks ago, I came across an exciting article by Frances Murphy and Francesco Liberatore of Jones Day’s London office, that I wanted to blog about, but did not get around to. By pure coincidence, I looked at it again today, and concluded I still want to blog about it!

Why?

Because I believe it is an important subject that every IP mediator and every mediation participant needs to be aware of!

The article alerts us to the fact that recently the European Commission began a process of checking whether patent settlements concluded among a number of pharmaceutical companies infringe EU Antitrust laws.

In this particular case, the Commission had sent an information request in January of this year as a follow-up to its inquiry into the pharmaceutical sector. As Frances and Francesco point out, “The Commission is in particular looking at patent settlements where an originator company pays off a generic competitor in return for delayed market entry of a generic drug (so-called “reverse payments patent settlements”).”

This suggests, the authors write, “that the Commission may be initiating a program to periodically monitor settlement agreements and could launch infringement proceedings against settlements it finds anticompetitive.”

The authors then go into the details of the antitrust rules regarding reverse payments patent deals, and analyze ho they compare to the law in the United States as it is developing between the FTC and the US courts. For a copy of the article, look here.

What interests me for our IP ADR Blog is how the eternal conflict between the antitrust laws and the “carve-out” created by patent protection may affect mediation.

Clearly, the parties, and hopefully also the mediator, need to be on the lookout for how patent laws interact with the antitrust laws of the United States and the European Union. Of course, while the mediator should not ever be tempted to give legal advice, it would be entirely within his province to raise the issue as a question as he/she helps the parties as they explore settlement options.

What should the mediator do if the parties agree on a settlement that he knows will violate antitrust laws? What if he only suspects it may violate antitrust laws? I welcome your input!

-EvG

Update on Google Book Settlement: Second Copyright Infringement Class Action Against Google, Inc., This Time by Visual Artists

Mary Zachar — Sun, 18 Apr 2010 23:55:33 -0800

Update on Google Book Settlement: Second Copyright Infringement Class Action Against Google, Inc., This Time by Visual Artists

The newest dispute in the Author’s Guild Google Book Settlement suit (previous post from 3/12/2010) arrived on April 7 when a coalition of photographers and illustrators led by the American Society of Media Photographers (ASMP), Graphic Artists Guild, the North American Nature Photography Association, the Professional Photographers of America, and represented by Mishcon de Reya New York LLP filed suit against Google, Inc., in the Southern District of NY, claiming that visual artists suffer distinct and separate infringements of their copyrights in their visual works (defined as “original visual works such as photographs, illustrations, graphic art, and other visual art”) embedded in books subject to Google’s Book Search by (1) scanning and creation of a digital copy (2) storing, and (3) distributing and publicly displaying the visual works. This new suit, also in Judge Chin’s courtroom, acting as a de facto intervention in the original settlement, demonstrates again that class actions are becoming the new lever for forcing licenses in IP.

Is there also leverage and efficacy in pre-suit mediation of copyright disputes – would a pre-suit demand for mediation have had any currency when Google’s fair use defense serves as a specter if not a shield from parties’ demands?

And does the earlier Perfect 10 case in which Google dealt with images play any role in this new dispute?

Are tomes of knowledge including visual images different from snippets of pornographic images (this question, already raised by Stephen Dang, Samuelson Law, Technology, and Public Policy Clinic in February, 2006)?

The Complaint by the Visual Artists

The Complaint (full text), which includes as lead plaintiffs, in addition to the Guilds, individual photographers Leif Skoogfors, Al Satterwhite, Morton Beebe, Ed Kashi and illustrators John Schmelzer and Simms Taback, is based on the “massive copyright infringement” of the visual works of the class. As counsel for the coalition stated in its April 7 press release:

The new class action goes beyond Google’s Library Project, and includes Google’s other systematic and pervasive infringements of the rights of photographers, illustrators and other visual artists. This action by ASMP and its sister organizations was taken in order to protect the interests of owners of copyrights in visual works from the massive and organized copying and public display of their images without regard to their contributions and rights to fair compensation.

The Mediator Perspective

What strikes my mediator chord is whether the visual artists had to file suit to get to the negotiating table – was it evil Google which called their bluff, or was it the litigator’s reaction when its claims were defensively challenged? Could a pre-litigation mediation agreement with these stakeholders allowed collaboration on the Book Search architecture as related to visual artists? Is Google so certain that its fair use defense will withstand this nuanced challenge that it can risk losing its market position?

In his interview with Publishers Weekly on April 7, 2010, NYU Prof. James Grimmelmann observed:

“Maybe they are going to litigate this though to judgment, but my guess is that both sides are more than happy to work out a deal,” concluding that “ What we are seeing is the commencement of the age of filing copyright class actions as a way of creating universal licenses. … But as somebody concerned with the rule of law and the judicial system, this is an awful way to create copyright policy.”

And Eugene Mopsik, President of the ASMP in the same article, admitted to Publishers Weekly:

What we're interested in, in the long run is a place at the table, and an opportunity to be involved in the creation of a system that will ultimately lead to compensation by Google or those others who use our members' images online. By no means are we interested in prohibiting those uses. We're not trying to bury our heads in the sand and say these uses shouldn't be made. What we want is a hand in crafting a system.

From a mediator’s perspective - what is the difference between this type of lever at the class action stage where attorneys fees can, as with the Author’s Guild Amended Book Settlement, run into the mega-multi-millions of dollars, $30,000,000 as of February, 2010, (as described in the papers filed in support of the fee motion memorandum of law ) versus a confidential prelitigation mediated response to the same concerns which fueled the class action? And from an even broader and deeper perspective, should copyright policy be formed by private parties’ vested interest in compensation for their intellectual property, or should we leave that to a forum where all stakeholders have a seat at the table?

Looking back to the beginning of the Google Book project, in 2006 Stephen Dang, writing for the Samuelson Law, Technology and Public Policy Clinic , raised the issue:

Similarly, the book snippets Google plans to make available in their Book Search Program would provide a new and valuable service by allowing searchers to quickly scan across many literary works to help us understand our cultural history. Copyright law is intended to “promote the useful sciences and arts,” and therefore fair use defenses exist for copying that furthers these goals. Google wants to make the past available to everyone, and in doing so, help promote creativity. Independent authors lack the ability to provide such a service. So instead, the AAP seeks to focus the issue solely on monetary profit. The choice that best promotes creativity should be clear.

Eric van Ginkel raised a similar concern in his most recent blog about the antitrust issues in a mediated settlement. Can we in our limited roles as mediators protect the public interest? Isn’t “policy” in fact formed in a private agreement when access to content is locked up? How can others be free in a digital age to create without unlimited access to data and information – and can the marketplace with its consumer demands and regulatory watchdogs correct imbalances created by private party licensing agreements?

Substantive Merits of the Second Google Class Action

As far as the merits of the new action, Grimmelmann in his April 6 Laboratorium blog, published before the new Complaint was public but in anticipation of its claims, explained the problem Google may face with its Fair Use defense:

The central fact distinguishing this lawsuit from the Authors Guild suit is likely to be the fact that Google isn’t indexing or displaying pictures. On the one hand, this is an argument in Google’s favor: it’s not doing anything that cuts into any kind of market for the images. This is true copying in the abstract. On the other hand, doesn’t that tend to undermine the fair use claim? Google can’t claim the benefit of a transformative purpose in the images, since it’s not offering a search service tied to them. On balance, I’d be inclined to call the digitization of the pictures a fair use, on the theory that it’s a necessary incident to the fair-use digitization of text for the transformative purpose of indexing. You can’t scan the text without also scanning the pictures. But that’s tentative and potentially contestable—and we’ll see, soon enough, what the visual artists are actually alleging.

My quick review of the Complaint reveals that this new infringement action targets beyond copying and display, focusing equally on Google’s stated intention to both scan and store the works in order to derive future benefits from its vast searchable electronic database by selling subscriptions and access to both institutions and consumers. What this new action does not change however is the exclusion of the public’s interest and unseen future interests as parties invited to the table. For additional legal battles in the foreign markets, Peter Brantley at the Open Book Alliance updates and advises we should stay tuned.

- MZ

Copyright, the Era of the Author and the Statute of Anne at Blawg Review #258

Victoria Pynchon — Mon, 05 Apr 2010 07:26:07 -0800

Blawg Review #258 at Cathy Gellis' Statements of Interest recounts the glorious history and ignominious decline of the Statute of Anne and issues a call for change.

Take a look, you won't regret it. Excerpt below.

But the end result of this 300-year "evolution" is a law full of absurdities that in no way delivers on the intended goal of the Statute of Anne. The quid pro quo of giving creators a little monopoly so the public could get access to their creations has given way to total domination by the creators over nearly all exploitation of their works, essentially indefinitely, at the expense of the public, and in nearly every country there is. This author-centric copyright law found around the world may be able to trace its lineage back to the Statute of Anne, but like a clone that's been copied too many times, its DNA has been degraded to the point that it is unrecognizable compared with its ancestor.

These changes have happened incrementally over the centuries, but with the arrival of the Internet the pace has increased. Like the Stationers' Company panicked at the coming of a new political age, today's incumbents fear the challenges to their power the digital age may herald.

But like we saw 300 years ago, change need not be unwelcome. Change provides opportunity to enhance society. Just as the Statute of Anne led to an explosion of public discourse, now liberated from heavy government control, the Internet presents the universe of nearly unlimited content to learn from, enjoy, experience -- and build upon. (Don't forget: even authors are regular users sometimes.) A tool like the Internet that can so enhance the public sphere needs law focused on enhancing the public sphere too, just like the Statute of Anne once did.

So maybe on this 300th anniversary of enactment of this statute its time to think about reviving it. It may be dead, but perhaps its promise is not quite dead yet.

See here for a follow-up to Lance Goddard's Blawg Review #257 at 22 Tweets, and tune in next week when Blawg Review #259 will be hosted at Legal Blog Watch. Blawg Review has information about next week's host, and instructions how to get your blawg posts reviewed in upcoming issues.

Metaphor as Conflict - the Google Settlement from a Mediator's Perspective

Mary Zachar — Fri, 12 Mar 2010 08:00:00 -0800

As a mediator reflecting on the label “Evil” attributed to the proposed Google Book Settlement (article by Tom McNichol in California Lawyer, Saving the World from Google: Public and private interests band together to fight a deal that, they say, would destroy competition on the Internet), I wonder under what alpha-tag Google might fall in Vickie Pynchon’s new book, A is for Asshole, the Grownup's ABC's of Conflict Resolution. Is there an E for Evil?

I am also curious about where this Evil metaphor might fit within Google, Inc.’s Senior Copyright Counsel, William Patry’s new book, Moral Panics and the Copyright Wars, which asks that we look at the moral panic generated by such labels not as aggressors, but rather as mediators in the copyright wars. As Patry describes in his blog, copyright is a system of social relationships, and that “the advantage in regarding copyright as a system of social relationships is that it focuses attention where it belongs: in mediating conflicts within that system… .”

If you would like some background and context use The Public Index, a project of the Public-Interest Book Search Initiative and the Institute for Information Law and Policy at New York Law School. For audio listen to Pamela Samuelson’s recent lecture, and for balance see the Google Public Policy Blog.

Here’s how Google became the Evil villain:

In September, 2005, the Authors Guild, representing about 8,000 US published authors and screenwriters, brought a class action against Google The Authors Guild, Inc. v. Google Inc., No. 05 Civ. 8136 S.D.N.Y Sep. 20, 2005), claiming that Google’s Library Project, launched as the Google Book Search, a project which scanned millions of in-copyright books from the collections of major research libraries, was copyright infringement. Google’s goal at the time was to make indexes of the books’ contents and to provide short snippets of the book contents in response to its users search queries.

In response to the lawsuit, Google temporarily suspended scanning, and agreed to allow copyright owners to submit lists of books they wish to be excluded. The Association of American Publishers then filed a second lawsuit (now coordinated with the earlier Authors Guild action) for copyright infringement, seeking injunctive relief, and this time Google defended arguing fair use, claiming that "snippets" from books were authorized under the Copyright Act’s fair use defense Section 107.

Settlement efforts commenced in the Spring of 2006, and in the Fall of 2008, a lengthy (over 300 pages) agreement was finally reached between the Authors Guild, the Association of American Publishers and Google, establishing a complex new business arrangement. An Amended Settlement Agreement was preliminarily approved November 19, 2009.

The Settlement gives Google a license to commercialize all out-of-print books and to make up to 20 per cent of their contents available in response to search queries (unless rights holders opt-out). Judge Denny Chin held a Fairness Hearing on February 18, 2010, which has been continued to late June. Holding up the Settlement is the Department of Justice’s Statement of Interest which asserts that the Agreement violates US anti-trust laws, and this along with many other objections has caused the fairness hearing to be postponed. As the DOJ argued in its recently filed Statement of Interest,

“This outcome has not been achieved by a technological advance in search or by operation of normal market forces; rather, it is the direct product of scanning millions of books without the copyright holders’ consent and then using Rule 23 to achieve results not otherwise obtainable in the market.”

To the DOJ, this seems to be at the core of Google’s Evil – that its position of dominance has arrived not by merit, but by self-help in scanning millions of books, without consent, and then benefiting from a settlement after the fact.

Is this Evil? Are there multiple interests at stake and who is supposed to represent these interests at the negotiating table?

It may appear unfair for Google to benefit by the Settlement which results in a privately negotiated compulsory license, using the class action status as a way to insulate itself from any future claims with respect to the use of the works, and making it the only source of a digital library. Yet Google, as a defendant in the lawsuit, did not construct the class (although some would say that it acquiesced because of the benefit conferred). Nor can it be responsible that it has not litigated the fair use defense for the benefit of all competitors. It is in fact the litigation and class action construct which allows a private settlement for a copyright infringement. The lawsuit, despite its class action nature, depends only on the relationship between the parties before the court and in the class. The court does not look beyond the class, although FRCP 23 does include representation guidelines built into class certification and court review of the settlement.

With neither libraries nor research interests as part of the class, can there be meaningful resolution of a copyright infringement dispute using a class action model?

The US Supreme Court recently confirmed a settlement reached under similar circumstances in ELSEVIER, INC., v. MUCHNICK,--- S.Ct. ----, 2010 WL 693679 (U.S.), 93 U.S.P.Q.2d 1719, a class action of authors against publishers claiming wholesale copyright infringement based on digitization of a data base of works. This mediated settlement also took over three years and yet it has not generated the same vitriolic response as the Google Books Settlement. So it seems possible to mediate the social relationships which inhere in the copyright system.

Then what’s so evil about Google?

Maybe the answer lies in the nature of the copyright system itself. As Mike Linksvayer put so kindly in his Creative Commons Blog on November 16, 2009,

“We hope that a socially beneficial conclusion is reached. However, it’s important to remember why getting there is so contentious. Copyright has not kept up with the digital age — to the contrary, it has fought a rearguard action against the digital age, resulting in zero growth in the public domain, a vast number of inaccessible and often decaying orphan works, and a diminution of fair use. If any or all of these were addressed, Google and any other party would have much greater freedom to scan and make books available to the public — providing access to digital books would be subject to open competition, not arrived at via a complex and contentious settlement with lots of side effects.”

Zohar Efroni, who contributes to the Stanford Law School Center for Internet & Society Blog, notes in his 4/19/09 post that because Google does not own the copyrights in the books it digitizes, it’s monopolistic position really only extends to infrastructure –

“its giant store of digitized content, together with smart and high-power logical and logistic commercialization tools. It does not have a monopoly over content….” “Technically, it is a mere licensee, not even an exclusive one. The real ‘monopolists’ here are, how surprising, the authors guild and the publishers’ association. “

As he opines,

“In my view, it is premature to flatly condemn Google at this point. We still know too little on how this system will function in practice. To me, the most important lesson is that the process of public lawmaking has failed miserably in structuring comparable mechanisms for providing broad access, and at the same time, accommodating rewards for rightholders. It is not surprising that private actors with the necessary foresight and resources rush to fill this gap. What’s the point of lamenting that the contracts they draft lack the checks and balances we would expect to find in public regulation? Prof. Samuelson calls the BRR ‘a new collecting society,’ which implicitly hits the mark: Technically, the term describes the BRR's principal functions and responsibilities. One main difference is, however, that real collecting societies are, for better or for worse, highly regulated entities (in Europe all the more). This is precisely what the BRR is not.”

What seems clear is that the Google Settlement matters.

In another compelling blog entry in Publishers Weekly, The Google Settlement: Why it Matters, finds that although the Google Books initiative may be deemed good for society in the sense that it "empowers users to seek out whatever they want to learn,

"the potential effect of the settlement terms cannot be ignored. Three areas he points to as matters of concern include: “(1) whether a handful of lawyers negotiating it can adequately represent the class members and the public interest; (2) the effective orphan works monopoly granted to Google; and (3) the risks presented by use of an opt-out class action mechanism and whether legislation is a more appropriate response. “

As Professor Grimmelmann observes,

“when search engines work right, they empower users to seek out whatever they want to learn. That's the exact opposite of broadcasting, in which a few big speakers choose what everyone else hears. In a world where everyone can self-publish, search engines turn what would otherwise be deafening cacophony into the best party ever, where every guest can instantly join the conversation that most interests them. That's good for freedom, and good for democracy. Building better search engines is a moral imperative.”

The problem lies in the Settlement, not the conduct per se which should be found fair use. As he points out, the Settlement goes far beyond just scanning and indexing and allows Google to sell full books, obviously an infringement. The settlement allows Google to sell out-of-print books unless the copyright owners object, while a competitor will need to get individual permission for any use. With respect to orphan works, by definition there is no one known from whom permission can be granted.

“The class action opens a door for Google, but leaves it closed for everyone else. That fact has always been the absolutely critical feature of the settlement. It makes the settlement exciting, because it means that millions of out-of-print and orphan books would become much more widely available. It also makes the settlement dangerous, because millions of copyrights would be collectively press-ganged into Google's service.”

The vote may still be out on whether Google’s status as a private company with a desire to maximize profit while doing what consumers want is good or evil. Google did not define the class, nor is Google a fiduciary with respect to the members of the class. Instead, the publishers and authors are the class representatives, and may through the proposed Book Registry continue an institutional bias based on the social relationships between owners and their market. As a metaphor, Evil imbues conduct with intent to harm. Was Google’s evil its initial conduct in copying the works in the first instance – even though it relied on fair use and many commentators agree that this defense has merit? Can we say that Google intended to harm the unseen interests in entering into a private settlement, court supervised, under the watchful eye of the federal court, Judge Chin, and the public? Or was this a skillful settlement, avoiding the slap of statutory damages for infringing over 7 million works, in exchange for a license to digitize, filling a consumer demand for access to digital works? And aren’t registered works under the Book Right’s Registry getting a large market share, 63%, for Google’s technological savvy and marketing?

If Open Book Alliance Co-founder Peter Brantley, who heads the Internet Archives' Bookserver Project, a coalition made up of Microsoft, Amazon, Yahoo, Author Guilds and libraries, prevails in their opposition to the Settlement, we may see intervening congressional hearings before the litigation concludes. This may be the answer necessary to address all of the social relationships at stake in the copyright system.

Copyright is a limited monopoly, designed to “promote the Progress of Science and useful Arts.” US Const. art. I, Sec.8, cl.8. It may be that some disputes can only be mediated in the forum in which the public’s long term interests in democracy, free speech and free markets also occupy a seat at the negotiating table. With copyright, that venue is Congress. With attention now focused on the future effect of this Settlement and how it may impact all the stakeholders, mediation has served a purpose here. It has opened up the conflict to allow dialog and illumination towards positive systemic change, always a good thing from a mediator’s perspective.

-MZ