Proving Good/Bad Faith and Intent: How can lawyers determine what drives creators and accused appropriators and can that be communicated to fact finders? Featuring Jake Linford (Florida State University), Benjamin Marks '97 (Weil), and Saurabh Vishnubhakat (Texas A&M), moderated by Rochelle Dreyfuss (NYU Law).
The full video of this panel is available on YouTube.
- So the last panel struggled with how to take something like music and allow lawyers and jurors to understand it and really kind of delve into something that's often hard to quantify. This panel is a great follow-up to that because this is a panel that in some ways asks the question of how do you look into the hearts of people and understand what their true thoughts are? So I want to turn it over to the next panel to really talk about how we think about proving good faith and bad faith intent.
- Well, this is sort of unfair because that's one hard act to follow. But I'm sure our panel is up to it. So I think of this as proving what the defendant knew and when did he know it. It's a little different from some of the other panels because the relevance of the issue to IP litigation isn't always clear. So yesterday we heard from Judge Leval that bad faith really doesn't matter, and yet we also discussed bad faith in various contexts on some of the other panels. So I've asked our speakers to talk, not only about how to prove intent, but to start with how it matters in their field and what exactly it is. Is it bad faith? Is it intent to do what exactly? And for that we have a great group of speakers. So I'm Rochelle Dreyfuss; I teach here. To my right is Jake Linford, and he will be talking about scienter and trademark context. He teaches at Florida State College of Law, where he teaches IP and contract law, including a specialty Trademark and Unfair Competition. Prior to becoming an academic, he litigated copyright and trademark matters at Pattershall-McAuliffe, and he clerked for, who I think is a great trademark judge, Margaret McKeown in the Ninth Circuit. Next we have Benjamin Marks, who will be our copyright person. He's an NYU Law grad, so that's the first thing. He's now co-head of Weil, Gotshal's IP and Media Practice, where he concentrates on, among many other things, copyright and unfair competition. And he also teaches IP Litigation in the Digital Age at the University of Pennsylvania Law School. And finally for patents we have Saurabh Vishnubhakat from Texas A&M, where he teaches patent law, civil procedure, and admin law. Like me, he's an ex-chemist. Before teaching he was an advisor at the USPTO. And before that he was at the Duke Center for Public Genomics. So each person will speak for about 10 minutes, and then we'll try to have a little conversation amongst us on how these relate to one another and then open it up to questions. So Jake.
- Alrighty, so I'll just move over here to the podium. When Chris Sprigman first invited me to present here he said, "I hear you've got some work on trademark intent, and so I'd like to hear, you know, kind of what you've got." Unfortunately what I'm doing with trademark intent or bad faith in trademark use, I'm not sure I've figured out what's going on yet, but I'm going to tell you where I am and probably terrify some of you, but I think there are just some interesting things going on here. All right, you'll probably know at least this much, that in every circuit we've got a different list of factors, but they overlap as far as what we do when we're trying to prove likelihood of confusion, which is our infringement test in trademark law. And one of the factors that stands out is this idea of the defendant's good faith or not. That's how they say it in the Second Circuit, the defendant's good faith in adopting mark, other circuits say defendant's intent, or defendant's bad faith, or defendant's bad intent. Barton Beebe, in his groundbreaking California Law Review article from 2006 says, "If you tell me two things, I can tell you the plaintiff always wins." And number one is does the similarity of marks favor likelihood of confusion, and number two is does intent also favor likelihood of confusion, and in that case, at least in the 330-some odd cases he looked at, the plaintiff always wins. So intent is a critically important factor. It is, in some ways, the 800-pound gorilla in the room in trademark cases. If you can establish it as the plaintiff, you're in very good shape. And if you can't refute that as the defendant, you're in some trouble. Now when we say intent, we mean intent to mean what? I was standing in the hallway yesterday. I was talking to Camilla, and she says that's got to be something like intent to, intent to confuse consumers, right? It's got to be something like that. And I said, well, maybe. So here's the Ninth Circuit's jury instruction. Intent to derive benefit from reputation of the plaintiff's marks, suggesting intent to cause likelihood of confusion. No absence of intent doesn't defend you. So that seems fair enough as far as it goes. And then you start to kind of break down things that count as bad faith, and I think the things courts say count as bad faith may be a little bit broader, right? Trying to take advantage of good will. Adopting a mark with deliberate intent to push rival out of the market, sure. And then you get cases like copying plus intent somehow equals a presumption of likelihood of confusion. This may stem from some Learned Hand cases from the early 1900s about marks like Listerine, which are technical trademarks, property-like. Somebody else comes out with Listegin, and Learned Hand says things like the defendant's got to have some really good excuse for picking a mark so close to this technical trademark. He doesn't say intent things, but that seems to be kind of some of the path we end up on, so we see a plaintiff who knows about the defendant, a plaintiff who adopts a mark that looks like the defendant's mark, and that starts to be trouble, and we are using that there's a presumption that then comes that you probably intended to confuse consumers. We'll presume you were successful if you're changing your mark to get more like the plaintiff's mark, the senior users mark. That's obviously going to get you in trouble. In some circuits, failing to conduct a reasonable trademark clearance search can get you in trouble. Now some things that don't count as bad faith or do count as good faith or are some thumb on the scale in favor of the defendant. Conducting a trademark search. You follow reasonable advice of trademark counsel. Circuits are kind of all over the map what they say about knowledge. It shouldn't be, most of them will say something like this, it shouldn't be enough just to know that the plaintiff or the senior user is out there, right? Because if all you know is the senior user's out there, someone could in good faith for a number of different reasons think well, maybe my mark isn't that similar, maybe there's a functionality issue, maybe there's a generic-ness issues, maybe there's a mere descriptiveness issue, et cetera. We get different sorts of statements about negligence or carelessness or willful behavior. If you can persuade a court to pick willful, that's great. If you can persuade a jury the defendant is willful, that's great for you as a plaintiff. And there's some messiness about what exactly we mean on that functionality point. You can all imagine, I think, situations where we might see similarity and be worried that the things that are similar are things that are not infringing or not, I'm sorry, not protected and thus we don't have infringement. I mean this was at issue in the blurred lines discussion we just had. It popped up all day yesterday. The Third Circuit has said things like, look if we're talking about copying trade drafts, we want some real strong evidence of an intent to confuse or deceive, some kind of misleading marketing material. If we don't see that, we don't think knowledge plus copying is going to be nearly enough. And then you get this case out of the Ninth Circuit where Dan Aykroyd and some buddies decide to sell vodka in a skull-shaped decanter, and then somebody else decides, hey skull-shaped alcohol bottle sounds like a great idea, I'll do some Day of the Dead ones. And this goes to two different jury trials, and in the first jury trial, the jury says there's no infringement. And in the second jury trial, it gets knocked out for evidentiary reasons, second jury trial, the jury says infringement. What's the key difference? The second jury hears evidence that the defendant's CEO brought the plaintiff's bottle to the designer as a model for the defendant's bottle. I don't like the model you gave me, use this bottle. Now that doesn't necessarily answer the functionality question, but you put that sucker in front of a jury, and they're like, well I see intent in my jury instructions. If that ain't intent, I don't know what it is. And so this is the potential problem. What kind of evidence might persuade a jury that there is some kind of bad faith intent? You may have heard that Walmart, at least at the district court level, has just lost a 100 million dollar judgment, four million of it punitive damages, over infringement of plaintiff Varsity's, they're basically a bunch of one step up from a dollar store in North Carolina. They're selling backyard things, and one of the things they sell is a grill, The Backyard or Backyard BBQ. Walmart decides to rebrand it's one-step up from one-step-up-from-a-dollar-store grills. And they end up picking Backyard Grill. On a motion for summary judgment in 2006, the courts says, look, Walmart's legal team said to Varsity, or Variety, excuse me, said to Walmart look Variety's mark's out there. You can't use this backyard mark. Walmart ignores them. That's how the judge see it in 2016 on a motion for summary judgment. Fourth Circuit gets ahold of it in 2018 says, I don't know about that. At least there's a potential that the jury could see the facts the other way. We're kicking it back to trial. So at trial what we get, and I love this. This is a judge in North Carolina who spent two years on a trademark case, and he's not happy about it. And the plaintiff and the defendant are arguing over what the case should look like, and he says, look, I can't understand what you're doing. How do you expect these eight people who went to 10th grade to understand it? This trial is in vain, a la Chris Sprigman, it's just a lottery, right? That's what we're going to get. What do we see in this case? Well, you know, Variety's opening argument says stuff look, Walmart was deliberately infringing, willfully infringing. They knew Variety was out there. They knew they were big and Variety was small, they figured they'd get away with it. So you get a Walmart manager who says, look when you're doing something like selling cheap grills, well, we don't say cheap, we say good-value grills, when you're doing something like selling good-value grills, the name really doesn't matter. Backyard tested as well as some other things, but consumers aren't buying these grills because we call them backyard. Consumers are buying these grills because it's in a Walmart, and it's cheaper than what they get at Lowe's, but they think it might last three years as opposed to one. Those are the sorts of noises that the defendant's brand manager made. You know, were you trying to trade off Variety's good will? No, certainly not. Do you think there were any confused consumers? Absolutely not. Now Variety did raise a complaint, and you have this nice visual the jury saw. Basically this is all the money Walmart made after a TTAB filing, after Walmart knew about Variety's grills, after a complaint, you know, 435 million dollars after the complaint. Now, many circuits will say that shouldn't necessarily matter that Walmart keeps selling grills after it's heard from the plaintiff, that the plaintiff's unhappy, after it's heard from the senior user, that the senior user's unhappy. Nonetheless this is the kind of evidence the jury got ahold of, and what they decided in the end is that Walmart was a willful infringer, and you end up with this 100 million dollars in damages. And on a motion for, now let me point out one thing. So Walmart's attorneys say, and I think lots of circuits say the same sorts of things, right? You've got to be sure Walmart intended to confuse consumers. That's what we think the standard is. They wanted the judge to say as much in the jury instructions. What the judge ends up saying in the jury instructions, and this reads, the whole transcript reads to me like a man in North Carolina who wants to do something other than a trademark case. And all he does is he reads a list of factors. Walmart's intent in selecting the word backyard as part of its trademark. That's what he hands to the jury. He says, look if you think the marks are similar and if you think infringement is willful, you tell me. And that's what the jury comes up with. The marks are similar, and there's willfulness. Now what should we make of this? One thing I think we should make of this is, if you are a trademark attorney, what you're going to get if you end up in front of a jury. Who know what you're going to get? I really do think there is a literal crapshoot element to this. It's not clear to me that jury instructions are at all clear. It is certainly the case that they seem to vary from state to state, from jurisdiction to jurisdiction, from district to district, from circuit to circuit. We might have a reasonable argument normatively about what these instructions ought to look like. I'm not sure this has been done in any sort of, excuse me. I set a timer for myself to keep myself on time. I thought I silenced it.
- You got me. What we are getting is lots of variety, even in what the circuit courts say about what they think the standard is and how they then rule on whether there was enough evidence for a jury to get past a motion to dismiss, a motion for summary judgment, to reject a motion for a new trial, or a judgment as a matter of law. I think there's a lot of uncertainty there. So the takeaway for me is there is a lot of room to argue about intent. And it is not entirely clear to me that we mean anything other, necessarily, than intent, than knowledge of a senior user out there and an intent to pick a mark that looks a lot like the senior user's mark, which may not be what normatively some of you might prefer is the rule, which is something like smoking-gun evidence of intent to confuse or intent to deceive. Mind you, Walmart had gotten warnings about Backyard BBQ but had refused to point to the specific user in the market who was using Backyard BBQ. And that gave Variety's attorney lots of room to say, we have Backyard BBQ. We're using it in commerce, although there's not a registration. I'm sure it was us. They just don't want to say so. Now you can think of all sorts of privilege problems there. The more we say, the more we potentially lose attorney-client privilege. But that was some of the space that Walmart left for Variety to then step into and may have been part of the reason why the jury decided it the way it did. That's where I am in my current look at how intent looks in trademark cases.
- Thank you.
- I'm Benjamin Marks. I'm going to talk about how good faith and bad faith fit into the scheme of copyright law. And the first question is, well copyright infringement is generally thought of as a strict liability tort, so what does proving good faith or bad faith have to do with copyright law? And the answer is, really quite a bit actually, particularly from the perspective of litigation. So I'm just going to tick through five or six areas where good faith and bad faith matter quite a bit to any case that gets past the pleading stage. The first, just by way of example, is when you get into doctrine to secondary liability for infringement and in particular inducement liability, that does depend on the defendant's intent. So the Supreme Court in the Grokster case said that the inducement theory premises liability on purposeful, culpable, expression, and conduct, which sounds a lot to me like you'd be getting into issues of good faith or bad faith. Another area where it's particularly important is statutory damages, which is very frequently copyright cases are brought for statutory damages rather than actual damages, particularly given when you get large-scale infringement cases where the multiplier effect of a statutory-damages award is what leads to potentially crippling liability for defendants. Courts and juries can consider bad faith as a factor in determining where within the statutory range to set the amount of the award. They have enormous discretion to do so. Deterrence is one of the objectives of statutory damages. I'd certainly argue that if the defendant acted in bad faith, more deterrence is required. If they acted in good faith, you would need less deterrence. That is something I'd hope a judge or jury would consider in deciding where within the range to set the award. Of course willfulness for statutory damages gives the plaintiff the right to enhanced damage awards, takes the maximum award up from $30,000 per work to $150,000 per work. And while willfulness is not strictly a good-faith-bad-faith inquiry, it's a closely related investigation of whether the defendant knew or should have known that the acts were infringing, and I think, from a litigation perspective, there's going to be a considerable overlap, certainly in rhetoric if not in tactics in trying to establish, if you're representing the defendant, the defendant was always acting in good faith, and if you're representing a plaintiff, that the defendant was acting in bad faith. And, as I'll turn to in a minute, you want to flip the script on the plaintiff's good faith or bad faith. The other area where it comes up in statutory damages is in establishing a downward departure and whether or not the infringement was innocent. And so the defendant's good faith leads into, is certainly an important part of the inquiry into whether or not they're eligible for a downward departure to the innocent range. Another area where it comes up and where you see a fair amount of litigation is attorney's fees. And that's not only the good faith and the bad faith in the underlying conduct but gets into the good faith or the bad faith of the litigation conduct. So were the claims pursued in bad faith? Were the defenses litigated in good faith? Were the positions taken in discovery positions taken in good faith or bad faith? So certainly that becomes an important part of litigation over attorney's fees. The other area where it will get litigated and does get litigated is in fair use. During his keynote address yesterday, Judge Leval presented a very compelling argument for eliminating any inquiry concerning bad faith as part of a fair-use inquiry. But when you look at the case, I don't think everybody is, the courts have not yet fully embraced that or adopted it. I think he's right, but, as he mentioned, in the Harper & Row case, there's language that fair use presupposes good faith and fair dealing. And while the court walked back from that in the Campbell v. Acuff-Rose case, the examples of lower courts considering bad faith as part of the fair-use inquiry are legion. Professor Beebe did a very influential study of that, finding that between 1978 and 2005, one-sixth of fair-use cases that looked at bad faith, they found bad faith a quarter of the time, and when they found bad faith, they always found that there was no fair use. There are also courts that have looked at good faith as a plus factor for the defendants in fair-use inquiries. So the courts will analyze the four fair-use factors and say, because it's a nonexclusive inquiry into the four statutory factors, courts have looked after going through the factors that, oh and by the way an additional thumb on the scale in favor of the defendant is that we find that their actions were in good faith. The Field v. Google case was a very good example of that, where they found that Google had acted reasonably and that the plaintiff had not. That was a case involving Google's automatic caching of websites, and they had the opportunity for people who didn't want their websites cached to provide instructions to opt out, and the plaintiff admitted that he knew that Google made that option available to prevent the automatic caching and didn't take advantage of it. And the court, in looking at the factors and finding that they generally favored Google, also said, look, Google was being as transparent as it could be, you knew how to prevent it if you didn't want it to happen, and this was basically a form of entrapment. Courts also look at improper access in the fair-use inquiry. And again, I don't mean to disagree with Judge Leval at all about whether it should be part of it, should be part of the fair-use inquiry, but it has been, and from the perspective of litigation, I can't imagine, if a case is in discovery not addressing those issues and being prepared to brief them just given how many courts have been, particularly district courts, have been willing to look at good faith. Two other areas I'll mention just as the stage setting for the rest of our discussion this morning. The role of intent, and people tend to think about copyright strictly in terms of infringement, but there's been an explosion in litigation activity here in the southern district, involving section 1202 of the copyright act and cases involving falsification, alteration, or removal of copyright management information, particularly in the area of photographs, where there have been thousands of cases brought in the last several years involving relatively minor uses of a copyrighted photograph, in which maybe as it gets pulled off the internet and put onto somebody's website or put into a program or what have you, the gutter credit for the original photographer gets lost along the way. And so there's been an explosion of cases, and intent is a very important component of section 1202. So the removal or the alteration of the copyright management information has to be intentional. The distribution, importation for distribution, or public performance with the false or altered copyright management information has to be done knowing that the copyright management information was removed. And it also has to be done knowing it will induce, enable, facilitate, or conceal infringement. So there are these multiple layers of intent that a plaintiff has to establish in order to succeed on a section 1202 claim. Negligence by the defendant is not enough under section 1202. And I want to come back to just one point I mentioned earlier, which is that I think it's important, to the extent you're representing a defendant in a copyright case, to flip the script. To consider whether or not you have arguments based on the plaintiff's bad faith. And there are a host of affirmative defenses that absolutely turn on good faith and bad faith inquiries. Equitable Estoppel, failure to mitigate damages, copyright misuse, unclean hands, whether there was a fraud on the copyright office. All sorts of avenues for defendants to pursue if the plaintiff has been acting in bad faith. So, again, I think if you're going to get into, if an infringement case survives a motion to dismiss, there's going to be litigation discovery on the good faith and bad faith inquiry. And I'll close with just one observation, picking up on Judge Leval's suggestion that it not be part of the inquiry on fair use. I think if the idea is that getting into these questions of good faith or bad faith are distracting, they're expensive, they cause tremendous delay, even if other courts were to follow his admonition and eliminate it from the fair-use inquiry, I think it would then be incumbent upon courts to consider bifurcating discovery if there's going to be a fair-use defense. Because of all of the other ways good faith and bad faith play into a copyright litigation, you're going to be doing the discovery on those issues anyway, and you're going to be briefing those issues in the context of everything else, so it doesn't really save you any time unless courts are more willing, and I think they should be more willing, to bifurcate and focus the preliminary round of discovery on a fair-use issue and maybe have multiple bites at the summary judgment apple. So with that.
- So what's in the black heart of patentees or patent infringers or alleged patent infringers?
- God only knows. Thank you for having me. It's a great pleasure to be here. In US patent law, the conventional view is that direct infringement, as in copyright, is a strict liability tort, and in a paper I wrote many years ago, at least it seems like many years ago, I argued that that's not quite right, and now I think that's the basis for Chris and Gene and everybody inviting me to take part in this great conference. That view has sort of now been tested in the courts, and here at the end of my career, I can sort of look back on how that view has held up. But the conventional view, at least as a starting point, is that direct infringement is a strict liability tort and that no intent to infringe is necessary. Indirect infringement, by which I mean induced infringement, contributory infringement, these do require intent, and that's written into this statute. Where intent to infringe does exist in direct infringement there is willfulness, that's a finding of willfulness. And that matters primarily in the remedies context, and as that's a subject I teach, I've explored that a little bit. In my remarks today, what I want to focus on is sort of three points, three major points, and the common thread that runs through all of them is a really salient question that Jake brought up in his remarks, and that is intent to do what. When I shared some of my research and policy arguments with other professors, for example, one good friend of mine said, when we were arguing about a case, "Well, if that's not intent, I don't know what is." And I said, that's exactly right, you don't know what it is. So the question of the intent to infringe, intent to do something other than infringe really matters as we'll see in the patent context. So first, the conventional wisdom that I noted at the outset, that direct infringement is a strict liability tort, is at least under specified. I happen to think it's wrong, and I sort of lay out my case for that in a 2016 article that's included in the CLE materials. But at least it is under specified. So I'll tell you what I mean by that in just a moment. The second point, the most recent Supreme Court decision on indirect infringement, and I'll focus on inducement because that's what the case was about, brings us actually quite close to a really problematic notion, and that is the notion that it's possible and indeed, in certain cases, likely to infringe an invalid patent. I think that makes almost no analytical sense, but that is what the court in a case called Commil v. Cisco that was decided three years ago, sort of brings us to confront with. And our third point, and this is a little more practical. I also teach civil procedure, so personal jurisdiction is what my students struggle with all semester long. Given how important online conduct is to infringing modern patent rights and indeed modern IP rights in general, the kinds of facts that establish the intent that's necessary in a prima facie case of infringement, induced or otherwise, can also be quite important in establishing jurisdiction, right, purposeful availment and these kinds of things. So that's the overall summary of my remarks, and so let me begin then with the strict liability error. The reason we consider direct infringement, direct patent infringement a strict liability tort, if you sort of go back through the cases that talk about why it's considered a strict liability error. There are two things that direct infringement does not require, and the absence of those requirements is sort of deemed to be, deemed to amount to strict liability. One, you don't have to have any intent to commit infringement, and two, you don't have to have any knowledge that the patent existed. And that's it. That's the hook on which we're hanging the conclusion of strict liability. Now anybody who sort of remembers first-year torts will know that's equally true of intentional torts. Intentional torts like trespass and battery, they don't require you to intend to commit the tort. They don't require you to know that any legal right exists or doesn't exist. If I step on somebody's land and intend to take that step, I don't know that it's your land. I might think it's my land. That doesn't matter. That's still trespass. The fact that I was pushed onto it can make a difference. The intent we care about, the intent to do what that we care about is intent to step on the land, the physical action. It's not knowledge or intent with respect to legal consequences. It's knowledge or intent with respect to actions that take place in the world. So in that case that I mentioned from 2016, Commil v. Cisco, the Supreme Court did something that it's never done before in a patent case, and that was to spell out, in so many words, that they think direct infringement, direct patent infringement is a strict liability tort. Now the Supreme Court saying so can make it so, but let's sort of step back and think about what they meant by that. One thing they meant was that it doesn't require any intent to commit infringement, doesn't require any knowledge that the patent exists or that infringement is taking place. Induced infringement, by the way, does require both of those things, and then some. And that's really what Commil was about. But the reason the Supreme Court went in that direction at all is that the government's brief, the solicitor general filed an amicus brief in that case repeating the strict liability framing. Both the government and the Supreme Court cited three sources. One was a 2015, excuse me, 2013 opinion in a case called Global-Tech v. SEB, and that had to do with whether an alleged induced-infringer, who was accused of actively inducing somebody else to commit direct infringement, if they thought that the actions they were inducing did not cause infringement, is it possible for them to be an inducer, and the court said no. You have to have an intent to induce the actions. The actions have to constitute infringement, and it has to have been your intention that those actions constitute infringement. If those elements are not all present, it's not inducement. So then the question in Commil was, okay, there's a good-faith belief that the patent is invalid. Is it necessary to believe the patent was valid? And the answer in direct infringement of course is no. If you guessed wrong, if you thought the patent was invalid, it turns out to be valid, you're still liable. But inducement requires a higher level of scienter, and so if you must know that the actions you induced constitute infringement, must you not also first know that the patent as to which you are inducing actions is valid? I think the answer to that question was yes. It had to be yes under Global-Tech. The Supreme Court said no. And the Supreme Court in Commil said it's possible to... They didn't quite come out and say this, but I think one reasonable reading of it is that it's possible to infringe an invalid patent, the patent that turns out to be valid but you thought was invalid. But liability will not follow. Now like Judge Newman in the federal circuit, I shook my head at that vigorously and then went back to work because what else could I do? But that's the sort of problematic position we're at, that it's possible to infringe an invalid patent. The three sources the Supreme Court and the government relied on, one was Global-Tech. Another was an earlier case from the 1960s, ERA Manufacturing, which really tied together the two strands of indirect patent infringement, inducement and contributory infringement, and said the same level of sienter is necessary for both. And both of those cited the 1937 edition of Deller's Walker On Patents, as a sort of a venerated treatise of the patent law. And both of those talk about knowledge or intent only as to legal consequences. So if you're sort of reaching for the conclusion that direct infringement is strict liability tort and doesn't require any intent to do anything, then the citation pattern that we go back to doesn't really quite get us there. So that's the under specification. Second, is the point on induced infringement, where does this leave us? Well, it leaves us with a sort of particularly incoherent outcome after Commil. If you think a patent is valid and you have a good-faith belief that the actions you induced don't infringe, well, then you're off the hook. That's Global-Tech. There's no intent to induce infringement. But if, after Commil, if you think that a patent is invalid and incapable of being infringed, then you might still be on the hook. That's what the Commil majority holds. And it leaves us in this sort of nonsensical position of having to accommodate patents we think are impossible to infringe but not having to accommodate patents that we know are valid and merely are trying to design around, okay? And so then the final word I'll say is just about how this plays out in the online environment. Obviously a lot of intent and purpose in both the prima facie elements of patent infringement, whether direct or indirect, and things like purposeful availment for purposes of jurisdiction, a lot of the evidence that's necessary is circumstantial. The courts have repeatedly said that circumstantial evidence is fine. You don't need smoking-gun evidence, thankfully. And so the question becomes how do you establish jurisdiction? After the Supreme Court decided TC Heartland, which is the venue case that took everybody out of the eastern district of Texas and allowed them to go free, you know, primarily to Delaware. That's apparently their natural habitat. The question for a lot of jurisdiction scholars was what effect will this change in venue law, this special venue statute in patent law, have on the ability of plaintiffs to secure jurisdiction against accused infringers, whom they wanted to make defendants? And the kinds of circumstantial evidence, I think is particularly salient in method claims because labeling instructions, things that inducers tell purported direct infringers to do, either through labeled instructions, online instructions, terms of use, these are the same sorts of things that, although they will be used in an infringement analysis, will also be used initially to set you up for having reached into the state to avail yourself of the benefits of doing business with people in that state and that commercial relationship, which is often not necessary but sufficient to establish an inducer liability, is also what courts have frequently turned to for establishing personal jurisdiction. So at that, I'll leave it there, and I welcome your questions. Thank you.
- So we've used a lot of different words: knowing, bad faith, willfulness, then there's willful blindness that comes out of some of these cases. Are there shades of gray or are these all the same thing basically? And are they the same in all different fields?
- I don't know yet. I mean I really don't. Courts are fuzzy enough about how they're using terminology in likelihood of confusion cases, is the only thing I can say. I think there's some more uniformity when we start to get to the kinds of things that get you punitive damages or attorney's fees, and that's--
- Badder faith?
- Well, that's shifting territory after Octane Fitness, where it used to be there was a laundry list of terrible things, and now it's a laundry list of much less-terrible things. I think it's a moving target, I really do, and I think a lot of it is about figuring out the circuit you're in, figuring out the buzz words that that circuit likes, and then arguing the facts as you have them. So what I tell my students in that case is, that's great for attorneys because that gives you space to work. The tendency is always to say, well, I hate that. I say, well, that's where you're going to make your money, you know. Uncertainty is where you make your money. Go make your money.
- I think it's also worth pointing out that the framing of this matters, right? Trademark is much more readily, although not to the exclusion of patents and copyrights, trademark law is much more readily characterizable as a form of industrial regulation, whereas patent law, certainly in the Supreme Court's recent jurisprudence, they keep reaffirming this view of patent law as a species of tort law. And I think that they're doing a lot of the tort things wrong, but as long as they keep thinking about it in tort-law terms, things like Global-Tech and Commil, where the level of sienter, the level of culpability necessary to establish that you really knew you were doing a bad thing and the things that you thought were being done, were, in fact, being done. The analytical framework that they reached for in that case was aiding and abetting, which is a sort of a classic common-law tort view--
- It's also criminal.
- Yeah, and--
- Willful blindness comes from criminal--
- So I think the distributive consequences that come from that, the economic consequences that come from that are quite profound, but the analytical starting point for them is frequently tort law when it comes to patents. And so if you use tort-like terms and hopefully use them correctly, then you're in a much better position in the federal circuit and in the Supreme Court than, all else equal, you might be if you went into a trademark case or a copyright case.
- And I would just say the way I think about your question through the framework of copyright law is that there's really a spectrum. You're absolutely right that you have all these different aspects where one standard may be reasonably knew or should have known. You have another that talks about intent in section 1202. You have others where there are just an open list of factors in whether it's fair use or where to set a damage award or attorney's fees where the court or the jury has enormous discretion. So I really think that there's a spectrum, an overlap. I mean, I think from the perspective of litigation, the more that you can paint your adversary as a complete monster, that's part of what people are trying to do a lot of the time. So certainly from a discovery and tactical perspective, you're going to look to be able to describe it as bad faith, if you can, and where exactly the lines get drawn, I think it's a spectrum of activity.
- So somebody intriguingly asked yesterday, if you need to show willfulness or something along that line for contributory infringement, does that mean you're always going to wind up with enhanced damages in those kinds of cases and does that actually make any sense, normatively?
- The answer is no. I mean you can have willful infringement and still an award at the low end of the range. So there's no, I don't think it's automatic that just because you find willful that you then start at 30 and then go up to 150. There are plenty of cases where the courts do find that the plaintiff has established willfulness, but when they evaluate all the factors about the appropriateness of the award, they'll still give an award that's below the $30,000 mentioned.
- As far as willfulness and patent law, there are a couple of intersecting answers to your questions, right? One is that the mere fact that inducement requires some active intentional conduct doesn't necessarily mean that that conduct, which was carried out in that willful way by the alleged inducer, is also capable of being imputed to the direct infringer. That said, the infringement statute penalizes all different kinds of conduct. There's making, there's using, there's selling, there's offering, there's importing. And, as in the Commil case, the same party can be on the hook for both direct infringement and induced infringement of somebody else who is also a direct infringer, you know, allegedly. And so in that regard, I think there can be room for willful... The evidence that's used to establish inducement can also be used to establish willfulness as to the same party, although it's for different conduct.
- So then I guess the ultimate question is, how do you get into the facts? You said use the facts as you have them, but how do you find out what's in the black heart of the defendant?
- Well, some of it is--
- Or a plaintiff.
- Or the plaintiff.
- Or a plaintiff, yeah.
- I mean look, I think there's going to be plenty of blackheartedness to go around. The interesting thing that I saw, you know, kind of specifically poring through the trial transcript and what evidence there was in the Walmart cases, I think there was a lot of space there to shape arguments based on a very fuzzy concept of what best practices are. In a lot of ways, what's going on in the Walmart case at least is, what do we think firms like Walmart should be doing? They should be spending the money to hire an attorney and do a trademark search, and they should be listening to their attorney when they do the trademark search. But that's always going to be kind of fuzzy because, you know, some of this is going to be privileged information. How much of it do we want to put into trial. The more we put into trial, the more likely we are to lose the privilege. The more we left unsaid, the more we give a defendant the opportunity to paint a picture that makes us look bad. This is the kind of dynamic that I see playing out in the Walmart case. I don't have a good sense yet whether many cases provide those sorts of opportunities or not. I just don't know that.
- I would say there are really a wide array of tools that you'd use to get a good faith or bad faith. I'll just walk through a couple of them. One is, obviously in a lot of cases there are actually internal communications that are very helpful as you get into the discovery process. You will find emails and other documents that the plaintiff or defendant knew exactly what was going on. So that's the easiest. You get the smoking-gun document or at least a document that allows you to elicit powerful testimony on cross-examination. Sometimes people will look at actions in other cases. So, for instance, a lot of media companies are both creators of intellectual property and owners of intellectual property, but are also significant users of intellectual property that they're licensing in as part of their products. And sometimes you get into issues of, oh well, they're saying now that this isn't a problem, but look at what they said when it was their intellectual property at stake. So sometimes people try to get into, you know, are you taking consistent positions in the case compared to the case where you're on the other side of the V. That's another way. A lot of times if there are, and by the way, that can get into the knew or should have known. So how is it that X giant media company didn't know about copyright? They're a huge copyright company. They have lobbyists on capital hill talking about copyright policies all the time. So sometimes people try to hang a company with their own statements or their own advocacy in other contexts as part of the knew-or-should-have-known standard. Very often there are financial incentives that are persuasive, and I'll give one example of where the good-faith and bad-faith inquiry shows up on both sides. There have been a bunch of cases, as we've moved from a paper world to a digital world, in particular. Newsletters, trade newsletters where it's an expensive subscription, and they sell, maybe they'll sell a firm-wide license or an entity-wide license or the fee will depend on how many users access it. And what happens is people want to save money, so they cut down the number of subscriptions when it gets digital, and then people forward the emails around, and there are a number of cases that involved infringement of going outside the scope of the license when you subscribe for one and they email it to their entire 20-person group, right? So, look, there are probably going to be documents that show up in some of those cases about, hey we can save 90% of our budget if we only subscribe to one and then just print out copies and walk them around the hall. Obviously you're going to be able to make some hay out of the bad faith involved there. On the other side of those cases, defendants have been able to make some progress by showing that the plaintiffs who, some of those newsletter plaintiffs have very sophisticated tracking technology, and they will know that this practice is going on, and they will wait the three years so they can rack up statutory damage awards for each of 52 weeks of each of three years. And then they say, hey we seem to notice you seem to be making a lot of extra copies. What's going on here? And that's been used to argue this is bad faith and that they're just trying to extort by the way the statutory damages provisions operate. So you can look at the financial incentives that play into the bad-faith determinations. And then sometimes copyright litigation is, you know, are you copying a famous work, whether it's in a blurred-lines context or something else? But in many cases, there is a big question about how did the defendant get access to my work? I handled a big case involving equity research reports for investment banks, and there was a defendant that was basically getting unauthorized access to their research reports and then repurposing them and excerpting them and selling excerpts in competition with the plaintiffs. And one of the issues is, how are they even getting these in the first place? And there were factual disputes about how they were getting it and lack of candor about how they were getting it. But discovery's very important. Sometimes you'll be using private investigators and forensic analysts to help you figure out how they're getting, how they're hacking into our system, how are they getting over firewalls? Who's giving it to them? Are our customers giving it to them? Whatever these issues are, but sometimes you get into very interesting questions about good faith and bad faith. Are they taking technical measures to avoid detection? Are they being deceptive about how they're getting access to your information? All those can play into the analysis as well. So there's really a huge array of tools that come into the analysis.
- So just two quick points. One, I think the discussion that Benjamin laid out for copyright is quite salient in patent law as well. The only thing that I would add to it is that because patent law is quite concerned consciously with the dissemination of technical know-how and the ability to make and use and sell the invention as part of the bargain, infringers or at least implementers of technology are often in a bind, and this is well recognized both in the law and in scholarship, that you want them to be able to know what other people's rights are and then design around them, whether they succeed or not. And then on the other hand, if they fail and knew all along they were treading close to the line, then they're potentially on the hook, not just for infringement liability, but for willful infringement liability. So that double bind of knowing as much as possible to try and design around it. Knowing as little as possible to avoid getting hanged with a willfulness finding, means that there will often be a paper trail, particularly in very complicated and unpredictable sciences like biochemistry, pharmacology, where inventor notebooks and detailed records of past attempts are quite important. The other point I'll make is that there's an institutional, this may be a little surprising to some, but an institutional unforeseen consequence of the patent trial and appeal board. I think that the Priest-Klein hypothesis of the early 1980s is fundamentally sound. We go into litigation when the value is high and the certainty is low. The ultimate rates and the econometrics we can fight about, but basically that intuition to me seems sound. And now that what we've done is taken the validity question out of the courts and put it into the agency where more expertise can lead to better outcomes, the questions that will, the disputes that will nevertheless make it into litigation will be, at least at the margin, more primarily concerned with infringement. And the only ones left will be that much more uncertain, that much more susceptible to two competing, sensible arguments. And so what that means is, there's greater uncertainty on the infringement side, and these questions of tort law will be that much more indeterminate in the select few cases that wind up in litigation. Although we've done a fairly good job with some caveats on the validity side, we may have made life a little more difficult for ourselves on the infringement side as a result.
- You could say that about patent ability too. They try to take out things like, what was the state of mind of somebody when they were inventing the invention?
- Right.
- And now it's popped up on the other side.
- And here we are.
- So open it up for questions, people? Have questions for the panel?
- [Audience Member] Yeah, thank you so much. This is a really, really interesting panel. I'll second it's kind of confusing, and it would be nice to have more of a framework, I think, or thinking about what intent means in these various areas of law. I just wanted to focus on one piece, which is the trademark piece that Jake talked about, which I really enjoyed your presentation and really learned so much from the courts' differing approaches to what kind of intent is necessary in the trademark action. So zooming in on the factors, right? Factor number six, where we're assessing whether there's likelihood of confusion, you say that courts are not clear about intent to do what, right? Is the intent to compete? Is it intent to copy what the other party is doing? Or is it intent to confuse? And my understanding of the way that this works, this is actually a Judge Leval opinion, is that there's really two reasons intent matters. And one is as circumstantial evidence of likelihood of confusion, right. You get these great quotes, it's like a missile to its target. If the party is intending to copy, and especially if they're intending to confuse, you better bet they've succeeded, right? Because what do you do when you try? You succeed. So that's number one. But there also a second piece, which is the unclean hands aspect, right? And so because the defendant is acting not with the greatest of intentions, no matter what those intentions are, the court should feel better in equity enjoining that party. So I just want to throw that out there because I feel like that would justify a lot of these other understandings of intent that you noted.
- And I think that could be entirely right. Here's what makes me nervous about that, right? Now I have seen folks argue that we ought to get rid of intent entirely. I think that's too strong of a move. I think there are reasons that intent can have, I think in the way you're pointing to, some of the beneficial aspects we'd like second-comers to be careful where there's space for it. But the fuzzier we are about the kind of intent we're looking for, the more broadly we go out looking for unclean hands, there's something we lose there as well, right? If you want to think about, whether we should think about trademark in tort-like senses or not in sort of negligence or reckless senses, if you think what economists often say about tort law, we want potential infringers to get right up to the line and go no farther, the fuzzier the line is, the more likely you are to overstep. And I think in trademark like in patents, you can have kind of that double counting problem that Saurabh was pointing to that makes me a little nervous, right? Now, it may be that courts are more disciplined than I think they are at my current course of the research here. I'm nervous about it. I think there are ways that we could refine this in a way that if courts followed the refinement, we'd get better results, where we catch more of the actual real bad faith, intent to confuse that we'd like to. I don't think we're there yet.
- [Audience Member] Thank you.
- Do you think there'd be more room for declaratory judgment actions? God created the declaratory judgment action for patent infringement.
- Possibly? I don't know how to get a declaratory judgment action that I'm a good-faith infringer as opposed to a bad one?
- But this is not infringing. It's the second
- I think it happens
- of a declaratory judgment
- a lot in trademark
- action on a patent case.
- cases anyway. I think we do have defendants positioning themselves as plaintiffs in trademark cases just like in patent and copyright cases.
- [Audience Member] So this kind of piggybacks on what was just commented with regard to the Walmart case and the question of bad faith. If you have a situation where a company has a mark internationally, not internationally but in Europe, and they want to launch in the United States. They don't get trademark approval because another company is operating within the same class but not the same products. They reach out. Try to arrive at an agreement with the other company. They're not willing to. What are your thoughts? If they go into the market anyway with a very clear understanding that they don't believe there's confusion because of the difference in products. Do you think there could be a finding of bad faith? Would you encourage that company not to take the risk of launching?
- In a way it reminds of the question in the copyright case. In the 2 Live Crew case, right? Where we reach out to Roy Orbison for license, and his agents deny us a license, so we go do what we want anyway. Is reaching out for the license a sign of good faith or is it a sign of bad faith? Is the fact that I tried to accommodate, you told me no, and then I decided to do my next best thing. How do we think about that? I think about the Walmart case, right? And there's two ways to tell this story. You've got a plaintiff, a senior user with a registration, but this is a fairly small operation that's primarily in the state of North Carolina. And you can tell a story that Walmart overlooked a competitor that was too small for them, and we're going to punish them for their hubris. And you can tell another story that Walmart can't realistically be expected to kind of look at every mom-and-pop operation. Your story sounds a little bit different to me where I'm entering a market where I see a senior user. I'm taking a risk, right? How we think normatively about that risk depends on lots of things. I mean, it depends on, do we think there's so much crowding that we can't pick another mark to get into the market? Do we think there's a legitimate space here where within this subject matter there should be lots of narrow tranches of different product lines? Are we worried about bridging the gap? Should we be worrying about bridging the gap? Do we care about the incumbent in this space? I could go on for half an hour with possible issues. I mean, in the abstract, I don't know how to answer that. But those are the things I'd be worried about advising my client if I were an attorney.
- One quick point about that. The question of whether to ask for forgiveness or ask for permission. One thing I think the Walmart case suggests is, you shouldn't try to do both. If you are 2 Live Crew and you go to Roy Orbison and he says no, and then you try to design around, or whatever the term would be in copyright for it. If you try to compose around the melody or sample just little enough so that you won't be on the hook and then it turns out you're wrong, well then in copyright, trademark, and patent we come to that venerated thing that you can get for the price of a milkshake, an attorney opinion saying that you're okay. And the fact that they didn't even listen to their own lawyers, that's just... I mean, I wouldn't know
- Well, the plaintiffs
- what to tell somebody
- sometimes refuse to
- at that point.
- license wrongly, right? Or they really didn't have the right to license in the first place.
- I also think that a lot of times people are taking licenses unnecessarily and courts recognize that. I mean the cost of a license may be trivial. It may be in dozens of dollars, whereas the cost of litigation could be seven figures easily. So there's a huge industry around licensing samples for use in hip-hop. I think if some of those cases were litigated under the current conception of transformative use, a lot of those uses would be fair use, and there wouldn't be infringement. But there's an industry that's born up. It's relatively simple to clear it. You pay your money, you move on. You don't have any uncertainty. You don't risk delay. You don't risk having to pull things off. So I think people, there are across a lot of industries there are people who are taking licenses unnecessarily as insurance and risk avoidance.
- Do you think it's constricting the scope of fair use? Because it seems to me as you create this as the norm, what seems to be fair will change.
- Yeah it does impact the fair-use analysis because then you get into developed markets, and you do have evidence of market harm that you wouldn't have if you had tested the case would have an issue. That's just the risk that you take. So I do think it changes it over time, but there are plenty of cases where courts have looked and said, even though there's been an established market where everybody in the industry is paying for it and happily, I don't know about happily, but perfectly content to operate under the license regime, a plaintiff comes along, gets greedy, asks one defendant for too much money. The defendant says, you know I've been paying all these years, but I don't really need to pay. I don't know why I'm doing this, and the whole, you know somebody pulls the thread out of the sweater and the whole thing unravels, so that's not uncommon either.
- Well, on that note, please join me in thanking the panel.