Why patent infringement shouldn’t be criminalized

First U.S. patent, signed by George Washington

Sorry for the overdose of IP law recently, I plan to return to local-government topics ASAP.

But my recent article discussing criminal enforcement of copyright caused me to wonder about why patent infringement is not a crime in the United States (aside from falsely asserting a product is patented or forging the seldom-used “letters patent”).

Why this disparity between different forms of IP protection? It surprised me how many different theories emerge. For example, professor Irina Manta lists three possible justifications in her article “The Puzzle of Criminal Sanctions for Intellectual Property Infringement” (footnotes omitted):

There could be a moral or utilitarian distinction between soft IP and patents, and the differing availability of criminal sanctions may be warranted because infringers of soft IP cause more harm and/or require harsher punishments for deterrence than infringers of patents. Alternatively, perhaps criminalizing soft IP infringement provides the proper balance of incentives for creators by giving them the safety of added protections for their works, whereas it would overly deter inventors in the patent context. Another possible explanation for the distinction is a public choice rationale: while a number of industries lobby for stronger protection for soft IP (especially copyright), different industries are at odds with one another regarding the proper level of protection for patents.

The Executive Office of the U.S. Attorneys also has commented on this disparity in the third edition of its training handbook “Prosecuting Intellectual Property Crimes,” which notes on page 246 the distinctions between patents and other forms of intellectual property:

Although patents and copyrights share a common constitutional source (and the concomitant requirement that these exclusive rights are for “limited times”), they differ in several meaningful respects. First, copyrights grant an author the right to exclude certain uses of the author’s expression of an idea contained in an “original work of authorship,” whereas patents grant an author the right to exclude others from making, using, and selling devices or processes that embody the claimed invention. Second, in exchange for granting the patentee this right to exclude, the patentee must publicly disclose the invention. Eldred, 537 U.S. at 216. “For the author seeking copyright protection, in contrast, disclosure is the desired objective, not something exacted from the author in exchange for the copyright.” Id. at 216. Third, a copyright gives the holder no monopoly on any knowledge or idea; a reader of an author’s writing may make full use of any fact or idea acquired by reading the writing. See17 U.S.C. § 102(b). A patent, on the other hand, gives the patentee a monopoly on his invention to prevent the full use by others of the knowledge embodied in the patent. Eldred, 537 U.S. at 217.

It is also worth considering the difference between a patent and a trade secret. The first difference is naturally that trade secret information is protected only if it is secret (see Section IV.B.3.a.v. of this Manual), whereas a patent is protected even after disclosure. During the patent process, a trade secret contained in a patent application may lose its trade secret protection through disclosure only to gain patent protection. (See Section IV.B.3.a.vi. of this Manual). Second, a patent gives its owner an exclusive right to his invention, even against another who discovered the patented invention independently, whereas a trade secret, like a copyright, gives its owner no protection against independent discovery. Confold Pac., Inc. v. Polaris Indus., 433 F.3d 952, 958-59 (7th Cir. 2006) (Posner, J.).

I think that the most compelling explanation may be that patents, unlike copyright, are especially at risk of being too broad. This is particularly so in industries like software, where an understaffed patent office cannot sufficiently limit incoming applications.

Although Abraham Lincoln once famously remarked that the patent system “added the fuel of interest to the fire of genius,” today many people see the patent system as enabling arsonists: Aggressive patent holders who use overbroad patents and costly lawsuits as a means to burn the competition.

Criminal enforcement of copyright

Kim Schmitz cropped and edited
Kim Dotcom, head of Megaupload.com, indicted for copyright infringement

My perspicacious coauthor and I recently accepted an offer from the North Carolina Journal of Law and Technology to publish our article “Criminal Copyright Enforcement Against Filesharing Services,” which I mentioned here last week. In honor of that, I’d like to share the introduction of the article, sans footnotes:

In January 2012 an elite squad of New Zealand anti-terrorism officers, under the direction of the United States Department of Justice, stormed Kim Dotcom’s lavish $24-million mansion. Equipped with body armor, tactical firearms, dog units, and a helicopter, the squad uncovered Dotcom hiding in a specially designed saferoom. As he was whisked to a police van, Dotcom asked the charges against him. The answer was two words: “Copyright infringement.”

The indictment of Dotcom and his infamous filesharing service, Megaupload, marked the start of a new battle in what reporters have christened the “copyright wars.” Yet it is not the federal government’s only recent foray into the fight against online filesharing services, which, viewed as hotbed for copyright infringement, have been under a decade-long siege of civil litigation from media companies. In 2010, for example, the Department of Homeland Security mounted “Operation in Our Sites” to seize the domain names of websites providing access to infringing content, and the operation has since resulted in the seizure of more than 400 domain names. The issue more recently caught the attention of Capitol Hill, where bills were introduced in both the House and Senate to target foreign websites that link to or host infringing content.

But these efforts have not always been effective. For many of the domain names seized by the Department of Homeland Security, the same infringing content quickly appeared on sites with only slightly modified web addresses, and a few sites even grew in popularity. And the backlash against the two new bills was fierce: many popular websites staged a “blackout” in protest, including the online encyclopedia Wikipedia, citing fears that they would face sanctions merely for linking to controversial sites, even in informational articles.

Meanwhile, other countries have seen some success in directly prosecuting the operators of filesharing services. First, Japan convicted Isamu Kaneko, a computer-science researcher who developed Winny, an early peer-to-peer filesharing system. Kaneko arguably fostered dubious uses of his service by collecting feedback and announcing updates through an anonymous Internet forum dedicated to filesharing. But although Kaneko was convicted by a Japanese district court, the Osaka High Court reversed the conviction after concluding that Winny was “value neutral”—essentially, capable of non-infringing uses—and that Kaneko did not offer Winny primarily to promote infringement, even if he knew that it was probably being used for that purpose. This decision touches on a key question in this article: if a filesharing service is known to have rampant infringing uses, at what point do the service’s operators open themselves to criminal sanctions?

More successful was Sweden’s prosecution of the operators of the Pirate Bay, then one of the Internet’s largest peer-to-peer filesharing services. The operators of the Pirate Bay mocked their contribution to infringing activity, often publishing and ridiculing complaints from copyright organizations. Although Sweden once had a reputation for relaxed copyright laws, the country amended its Copyright Act in 2005 to make it a crime to transfer copyrighted content without permission. When prosecutors then indicted four operators of the Pirate Bay in 2008 for “complicity” in violating the Act, the operators raised the same arguments as Kaneko: that their services had noninfringing uses, and that they were ignorant of any specific infringing activity. But the court found them guilty, emphasizing that they had profited from infringing content by collecting advertising revenue and that knowledge of specific infringing content was unnecessary given that they had created conditions that fostered infringement and ignored notices of infringing content. The defendants were sentenced to one year in prison each and ordered to pay restitution of $4.3 million.

The success of this prosecution has been heralded as harbinger of ones like the action against Megaupload. Yet criminal prosecution of filesharing services is a new development in the United States, and only time will tell whether this new approach proves effective, or under what circumstances it should be used. The future holds many questions: What pushes a legitimate online file-storing business over the edge to criminal enterprise? How might criminal copyright enforcement differ materially from civil enforcement? We seek to answer these questions in this article. We focus on those online businesses enabling users to share infringing content with others online, and we refer to these businesses simply as “filesharing services,” intending this definition to cover diverse types of technology—including “cyberlockers” like Megaupload, which host files on servers controlled by the service, and “torrent” sites like the Pirate Bay, which provide links to connect users to infringing files stored by their peers.

In the end, we conclude that criminal enforcement actions should be limited to those filesharing-service operators that, in order to profiteer from infringing content, foster infringement by egregiously defying the established boundaries of copyright law and civil means of copyright enforcement.

New article on criminal prosecution of filesharing services

kim dotcomAlong with a coauthor, I’ve written an article about criminal enforcement actions against filesharing services, including the ongoing prosecution of the operators of Megaupload. The article also touches on the actions against the Pirate Bay and NinjaVideo. This area of law is important in defining how the federal government protects creators of copyrighted content without stifling innovation. Yet many questions remain about the extent of criminal liability of these services as “secondary” infringers. You can download the article here (and if you do, please let us know what you think). The abstract is below:

The high-profile prosecution of the popular online storage website Megaupload for criminal copyright infringement is the latest in a series of recent criminal prosecutions of online filesharing services. But what pushes a legitimate online file-storing business over the edge to criminal enterprise? How might criminal copyright enforcement differ materially from civil enforcement?This article answers these questions and suggests guidelines for prosecutorial discretion. After a condensed history of criminal copyright law, we explain why “secondary” theories of infringement apply in the criminal, as well as civil, context and why the DMCA “safe harbor” defense is a red herring in criminal copyright actions. We then propose guidelines for prosecutors to consider before bringing a criminal enforcement action against filesharing services: Limiting prosecutions to theories of liability already established in civil case law, and targeting only those filesharing-service operators that openly defy civil enforcement actions.