Saturday, September 1, 2018

Should Corporate Lawyers and Business Law Professors Be Talking About DAOs?

Did I lose you with the title to this post? Do you have no idea what a DAO is? In its simplest terms, a DAO is a decentralized autonomous organization, whose decisions are made electronically by a written computer code or through the vote of its members. In theory, it eliminates the need for traditional documentation and people for governance. This post won't explain any more about DAOs or the infamous hack of the Slock.it DAO in 2016. I chose this provocative title to inspire you to read an article entitled Legal Education in the Blockchain Revolution.

The authors Mark Fenwick, Wulf A. Kaal, and Erik P. M. Vermeulen discuss how technological innovations, including artificial intelligence and blockchain will change how we teach and practice law related to real property, IP, privacy, contracts, and employment law. If you're a practicing lawyer, you have a duty of competence. You need to know what you don't know so that you avoid advising on areas outside of your level of expertise. It may be exciting to advise a company on tax, IP, securities law or other legal issues related to cryptocurrency or blockchain, but you could subject yourself to discipline for doing so without the requisite background. If you teach law, you will have students clamoring for information on innovative technology and how the law applies. Cornell University now offers 28 courses on blockchain, and a professor at NYU's Stern School of Business has 235 people in his class. Other schools are scrambling to find professors qualified to teach on the subject. 

To understand the hype, read the article on the future of legal education. The abstract is below:

The legal profession is one of the most disrupted sectors of the consulting industry today. The rise of Legal Tech, artificial intelligence, big data, machine learning, and, most importantly, blockchain technology is changing the practice of law. The sharing economy and platform companies challenge many of the traditional assumptions, doctrines, and concepts of law and governance, requiring litigators, judges, and regulators to adapt. Lawyers need to be equipped with the necessary skillsets to operate effectively in the new world of disruptive innovation in law. A more creative and innovative approach to educating lawyers for the 21st century is needed.

For more on how blockchain is changing business and corporate governance, come by my talk at the University of Tennessee on September 14th where you will also hear from my co-bloggers. In case you have no interest in my topic, it's worth the drive/flight to hear from the others. The descriptions of the sessions are below:

Session 1: Breach of Fiduciary Duty and the Defense of Reliance on Experts

Many corporate statutes expressly provide that directors in discharging their duties may rely in good faith upon information, opinions, reports, or statements from officers, board committees, employees, or other experts (such as accountants or lawyers). Such statutes often come into play when directors have been charged with breaching their procedural duty of care by making an inadequately informed decision, but they can be applicable in other contexts as well. In effect, the statutes provide a defense to directors charged with breach of fiduciary duty when their allegedly uninformed or wrongful decisions were based on credible information provided by others with appropriate expertise. Professor Douglas Moll will examine these “reliance on experts” statutes and explore a number of questions associated with them.

Session 2: Fact or Fiction: Flawed Approaches to Evaluating Market Behavior in Securities Litigation

Private fraud actions brought under Section 10(b) of the Securities Exchange Act require courts to make a variety of determinations regarding market functioning and the economic effects of the alleged misconduct. Over the years, courts have developed a variety of doctrines to guide how these inquiries are to be conducted. For example, courts look to a series of specific, pre-defined factors to determine whether a market is “efficient” and thus responsive to new information. Courts also rely on a variety of doctrines to determine whether and for how long publicly-available information has exerted an influence on security prices. Courts’ judgments on these matters dictate whether cases will proceed to summary judgment and trial, whether classes will be certified and the scope of such classes, and the damages that investors are entitled to collect. Professor Ann M. Lipton will discuss how these doctrines operate in such an artificial manner that they no longer shed light on the underlying factual inquiry, namely, the actual effect of the alleged fraud on investors.

Session 3: Lawyering for Social Enterprise

Professor Joan Heminway will focus on salient components of professional responsibility operative in delivering advisory legal services to social enterprises. Social enterprises—businesses that exist to generate financial and social or environmental benefits—have received significant positive public attention in recent years. However, social enterprise and the related concepts of social entrepreneurship and impact investing are neither well defined nor well understood. As a result, entrepreneurs, investors, intermediaries, and agents, as well as their respective advisors, may be operating under different impressions or assumptions about what social enterprise is and have different ideas about how to best build and manage a sustainable social enterprise business. Professor Heminway will discuss how these legal uncertainties have the capacity to generate transaction costs around entity formation and management decision making and the pertinent professional responsibilities implicated in an attorney’s representation of such social enterprises.

Session 4: Beyond Bitcoin: Leveraging Blockchain for Corporate Governance, Corporate Social Responsibility, and Enterprise Risk Management

Although many people equate blockchain with bitcoin, cryptocurrency, and smart contracts, Professor Marcia Narine Weldon will discuss how the technology also has the potential to transform the way companies look at governance and enterprise risk management. Companies and stock exchanges are using blockchain for shareholder communications, managing supply chains, internal audit, and cybersecurity. Professor Weldon will focus on eliminating barriers to transparency in the human rights arena. Professor Weldon’s discussion will provide an overview of blockchain technology and how state and nonstate actors use the technology outside of the realm of cryptocurrency.

Session 5: Crafting State Corporate Law for Research and Review

Professor Benjamin Edwards will discuss how states can implement changes in state corporate law with an eye toward putting in place provisions and measures to make it easier for policymakers to retrospectively review changes to state law to discern whether legislation accomplished its stated goals. State legislatures often enact and amend their business corporation laws without considering how to review and evaluate their effectiveness and impact. This inattention means that state legislatures quickly lose sight of whether the changes actually generate the benefits desired at the time off passage. It also means that state legislatures may not observe stock price reactions or other market reactions to legislation. Our federal system allows states to serve as the laboratories of democracy. The controversy over fee-shifting bylaws and corporate charter provisions offers an opportunity for state legislatures to intelligently design changes in corporate law to achieve multiple state and regulatory objectives. Professor Edwards will discuss how well-crafted legislation would: (i) allow states to compete effectively in the market for corporate charters; and (ii) generate useful information for evaluating whether particular bylaws or charter provisions enhance shareholder wealth.

Session 6: An Overt Disclosure Requirement for Eliminating the Duty of Loyalty

When Delaware law allowed parties to eliminate the duty of loyalty for LLCs, more than a few people were appalled. Concerns about eliminating the duty of loyalty are not surprising given traditional business law fiduciary duty doctrine. However, as business agreements evolved, and became more sophisticated, freedom of contract has become more common, and attractive. How to reconcile this tradition with the emerging trend? Professor Joshua Fershée will discuss why we need to bring a partnership principle to LLCs to help. In partnerships, the default rule is that changes to the partnership agreement or acts outside the ordinary course of business require a unanimous vote. See UPA § 18(h) & RUPA § 401(j). As such, the duty of loyalty should have the same requirement, and perhaps that even the rule should be mandatory, not just default. The duty of loyalty norm is sufficiently ingrained that more active notice (and more explicit consent) is necessary, and eliminating the duty of loyalty is sufficiently unique that it warrants unique treatment if it is to be eliminated.

Session 7: Does Corporate Personhood Matter? A Review of We the Corporations

Professor Stefan Padfield will discuss a book written by UCLA Law Professor Adam Winkler, “We the Corporations: How American Businesses Won Their Civil Rights.” The highly-praised book “reveals the secret history of one of America’s most successful yet least-known ‘civil rights movements’ – the centuries-long struggle for equal rights for corporations.” However, the book is not without its controversial assertions, particularly when it comes to its characterizations of some of the key components of corporate personhood and corporate personality theory. This discussion will unpack some of these assertions, hopefully ensuring that advocates who rely on the book will be informed as to alternative approaches to key issues.

 

September 1, 2018 in Ann Lipton, Compliance, Conferences, Contracts, Corporate Governance, Corporate Personality, Corporations, Current Affairs, Employment Law, Human Rights, Intellectual Property, International Business, Joan Heminway, Joshua P. Fershee, Law School, Lawyering, LLCs, Marcia Narine Weldon, Real Property, Shareholders, Social Enterprise, Stefan J. Padfield, Teaching, Technology, Web/Tech | Permalink | Comments (0)

Friday, February 9, 2018

The Business of Designing for the Olympics

As I watch the opening ceremonies of the 2018 Winter Olympic Games, I am struck by all of the design work that goes into the ceremony and the games.  Who designs the vast opening and closing ceremony productions?  Does the host country hire some or all the people who appear in the productions or are some or all volunteers?  Who holds the intellectual property rights to the program elements and the recording of the program?  The International Olympic Committee, I guess . . . .  It strikes me that the Olympic Games have become big business, and intellectual property rights have become important to the value of that business.  The World Intellectual Property Oganization notes that "[t]he Games are as much a celebration of innovation and creativity as they are of humanity, fair play and sporting excellence."

Perhaps most amusing to me in the run-up to the 2018 Winter Olympic Games has been the coverage of the U.S. opening ceremony outfits, designed by Ralph Lauren.  Even for those of you who purport to know nothing about fashion design, you may recall that Ralph Lauren designs those shirts and shorts and sweaters with the little embroidered polo horse on the chest . . . .  But trust me, he's an iconic American designer.  Anyway, here is a critique of the American ensembles, ranking each item.  The jacket is heated (!).  But the large fringe suede gloves appear to be a particularly controversial fashion choice.  As one critic noted:

These outfits have come in for a lot of criticism, particularly because they require the athlete to wear ludicrously large gloves that look as though they were designed for grilling by some sadist who then wants the grillers to go up in flames because the fringe of their large gloves has caught on fire.

She goes on to say the following:

The gloves have also come in for criticism because they have a Southwestern, Native American–meets–Route 66 truck stop, tchotchke vibe to them. The Olympic rings and the American flag are beaded. Between the fringe and the beading, there have been some claims and concerns about appropriation. I hear those. However, I do think that, in the long view, we want the American Olympic team outfits to be referencing a broader set of cultural influences on American life.

Wow.  Who knew the business of deigning for the Olympic Games was so complex and fraught with peril?

In truth, the relationship between the U.S. Olympic Committee and Ralph Lauren is just one example of a designer collaboration seen frequently in fashion design in recent years.  Target, H&M, and many others have entered into successful collaborations with major designers.  See, e.g., herehere and here.  These collaborations involve contracts addressing the fusion of the applicable intellectual property rights, among other legal and business issues.  See, e.g., here and here.  This is undoubtedly an interesting aspect of fashion law.

But back to the Olympic outfits . . . .  Bustle is running a series of articles on the team uniforms and their designers.  Here is the first installment.  And if you want to know how much it will cost you to buy parts of the Team U.S.A. opening ceremony outfits, you can read about that here.  They're pricey; be prepared . . . .

February 9, 2018 in Intellectual Property, Joan Heminway, Licensing | Permalink | Comments (0)

Saturday, November 18, 2017

How 'Bout Them Lady Vols?

Quietly, just over two months ago, we got our Lady Vols back.  As you may recall, back in 2014, The University of Tennessee, Knoxville decided to consolidate its athletic branding behind the ubiquitous orange "Power T." The women's basketball team was exempted from the brand consolidation and retained the Lady Vol name and old-school logo in honor of our beloved departed coach, Pat Head Summitt. (See here.)

Many can be credited with the revival of the Lady Vols brand (and I do consider it to be an accomplishment), although perhaps these five heroic women are owed the largest debt of gratitude for the achievement.  I guess my earlier envisioned dreams of profiting from the abandonment of the trademarked Lady Vols logo will not soon be realized . . . .

There are lingering lessons in this affair for businesses and their management--and universities (as well as their athletic departments) are, among other things, businesses.  Knoxville's former Mayor weighed in with comments on the matter in a recent local news column, advising "you need to be sensitive to what the customer likes." He concludes (bracketed text added by me):

People will speculate for a long time on how UT let itself get caught up in this unfortunate situation for three years. It did not have to happen. It can be a valuable lesson, if once leaders realize a mistake has been made, postponing a resolution does not improve it. Better to make amends and move on.

Hopefully, DiPietro [the university's President] has learned from this that it is better to get ahead of a volatile issue than to be consumed by it. Currie [the university's new Director of Athletics] and Davenport [the campus's new Chancellor] solved it for him. They have won considerable good will for themselves and the university.

From Coca-Cola and its disastrous New Coke introduction (mentioned in the article) to Google Glass (which may have better applications, for the moment, than the general consumer market), businesses and their management have learned these lessons over and over.  Listen to the customer, and if you make a miscalculation, admit it and move on.

As law schools and law instructors continue to innovate to serve students, our universities (for those who are part of one), and the profession (among other constituencies), we may be able to learn a lesson or two from some of the broader experimentation in the business world in the introduction of new products and services.  Change for the sake of change or for the sake of branding simplicity, without an understanding of the relevant constituents, certainly is a risky proposition.  I hope that we can be thoughtful and consider all affected interests as we innovate.  And I also hope that when we fail in our change efforts (and some of us will fail) we can cut our losses and re-appraoch change with new knowledge and renewed energy to succeed. 

Getting back to those Lady Vols, our women's basketball team is now 2-0 with convincing wins over ETSU and James Madison.  The next game is Monday against Wichita State, followed by a Thanksgiving evening match against Marquette.  Go Lady Vols!

November 18, 2017 in Intellectual Property, Joan Heminway, Law School, Management, Sports | Permalink | Comments (3)

Tuesday, November 14, 2017

No Need to Veil Pierce an LLC When Direct Liability Is Available (and LLCs Are Still Not Corps)

A new Maryland case deals with claims against a limited liability company that the plaintiff claimed was "registered as a limited liability corporation ('LLC')." Farm Fresh Direct Direct By a Cut Above LLC v. Downey, 2017 WL 4865481, at *2 (D. Md., 2017).  The court repeats the mistake, but the complaint is the original source, as it incorrectly identifies the LLC as a "corporation" and not a company.  The court then explains some of the allegations as follows: 
Plaintiff alleges that Sinsky violated 15 U.S.C. § 1125(a)(1)(A) and engaged in unfair and deceptive trade practices, in violation of Maryland common law. ECF 1, ¶¶ 17-22, 23-26. At its core, plaintiff's contention is that “Sinsky is the resident agent and incorporator” of Farm Fresh Home (ECF 1, ¶¶ 12-13), and in that capacity she “filed” the articles of organization for Farm Fresh Home, creating a name for the “competing company” that is “intentionally confusing” because of its similarity to Farm Fresh Direct. ECF 1, ¶ 12.
. . . .
*4 Farm Fresh Home is a limited liability company. As a threshold matter, I must determine whether Sinsky is subject to suit in light of Farm Fresh Home's status as a limited liability company.
Id. at *3–4. 
 
That is not quite right. The complaint alleges that Sinsky, by helping to form the LLC, violated the Lanham Act and Maryland common law (the court repeats the complaint's "incorporator" language, but presumably this is meant to refer to the formation of the LLC).  The question, at least initially, should not be whether Sinksy is subject to suit as a member of the LLC.  The question, then, is whether there is a direct claim against Sinsky for creating the competing entity.
 
The court seems to understand this is at least part of the analysis because the opinion discusses veil piercing (in the corporate context, of course) as well as the concept of direct liability.  As to direct liability, the opinion correctly explained: “An LLC member is liable for torts he or she personally commits, inspires, or participates in because he or she personally committed a wrong, not ‘solely’ because he or she is a member of the LLC.” Id. at *5 (quoting Allen v. Dackman, 413 Md. 132, 158, 991 A.2d 1216, 1228 (2010)). The opinion further states that there can be direct liability under the Lanham Act and for unfair trade practices, even when an entity is involved.  This is (at least conceptually) correct.  Despite this, the opinion ultimately misses the mark: 
The question here is not whether plaintiff will ultimately prevail. Its allegations as to Sinsky border on thin. But, for purposes of the Motion, plaintiff adequately alleges sufficient facts and inferences that Sinsky participated in the creation of Farm Fresh Home for the purpose of using a confusingly similar name to compete with Farm Fresh Direct. See A Society Without a Name, 655 F.3d at 346. Therefore, plaintiff is not entitled to the protection of the corporate shield at this juncture.
Id. at *7 (emphasis added). No and no. First, LLCs do not have corporate shields. They have LLC or limited liability shields, but You Can’t Pierce the Corporate Veil of an LLC Because It Doesn't Have One!  Second, there is no need to consider veil piercing at this point. The court has found sufficient claims as to Sinsky's participation to support direct liability. The inquiry should end there. And even if there were value in discussing both direct liability and veil piercing (there is not), the court's own citation to Allen v. Dackman should indicate that this section is not solely related to entity-derived liability.  
 
I don't mean to be too hard on anyone here.  This is not personal -- it simply about identifying and trying to correct errors related to entity status. I know that not all courts or practicing attorneys spend the amount of time I do with entities and their nuances.  And this case involves a pro se party, which can make things even more challenging.
 
I just still maintain that this is something we can correct. Apparently, one blog post at a time. 

November 14, 2017 in Accounting, Corporate Personality, Corporations, Intellectual Property, Joshua P. Fershee, Litigation, LLCs | Permalink | Comments (5)

Monday, September 25, 2017

Rocky Top at 50

 RockyTopPride

A recent Knoxville New Sentinel article (as well as articles and other press coverage, including stories on local television outlets like this one) noted the golden anniversary of The University of Tennessee's unofficial* fight song (also a Tennessee state song), Rocky Top.  Any of you who have been to Neyland Stadium--or to Thompson-Boling Arena or any other venue at which the Vols are accompanied by the Pride of the Southland Marching Band or one of the pep bands--are familiar with the tune.  Many of our opponents just despise it.  It's catchy, and it's country.

And it has led to merch in which The University of Tennessee has an interest.  Rocky Top hats, t-shirts, etc. abound.  Lyrics from the song (especially "Home sweet home to me") adorn the same.  That little song has become a big (read: commercially successful) deal.

But it also has been involved in some recent intellectual property law controversies involving a town just North of us here in Knoxville--a town formerly known as Lake City, Tennessee and now known as (you guessed it) Rocky Top, Tennessee.  It will take me two posts to cover this without boring you all, but I will start with the article written by my colleague Brian Krumm and one of our alums, Liz Natal.  In Good Ole Rocky Top: Rocky Top Tennessee, Brian and Liz lay out the details of how our beloved song (which co-blogger Doug Moll says periodically rings in his head from a football game long ago . . .) became the name of a town despite a trademark suit over the affair.  The details are in the article.  For those interested in trademarks, the article lays out the controversy and offers some interesting observations.

But Brian and Liz's piece just tells the early part of the story.  There's more to say about the intellectual property ramifications of this name change.  Another of my colleagues, Gary Pulsinelli, is working on a piece along those lines now.  I will share it with you once he's got at least a draft posted somewhere.  But I have heard presentations on this work, and it's also quite interesting--even if Rocky Top is not your thing.  Stay tuned! 

RockTopTownSign

* The word "unofficial" was added to this post on September 28 in response to a reader's comment, reflected below.  The official fight song of The University of Tennessee, Knoxville is "Down the Field," also known as "Here's to Old Tennessee."

September 25, 2017 in Intellectual Property, Joan Heminway, Sports | Permalink | Comments (3)

Friday, September 8, 2017

Law & Wellness: Interview with Gabe Azar (Sr. Patent Counsel at Johnson & Johnson)

Gabriel (“Gabe”) Azar and I graduated one year apart, from the same law school. He has an undergraduate degree in electrical engineering from Georgia Tech and started his legal career as an associate practicing patent law at Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. He moved from Finnegan to Paul Hastings and from there to an in-house position with FIS. Currently, he is Senior Patent Counsel at Johnson & Johnson. I’ve admired, mostly from a distance (he lives in Jacksonville, FL now), how Gabe has balanced family, work, and health. We recently reconnected on Strava, and it has been inspiring to see a dedicated husband/father/attorney taking his fitness seriously.   

 

The interview is below the page break.

Continue reading

September 8, 2017 in Business Associations, Haskell Murray, Intellectual Property, Law Firms, Law School, Lawyering, Wellness | Permalink | Comments (0)

Thursday, March 2, 2017

Hrdy on "The Reemergence of State Anti-Patent Law"

My Akron Law colleague Camilla Alexandra Hrdy has posted "The Reemergence of State Anti-Patent Law" on SSRN.  You can download the paper here.  Here is the abstract:

The majority of states have now passed laws prohibiting bad faith assertions of patent infringement. The laws are heralded as a new tool to protect small businesses and consumers from harassment by so-called patent trolls. But state “anti-patent laws” are not a new phenomenon. In the late nineteenth century, many states passed regulations to prevent rampant fraud by patent peddlers who aggressively marketed fake or low value patents to unwitting farmers. However, courts initially held the laws were unconstitutional. Congress, courts reasoned, had power under Article I, Section 8, Clause 8 to “secure” patent rights. If states could tax patents or alter the terms on which patents were sold and enforced, this risked destroying a federal property right and nullifying an Article I power. In the early twentieth century, the U.S. Supreme Court finally held that states retained some authority to regulate, and to tax, patent transactions. But the Court made clear that states could never impose an “oppressive or unreasonable” burden on federal rights. The Federal Circuit has completely ignored this preemption law. But it has never been overruled and must be consulted today in assessing the constitutionality of states’ current efforts to combat patent trolls.

March 2, 2017 in Intellectual Property, Stefan J. Padfield | Permalink | Comments (0)

Friday, February 10, 2017

Patents to Non-Human Inventors?

The Constitution tells us that patents can be given to “inventors,” and the Patent Act states that protection is available to “[w]hoever invents or discovers” an invention.  These are not generally controversial propositions, but like so many legal regimes, technology is forcing these analog laws to deal with digital phenomena. The culprits here are artificial intelligence and software capable of inventing new technologies. Can patents be given to digital “inventors,” and if not, does any human have the right to patent such an invention?

Obvious comparisons can be drawn to whether non-humans can be “authors”—as required by the Constitution—for copyright purposes. For instance, can a digital composer of music be given copyright protection for its work? The academic consensus is that technology is not an author (for Constitutional purposes), but the agreement dissolves from there. Some have argued that programmers should be given ownership rights—a reasonable proposition—but this sentiment is far from universal.

With little guidance from copyright law, parties have looked elsewhere for ideas in the patent sphere.  It has been posited that—if a non-human cannot be an inventor—current patent laws require the first person to “discover” the value of the non-human invention to be the inventor. This may be correct, but one must consider if that policy creates maximum incentives to further the progress of technology. Perhaps an amendment to the Patent Act is appropriate.

There are several potential avenues to address this issue. Ownership could be allocated to the programmer, the company owning the hardware, or to no one at all. Granting ownership to any party incentivizes creation of more inventing software and artificial intelligence. This benefit, however, comes at the price of granting 20-year patent monopolies at a relatively small marginal cost to the patentee (after software is accounted for). Does this encouragement to create and use of inventing software/computers come at too high of a cost to society?

Denying any patent protection enriches the public domain by including all non-human inventions—a social positive. That policy, however, potentially discourages the creation of inventing machines (as it decreases their market value) and incentives fraud before the Patent Office.  Should a party identify a valuable invention created by a non-human, it might falsely claim that a human was the inventor to secure a patent. This would benefit dishonest firms at the expense of honest companies and society at large. 

Lastly, there is an interesting potential distinction to be drawn between inventing algorithms or software (e.g., genetic algorithms) versus artificial intelligence. Non-human corporations continue to obtain greater rights under the Constitution (see Citizens United). Might artificial intelligence (e.g., something that could pass the Turing Test?) be recognized as an inventor at some point, while a “mere” algorithm or software might not? The question is probably premature, and as presented, is likely not sufficiently nuanced.  However, the topic may eventually be raised.

At this time, no one has the answers to the above legal and policy questions, though I’m sure many commentators (myself included) will chime in.  I invite readers to voice their opinion in the comments.

February 10, 2017 in Intellectual Property | Permalink | Comments (2)

Friday, January 27, 2017

The Star Trek Fan Film Case, part 2 - Thoughts on the Fair Use Opinion

The Star Trek copyright lawsuit I previously wrote about settled last Friday.  This was not a surprise. Defendant Axanar’s best bet was arguing that its fan film made fair use of the Star Trek works. The court, however, foreclosed that defense a few weeks ago.  This post addresses a few points (out of many) from the opinion ruling against Axanar’s assertion of fair use.  I’m not certain that the judge got the multi-factor analysis incorrect, but I do worry about how some aspects of the opinion will be applied in the future. 

When assessing fair use, courts must review whether the work is commercial or not.  For-profit use weighs against the defense.  Axanar argued that its film was non-commercial because it would be freely downloadable.  The court rebuffed, positing that “indirect commercial benefit” is sufficient to render a use commercial. While there is precedent supporting this proposition, the opinion expanded the idea of indirect commercial benefit a step too far. 

The court held that defendants’ intent to create “other job opportunities” through the Axanar project rendered it commercial and thus, disfavored fair use.  The problem is that almost any author, film producer, etc. hopes that their projects will be successful and create future job prospects.  Accordingly, this consideration will disfavor fair use in almost all situations under the Axanar opinion. 

To be fair, there was evidence that defendants attempted to leverage their project into new business opportunities, and that probably supports the “commercial” determination. This fact, however, was not elaborated on in the opinion, and that nuance is unlikely to be referenced in future citations to the case.   

My second concern with the fair use analysis pertains to the court’s assessment of the “Amount and Substantiality of the Portion Used.” Under this factor, the more of the copyrighted work that is used (in both volume and importance), the less likely the defense is applicable. The court found that Axanar’s use of many details from the Star Trek universe (e.g., Vulcans, phasers, etc.) disfavored fair use.  There was no discussion of whether Axanar used primary plots or characters from Star Trek.

This precedent again casts broad shadows. Under the opinion, stories that take place in a preexisting fictional world (e.g., fan works) will almost always be disfavored as a fair use (regardless of how much of the actual plot is used).  Works of that type commonly use small details to stay consistent with the original universe, and thus, under the Axanar opinion, will usually be disfavored as a fair use.  I doubt the court intended the “amount used” consideration to disfavor fair use for almost all works of this nature (including most fan productions).  Again, while the court’s final conclusion may be correct, the precedent it established seems to be unnecessarily broad.

January 27, 2017 in Intellectual Property | Permalink | Comments (0)

Friday, January 20, 2017

Thoughts on the Star Trek Fan Film Copyright Lawsuit

A copyright lawsuit against Star Trek fan film creator Axanar Productions is going to trial this month. CBS and Paramount alleged infringement after Axanar raised over $1 million to produce a freely downloadable Star Trek movie and a previously released teaser. The case raises a host of interesting issues, which I’ll look at over a couple of posts.

I found this case notable for how it fits into the expansion of copyright protections and the influence of repeat litigants. Copyright has evolved to protect increasingly granular elements of a story (i.e., protecting discrete things in a story, not the entire work). It was once questionable if an isolated character could be protected, but now copyright extends to means of transportation (Batmobile), monsters (Godzilla), and implements of mass murder (Freddy Krueger’s glove). 

This is good for copyright holders. It is easier to prove infringement a copyrighted light saber than it is to show that someone copied the story of a farm boy who learned a mystical religion, got a light saber, found out his dad was Darth Vader, and so on. The Star Trek suit falls into the trend of increasingly granularity; CBS and Paramount assert protection of individual phrases (“beaming up”), made-up languages (Klingon), and fictional styles of architecture.

These allegations are not surprising, but they are interesting as part of a continuing trend of large-scale copyright holders attempting to protect small elements of a story. These parties will be repeat litigants, and they aim to craft beneficial precedent. It behooves them to allege granular protection, see if any assertions catch the court’s favor, and proceed with likely winners. Losing allegations are dropped or the case settled. Content owners thus secure caselaw supporting granular (easily infringed) copyright, without creating adverse precedent. This is smart business, but limits authors and filmmakers who must avoid these copyrights.

I’m also curious about the message sent by this case. Most fan fiction/films are either tacitly accepted by copyright holders or endorsed as advertising. This lawsuit will certainly chill the production of fan fiction and films—especially high-end works. Was Paramount so concerned about competition from fans that it was willing to lose the goodwill that Axanar could have generated? A million dollar fan film might have "competed" with Star Trek movies to some extent, but it almost certainly would have created significant buzz among fans. I wonder if other franchise-owners would have made the same decision. At this point, I doubt they’ll have to; I wouldn’t expect any fan to be willing to venture into “high-end” fan works anytime soon for fear of a lawsuit. 

January 20, 2017 in Intellectual Property | Permalink | Comments (0)

Monday, January 16, 2017

Welcome Professor Mike Schuster to BLPB!

Mike.schuster

Professor Mike Schuster of Oklahoma State University, Spears School of Business, will be guest blogging at BLPB for the next 4 weeks. Prior to joining Oklahoma State's faculty, Professor Schuster was at attorney at Vinson & Elkins LLP in Houston, Texas. His research is primarily in the intellectual property space, which, as we all know, is quite important to businesses.

Professor Schuster's most recent academic article, "Invalidity Assertion Entities and Inter Partes Review: Rent Seeking as a Tool to Discourage Patent Trolls" is forthcoming in the Wake Forest Law Review and his SSRN page is available here.

Please join me in welcoming Professor Mike Schuster to BLPB. 

January 16, 2017 in Business Associations, Business School, Intellectual Property | Permalink | Comments (0)

Friday, October 21, 2016

Legal Issues for Startups and Small Businesses

Sadly, I am still in the midst of grading business associations and civil procedure midterms so I cannot finish my substantive post on Wells Fargo yet. WF is the gift that keeps on giving from a teaching perspective, though. Yesterday I showed students some of the litigation that has come out of the debacle to illustrate the difference between a direct and derivative suit (and to reinforce some civil procedure principles too).

Last night I took a break from grading to go to a Meetup called Ask a Start Up Lawyer. I hope to teach a 2-credit skills course on legal issues for startups, small businesses, and entrepreneurs next semester and I have found that going to these sessions and listening to actual entrepreneurs ask their questions helpful. Last night's meetup was partcularly enlightening because a number of international entrepreneurs here in Miami for a State Department initiative attended. While in the past some of these sessions have focused on funding options and entity selection, last night's "students" mainly wanted to learn about intellectual property and international protection. Many of them come from countries with no copyright law, for example. Others come from countries where owning shares is a rarity. Although my course will focus on domestic entities, given the South Florida market in which I teach, I may need to add some of these comparative components to my already ambitious draft syllabus covering tax, employment, entity selection, governance, IP, business torts, basic securities regulation, social entrepreneurship, and exit strategies. 

If you have taught a course like this or have any ideas on materials to use, please comment below or send me a message at mnarine@stu.edu. 

October 21, 2016 in Intellectual Property, International Business, Lawyering, Marcia Narine Weldon, Teaching | Permalink | Comments (3)

Monday, February 22, 2016

Free Web Seminar: The Opportunities and Pitfalls of Cybersecurity and Data Privacy in Mergers and Acquisitions

One of my two former firms, King & Spalding, is hosting a free interactive web seminar on cybersecurity and M&A on February 25 at 12:30 p.m. Thought the web seminar might be of interest to some of our readers. The description is reproduced below.

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An Interactive Web Seminar

The Opportunities and Pitfalls of Cybersecurity and Data Privacy in Mergers and Acquisitions

February 25, 2016

12:30 PM – 1:30 PM

Over the last several years, company after company has been rocked by cybersecurity incidents. Moreover, obligations relating to cybersecurity and data privacy are rapidly evolving, imposing on corporations a complex and challenging legal and regulatory environment. Cybersecurity and data privacy deficiencies, therefore, might pose potentially significant business, legal, and regulatory risks to an acquiring company. For this reason, cybersecurity and data privacy are becoming integral pre-transaction due diligence items.

This e-Learn will analyze the (1) special cybersecurity and data privacy dangers that come with corporate transactions; (2) strategies to mitigate those dangers; and (3) benefits of incorporating cybersecurity and data privacy into due diligence. The panel will zero in on these issues from the vantage point of practitioners in the deal trenches, and from the perspective of a former computer crime prosecutor and a former FBI agent who have dealt with a broad range of cyber risks to public and private corporations.  This e-Learn is for managers and attorneys at all levels who are involved at any stage of the M&A process and at any stage of cyber literacy, from the beginner who is just starting to appreciate the complex nature of cyber risks to the expert who has addressed them for years.  The discussion will leave you with a better understanding of this critical topic and concrete, practical suggestions to bring back to your M&A team.

Program Speakers

Robert Leclerc, King & Spalding’s Corporate Practice Group and experienced deal counsel; Nick Oldham, King & Spalding, and Former Counsel for Cyber Investigations, DOJ's National Security Division; John Hauser, Ernst & Young, and former FBI Special Agent specializing in cyber investigations.             

Click Here to Register.

February 22, 2016 in Corporate Governance, Corporations, Haskell Murray, Intellectual Property, M&A, Management, Technology, Web/Tech, White Collar Crime | Permalink | Comments (1)