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Copyright Infringement? Peloton Punches Back With Antitrust

Copyright Infringement? Peloton Punches Back With Antitrust

[This post was updated in September 2019:  “Contract, Combination or Conspiracy” – Can Peloton’s Lawsuit Survive the Music Publishers’ Motion to Dismiss?]

Can a trade association negotiate sales or licenses on behalf of its members? Can it tell members, “don’t negotiate individually with a specific purchaser, and if you are already in negotiations with that purchaser cut them off and let us negotiate on behalf of you and other members”? At what point does this conduct become an antitrust violation? 

These are the issues raised in a lawsuit between Peloton Interactive, Inc. on the one hand, and a group of music publishers and the National Music Publishers Association, Inc. (NMPA) on the other.

Peloton and Music Licensing. Peloton sells high-end, in-home stationary bicycles. An important feature of Peloton’s service is music-backed, instructor-led workout classes streamed to users via a built-in video screen. Some of these classes are broadcast live, and many are recorded and accessed on-demand.

Peloton doesn’t own its music, instead Peloton instructors create their playlists using popular recordings drawn from Peloton’s commercial music library.

To do this Peloton needs several music licenses. To play the sound recordings it needs master licenses from record companies. For public performance of the musical works (the compositions) it needs licenses from the performance rights organizations, ASCAP, BMI and SESAC. And, to reproduce the musical works along with videos, it needs synchronization licenses, so-called “sync licenses,” from the owners of the musical works.1

A sync license does not fall under any of the compulsory license provisions of the Copyright Act, and therefore sync licenses must be negotiated directly with the publishing companies that hold the copyrights. Here, it seems, is where Peloton’s attempt to acquire music rights fell short – Peloton was able to purchase blanket or “catalog-wide” sync licenses from what it calls the “major” publishers2 and many (but not all) “independent” publishers. 

The Publishers’ Copyright Suit. In March 2019 nine independent publishers filed suit against Peloton, claiming copyright infringement of more than a thousand musical works and seeking total damages as high as $150 million. According to the publishers Peloton transmitted these compositions with exercise videos without a sync license.

Based on the complaint the publishers appear to have a strong case, and it is unlikely that their core allegation – that Peloton was using these songs in videos without sync licenses – was false. If true, Peloton is looking at a significant settlement (or worse, a large court judgment). And, Peloton didn’t assert a credible public defense to the suit – in fact, it reacted by withdrawing the songs at issue from the library of tunes available to its instructors.

But it’s often the case that the best defense is a good offense, and Peloton has attempted to strike back in its countersuit.

Peloton’s Antitrust Counterclaim. In April Peloton filed a counterclaim against the nine publishers and NMPA, which it added as a defendant to its counterclaim. The heart of its claim is that, under the influence and urging of NMPA, the nine publishers refused to negotiate directly and individually with Peloton. Rather, they engaged in price fixing and a group boycott by insisting that Peloton negotiate licenses with NMPA on behalf of all the publishers. Peloton’s counterclaim states:

NMPA has instigated a coordinated effort with the Counterclaim Defendant music publishers to fix prices and to engage in a concerted refusal to deal with Peloton. Through these actions, NMPA has exceeded the bounds of legitimate conduct for a trade association and become the ringleader of concerted activity among would-be competitor music publishers, all in violation of the antitrust laws. . . . NMPA first sought to extract supracompetitive license terms from Peloton by negotiating collectively on behalf of a large (though unidentified) number of member publishers. . . . When NMPA’s collective negotiations with Peloton later stalled (for reasons NMPA never disclosed to Peloton), Peloton pursued direct negotiations with a number of music publishers. After participating in seemingly meaningful negotiations, however, several of the Coordinating Publishers suddenly — and virtually at the same time — cut off their negotiations and collectively refused to deal with Peloton. This refusal to deal with Peloton was at the urging of NMPA … 

Does Peloton have a viable antitrust claim? It’s a close call.

Buying Groups and Selling Groups. To understand the antitrust issues here I start with the concept of buying groups, or group purchasing organizations. The courts have recognized that most buying groups are economically efficient and (for example), enable small retailers to compete more effectively with larger retailers. Consequently, buying groups are “not a form of concerted activity characteristically likely to result in predominantly anticompetitive effects.” Northwest Wholesale Stationers v. Pac. Stationery & Printing Co. (USSC 1985). So long as the members of the buying group have a market share of less than 40% of buyers, they are protected by an FTC and court-approved safe harbor from antitrust liability for group negotiation of “input prices.”

However, the same is not true of “selling groups” – competitors who agree to set “output prices” at which they will sell or license their products. Output pricing by members of a trade association can easily cross the line over into price fixing, a per se violation under the antitrust laws.

“Hub-and-Spokes” Conspiracy. And that is what Peloton alleges occurred here. The antitrust theory behind Peloton’s counterclaim appears to be based on a “hub-and-spokes” conspiracy, similar to United States v. Apple (2nd Cir. 2015), where Apple acted as the organizer of an illegal horizontal price-fixing conspiracy among publishers in the e-book market.3 Peloton alleges that NMPA has acted as a “ringleader” similar to the role played by Apple in that case.

Twombly “Plausibility.” However, the NMPA and the publishers have already informed the court that they intend to file a motion to dismiss Peloton’s counterclaim. This motion is likely to rely on the argument that the counterclaim fails to allege facts that satisfy the Twombly “plausibility” requirement required for pleading an antitrust conspiracy.4 The publishers are likely to argue that the complaint contains insufficient allegations of concerted action between the publishers to support the inference that the publishers engaged in a horizontal conspiracy. In other words, in the language of the hub-and-spoke metaphor, there is no “rim.”

Indeed, Peloton’s antitrust claim provides no direct evidence of an overarching conspiracy between the publishers. There are no allegations of communications between the publishers from which the court could infer an agreement or conspiracy between them; there are no statements by informants or witnesses that support a horizontal conspiracy; and there are no specific allegations of back-room conspiratorial meetings between the publishers. Peloton alleges that several publishers pulled out of direct negotiations with Peloton at about the same time, but even these allegations of parallel conduct appear lacking: of the nine publishers alleged to be part of the conspiracy, Peloton provides specific allegations of parallel conduct as to only three.5

On this record Peloton may be hard-pressed to meet the “plausibility” standard and persuade the court that the conduct at issue is not the result of independent decision making on the part of the publishers – that is, that they would be better off having NMPA negotiate with Peloton on their behalf then negotiating directly.

Consequences if Peloton Prevails. That said, court rulings on motions to dismiss are unpredictable, and unappealable by a losing defendant. If Peloton’s counterclaim does survive a motion to dismiss its antitrust case represents a real threat to NMPA and the publishers. Any damages Peloton can prove will be subject to trebling, and NMPA and the publishers may be liable for Peloton’s attorney’s fees, which in an antitrust case can be substantial. And, the publishers’ copyrights may be unenforceable against Peloton based on the doctrine of copyright misuse.6

To add to this, there are practical issues that are not immediately apparent from the court filings. Can Peloton’s law firm represent all ten defendants (NMPA and the nine publishers) against this counterclaim? Or, are there sufficiently different interests that will require the publishers to each retain separate counsel, increasing their overall defense costs?

If the publishers’ lawyers are representing the publishers on a contingent fee basis, did they agree that this would include the defense of any counterclaims? If not, are the publishers (many of which are relatively small entities) prepared to incur the substantial cost of defending a complex, multi-party antitrust suit? Are they prepared, on behalf of their artist clients, to risk losing the right to enforce their copyrights against Peloton under the copyright misuse doctrine?

I would venture that the answers to most of these questions is “no.” Quite likely, once the potential impact of Peloton’s counterclaim sinks in, and assuming the counterclaim survives the motion to dismiss, some of the publishers will negotiate directly with Peloton and settle their copyright claims in exchange for a release from Peloton’s antitrust claims, leaving fewer and fewer of the “starting ten” counterclaim defendants to fight with Peloton. As the number of publishers left in the case decreases, the pressure on the remaining publishers will increase, eventually forcing them to the settlement table.7 How NMPA, the alleged “ringleader” – which owns none of the music involved – will navigate this minefield and emerge from this litigation is an open question.

Update: The music publishers have filed a proposed amended complaint greatly increasing the number of compositions at issue – and therefore the damages they are seeking from Peloton. Link here.

Update: This case was settled after the court dismissed Peloton’s antitrust counterclaim. (Link)


Judge Young Pulls No Punches When it Comes to Mandatory Sentencing

You may recall the brouhaha that arose last year when a Massachusetts state district court judge vacated a prior state court conviction in order to mitigate the impact that the conviction would have on the defendant under the federal sentencing guidelines in an upcoming sentencing in federal court. The defendant, Matthew West, was due to be sentenced in federal court by Judge Young later the same day. Under the federal sentencing guidelines, the existence or non-existence of a prior conviction made a huge difference in how much time West would be required to serve under the guidelines. Hence the urgency (on the part of West) in getting the earlier conviction vacated so it wouldn’t be counted against him.

The whole bizarre story is described here. You may recall that after that story broke the judge was the subject of massive public criticism (think talk radio, Boston Herald). She ended up in the emergency room with chest pains, and upon recovering she changed her mind and reinstated the conviction. Wow. Being a judge in Massachusett is very stressful. (For another example of just how stressful, click here).

Now Massachusetts Federal District Court Judge William Young has used his sentencing memorandum in the Matthew West case to expound his views on the legislative and judicial history behind the guidelines. This 35 page memorandum, available here, is a brilliant, exhaustively researched and opinionated discussion of the extraordinarily controversial issues associated with mandatory sentencing guidelines. Suffice it to say, Judge Young was no fan of this law (which was demoted from “mandatory” to “advisory” by the Supreme Court in 2005 in Booker v. United States and subsequent cases), and he is highly critical of the law, even as it is applied post-Booker.

As a sordid bonus, the memorandum includes the 15 page transcript of the hearing before the state court judge at which West’s state conviction was vacated, including the famous quote from the judge, “Tell him it was an early Christmas present.” The question of who said this is likely to be a trivia question for Massachusetts lawyers for years to come. The answer: Justice Diane Moriarity.

Oracle v. Google: Will The Best Analogy Win?

Oracle v. Google: Will The Best Analogy Win?

Analogies, it is true, decide nothing, but they can make one feel more at home – Sigmund Freud

One good analogy is worth three hours discussion – Dudley Field Malone

Oracle v. Google, now before the Supreme Court, is a complicated case in more ways than one. The copyright law issues are difficult, but the case is made even more challenging by its subject matter, which involves highly technical and abstruse computer technology. Judges have a hard enough time applying copyright law to traditional media like music, novels and photographs, but software copyright cases add another order of magnitude of complexity.

The legal briefs now before the Supreme Court are overflowing with computer jargon. You can read all about the “Java language,” the “Java virtual machine,” the “Dalvik virtual machine,” “application programming interfaces (APIs),” “packages,” “classes,” “calls,” “declarations,” “methods,” “implementing code” and “declaring code,” and much more.

Nor did the Federal Circuit pull any punches in its 2014 decision (one of two under appeal.) The Federal Circuit described the Java system as follows:

In the Java system, source code is first converted into `bytecode,’ an intermediate form, before it is then converted into binary machine code by the Java virtual machine” that has been designed for that device. The Java platform includes the Java development kit (JDK), javac compiler, tools and utilities, runtime programs, class libraries (API packages), and the Java virtual machine.

If you’re shaking your head with confusion (or your eyes are glazing over), you’re probably not a Java programer. These are difficult concepts, especially when they are encountered for the first time by people with no background in the complex world of the Java runtime environment.

As best I can determine, the nine Supreme Court justices have little or no background in computer technology. It’s unlikely many of the Supreme Court justices have seen a computer program, less likely they have written one, and even less likely that they are familiar with the Java programming environment. Even if the younger judges received some exposure to programming in college, the world of Java programming is a far cry from the days of BASIC, Fortran and Cobol, the languages taught when the justices were in college.

If, as commentators have suggested, the Federal Circuit’s 2014 decision reflects “a fundamental misunderstanding of how software works” where does this leave Google and Oracle, who have to explain the Java environment to the justices so that they can understand the Java API and decide whether Google infringed it?

One answer is through analogy and metaphor. The right analogy has the potential to go to the heart of the case and persuade a judge who might otherwise feel uncomfortable with the technicalities of the case. The right analogy can make the difference between winning and losing this case. However, analogies can also be dangerous – an analogy may be distinguished or even turned against the offering party, so an advocate has to use them carefully.

The last (and until now only) computer software copyright case heard by the Supreme Court in 1996 — Lotus v. Borland — demonstrates this. That case, which involved an easy to understand menu command hierarchy, was far simpler than Oracle/Google from a technical standpoint. Nevertheless, analogies played a significant role. The First Circuit compared Lotus’s menu commands to the buttons used to control a VCR. During oral argument before the Supreme Court the analogies included the dashboard of a Model T Ford (Justice Souter), a system for organizing a department store and labels on the controls in a plane’s cockpit (Justice Breyer), and a method of dance notation and a language (Borland’s attorney).

There has been no shortage of attempted analogies as Oracle v. Google has made its way through the courts over the last ten years. However, in its Supreme Court merits brief filed on January 6, 2020, Google seems to have forgotten the power of analogy. Beyond a simple filing cabinet analogy the district court judge used and that neither party disputes (each package is like a filing cabinet, each class like a drawer and each method like a folder), Google’s brief is lacking analogies that go to the heart of what an API is and how it relates to the Java implementing code.

Fortunately for Google, Google’s supporting amici came to the rescue. Or, it would be more accurate to say that they tried – there’s no guarantee that the justices actually read amicus briefs (there are 27 of them so far, and that number will increase after Oracle files its merits brief).

Nevertheless, the analogies posited by the Google amici are potentially powerful. Here is a sampling.

The Juke Box Analogy. Few academics have written more about copyright protection of APIs than Professor Peter Menell. The Brief of Professors Peter S. Menell, David Nimmer and Shyamkrishna Balganesh (link), written by him, is an argument in support of Google wrapped in a treatise explaining the history of software copyright law. Here is my favorite example from this brief:

If the Java programming language is analogized to musical language, each API implementation can be characterized as a record album featuring songs (methods). Java Standard Edition (SE) then functions like an electrical-mechanical juke box, containing API record albums from which programmers can choose particular songs by invoking declarations (song titles). The fact that another juke box uses those song titles (declarations) to invoke a known song (method) is purely functional: it does not copy a song (method), it merely identifies a known song (method).

I suspect that if there is one amicus brief the justices may want to read it is this one, given that the Nimmer treatise caries so much authority on copyright law.

The Car Controls Analogy. The Brief Amici Curiae of Eighty Three Computer Scientists (link). borrows from the First Circuit’s decision in Lotus v. Borland and uses the analogy of the controls of a car:

A steering wheel and gas and brake pedals have been standard in cars for over a century. . . . Treating software interfaces as copyrightable would be like requiring car manufacturers to invent a substitute for the steering wheel. Startups would not risk manufacturing such a car, and even if they did, consumers likely would not purchase it.

This analogy never gained much traction in the many software copyright cases decided post-Lotus, and I doubt that it will be persuasive here.

The New York City Map Analogy. IBM and Red Hat’s amicus brief (link) analogizes the Java software interface to the New York city maps at issue in a 1879 Supreme Court case, Perris v. Hexamer, where the Court held that a copyright in maps did not extend to a “system of coloring and signs” for identifying real property characteristics or to a “key” which explained symbolic meanings of coloring and signs. Interestingly, Google does not cite this case, even in passing.

The Supreme Court Language Analogy. The entire amici brief of the Empirical Legal Researchers (link) is devoted to developing and explaining an analogy. The brief states:

The facts of this case are unusually technical and threaten to obscure the legal issues. As attorneys who are also software developers, the amici offer an analogy between the computer languages, with which the Court may be unfamiliar, and a kind of language with which the Court is uniquely familiar: the text of Supreme Court opinions.

You’ll have to read the brief if you want to understand this complex analogy and the statistic analysis on which it is based. Perhaps it’s accurate, but it didn’t hit home with me.

The Book and Title Analogy. The Software and System Developers and Engineers for U.S. Government Agencies amici brief (link) uses the analogy of the relationship between a book and its title:

For developers, relying on a declaration to identify a component for interoperation is like relying on a book title to refer to a book, enabling someone to identify the book to locate it and read it. While a book, like an entire software program, may be subject to copyright, a title of a book has long been understood as not subject to copyright.

This is the simplest and best analogy that I’ve seen in the amicus briefs. It will be interested to see if any of the Justices raise it at oral argument.

The Online Checkout Analogy. The amicus brief of the Small, Medium and Open Source Technology Organizations (which includes Mozilla, Shopify, Etsy and Wikimedia Foundation; link) encourages the Court to view software interfaces as “similar to electronic checkout forms you see when shopping online,” where the fields and structure, sequence and organization have become standard conventions. I’m not sure I agree with this analogy, but I can’t challenge the technical qualifications of the companies that proposed it, so perhaps it has some merit.

What about Oracle? How will it respond to these analogies?

We won’t know that until Oracle files its merits brief in February. But Oracle hasn’t been shy in using analogies in this case. Oracle’s 2014 opening brief to the Federal Circuit (link) began with this lengthy analogy:

Ann Droid wants to publish a bestseller. So she sits down with an advance copy of Harry Potter and the Order of the Phoenix—the fifth book—and proceeds to transcribe. She verbatim copies all the chapter titles—from Chapter 1 (“Dudley Demented”) to Chapter 38 (“The Second War Begins”). She copies verbatim the topic sentences of each paragraph, starting from the first (highly descriptive) one and continuing, in order, to the last, simple one (“Harry nodded.”). She then paraphrases the rest of each paragraph. She rushes the competing version to press before the original under the title: Ann Droid’s Harry Potter 5.0. The knockoff flies off the shelves.

J.K. Rowling sues for copyright infringement. Ann’s defenses: “But I wrote most of the words from scratch. Besides, this was fair use, because I copied only the portions necessary to tap into the Harry Potter fan base.”

Obviously, the defenses would fail.

Defendant Google Inc. has copied a blockbuster literary work just as surely, and as improperly, as Ann Droid—and has offered the same defenses.

The analogy between the Java API and the topic sentences of a fictional literary work seems far fetched. Nevertheless, Oracle seems very attached to it, so look for Oracle to use it again in its Supreme Court brief.

I have no doubt that the many lawyers and technologists on both sides of this case have devoted hundreds, if not thousands, of hours searching for the perfect analogy – the analogy that will go to the heart of the case, make sense to the justices, and lead to victory for their side. Whether Google or Oracle will reach this goal remains to be seen. But when the transcript of oral argument is released  keep an eye open for analogies used by the justices and the parties to see which were used and whether they appeared to be effective.

By the way, if you’ve read this post and you’re still wondering, “what the heck is an application programming interface?” you may want to start with Sara Jeong’s 2016 article, What an API Is and Why It’s Worth Fighting For” (link).

*    *    *

Postscript: Of the nine justices serving on the Supreme Court when Lotus v. Borland was argued in 1996, only three remain today: Ruth Bader Ginsburg, Clarence Thomas and Stephen Breyer. Justice Breyer has a particular interest in copyright law, and he was the most active questioner during oral argument in that case. Pay close attention to him during oral argument in this case.

For a summary of all of the amicus briefs filed to date see Jonathan Brand’s post: Broad Support for Google in the First Round of Supreme Court Briefing

Update, 2-13-2020: Oracle did use the Harry Potter analog in its merits brief, but a much shorter version than it used at the Federal Circiuit:

By Google’s logic, a plagiarist could define J.K. Rowling’s idea as “a story about Harry Potter, Ron Weasley, and Hermione Granger who attend Hogwarts” and steal the characters and their back stories. Or she could market detailed knock-offs of bestsellers by declaring that she “had no other choice” but to reproduce verbatim the 11,300 most memorable sentences or scenes because they were “necessary” to allow fans to use their existing knowledge

“Contract, Combination or Conspiracy” – Can Peloton’s Lawsuit Survive the Music Publishers’ Motion to Dismiss?

“Contract, Combination or Conspiracy” – Can Peloton’s Lawsuit Survive the Music Publishers’ Motion to Dismiss?

This is a brief follow-up to my earlier post, Copyright Infringement? Peloton Punches Back With Antitrust.

Under Section 1 of the Sherman Act a “contact, combination or conspiracy” in restraint of trade is illegal. However, the Sherman Act says nothing about how much evidence is necessary to file a lawsuit alleging an illegal antitrust conspiracy. In other words, what factual allegations do you need in the complaint to avoid having it dismissed? In lawyer-speak: “what do we need to get into court?”

This question arises frequently in antitrust litigation, and it’s often a close call. Evidence of an antitrust conspiracy may exist, and it may be accessible via discovery, but the plaintiff needs to make enough factual allegations to avoid dismissal to get access to discovery and prove the conspiracy. If it can’t allege the illegal conduct in a complaint, it’s likely to face a motion to dismiss that will kill the case at its inception.

The Supreme Court has made this challenging for plaintiffs. In Bell Atlantic v. Twombly (2007), the Court held that a complaint alleging an antitrust conspiracy must plead “enough facts to state a claim to relief that is plausible on its face.” “[T]he complaint’s factual allegations must be enough to raise the right to relief above the speculative level, i.e., enough to make the claim plausible.” If the complaint doesn’t meet this “plausibility” standard, it will be dismissed on a motion filed by the defendant. 

The problem is that “plausibility” is highly case-specific. 

In my first post on Downtown Music Publishing v. Peloton1 I predicted that the music publishers would use this defense to try to dismiss Peloton’s counterclaim alleging that they had engaged in an illegal antitrust conspiracy. As expected, this is exactly what the publishers have done. 

To recap, in early 2019 nine independent music publishers filed suit against Peloton, claiming copyright infringement of more than a thousand musical works and seeking total damages as high as $150 million. Recently, the publishers filed an amended complaint that doubles the number of works infringed, as well as the damages.2

Peloton responded by denying it had engaged in copyright infringement and filing a counterclaim against the nine publishers and the National Music Publishers Association, Inc. (NMPA). The counterclaim alleged that, with the coordination of NMPA, the nine publishers engaged in a conspiracy to fix prices and boycott Peloton.

The law that has evolved under Twombly allows an antitrust plaintiff to allege a conspiracy based on direct evidence or circumstantial facts that support an inference that a conspiracy exists. Here is the essence of the publishers’ argument addressing the allegation of a direct conspiracy – 

Peloton does not even attempt to allege a direct case of conspiracy … Its complaint fails to plead the required “evidentiary facts: who, did what, to whom (or with whom), where, and when.” . . . Rather, Peloton relies on vague allegations that the Publishers . . . have engaged in collective negotiations of license terms and have exchanged information with each other about ongoing license negotiations at unidentified times and places. . . . Such allegations fall far short of pleading an agreement that can withstand dismissal. See Twombly … (holding that “a conclusory allegation of agreement at some unidentified point does not supply facts adequate to show illegality” where the allegations “mention[] no specific time, place, or person involved in the alleged conspiracies.”).

This argument is persuasive, and I expect the publishers to win on this point. The complaint is missing the allegations of “who, what, where and when” that are usually the basis for a direct conspiracy.

However, Peloton also can meet the “plausibility” standard based on circumstantial evidence that supports an inference of a conspiracy. And here things get murky. 

The music publishers undertake a lengthy, and frankly somewhat convoluted, explanation for why the publishers might have cut off negotiations with Peloton without engaging in an agreement or conspiracy – that is, that each of the publishers acted independently in its own economic self-interest. (Music publishers brief here).

Peloton responds – 

. . . absent their agreement in restraint of trade, each of the coordinating publishers’ own economic-self interest should have led them to enter into direct license agreements with Peloton. The facts at trial will reveal that Peloton had entered into multiple licensing agreements with dozens of publishers (including all the “majors”) on terms viewed as favorable by those many licensing publishers, and that Peloton similarly offered to license the counterclaim defendant publishers on favorable terms that, had they been acting individually, would have been in their economic interests to accept. The only plausible inference in such circumstances is that the counterclaim defendants believed that, by seeking to license collectively and otherwise refusing to deal with Peloton, they could extract supracompetitive fees.

This issue is a close call, but I’m going to predict that Peloton will win this motion – that the music publishers’ motion to dismiss Peloton’s antitrust case will be denied. The publishers’ argument is somewhat plausible, but so is Peleton’s. Where the parties’ positions are so evenly balanced I am doubtful that the court will dismiss Peloton’s antitrust claims.

Either way, the stakes are high for both sides. If the publishers succeed in getting the antitrust case against them dismissed, Peloton will have the right to an immediate appeal to the Second Circuit. But that takes time, and in the meantime Peloton (which just went public and raised $1.3 billion) will have lost the leverage its antitrust counterclaim gives it to negotiate a reasonable settlement of the publishers’ copyright case. Shareholders are unlikely to be enthusiastic about spending Peloton’s newly obtained capital to defend the publishers’ copyright case, and risk almost one-third of it if the publishers win.

On the other hand, if the publishers’ motion to dismiss is denied the publishers will be looking at expensive discovery before a summary judgment motion gives them their next opportunity to dismiss Peloton’s case. And, of course, discovery may reveal conduct that supports Peloton’s case.

Bottom line: this is a copyright and antitrust case worth watching.


Judge Michel Announces Resignation, Lays it On the Line (and promises more to follow)

Judge Michel Announces Resignation, Lays it On the Line (and promises more to follow)

CAFC Chief Judge Paul Michel doesn’t pull punches when he states his views on problems with the U.S. patent system and the federal courts more generally, and he didn’t pull too many when he announced his upcoming retirement from the CAFC on on November 20, 2009.  A few notable quotes from his speech:

On interlocutory appeals of claim construction rulings to the CAFC: A provision in a Senate patent reform bill would allow interlocutory appeals of Markman rulings.  Predictably, Judge Michel doesn’t like the idea.  He states that interlocutory appeals would double or triple the case load on the CAFC, and the court “can’t handle it.”

The median time to adjudicate a patent case before the CAFC?  One year “from filing, to the opinion going up on the Internet.”  Interlocutory appeals would double this to two years.

And, interlocutory appeals are unnecessary as a practical matter, he argues.  Some interesting statistics from Judge Michel:  “About 3,000 [patent cases] are filed a year, about 2,700 settled spontaneously. Of the remaining 300, about 200 are resolved on summary judgment, almost always based on claim construction. . . . The remaining 100 go to trial. . . . there almost are never second trials. There usually aren’t even first trials.”

On Upcoming Retirements from the CAFC: The CAFC has 11 active judges and five senior judges. . . .  [t]he . . .  little secret here is there are five other judges of our active 11 who could retire tomorrow, or take senior status. . . . [p]otentially five other seats at any time could become vacant.  A year hence . . . two more will be eligible for that conversion of status. So there could be seven more vacancies within a year of tonight.”

On Diversity: “We don’t have and have never had an African-American judge on our Court. Nor do we have an Asian-American heritage judge on our Court. We do have three women out of 16, but three women out of 16 is less than a quarter — it’s half the population.”

As I’ve noted before, Massachusetts U.S. District Judge Patti Saris has been mentioned as a strong candidate for a CAFC seat.

And of course:

Earlier today, I sent a letter to the President informing him of my intention to retire from active judicial service, effective May 31, 2010. . . . I had always imagined I would stay a senior judge until I was carried out of the courthouse in a pine box. But I’ve come to a different conclusion, because I see a huge need for someone to be able to speak out on behalf of the court system generally — of the judges, the lawyers, and the litigants.