The 2nd Circuit Court of Appeals ruled against Wall Street banks (and a lower court) in holding that a financial news service did not misappropriate their analyst research for its website.

The Appeals Court said the lawsuit against Theflyonthewall.com under New York "misappropriation" statutes was preempted by federal copyright law.

Financial institutions argued that Theflyonthewall.com was getting a "free ride" by "misappropriating research", including stock news, which cost them profits.

Theflyonthewall.com countered that it had a First Amendment right to publish before news goes stale, and that it got much of its information from public sources or from talking with traders and others in the Wall Street area.

The Appeals Court concluded: "We conclude that in this case, a Firm's ability to make news -- by issuing a Recommendation that is likely to affect the market price of a security -- does not give rise to a right for it to control who breaks that news and how."

Because of some legal gymnastics and an earlier ruling that Theflyonthewall.com had "waived" its First Amendment and fair use defenses, the Appeals Court did not directly rule on the First Amendment/fair use argument, but sections of the latest decision seem to suggest that court would have been sympathetic to it.

For instance, the Appeals Court wrote:

As the INS Court explained, long before it would have occurred to the Court to cite the First Amendment for the proposition:

"[T]he news element -- the information respecting current events contained in the literary production -- is not the creation of the writer, but is a report of matters that ordinarily are publici juris; it is the history of the day. It is not to be supposed that the framers of the Constitution, when they empowered Congress "to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries" (Const., 8 Art I, § 8, par. 8), intended to confer upon one who might happen to be the first to report a historic event the exclusive right for any period to spread the knowledge of it."

...

We do not perceive a meaningful difference between (a) Fly's taking material that a Firm has created (not "acquired") as the result of organization and the expenditure of labor, skill, and money, and which is (presumably) salable by a Firm for money, and selling it by ascribing the material to its creator Firm and author (not selling it as Fly's own), and (b) what appears to be unexceptional and easily recognized behavior by members of the traditional news media -- to report on, say, winners of Tony Awards or, indeed, scores of NBA games with proper attribution of the material to its creator.

Reuters has more here:

http://www.reuters.com/article/2011/06/20/us-theflyonthewall-wallstreet-banks-idUSTRE75J3RN20110620

Full court opinion here: http://www.ca2.uscourts.gov/decisions/isysquery/61c431d7-9894-48c3-8222-dda6c1b74742/2/doc/10-1372_both.pdf#xml=http://www.ca2.uscourts.gov/decisions/isysquery/61c431d7-9894-48c3-8222-dda6c1b74742/2/hilite/

In what could be interpreted as a tacit admission that their previous ruling in Bilski last year was about as clear as mud, the Supreme Court has decided to take up another case concerning the validity of a patent claim "that covers observed correlations between blood test results and patient health, so that the claim effectively preempts all uses of the naturally occurring correlations, simply because well-known methods used to administer prescription drugs and test blood may involve 'transformations' of body chemistry."

This is another case that will be closely watched.

The full case name: Mayo Collaborative Services v. Prometheus Laboratories, Inc.

Background details of the case here:

http://www.scotusblog.com/case-files/cases/mayo-collaborative-services-v-prometheus-laboratories-inc/

More from the Patently-O blog here:

http://www.patentlyo.com/patent/2011/06/supreme-court-to-revisit-patentable-subject-matter-eligibility.html

With apologies to all of our legitimate commentators: links are now banned in comments. If you submit a comment with a link it will not be processed. I am sorry that is come to this, but it is probably the first step that is needed to reduce the spam in the comments.

The New York Times ran four letters today criticizing its earlier editorial on the Protect IP Act currently in Congress link here. All four were written by the minions of the copyright industry who railed against the injustice of copying or as they prefer, piracy.

I had intended to write on the original editorial when it appeared link here, but Mike Masnick did such a masterful job that I decided to refrain link here. Take a look, if you haven't already.

We need a better vocabulary. They call us opponents "pirates" and "robbers" and we can only respond, "monopolists." Those monopolists are the real thieves with their government created and enforced monopolies who use an artificial shortage to raise prices and throttle innovation under the guise of protecting private property when it is neither property that you can see and touch nor private but the creation of a long discredited and dead king who extracted rents for his own preservation.

Here is the text of a message that was recently sent to the entire membership of the American Federation of Television and Radio Artists (AFTRA) -

Dear AFTRA Member:

I'm writing to you today both as the National President of AFTRA and as an individual who, just like you, has dedicated my life to the art, craft and business of entertainment and media. I am a professional performer who earns my living and health and retirement benefits by acting, performing voiceover work, doing narration for industrials and working on other types of projects. Like for many of you, entertainment and media is my career - it is my livelihood - and right now, my career and my livelihood are under attack, and so are yours.

The digital theft of movies, music, videogames, audiobooks and television shows - what has often been called "piracy" - is the biggest threat the entertainment community has ever faced, and 2.4 million of us who make a living in entertainment need to join together to fight back.

The term "piracy" doesn't do justice to the problem; this is THEFT on a massive scale. Movies, music, videogames, audiobooks and television shows are illegally downloaded or streamed at least 500,000 times every day. Millions of counterfeit DVDs are sold each year. International criminal operations masquerade as legitimate sites, appear in search engines and even accept credit card payments, confusing and siphoning off our audiences. These thieves steal money out of our pockets and deprive us of the earnings we need to qualify for critical health insurance and retirement benefits. In fact, digital theft is so serious that it is one of the crimes investigated by U.S. Immigrations and Custom Enforcement, along with human trafficking, money laundering, weapons smuggling and narcotics.

The impact on each one of us is real. The digital theft of movies, music, videogames, audiobooks and television shows reduces our residuals and royalty payments, as well as our retirement and health benefits, and more than 140,000 entertainment-related jobs have already been lost to content theft. Every film, sound recording, videogame, audiobook and television show that is stolen represents a terrible loss to all of the people who created it, reduces funds available for future work and reduces creative and employment opportunities for AFTRA members and everyone else works on a production or sound recording.

Almost two years ago now, Delegates to the 2009 AFTRA National Convention in Chicago unanimously passed a resolution making the fight against digital theft our highest legislative priority. Since then, AFTRA has worked with DGA, IATSE, SAG, MPAA, and from time to time also AFM and the Teamsters to help raise awareness among lawmakers in Washington, DC, about the real danger this threat presents to our livelihoods and to the American economy. We have also been working closely with Victoria Espinel, the U.S. Intellectual Property Enforcement Coordinator appointed by President Obama in September 2009, to help her understand just how grave this threat is to the United States. We must devleop sound regulatory and public policies to protect creative content and ensure that the people and industries that produce the uniquely American product continue to thrive.

We are making good headway in D.C. Latest proof of our success lies in the bipartisan support for new legislation introduced on May 26, 2011: the Protect IP (Intellectual Property) Act was unanimously passed out of the Senate Judiciary Committee. The PROTECT IP Act is critical to efforts to aggressively combat the proliferation of foreign "rogue websites" that steal U.S.-produced content and profit from it by illegally selling it to the public.

But, remember: this is just a step forward in what will be a long battle against criminals who are stealing our work. To be successful, we need more than just strong laws: we need a fully engaged community of entertainment and media professionals - AFTRA members like you - to stand up, make our voices heard and do our part to stop digital theft.

We pour our hearts into making the movies, music, videogames, audiobooks and television shows that the world loves. Entertainment is one of America's most important economic engines. The theft of creative content must be stopped, so we are redoubling our efforts.

AFTRA is on the battle lines against digital theft with our sister unions, as well as producers and other stakeholders in the media and entertainment industries. This is bigger than any single group alone. So in the coming months, you'll be getting more information about digital theft and its impact on our jobs and creativity. If you would like to get involved or learn more about ways you can help protect our future, please email ProtectMyWork@aftra.com or call and we will contact you with information about how you can help in this effort.

Entertainment and media is changing fast, and we are all working to find new ways to share our creativity with audiences here at home and around the world. Please watch for regular updates and information about what AFTRA is doing, and what you can do to join the fight.

Sincerely,

Roberta Reardon

National President AFTRA, AFL-CIO

Edward Wyatt writes in the NYTimes about an example of a costly business-method patent link here. His story emphasizes that Senator Schumer is doing the banking industry's business, has got the bill passed in the Senate as part of the broader "reform" patent bill, and has sent it on to the House. It may or may not pass there, but given the banks' clout with Republicans, I expect the provision will be approved if the overall bill passes. Wyatt doesn't speculate on whether the President will sign, but he is out passing the hat for campaign funds among the banks.

The banks concern is the cost of their patent license, said to be hundreds of millions over the years. The patent is for a method to process digital copies of checks, which to me sounds like a software patent. The patent owner, DataTreasury Corporation from Plano TX, has won a series of suits challenging the validity of the patent at the Patent Office and won consistently in the courts. DataTreasury now has license agreements with "more than three dozen banks," so it would seem to be the industry standard.

Wyatt adds one more jab at DataTreasury which he reports once had more than 100 employees but is now a mere holding company with only a few employees, reportedly because the banks stole its patented technology.

Wyatt finally takes on the Patent Office which is said to have drafted the provision and would be the biggest winner from the current draft bill, as it would get to keep all the fees it charges, "removing it from the politics of the Congressional appropriations process."

Our concern as consumers should be that this is a highly questionable patent (like most business method patents) that adds to the costs of society as a whole without improving welfare. Watching how the legislative sausage is being made does not make it smell less or taste better.

The Economist examines academic publishing link here, "And what a living it is. Academic journals generally get their articles for nothing and may pay little to editors and peer reviewers. They sell to the very universities that provide that cheap labour. As other media falter, academic publishers have soared. Elsevier, the biggest publisher of journals with almost 2,000 titles, cruised through the recession. Last year it made £724m ($1.1 billion) on revenues of £2 billion an operating-profit margin of 36%."

Most of the publishers' revenues came from university libraries which subscribed to bundles of journals at very high prices, according to the article. Now, the universities can no longer afford to do so. This racket is based on the fact that academic promotion comes from peer-reviewed publications in these journals, now for the most part online.

The Economist doesn't mention it, but the solution is to set up their own peer-reviewed journals on line. The saving in subscriptions should be more than enough to pay generously for such a system. Why they haven't remains a mystery.

The Supreme Court has handed down another important decision regarding U.S. patent law.

At issue is the level of proof that is needed to show that a patent is invalid, after it has been granted by the U.S. Patent Office.

Microsoft (in trying to get a competitor's patent to be declared invalid) argued that it need only show that a patent is invalid through a "preponderance" of evidence.

Microsoft's rival in this case, i4i, argued that a patent should only be invalidated based on "clear and convincing" evidence - a higher standard that is more difficult to overcome if you are trying to overturn a patent.

Today, the U.S. Supreme Court held that the tougher "clear and convincing" standard is needed to raise an invalidity defense to patent infringement.

In terms of policy, this is most regrettable. In terms of legal interpretation, it is justifiable enough to say that the fault must ultimately lie with Congress on this matter - rather than the courts.

As the Court's decision notes: "We find ourselves in no position to judge the comparative force of these policy arguments...Any re-calibration of the standard of proof remains in its hands."

From a policy standpoint, some small amount of solace is found in the concurring opinion of Justice Breyer (joined by Justices Scalia and Alito):

I write separately be-cause, given the technical but important nature of the invalidity question, I believe it worth emphasizing that in this area of law as in others the evidentiary standard of proof applies to questions of fact and not to questions of law. See, e.g., Addington v. Texas, 441 U. S. 418, 423 (1979). Thus a factfinder must use the "clear and convincing" standard where there are disputes about, say, when a product was first sold or whether a prior art reference had been published.

Many claims of invalidity rest, however, not upon factual disputes, but upon how the law applies to facts as given. Do the given facts show that the product was previously "in public use"? 35 U. S. C. §102(b). Do they show that the invention was "nove[l]" and that it was "non-obvious"? §§102, 103. Do they show that the patent applicant described his claims properly? §112. Where the ultimate question of patent validity turns on the correct answer to legal questions what these subsidiary legal standards mean or how they apply to the facts as given today's strict standard of proof has no application. See, e.g., Graham v. John Deere Co. of Kansas City, 383 U. S. 1, 17 (1966); Minnesota Mining & Mfg. Co. v. Chemque, Inc., 303 F. 3d 1294, 1301 (CA Fed. 2002); Transocean Offshore Deepwater Drilling, Inc. v. Maersk Contractors USA, Inc., 617 F. 3d 1296, 1305 (CA Fed. 2010); cf. Markman v. Westview Instruments, Inc., 517 U. S. 370 (1996).

Courts can help to keep the application of today's "clear and convincing" standard within its proper legal bounds by separating factual and legal aspects of an invalidity claim, say, by using instructions based on case-specific circumstances that help the jury make the distinction or by using interrogatories and special verdicts to make clear which specific factual findings underlie the jury's conclusions. See Fed. Rules Civ. Proc. 49 and 51. By isolating the facts (determined with help of the "clear and convincing" standard), courts can thereby assure the proper interpretation or application of the correct legal standard (without use of the "clear and convincing" standard). By preventing the "clear and convincing" standard from roam-ing outside its fact-related reservation, courts can increase the likelihood that discoveries or inventions will not receive legal protection where none is due.

Read the full opinion (and concurring opinions) here [PDF]:

http://www.supremecourt.gov/opinions/10pdf/10-290.pdf

My latest contribution on intellectual monopooly is "Slave Labor and Intellectual Property."

Cop:You're under arrest!

Victim: What for?

Cop: Its a secret. I can't tell you.

This is America?

That is the Patriot Act, parts of which were about to expire but were just renewed for 4 years with almost no debate. For links on this, start here and here and here

Senators Ron Wyden (D-Ore) and Morris Udall (D-Col) have been highly critical of the extended parts which they believe have been interpreted by the security folks in a way that conflicts and extends the generally understood interpretation of the law.

Wyden had put a hold on the bill but then removed it on the promise of hearings that would allow him to pursue his doubts on the law (while not jeopardizing U S security).

This is the same law that has been interpreted to allow the Justice Department to seize internet service providers and close them without a public process or explanation, ostensibly for violating copyright - hardly a security priority.

Rand Paul has also picked this legislation for criticism, but mainly on libertarian grounds with which many people disagree. Others are critical on civil rights and due process grounds.

All opposition on this one is welcome. It is an outrage.