02 November 2005

Intellectual Property Litigation

Al Lewis wrote yesterday about two jewelry makers who incorporate ancient quotes into their jewelry, Mark Becker of Denver, and Jeanine Payer of San Francisco, a decidedly higher end jeweler.

Jeanine Payor sued Becker for "trade dress infringement", i.e. copying a look and feel, which at the outset is a good indication that her claim is a weak one. But, her suit was not so frivilous that it was prevented from going to trial, and my point today is not to discuss frivilous intellectual property claims. My point today is to point out how expensive our system of litigating intellectual property claims which are not frivilous can be, even when the basic dispute is very simple, as it was in this case, and to point out how strongly influenced third parties can be in intellectual property cases:

Becker turned to a group called the Colorado Lawyers for the Arts, a nonprofit that provides free legal services to its members. The group usually helps artists with more mundane legal problems, such as setting up nonprofit entities, executive director Jim Conder said. . . .The group put Denver intellectual property attorney Christopher Beall of Faegre & Benson on the case. Beall, in turn, got help from law firm Latham & Watkins in New York.

The legal team spent a year and a half and more than 2,000 hours defending the case for free. Had they been paid, it would have cost more than $500,000, Beall said. For his part, Becker agreed to pay expenses, which he said total about $90,000. Last week, a jury ruled in Becker's favor.

"This case was an important victory for artistic freedom and free competition," said Beall. "In vindicating Mark, the jury sent a powerful message that artists should be free to compete with each other ... even if their styles of expression are somewhat similar."

First, $590,000 to litigate whether two lines of jewelry are similar is outrageous. Car accidents, which sometimes involve far more complex facts, are frequently litigated for $50,000 or less. Sometimes the system can allow too much due process.

But, second, why would a bunch of artists and lawyers freely give money to a fund undertaking litigation which would seem primarily to benefit Mark Becker. The recovering alcoholic isn't that nice a guy. Of course, the answer is simple. If the advocacy process were allowed to run its course, without their aid, Becker would likely have lost his case and other artists could have been at a disadvantage as a result in the future. Their economic interest in that not happening is clearly illustrated by the fact that they are willing to chip in to a legal defense fund that superficially is benefitting him. (Of course, it is a bit more complex than that, lawyers are expected to do free legal work from time to time and litigating whether sets of jewelry are similar for 2,000 hours is much more entertaining than handling several child custody cases involving destitute parents, which is a more typical pro bono assignment.)

Part of the problem with our intellectual property laws is that they encourage blowing up triffles like this, which are relatively unimportant economically for either party, into very expensive litigation. In the absence of trade dress rules, Payer could still have prevented Becker from producing the offending jewelry. But, instead of doing so by bringing suit to demand that Becker cease and desist, he would have had to pay Becker some sum of money, certainly less than $590,000, in exchange for a promise to stop competing with Payer in the future. Payer would have gotten what he wanted, no court would have establishing any lasting legal principles that implicated third parties, and Becker could be better off economically than he is under this scenario where he still unders up upside down to the tune of $90,000, simply for the privilege of continuing his business.

As long as intellectually property rights are overly expansive, to the extent that a broad reading of them threatens everyone in the profession, money will surface to fight battles royal over relatively minor cases like this one. And, those litigation costs are largely dead weight losses to society, as are the opportunities lost by artists refraining from producing works for fear that they might be in a gray area that might subject them to prolonged litigation even if they might ultimately prevail in court on the merits, as Becker did. What attorney in good conscious would advise Becker to make the jewelry that he did if they had seen this lawsuit coming?

1 comment:

Kyle said...

Nice post. IP issues have been bothering me a lot lately as I've learned more about them. It seems a very complicated mess. Any more opinions you have on the subject would be a welcome read.