Create, Consult, Control
News & commentary on intellectual property issues.
Mar022011 | Steve O'Donnell
Social Media contracts
It shouldn’t be shocking to anyone that not all of the social media posts (Twitter, Facebook, LinkedIn, etc) that a company puts out are written by the CEO after a meeting of the board of directors. Some companies use internal people to maintain official accounts, others have a swarm of people handling specific aspects of the accounts, and some companies outsource that work to an external contractor. It’s certainly common to outsource marketing, but traditionally, outsourced marketing would still be approved by someone before being made public. In the case of social medial marketing, where quick and short messages are the norm, it’s just not possible to have management approve every outgoing message so it’s incredibly important to have a written agreement detailing what both parties expect from the social medial marketing in place and detailing what happens if something goes horribly wrong.
There is not much to be found online about what should be in this type of contract, which isn’t surprising. It’s a fairly new field and possible that these agreements haven’t made their way before a judge yet. The lack of guidance to be found in forms might be troubling to some, but to a lawyer that drafts contracts, this is fun, or at least as fun as drafting contracts gets, because it frees me to be creative with the work.
After reflecting on what things I post to my social media profiles, and giving some thought to what is mostly likely to go wrong I’ve come up with a few clauses or sections that should probably find their way into these contracts.
Firstly, there’s nothing particularly magical about these contracts and they’re pretty closely related to any independent contractor agreement. Therefore, I’m not going to say anything about payment, cancellation, intellectual property, independent contractor status or any of the “standard” clauses like arbitration, heading, integration, saving, etc.
•Length of average post and number or posts/time. No one wants to see someone post nothing but 2 word status updates every 15 minutes. Specify roughly how long an average post should be and roughly how many should be done per day/week/month. I say roughly, because it’s just silly to expect someone to pay a terrible amount of attention to that, but you do want to ensure that the posts aren’t too short, too often.
•Timing of posts. It might not help a business if they’re more active online in the middle of the night or if all messages go out in a burst every day. A good agreement will allow flexibility here, but make it clear that some reasonable spacing will be used.
•Content. It’s a good idea if someone at the company can feed suggested posts to the independent contracts. It doesn’t have to be a steady diet, but the business should have some regular input so the contractors know about promotions, new products, etc.
•Ratio of post topics. Not many people are going to follow a company’s social media account if all the posts are “try our new diet Slurm.” Also, it won’t help a company if all the posts are off topic. There should be some ratio to act as a guide, maybe 1/2 company line, 1/2 light small talk. That ratio will need to be customized for each outlet. Twitter is better suited for small talk, but the same kind of post would be out of place on LinkedIn.
•Disclaimers. Even with light small talk posts, the odd minor controversy can come up. The poster should be able to make it clear that opinions on who should win the World Series, etc, are their own.
•Language. Specify that things like profanity shouldn’t be used in the posts, and that the contractor shouldn’t post their personal political opinions. Hopefully no one is stupid enough to use their access to a company’s official twitter account as their own personal soapbox, but it could happen. Also, most businesses will probably want to avoid excessive text-speak. “OMFG I <3 ur lolcatz!!” might be an excessive example, but you see what I’m getting at with it.
•Terminable posts. Someone’s opinion about a sports team or the weather probably isn’t going to be an issue with anyone, but what if a poster makes a nasty remark about a politician or makes some sweeping offensive generalization? There should be some definition of what crosses the line. Actual determination of whether something is too far will have to be made by the company, but having some definition in the contract itself will keep the company from abusing their discretion.
•Damages. Hopefully it won’t come to this. But lets say a company hires an independent contractor that then hires someone that has a particularly bad day and decides to quit their job in the most flamboyant, bridge burning way they can (it happens)--so they use the LinkedIn account to defame another business, or make a very blue joke, or start discussing their bizarre “solution” to the Gaza Strip conflict--things like that might conflict with your brand identity, to say the least. The contract should have something in there addressing damage mitigation and control. Certainly the offending person should be removed from the account, but what then? The damage is done. For something like this, I might suggest a liquidated damages clause for terminable posts to ensure that the contractor is careful about who they have actually posting the content. Also, in the event of a terminable post by a sub-contractor or employee of the contractor, the contractor should offer some amount of damage mitigation, perhaps by including 10 explanatory posts for every terminable post (this might be one of the situations where fighting fire with fire actually works). Again, hopefully it won’t ever come up, but having an agreement in place is critical in case of situations like this.
I’m interested if anyone has other thoughts on what should be in a social media independent contractor marketing contract that might not be in other contracts. If you have something to add, please leave a comment. Also, if you need such a custom contract drawn up for your company, whether you're the one hiring the contractor or the contractor, E-Mail me to set up a consultation.
Feb282011 | Steve O'Donnell
Zebra trademark backlash
About a week ago, The Lones Group in Washington state brought an action for trademark/tradedress infringement against Dan Rothamel and Strong Team Realtors (in Virginia) over the defendants’ use of some allegedly “confusingly similar” elements. As often happens, this didn’t sit well with a number of people (check out Twitter hashtag #savethezebra). Does the Lones Group have a case? If not, what could they have done differently to protect their marks? Could this have been resolved without a formal complaint and the resulting backlash?
First, I have no particular insight into the facts of this case beyond those I’m assuming to be true from the complaint. So, if you have a problem with what the Lones Group says in their complaint, don’t complain to me. Second, I’m not going to take sides; if you want to read something that cuts down the Plaintiff (Π) or the Defendant (Δ), I’m sure you can find plenty of material online. What I am going to do is point out some difficulties that Π will likely encounter in a lawsuit, offer some suggestions and what they could have done differently, and hopefully add a little something to the discussion.
Trademarks are something, a name, a symbol, a slogan, etc, that identify the source of goods or services. You can rely on the assumption that if you buy a can of Coke, that it was made by Coca-Cola. Trademarks can be a company’s most valuable asset if managed properly. Trademarks can also be separated into registered and unregistered. Registered trademarks go through an examination procedure at the trademark office, unregistered trademarks can gain “common law” rights through their use. There isn’t a particular need to register a trademark, but registration offers some huge benefits such as the right to bring an action in federal court, public notice of the mark, possibly greater damages, a presumption of ownership, and the exclusive right to use the mark nationwide in connection with the goods/services listed in the registration. If you’re using a trademark, you should contact a trademark attorney to discuss registration--there’s really no reason not to register a mark.
Π starting using the word “Zebra” and employing a zebra-theme at least as early as 2005 to identify their real estate business, but did not register the mark(s) as far as I can tell (a quick search of the trademark office records did not find it, and if there were registrations, the complaint would almost certainly have noted the registration numbers). Later, Δ started using the domain “realestatezebra.com” for a real estate blog. Had Π registered the trademark, their position to have Δ’s registration canceled or to get the domain turned over to them would have been much stronger through ICANN’s dispute system.
Π discovered that Δ was using a mark they considered their own, didn't care for it, and filed a trademark infringement lawsuit.
Since the marks were not registered, Π will have to demonstrate that their Zebra marks have acquired secondary meaning (meaning that people in the market for real estate marketing services identify “Zebra” as meaning the Lones Group, and that either their mark is known where Δ does business or that Δ is doing business where the mark is known. So, either the mark is known in VA (assuming Δ only does business in VA, for example) or, if the mark isn’t known in VA, that Δ is doing business in WA (or wherever Π is known)). It’s certainly possible, but it is an extra layer of work to do in the lawsuit which could have been avoided had Π registered the mark.
Π will also have to show that Δ is using the disputed mark in the same market. Trademarks, both registered and unregistered, can peacefully co-exist if their markets are different enough. Zebra (as used for real estate services) could, and does, happily exist along side Zebra Technologies (specialty printing company) and Zebra Tattoo and Body Piercing. It’s extremely unlikely that anyone is going to go for a tattoo and ask the artist about their bar code label printers or their real estate services.
In this case, after a minute on each party’s website, Π appears to be a marketing consultant for real estate agents, while Δ seems to primarily be a realtor, although it looks like he does do some educational work in the field. Is that the same market? I’m not sure of the answer. If it’s not the same market, is it close? If the markets have enough connection, even though they’re not exactly the same, it could be close enough to infringe. The whole thing comes down to likelihood of confusion. How likely is it that a consumer would confuse Π and Δ based on their use of “Zebra?”
Is the case a slam-dunk, no. Is it frivolous, no. If the Lones Group asked me about it, I wouldn’t have suggested ignoring it. Trademark owners have a duty to police their mark or they risk losing it. Based on what little I know about the case, it sounds perfectly reasonable to bring the action, but was that the best route to take?
There seems to have been an explosion of late of trademark owners being overly aggressive about protecting their marks, or maybe it’s just that the internet has picked up on it and these things are being publicized more. I don’t think this is a case of a trademark bully, but it still could have been handled differently.
I hate second guessing Π because I have the advantage of seeing the fallout the lawsuit has caused, but this is an era of social networking and the fallout could have been foreseen. For one thing, it’s rarely a great idea to sue a potential client, that just doesn’t sit well with other potential clients. If this same exact controversy came up a couple years ago, a few bloggers would have picked it up, but it probably wouldn’t have caused anywhere near the backlash that it has. If it came up a decade ago, it’s doubtful many outside of the parties would even have found out about it. Today though, one has to assume that any action will draw the attention of every person that might be interested in it.
If I was handling the matter for Π (and admittedly, this is with the benefit of hindsight), I would have attempted to open communication with Δ and tried to convince them to abandon “Zebra.” If that failed, since the market overlap (both geographic and by type of service) isn’t exactly in unity, I would have suggested that the matter be settled with a disclaimer on Δ’s materials that any use of “Zebra” or of “Zebra themes” does not imply a connection with Π. If that failed, I’d have to take an even closer look at market overlap before suggesting further action. Since it’s not a slam dunk case, and since the marks were never registered, I might have drafted an opinion letter discussing how Δ’s use of “Zebra” and related were not actionable trademark infringements or at least that it was questionable. Such an opinion letter could be used later to defend against a claim of trademark abandonment if an action was initiated against a more clear infringer.
Bottom line, if you have a trademark--register it to put yourself in a better position if someone starts using the same, or confusingly similar, mark; and before taking action to protect your trademark, consider social networking backlash. One thing you don’t want to do is cause damage to your brand by trying to protect it.
I’m interested in seeing some comments and questions. I hope this post is of some value, but if nothing else, you’ve learned that lawyers use Π and Δ as shorthand for Plaintiff and Defendant--that alone is worth the price of admission.
Photo by Nevit Dilmen and licensed under the GNU Free Documentation License
Jan112011 | Steve O'Donnell
When a parody isn’t a parody
I’m willing to bet that at some point you watched something labelled a parody video on YouTube. In the past week I’ve run across three that people have either sent me our pointed out on twitter. Of those, one was a song played on top of clips from the original Star Trek series, one was a mashup of an 80's metal song and a 60's pop song, and the last was a pop song done with different lyrics to poke fun at one of the many reality show disasters. Each was labelled as being a “parody,” probably as an attempt to cut off a copyright issue before it became a problem. Each was very clever and well done, but are they protected parodies?
Parody is protected fair use of a copyrighted work, but it doesn’t mean that all comical uses of a copyrighted work are protected. For a work to be a fair use parody of a copyrighted work, it has to actually parody the copyrighted work. [sounds like a lawyer wrote that last line.]
It would probably be helpful if I linked to the videos that inspired this post, but I don’t want to step on anyone’s legal defense (if it came to that).
First, lets touch on fair use. In determining whether a use of a copyrighted work is a “fair use,” courts will look to a few factors:
(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
(2) the nature of the copyrighted work;
(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
(4) the effect of the use upon the potential market for or value of the copyrighted work.
If you ever read a case with that list in it, you’ll notice that something like “although each prong is not determinative…” is nearby. In other words, a court will look at all the factors in deciding if a use if a fair one. That can be a hard thing to explain since most people thing that just because some use is noncommercial that it’s automatically a fair use, which isn’t the case.
Second, lets briefly go over the differences between parody and satire, at least in this context. Parody pokes fun at a work and needs to use part of that work in order to do so. Satire pokes fun at society, usually for social change. Either parody or satire can be protected fair use, although the fair use is generally much easier to find in parodies (look again through the four factors).
Turning then to the three YouTube videos I mentioned:
A song played over Star Trek clips. What is being made fun of? The song isn’t changed, so the song isn’t being parodied. The show might be parodied since it’s taking a serious sci-fi show and making it into a video for the song with some creative editing. Use of the song is not parody, even though it’s used as part of a parody of something else. Use of the clips, though, might be protected.
A mash up of two songs. That might be parody. I’d argue that the use of each work is poking fun at the original, in this case, by pointing out the structural similarities and interchangeability of certain elements between two otherwise disparate works.
New lyrics to a pop song making fun of a person. Since the song itself isn’t really the target of the new work, it’s probably not a parody of the song.
Of course, like just about everything in copyright law, each case is different and fair use is not an easy doctrine to pin down. It’s always in your interest to get an attorney’s opinion about your plan, especially if your parodies are for-profit. Although “not determinative” (there’s that term again), for-profit uses tend to get a closer look from copyright owners.
So, if at least some of these YouTube videos are not really fair use, why are they still there? Shouldn’t YouTube take them down? Why aren’t the copyright holders suing?
A couple reasons that probably explain that. For one, fair use is not a clear cut test, I wouldn’t be shocked to find a judge that came to different conclusions than I did. Also, in some cases, the copyright holder probably likes the additional expose they get through a popular YouTube video.
For a quick, fun read, take a look at Campbell v Acuff-Rose Music to see what the Supreme Court said about 2 Live Crew’s version of Pretty Woman.
Jan042011 | Steve O'Donnell
Safely choosing images for your website
Over the past year I’ve had a few clients come to me with nasty letters from image licensing sites demanding $1000+ for copyright infringement. In these cases, a few simple tips could have prevented them from having any trouble.
1) Don’t just grab images you like from other blogs/websites. You don’t know where those images came from: they may be licensed, they may be original works. If you really, really want to use the image, email the site for permission or information on licensing.
2) If it looks professionally done, it probably is. Many people make money from works they post online and don’t like it if you just take them.
3) Be careful. It’s one thing to download examples from a stock photo site to use to create a mock-up page, it’s another to make that page live without being sure that you have a license to use those images.
4) Don’t assume you have “fair use” rights. Fair use is a very fact intensive defense to copyright infringement. You may think you can do something because of fair use, but, you’re probably wrong. Sorry, I didn’t write the law. Even if you do have a bullet-proof fair use defense. . . it’s a defense, it doesn’t prevent you from being sued or from getting a DMCA takedown notice. It’s something you argue in court, after paying your legal team some hefty fees
5) Wide use doesn’t mean it’s public domain. Sometimes wide use means that the image is just really popular, and brings in license fees.
So, how does one find images that they can use without running into problems?
1) License them. Look for images from Getty Images or iStockphoto or any of a number of other image licensing sites, pay their fees, and comply with their licenses.
2) Creative Commons. Search for images and read/comply with the license. These aren’t totally free, they might not cost money, but they might limit what you’re allowed to do or require a link back or attribution. When I’ve used CC images I’ve sent a copy of the page using the image to the creator and thanked them for their image. I’ve always received a nice thank you from the creator.
3) Use free images. Lots of site republish free images. Pull out your google-fu and search for “public domain,” “free graphics,” or whatever search terms suit your fancy.
One annoying point: even if you use a “free image” or a Creatively Commons licensed image. . . or even a purchased image, you can never be totally sure that the image is clear. There is nothing to stop someone from downloading an graphic and reposting it under a Creative Commons license or otherwise granting a dubious license. If you really, really, positively need an image you are stuck with either creating it yourself or commissioning the work (with the appropriate transfer(s) in place). Otherwise you’re depending on others being truthful and granting rights they have the ability to grant. Of course, I’ve never heard of a case where someone has offered a graphic for license that they don’t have the rights to, but that doesn’t mean that it couldn’t happen. The best course of action is to keep a paper trail for all images you use so that if you receive a nasty letter you can point to your records to explain why you’re not a proper defendant.
If you receive a threatening letter concerning an image you’ve used, you should contact an attorney that is familiar with copyright law to discuss your issue.
That picture. . . well, I had some credits with iStockphoto that were about to expire so I searched for “patent” and after looking at a bunch of lightbulbs found a pair of patent leather boots. It seemed almost relevant.
Nov102010 | Steve O'Donnell
Are my tweets copyrighted?
Twitter updates are probably not copyrightable. . . but could be.
Nov052010 | Steve O'Donnell
Cooks Source’s hilarious copyright infringement
An interesting little story came out yesterday and spread quickly through the interwebs that illustrates some misconceptions about copyright law.
I’ll just point to the original post for the full story. The very short version is that someone posted a story, that story was nicked by a magazine and published, author sends a letter to magazine, editor responds with a hilarious letter about how everything on the web is public domain and that the magazine was doing the author a favor by editing and publishing it.
There are a few reposts floating around, many with comments enabled. The comments overwhelmingly encourage legal action.
There are two things I want to clear up. The first is that putting something on the web does not transform it into a public domain work. That is so silly it’s hard to believe anyone would think that. In fact it’s such an unbelievable statement that it almost makes me question the entire story.
The second problem is that people assume that copyright litigation automatically makes sense in this context. The author did put a copyright notice on the original page, which really doesn’t mean much of anything in the US. Notices aren’t required, copyright “attaches” as soon as something is created. But, if the copyright wasn’t registered with the copyright office, recovery is limited to actual profits/damages and an injunction.
What are reasonable profits/damages here? I can’t say for sure, but I can’t imagine that the original story was generating profits that were impacted by the article’s publication in Cooks Source; I also can’t imagine that the inclusion of that one short piece caused an increase in the magazine’s circulation or in advertising revenue. Monetary damages are probably minimal. An injunction also probably isn’t going to be of much use. The magazine is out, it’s done. An injunction could keep Cooks Source from using the story in a compilation edition, but that alone might not make it worth filing a lawsuit.
If the author did register the copyright with the copyright office, then statutory damages would be on the table and we could be talking about damages in the tens of thousands.
Legal analysis aside, it looks like Cooks Source is taking a beating over the issue on their Facebook page.
Nov042010 | Steve O'Donnell
Your videos, YouTube, and Web clip shows
In it’s never ending quest to find content that is cheap to produce, some networks have been finding some of the strangest and funniest clips on YouTube, Break.com, and similar websites and building shows such as Web Soup (G4) and Tosh 2.0 (Comedy Central) around them. Do the creators of the clips have an action for copyright infringement?
This is one of those questions that doesn’t have a great, easy answer. There are a few prongs that need to be considered before suggesting a course of action.
The first thing to do is look at the agreement that YouTube (or another upload place) requires users to accept.
YouTube’s terms, at Paragraph 6-C gives them the right to sublicense any videos to anyone they want. So if YouTube has licensed a particular video to Web Soup, then the creator of the video might not be able to do anything about the broadcast.
If, for some reason, that isn’t a problem (maybe the infringer hasn’t licensed the video from YouTube, or maybe the video was posted as an imbedded .avi or QT video on an independent web site), then the creator would have to determine what damages would be available. That will mostly depend on whether or not the work was registered so that statutory damages would be available. Most people that aren’t producing commercial video (and even a lot that are) simply don’t register their copyrights. If that’s the case, all one could win in court would be actual damages and profits, and an injunction. For most works it might not be worth pursuing an action beyond an angry letter or two. . . speaking strictly about the financial possibilities. If it was registered so that statutory damages are available, which could run as high as $150,000 plus legal fees, then the case is much more attractive financially.
Then, we have to look at what defenses the other side has and estimate how good they are. The most likely defenses are some flavor of “fair use,” but laches (basically that the creator sat on his rights too long to bring an action), and even an implied license might be argued. The implied license is one I’d really like to see argued from a copyright nerd perspective. Basically, the argument would be that by putting something on the internet that the creator has impliedly licensed the video to the public to use as they wish. I don’t think it would work, but I’d like to read the briefs (or have the time to research them myself).
If you have a video that you really don’t want to see mocked on Tosh 2.0, the easiest thing to do is to not upload it. If you really have to share it online, make sure you read and understand whatever terms of use you’re agreeing to by posting it. In either instance, register the copyright as soon as you can to give yourself some leverage if you do have to go after someone for nicking it. Depending on the exact facts, there might be other ways of protecting your work. The best thing to do is probably meeting with a copyright attorney to plan things so that the risk of infringement is minimized.
Oct272010 | Steve O'Donnell
Can typefaces be copyrighted?
In short: No. In long: Noooo.
37 C.F.R. 202.1(e) states that a “typeface as typeface” is not material that is subject to copyright.
It would have been nice if Congress could have used slightly less circular language than “typeface as typeface,” but in their wisdom didn’t think that was needed.
What that means, and how it’s been interpreted by the courts is that a “typeface is an industrial design in which the design cannot exist independently and separately as a work of art.” In other words, if the artistic expression in a typeface design can’t be separated form the utilitarian use of the typeface, then copyright is not applicable.
This doesn’t necessarily mean typefaces are completely foreclosed from protection. Design patents can be used to protect the design of a font such as in patents USD289422, USD340738, or USD266006. Also, a design that incorporates a non-copyrightable font, may still be copyrighted. Further, if some computer code is used to dynamically scale or manipulate a font, that underlying code can be copyrightable.
Copyright law is a morass and navigating it really requires someone familiar with its particularities. Call or E-mail me to get together and go through any specific questions you have.
Oct022010 | Steve O'Donnell
Limits to using public domain works
The Constitution gives Congress the power 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,” but what happens after that limited time is done--does that mean one can do whatever they want with something that has passed into the public domain?
For patents, the answer is yes. Once a patent expires it’s free game for anyone to take advantage of it without worrying about being sued by the inventor. Of course, there might be other considerations, certain inventions such as those deemed to be vital to National Security or those regulated by the FDA may still be illegal to make use of without additional clearances, but those are not concerns of patent law.
For copyright, the issue is a little more complicated. First, it’s not as easy as people might think to determine if something is really in the public domain. Just because something is old doesn’t mean it’s in the public domain. This chart gives a good breakdown of when copyright expires. The confusing mess of copyright duration is a prime example of what can happen when Congress tries to do. . . well, just about anything.
Second, certain works have “moral rights” attached to them. The US recognizes an authors right to attribution and integrity for works of visual art. These moral rights are separate from “usual” copyright protection.
So what, if anything is keeping me from taking Moby Dick, running a few search/replace commands in my word processor, and selling it as “Steve, His Friend Skippy, and the Big, Dumb Whale That Ate Steve’s Leg?” Other than being laughed at, not much.
Of course, everything is done online and is accessible by the entire world, which can further complicate things.
The US “moral rights” law does not extend as far as some other countries’ laws. In France, for example, I’d expect a problem with my version of Moby Dick. If French jurisdiction can reach me, I might be sued under their laws. There is also the possibility of a French judgment being entered against me and enforced in the US, even if I’m not under French jurisdiction. Generally, I think the possibility of that happening is close to zero because of the conflict that would create with our own Constitution, but it’s still something that should be at least considered.
Almost nothing is clear-cut in copyright law. I’d suggest that anyone wanting to play around in it get an opinion from an copyright attorney.
Sep102010 | Steve O'Donnell
Reverse settlements still ok for now.
In a reverse settlement, at least in the pharmaceutical context, a patent owner agrees to license the patent or pays off a generic company to drop their patent challenge.
There are regulatory issues that make pharmaceutical patent litigation different than other cases. If a generic company wants to enter the market for a patented drug it needs to file a certification with the FDA regarding the patent, one such common certification is under “paragraph IV.” With a paragraph IV certification, the generic is alleging that the patent is unenforceable. When they do that, the patent holder has a chance to file a lawsuit for a technical act of patent infringement (meaning it’s really not an infringement yet, but the statute says it is). If they do that, then the FDA puts everything on hold until either the case ends, or 30 months, whichever comes first.
If this litigation goes to it’s conclusion and the generic company wins, then the patent holder potentially loses years of patent exclusivity and the huge stacks of cash that comes with a patented drug. The generic victor in this situation will have the 180 days of exclusivity as I noted, but then a flood of other generics is virtually guaranteed, which will erode profits.
With the billions of dollars at stake, it’s hard to imagine that someone wouldn’t come up with a clever innovation. You know, necessity being the mother of all invention, or something like that.
Increasingly we’re seeing reverse settlements. In these settlements, the generic company agrees to drop the lawsuit, typically in exchange for the ability to enter the market under a license. In that way, the patent holder is happy because they get to hold onto their exclusivity and the generic is happy because they’re guaranteed entry into the market, often for a longer time then the 180 days marketing exclusivity that they could have received from the FDA.
The FTC and the class action plaintiff’s bar has been arguing that these settlements are anticompetitive, and I have to agree with them. The drug companies argue that the settlements are pro-competitive because they ensure that a generic will enter the market. However, even if a generic enters the market, it’s still not an open marketplace, it’s an oligopoly (a market controlled by a small number of businesses). Accordingly, the generic keeps its price fairly close to the brand name drug, after all, there is no real competition to drive the price lower.
This battle between the FTC/lawmakers and the pharmaceutical industry has been going on for a couple years and the pharmaceutical industry appears to be winning. Just the other day, the 2nd Circuit refused a full rehearing of a case concerning one such settlement.
What do you think should happen? Should these settlements be barred? If so, doesn’t that go against the strong bias we have towards equitable settlements? I think it’s clear that the settlements are anti-competitive, but patents themselves are anti-competitive and most recognize that they’re generally beneficial. Maybe the statute should incentivize a second generic challenging after a reverse settlement. Right now the 180 day generic exclusivity is only available to the first challenger, maybe changing that would mitigate the impact of reverse settlements. I’m not sure what the answer is, but I’d love to hear some ideas.
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Comments
something that the client did not approve like "free coffee for life". I even posted a similar question on LinkedIn. It seems that my hunches are pretty much in line with what you and others have mentioned. As an infant industry, I don't think that there has
been many court cases that spell things out, ...yet. Thanks for your insight.