Thursday, August 02, 2007

The Price May Be Right But There's Still No Protection

On October 7, 2005, I did a post on Judge John Koeltl's fine opinion in New York Mercantile Exchange, Inc. v. Intercontinental Exchange, Inc. Judge Koeltl granted defendant's motion for summary judgment finding that settlement prices for NYMEX open positions were not protectible. Yesterday, the Second Circuit affirmed in an opinion by Judge Katzmann, with a concurring opinion by Judge Hall. Judge Katzmann's opinion is pretty much a by-the-numbers opinion (pun intended), but there were sparks between the two opinions on the threshold standard for protection and the originality of the prices at issue.

As I noted in the original posting, NYMEX's claim was for the individual prices, and not in the compilation of them. One might wonder how NYMEX got a registration for prices. The answer is it didn't. The Copyright Office repeatedly refused registration for the prices and NYMEX then (in my opinion) misused the registration process to get into court with a registration. The Office submitted a very helpful brief to Judge Koeltl. I confess to being baffled by why NYMEX every thought it had a claim for such clearly unprotectible material. To me, it matters not if NYMEX exercised judgment in setting a price, the price was still that price and that was a fact. Moreover, the individual price itself not remotely the type of work protected by copyright.

In rejecting plaintiff's claim, Judge Katzmann's opinion evidences some tsouris about drawing the line between discovery and creation -- did NYMEX "author" the prices" or did it discover them? That is a line that has no relevance here: NYMEX's claim was in individual discrete items that could not rise to the level of originality even if it had given them a fanciful name like googa-geeba.

Judge Kaztmann was, I suspect, perfectly happy to decide the case on the solid ground of lack of originality, but didn't, opting instead for what he thought the safer ground of merger. I think safer here relates not to the merits, but to the fact that he avoided a dissent by Judge Hall since while Judge Hall disagreed on the originality issue, he too rejected the claim on merger grounds. Politics aside, I find the merger argument the weakest. In Arica Institute, Inc. v. Palmer, the Second Circuit stated that the roots of the merger doctrine “can be found in cases such as Baker v. Selden.” That seems inaccurate since Baker neither used the term nor were issues commonly associated with the concept raised: Defendant's forms in Baker were concededly not substantially similar to plaintiff's and hence there was more than one way to express the idea. Plaintiff's claim was instead that copyright in his book gave him a monopoly over the system of bookkeeping discussed therein. (See Pam Samuleson's article discussed in yesterday's blog for more on this point).

The merger doctrine has been explained by language like, "When the 'idea' and its expression are … inseparable, copying the 'expression' will not be barred, since protecting the expression' in such circumstances would confer a monopoly of the 'idea' upon the copyright owner free of the conditions and limitations imposed by the patent law." Subsequent courts have expanded the doctrine's reach, finding it applicable when there are a number of ways to express a particular idea, and yesterday's Second Circuit opinion follows this trend.

The doctrine is, however, based on a faulty premise: If an idea and its alleged expression are truly inseparable, there can be no selectivity sufficient to permit originality. This is also true if there are only a limited number of ways to “express” the idea. Such a conclusion is, in reality, a statement that the purported copyright owner's way of expressing the idea contains only a de minimis number of non-ideas. So understood, merger is merely a judgment that there is a lack of originality and thus, like the idea-expression dichotomy, merger merely reflects a judgment about where on the continuum of expression the work at hand lies. The prices asserted by NYMEX fall off the spectrum completely.


Rebecca Tushnet said...

There's some mischief in the main opinion's footnoted attempts to distinguish this case from CCC & Kapes -- "estimates" of the truth are no more creative than bald statements (which are also often just best guesses). A census conducted by probability sampling would be no less factual than a census attempting to contact every person.

William Patry said...

I agree Rebecca, but then I think CCC is itself a very problematic opinion. I believe Judge Leval shares that view too.

Rebecca Tushnet said...

Yes, CCC is troublesome, which is why I would have stopped at calling its price-specific holding "dicta." Though I'm not sure that's really true, since on my reading it's not clear that the Red Book copied the coordination & arrangement of the prices, though maybe copying the selection (based on region, model, etc.) is enough -- in which case we're back to protecting the prices themselves de facto and plaintiff here could have made a similar argument. Anyway, after dismissing CCC, the opinion would have been better if it just disagreed with Kapes rather than positing a distinction between estimates and real facts.

Chris said...

I've never really liked looking at the idea/expression dichotomy through the lens of originality, mainly because facts can be original and, in fact, seem to be in this case: the NYMEX said "We decide that the closing price will be X." If the NYMEX had not said that X was the closing price, even if nothing else changed, then X would not be the closing price. So, X originates, at least in a technical sense, with NYMEX. (unlike the NYSE or NASDAQ, the NYMEX actually choses the price.)

I suggest that the reason X isn't copyrightable is because it is not a work of authorship under S. 102 -- it has no creative expression.

The court got there circuitously, through the merger doctrine, but I wish they had just attacked it correctly by saying "taking a stack of numbers and applying a standard formula to them isn't authorship, so it's not subject to copyright."

Originality allows you to say "you didn't create it." Authorship allows you to say "you might have created it, but it's just not enough creativity or expression." (sorry for overloading the word "Create.")

William Patry said...

Chris, generally I agree with you but the Second Circuit and I think all other courts have broken originality down into two requirements, independent creation and a sufficient modicum of creativity. I still think indepedent creation has to be of copyrightable material, but even accepting NYMEX's view that it independently created the price in the sense of not copying it from anyone else, the individual prices certainly lack a modicum of creativity.

There is I agree a circularity to it since one can only be an author of original material. One could have created something without copying but if it is not deemed to possess the requisite level of creativity, you are not an author since you didn't create anything original.

Crosbie Fitch said...

Ahem, let's not start letting copyright dictate what constitutes an author, via its notion of originality.

This is like letting Coca Cola define what constitutes spring water (via Dasani).

Authors do not need to show originality in order to be defined as an author. They merely need to realise their thoughts or otherwise exert intellectual effort that can be apprehended by the intellect of another.

If it took thought to write, the writer is an author. If the writing is even indistinguishable from the work of another author (whether contemporary or not), it is authored by both, not just by the first.

Granted, a writer who merely copies verbatim, is not an author of the work - since they expended no thought in their writing. A writer who annotates another author's work is an author of their comments, but not of the other author's work. An editor is author of their edits, but not of the work they edit.

So there's a subtle distinction between the adjective 'original' as in 'highly dissimilar from what has been seen or exists elsewhere', and the notion of authorship that means to express one's thoughts (however similar or dissimilar the result to anyone else's).

So, it is quite possible to originate highly unoriginal thoughts. The origin is your mind, but the result may not be unique or regarded as at all original.

This is why many software engineers, who've long known how unoriginal their algorithms are (irrespective of the considerable thought it can take to independently arrive at them), realise that software patents are a ridiculous hindrance to unavoidable and necessary unoriginality.

The same goes for authors of literature. One can have unoriginal ideas, and unoriginal expressions of unoriginal ideas, but originality cannot be the criteria for authorship. Thought is the criteria. A work of authorship need only originate from someone's thinking (though not just their memory).

But, for the purposes of law I'd suggest it would be better to adopt a definition of intellectual property that doesn't require a subjective appraisal of how original it is. The crime of IP theft needs evidence of theft. It is not a matter of how original or otherwise worthy the property may be.

Naturally it is impossible for anyone to steal their own property, so we'll leave the issue of whether authors should be granted monopolies over their apparently original ideas, or expressions thereof, until another day.

William Patry said...

Crosbie, I think you are using author in a different sense than the one used by courts. There are many contexts for use the word and it is the context that will give meaning to the term. I think for the narrow purposes of defining who, initially should be accorded the impressive battery of exclusive rights copyright grants, the courts' definition is appropriate.

Eric Goldman said...

I thought Rebecca's 10:51 comments were exactly right. Eric.