Baseball stats and intellectual property

In a little publicized (outside of sports news) case, a judge in St. Louis ruled earlier this month that certain information is not subject to copyright laws. The specific case involves baseball fantasy league. As the New York Times (Baseball Is a Game of Numbers, but Whose Numbers Are They?) noted when the case was first filed:

Like no other corner of American popular culture, baseball communicates in numbers. From .406 (Ted Williams’s 1941 batting average) to 755 (Hank Aaron’s record home run total) to countless digits bandied about water coolers every morning, statistics convey ideas and images that, even overnight, become inseparable from the players to whom they belong.
This relationship between players and numbers, so often romanticized, is now being stripped to its skeleton in a lawsuit with considerably wider ramifications. While the dispute focuses on fantasy baseball — in which millions of fans compete against one another by assembling rosters of real-life major leaguers with the best statistics — a real legal question has arisen: Who owns that connection of name and number when it is used for such a commercial purpose?
Many onlookers have cast this issue as a tiff over batting averages — as if children were squabbling over the backs of baseball cards — but legal experts are saying it could affect the wider arena of celebrity rights, freedom of the press and even how the press is defined as the Internet age unfolds.
The dispute is between a company in St. Louis that operates fantasy sports leagues over the Internet and the Internet arm of Major League Baseball, which says that anyone using players’ names and performance statistics to operate a fantasy league commercially must purchase a license. The St. Louis company counters that it does not need a license because the players are public figures whose statistics are in the public domain.
. . .
Major League Baseball Advanced Media is not making a copyright claim to the statistics themselves; a 1997 decision in the United States Court of Appeals involving the National Basketball Association ruled sports statistics to be public-domain facts that do not belong to the leagues.
Rather, the central issue concerns celebrities’ ability to control use of their names in commercial ventures, and how this “right of publicity,” which has developed under state common law and statute over the last half-century, may commingle with Constitutional press protections under the First Amendment.
The term “right of publicity” was coined in 1953 when, in a case involving baseball, a court ruled that Topps Chewing Gum company could not print trading cards that featured baseball players’ names and likenesses without their permission.
In 1970, in a case starkly similar to the CBC case, a Minnesota state court found that two baseball board games, each of which used only names and statistics, misappropriated the players’ marketable identities and was subject to license.
But other subsequent cases have favored First Amendment concerns over the celebrities’ right of publicity. Several courts have maintained that the dissemination of information, even for profit or for entertainment, cannot be curtailed by any state’s right-of-publicity laws. In its court filings, CBC argued that it relied on baseball players’ names and statistics “as their lifeblood in much the same way that the sports sections of newspapers do.”
Major League Baseball Advanced Media, however, says that selling a service that helps customers pick and trade players crosses the line between reporting on games and running a nonjournalistic, commercial enterprise.

But, as the WSJ Law Blog notes, the judge ruled in favor of CBC – Fantasy Sports Leagues Hit Grand Slam With Court Ruling:

“The undisputed facts establish that the names and playing records of (MLB) players as used in CBC’s fantasy games are not copyrightable and, therefore, federal copyright law does not pre-empt the players’ claimed right of publicity,” wrote Judge Mary Ann Medler. Even if players have a claimed right of publicity, she added, “the First Amendment takes precedence over such a right.” The judge likened the names and stats of professional ballplayers “to the names, towns and telephone numbers in a phone book, to census data, and to news of the day.”

(The Wall Street Journal has also posted the judge’s opinion).
Major League Baseball has said it will appeal, according to AP – Baseball Appealing Fantasy Legal Victory

MLB Advanced Media spokesman Jim Gallagher said the league has distinguished that gray area from the beginning.
“We’ve agreed that the stats and names are in the public domain,” Gallagher said. “But when you start to use teams logos and other images as CBC did, you need a license, it’s that simple.”

In this game, nothing is simple. Any one want to take bets on whether this one is headed for the Supreme Court?

A tale of two companies

Maybe some of the big dinosaurs are beginning to get it. For example, there is this story – Matsushita Electric Aims to Profit By Improving Design Efficiency:

Fumio Ohtsubo, the new president of Matsushita, which produces Panasonic brand goods, said in an interview that improving the design and assembly of its products is pivotal to raising profit margins.
Matsushita, the world’s largest consumer-electronics maker by sales, last week said it will consider closing some of its 170 remaining plants in North America, Asia and Europe.
Mr. Ohtsubo’s predecessor, Kunio Nakamura, was able to turn around Matsushita — hit by a big loss in the fiscal year ended March 2002 — by closing factories and cutting thousands of jobs. He also focused on a few major products, such as flat-panel plasma displays and digital cameras.
. . .
The 60-year-old Mr. Ohtsubo sees a focus on product-design improvements as central to pushing Matsushita into a new stage of growth. “I want to strengthen our cost competitiveness at the design level,” Mr. Ohtsubo said.
He said his first step will be to head a new task force to break down the barriers between design teams. This will aim to get teams to share more information and design products that use fewer parts and are more easily assembled.

And then there is this Business Week interview with Bill Ford – Ford on Ford

Business Week: The truth about the auto business is that it takes years to bring new product to market, and there’s little you can do to move the ball financially in the short term. Is the revised restructuring plan mostly meant to convey action—that you are digging deeper and faster to really change the company?
Ford: There’s a large element to that. People need to see that we’re attacking what we can attack. It’s not just costs. It’s also product. Most people focus on that we are too big and our costs are too high. It’s about cutting costs. But it’s very much a product-focused plan. We had already begun to diversify away from large SUVs and trucks well before the oil price spike. But we have to see how my product programs can accelerate and pull forward.

Or maybe not. Matsushita is talking about design-for-manufacturability and Ford is looks to simply catch up with the market.
Guess it takes a lot more to make dinosaurs dance.

iPod patent settlement

Yesterday’s announcement of the patent settlement between Apple and Creative Technology could be seen as a standard story of conflicting patents and how many patents can dance on the head of an iPod. As the WSJ Law Blog explains:

In May, Creative filed a patent infringement lawsuit against Apple. In addition to the federal lawsuit brought in San Francisco, Creative filed a trade complaint with the U.S. International Trade Commission to prevent Apple from importing its allegedly infringing iPod devices, which are manufactured in China.
Apple filed two countersuits, one in federal court in Madison, Wis., and the other in Texarkana, Tex., alleging that Creative infringed seven of Apple’s patents. Apple also filed a similar trade complaint with the U.S. ITC seeking to halt imports of Creative’s MP3 into the U.S.

The Washington Post captured what has become a routine part of these cases:

“From the point of view of Creative, their bitterness stems from the fact that when they approached Apple, they were arrogantly dismissive” about licensing their technology, said Phil Leigh, senior analyst with Inside Digital Media Inc., a Tampa-based market research firm. “Apple’s point of view on this is, ‘These guys are patent trolls,’ ” who are profiteering off of the technology patent process, he said

But, there is one element in this situation which caught my eye. According to the Journal’s story today:

The deal will also allow Apple to recoup an undisclosed portion of its licensing fee if Creative is successful in licensing its patent to others. In fact, its agreement with Creative may lead to more such licensing deals. The agreement could strengthen Creative’s patent in the eyes of competitors hoping to bring their own music players to market, spurring them to reach licensing agreements with Creative or giving the company a stronger hand in future licensing litigation.
“When you have a settlement with a large player, that sends a signal that this is a serious claim,” said Allonn E. Levy, an intellectual-property attorney at Hopkins & Carley in San Jose, Calif.

In other words, the agreement with Apple may be just as valuable as the patent itself. And the value of the patent is now much higher than simply the value derived from the licensing fee. I realize that this is a standard dynamic in the industry — validation of a technology by an industry leader raises the value. But I wonder how much a deal with Apple is worth compared to one with some other small fry? And how does that show up on the company books?

Shifting jurisdicational advantage

Yesterday, I talked about the importance of creativity in jurisdictional advantage. Clearly, communities need to understand the factors and forced that make their location a desirable place for economic activity. Some of those forces are internal – the creativity and entrepreneurship resident in the community. Others are external. And like a company’s competitive advantage, jurisdictional advantage can (and does) shift.
An example of that shift can be seen in two case studies – both of which focus on energy costs and regulation.
The first is about an aluminum plant in central Maryland — just north of Washington DC – “The Power of Rising Energy Prices”:

For 35 years, the aluminum plant surrounded by fields of soybeans and corn in Frederick County has provided high-paying, reliable jobs that lured workers from faraway states.
. . .
Years ago, when companies chose locations to build aluminum plants, they did it to be close to the country’s lowest-cost power providers. Eastalco long relied on cheap power provided by the Allegheny generating facilities that are close to cheap coal.

But with deregulation and nation-wide marketing of electricity, the price is the national price – not based on nearby resources:

If the market were still regulated, the company said, the price it pays would be more closely related to the price of coal, the dominant fuel for Allegheny’s plants. But the company said that the PJM market establishes prices that are more heavily pegged to the price of natural gas. The most expensive unit of electrical generation, the company said, is used to determine the market rate. And that price is typically for power generated with natural gas, whose costs have increased much more rapidly than coal’s.

So, with the disappearance of cheap local electricity, the plant is in trouble.
The second is the opposite set of regulations – an area that thought it would thrive because of cheap local power but was forced to export that electricity: the Columbia River basin. Tech Firms Go Mining for Megawatts:

There is cheap electricity here and lots of it. That is because the Columbia, the premier hydroelectric river in North America, flows nearby. Three publicly owned, local utilities own five large dams on the river, and they produce much more electricity than the sparse local population can use. With power prices soaring, the three utilities have become the hydroelectric emirates of the Pacific Northwest.
Until now, they have been obligated under 50-year-old contracts to sell about two-thirds of their power — without profit — to major utilities serving millions of people in Seattle, Tacoma and Portland. The arrangement helped keep monthly electric bills in the Northwest far below the national average.
Those old contracts, though, are expiring — a development that will help push up residential electricity rates across the region. And the mid-Columbia utilities are scurrying to sell their newly unleashed power to the corporate giants of the Internet — if they are willing to plant “server farms” in two-stop-light towns such as Quincy.
They do seem uncommonly eager.
Out in the bean field, Microsoft is rushing to complete what it says will be the largest data center it has ever built. It is scheduled to go online in February. Downstream in The Dalles, Ore., Google is building a data center that will go online within the next year and is reported by local officials to be scouring the region looking for other sites. Upstream in Wenatchee, Wash., Yahoo is expected to go online with another data center in the fall and is in negotiations for still others.

This was the original promise. The promoter of the Grand Coulee dam (local newspaper publisher Rufus Woods

boasted noisily in the pages of his newspaper that electricity from the dams would lure major industry to Wenatchee and the Columbia Basin. But the federal government broke his heart by stringing wires across the Northwest and setting up rules requiring dams to sell most electricity at a postage stamp rate, meaning that power had to cost the same in Wenatchee as it did hundreds of miles away in Seattle, Tacoma or Portland.
Although farming in the Columbia Basin boomed, thanks to irrigation water diverted by Grand Coulee, major industry, for the most part, ignored Wenatchee and towns such as Quincy for most of the past seven decades.
Companies could get plenty of cheap power in Seattle and Portland without having to build in the boondocks — until now.

In both cases, external forces are shifting the communities’ advantages – one positive and one negative. Those external forces may not be under the communities’ control, but the internal forces will determine how each community copes with the changes.
In his paper, Why the Garden Club Couldn’t Save Youngstown, Sean Safford talks about the social and political infrastructure needed for a community to respond to an economic shift. In this case, why Allentown was able to successfully respond to the shift and Youngstown was not. Often referred to as “capacity building,” this institutional infrastructure is just as important a jurisdictional advantage as cheap electricity or a skilled workforce.
It is also the most intangible of intangible assets – one that is often defined more by its absence and not considered until too late. Capacity building should be at the top of our economic development concerns. Unfortunately, it is not as sexy as luring the next plant or setting up a high-tech oriented partnership. But it is the foundation of all that other work – and we need to start treating it as such.

IPR and trade

I find myself in the strange situation of agreeing (somewhat) with the Editorial Board of the Wall Street Journal as they complain about companies now using the trade laws to bring patent infringement cases – see the poorly titled article Smoot-Hawley’s Revenge:

The ITC was established in 1916 as the U.S. Tariff Commission. Smoot-Hawley gave it the authority to review claims of “unfair trade practices” based on patent infringement. If a company with U.S. operations believes a competitor is importing a product that infringes on its intellectual property, it can bring a Section 337 claim to the ITC. An administrative law judge then hears the case, and he can issue an exclusion order barring imports of the infringing product for the duration of the patent. The order is also subject to the review and approval by the six-member, bipartisan ITC board.
Incredibly, all of this takes place separately from normal judicial proceedings on patent infringement or validity. Most of the cell-phone cases mentioned above are also in court on patent-infringement grounds, but these cases can take years and are subject to lengthy appeals. The ITC tries to discharge Section 337 cases in about a year, and will not wait for the courts. Once the ITC votes on the judge’s order, there is only one avenue of appeal: The President has 60 days to override the ITC’s order. If he doesn’t act, the import ban takes effect.

One would think that the Editorial Board would be all in favor of strong IPR and use of trade law to crack down on “the theft of intellectual property.” In the past, they have complained about allowing developing countries to copy drugs under the guise of declaring a health emergency.
But on patents and copyright, the WSJ has been relatively consistent. In 2002, they urged the Supreme Court to overturn the 1998 Sonny Bono Copyright Term Extension Act which extended existing copyrights 70 years after the death of the creator. More recently, in their comment on the Blackberry case – “Patently Absurd”, they stated,

Patents are supposed to protect intellectual property and spur innovation, and once upon a time in America they did. But like everything else the legal system touches nowadays, U.S. patent law has been hijacked so that it now operates nearly in reverse, deterring research and penalizing innovation.

My agreement with the Journal in this case is only partial, however. The Journal get the problem right — concern over companies gaming the system — but picks on the wrong target. The Journal apparently would like to throw out the Section 337 process — thus depriving the US of its major tool to combat foreign counterfeiting. But the problem isn’t the ITC and Section 337. As the Journal admits (but dismisses), there are three levels to the ITC process: an administrative law judge; the Commission; and Presidential review. Any one of these can throw out a bad decision.
And there is judicial review (see ITC FAQ’s), even if it appears to be more circumspect than in patent law cases — as the law firm of Jones Day notes:

District courts are reversed by the Federal Circuit with regard to the meaning of patent claims from 38 to 50% of the time, depending on the statistical data gathered. See, e.g., Andrew T. Zidel, Patent Claim Construction in the Trial Courts: A Study Showing the Need for Clear Guidance From the Federal Circuit, 33 Seton Hall L. Rev. 711 (2003) (citing numerous studies showing the Federal Circuit’s high reversal rate on claim construction issues); Kimberly A. Moore, Are District Court Judges Equipped to Resolve Patent Cases?, 15 Har. J. Law & Tec. 1 (2001) (“The high reversal rate on claim construction is problematic. It creates uncertainty in patent cases and in patent claim scope analysis until the Federal Circuit review is complete.”). The ITC’s claim interpretations are, however, rarely reversed by the Federal Circuit. Thus, the uncertainty that accompanies claim construction rulings by federal district courts is greatly minimized in a Section 337 proceeding before the ITC where experienced, specialized judges conduct the investigations.

The real problem is our patent system — especially with the presumption of the validity of a patent even in the face of evidence of problems with patent quality. There are provisions in pending patent reform legislation that would deal with that problem. Specifically there are proposals for a pre-grant opposition process and a post-grant review procedure. These mechanisms would help determine the validity of a patent well before the litigation or Section 337 process began.
The Journal has highlighted a problem. I hope they will now start advocating for the correct solution.

Authentic innovation

Bruce Nussbaum says, For Innovation, Forget Milan And Go To Santa Fe’s Indian Market.
It has been over a decade since I visited the Indian Market (when I was working for Senator Jeff Bingaman) – but I still have some nice creative pieces I bought there. So I would second Bruce’s suggestion that:

If you are interested in the method of combining the authenticity of tradition with the creativity of innovation, you need to go and talk to the artists at Indian Market. Awhile back, Xerox Parc experimented with bringing artists and engineers together to promote creativity. It’s time to do this again–on a much bigger scale.

I would also second his second suggestion about bringing engineers and artists together. My impression is that this is one of the goals of some of the more innovative design school programs – like the Stanford d-School. That works for design students, but maybe we need a bigger program for working engineers and artists to meet on a regular basis.

Creative Toronto . . . and other cities

Toronto has just released a new report on the future of the city, entitled Imagine a Toronto …:

The goal of this project is to produce a strategy that addresses the current needs of Toronto’s creative economy, that promotes its future growth and that leverages these creative assets to enhance economic and social opportunity.

The report sets out a “Credo for Creative Cities”:

Creativity owns imagination. And imagination is what builds our cities. Creativity commands the allegiance and love of the creative person as a way of being, living, thinking. The imagination that comes of that allegiance is powerful, self-renewing, and tireless in delight. It permeates all aspects of civic life. It is the only limitless resource.
To know this is to release an industry in perpetual motion. Allegiance to true creativity defines imagination against the myopia of market greed. For the ethos of creativity left unchecked, by its natural genius, instructs all witnesses to the shared project of wonder. This is what makes a city great, a society great and, yes, even productive.
Creativity must become a way of life. It is not a question of sustainability but of survival, and the beauty that inspires it. And the kinds of risks that true creativity demands are crucial to that end.

The Toronto report has laid down an important marker. Energizing our cities is a key component of a national competitiveness strategy. As Business Week recently pointed out in Slicker Cities:

America is losing its competitive edge. That premise has been pounded into our heads so often by pundits, and reinforced with each report on the rise of China and India, that it’s almost taken as a given. But can a nation that has averaged 3.4% growth for three years and keeps posting sterling productivity gains really have a competitiveness problem? Or is that problem much more local?

The BW special report Pushing For Growth: How Cities Succeed goes on to describe what a number of cities are doing:

Even with globalization, location still matters in economic competition. But it is more important than ever for communities to offer distinctive advantages.

Creating that jurisdictional advantage is something that we at Athena Alliance have been stressing for a long time – see our session on the topic with Professor MaryAnn Feldman.
Creativity is part and parcel of that advantage. But it is not necessarily the differentiating factor. All locations need to tap into their creative and innovative capabilities – but how they utilize those capabilities and the direction that their creativity takes them will provide that differentiation. It is not enough to simply say “be creative.”
As Business Week illustrates, cities can take different routes:

Stockholm shows how to succeed in the Knowledge Economy: It serves as a base for major companies and tech universities, it subsidizes broadband, and it offers a vibrant urban environment that lures young talent. Orlando has diversified its economy by nurturing a new industrial cluster: digital media. Singapore thrives by persuading multinationals to use it as a base for R&D and as regional headquarters, and even anticipates companies’ needs five years out.

Edinburgh is an example of a city that has successfully taken the “creative route,” as Lorna Jack of Scottish Development International pointed out in a comment on the BW story:

I was interested to read that as the international marketplace becomes more globalized by innovative and competitive communities, regions are shaping unique infrastructures to meet the need. Edinburgh’s strong creative and digital media industry was built upon a hub of academia, an expert labor force, and the wildly creative Edinburgh Festival. Paired with support from economic development agencies within governments, it’s no wonder business flocks to these communities.

But this route – what I call the traditional arts path – is not for every location. Just as every city can’t be Silicon Valley, every city can’t replicate the Edinburgh Festival. Each location needs to understand and build upon its own strengthens and resources. The creativity of individuals, companies and communities is a part of that mix. “Creative industries” aka, the arts, may also be part of the mix depending upon the location. But the two are different.
As the Toronto report stated “creativity must become a way of life.” Let us foster creativity in all its forms and manifestation – and in all industries and sectors. And let us help communities discover the creative forces in all of their economic activities.