USPTO Blames Unprecedented Fee Hike Proposal on $100 Million Shortfall & Inflation
Also: growing momentum in DC & Silicon Valley against OpenAI's claim of "fair use" and expectations for meaningful SEP protection in Japan
This Week in Patents IP: Growing Opposition to OpenAI’s Claim of “Fair Use”
Although Voice of IP has mainly focused on patent-related developments, the biggest IP war right now in the US is the one between copyright owners and tech companies who are scraping copyrighted works for AI models.
Early salvo: at the end of last year, the New York Times sued OpenAI for copyright infringement. Thomas Carey, of Sunstein LLP, called it “The Biggest IP Case Ever,” while noting that “the Times is looking for an award of at least $2.25 billion, and perhaps as much as $450 billion” for OpenAI using its archive of 3 million newspaper articles to train ChatGPT.
OpenAI response: “Training AI models using publicly available internet materials is fair use” and cited “a wide range” of “recently submitted comments to the US Copyright Office.”
The public’s quick and enthusiastic adoption of ChatGPT made it seem likely that their view would prevail. However, as Napster learned, that’s not always enough. Copyright owners1 are working hard to make sure of that and are gaining noticeable momentum.
View from DC: The Generative AI Copyright Disclosure Act was introduced last week by Congressman Adam Schiff - who also happens to be the likely next Senator from California.
Act requires “a notice to be submitted to the Register of Copyrights prior to the release of a new generative AI system with regard to all copyrighted works used in building or altering the training dataset for that system.
Bad news for OpenAI: “The bill’s requirements would also apply retroactively to previously released generative AI systems.”
View from Silicon Valley: more surprisingly, SV is fairly divided on the subject. Some companies are quietly paying copyright owners for their content. Others - like top angel investor2 Jason Calacanis - are openly attacking OpenAI’s stance and calling for an alternative approach by tech companies. In a recent episode of his This Week in Startups podcast, Calacnis celebrated “IP” and Schiff’s bill while attacking OpenAI’s stance regarding “fair use”:
You can't just take people's work and build a derivative product out of it without their permission and without their consent, without paying them. Here, the [tech] industry has stolen content and they've explicitly stolen it and they knew they were stealing it. So, Open AI has stolen tons of content. They built scrapers to do this and the concept that it's fair use is laughable.
You, as the person who created this IP, have the right to create the derivative products from that IP. The fair use doctrine is very narrow and its purpose is very clear: educational, to make society better . . . So, what I like about this bill is it just says: hey, tell us what you used. And that seems more than fair if you used my content to build something I should know . . . I hope that New York Times gets an injunction against OpenAI and they have to pull their product from the market.
VIP will leave it to others to assess whether Calacanis is right about Open AI relying on fair use “is laughable.” However, this makes it much harder for OpenAI to argue that there is no plausible alternative. There’s no question that the law - through the courts and once in a while through Capitol Hill - mostly ends up following what influential “laymen” like Calacanis think.
Standard Essential Patent (SEP) enforcement on the rise in Japan?
Japanese companies have long been some of the world’s top patent filers. However, trying to enforce patents in Japan has usually proven to be a waste of time and resources.
Flashback
The skirmishes in Japan during the Apple v. Samsung global patent war are a good illustration of that dynamic. While filing lawsuits against Samsung for billions of dollars in the US, Apple sued Samsung in Japan for only $1.3 million alleging that Samsung’s Galaxy smartphones and tablets infringed 7 of Apple’s patents. A week after Apple was awarded $1 billion by a US jury that found that Samsung infringed 6 of those 7 patents, the Tokyo District Court ruled that Samsung did not infringe any of Apple’s patents.
At around this time, Samsung sued Apple in Japan for infringing its SEPs related to cellular phone standards. Japan’s IP High Court refused to grant an injunction and, on May 16, 2014, ruled that “Samsung did not have a right to seek damages beyond approximately ¥9.96 million ($100,000).”
Impact
These relatively recent, high profile patent lawsuits in Japan left a lasting impression on those who enforce patents globally. The thinking went that if even Apple and Samsung could not obtain a single, worthwhile outcome in Japanese courts for ubiquitous smart phones infringing patents, there was no reason to pursue enforcement there in almost every other scenario.
Signs of improvement in Japan
In a fascinating new episode of The SEP Couch, Tim Pohlmann talks to Shogo Matsunaga - one of Japan’s leading lawyers focused on SEPs. Shogo pushes back on the general consensus about the state of patent enforcement in Japan and predicts that the SEP community will see examples of successful, meaningful cases of enforcing SEPs in Japan in not too long. He seems to attribute at least some of that change to the growing appreciation of standards in Japan.
USPTO’s Fee Proposal for 2025 - Part III
VIP has finally received some answers directly from the USPTO regarding the proposed fee increases.
Previously, VIP pointed to its own reporting about how the unprecedent fee increases were targeted at “big pharma.” At the time, VIP was still waiting to hear back from the USPTO regarding the fee increases. The USPTO has previously acknowledged its goal of “promoting access to prescription pharmaceuticals for American families and increasing competition in the marketplace.” In the notice of proposed fees itself, the USPTO explains the patent term extension-related fees by indicating that “[t]he users of these services are typically large pharmaceutical and medical device companies due to the expense required to develop and obtain marketing approval for such inventions” and that “when compared to either FDA user fees or the research and development costs required to develop a new drug and obtain marketing approval, the proposed fees to obtain a patent term extension for the patent covering such a new drug are quite small.”
However, to VIP’s surprise, the USPTO was not interested in mentioning any connection between the administration’s approach to “big pharma” and the 2025 fee proposals in answers to questions from VIP. Instead, the USPTO pointed to “two material changes to the USPTO’s budget that require us to adjust fees,” including:
The Unleashing American Innovators Act of 2022 creating a $100 million shortfall for the USPTO because of substantial discounts for small and micro entities applying for patents; and
“[H]igher-than-expected inflation in 2021 and 2022 in the broader U.S. economy.”
Although the USPTO mentioned these factors in the notice of proposed fees, they hardly explain the unprecedented nature of the particular fee raises. And, while the USPTO acknowledged “consideration of certain policy factors,” they did not mention anything regarding why these fees seem particularly targeted at those in the pharma space in its responses to VIP. Undoubtedly, the USPTO is being careful to avoid providing any grounds for challenging the fees.
VIP plans to share more of the USPTO’s explanation in future updates.
Have you come across signs that made you think about IP? Are you less optimistic about prospects of SEP enforcement in Japan? Do you know the real story about how the USPTO came up with the proposed fees?
Please email eli@VoiceOfIP.com or send message eli.92 on Signal.
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