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Have tech platforms captured the Supreme Court?

Have tech platforms captured the Supreme Court?
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For over a decade, a simple rule of thumb predicts the outcome of most cases before the Supreme Court that impact intellectual property rights: Just select the outcome that will advance the interests of tech platforms. Wrapped in the flag of “information wants to be free,” tech platforms have repeatedly persuaded the Court that robust enforcement of IP rights is bad for consumers and innovators. This is the Silicon Valley equivalent of “What’s good for GM is good for America.”

In fact, there is strong reason to believe that the Court’s continuous dilution of IP rights is not good for America. 

The Court’s decision last week in Google v. Oracle illustrates its predilection for endorsing the weak-IP policies advanced by tech platforms. The Court applied the fair use doctrine to shield Google from liability for having copied over 11,000 lines of code from Oracle’s copyright-protected Java programming language. The end-result: Google owes nothing to the first mover in an innovation sequence that led to Android’s dominance in the smartphone operating systems market. It is puzzling how this outcome could be deemed fair.

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The key purpose of an IP right is simple: It provides a profit incentive to elicit investment in developing intangible assets that are otherwise often replicable without compensation. This is accomplished by issuing a property right that enables the market to put a price on those assets. The undisputed facts of Oracle v. Google tell a story of upside-down copyright, in which flagrant and profitable infringement is exonerated by judicial fiat. 

It is undisputed that Sun Microsystems (Oracle’s predecessor) offered Google a license to use Java in developing the Android operating system. It is undisputed that Google instead chose to copy certain Java application programming interfaces to facilitate adoption by programmers, even though it was technically feasible to construct an operating system without doing so. It is undisputed that Android, released by Google on a royalty-free basis, has supported a digital ecosystem from which Google has earned billions of dollars in revenues from ads, apps, and other services.  

The Court declined to address whether Google acted in bad faith. Yet it is hard to find a better example of an infringer who, in the words of a 1918 decision by the Court, “is endeavoring to reap where it has not sown.” It might nonetheless be objected that Google’s actions generated public benefits that merit finding fair use. Whereas Oracle/Sun has licensed Java for certain uses in exchange for a royalty fee, Google has always licensed Android on a zero-royalty basis and its widespread adoption has elicited an abundance of value-generating services. Hence, it might seem that constraining Oracle’s copyright over Java is aligned with the public interest.

This conclusion relies on a familiar but often false tradeoff between enforcing IP rights on the one hand and preserving access for users and subsequent innovators on the other hand.

First, a robust ecosystem might nonetheless have emerged even if Google had agreed to pay a license fee, as Amazon and Samsung elected, or had chosen, like Apple and Microsoft, to refrain from using any Java code. Microsoft Windows was released to end-users on a positive-royalty basis but the Windows-based PC ecosystem nonetheless flourished, expanding access to computing capacities that were once reserved for governments and large corporations.  

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Second, Google’s success in funding Android on a royalty-free basis only shows that weak-IP environments are hospitable to giveaway business models, in which a free service elicits user adoption that in turn supports a pay service. However, a weak-IP environment is not hospitable to other business models that monetize innovation more directly through licensing and other IP-dependent transactions. As a result, fair use impedes the ability of competitive forces to converge on the best mix of business models for a particular technology or content market. 

The “take, giveaway, and litigate” strategy is unique neither to Google nor the circumstances of this case. Technology platforms have deployed this approach in a broad spectrum of digital markets, ranging from software to books to images to music. Under the legal umbrella provided by doctrines such as fair use, the “information wants to be free” slogan has been converted into a business strategy for using others’ IP assets, giving those assets away to seed platform adoption, and capturing revenues through complementary services in which the platform has a competitive advantage. While the normalization of infringement aligns with certain platforms’ private interests, it is not clear that it is aligned with the public interest.

Everyone likes to get free stuff. However, the devaluation of IP rights under rulings such as Google v. Oracle is likely to discourage investment by (and in) the inventors, artists, and entrepreneurs who stand at the foundation of a robust innovation economy. It is time to reconsider whether the current weak-IP policy trajectory is on the right track.

Jonathan M. Barnett is the Torrey H. Webb Professor of Law at the University of Southern California, Gould School of Law and the author of “Innovators, Firms, and Markets: The Organizational Logic of Intellectual Property (Oxford University Press 2021).