Courts are supposed to do justice even if doing so costs individuals a lot of money.

Joe Nocera writes in the New York Times that to even suggest “that maybe, just maybe, deals that stop making sense ought to be called off, or at least rejiggered, especially in the middle of a once-in-a-lifetime financial crisis – invites withering scorn, especially if you say it to someone on Wall Street or in the legal profession.”

I’ve worked in the legal profession on Wall Street, and I like to think that when what the law seems to compel makes no sense the law has the capacity to adjust, to do justice instead of nonsense.  My thinking isn’t purely the product of naivete and idealism.  There really  is a legal (or,  rather, for the lawyers among my readers, an equitable) argument to stop the particular deal Nocera is writing about.  Moreover, that argument is precisely that the deal makes no sense to an interest — the public — much more important than the individuals who would profit mightily from the deal.

Here’s the deal:  “Last summer, the Dow Chemical Company won a heated auction for a well-run, highly valued specialty chemical company called Rohm & Haas. . . . The price it agreed to pay was high: $78 a share in cash, a 74 percent premium, for a total of about $15.3 billion.”  The problem is that in light of the global financial crisis and a collapse of the chemical business, if the deal goes through the resulting Dow/Rohm & Haas entity “could be badly damaged, saddled with high-priced debt in a horrible business environment, and a junk bond credit rating.”

What does that mean? It means that if the deal goes through Dow would need to strip itself to the bare bones to survive or would collapse altogether.  This while “Dow Chemical employs around 45,000 people; Rohm & Haas employs more than 15,000.”  This while “the American chemical industry – which was suffering even before the financial crisis because of the rise of commodity chemical companies in China and elsewhere – is going to be in a bad place for the foreseeable future.”   This “[a]t a time when every job matters, and when the economy is holding on for dear life . . .”

In return, the shareholders of Rohm & Haas will get $15.3 billion.  According to Answers.com, ‘the Haas family, descendants of one of the company’s two founders, continue to control a substantial ownership interest of nearly 30 percent” of those shares. So the the Haas family and the other Rohm & Haas shareholders are suing for “specific performance” of the contract with Dow; that is, they are asking a Delaware court to order Dow to go through with the deal to buy Rohm & Haas for $15.3 billion.

I’m not sure why there’s “withering scorn” for the suggestion that a court might refuse to enforce a deal that threatens 60,000 jobs and, as Nocera writes,  would probably destroy “billions of dollars of value.”  It’s no stretch to suggest that at a time of global economic collapse and at a time when President Obama is fighting to inject billions of dollars into the economy, the deal is not in the public interest.

Why am I willing to defy the withering scorn of the Wall Street experts?  Because specific performance, the remedy Rohm & Haas is asking the court to grant, is an what is known as an “equitable” remedy.  In order to show it is entitled to equitable relief, Rohm & Haas must show that the outcome makes sense even after the court balances “all the equities” involved.  In other words, the court must determine whether, considering all of the interests at stake in the lawsuit, ordering the deal to go through would be more fair than unfair.  The public interest plainly is one of those interests the court must consider. Because the deal poses such a great threat to the public interest, the equities do not favor the deal; the equities, in fact, weigh heavily against enforcing the contract between Dow and Rohm & Haas.

In legalese, Corporate and Commercial Practice in Delaware confirms that this is the law in Delaware:

[I]f specific performance of a contract would cause significant public harm, then the Court has discretion to deny such relief, even where a breach of contract and substantial harm to plaintiff have been established . . .

1-12 Corp & Commercial Practice in DE Court of Chancery § 12.03 (Matthew Bender 2008), citing Alro Assoc., L.P. v. Hayward, CA 19544 (Del. Ch. Oct. 31, 2003), mem. op. at 22-26 (holding that where plaintiff had established breach of contract by Delaware Department of Transportation and where Court had assumed irreparable harm to plaintiff, specific performance was not appropriate  due to a balance of equities weighing strongly in favor of public interest).

Courts really are supposed to do justice notwithstanding the fact Wall Street expresses withering scorn at the thought.

The Great Emancipator, 200-year-old mashup artist

Reflecting on Abraham Lincoln’s 200th birthday, I’ve made the startling discovery that he was not only an inventor but that he espoused ideas that constitute one of this blog’s principal themes — that innovation and progress require the technical capacity and the legal freedom to exploit existing knowledge.

I hadn’t learned in school or in the many books I’ve read about him since that Lincoln  is the only President to have applied for and received a patent. It was for a device to lift boats over shoals. In fact, throughout his life Lincoln was fascinated by mechanical devices. William H. Herndon, his law partner, wrote that Lincoln “evinced a decided bent toward machinery or mechanical appliances, a trait he doubtless inherited from his father who was himself something of a mechanic and therefore skilled in the use of tools.”

On February 11, 1859 (on the eve of his 50th birthday and precisely 150 years prior to the moment at which  I am writing this post), Lincoln delivered a lecture on “Discoveries and Inventions” in Jacksonville, Illinois. Published as the “Second Lecture on Discoveries and Inventions,” Lincoln described the U.S. as the embodiment of a youthful vitality that caused some to think it “conceited and arrogant” but also made it “the inventor and owner of the present, and sole hope of the future.”

Lincoln attributed this extraordinary national role to America’s capacity for innovation:

The great difference between Young America and Old Fogy, is the result of Discoveries, Inventions, and Improvements.

But Lincoln didn’t consider America’s talent for innovation to be the product of some unprecedented national genius. Instead, its inventiveness resulted from the recognition that innovation requires using and building on earlier innovation. Thus, speaking of the invention of the steam engine, Lincoln made clear that his comparison of “Young America” to “Old Fogies” was ironic:

[W]as this first inventor of the application of steam, wiser or more ingenious than those who had gone before him? Not at all. Had he not learned much of them, he never would have succeeded—probably, never would have thought of making the attempt. To be fruitful in invention, it is indispensable to have a habit of observation and reflection; and this habit, our steam friend acquired, no doubt, from those who, to him, were old fogies.

Furthermore, while humans instinctively exchange knowledge, the progression from speech to writing to printing was indispensable to “facilitating all other inventions and discoveries”:

When man was possessed of speech alone, the chances of invention, discovery, and improvement, were very limited; but by the introduction of each of these, they were greatly multiplied. When writing was invented, any important observation, likely to lead to a discovery, had at least a chance of being written down, and consequently, a better chance of never being forgotten; and of being seen, and reflected upon, by a much greater number of persons; and thereby the chances of a valuable hint being caught, proportionally augmented. By this means the observation of a single individual might lead to an important invention, years, and even centuries after he was dead. In one word, by means of writing, the seeds of invention were more permanently preserved, and more widely sown. And yet, for the three thousand years during which printing remained undiscovered after writing was in use, it was only a small portion of the people who could write, or read writing; and consequently the field of invention, though much extended, still continued very limited. At length printing came. It gave ten thousand copies of any written matter, quite as cheaply as ten were given before; and consequently a thousand minds were brought into the field where there was but one before. This was a great gain; and history shows a great change corresponding to it, in point of time. I will venture to consider it, the true termination of that period called ”the dark ages.” Discoveries, inventions, and improvements followed rapidly, and have been increasing their rapidity ever since.

It is easy to imagine, then, that Lincoln would revel in the capacity of today’s technology to copy and disseminate information world-wide in mere moments. Without the technological capacity to pass knowledge across time and space, “[i]t is very probable—almost certain—that the great mass of men . . . were utterly unconscious, that their conditions, or their minds were incapable of improvement. They not only looked upon the educated few as superior beings; but they supposed themselves to be naturally incapable.”

But it was knowledge, not intelligence, they lacked.  Lincoln knew innovation is not the product of individual genius towering above the mass of humanity.  It is a collaborative enterprise that grows from one person’s creative use of someone else’s invention, which itself appropriated another’s discovery that was inspired by something written across the world in an earlier century.  To think it could be otherwise is to enslave humanity not on a plantation but in ignorance:

To emancipate the mind from this false and under estimate of itself, is the great task which printing came into the world to perform. It is difficult for us, now and here, to conceive how strong this slavery of the mind was; and how long it did, of necessity, take, to break its shackles, and to get a habit of freedom of thought, established.

It is even more difficult for us, for whom the printing press seems the equivalent of cuneiform.  But if we are to overcome the challenges we face, we must embrace the full potential of the technology that makes it so easy to improvise on the creations of others.  It is improvisation and reworking and remixing that leads to innovation and progress.

Who knew that Remix Culture is merely an appropriation of Abraham Lincoln’s thinking, that the Great Emancipator believed that for humans to be truly free  knowledge must be free too?

I think the answer is yes.

James R. Elkins asks:

My question is this: Is there a way to make use of the imagined spaces in which we read-read as students of law, read novels for pleasure-and perceived chasm between pleasure and work? Is there a middle ground of reading, a strategy for reading, that would allow a student of law to think about reading law cases as literature and reading novels as if they might be of central importance in the way one becomes a lawyer? Is there a way to read law for pleasure and novels as instructive vocational texts? If so, we may find in “lawyers and literature,” that we’ll need to redefine pleasure and purpose; we redefine what it means to be a reader of law and of literature.

Now Shepard Fairey sues AP

The AP/Shepard  Fairey showdown continues.  The New York Times reports:

In a pre-emptive strike, the street artist Shepard Fairey filed a lawsuit on Monday against The Associated Press, asking a federal judge to declare that he is protected from copyright infringement claims in his use of a news photograph as the basis for a now ubiquitous campaign poster image of President Obama. . . .

Mr. Fairey’s lawyers, including Anthony T. Falzone, the executive director of the Fair Use Project and a law lecturer at Stanford University, contend in the suit that Mr. Fairey used the photograph only as a reference and transformed it into a “stunning, abstracted and idealized visual image that created powerful new meaning and conveys a radically different message” from that of the shot Mr. Garcia [the photographer] took.

Further complicating the matter is the fact that “Mr. Garcia contends that he, not the Associated Press, owns the copyright for the photo.” Mr. Garcia also states, “‘If you put all the legal stuff away, I’m so proud of the photograph and that Fairey did what he did artistically with it, and the effect it’s had.’”

Mr. Garcia might want to put the “legal stuff away,” but,  as I’ve written,  “the legal stuff” is precisely what Mr. Garcia is talking about when he talks about what  Mr. Fairey did artistically  with the photo and that the effect his artistic transformation of the photo had.  That Fairey so transformed the photo into something that changed the stencil of a generic wire service campaign photo into an iconic image is a huge part of why legally what he did is perfectly legitimate. So, while Mr. Garcia might “not condone people taking things, just because they can, off the Internet,” what Mr. Garcia condones or does not condone is really what is not the “legal stuff.”

Again, let’s give more attention to individual justice and less devotion to abstract rules

The hope for the Obama administration I expressed in my post last Thursday was that it would promote a legal culture in which courts would begin to pay more attention to the justice required in individual cases rather than, as has been increasingly true over the last thirty years, feel increasingly bound to abstract interpretations of language that lead to plainly unjust results. My focus in that post was on statutory interpretation, but the same sentiment applies to the interpretation of contract language, as Ralph James Mooney made clear in The New Conceptualism in Contract Law, 74 Or. L.Rev. 1131, 1170-1171 (1995). Mooney also noted, as I implied in last Thursday’s post, that the new focus on abstract rules and language at the expense of just results in individual cases invariably favors moneyed corporate interests:

Just as they have in contract formation disputes, American courts recently have embraced far more conceptualist approaches to contract interpretation issues. They [exalt] the written word over the parties’ actual . . . agreement. They exercise their pre-modern faith in the objectivity of language, and overturn jury verdicts, by applying classical interpretive rules like ”plain meaning,” ”four corners,” and interpretation as a ”matter of law.” In general, American courts the past dozen years have moved noticeably away from the most fundamental theorem of contract interpretation, that the law should enforce the parties’ intention, toward a more abstract, disembodied inquiry, resembling, what should the parties have meant when they signed this form contract? In addition, this intellectual regression once again has had important political consequences. . . . Notice that, as in formation cases, it is almost invariably a seller, a bank, an employer, or . . . an insurer that benefits from the New Conceptualism in contract interpretation. This judicial tilt away from underdogs, back toward the privileged beneficiaries of classical contract law, is, of course, the New Conceptualism’s most troubling feature of all.

Why AP has little chance of success against Shepard Fairey

 Let me explain in greater detail why I not only think Shepard Fairey will prevail in the lawsuit AP has brought against him for copyright infringement, but also why I think it isn’t even a close case. The case, of course, involves Fairey’s poster (pictured on the left), which Fairey created by first stenciling the AP photo wire photo pictured on the right.

As the Stanford Copyright & Fair Use site explains, determining whether a work that appropriates all or part of a copyrighted work is no easy thing:

The only guidance is provided by a set of fair use factors outlined in the copyright law. These factors are weighed in each case to determine whether a use qualifies as a fair use. For example, one important factor is whether your use will deprive the copyright owner of income. Unfortunately, weighing the fair use factors is often quite subjective. For this reason, the fair use road map is often tricky to navigate.

The four factors and my evaluation of their significances in this case are as follows:

(1) The Purpose and Character of Your Use: As the Stanford Fair Use & Copyright site makes clear, this factor turns to s large degree on the following two questions:

(a) Has the material you have taken from the original work been transformed by adding new expression or meaning?(b) Was value added to the original by creating new information, new aesthetics, new insights and understandings?

As I’ve already made clear, I am convinced of that Fairey’s image sufficiently transforms the image of the AP photograph to be considered genuinely tranformative. Except for the fact that both are plainly images of Obama and that in both his expression and the tilt of his head are the same, the two images are entirely different. They are so different, in fact, that for many, many months no one, much less AP, was even able to identify the image from which Fairey started from. The physical changes Fairey has rendered to the image are plain. He has changed elements, and, through his painting style, simplified the elements significantly. In one image, you have all the complex information of a photo; in the other you have three colors arranged in a small number of blocks and lines. Finally, the photo could not possibly have become an iconic image of the presidential campaign. The Fairey poster did.

(2) The Nature of the Copyrighted Work: The AP photo is a generic wire service photo. While photography is, of course, a creative endeavor, some images are more creative than others, and the AP photo of Obama is about as generic as they come. First, it’s an image of the most recognizable face in the world. Second, there is nothing special about it. This generic nature of the work is emphasized by the fact, as I pointed out above, that it took months before someone (not from AP), after scouring the internet on a search for the source of Fairey’s image, finally found the right one. AP had not even known its copyright image was part of a poster that was visible all over the country and in all the media.

(3) The Amount and Substantiality of the Portion Taken: In fact, this might be the factor that counts most seriously against Fairey, but even this factor is, I believe, a close call. As i explained above, about all Fairey’s image ultimately uses is the expression and the tilt of Obama’s head. The very nature of the image is changed from that of a photograph to that of a semi-abstract painting. The background is changed. The color of the tie (a generic tie on a generic suit) is changed. The circular Obama symbol on the suit’s lapel is added. And, of course, the word “HOPE” is added.

(4) The Effect of the Use Upon the Potential Market. This factor, which in the past has been referred to as the most important factor, isn’t even close. Fairey’s image has obviously had NO negative impact on the market for the AP photo. The only possible effect, a likely one, is that it has substantially increased the value of AP’s copyrighted image.

The Stanford Copyright & Fair Use site also points out that “Fair use involves subjective judgments and are often affected by factors such as a judge or jury ’s personal sense of right or wrong.” The fact that Fairey’s image was produced as his contribution to a political campaign would, I believe, weight the case even more heavily in his favor. The courts give great leeway to political speech, which is at the very core of the First Amendment’s values.

ADDENDUM: Brian Ledbetter kindly quotes substantially all of this post and expresses agreement with most of it, but also expresses two reservations: (1) cross-media copying like Fairey’s — whether it be from photograph to painting, painting to statue, photo to Hallmark card-does not necessarily fall under “fair use” exceptions of Copyright law and (2) modern technology makes alterations to photos like the ones Fairey made to the AP photo so easy that we’ll have to begin to believe that “anyone” can create art.

My response, reproduced from the comments to his post:

Cross-media copying is not fair use only to the extent that the result is a “derivative” use. What constitutes a “derivative” use may be as obscure as any other matter on this topic, but it cannot possibly mean any work that is “derived” from a copyrighted work. Every fair use is derived from a copyrighted work.

So what is a “derivative” work? I would submit it is something that exploits at least in part the market created by the original work. Thus, for example, a Snoopy mug would be a derivative work, as would a cover song. I would submit that this mashup, though quite entertaining, is a derivative work in that all it does is exploit the market created by Charles Schulz and OutKast:

The trivia book based on Seinfeld was a derivative use because its targeted market was the audience created by the sitcom. The bio of Salinger that was enjoined was a derivative use because it used such large portions of unpublished Salinger letters that it at least in part was intended to exploit the market for people hungry for anything new by Salinger (he hadn’t published in decades).

But [Brian's} Tom Daschle photo.isn't exploiting any market created by the original. And you know what? The more and more such things get turned out, the less and less they'll have an impact. There's no denying that Fairey's image, while simple, is a powerful one, or at the very least that it resonated as one with a huge portion of the public. I don't think [Brian's] Daschle workup would. And if so, so what? Does that hurt the original photographer? Are we to stifle your creativity to protect some right of the photographer not to have his photograph used in ways he doesn’t want it used? There is no such right. Instead, there’s the First Amendment, which, in the absence of copyright (created to PROMOTE creation) would allow us to use anything.

Let us regain the understanding that law is to do Justice.

There are many, many changes I’d like to see the Obama administration implement and encourage in the law, and today’s collective effort to comment on our hopes for the new administration in each of our respective areas of expertise will spur me to address many of these specific matters in the coming days and weeks.  But for today, I would like to address a topic particularly dear to my heart: the art of legal interpretation.

Over the last 30 years or so, there has been a relentless drumbeat from the right attacking judges deemed too liberal for being too “activist,” for “making” law, not merely applying it.  The judges we need, it’s been said, are “strict constructionists” who apply the law “as it is written,” not as the particular judge might wish it to be.

This rhetoric has obscured what judging is.  It is not a controversial proposition to state that interpretation of legal language is not merely a matter of applying words to facts.  Words are too ambiguous, and the world is so complex that the legislators who write the words of statutes cannot possibly foresee every possible situation to which the statutes will apply.  Judges, thus, must make judgments.  Judgments require weighing different possible interpretations and different possible implications and different possible intentions.

Worst of all, however, I fear we’ve lost sight of the fact that judges are part of a justice system.  Their efforts to properly interpret and apply the law should always be guided by the effort to achieve justice.

We’ve lost sight of the fact that judges are people whose judment we must trust to do justice.  As Euripides put it, you must “judge a tree from its fruit, not from its leaves.”

The infamous Lily Ledbetter case is a perfect example of what has gone wrong.  As Gail Collins recently summed up the facts of the case:

Ledbetter, now 70, spent years working as a plant supervisor at a tire factory in Alabama. How, when she neared retirement, someone slipped her a pay schedule that showed her male colleagues were making much more money than she was. A jury found her employer, the Goodyear Tire and Rubber Company, to be really, really guilty of pay discrimination. But the Supreme Court, in a 5-to-4 decision led by the Bush appointees, threw out Ledbetter’s case, ruling that she should have filed her suit within 180 days of the first time Goodyear paid her less than her peers. (Let us pause briefly to contemplate the chances of figuring out your co-workers’ salaries within the first six months on the job.) Until the Supreme Court stepped in, courts generally presumed that the 180-day time limit began the last time an employee got a discriminatory pay check, not the first.

The operative language of the statute provided that “A charge under this section shall be filed within one hundred and eighty days after the alleged unlawful employment practice occurred.”  Interpretation of a statute is typcially described as an effort to determine the intent of the legislature that passed the statute.  Could Congress have intended to outlaw discrimination in employment on the basis of sex and yet have provided that someone who could not have found out about a discriminatory decision until long after it had intitially been made could not recover.  Such an interpretation seems absurd.  Thus, it is no surprise that prior to the Supreme Court’s decision courts had typically held that each new paycheck for an amount less than it would have been in the absence of the discrimination constituted an “alleged unlawful employment practice.”  Thus, the employee could sue for disrimination within 180 days after the most recent pay check that resulted from the discrimination.

These decisions made perfect sense.  As I said, it would be absurd to believe Congress intended people like Lily Ledbetter, who had no knowledge until she neared retirement that her pay was lower than that of her male colleagues merely because she is a woman, should not have an opportunity to sue over that unlawful discrimination.

Yet, “Justice” Alito held that that absurdity was precisely what the statute required the Court to find.  As Justice Ginsburg explained , joined by Justices Stevens, Souter, and Breyer in her dissenting opinion, Alito’s reading was a “cramped” one that flew in the face of what Congress plainly had intended:

[U]nder the Court’s decision, the discrimination Ledbetter proved is not redressable under Title VII. Each and every pay decision she did not immediately challenge wiped the slate clean. Consideration may not be given to the cumulative effect of a series of decisions that, together, set her pay well below that of every male area manager. Knowingly carrying past pay discrimination forward must be treated as lawful conduct. Ledbetter may not be compensated for the lower pay she was in fact receiving when she complained to the EEOC. Nor, were she still employed by Goodyear, could she gain, on the proof she presented at trial, injunctive relief requiring, prospectively, her receipt of the same compensation men receive for substantially similar work. The Court’s approbation of these consequences is totally at odds with the robust protection against workplace discrimination Congress intended Title VII to secure. See, e.g., Teamsters v. United States, 431 U. S., at 348 (“The primary purpose of Title VII was to assure equality of employment opportunities and to eliminate … discriminatory practices and devices … .” (internal quotation marks omitted)); Albemarle Paper Co. v. Moody, 422 U. S. 405, 418 (1975) (“It is … the purpose of Title VII to make persons whole for injuries suffered on account of unlawful employment discrimination.”).

This is not the first time the Court has ordered a cramped interpretation of Title VII, incompatible with the statute’s broad remedial purpose. See . . . 1 B. Lindemann & P. Grossman, Employment Discrimination Law 2 (3d ed. 1996) (“A spate of Court decisions in the late 1980s drew congressional fire and resulted in demands for legislative change[,]” culminating in the 1991 Civil Rights Act (footnote omitted)). Once again, the ball is in Congress’ court. As in 1991, the Legislature may act to correct this Court’s parsimonious reading of Title VII.

Congress did fix the Court’s wrong, and on January 29 of this year President Obama signed into law the Lilly Ledbetter Fair Pay Act.  But it should never have gotten to that point.  Judges should judge, should bear the fruit of justice.  To say so is not to argue that judges should ignore what the law says.  But it is to say that judges should be open to what the law does as well, and that what the law ultimately is supposed to do is justice.

Thus, I would like the Obama administration to appoint judges whose judgement we can respect and trust, and to push hard to re-educate the public about what law and justice are — to, in other words, begin to redress the cultural tide of the last 30 years that has learned to fear critical judgment and to ignore justice.

The fight is on: AP sues Shepard Fairey.

Brian Ledbetter has the news and a comprehensive set of links to various views on a dispute I’d love to see resolved in a court (even the Supreme Court): AP has sued Shepard Fairey, claiming that his Obama poster infringes AP’s copyright in the photo Fairey stenciled before altering its colors, its background, and Obama’s suit jacket and tie to create the poster that became an iconic symbol of the presidential campaign.  I hope Fairey sticks to his guns and fights this out without settling.  I think his poster so profoundly transforms the impact of the image from the photograph that his poster is not an infringement. And AP has been known to assert blatantly silly infringement claims.  Of course, not everybody feels the way I do.  So I’d very much like to see the matter decided, and I suspect Fairey, unlike many of the victims of copyright overclaiming, has the resources to take the case to trial and through appeal.

ADDENDUM: I am not alone in my conviction regarding the tranformative way Fairey’s poster alters the AP photograph.  Submitted to a Candid World Writes:

Part of the law that’s grown up around these simple factors is the doctrine of “transformative” use, whereby a copyrighted work appropriated but utterly transformed in meaning and substance provides the original “artist” with no valid copyright claim. Oddly, to satisfy this doctrine, artistic transformation of an artistic work may not be enough, even if the effect of the transformation is to invert the work’s meaning.  The law requires more than a different perspective and a little hand-coloring. See Rogers v. Koons, 960 F.2d 301 (2d Cir. 1992).¹ But Fairey’s case is a significantly greater reinvention: here, Fairey took an image intended for neutral description in the news media and transformed it into an inspirational image associated worldwide with Barack Obama’s historic candidacy and unique promise. In the process of creatively altering the image from the purely representational to the artistically abstracted, he added meaning and value, and he crossed expressive genres in the process, depriving the AP of any legitimate claim of lost revenue. This may just be over the border of “fair use,” but fair use it is. The AP should back off.

Detroit Mercy is one of the most innovative law schools in the U.S.

Many people (more often lawyers than law professors) believe law school education is in dire need of innovation. I am very proud to note that the school where I am teaching this year, the University of Detroit Mercy Law School, was featured in the current issue of National Jurist’s PreLaw Magazine as one of the ten most innovative law schools in the U.S.

Shepard Fairey, Creator of Iconic Obama Image, Speaks About His Art

A happy and grateful welcome to A + E: Art + Environment / Architecture + Engineering / Aesthetics + Ethics

And speaking of promoting creativity, I’m thrilled that Pavel and Alex Getov, the principals of Studio Antares A+E, have joined the the Geniocity collaborative with a new blog, A + E: Art + Environment / Architecture + Engineering / Aesthetics + Ethics.

How do we promote creativity?

One common theme that runs through my views regarding intellectual property is that there is way too much treatment of intellectual property as the equivalent of real property (that is, land). I can fence off my land and keep everyone off of it. Therefore, too many feel, I can fence off my intellectual property and prevent anyone from doing anything with it that I don’t give them permission to do. One commenter on my post last week regarding Shepard Fairey’s Obama campaign poster manifested this confusion about the differences between real property and intellectual property. I think the authors who didn’t want their books to be accessible for word searches via the Google Library Project did as well.

My greatest knowledge about intellectual property concerns copyright. The first thing to know is that copyright is a relatively recent legal creation and that tall U.S. copyright law exists by virtue of and within the limits of 27 words in Article 1. Section 8 of the U.S. Constitution:

The Congress shall have 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.

In other words, copyright law exists to promote invention and creativity, and to the extent it discourages invention and creativity it is unconstitutional. Works that are genuinely creative in their own right but appropriate copyrighted works (Girl Talk and Shepard Fairey, among many others) therefore have a very strong claim to legitimacy as long as they do not exploit the market created by the original work. Indeed, that’s exactly what the fair use doctrine is intended to allow and is beginning to reflect.

My views are shaped to a considerable degree by my belief that all creativity is grounded in previous work, and that the more leeway the law gives to appropriation the more creativity we will have. Of course there are limits. You cannot entirely rob the artist of the financial profits of his work. But using that first artist’s work in an altered way that creates something people want for reasons entirely different than the reasons they wanted the original work does not rob the first artist of the fruits of his labor. Rather, it allows someone else to sprout new fruit.

Apparently, IBM shares this attitude with respect to inventions it could patent. As Securing Innovation reports:

IBM used the occasion of the recent announcement of its 2008 patent record to introduce plans to help stimulate innovation and economic growth. The company plans to increase by 50% — to more than 3,000 — the number of technical inventions it publishes annually instead of seeking patent protection.

Why? According to IBM’s press release:

Publication of technological information is one means to “promote the Progress of Science and useful Arts” the phrase in the U.S. Constitution giving the Congress the power to enact patent laws. Publication protects inventors from allegations of infringement by placing the intellectual property into the body of prior art. Publications also improve patent quality, since they can be cited by patent offices in limiting the scope of patent applications. Publication also helps spur follow-on innovation that ensures dynamic business growth.

While IBM will continue to seek patents and will protect its intellectual property, its planned increase in publishing inventions will focus on those technology areas that will increase the build out of a new, smarter infrastructure. The evolution of IBM’s policy builds on prior efforts to stimulate innovation by pledging not to assert certain patent rights in the area of open source software, health care, education, the environment, and software interoperability.

Economic pressures motivate law firms to try innovative billing practices

There is nothing new in lawyers trying to find ways to price their services in ways other than the standard practice of charging a price for each “billable hour” of work performed for a client.  Each lawyer, of course, is billed to a client by her firm at a different rate, the precise rate per lawyer depending primarily on her experience.  When I began practice in 1984, my firm billed my work to it clients at about $100 per hour.  By the time I left practice to teach, the hourly rate my firm billed my time out to clients was $315 dollars per hour.  I can only imagine that had I continued in practice, by now, twelve years later, my hourly rate would be in the ballpark of $500 an hour.    According to the New York Times, Cravath, Swaine & Moore in New York is “one of a number of large firms whose most senior lawyers bill more than $800 an hour.”

Lawyers have always also used pricing schemes other than billing per hour.  Certain types of transactions are generic enough that lawyers can charge a flat rates for representing a clients in such a transactions.  And, of course, firms that represent clients with modest to poor economic means suing wealthy clients have regularly charged contingent fees, collecting a percentage (typically 25-40%) of any recovery achieved as a result of the lawsuit.  Those firms finance their losing cases with the windfalls they earn in winning cases.  And their clients benefit because without the contingent fee arrangement they could not possibly afford to pay for the lawsuit.  The most typical types of cases employing these billing methods are personal injury and malpractice lawsuits.

But in most other situations the billable hour has been the standard way to price legal services.  There always have been severe criticisms of the practice. Its potential defects are plain.  Some firms break the hour into 15 minute segments; others into 6 minute segments.  If you perform one minute of work by, say, making a brief telephone call on behalf of a client, you might well  record an entire billable segment (6 or 15 minutes) for the call.  Everywhere I worked I had the discretion to choose not to record time for such brief tasks.  So I wouldn’t.  I couldn’t justify the cost the minimal effort would cost the client. If, for example, an attorney makes a one minute telephone call, the attorney records that call as fifteen minutes of billable time, and his  firm bills his work out at an hourly rate of $300 dollars, that one minute phone call would cost the client $75.

But the fact I wouldn’t bill a quarter of an hour for a one minute phone call could hurt me in a very real way.  It reduced the amount of time I recorded as billable hours.

And the number of hours a lawyer bills over the course of a year plays a significant part in the firm’s evaluation of his performance.   The lawyers conducting the evaluation may understand that the sheer number of billable hours bears little relationship to the quality of a lawyer’s work, but any overburdened organization engaged in evaluation tends to put a lot of weight on hard numbers that bear little relationship to the qualities being evaluated.  So my failure to bill a quarter hour for one minute of work could work against me in my efforts to advance within my firm.

The system also biased the evaluations against better lawyers.  I always prided myself on my research and writing skills.  I felt I could identify, analyze, and research a disputed issue faster and more effectively than any of my colleagues.  I also felt I wrote better and more quickly than my colleagues.  Yet colleagues who were slower at the same work I did billed more hours for that same work, and that higher number of hours accrued to their benefit, at least in part, when our performances were evaluated.

I was exceedingly fortunate in not suffering from these potential defects in the billable hour system.  I worked regularly with a close-knit group, so we knew each other’s work well.  Our work, therefore, could be evaluated direrctly on the basis of its quality.  But the larger the firm and the more a lawyer is shuttled from colleague to colleague as he works on new matters, the less the firm will evaluate his work based on its intrinsic quality and the more the firm will rely  on the number of his billable hours.  And some firms, naturally enough, don’t care why a lawyer might bill more hours than a better performing colleague.  The higher number of hours mean more money for the firm.

I certainly felt the constant pressure to bill as many hours as possible.  Over my 12 years of practice I billed between 1900 and 2400 hours a year.  1900 billable hours seemed a livable amount of work (and seemed to be the minimum an associate could get away with), but it hardly amounted to what most people would consider a reasonable work schedule.  For one thing your billable hours are not the hours you work.  They are only the hours you work on matters that can be billed to clients.  The hours spent on administrative work on behalf of the firm, on pro bono work, on training younger attorneys, and on the necessary interludes from the demanding work are not billable hours.  In my last years of practice, as a partner, when I was still a relatively young but experienced commercial litigator, I generally was in the office from 8:30 a.m. until sometime between 7 and 8 p.m.  I also worked regularly on weekends for 3 to 8 hours.  During my busiest times, which occurred with regularity, I could easily bill something on the order of 110 hours a week.  I don’t know how I did it.  There are only 168 hours in a week.

The system provides an incentive to the firm itself, and not merely its lawyers, to maximize the number of hours billed to a client.  The more time a firm spends on a matter, the more money the firm will make.  That makes for a perverse incentive — clients want matters resolved as quickly and cheaply as possible.  But it is in lawyers’ short term financial interests to resolve matters in the most complex and drawn out ways possible.  As the New York Times points out,  “In litigation, firms that charge by the hour can suffer if they are too successful and end a lawsuit – and the stream of payments from continuing work – too quickly. One law firm that recently collapsed, Heller Ehrman, was hurt in part because a number of cases had settled.”

The defects inherent in billing by the hour began to become an issue to clients  in the late Eighties as a consequence of the economic difficulties set off by the 1987 stock market crash and the Savings and Loan debacle.  Money was tight, so clients would scrutinize more carefully the prices they were being charged and the ways those prices had been arrived at.   It doesn’t surprise me, therefore, that the New York Times suggests that today’s “rough economic climate is making clients more demanding, leading many law firms to rethink their business model.

One change demanded by a client I worked for back in the late Eighties and early Nineties was to produce a detailed budget in advance of his decision to have our firm represent his company in a  lawsuit.  The budget would provide an estimated cost of the representation, with the ultimate cost limited no more than a fixed amount above  the estimated total cost.  The budget would lay out in detail the work that would have to be done — work that would include, among a myriad of other things, drafting pleadings, drafting and arguing any and all pre-trial motions, conducting discovery (including the oral examination of witnesses under oath in depositions, the review of documents, and our own independent investigation into relevant matters), any and all legal research that might become necessary in the course of the case, the retention and preparation of any experts that might be required, and the preparation of our own witnesses for both deposition and trial testimony.

The time and effort necessary to conduct these tasks is to a great degree unknowable in advance of a lawsuit.  Moreover, unforeseeable complexities are almost inevitable.  It is virtually impossible to calculate  the number of new claims that might be asserted in a lawsuit, the number of new parties who might be drawn into it, the number of  new legal issues that will inevitably arise in the course of the case, and the amount of work each of these and other unforeseen complications will require.  Preparing these budgets was one of the most difficult things I ever did as a lawyer because so much of their content seemed largely the result of guesswork.

It was not, however, a senseless product I was producing.  Essentially, the budget set forth our best estimate of a fixed fee  for all the work required to conduct the lawsuit through trial.  In the event the case settled before trial , our fee would be limited to the amount the budget had allocated for the work we had actually done.

With the recovery of the economy in the Nineties and the enormous sums earned by corporate America, the motive to impose such novel billing methods waned, and the billable hour managed to maintain its role as the foundation of large firm billing practices.

But, as Friday’s New York Times stated:

The evidence of a shift away from billable hours is, for now, anecdotal, as few surveys exist. But partners at a half-dozen other big bellwether firms and lawyers at corporations, who sometimes engage outside counsel, say they are more often seeing different pay arrangements.

One such novel scheme was followed by Morrison & Foerster, and in fact resulted in the firm earning a much higher fee than if it had charged by the hour:

In one case, he said, Morrison & Foerster negotiated a fixed fee for defending a company in court, covering work up to the point of a motion for summary judgment.

On top of the fee, if the case settled for less than what the company feared having to pay if it lost in court, the law firm got a percentage of the amount saved. The arrangement made sense when the goal was to resolve the dispute quickly, Mr. Leonard said.

Lawyers on the case negotiated a settlement for much less than the client’s worst-case number, Mr. Leonard said. “The effective hourly rate was something like 150 percent of our hourly rates,” he added. “We made money, the client was happy.”

What other types of pricing will clients and lawyers develop?  It remains to be seen.   But since the financial crisis seems more dire than any we’ve experienced in the last seventy years, law firms might have to engage in the first comprehensive overhaul of their pricing systems since at least the Sixties.

Finally, let me emphasize that there are good lawyers and bad lawyers, just as there are good and bad people in every profession.  The people I worked closely with were kind, generous, hardworking, and dedicated to serving our clients as efficiently and effectively as possible.  We would not bill a quarter of an hour for a one minute phone call. The founder of one firm  I was a member of for many years,  Gene Anderson, made sure the firm’s lawyers put our clients first in everything we did.  Any business air travel, for example, had to be made in coach class.  Every lawyer I knew at comparable firms would fly First or Business Class.  Doing the least expensive and most efficient work for the client was, in short, the ethic of almost every lawyer I  personally worked with.

But I have encountered many a lawyer whose “ethic” is to extract from his every cent he can.  The principal way to maximize one’s fees is to fight as long and hard as possible on any and every issue that can be made into a fight. The truly sad part of this phenomenon is the belief among many, many people that the most effective lawyer is the nastiest lawyer.  Those people get their nasty lawyers.  They also make the cost of their representation as high as possible.

Nastiness is bad lawyering.