On May 18, the United States Supreme Court decided two intellectual property cases with two seemingly different results. A closer look, however, reveals a complimentary concern with the monopolistic power of first movers and how the legal system should enable innovation from second movers over time, writes Randy Picker.
On May 18, the United States Supreme Court decided two intellectual property cases. The first, Goldsmith, was an eagerly anticipated copyright decision involving pop art legend Andy Warhol. The second, Amgen, concerned two pharmaceutical firms and was an important if perhaps less visible case about patent law’s enablement requirement, which requires that the patent give enough information to enable a second mover to make the invention in question once the patent has expired. Despite the cases’ differences, both raise the same broad questions, namely, how much space can an IP first mover control? How big is the scope of the monopoly held by the first mover and how much subsequent competition will we enable from second movers? Fundamentally, how should a legal system organize creation over time?
When you think Warhol, certain images come to mind: Campbell’s soup cans at New York City’s Museum of Modern Art (MoMA), the Brillo Box (also at MoMA) and his famous silk-screens of Mao and Marilyn Monroe (more MoMA and MoMA). Goldsmith centers on Warhol’s silkscreens of the musician Prince. The background to those images is critical and we need to start with the work of Lynn Goldsmith. Perhaps none of her work comes to mind, but Goldsmith is a professional photographer whose work has appeared in leading magazines, and museums. The works she creates are at the core of U.S. copyright law. And, relevantly here, she had taken photos of Prince. (You can see one of them on page four of the Supreme Court’s majority opinion.)
In 1984, Vanity Fair hired Warhol to create an image of Prince for a story. Vanity Fair provided Warhol something called an artist’s reference, meaning a photograph of Prince. To do so, Vanity Fair licensed one of Goldsmith’s images from her agency, paid $400, and received the right to use the image once. Vanity Fair published an image of Warhol’s Purple Prince silkscreen. All well and good.
After Prince’s death in 2016, Vanity Fair’s publisher, Condé Nast, reached out to the Andy Warhol Foundation (AWF), the organization that controlled the copyright to Warhol’s works after his death in 1987. Condé Nast paid AWF $10,000 to reproduce a second silkscreen, Orange Prince, on a commemorative magazine, but Goldsmith received nothing in connection with that use, no credit, no money. Goldsmith approached AWF and AWF would eventually sue Goldsmith seeking a declaration that the portraits in Warhol’s Prince Series—there were 14 silkscreens in total—did not infringe Goldsmith’s copyright in her original photograph. The legal dispute in the case would eventually turn on copyright’s fair use doctrine. More on that in a second.
Turn to the facts of Amgen and now we are in the land of science. Amgen received two patents related to cholesterol. To simplify considerably, Amgen had identified 26 antibodies that operate to thwart the effect of bad cholesterol, but in particular claims in the patents—the precise ways in which Amgen defined its invention—Amgen tried to grab a larger universe of antibodies than the 26 it had identified. Another pharma firm, Sanofi, challenged those claims under the Patent Act’s enablement requirement (Section 112(a) of the Patent Act).
Two cases with very different facts, but be sure to see the overlap. Warhol wanted to put Goldsmith’s photograph to work without her permission, while Sanofi wanted to learn what it could from Amgen’s original patent without being blocked from finding another successful antibody so long as it did not just copy one of Amgen’s original 26. A decision in favor of Goldsmith would limit what future Warhols could do with prior works like those created by Goldstein, while a decision in favor of Amgen would mean that it could carve out a large space for its patent without having to do all of the work upfront to identify even more antibodies. Plus, subsequent movers would be forced to negotiate with Amgen if they discovered a new antibody. Goldsmith was decided 7-2 in favor of Goldsmith—the first mover in that situation—with a majority opinion by Justice Sonia Sotomayor and an impassioned dissent by Justice Elena Kagan (joined by Chief Justice John Roberts), while Amgen was decided 9-0 in favor of the second mover. How should we make sense of those results?
Goldsmith turns on the fair use doctrine, once purely made at the discretion of judges but now set forth in the statute with a list of relevant factors. A core idea in prior Supreme Court fair use decisions, especially Campbell (a 1994 rap music parody case) and Google (a 2021 case about the reuse of the structure of computer code), has turned on whether a subsequent work was transformative. Kagan makes clear her incredulity at the suggestion that Warhol’s work wasn’t sufficiently transformative, but the majority opinion actually slices the issue a little more thinly. The question isn’t whether the second work is transformative but instead the majority insists that each use of the original work has to be fair and then looks to the question of transformativeness use by use. Warhol creating Orange Price was one use of Goldsmith’s work, hanging it on say a museum wall a second use (a public display in copyright terms), and licensing it to Condé Nast for a magazine cover a third use. The first two uses could be transformative and fair—the majority doesn’t decide that question—but that wouldn’t mean that the third use was necessarily fair. Rather, the third use needed to meet the fair use test on its own. The majority didn’t see that use by AWF as particularly transformative, as Goldsmith stood at the ready to license her original photograph to Condé Nast as well.
My guess is that the seven justices in the majority see the results as a sensible rough justice and balancing of incentives for initial and subsequent uses. Warhol’s museum-quality silkscreens aren’t at risk—though to be clear the majority doesn’t resolve that here—but Goldsmith doesn’t face another competitor in the magazine licensing market and one using her original image to boot. How much that helps someone like Goldstein is hard to say, as she undoubtedly faces other competing photographers who had their own images of Prince, but the result does cut off one channel of competition and pushes someone like Warhol to negotiate for more upfront if that is what he really wants.
Kagan’s dissent emphasizes what Warhol achieves in his works and the risk to the creative process if copyright law adds friction. Having to get permission from the original creator is perhaps even more than mere friction, as it gives the first creator the power to block the second creator from using her work in the second work. In Campbell, the rap group 2 Live Crew approached Roy Orbison for a license to make their own version of Orbison’s classic song “Oh, Pretty Woman.” Orbison said no, but 2 Live Crew went forward anyhow and were able to defend their use as fair based on the idea that they had transformed Orbison’s work and had needed to use Orbison’s work to comment on it, which was a key part of what they wanted to do. In contrast, nothing suggests that Warhol cared about commenting somehow on Goldsmith’s work, so he had no real justification for using her work. That said, Kagan understands that we could create a richer culture if we allowed subsequent use without the need to necessarily comment on the prior work, but that does turn earlier work into raw material for new works. And, to jump, that issue is going to loom quite large as we start to litigate how copyrighted works are used as inputs in artificial intelligence training sets.
In contrast, Amgen is a more conventional case—it was 9-0 after all—and reflects what can be the real power of patents. Presumably, there are lots of Prince photographs floating around in competition with each other, for magazine licensing but also for licensing rights to Warhol upfront. But a patent is genuinely exclusive: If Amgen really owned the entire class of antibodies that it hoped its actual set of 26 represented, it would force all subsequent inventors of antibodies 27, 28 and so on to come back to buy rights from Amgen. The Court’s interpretation of the enablement requirement serves to protect a leveling playing field between Amgen and others to chase those new inventions.
Creativity and invention occur in a flow across time. The rules that we establish for subsequent use of prior works are a key lever for shaping incentives and opportunities to the creation of new works. Goldsmith and Amgen interpret very different statutes, but in both cases, the central issues presented are the tradeoffs in constructing a creative world that builds on itself.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
