Author Archives: Stephen Diamond

SAG-AFTRA unity shaken by leadership battle

You would never know it reading this convoluted piece by SAG-AFTRA cheerleader Jonathan Handel but a leadership crisis has hit the newly merged union. SAG veteran and SAG-AFTRA co-president Ken Howard is refusing to back his AFTRA merger partner and fellow co-president Roberta Reardon for the role of Executive Vice President in the upcoming fall elections. The union had decided to move to a single president structure this year.

Handel’s “exclusive” is elusive on the basis for the battle but it likely reflects the huge cultural divisions between the organizations that prevail a year after they cobbled together a controversial merger that followed coercive tactics by the big studios. AFTRA loyalists complain that top staff jobs are now dominated by old SAG staffers which Handel confirms. And SAG loyalists, many of whom were pro-merger, are livid at the shutdown by the union of key regional offices such as Portland.

Meanwhile, Membership First, the so-called “radical” group in the union, has resurfaced and will likely back actor Esai Morales for President.

All of this points to the core problem: what is the vision and strategy of the union for the long term? The industry in which performers work is changing in dramatic ways and the pressure is on to revise business models in the face of new technology. But decisions by the union leaders like the regional office closures and staff restructuring are justified only on the basis of cost savings with no connection to union strategy.

Union apologists will inevitably say the strategy is a secret but this leadership war suggests there is an intellectual vacuum at the top of the new organization. Perhaps we now know why the member benefit plans have yet to merge – with the union merged in name only it may make sense to wait and see if this entity will survive.

SAG-AFTRA Co-President Ken Howard to Run Separately From Slate Exclusive – The Hollywood Reporter.

In defense of patent “trolls”

Cheers went up loudly around Silicon Valley today, at least in the C-suites of the large incumbent companies. Why? Because now the President, who has been a heavy fund raiser here in the Valley, is promising to institute reforms of the nation’s intellectual property regime that favor those incumbent companies and potentially harm inventors and entrepreneurs. This follows a recent shift in our patent regime, also heavily tipped in favor of large well established technology companies, that favors those who are the first to file for a patent not the first to invent a new technology.

For years, law firms, academics and lobbyists working for big technology companies like Apple, HP and Intel have been pushing for these kinds of reforms. But the individual entrepreneurs and inventors who have historically been “present at the creation” of these now giant companies are not able to make their voices heard in the same way. They are widely dispersed, often young and without the huge resources of the incumbents.

Many new inventions threaten the existing invested capital of the incumbents and they are in fact worried about the impact they could have on their existing business models. In fact, many new ideas are unable to find investors or are swept up into the giant portfolios that the big companies now assemble and are never heard from again.

That’s why a young Bill Gates in the 1970′s made a passionate defense in favor of the IP rights of writers of software code for startups like his, but years later Gates started attacking the granting of patents to code writers. As Richard Stallman of the Free Software Foundation discovered:

“Here’s what Bill Gates told Microsoft employees in 1991: ‘If people had understood how patents would be granted when most of today’s ideas were invented and had taken out patents, the industry would be at a complete standstill today…A future start-up with no patents of its own will be forced to pay whatever price the giants choose to impose.’”

Of course, Microsoft was fast becoming one of those giants and now it uses that power to back groups like Intellectual Ventures which is scooping up thousands of patents and providing expensive mass licenses to firms that want a moat around their business model. Valley VC’s recently established a firm called RPX that does much the same thing.

It is no surprise then that an older successful Bill Gates was once asked what kept him awake at night and he answered – to an audience in Palo Alto – the fear that two guys in a garage somewhere nearby were developing a new way of doing things that would threaten his business model. Ironically, at that very moment, in the late 90s, Sergey Brin and Larry Page had started a little company called Google, first in their dorm rooms at Stanford and then in a nearby garage.

In other words, when the IP system helped a young Gates he tried to enforce it, when it began to threaten him he found ways to change it. Gates is not alone in this, of course, as Apple and Intel and Cisco and HP and ATT and IBM all do the same thing. But do we ever stop to ask, where will the new forms of these companies come from?

One of the targets of the patent reform movement are companies derisively labelled “trolls.” In the pure form these are companies formed solely to buy up orphaned technology that may have value because it is possible there are infringers out there in the world of existing companies. Thus, these companies provide a valuable secondary market for the exploitation of technology that inventors can no longer afford to pursue. Our entire economy is built on similar kinds of secondary markets, for IP and for financial instruments and for entertainment products, heck, even for used cars.

The advantage of these markets is that inventors know there is at least some value they can get out of their invention even if they cannot build an entire company around it. The existence of this market also signals to incumbent players that they have to play by the rules. I spent eight years on the board of directors of a technology company whose original inventions were trampled on by big players, like AMD, Apple and Intel. That destroyed the company and only an aggressive licensing and litigation strategy helped recover some value for our shareholders.

That (eventually successful) strategy was long, complex, expensive and unpredictable. Now the new reforms will make defending the original ideas of our entrepreneurs and inventors even more difficult.

The bottom line is that in many ways we are all “trolls” now because the pace of innovation is so intense that every inventor and firm must have an aggressive IP strategy, both defensive and offensive.

And yet when firms like the one I helped out as a lawyer and a board member try to defend their own technology, they are dismissed as “trolls.”  When firms like Acacia Research emerge to provide a secondary market for IP that might otherwise be grabbed without compensation by larger players they are dismissed as trolls.

Meanwhile, it is the large incumbent and increasingly less innovative companies that are using their resources to capture the political process in order to defend their slowing business models.

We will all pay a price in a weaker culture of innovation.

SAG-AFTRA getting hit from all sides

As I posted a few days ago, the former Membership First group now calling themselves United Screen Actors Committee, sued SAG-AFTRA over the question of foreign royalty payments. I have just obtained a copy of the complaint and you can read it here. Once I have a chance to digest it, I will see if there is anything worth discussing. I have already made my major point: there may be a problem here, even a big one, but lobbing law suits against their own union does not turn the SAG-AFTRA ship in a new direction. That requires a vision and a strategy. It’s not clear that the new USAC intends to put forward such a vision.

Meanwhile, the incumbent pro-merger SAG-AFTRA leadership is under pressure from its own ranks over the question of closing regional offices. The latest salvo is a letter from Governor Kitzhaber of Oregon in defense of the SAG-AFTRA office in Portland, which SAG-AFTRA NED David White has said must close.

Critics have pointed out that these offices play an important strategic role for SAG-AFTRA and any decision about them should be part of a wider debate about the future of the union at its upcoming convention.

They are right.

Yet another lawsuit against actors’ union

Where there is smoke there may, indeed, be fire, but the former SAG “radicals” behind this lawsuit can’t win back control of the union by suing it. This move suggests the lack of a real strategy and vision for the former “Membership First” group within the old SAG, now members of the merged SAG-AFTRA.

SAG-AFTRA Sued For Witholding Foreign Residuals And Rewarding Officials; UPDATE: Union Says “Without Merit” – Deadline.com.

Tens of millions sought as federal court buys into myth of law school brochures

In what may be the first such success outside the state of California, a federal judge in late March denied a motion to dismiss by Widener Law School against a claim by several graduates the School defrauded them. Senior District Judge Walls’ full opinion can be read here.

As with other suits, the students claim that aggregate employment statistics suggesting that more than 90% of Widener graduates were employed nine months after law school fooled them into borrowing more than $100,000 to attend law school.

The decision is notable because it makes clear how much money may be at stake in these lawsuits. In this case, the plaintiffs are seeking $75 million in “disgorgement and restitution.” If cases like this were to be successful on a national scale, class action attorneys might be looking at a payday in the hundreds of millions of dollars.

In his opinion, Federal Judge Walls makes clear he buys the idea that law school brochures, admittedly literally accurate, could be the basis for such lawsuits.

I argued here that it is a myth to think that law school brochures could be considered responsible for the flood of students into law school in the mid-2000’s any more than they were responsible for the drop in law school enrollment in the early 2000’s. Something more powerful was at work, namely rational students making rational decisions about when and whether to attend law school in response to changing macroeconomic conditions. I explore this issue more fully in my review essay on Brian Tamanaha’s book here.

Nonetheless, Judge Walls concluded:

“Here, an employment rate upwards of 90 percent plausibly gave false assurance to prospective students regarding their legal employment opportunities upon investment in and attainment of a Widener degree. While the thread of plausibility may be slight, it is still a thread. At this motion to dismiss stage, under New Jersey’s broad remedial statute, Plaintiffs have sufficiently pled an unlawful affirmative act under the NJCFA.”

Where the case may run into difficulty over the long run is the way in which Judge Walls attempts to differentiate his conclusion from those of several other courts in New York and Michigan. I discuss one of those lawsuits more fully here.

He admits “there was a wealth of information outside the Widener website that would have indicated that the employment rate portrayed by Widener referred to an aggregate employment statistic.”

But the standard required by the statutes in question – Delaware and New Jersey Consumer Fraud Acts – does not require law students to look beyond the material on the website. Widener has a campus in each state.

Judge Walls writes: “The NJCFA recognizes ‘the fact that the [advertisements are] literally true does not mean they cannot be misleading to the average consumer.’”

And therefore, “it is not implausible that a prospective law student making the choice of whether or which law school to attend, would believe that the employment rate referred to law related employment.”

As examples of the way in which labeling can mislead the “average consumer” Judge Wall cites to cases involving soup can labels and magazine subscription solicitations.

Are recent college graduates who are aspiring lawyers to be considered “average consumers” no different than consumers of soup or readers of mass-market magazines? Are they incapable of reading a law school brochure or website with anything more than the potential gullibility of the average consumer? Somehow I doubt the drafters of these consumer protection statutes, many lawyers themselves, had law students in mind when they put them on the books.

At the motion to dismiss stage a court may feel it has some obligation to bend over backwards to see if there is any reasonable basis to allow a fraud claim to move forward, but one has to agree with Judge Walls that indeed the “thread of plausibility” here appears to be “slight.”

 

 

Local producers back SAG-AFTRA presence in Oregon

imagesIt is not widely understood but the labor movement in America has always depended for its survival on support from a certain layer among employers. This idea might come as a shock to many on the so-called “left” for whom the “boss” is always, like in a Snidely Whiplash cartoon, the enemy. But in the real world of building a strong democratic labor movement, in a culture that prizes a dog eat dog version of capitalism, winning over some segment of the employers is critical to union survival and even success.

How does a union do that? By making an argument that unionization can help build a stronger and more resilient industry because of higher labor standards such as better working conditions and improved pay. There is a wider benefit to these improvements felt beyond the pocket book of individual union members. A strong labor movement means a strong economy and that helps employers, too.

In other words, a strong labor movement helps win the battle against the “race to the bottom” in labor standards.

Over many years, SAG has done a good job in this regard in many of its markets. One example, apparently, is to be found in Oregon as evidenced by this OpenLetterToDavidWhite from Tom McFadden of the Oregon Media Production Association to David White, the NED of SAG-AFTRA.

Mr. McFadden writes: “we feel that growing and maintaining the U.S. share of business means supporting and protecting labor standards while holding performers to the standards of professionalism that our industry requires in those locations where the business is protected.”

Such support from an association that represents employers as well as labor is relatively rare and raises an important question: what is the connection between the decision to shutter numerous SAG-AFTRA offices and the union’s strategy to improve the conditions for their members? Does the current SAG-AFTRA leadership understand how to engage employers in fighting a race to the bottom in working conditions?

No public explanation is available which is fine, of course, since it may be appropriate to keep that strategy under wraps. But the problem is that much of the dissent about the shutdowns is coming from well known union activists. That suggests there is no clear connection to a strategy.

Some union activists argue that the shutdown proposal should have been brought to the upcoming union convention for debate. That makes a lot of sense because it would have allowed the union to debate the idea openly. Unfortunately, it is not the approach taken by the current union leadership. Perhaps Snidely has gotten to them already.

Recent law school grad job rate ticks up sharply

Newly released data from the ABA suggests a sharp turnaround is underway for recent law school graduates with those able to secure “long-term, full-time positions where bar passage was required [rising] 7.6 percent to 26,066 from 24,149″ over the previous year.  The increase was sustained even in the face of the absolute size of the graduating class, one of the largest in recent years.

As the impact of the economic crisis took hold subsequent classes have shrunk and so there will quite likely be an improvement in job outcomes for grads this year and in the next few years, barring an unforseen problem in the wider economy.

This result will come as cold comfort to the law school critics who have been claiming law school is a failing institution. But it is entirely consistent with trends over many decades where legal employment responds cyclically to the macroeconomy.

My critical assessment of the case made by one of the leading critics, Brian Tamanaha, can be found here. That case “relies on very generalized data sets that do not provide persuasive evidence of misbehavior by any individual school, fails to test for counter-factual explanations, and draws conclusions that are only one among several possible explanations for the current situation.”

Other less comprehensive data prepared by Ben Barros at Widener Law suggests improved outcomes for 2010 and 2011 grads, too, as the economy has begun to pick up some momentum.

ABA Releases Class of 2012 Law Graduate Employment Data – ABANow – ABA Media Relations & Communication Services.