Getting Paid: How Disparate Rulings About Silicon Valley Engineers and Amateur Athletes Define Intellectual and Human Capital Ownership
Just another sweltering Saturday morning in August. Not much to do but think about how to get under some cool water somewhere.
Unless, that is, you happened to glance at the front page of the New York Times and noticed two articles about seemingly different realms of human endeavor, but placed curiously close to each other below the fold.
One of them reported that the judge in the case charging that Silicon Valley firms had conspired not to poach one another's engineers, in effect depressing their compensation potential, had rejected a proposed settlement as inadequate given the evidence - and the financial damage to the employees. The other article reported that judges had similarly rejected National Collegiate Athletic Association (NCAA) claims that amateur student athletes had no right to compensation for the use of their images, names and likenesses.
What the two have in common is a growing consensus - now effectively codified (despite whatever appeals may be filed) that the era of free information is over. Gone. Dead. History.
The Big Data era is predicated on the assumption that there is a substantial return available on all that personal information just waiting to be analyzed interpreted and deployed to reduce uncertainty and increase the likelihood that whoever it targets will pony up for whatever's being sold. The size of that return, however, fluctuates with the cost of the underlying data being acquired. And the reality is that, by and large, the return is so large because for much of that info, there is virtually no cost.
The cost is minimized because its sourcing is based on the assumption that consumers will often provide useful information without demanding compensation. They behave this way because they believe they are obligated to do so or because they perceive some advantage in providing, however imprecise the terms of the exchange. By extension, the enterprises interested in using this data have operated on a model that suggests - or has suggested until now - that their rights supersede those of their customers, employees and suppliers.
What the rulings described in the articles below infer is that that model may no longer be valid or, at the very least, no longer as profitable. Because the notion of ownership and the rights that accrue to such ownership are catching up with the economic value inherent in the uses of that data. So, however seemingly subordinate a person's power may be in relation to the forces guiding his or her life, the right to basic protections governing compensation for activities, freedom of movement and ownership of ideas, likenesses, names and images - assets once considered so 'intangible' as to be incapable, even unworthy, of any accounting treatment - now have value that can be defined, analyzed, protected - and monetized. JL
David Streitfeld, Ben Straus and Marc Tracy report in two New York Times articles:
1)Silicon Valley was engaged in an "overarching conspiracy" against its own employees that accused leading tech companies of agreeing not to poach one another's engineers.
2)"the NCAA does not provide credible evidence that demand for the product would decrease if student-athletes were permitted to receive a share of the revenue
generated from the use of their own names, images, and likenesses,”
Article 1, Judge Rejects Deal on Silicon Valley Hiring Conspiracy: There is “ample evidence” that Silicon Valley was engaged in “an overarching conspiracy” against its own employees, a federal judge said on Friday, and it should either pay dearly or have its secrets exposed at trial.
Judge Lucy H. Koh of the United States District Court in San Jose rejected as insufficient a proposed $324 million settlement in a class-action antitrust case that accused leading tech companies of agreeing not to poach one another’s engineers.
In addition, her decision immediately resuscitated a public relations nightmare for Google, Apple and other top tech companies while vindicating a range of observers — including one of the plaintiffs in the suit — who said Silicon Valley was escaping justice.
With the case once again heading to trial, it threatens to expose to further scrutiny the business practices of Steve Jobs of Apple. The blunt emails of Mr. Jobs, an unquestioned genius, could prove to be his company’s undoing.
The anti-poaching agreements at issue in the case stem from the 1980s, but, the plaintiffs say, the practice became widespread in the middle of the last decade, when Google was expanding and the demand for engineers was greater than ever.
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The judge said the evidence against the defendants was compelling — saying, for example, that Steve Jobs, Apple’s late chief executive, was “a, if not the, central figure in the alleged conspiracy.”Credit Jim Wilson/The New York Times
In April, lawyers for the 64,000 class members and the companies reached a tentative deal. But the judge said the money did not fall “within the range of reasonableness.” After the plaintiffs’ lawyers took their 25 percent cut, the settlement would have given about $4,000 to every member of the class.
Judge Koh said that she believed the case was stronger than that, and that the plaintiffs’ lawyers were taking the easy way out by settling. The evidence against the defendants was compelling, she said. And she labeled Mr. Jobs, revered in the modern history of technology, as “a, if not the, central figure in the alleged conspiracy.”
The case will now go to trial unless the parties cobble together another settlement that meets the judge’s approval. Lawyers for the plaintiffs earlier cited damages of $3 billion to the class members. If a jury awarded that amount, it would be automatically tripled.
While judges often fine-tune proposed class-action settlements, it is unusual for one to be entirely thrown out in favor of a trial.
“I cannot recall a judge saying in a class-action case that the amount of settlement is too low and you need to go back and go for broke at trial,” said Daniel Crane, who teaches antitrust law at the University of Michigan Law School. “This is very striking.”
The rejection of the settlement is a victory for one of the five original plaintiffs, Michael Devine, who had raised objections to the deal.
“I am pleased that this case again has the opportunity to achieve real justice for the members of the class,” Mr. Devine said in an interview. “My hope is that the companies will pay at least as much back to their employees as they gained from these illegal agreements. Only then will there be real incentive to them, and others, to respect the law.”
Three of the defendants — Google, Apple and Adobe — declined to comment. A spokesman for the fourth company, Intel, said, “We are disappointed that the court has rejected preliminary approval of an agreement that was negotiated at arm’s length over many months.”
Settlements were reached last year against three other defendants in the suit — Lucasfilm, Pixar and Intuit.
Joseph R. Saveri, a lawyer for the plaintiffs, said he could not comment because he was traveling and had not had a chance to review the order. Another plaintiff’s lawyer, Dean Harvey of the firm Lieff Cabraser Heimann & Bernstein, did not respond to a message requesting comment.
The case, which has been underway for three years, has mesmerized Silicon Valley.
“Every time a new piece of evidence comes out, people get more shocked than they did the last time,” said Sam Altman, president of Y Combinator, a technology accelerator that has funded hundreds of start-ups. “You don’t need a law degree to know that what the companies were doing was deeply wrong.”
Judge Koh’s rejection of the settlement did not come out of the blue. At a hearing in late June, she sharply questioned the lawyers about the size of their cut and whether they were undervaluing their case. She noted the abundance of incriminating material from Mr. Jobs and other executives.
For instance, court papers showed, Google wanted in 2005 to hire a group of Apple engineers. Mr. Jobs’s response: “If you hire a single one of these people, that means war.”
A jury, Judge Koh noted, “would have found these documents very significant and pretty compelling.”
In the world depicted in the court papers, the valley executives feared Mr. Jobs, who died in 2011, and did their best to placate him, even at the expense of their own businesses.
For instance, Sergey Brin, Google’s co-founder, was quoted as testifying that Mr. Jobs’s view seemed to be that people shouldn’t upset him.
Things that appeared to upset him, Mr. Brin said, “would be hiring, you know — whatever.” And Eric Schmidt, then Google’s chief executive, said: “Steve was unhappy, and Steve’s unhappiness absolutely influenced the change we made in recruiting practice.” At one point, Mr. Jobs got a Google recruiter terminated for attempting to hire from Apple.
Appointed to the federal court in 2010, Judge Koh is the first Asian-American district judge in the Northern District of California. Before becoming a federal judge, she was a judge for the Superior Court of California for Santa Clara County. She also worked in Washington for the Senate Judiciary Committee and later for the Justice Department.
She has overseen many of the most prominent tech-related cases, including the big patent fights between Apple and Samsung Electronics. She has built a reputation for keeping strict control of her courtroom, showing no hesitation to challenge even the most powerful lawyers when she feels they are involved in shenanigans.
If the companies wish to forestall a trial, they will have to come up with enough to satisfy the judge that justice is being done.
“A settlement that is more in the billion-dollar ballpark would likely be viewed by the court as within the zone of reasonableness,” said Orly Lobel, a professor of employment and labor law at the University of San Diego. “Such a figure would be closer to one-third of the potential win in trial.'
Article 2 - Judges Rule Amateur Athletes Must Be Paid
In a decision that could drastically reshape the world of college sports, a federal judge ruled on Friday that the N.C.A.A.’s decades-old rules barring payments to college athletes were in violation of antitrust laws.
In a 99-page ruling, Judge Claudia Wilken of United States District Court in Oakland, Calif., delivered a resounding rebuke to the foundation of the N.C.A.A., issuing an injunction against current rules that prohibit athletes from earning money from the use of their names and images in video games and television broadcasts.
The decision in the so-called O’Bannon case would allow universities to offer football players in the top 10 conferences and all Division I men’s basketball players trust funds that can be tapped after graduation, giving players a chance to share in the billions of dollars in television revenue they help generate for their colleges and the N.C.A.A.
The ruling, which would take effect in 2016, does not mandate that players be paid. But it could allow universities to engage in bidding wars for the best athletes, though the N.C.A.A. would probably try to prevent that by capping payments, which Judge Wilken said was permissible.But she said she fully expected the universities to shoulder the additional costs.
“The high coaches’ salaries and rapidly increasing spending on training facilities at many schools suggest that these schools would, in fact, be able to afford to offer their student-athletes a limited share of the licensing revenue generated from their use of the student-athletes’ own names, images, and likenesses,” Judge Wilken wrote.
Advocates for student-athletes declared it a major victory.
“The decision goes behind the curtain of amateurism and says there’s nothing there,” William Isaacson, a lawyer for the plaintiffs, said. “It’s a remarkable step forward for decency for college athletes.”
A unionization drive among football players at Northwestern has also gained traction. And a suit that essentially demands that college athletes be paid at market rates has been filed by Jeffrey Kessler, a prominent antitrust lawyer. But many saw the O’Bannon case as perhaps the biggest threat of all to the N.C.A.A.
“The main thing is you control your likeness,” Mr. O’Bannon, 41, said in an interview Friday night. “It means everything because that’s what this whole thing is about. I’m really happy players can control their likeness, because in any other walk of life you can. I never understood why the student-athlete wasn’t able to, and now he can.”
Amid the flurry of lawsuits, the N.C.A.A. discontinued its partnership with EA Sports last year, terminating the popular college football and basketball video games.
Donald Remy, the N.C.A.A.'s chief legal officer, issued a statement saying he disagreed with the ruling. The N.C.A.A. is expected to appeal the decision.
“We note that the court’s decision sets limits on compensation, but are reviewing the full decision and will provide further comment later,” Remy said. “The N.C.A.A. is committed to fully supporting student-athletes.”
The N.C.A.A. has long argued that its amateur rules, while potentially restrictive in the marketplace, were vital for its business model.
At trial, over three weeks in federal court in Oakland in June, a parade of N.C.A.A. officials, including the association’s president, Mark Emmert; the Big Ten commissioner, Jim Delany; and Stanford’s athletic director Bernard Muir, echoed those arguments.
One after another, they argued athletic departments and nonrevenue generating sports, like swimming and volleyball, would be hurt if football and basketball players were paid.
In his testimony, Dr. Emmert called college sports “a social glue that holds a campus together” and said universities should not pay student-athletes. “To convert college sports to professional sports would be tantamount to converting it to minor league sport,” Dr. Emmert said.
Judge Wilken rejected those arguments. The N.C.A.A. “does not provide credible evidence that demand for the N.C.A.A.'s product would decrease if student-athletes were permitted, under certain circumstances, to receive a limited share of the revenue generated from the use of their own names, images, and likenesses,” she wrote.
During the trial, O’Bannon’s lawyers presented a series of internal communications at N.C.A.A. headquarters in Indianapolis that illuminated the unrest over the future of college sports.
In one memo to Dr. Emmert, a senior aide, Wallace Renfro, described a growing public perception that unpaid athletes were driving a multibillion-dollar industry as the “great hypocrisy of college athletics.”
“It’s a huge day, and it’s a huge loss for the N.C.A.A. because they have relied on amateurism for so long,” said Michael Carrier, a Rutgers law professor who specializes in antitrust law. “It opens the door for future challenges to all of the N.C.A.A.'s policies.”
The amounts in the trust funds would be up to the discretion of institutions, at least initially. College athletes will almost certainly not be receiving million-dollar paydays anytime soon. The injunction allows the N.C.A.A. to cap the payments, though if it does, the minimum payment would be $5,000 a year per football and basketball player.
If that were the cap, athletes at Division I basketball and Football Bowl Subdivision universities could earn an estimated $300 million combined over a four-year period, according to Mr. Isaacson.
There have also been two congressional hearings this year on the status of student-athletes. Last month, Dr. Emmert testified before largely skeptical members of the Senate Commerce Committee.
Judge Wilken suggested that other bodies may have to weigh in on the state of college athletics. “Such reforms and remedies could be undertaken by the N.C.A.A., its member schools and conferences, or Congress,” she wrote.
As a Partner and Co-Founder of Predictiv and PredictivAsia, Jon specializes in management performance and organizational effectiveness for both domestic and international clients. He is an editor and author whose works include Invisible Advantage: How Intangilbles are Driving Business Performance. Learn more...
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