PrawfsBlawg

Judicial takings and alternatives to offemsive litigation

This Seventh Circuit case (Diane Wood for Manion and Scudder) is weird and I am trying to figure it out. I think it illustrates broader points about the problem of offensive-or-defensive litigation on constitutional issues.

A group of property owners brought a state-court quiet title action against Indiana, arguing that they owned Lake Michigan beach-front property to the low-tide mark, as reflected in their deeds; the Indiana Supreme Court (Gunderson) held that Indiana holds and retains submerged property up to the high-tide mark. The legislature then codifed the decision, declaring its ownership and declaring laekfront property owner's non-ownership below that mark. A different group of property owners (non-parties to Gunderson) brought this action against the governor, AG, against the governor, AG, and heads of the agencies on natural resources and state lands, alleging a judicial taking and seeking a DJ and injunction that they owned the property to the low-water mark.. The  panel dismissed the claim on standing grounds, finding no traceability or redressability to the state officials sued, since they do nothing to enforce Gunderson or the statute defining the property lines and can do nothing to grant the plaintiffs title to the challenged portion of the lakefront. The court also identified federalism-and-comity based caution (reflecting the ideals, if not applications, of Rooker-Feldman) in hearing a case raising a novel legal theory that requires a lower federal court to review the merits of a state supreme court decision. The court dismissed with leave to amend, although I am not sure what they can do to salvage this action.

The outcome is correct, but the case highlights some weird doctrinal interstices. It also shows how constitutional litigation occurs outside the ordinary pre-enforcement offensive action against a state executive. Assuming judicial takings can be a thing, what are plaintiffs such as these to do?

1) The appropriate course for a judicial-takings claim is to appeal the state-court decision effecting the taking to SCOTUS. That is not available to the federal plaintiffs, who were not party to the state decision. That also explains why the court did not dismiss on RF grounds--the federal plaintiffs were not state court losers.

2) One possibility is that non-parties cannot suffer a judicial taking, since the state-court judgment had no effect on their property rights. Thus Gunderson may have taken the property of the owners who sued in state court, but not of the different owners who sued in federal court. This has intuitive appeal. Judgments in non-class-actions do not bind non-parties. It makes no sense to give a judgment a broader effect as a taking than as a judgment. Any "taking" of the federal plaintiffs' property arises from Gunderson's precedential effect in future litigation, but any taking should not happen before then. This point should apply had the federal plaintiffs brought a claim for compensation for the taking rather than an injunction (the court suggests they would have had standing to do that, because these officials could provide compensation). These owners are not (yet) entitled to compensation because Gunderson did nothing to their property rights, beyond precedential

The district court rejected any judicial-takings claim here because Gunderson did not strip these owners of established ownership rights, as required by the Scalia plurality in Stop the Beach. At worst it resolved an ambiguity as to ownership; at best it declared, as a matter of state law, that they never owned this land at all and it has always been state property. My argument provides another basis for rejecting that claim--as non-parties to Gunderson, their property was not lost because that decision did nothing as to their property.

3) The plaintiffs made a strange concession: that their challenge to the statute turns on their judicial-takings claim. "If Gunderson stands, it follows that the Owners never held title to the land below the ordinary high-water mark, and the legislation therefore had no effect on their property rights." I do not understand this point. The legislature owns state property, subject to judicial review and interpretation. The state supreme court having declared the state owns to the high-water mark, I do not understand why the legislature could not enact legislation declaring state ownership, whether consistent with Gunderson or consistent with the owners' deeds. To the extent state declarations of ownership below the high-water mark constitute a taking, why does the statute alone not effect that taking? This does not resolve the standing problem as the court sees it, since the defendant officials continue to lack power to grant ownership. But it makes the possible taking argument clearer.

4) Traceability and redressability fail because the court cannot order any of the defendants to grant the plaintiffs title to the contested land. How, then, can they assert whatever rights they might have? The court imagines how this comes up for the owners:

Gunderson recognized that members of the public have a right to walk on the beach in front of the Pavlocks’ house as long as they stay lakeward of the high-water mark; an injunction requiring the State to refrain from any action would not grant the Pavlocks the right to exclude. If Cahnman wants to sell his beachfront property, he may convey land only from the high-water mark. The requested injunction would not give him title to submerged lands that Indiana law (confirmed by both the state’s highest court and its legislature) says belongs to the state. To the extent the Owners’ deeds conflict with Gunderson and HEA 1385, the latter two sources govern. And if, for example, the Pavlocks tried to sue people who walked on the section of beach between the high- and low-water marks for trespass, or Cahnman tried to hoodwink a buyer by representing that he held title down to the low-water mark, an injunction against state officials would not prevent Indiana’s Recorder’s Offices from correcting that error, or Indiana courts from applying Gunderson.

This hints at how this sort of takings claim, if it can exist, should come to court. The Pavlocks sue people walking on  the beach for trespass; the trespassers cite Gunderson and/or the statute as the source of their right to walk there; the Pavlocks argue that the decision in their case applying Gunderson and the statute effect a taking; and that argument provides a basis for § 1257 review of the state court. Cahnman hoodwinks a seller; the seller sues him for hoodwinking him, citing Gunderson and the statute; Cahnman defends on the ground that Gunderson and the statute effect a taking; and that defense provides a basis for § 1257 review of the state court.

The hypothetical suit against the trespassers should sound somewhat familiar to Fed Courts geeks--it is basically Mottley. This suggests that the Mottleys could not have sued the executive when Congress enacted the law prohibiting free passes--like the plaintiffs here, they would have lacked standing. They would have been forced to proceed, in state court, as they did--Mottleyssue the Railroad for breach; RR argues impossibility based on the statute; Mottleys argue statute violates the 5th Amendment; argument provides a basis for § 1257 review.

Again, consider this another example of asserting constitutional rights outside the typical offensive EPY action. Some of these claims are somewhat offensive in that the Pavlocks initiate the lawsuit, although the federal constitutional issue is not the main piece of the claim and arises downstream in the litigation. Nevertheless, we accept this as appropriate procedure, not some conspiracy to eliminate judicial review.

Possession as Estoppel—Last of a Lakefront Series on Property Law

The following post is by Joseph Kearney (Dean, Marquette) and Thomas Merrill (Columbia). It is the final in their series of guest posts about  Lakefront: Public Trust and Private Rights in Chicago (Cornell University Press). We thank them for sharing this series.

Our previous four posts in this five-part guest series, generously welcomed and introduced by Howard Wasserman, have shown that possession seems often to influence the outcome of fights over the use of resources along the Chicago lakefront. We have drawn on the cases and chronicles set forth in our new book, Lakefront: Public Trust and Private Rights in Chicago (Cornell University Press 2021). In this wrap-up post, we will offer a more precise definition of what possession means in this context, and will try to pinpoint, in legal terms, what role possession seems to play.

According to a recent draft of the Restatement (Fourth) of Property approved by the American Law Institute, to be in possession is defined as having “established effective control over [a] thing” while manifesting “an intent to maintain such control to the exclusion of others.” (Tentative Draft No. 2, Vol. 1, Div. II, Ch. 1, § 1.1 (Apr. 7, 2021).) What does this mean in the context of the various disputes over the use of resources on the Chicago lakefront?

With respect to land under the lake, being in possession presumably means filling the submerged land and building a structure on it or otherwise excluding others from access to it without permission. Thus, the Illinois Central Railroad never secured possession of the submerged land granted to it in 1869 for construction of an outer harbor, because it never managed to fill the submerged land, let alone build the harbor (post one). Similarly, the park districts did not immediately take possession of the submerged land granted to them to construct north and south Lake Shore Drive, because they delayed filling the land for years (post four). In contrast, in those same Lake Shore Drive stories (so also post four), the riparian owners did secure possession of the submerged land inside the boundary-line agreements (made between them and the park districts), because they promptly filled the land and developed it for their own purposes, thereby excluding others.

With respect to bare land, like that of Grant Park, being in possession means constructing a building subject to limited access or policing the land to the exclusion of others (post two): Thus, the Art Institute obtained possession of a portion of the land once it built its museum on it, which was allowed to stand despite the public dedication doctrine. But the Field Museum never obtained possession in Grant Park, since it never got beyond driving a symbolic stake into the ground before the project was tied up in litigation and eventually enjoined.

The case of Cap’n Streeter and his gang of squatters, along the lakefront north of the Chicago River, is more complex (post three). Streeter probably succeeded in establishing possession of the boat, makeshift fortress, or broken-down motor truck that he variously occupied on the newly formed land. But he never established effective control over the full area he claimed—eventually determined to be 160 acres—because he did not command a large enough force to do so. Nor did he have the support of the police to back up his claim of possession to this larger area.

To pinpoint more precisely in legal terms what role possession seems to play in various lakefront controversies, we think that the best analogy may be estoppel.

Estoppel, an equitable doctrine, is most commonly invoked to bar individuals from asserting a legal claim contrary to what they have previously affirmed, by word or deed. In the context of the various disputes that we have cataloged, it seems that acquiescing in possession of something by others is seen as an implicit affirmation of their rights. Hence, the assertion of a contrary legal claim is more likely to be denied (by estoppel) than it would be otherwise.

The equation of possession with estoppel was made explicit in a momentous decision of the Illinois Supreme Court in 1966: Hickey v. Illinois Central Railroad Co., 35 Ill. 2d 427, 220 N.E.2d 415. The case involved the landfill created by the Illinois Central Railroad between Randolph Street and the Chicago River, east of Michigan Avenue, where it had constructed its primary terminal, among other facilities. The question became whether the Illinois Central only had an easement for railroad purposes or instead held full fee-simple title to the area. If only an easement, then the air rights above the area belonged to the state. If a fee simple, then the railroad could sell off the air rights for development of high-rise commercial buildings or condominiums.

Legally speaking, the state and the other plaintiffs had strong arguments that the railroad had only an easement. The problem with this assertion was that the railroad had been in possession of the land for as long as anyone could remember. Some of it had been used as a terminal going back to the 1850s. Some of it had been used for huge grain elevators, which were not essential elements of a railroad terminal. And more recently (in the mid-twentieth century), a state agency had signed off on projects to sell the air rights, in this area, for construction of the Prudential Building, then the tallest building in Chicago, and a large apartment house.

The Illinois Supreme Court in Hickey did not rule that the Illinois Central owned the air rights—it ruled, rather, that the state was estopped from denying that the Illinois Central owned the air rights. It cited a series of statements and actions by the government seeming to assume or understand that the railroad had full title to the contested land. These were said to reflect the “prevailing governmental attitude, both State and city, since near the beginning of this century,” which “has regarded the Illinois Central Railroad as the owner, in fee, of the now disputed lands.” Hence, “basic concepts of right and justice preclude the State from now asserting any claim to the lands involved in these proceedings.”

The Hickey court’s invocation of estoppel to rebuff the State’s claim to the air rights could have been written as a judgment conferring title by adverse possession. The general rule, however, is that one cannot claim title by adverse possession against the government. It is also unusual for a court to invoke estoppel against the government. But estoppel, as an equitable doctrine, is more susceptible to case-specific application. For this reason, estoppel may be a better description of the role of possession in resolving contests on the lakefront than the hard-and-fast rule of adverse possession, grounded in the passing of a statutory period.

In addition to the public trust controversies considered in the first post, consider the public trust cases decided since the Illinois Supreme Court announced an uncertain but more intrusive standard of review of such claims in 1970. In two cases involving a legislatively authorized proposal to fill submerged land, the courts held that this was prohibited by the public trust. One case involved a grant of submerged land to expand a steel plant on the South Side; the other a grant of land to expand a private university on the North Side (Loyola). In both cases (considered here as well as in Lakefront itself), the beneficiary of the legislative grant could not maintain that it had possession over the contested area.

In contrast, in two other cases, which involved, rather than filling, changes in the use of land previously dedicated to a different type of use, the court denied the public trust claim. One case entailed a proposal to use a portion of a public park to construct a new public school; the other involved a proposal to rebuild Soldier Field to accommodate the wishes of the primary tenant, the Chicago Bears. In both cases (considered in the same posts linked in the previous paragraph and in Lakefront), the party that successfully sought to change the existing use of existing land could fairly claim that it was already in possession.

In none of these four cases was estoppel cited, nor was existing possession. But the pattern continues to reflect the one that we have discerned in a variety of other contests. Courts are reluctant to interfere with possession. This is so, whatever may be the strength of the legal claim, or the public rights doctrine, pointing to a contrary conclusion. If there is no relevant claim of possession, public rights are more likely to be vindicated.

Boundary-Line Agreements and Possession: The Extraordinary and Ordinary Story Behind Chicago’s Lake Shore Drive

The following post is by Joseph Kearney (Dean, Marquette) and Thomas Merrill (Columbia). It is the latest in a series of guest posts about  Lakefront: Public Trust and Private Rights in Chicago (Cornell University Press).

This is the fourth of five posts in a guest series exploring the power of possession in property law. Our basis is empirical: the history of the Chicago lakefront, which we chronicle more comprehensively in our new book, Lakefront: Public Trust and Private Rights in Chicago (Cornell University Press 2021). This post examines an extraordinary legal device that emerged during the construction of Lake Shore Drive and associated parks up and down the better part of the city’s lakefront (north and south in Chicago along Lake Michigan, that is). The device—called a boundary-line agreement—was used repeatedly to extinguish the riparian rights of persons who owned lakefront property. The story of the development, flourishing, and, finally, desuetude of the boundary-line agreement is a fascinating one. We will relate enough of the story here to advance the purpose of this series: using Lakefront to draw out some illustrative and instructive points respecting the perhaps-ordinary power of possession in property.

Let us begin by framing the problem that confronted government entities in Chicago in the late nineteenth and early twentieth centuries, as they wished to build lakefront parks and an associated drive. It was not a lack of a legal right to fill submerged land in Lake Michigan for these purposes: Various cases in the 1890s had established that the State of Illinois owned the land under Lake Michigan and could grant it to local government entities (such as the Lincoln Park District) for this purpose; these cases included the landmark Lake Front Case—the U.S. Supreme Court’s 1892 decision, Illinois Central Railroad Co. v. Illinois, which announced the American public trust doctrine.

The problem, rather, involved the legal rights of those who owned the property along the shore. These riparian rights, such as the rights to access and view the water, long have been regarded as especially valuable property rights, and courts often say that the government can extinguish them only by paying just compensation.

To be clear on the point and the problem: In order for the park districts to fill the submerged land granted them by the state, and thereby extend existing parks and build Lake Shore Drive, they had to acquire the riparian rights of the landowners on the shore (the riparian owners, as they may be called). But both the Lincoln Park District on the North Side and the South Park Commission on the South Side were short on money.

The ingenious primary device for solving this problem involved boundary-line agreements. In form, these were contracts specifying the boundary between the land of the riparian owner and the submerged land owned by the government (first the state and then the park district) and slated to be filled for the new parks. In substance, the boundary-line agreements were a quid pro quo in which riparians traded their rights for additional land.

How could that be? It all depended on where the parties agreed to draw the line. Here is how it worked: The park district would agree to set the boundary line in the lake—typically about 100 feet east of the original shoreline. (This was facilitated by the fact that erosion and, in particular on the North Side, accretion had obscured the original shoreline in parts.) For its side of the deal, the riparian would convey its riparian rights to the park district.

The agreement then would be presented to a court, typically quietly and with little public awareness (there being no adversity in this litigation, with an exception immaterial here). Upon being approved by the court, the agreement—now a judgment—would establish a new and permanent boundary between the previously riparian land and the new parkland to the east (abutting the lake). Indeed, the state statutes providing for this process decreed that the new boundary line could never be challenged based on where the shoreline had been at any time in the past or according to whether the former riparian owner had, at the time of the agreement, proper title to accretions.

Once the boundary was set, both the riparian and the park district were free to start filling the lake: the former to solidify their new holdings next to (east of) their original land, the latter to build the expanded park and the drive between the new boundary line and Lake Michigan to the farther east. In fact, we might now call the former “the former riparians,” as there now (or soon) were supposed to be a park and a roadway between their property and the lake.

This brings us to the power of possession: As experience with these boundary-line agreements grew, it became clear that establishing possession was important on both sides of the deal. For the former riparians, there was every incentive to begin filling the new land almost immediately. Indeed, our research unearthed that many, perhaps most, commenced filling the lake up to the boundary line well before the park district was able to start filling, east of the boundary line, for the parks and the drive.

The incentive of the former riparians to fill quickly was both economic and legal. The reason for giving up their riparian rights had been the promise of more land, even if it was in the interests of both sides not to publicize this. The sooner the former riparians secured or established that land, the more value they could extract from the deal. Legally, the former riparians may have worried that the agreements would be publicized and that public condemnation would lead to a demand to reverse the deals.

Even to leave aside the earlier reaction to the Lake Front Act of 1869 (decrying it as the Lake Front Steal and leading to its repeal in 1873), there was a basis for this worry in very recent history. When an explicit conveyance of submerged land was used to fund an earlier extension of Lake Shore Drive, just north of the Chicago River, in Streeterville, in the 1890s, a major public controversy erupted that led to litigation and calls for legislative reform.

The legal instincts of the former riparians would be vindicated many decades later, when the Illinois courts reformulated the public trust doctrine as a prohibition against any conveyance of public rights—quintessentially, submerged land under Lake Michigan—for private gain or private use. (These have gone beyond dicta: One such legislative grant, involving the South Works plant in the 1960s and 1970s, was judicially invalidated on this basis, after the grantee waited a decade to try to take active possession of submerged land once the state gave it the title.) Yet no one has ever suggested that the conveyances of submerged land to private riparian owners in the early decades of the twentieth century—whose land is now well west of the lake, given the park and the drive in between—should be reversed under this revised public trust doctrine. Possession, as we saw in the first post in this series, operates as a kind of unspoken statute of limitations on public trust claims.

What about the other side to the deals—the park districts? Their contrasting fate is similarly instructive. Recognizing that all of the primary conduct is recounted in detail in Lakefront (though not with an unwavering eye on possession), let us look at enough of it here to make the point.

Unlike the riparian owners, the park districts failed to take rapid possession of the submerged land outside the newly agreed boundary lines. The dilatoriness of the Lincoln Park District, on the North Side, has a simple explanation: it did not have the money. The park district had been able to overcome the financial cost of acquiring riparian rights, it is true, by using boundary-line agreements. But it still had to pay for landfilling, roadbuilding, landscaping, and a seawall. Consequently, years and often decades would pass before the park district commenced construction.

The delay in taking possession of the submerged land designated for the drive and new parks would prove to have fatal consequences.

As the years rolled by (this was all largely during the first quarter of the twentieth century), without action by the park district near their particular property, many riparians grew angry. One irritation was storm damage to their land. They had been led to believe that their land, old or new, would be protected against storm damage from the lake by a new park and seawall constructed by the park district. Instead, they often had to pay for protection and, in some cases, land restoration, themselves. In a practical sense, if you will, they were unhappy that they were not yet former riparians.

Another and more consequential irritation was a major change in the plans of the Lincoln Park District. Whether to build support for higher tax assessments or simply on the merits, the district announced plans for a greatly expanded park and drive. The original 1895 plan for expanding Lincoln Park northward called for a strip of park roughly 1,000 feet wide (west to east) along the shore of the lake. The new plans, as they began to emerge in the mid-1920s, projected filling approximately four times as much land, in order to accommodate a variety of recreational opportunities, such as a golf course, picnic areas, lagoons, and harbors. And instead of a narrow pleasure drive running along the water, at the eastern edge of the park, the new plans depicted Lake Shore Drive as a multilane limited-access highway running along the park’s west edge—adjacent to the boundary line with the former riparians.

Some riparians sued, alleging that the failure to protect their land from storm damage and the radically changed conception of the project constituted a breach of the original boundary-line agreements. The Illinois Supreme Court agreed, enabling various disgruntled landowners to rescind the agreements.

So the Lincoln Park District (and its successor, the unified Chicago Park District) had to find some other way to acquire riparian rights. It tried condemnation, but this proved to be too expensive and time-consuming. It tried negotiating new, much-sweetened boundary-line agreements. But this too ran into resistance, as riparian owners along the lakeshore, north of Hollywood Avenue (5700 North in Chicago), began constructing high-rise apartment buildings, whose market value was closely tied to direct views of the lake.

In short, the failure of the park district to take possession of the submerged land designated for park purposes soon after it was authorized to do so—1895 on the North Side—is directly responsible for the fact that Lake Shore Drive ends at Hollywood, well short of Devon Avenue (6400 North), the latter having been the original and longtime projected terminus of the extension of the drive and Lincoln Park. In areas where the park district could show only an abstract right to fill the lake and various planning documents about future intentions, former riparians successfully sued for rescission. In areas where the park district had succeeded in filling the lake and constructing some kind of park and drive—that is, where it had taken possession—there was no suit for rescission that we have discovered.

The boundary-line device also played a major—indeed, monumental—role on Chicago’s South Side, in the work of the South Park Commission. We use the emphasized word because it is the device of the boundary-line agreement that made possible the construction of the Field Museum, which opened in 1921, and the subsequent development of the Museum Campus. All of that, too, is an extraordinary story, but a separate one for our purposes here.

Lakefront tells that chapter as well, including how the stories meet in the middle—with the construction in the 1930s of the bridge over the Chicago River, connecting the north and south portions of Lake Shore Drive, as the roadway would soon be uniformly denominated. Its formal name was expanded by Chicago just this summer, to be Jean Baptiste DuSable Lake Shore Drive, “in honor of the Black trader cited as the first non-Indigenous settler of the Midwestern city.”

Our next (fifth) and final post will consider how possession functions as a kind of statute of limitations—a de facto type of adverse possession—in defeating claims of public rights. It will complement not only this fourth post in this series but also the first post, which showed that defendants who had established possession of submerged land prevailed in early public trust controversies, while those who had not established possession lost; the second post, which explained that the same appears to be true of public dedication controversies involving the construction of the buildings in Grant Park; and the third post, which highlighted the perceived advantages that possession plays in motivating persons to be the first to possess some valuable resource.

Possession vs. Ownership in Property—First of a Lakefront Series

The following post is by Joseph Kearney (Dean, Marquette) and Thomas Merrill (Columbia). It is the first in a series of guest posts about  Lakefront: Public Trust and Private Rights in Chicago (Cornell University Press).

“Possession is nine-tenths of the law,” a common version of an old saying holds. More recently, Carol Rose, one of our most distinguished property scholars, has argued that this understates the point. Possession matters, she has written, largely because when we see someone in possession of something, we assume that person to be its owner. (See her chapter in Law and Economics of Possession, Yun-chien Chang, ed., Cambridge University Press, 2015.)

Among its other virtues (we respectfully suggest), our new book, Lakefront: Public Trust and Private Rights in Chicago (Cornell University Press), allows us to consider both the dictum and Professor Rose’s critique of it. In particular, the book documents a number of episodes in the history of Chicago (its lakefront, that is) in which someone either was in possession of some resource but had no clear right of ownership or, by contrast, had a fairly clear legal right of ownership but lacked possession. Who was more likely to prevail: the possessor without ownership, or the owner without possession?

With great thanks to Howard Wasserman and his PrawfsBlawg colleagues for the introduction and opportunity, let us proceed.

We can begin with the early part of the story, which involves the Illinois Central Railroad and its quest to secure a grant of submerged land under Lake Michigan to construct an outer harbor, supplementing the existing (inner) harbor of the Chicago River and the railroad’s lake trackage and lakefront facilities. In 1869, the railroad got what it wanted: With some skillful lobbying and at least a little graft (the former is quite clear, the latter clear enough), it persuaded the state legislature to grant it 1,000 acres of submerged land “in fee,” for purposes of building an outer harbor in the lake. In effect, in the Lake Front Act, the state granted the railroad ownership of the submerged land.

Because of dire economic conditions in the early 1870s, the railroad did little to implement the grant, i.e., to take possession of the submerged land and begin constructing a harbor. Chicago politicians, who had wanted the right to construct such an outer harbor themselves, capitalized on the railroad’s inactivity and public unhappiness and secured a repeal of the grant to the railroad in 1873 (the Lake Front Steal was the popular local name for the 1869 act, and the more general Granger Movement against the railroads helped the city).

The 1873 legislators were insufficiently impressed by the arguments of the railroad’s lawyers that the 1869 grant was a “vested right” that could not be repealed consistently with the Constitution’s Contracts Clause. Many of the legislators were lawyers, but it cannot have helped the railroad’s cause that its claim of ownership was not accompanied by possession.

Many years later, in 1892, the U.S. Supreme Court had to decide whether the 1873 repeal of the original grant was constitutional. Although the railroad’s lawyers had weighty precedent on their side in support of the claim of vested rights, a four–to–three majority of the Court held that the grant was, if not void altogether, properly revocable.

The winning point, as articulated for the Court in an opinion by Justice Stephen J. Field, was that the submerged land was impressed with a “trust” in favor of “the people,” so that “they may enjoy the navigation of the waters, carry on commerce over them, and have liberty of fishing therein freed from the obstruction or interference of private parties.” Thus was announced, as it would come to be called, the American “public trust doctrine.”

By itself, this public trust would seem to have doomed much of the Illinois Central’s existing facilities along the lakefront. The railroad had constructed, by the time of the 1892 decision, a massive complex of terminals, engine houses, grain elevators, and piers, much of it on landfill in the lake—both north and south of the area targeted for construction of the outer harbor. (Map C in the Supreme Court’s report of the case, also known as the Morehouse map, gives a sense of this, as of course does Lakefront in any number of ways.) These facilities would seem to constitute an “obstruction or interference” with the public’s access to the lake.

Field nevertheless discussed two arguments that might support allowing the railroad’s various improvements constructed in the lake to stay. One was based on language in the Illinois Central’s 1851 state legislative charter, which allowed the carrier to use “any lands, streams and materials of every kind” owned by the state if needed by the railroad to construct depots, shops, yards, etc. Perhaps this charter language justified the railroad’s construction in the lake.

The other was based on the common-law privilege of a riparian landowner to “wharf out” from the shore if necessary to reach water deep enough to float a boat. If sufficiently modest in size, Field observed, such landings—such wharves, piers, docks, and the like—were consistent with the public trust, since they enhanced the ability of the public to access navigable waters. The case was accordingly remanded to the lower courts for an inquiry whether the railroad had constructed any facilities in the lake that went beyond the point of practical navigability (and thus could not be sustained by the wharfing-out privilege).

On remand, both the district court and the newly created U.S. Court of Appeals for the Seventh Circuit held that the railroad’s massive complex did not violate the public trust identified by the Supreme Court. Focusing in particular on the right to wharf out, the lower courts concluded that the Illinois Central’s various landfilling did not intrude into the lake beyond the point of practical navigability, especially given the emergence of a new class of lake steamers with a much deeper draft than the schooners of bygone days. In short, the construction in the lake was sustained as properly implementing the railroad’s right as riparian owner to access the lake’s navigable waters.

Consider the implications of all this for our question. To recap: On the one hand, the Supreme Court upheld the repeal of the grant “in fee” to the railroad to construct an outer harbor. This was, at most, an abstract right of ownership, for the railroad had never converted it to actual possession. On the other hand, the lower courts sustained the right of the railroad to retain all the terminals, elevators, repair facilities, and track that it actively possessed, even though the better part of these had been constructed on landfill never explicitly authorized by the state.

It gets better. Between the Supreme Court’s 1892 decision and the time the remand worked its way back to the Seventh Circuit in 1899, the Illinois Supreme Court, in other litigation, repudiated both of the arguments that Justice Field had suggested might justify the railroad’s keeping the various facilities it had constructed in the lake. In 1898, the state court repudiated the right to wharf out, at least as applied to Lake Michigan. That same year, it also held that the Illinois Central’s charter did not justify landfilling in the lake, since the lake was neither land nor a stream nor (apparently) “materials of [any] kind” owned by the state.

Naturally, then, the state argued that the railroad had no legal right to remain in the lake. The Seventh Circuit dodged the issue. It ruled that the only question open for consideration on remand was whether the Illinois Central’s various improvements extended into the lake beyond the point of practical navigation. Nothing else could be considered. When the matter returned to the Supreme Court in 1902, the high court adopted the same dodge.

So it was that the Illinois Central, which had no viable argument to support its being in the lake, was allowed to remain there, with respect to the facilities that it had actively possessed at least since the late 1880s. The courts were willing to validate the repeal of the Lake Front Act. But they had no desire to dismantle one of the major rail complexes in the United States.

In both 1873 and 1892, the relevant legal actors (the Illinois legislature and the U.S. Supreme Court) were willing to strip the railroad of its claim to ownership of land that it had never possessed. In 1899 and 1902, the relevant legal actors (the Seventh Circuit and the U.S. Supreme Court) upheld the right of the railroad to retain control of facilities that it did actively possess, even though it no longer had any viable claim of ownership to them.

So far in the story, it would seem that possession is more powerful than ownership in determining the attitude of legal actors regarding the allocation of control over valuable resources. Our second entry (the series will entail five posts) will consider the power of possession in the context of the public dedication doctrine (not to be confused with the public trust doctrine)—that is, in the case of the Chicago lakefront, in determining the fate of various challenges to constructing buildings in Grant Park.

Joseph D. Kearney and Thomas W. Merrill

Coase and Fireworks

In my continuing effort to demonstrate what the mundane world looks like through the eyes of a nerdy law professor, today we will talk about Ronald Coase, recipient of the Nobel Prize in economics, and fireworks.

Before we had dogs, I liked fireworks, at least the professionally staged kind.  Up here in Charlevoix, Michigan, every year in late July the town has a week-long event called Venetian Festival.  The highlight on Friday night is a spectacular fireworks show out over the lake for which our deck is effectively a front row seat.  For the last seventeen years or so, however, I have not been out on the deck nor have I seen the fireworks.  No, I am back in a closet with the door closed, comforting our dog(s) who is/are going batshit crazy.

With the professionally staged fireworks, at least I know when to go into the closet and when I can come out.  It's the private ones that really drive me crazy.  In Massachusetts, where we live nine months of the year, I don't have worry.  Private fireworks are illegal, end of story.  

Here in Michigan, however, we have to deal with one aspect of the state legislature's Year of Living Stupidly.  In 2011, the same year it passed the law eliminating the requirement that motorcyclists wear helmets, Michigan first permitted the sale of fireworks in the state.  In 2013, it amended the law to permit local units of government to ban the use of consumer fireworks, but not on national holidays, the day before or the day after a national holiday.  (It also allows any city in the state with a population greater than 750,000 - there is only one - to ban them between midnight and 8 a.m. on such holidays, and only between 1 a.m. and 8 a.m. on New Year's Day.)

The reasons for my sitting on the beach and, like a complete dork, reading Ronald Coase's The Problem of Social Cost follow the break. If he had the house next door, and had the same issues I do, what might he say about it?

Our local unit of government, the City of Charlevoix, and the surrounding Charlevoix Township each enacted ordinances banning the private use of consumer fireworks to the extent permitted by the Michigan statute.  Thus, for three of the days we are here during the summer (July 3-5), we have to deal with the possibility that some *)&(*^*^&$ is going to be responsible for random and unexpected fireworks activity that turns our dogs' brains into petroleum jelly and causes them to (a) howl madly, and (b) scurry around the house wildly under beds, couches, and other areas of perceived safety.  

The rest of the summer we can be fairly sure that our nearby neighbors won't be using consumer fireworks because of the local ordinance.  If they did out of a misunderstanding of the law, and they were to ignore our friendly suggestion that they obey the law, we would be within our rights to call out Charlevoix's Finest.

Here's the problem.  If you happened by my earlier discussion of riparian rights, you saw this Google Earth picture. It so happens that I took the above picture just about at the tip of the red arrow.  The city proper is largely to the left (west) of the tip of the arrow.  The township pretty much ends at the other end of the arrow.  Every thing else to the right, including that peninsula (known as Pine Point) that looks sort of like India, is in Hayes Township.  Hayes Township has never passed an ordinance banning fireworks.  So just after it gets dark, for much of the summer, we are treated to a fireworks display that carries very nicely, sound and otherwise, across the mile or so to our house.

Where our dogs, having dog-like senses of hearing and smell, proceed to have their brains turned into petroleum jelly and thereupon to (a) howl madly, and (b) scurry around the house wildly under beds, couches, and other areas of perceived safety.

Now, I know that the reason for all of this fireworks activity under the current legal regime is the result not of, as Coase might hypothesize, a railroad needing to run a railroad even if sparks cause crops to catch fire, or industries needing to burn fuel even if it causes air pollution nearby.  It is the product of market activity in which the total value of production exceeds the cost of such production, and consumer activity in which the utility engendered by playing with toys that make loud booms and bright flashes exceeds the cost of such activity, at least for those engaged in it.

The social cost occurs across the lake at my house, where I am contemplating the purchase of doggy Xanax.

The popular takeaway - the "Coase Theorem" - applied to my situation is this.  In a world of zero transaction costs, the total net social welfare of setting off fireworks, on one hand, and my distress in dealing with the dogs does not depend upon the initial allocation of rights.  Assuming that we valued noise and peace in the appropriate ranges, either the celebrants would pay me for the right to have the rockets' red glare or I would pay them to cease and desist. 

It works like this. Let's assume that the pricing system works costlessly and the only actors are A across the lake who wants to use fireworks and me.  The cost to me of insulating my house against fireworks noise is $100.  If the default rule is that the fireworks can't be used without my consent, and the value to A of his (and it's always a "he") activity is more than $100, then A ought to be willing to pay me up to $100 to shoot off fireworks (the cap being $100 because for that amount he can pay for the insulation of my house).  If there is no regulation against fireworks, and I value silence at more than $100, I ought to be willing to pay A up to $100 to have him stop.  In short, with a smooth and costless pricing system, you get the same result regardless of the initial legal entitlement. But, of course, the idealized world of zero transaction costs doesn't exist, and so even if the world only consisted of A and me, and the transaction costs of paying off A creates a total cost to me that exceeds the value of silence, I won't do it, even if without transaction costs it would have been the more efficient result.  And it's not just A and me.  It's many of the good citizens of Hayes Township and many of the good citizens of Charlevoix.

Is there a market solution to my problem?!!?  It turns out that Coase didn't articulate a theorem (or at least that wasn't his object in the article).  There were no helpful hints on how to articulate a default rule so as to minimize transaction costs with the aim of an optimal allocation of resources.  In fact, he never used the word "theorem" or the term "transaction costs."

I recommend Pierre Schlag's critique of the morphing of what Coase said in Social Cost into neo-classical law and economics.  At the beach the other day, I confirmed Pierre's statement that you can get the entire basis for what others now call the Coase Theorem by page 8 of Coase's original 1960 article and skip the remaining 36 pages (actually there's a piece of it at pages 15-16 as well).  Pierre's critique is not of Coase's article. His point was that the popular takeaways - mainly Chicago Law and Economics - have transformed Coase's point into something else entirely. It wasn't Coase who developed the L&E focus on using neo-classical economics to justify legal rules, or to focus on the reduction of transaction costs in pursuit of an idealized efficient solution.  Moreover, in a different piece, Pierre observed that the L&E approach to transaction costs itself is neither theoretically intelligible nor operationally applicable.

To the contrary, according to Schlag (and, by my reading of Coase, he is right), Coase had a far different goal in Social Cost. Coase wanted neo-classical economics to take account of the real world, in particular the effect of law and legal institutions on resource allocation.  Coase's main object was to criticize the prevailing acceptance among neo-classical economists of the idea of Pigouvian taxes.  He wanted to demonstrate the problem with Pigou's approach to externalities - namely, to impose taxes or bounties to the extent that the social cost of an activity exceeded the private cost to the actor.  

Coase was skeptical of Pigou's entire approach.  The bounties or taxes were likely to be overbroad.  Indeed, the focus on making an actor's private costs equal to the total social cost of the activity was misplaced.  In the foregoing example, suppose the social cost of fireworks noise is $200 to me.  Coase criticized the knee-jerk remedy merely of taxing the activity in the amount of $200, because it is possible, in an appropriately free market, that it would only cost $100 to achieve an optimal allocation of resources. In short, the appropriate way to judge externalities (Coase didn't use that term either) was to assess the total effect on social costs both for the actors and those affected by the actors and not simply to add costs to deter the unwanted activity.

But, wait. If the market is not going to work, am I out of luck?  I don't think so.

If Professor Coase lived next door and I were to walk over there and find him, like me, huddled in a closet with his batshit crazy dogs, I don't think, based at least on what he said in The Problem of Social Cost, that he'd rule out the idea of having government rather than the market decide how resources are to be allocated. Firms get organized when there are opportunities for value-enhancing transactions, but only under a scheme where less expensive intra-firm administrative costs substitute for higher costs of market transactions. And then there is the case of something like fireworks noise, "which may affect a vast number of people engaged in a wide variety of activities" and so "the administrative costs might well be so high as to make any attempt to deal with the problem within the confines of a single firm impossible.  An alternative solution is direct Government regulation."  Here, Coase observed that "[t]he government is, in a sense, a super-firm (but of a very special kind) since it is able to influence the use of factors of production by administrative decision."  Coase pointed out that the "government is able, if it wishes, to avoid the market altogether, which a firm can never do."

That is an interesting point up here along the lake. Yes, government regulation can be overbroad and inefficient. 

But equally there is no reason why, on occasion, such governmental administrative regulation should not lead to an improvement in economic efficiency. This would seem particularly likely when, as is normally the case with the smoke nuisance, a large number of people are involved and in which therefore the costs of handling the problem through the market or the firm may be high.

But you have to get down to cases and not deal in abstractions. Coase thought economists and policy-makers over-estimate the advantages of government regulation, but all that does is suggest that government regulation should be curtailed. "It does not tell us where the boundary line should be drawn. This, it seems to me, has to come from a detailed investigation of the actual results of handling the problem in different ways."  The problem even with local government regulation is that it doesn't fully account for all of the social costs, because the board of supervisors in Hayes Township has not enacted the same ordinances as Charlevoix and Charlevoix Township, and parts of Hayes Township are closer to my living room than parts of my own city.

So, here I am, 1,778 words into this blog post, and discovering that, if Ronald Coase were my neighbor, I might well get him to join me in an effort to get the county or maybe the state government to understand there is a social cost to fireworks.  Not everything needs to be dealt with in terms of markets.

In this article, the analysis has been confined, as is usual in this part of economics, to comparisons of the value of production, as measured by the market. But it is, of course, desirable that the choice between different social arrangements for the solution of economic problems should be carried out in broader terms than this and that the total effect of these arrangements in all spheres of life should be taken into account. As Frank H. Knight has so often emphasized, problems of welfare economics must ultimately dissolve into a study of aesthetics and morals.

I suspect he'd agreed with me that, for fireworks, as elsewhere, "[in] devising and choosing between social arrangements we should have regard for the total effect." We could gather up the dogs and all those suffering from PTSD and march on township hall to tell them just that.

Or maybe he would tell me that I had over-thought the issue and suggest reading more appropriate for the beach.

AirBnB as Online Intermediary?

Tuesday I posted about tort law and the sharing economy, and today I want to continue with the sharing economy theme by discussing an AirBnB lawsuit against San Francisco. 

A city ordinance was passed requiring short-term rental hosts to register with the city. One of the provisions allows the city to fine AirBnB and similar platforms if unregistered hosts rent places through the site. AirBnB is challenging the law on numerous grounds, including under the First Amendment, Stored Communication Act, and the Communication Decency Act (CDA). It's the CDA issue that some cyberlaw scholars are watching closely. 

Section 230 of the CDA creates immunity for online intermediaries against liability for the content others post. This immunity has allowed the internet as we know it to flourish as a marketplace of ideas and haven for free speech. Without it, websites would police content and censor heavily to mitigate their liability risk. But the CDA is over 20 years old and its use has clearly expanded beyond its original purpose, which really contemplated defamatory comments on news sites or similar circumstances. 

Now, AirBnB is using CDA immunity to argue that the San Francisco ordinance violates federal law by holding AirBnB accountable for the actions of hosts. Essentially, AirBnB says it's just an online intermediary and it can't be on the hook for its users' illegal activity. While the CDA is meant to immunize online intermediaries for liability for the actions of its users, its provisions are not absolute. Some websites have lost arguments about CDA immunity because they helped create or develop content, rather than merely serve as a passive platform for it. 

Last month a federal court in San Francisco did not agree with AirBnB and denied its motion for a preliminary injunction, noting that the ordinance is not limiting AirBnB's ability to publish user content. Instead, the ordinance's penalties kick in when AirBnB collects fees for an illegal rental. For AirBnB, losing its preliminary injunction motion is probably quite concerning. CDA immunity is not clear cut because AirBnB imposes requirements on hosts, profits from each individual transaction, and processes the payments. Like other sharing economy companies, its role expands beyond that of a neutral listing platform, perhaps even into the realm of booking agent or joint venture. 

It's important to note that CDA immunity is crucial for protecting our freedom online, and attempts to chisel away at it should be approached with great skepticism. But as we continue to blur the lines between real-world transactions and online activity, perhaps a more nuanced definition for "online intermediary" is needed in order to save Section 230 from dilution. In the meantime, a lot is at stake for AirBnB, as other cities contemplate similar ways to deal with a loosely regulated ad-hoc rental market. 

What the what? Ben Carson to head HUD!

(And the real story of segregation, Detroit, AFFH, and busing)

Far be it for me to try to make rhyme or reason of Trump's cabinet picks(!), but while I wondered and worried last week about who he'd tag for HUD, Ben Carson's name didn't even come to mind. I hoped for someone like Pamela Patenaude or even former Senator Scott Brown, who instead now seems headed to be secretary of Veterans Affairs. And I worried that Trump would, instead, name someone like Robert Astorino, Westchester County Executive who has been long been fighting HUD on fair housing issues in suburban NY. Instead, we have Dr. Ben Carson, whose only experience with fair/affordable housing issues seems to be that he grew up in center-city Detroit. Carson is not a housing expert, but he has made a few discouraging (and fairly incomprehensible) statements on housing policy, for example in his 2015 op-ed in the Washington Times.

In his Washington Times op-ed, Carson calls HUD's AFFH rule "another failed socialist experiment" and draws parallels with mandated busing to de-segregate schools.  In his op-ed, Carson says that busing was a failure because (1) it did not improve school integration (the percentage of blacks attending majority black schools stayed essentially the same), and (2) was "unpopular among both blacks and whites."  Carson then states that mandated busing led to white flight because anyone with the means to do so moved to the suburbs "to escape mandated busing" which "contributed to a blighted inner cities in which poverty and school segregation became even more concentrated."  

What the what?

First of all, I'm pretty sure that Carson means "social experiment" not "socialist experiment" (and yes, Mr. Brain Surgeon, there is a big difference).  

As far as Carson's bizarre description of school busing and white flight, let's do a brief history lesson about segregation and busing in Carson's home town, Detroit.

Housing Segregation - and why we have it: Detroit is, and has long been, one of the most racially segregated cities in America (if not THE most segregated). As in other cities, segregation in Detroit was not just a naturally occurring social phenomenon. Rather, it is product of decades of deliberate governmental policies:  

• The Federal Housing Administration actually created maps that disallowed lending in minority neighborhoods and then created a handbook to help neighborhoods keep their communities white (ahem..."financeable") by creating racial restrictive covenants.
• At the same time as the federal government was teaching real estate professionals how to best discriminate, it was subsidizing white home-buying in white communities into the suburbs.
• And local governments got into the discrimination game with use-based zoning laws designed to keep poorer populations "in their place" away from the more affluent, white communities.

White flight: Carson's decried "white flight" actually really started when the FHA (remember - the agency that would only lend to whites) established all sorts of policies and procedures to promote homeownership as "The American Dream," and then eased the burden of buying a home in the new, white suburbs. This is what started the trend of massive flight of whites from inner cities. So, yes, white flight was, in fact, caused by a social engineering funded and directed by the federal government, but the social experiment that caused this was the FHA policies of the 1930s-60s, not busing in the 1970s (to which Carson refers). (And since the federal gov't broke it, it has to buy it!)

During Carson's youth in Detroit (and in the decade before he was born), the demographics of the city profoundly shifted as whites fled to, but blacks were kept out of, new suburbs.  This all started with post-war industrialization, when black workers migrated into the city, much to the alarm of its white residents. White residents moved into white-only suburbs when blacks moved into the city, this move aided by federal funds with segregation provided by the FHA and local zoning boards.  Although it is true that banks, landlords, realtors, and wealthy homeowners had joined in a strong unholy alliance to keep minority households concentrated in high-poverty areas, it was the federal government who legally and financially established and enabled these efforts and for decades turned a blind eye to the horrific inequalities that resulted. 

Race Riots and Fair Housing:  When Carson was 16 years old, (1967), the Michigan Civil Rights Commission (the “CRC”) determined that 90% of the state’s nonwhite population lived in residentially segregated areas, having been “forced to live apart in urban ghettos.” (Note - This was BEFORE the busing that Carson mentioned in his op-ed.)  This was not a separate-but-equal situation: minority neighborhoods had vastly inferior and higher-rent housing.  The huge disparity in opportunity and quality of life that this intense segregation and inequity caused is what exploded in the deadly 1967 Detroit race riots (which, surely, Carson remembers since he was there and a teenager at the time). Michigan's fair housing legislation, enacted in 1968 just before the federal Fair Housing Act, was pushed through under the leadership of Governor George Romney (Republican) and attempted to address the huge social consequences of government (and private) housing discrimination. 

Fractionalization of Detroit and Busing Schemes: Detroit is cut up into small political subdivisions - the city proper and numerous small white suburban enclaves. This reflected the white-flight development patterns of the 1940s, 50s, and 60s, and was enabled by the home-rule political approach to municipal authority in Michigan.  Once the Fair Housing Act and Brown v. Board of Education became the law of the land, the Detroit region was legally required to affirmatively further fair housing AND integrate schools "with all deliberate speed." But if each small suburban enclave was its own school district, there would be no diversity in the schools at all. Furthermore, the predominantly minority areas would have far less resources (property tax revenues) to spend on schools (as well as more municipal fiscal demands). So the Detroit Board of Education passed an integration and decentralization plan that redrew school district boundaries in order to increase school population diversity, but a group of white citizens lobbied to recall the board members and got the Michigan State Legislature to pass legislation voiding the redistricting plan. This legislation also localized school districts and further fractionalized the metro area. 

The NAACP tried to fight back by filing a lawsuit claiming that the legislation was unconstitutional because it perpetuated historic segregation. The district judge agreed and struck it down. On appeal, the 6th circuit affirmed that holding and further held that since there was no longer a proposal on the table to redistrict in a way that increased diversity, Detroit metro area would have to engage in busing as the only possible way to fulfill Brown v. Board's mandate of school desegregation. (So the busing plan was NOT put into effect by HUD, Dr. Carson. Rather, it was the only option left to de-segregate schools after the housing de-segregation efforts flopped and local governments used home-rule to defeat school redistricting plans).  Not only was this busing plan unpopular (as Carson states), it was eventually rejected as not constitutionally required by the US Supreme Court in Milliken v. Bradley (1974).  It was the Supreme Court’s decision in Milliken v. Bradley that accelerated white flight, expanded the inner-city racial ghetto, and spelled the end of school desegregation in Detroit. 

FYI: Here's what I've said about busing and housing segregation (in an an upcoming law review article) "Admittedly, mandatory busing schemes are emotionally charged and politically difficult. So perhaps the problem could be better addressed directly, in terms of affirmatively desegregating housing. Instead of attempting to have a regional school desegregation occur through busing, integration of residential housing would achieve desegregated schools in a more natural way. Much like the issue of school segregation, the segregation problem in housing must be considered and addressed at the regional level, not individual by each small political subdivision. Localism in housing control must give way to fairness, sustainability, and fair housing (and fair schooling) constitutional mandates."

And now -- Back to Carson's Housing Op-Ed:

After his false statements and intimations re: busing and white flight, Carson criticizes the Affirmatively Furthering Fair Housing Rule of HUD as relying on a "tortured reading of the Fair Housing laws to empower HUD to “affirmatively promote” fair housing, even in the absence of explicit discrimination."  In fact, no tortured reading is required at all - the affirmatively further mandate has been there since 1968, in the original Fair Housing Act. 

The Fair Housing Act: The Fair Housing Act (and most state fair housing legislation) actually has two mandates. First, it outlaws overt discrimination based on a protected class (race, but also several other impermissible grounds). Second, it requires that local communities who receive HUD funding "affirmatively further fair housing." This second mandate was acknowledged and promoted by George Romney back when he became the Republican secretary of HUD (although he had to fight Pres. Nixon to do so).  Even now, affirmatively furthering fair housing remains not only the letter of the law but somewhat of a bipartisan issue in an era of party politics extraordinare. When some republicans (Sen. Mike Lee from Utah) tried to defund HUD after the most recent rule implementing the 1968 affirmatively furthering mandate, 13 Republicans crossed the aisle to vote down that measure.  

Carson, in his op-ed, characterizes the AFFH approach as a brand new approach, but of course that isn't true. This is a return to the actual mandate of the 1968 Act - a revival that took 50 years of struggle to achieve, sadly, because Washington hasn't shown too much concern with the intractability of racially segregated housing in our society - even though it is incredibly harmful. 

Housing segregation harms include, but are not limited to:

1. de facto school segregation & disparate educational opportunities & outcomes for children of different races
2. gap in achievement in school & graduation (high school) and college attendance
3. gap in labor force participation rates & earnings
4. high single parenthood in minority communities
5. racial wealth gap and homeownership gap
6. increased rates of infant and adult mortality in minority communities
7. lower civi participation in minority communities
8. increased incidence of predatory lending (and destabilized capital, housing, and financial markets )
9. neighborhood decline, failing urban cores, and distressed neighborhoods w/vacant homes and high crime
10. racial tensions and violence

etc. etc. etc. 

Detroit is the poster child for the public harm that housing segregation causes.  The city spun into an accelerating cycle of decline.  Loss of its wealthiest residents and their contributions to the city in which they worked (the city's per capita income fell 20% in the first decade of the 21st century and its population has fell by 25% during that time) ultimately led Detroit to declare bankruptcy in 2013 - the largest municipality to ever do so.   

Ben Carson to head HUD

Trump offered Carson the HUD position on Wednesday, and although Carson said that he wanted to ponder the offer over the long weekend, in a Facebook post today (and as reported on FoxNews and confirmed in online media late Thursday evening), it appears that Carson is set to accept the appointment. In his Facebook post (and can I just pause here to note how bizarre it is that we are quoting public figures' policy beliefs based on their social media postings nowadays), Carson states that "I feel that I can make a significant contribution particularly to making our inner cities great for everyone. We have much work to do in strengthening every aspect of our nation and ensuring that both our physical infrastructure and our spiritual infrastructure is solid."

Already many in the media have decried the selection of Carson for HUD.  (See this thoroughly articulated New York Times story, this snarky NY Magazine piece, this interesting piece from The Atlantic, and this Slate article suggesting that Carson will "lobotomize" HUD.)

It is hard to know what impact Carson's leadership will have on HUD. As I mentioned, he has zero experience in housing, and his sparse commentary on HUD and housing issues disclose a profound lack of understanding of history and the Fair Housing Act. Based on the cryptic statements in his Facebook post and his negative statements re: placement of affordable housing units in single-family suburbs, it may be that HUD under Carson will focus on repairing and improving inner cities (gentrification with an eye to desegregation, perhaps? We can hope), rather than efforts to integrate poorer minority housing aid recipients into white affluent suburbs. 

I nope that Ben Carson will not turn out to be a horrible choice for HUD. After all, he does have a personal background that should allow him to sympathize with and perhaps understand the challenges faced by declining urban cores - and it is hugely important to address inner cities in terms of infrastructure/community decline, rental affordability, and persistent segregation.  Maybe his anti-affirmatively furthering fair housing statements in that one op-ed merely are the result of his lack of knowledge of the issue and the Fair Housing Act. 

The New York Times article on Carson's appointment helpfully explains (to Carson, perhaps?) that the AFFH Rule actually is not some ill thought-out governmental meddling in local affairs. It states: 

"In practice, the rule provides those communities with detailed data on factors like racial demographics, poverty rates, school quality and housing voucher use to help them determine whether lower-income and minority families are isolated from good schools or segregated from opportunity. The rule requires communities to use that information to draft plans to reduce segregation where it exists. Those that habitually defy the requirements risk lose funding from the agency."

 

Our country is in the grips of a housing affordability crisis.  Fifty-year-old fair housing legislation has done little to de-segregate housing in the nation, and racial tensions continue to intensify.  At the same time, pockets of the nation (many city centers) are in steep decline. Even though under many Republican presidents, the HUD secretary was a throwaway appointment, Housing and Urban Development is actually a critically important Department in the government. I hope that Dr. Ben Carson is up to the job, I hope he studies and learns about both aspects of fair housing law as well as affordability and revitalization issues with an open mind. And I hope that in the next 4 years we can take a step forward when it comes to housing equity in this country, rather than take two steps back.

Housing Bubble (Toil & Trouble)

The 2008 Foreclosure Crisis seems like only yesterday.  Surely we must still remember the lessons learned from the crash and will not again allow real estate prices to inflate above a sustainable level... right?  But here's a little chart that sort of scares me - note that we're at the top of the second peak in this roller coaster ride called the housing market:

Yesterday the FHFA announced an increase to the loan limit for prime loans, with the new maximum home mortgage loan for one-unit properties set at $424,100 for 2017 (more in higher-priced markets). This is the first maximum loan dollar increase since 2006. Unless you follow real estate or are in the market for a large mortgage loan, you may not have recognized the significance of this increase. The Housing and Economic Recovery Act of 2008 prohibited any increase in the loan limit above $417,000 unless and until the average U.S. home price returned to its pre-decline level.  That hasn't happened until this year.  The FHFA just announced that "that average home prices are now above their level in the third quarter of 2007."  I guess we're back, baby.

In a way, it isn't that surprising that housing prices have been growing back toward their record peak levels, particularly in some parts of the country.  The government has done its utmost to help us "recover" from the market meltdown.  For one thing, the Federal Reserve has aggressively pushed down interest rates for the past several decades - and they keep setting a new record for "how low can you go?"   Such extremely low interest rates means very low cost of capital, and cheap capital makes it smart to borrow and stupid to save.  Is it any wonder that rational consumers borrow and borrow and borrow, and hardly ever save? (this chart shows interest rates over time - better version of it is here).

Now, some types of borrowing are more available than other types. There were times when anyone with a pulse could get a credit card, and for several years in the run-up to 2008, anyone who owned or wished to own a home could obtain a mortgage loan for nearly the entire sticker price or appraised value of the home. A little not-so-long-ago-history primer: easy mortgage credit fueled a buying and re-fi frenzy for homes that drove up prices, all premised on the idea that real estate values always go up. It couldn't last. It didn't last. 

While it has been popular during the past 8 years to blame lack of regulation for the Housing Crisis, I concluded back in 2010 that the low interest rates played a very key role (along with imaginary underwriting) in the out-of-control mortgage lending. Other analysts have agreed (see also here and here). The Economist is similarly skeptical that high housing prices indicate a booming economy, pointing out that "despite efforts to fix the plumbing of the American mortgage market, housing in the United States remains a dangerous menace to the world economy" and explaining that soaring property prices in America are "underpinned by low interest rates."

The "bubble" that we now find ourselves in is different. For one thing, mortgage credit has become more difficult to obtain, due in part to the (somewhat) more attentive FHFA underwriting approaches, the (slightly) more stringent requirements for loans to qualify as prime, and the (marginally helpful) disclosure obligations mandated by the CFPB.  But if you can get a home loan, it's cost is still very low because of low interest rates. Cheap capital enables rising prices.  Another thing that is arguably different this time around is that the supply of homes has not increased as quickly as previously, and in some parts of the country, shortage of supply may be helping to prop up property sale prices (see CNBC story here). 

The Trump win, analysts believe, will lead to multiple increases in these record-low interest rates, policy makers have indicated that this could happen in December 2016, and bank stocks have brightened at this news (after initially falling, Wall Street rallied after Trump's unexpected victory - see story here). Of course, the Fed had previously promised to raise interest rates this year, but that has not really happened (see NY Times story here).  If interest rates really do increase (and I tend to think they finally will, see Wall St. J article here), will this cause housing prices to drop in 2017? Would that necessarily be a bad thing?

For more stories re: Housing bubble 2.0, the 2016-17 edition, see here, here, here, here and here.  Some of these are major news outlets, others more fringe-y, but they raise issues that those of us who watch the housing market with baited breath should not ignore.

Whitman on Transferring Negotiable Notes

Property Scholar Dale Whitman has just published an article, entitled "Transferring Nonnegotiable Notes", explaining where the law is and where it needs to go with respect to the transfer of the right to enforce mortgage loans.  This issue has been one of the most confused and contested questions of legal interpretation in the aftermath of the Foreclosure Crisis.  When the whole housing finance system began to unravel upon the unexpectedly high volume of mortgage defaults, un-tested and unorthodox industry practices regarding loan transfer ran smack into legal uncertainty regarding who held what rights to which loans subject to what defenses.  This legal uncertainty stuck like a rod in the gears of the foreclosure system, causing massive delays and, in some cases, loss of the right to enforce the loan.  

The question of mortgage negotiability and transfer adequacy has caused a "vast amount of litigation" (as Whitman puts it), and this litigation has "greatly expanded our understanding" regarding how negotiable notes are transferred. But there remains a gap in legal comprehension related to the transfer of nonnegotiable notes.  In addition, open questions regarding defenses can destabilize the market and incentivize market player misbehavior. Professor Whitman attempts to bring clarity to the murky legal questions regarding who has (and should have) the right to enforce the loan and what defenses a borrower can (and should be able to) assert against an assignee of a mortgage note. 

Professor Whitman is perhaps the most recognized the national expert on the subject of note negotiability and transfer adequacy.  His most recent article adds an important piece to the secondary mortgage market puzzle, in terms of understanding what went wrong, what rights parties have with respect to defaulted mortgage loans, and how the law should evolve to create a fairer, more stable mortgage capital market.

Here's the abstract:

This article reviews what we know about transferring ownership and the right of enforcement of nonnegotiable notes. The focus will be on notes secured by mortgages, since this is likely the context in which most modern nonnegotiable notes are created. There has been a vast amount of litigation about the transfer of negotiable mortgage notes in the past half decade, greatly expanding our understanding, but there has been little development involving nonnegotiable notes. Hence, it is helpful to compare negotiable and nonnegotiable notes, with particular emphasis on how each is transferred. Perhaps ironically, this means that the bulk of this article discusses negotiable notes as a point of reference, despite the fact that its ultimate focus is nonnegotiable notes. Part I of this article reviews the history of the definition of negotiability, and shows how our current understanding of negotiability came to be. Part II demonstrates how to tell the difference between negotiable and nonnegotiable notes, and why that difference is important. Part III discusses the meaning of “transfer” of a promissory note. Part IV examines specifically how the right to enforce nonnegotiable notes can be transferred under present law, and considers whether changes are needed. Finally, this article concludes with a brief description of a proposed national mortgage registry that has the potential to make transfers of both negotiable and nonnegotiable mortgage notes far more efficient without disrupting the current legal regime.

This article is a good resource not only with respect to the legal requirements for transferring nonnegotiable notes, but also for:

1. The history and background of the Holder in Due Course doctrine.
2. How to identify whether a note is negotiable (including Fannie/Freddie forms and notes secured by FHA and VA mortgages)
3. How negotiable notes (and the mortgages securing them) must be transferred
4. The impact of UCC Article 9 on transfers of both negotiable and nonnegotiable notes.

To me,  a very interesting and important part of the piece,  particularly the part that deals with the current applicability of the Holder In Due Course doctrine to mortgage loan transferees.  Professor Whitman articulates why this doctrine should not apply to mortgage notes, and I wholeheartedly agree.  For one thing, in a typical mortgage transaction, loan buyers are expected to conduct due diligence with respect to the quality of the credit and collateral behind the mortgage loan.  The secondary market players, of course, want the holder-in-due-course doctrine to apply, because it allows for incompetent underwriting by their industry and insulates them to some extent from illegal practices of mortgage originators.  Professor Whitman makes the compelling economic and political argument that the Holder In Due Course doctrine should not continue to apply to mortgage notes. He writes:

If the holder in due course doctrine was abrogated, and secondary market investors were forced to bear the risk of fraudulent conduct by their originators, their costs would doubtlessly rise, either to screen out the “bad apples,” or to suffer the financial losses engendered by the originators’ bad behavior.  If the private securitization industry, which has been virtually shut down since mid-2007, manages to arise again, its economics could be significantly affected by loss of the protection it has hither-to received from the holder in due course doctrine.

Nonetheless, sound economic policy strongly favors repeal or drastic modification of holder in due course. The reason hinges on the relative availability of information about the propensity of particular loan originators to engage in bad conduct. Consumer borrowers, who enter the mortgage market only at infrequent intervals and who typically have only a limited and unsophisticated understanding of its operations, have virtually no factual basis for identifying and avoiding originators who are apt to engage in fraud, and they cannot gain this sort of information at any reasonable cost. Secondary market investors (including securitizers), on the other hand, participate in the market on an ongoing or regular basis, and commonly buy loans by the thousands. Their costs in identifying and policing bad actors, when spread over a large number of loans, are likely to be quite modest. As a matter of sound economics, it is obviously more efficient to impose these risks on the parties who can best identify and avoid them. As a lawyer and an economist from the Federal Reserve Bank of Cleveland put it, if the holder in due course rule were abandoned, we could expect the following result: "By forcing the market to internalize the cost of consumer compliance and spread it across all consumers, the market’s ability to adjust costs [would be] aligned with the incentive to minimize costs that result from a competitive marketplace.” In the absence of assignee liability, these incentives are not aligned. The holder in due course rule artificially lowers the cost of consumer compliance to the market, eliminating the incentive to minimize those costs through competition. Consumers, then, bear the risk of unlawful origination practices, but lack the ability to price them into credit.

These problems arise in the context of residential mortgage loans because of the assumption by courts that mortgage notes on Fannie and Freddie forms (and FHA and VA insured notes) are negotiable.  Although standard form use does not negotiability make, Professor Whitman admits that it is likely that the Fannie/Freddie forms will continue to be seen as negotiable by courts.  The same need not be true, says Whitman, for commercial mortgage notes.

Enforcement rights with respect to negotiable notes generally requires possession of the note, but transfer of nonnegotiable notes is subject to different rules.  There is a concept under UCC Article 3 of a non-owner of the note who can enforce it - the PETE (person entitled to enforce the note).  UCC 3's PETE status is applicable only to negotiable instruments, however.  Therefore, if a note is not negotiable, enforceability by a non-owner turns on principles of the common law as well as UCC Article 9.  Note ownership is based on the principle of "follow the money and see where it goes."  And although that is an interesting question in some contexts, it is irrelevant to the question of who is entitled to collect payments, enforce the obligation, and negotiate a modification with a borrower.  In modern loan securitization parlance, the servicer should be entitled to enforce the note, even though the servicer is not the owner (the owner, of course, is the beneficiary - the entity that owns the securitized pool of mortgages).   

Among the many prior articles that Professor Whitman has written on the broader subject of mortgage loan transfer and enforcement, see:

• Dale A. Whitman, How Negotiability Has Fouled up the Secondary Mortgage Market, and What To Do About It, 37 PEPP. L. REV. 737 (2010).

• Dale Whitman, “THE PERSON ENTITLED TO ENFORCE:” LESSONS LEARNED FROM BAC HOME LOANS SERVICING V. KOLENICH, ABA REAL PROP. NEWS, Dec. 2012.   

• Dale A. Whitman & Drew Milner, Foreclosing on Nothing: The Curious Problem of the Deed of Trust Foreclosure Without Entitlement to Enforce the Note, .66 ARK. L. REV. 21 (2013).

• Dale A. Whitman, What We Have Learned from the Mortgage Crisis About Transferring Mortgage Loans, 49 REAL PROP. TR. & EST. L.J. 1 (2014). 

 

IP, The Constitution, and the Courts - IPSC 2016

IPSC 2016 - Breakout Session III - IP, The Constitution, and the Courts

Lexmark and the Holding Dicta Distinction – Andrew Michaels

A Problem of Subject Matter: Patent Demand Letters and the Federal Circuit’s Jurisdiction – Charles Duan & Kerry Sheehan

Established Rights, the Takings Clause, and Patent Law – Jason Rantanen

A Free Speech Right to Trademark Protection? – Lisa Ramsey 

Lexmark and the Holding Dicta Distinction – Andrew Michaels

How do we distinguish dicta from holding? This project uses the Federal Circuit's dispute in Lexmark (on remand) over the breadth of the holding in Quanta. As Paul Gugliuzza summarized it for me (I was a late arriver), Michael's argument is that, rather than treating holding/dicta as a binary distinction, we should envision a spectrum of the types of things that courts say in their opinions. 

A spectrum approach to holding v. dicta might helpfully restrict courts. If a holding says "No red convertibles in the park", we might worry about a case where a subsequent court says the opinion requires a holding of no vehicles in the park. They are not unrelated, but perhaps still dicta. Broader statements should have less capacity to bind than narrower holdings.

Jason Rantanen: This is interesting. We often see doctrinal pronouncement in Federal Circuit's case, much broader than necessary to decide the case. We also see language from earlier court opinions that are clearly dicta. Panels in the Federal Circuit nevertheless use it later. I wonder, however, whether we should take into account how the court is using the language. For example, do we bind the court to holding language only, or might they be appealing to the persuasiveness of early reasoning. Your spectrum focuses on text as it appears in the early opinion, but is that too narrow? Can dicta apply? 

Andrew - Sometimes dicta is well considered. But if the court pretends it's a holding, and acts as if it is bound, then they are failing to adjudicate the dispute, and that's a problem.

Paul Gugliuzza - I think the Federal Circuit may engage in some over-use of dicta. Is there a prescriptive payoff to this spectrum? How does the court determine whether to follow the statement or not?

Andrew - The payoff is to require courts to deal more directly with the question of dicta.

Pam Samuelson - I think it's interesting when dicta becomes a holding, over time, and solves a problem. For example, the 3rd Circuit (Whelan) case had a lot of broad dicta that led to a lot of litigation. But the 2d Circuit also included a lot of dicta in Computer Assocs. v. Altai, and the dicta from the that case seems to have knocked out Whelan, and been followed, correctly from Pam's view, in many other circuits.

A subsequent observation from Paul: I think the spectrum provides an interesting descriptive contribution, but I wonder whether, instead of arguing whether a statement is holding or dicta, we'd just end up arguing about (1) where on the spectrum a particular statement falls and (2) whether, given its location on the spectrum, it's binding law or not.

 

A Problem of Subject Matter: Patent Demand Letters and the Federal Circuit’s Jurisdiction – Charles Duan & Kerry Sheehan

States are passing laws designed to cabin patent demand letters. We might presume that the Federal Circuit has primacy, but this paper argues the question isn't so cut and dried. The Supreme Court, in a case about attorney malpractice, held that there should be a balance struck between the interests of the federal courts and the state's consumer protection laws.

In a demand letter case, we could ask whether 1) this raises a sufficient issue of federal patent law, and 2) is the law unconstitutional or improper. To understand the second question, look to the Federal Circuit's Globetrotter case. The patent holder threatened to send letters to the defendant's clients. The defendants sued for tortious interference, and Fed. Cir. held that the Patent Act preempted acts that prevent sending demand letters.

We argue there is an odd disconnect in the Federal Circuit's analysis. It's a mistake that makes the Federal Circuit's jurisdiction appear larger than it is.

What is the right policy outcome? Should the Federal Circuit have primacy here? The uniformity issues that inspired the creation of the Federal Circuit doesn't necessarily reach every case that touches on patent law, and perhaps these demand letter cases are outside the needs of the uniformity requirement.

Jake Linford: I'm unclear on where the line is between the stuff the Federal Circuit controls and the stuff it doesn't. It sounds circular to me. Help me understand.

Charles: The Supreme Court doesn't take the view that the Federal Circuit is the final arbiter of all patent issues. The Christensen and Gund cases are examples where the Supreme Court put the responsibility with the Seventh Circuit and Texas courts respectively. Questions of validity of the patent may go to the Federal Circuit, but not claims about a clearly invalid patent.

Lisa Ramsey: One of the reasons this is so important is because people will get different results before a state court than the Federal Circuit. Is that right?

Charles: It's unclear. If we sort some cases for the Federal Circuit and others for the states, we might get divergent outcomes.

Pam Samuelson: How does the issue of validity of the patent get to the Federal Circuit if the case starts in state courts? 

Charles: Removal is the mechanism. 

Pam: If so, then how do we take the ability of the Federal Circuit away? If the Federal Circuit decides whether it has jurisdiction...

Charles: Perhaps the Supreme Court takes cert?

Paul Gugliuzza: What triggers the arising under jurisdiction of the patent clause? Isn't this a matter of patent jurisdiction?

Charles: I'm not sure this meets the Constitutional language...

Paul: The Federal Circuit may rely on Globetrotter, even if I disagree with them. 

 

Paul Gugliuzza sent me the following summary of the Duan - Sheehan paper, which I find much better than my own:

The paper focuses on state law tort/unfair competition claims against patent holders, such those brought under the new anti-troll statutes adopted in over half the states.  As a substantive matter, Duan and Sheehan criticize the Federal Circuit for giving patent holders nearly absolute immunity from civil claims based on their enforcement behavior, an issue I’ve written about here:  http://ssrn.com/abstract=2539280.  As a matter of institutional policy, they argue that the Federal Circuit is poorly suited to assess the constitutionality of laws regulating patent assertions because the court has embodied various problems theorized to be associated with specialized courts, such as rule-orientedness, a detachment from broad policy concerns, and, perhaps most importantly, capture.  The Federal Circuit’s orientation toward patent holders, they seem to be arguing, would make the court too suspicious of government efforts to regulate patent holders.  Accordingly, they make a doctrinal argument that a challenge to the constitutionality of an anti-troll statute does not “arise under” patent law, as is required for the Federal Circuit to have appellate jurisdiction.  

 

I’m not sure about this.  I agree that, after the Supreme Court’s 2013 decision in Gunn v. Minton, a civil case challenging patent enforcement behavior does not “arise under” patent law.  The embedded patent law issues would be about the validity or infringement of a particular patent—the sort of case-specific issues that are not sufficient to create “arising under” jurisdiction.  But, in my mind, there’s a distinction between those case-specific issues and those that would be raised by a counterclaim seeking a declaratory judgment that a state anti-troll law is unconstitutional.  I suspect the Federal Circuit would say that THAT claim DOES “arise under” patent law, as it raises the issue of whether federal patent law “preempts” state law.  After the AIA’s so-called Holmes Group fix, that counterclaim would be sufficient to confer jurisdiction on the Federal Circuit.  Perhaps a better argument against Federal Circuit jurisdiction is that the federal issue is not preemption by the Patent Act, but the constitutionality of the statute under the First Amendment.  In that circumstance, the case would arise under federal law, but perhaps not federal PATENT LAW, meaning that the Federal Circuit would NOT have jurisdiction.  (In the article linked above, I argue that the Federal Circuit has erroneously stated that immunity for patent holders is about “preemption” of state law when, in fact, the court is actually drawing on the First Amendment right to petition to the government.)  In any event, this is an interesting and provocative project.  And if you’re still reading at this point, cheers to you for your commendable enthusiasm about patents and procedure!

 

Established Rights, the Takings Clause, and Patent Law – Jason Rantanen

Recent arguments have suggested that when patent laws change, the takings clause may be implicated. I wanted to understand the analytical reasoning behind the takings claim. Takings case law is a deep, Alice-in-Wonderland rabbit hole.  How does it actually apply to patent law?

1) Jason agrees that patents are property subject to takings clause. (The Federal Circuit said no, in Zoltec, when the government infringes the patent. The Supreme Court, instead, suggested in dicta in the raisin takings case, that patents are the type of property subject to the takings clause)

2) But it's inappropriate to cut and paste takings case law to patent cases. Patents aren't like rights in real property. We know what a takings of a coal mind looks like. Patents aren't the same. In addition, one key right "taken" is the right to use, and the patent holder doesn't lose the right to use, only the right to exclude or alienate. So application of standard takings cases is difficult.

3) The question is instead whether the new law changes or destroys an "established property right" in the patent. That's the taking, if there is one. What's an established property right? The type associated with property, established with a high degree of legal certainty. See, for example, the Penn Central case, where the Supreme Court is looking for certain rights. If we are looking for high degree of legal certainty, many aspects of patent law has changed significantly and frequently over time. Patent has replaced the entire statutory framework at least four times, with only very minor exceptions. For example, when Congress passed the 1836 Patent Act, it replaced the prior act, and also applied the new act to pending litigation. There are many similarities, but this is a new draft. Same with the 1952 Act: "It shall apply to unexpired patents." Damages changed dramatically, as summarized in Halo v. Pulse. Patent owners used to get treble damages automatically, and they don't anymore. Patent holders in 1836 lost that right while claims were pending.

Lisa Ramsey: One argument against cancellation in the Redskins case is takings. 

Jason Rantanen: The Redskins case considers whether the right was valid in the first place, which falls outside of standard takings analysis.

Camilla Hrdy: You may want to consider why the Supreme Court has held a trade secret can be taken. If so, why not a patent?

 

A Free Speech Right to Trademark Protection? – Lisa Ramsey 

The Federal Circuit recently held that the 2(a) bar against registering disparaging trademarks is unconstitutional. Lisa's paper aims to make two unique contributions to literature on disparaging trademarks and the First Amendment:

1. Is there a right under international treaties to be able to register a disparaging or scandalous trademark? The answer is no.
2. A framework of six elements that should be applied in deciding whether laws against offensive trademarks run afoul of free speech rights.

The U.S. is not the only country that bans registration of scandalous marks. Canada even bans use. 

We are members of the Paris Convention, which gives signees the discretion to decide whether to deny a registration on the grounds that a mark is contrary to morality or public order.

Lisa's framework (and 2(a) seems to meet most of these conditions):

1. Is there government action? Who regulates the expression?
2. Suppression, punishment, or harm: How does the regulation harm expression? Are there unconstitutional conditions imposed on speakers by denying the benefit? Lisa says no, because the benefit being denied is the right to restrict the speech of others.
3. Expression. What is being regulated?
4. Is this individual or government speech? Whose expression is regulated?
5. No categorical exclusion for the expression: Is the regulation justified because of a categorical exclusion, like obscenity or misleading commercial expression?
6. Does the regulation fail constitutional scrutiny? Is it content-neutral or content-based? That triggers different levels of scrutiny in the U.S.

What could the Court do if it wants to uphold 2(a)? 1) Say it's not suppression or punishment, and the unconditional conditions doctrine does not apply, under factor 2. 2) It satisfies the scrutiny under 6. 3) Make a "traditional contours" argument like in Eldred and Golan. 

Saurabh Vishnubhakat: Pushing on Lisa's state action analysis, if we apply Shelly v. Kramer broadly (where the Supreme Court refused to allow the enforcement of racially restrictive covenants in court, and which may be limited to its fact), that may suggest everything is potentially a state action?

Rebecca Tushnet: If the Court is taking a "hands off" approach to conflicts between trademarks and the First Amendment, then doesn't hands off mean no registration? Isn't that state action?

Lisa: It is state action.

Rebecca: Then isn't everything state action.

Lisa: There are real benefits to registration that impacts the first amendment. Demand letters work better when backed by a registration. And when you have a registration, it's easier to push claims that some see as questionable, like dilution and merchandising cases.

Charles Duan: When it comes to disparaging marks, those have particularly strong expression value - used to express feelings, and therefore even worse to restrict than other registrations.

Lisa: Exactly!

Pam: Is there an international standard?

Lisa: No, as I read the law, each country has discretion to set up the system it prefers.

Copyright Doctrine: IPSC2016

IPSC - Breakout Session II - Copyright Doctrine

Summaries and discussion below the break. If I didn't know the questioner, I didn't guess. If you asked a question and I missed you, feel free to identify yourself in the comments.

Copyright State of Mind – Edward Lee

Reforming Infringement – Abraham Bell & Gideon Parchomovsky

Authorship and Audience Appeal – Tim McFarlin

Free as the Heir?: Contextualizing the Role of Copyright Successors – Eva Subotnik

 Leveraging Death: IP Estates and Shared Mourning – Andrew Gilden

 

Copyright State of Mind – Edward Lee

Offering a descriptive taxonomy about how state of mind is used in copyright law.

2d Circuit in Prince v. Cariou: transformative use, the first factor in the fair use test: objective state of mind

9th Circuit in Lenz v. Universal: DMCA 512(f) violation: subjective state of mind

State of mind re: copyright liability - it is often said that copyright infringement strict liability. This differs from criminal law, where mens rea (criminal intent) typically matters.

If we look beyond liability, state of mind figures prominently in many different copyright doctrine. For example, authorship, including intent to be joint authors (both objective indicia and subjective intent). We haven't considered the intent of the lawsuit - are we protecting copyright or privacy, for example, but Judge McKeown on the Ninth Circuit recently argued we should. For ISPs, we have the red flag cases which have both subjective and objective elements.

Dave Fagundes: Property also deals with intent. Adverse possession and first possession have a whole mess of intent-related doctrines. Perhaps the ownership intent doctrines might help conceptualize these issues.

Pam Samuelson: Think about remedies as well. Innocent infringement, as well as willful infringement. It can play out also in relation to injunctive relief. Plaintiff's state of mind might matter with regard to obtaining injunctive relief. See also the new Kirtsaeng attorneys' fee case.

Ed Lee: Perhaps I should also look at the Supreme Court's patent cases.

Matthew Sag: If there is a universal theory about what state of mind should be for any of these doctrines, is there a logic that connects us to why we have copyright in the first place?

Ed Lee: I'm skeptical of a uniform theory. See, for instance, DMCA which is a negotiation between stakeholders.

Dmitry Karshtedt: My understanding is that civil liability more objective than subjective, while for criminal liability, intent is more subjective. and should we see the same play out in copyright?

 

Reforming Infringement – Abraham Bell & Gideon Parchomovsky

We have an immodest goal of reforming remedies in copyright, more systematically including culpability in the analysis. Under the reformed regime, we would treat inadvertent infringement (where the infringer was unaware and couldn't reasonable become aware) and willful infringement (blatant disregard of copyright law) different from standard infringements (with a reasonable risk assumption).

The close cases are in the middle category of standard infringement. The default is standard infringement. Compensatory damages should be awarded in every case. Injunctions would be rare and no restitution for lost profits awarded in the inadvertent cases. We are trying to preserve statutory damages only for cases where it is difficult to prove actual damages. So the defendant in the standard infringement case could argue that statutory damages exceed actual damages.

Why bring it in? 1) Information forcing - incentivize owners of copyright to clarify ownership and terms of licenses. 2) Avoid overdeterrence of follow-on creation. 3) Increase fairness.

Ted Sichelman: In the patent context, we worry about transaction / licensing costs. It may matter for copyright as well. For example, if the work is an orphan work, why should I face huge potential liability?

Abraham: The inquiry should account for the difficulty of finding the copyright owner.

Ian Ayres: Does any kind of negligence go to willfulness because there is no reasonable basis for non-infringement?

Abraham: It's not clear how we would calculate such a thing: What is a reasonable risk, re: evaluation of risk of law. We're treating standard as a residual category. But we are still arguing about this point.

Pam Samuelson: Have you been thinking about remedies re: secondary liability? The framework appears to deal with direct liability, but secondary liability cases may be the more complicated cases, where we wonder how culpable is the platform? The statute tries to grapple with through 512.

Abraham: We didn't think about secondary liability until we talked with Lisa Ramsey last week.

Pam: Secondary liability is the area that needs the most reform!

Abraham: We'll have to bracket this right now. Secondary seems to follow primary, and we don't have a better model right now.

Shyam Balganesh: How much of your proposal unravels other parts of the system? Are you accounting for systemic effects? For example, if information forcing matters, why not deal with that through a heightened notice requirement? Do you think infringement is independently problematic, or is it the best place for achieving information forcing goals?

Abraham: Unlike information forcing, overdeterrence is harder to fix with levers in other places. This isn't the only way to accomplish these goals, and we don't claim that, or that it's the best way.

Jerry Liu: Is it necessary, from an overdeterrence standpoint, to distinguish between willful and standard infringement? Google Books was arguably willful infringement, but it was also efficient infringement.

Abraham: I think Google probably was a standard infringer, from a culpability standpoint. They took a fair use gamble, and they won.

Jerry: How about the MP3.com case?

Abraham: You can make an argument that format change / transferring medium is fair use, so standard.

 

Authorship and Audience Appeal – Tim McFarlin

Recent projects have looked at disputes between Chuck Berry and his piano player, and Orson Welles and a script-writer. In both cases, questions of audience appeal have been nagging at me, and I want to explore that further.

Can we better use audience appeal in the infringement context than the authorship context?

Audience appeal, from the Aalmuhammed v. Lee case (9th Cir 2000), is an important factor. Audience appeal turns on both contributions, (by potential coauthors), but "the share of each in the success cannot be appraised," citing Learned Hand.  If that's right, and we can't evaluate audience appeal in the authorship context, is it a junk factor? If we can, how do we do it? And if we can, should we?

What do courts do with audience appeal? Mentioned in 21 cases, but 9 ignored it in reaching the decision. 9 found it weighed in favor of joint authorship, and 3 found it weighed against joint authorship?

How do we appraise it? If we find evidence of audience appeal from both contributions, at what point is the smaller contribution too small? 60/40?

Might audience appeal help with questions of infringement, for example in the Taurus / Led Zepellin case? Might we consider the appeal of Stairway to Heaven v. the appeal of Spirit's Taurus as a reason for public interest to weigh against injunctive relief? See Abend v. MCA (9th Cir. 1998).

Jake Linford: Perhaps talk to Paul Heald about his research on how musicians copy from each other. There is some potential danger in using audience appeal to decide infringement, injunctive relief, or damages, because that leads to a copyright regime where the party who is best-placed to take advantage of the works gets to use and make money with it, even if that party doesn't pay.

Peter DiCola: You are right to challenge Learned Hand. Audience appeal can be appraised. The question is whether it can be appraised convincingly. The part about in general where does audience appeal matter may be too general, and may not be at the heart of your paper.

Pam Samuelson: Some works have audience appeal, some don't, and it might not be relevant for unconventional expressive works For example, the internal design of computer programs are not appealing. You may need to unpack works where appeal matters and where it doesn't.

Jani McCutcheon: Watch where trademark and copyright protection overlap on this issue.

 

Free as the Heir?: Contextualizing the Role of Copyright Successors – Eva Subotnik

This paper is inspired by two recent controversies surrounding Harper Lee and To Kill a Mockingbird: the appearance of Go Set a Watchmen, and the decision by her estate to pull the student-priced paperback from the marketplace. Both of these stories are murky. Lee may not have been in her right mind when Go Set a Watchmen was released, and the announcement from Hachette about the student-priced paperback suggest both the estate and Lee wanted the low-priced version discontinued.

Should motivations of the author or the heir matter for copyright decisions? Eva argues that it should. The law should be tougher on post-death copyright successors. We should treat them more like stewards, and require some duties on their part. If copyright ownership limits post-mordem access, heirs should be encouraged to take care.

What might stewardship mean? It has its origins in theology, traditionally applied to land. It's taken on a secular cast today. Stewardship suggests that the owner has duties as well as rights. Stewardship has something in common with commons advocates - copyright should be forward looking, and concerned about future generations. Bobbi Kwall has argued that authors are stewards, and I think it should be applied to heirs as well. Unlike authors, publishers, and distributors who did work with the work, stewardships step in as recipients of a gift, and perhaps they should step into some duties.

Application: Eva doesn't argue for a statutory change, and it's not clear stewardship would change the analysis of the Harper Lee issues, but stewardship could change fair use analysis, for example with biographers and scholars. When the heir has the ownership of a sole copy, stewardship could matter [JL: unclear to me how]. Perhaps stewardship could allow authors to better shape stewardship of their legacy. [JL: Doesn't the termination provision already exclude wills?]

Brad Greenberg: A potential disconnect between assignments and statutory heirs of termination rights. What if the author's assignee is a good steward, and the children are poor heirs, from a stewardship standpoint? Is Stewart v. Abend's analysis of the renewal right a problem for your analysis? Should we also apply stewardship duties to non-author copyright owners?

Eva: To my mind, a post-death successor gains enhanced prominence in managing the copyright after death, and I'm trying to say something specific to that group of copyright owners.

Dave Fagundes: I like the idea of stewardship, but it's still inchoate, and I can't tell to whom is the steward responsible? The work? The public? The author's intent? What if authors wanted their families to be taken care of?

Eva: You could also add the author's legacy, which may differ from author's intent. [JL: This reminds me of Mira Sundara Rajan's project from the first breakout session.] 

Ed Lee: Perhaps the moral rights of integrity literature could also be helpful, which is more about legacy than children.

Giancarlo Frosio: French case 2007 might be helpful. See also Kant.

 

Leveraging Death: IP Estates and Shared Mourning – Andrew Gilden

Scholars seem to distrust claims by estates and heirs, but the tend to succeed in advocating for statutory change, and winning cases before the courts. But I found some recent claims that sound in mourning and grief that perhaps we shouldn't discount in copyright and right of publicity cases.

IP Narratives that are traditionally invoked:

1) Anti-exploitation. Randy California was badgered for years to sue Jimmy Page, but his heirs stepped in to claim some recognition for him.

2) Family privacy. James Joyce / J.D. Salinger estates

3) Purity narratives. Limit downstream uses, especially those that raise potential sexual purity. 

4) Inheritance. It's all that the author left to the family.

5) Custody (like child custody). Children as caretakers of the work.

Copyright scholarship tends to ignore these types of claims, but we see them invoked successfully in cases like family businesses, bodily disposition, organs and genetic information, digital assets, like email, and succession laws dealing with omitted family members.

What would happen if IP took these interests seriously? Perhaps there is a desire for shared mourning and grief, both by authors' heir and fans. Fans circulate and disseminate broadly as part of public mourning, but mourning families look inward, seek silence, achieve some semblance of privacy. These interests might not be as irrational as we might think.

One solution might be to bring issues of estate planning more to the fore. Marvin Gaye and Frank Sinatra created a family business when they secured copyright, whether they meant to or not.

Rebecca Curtin: You've made a very sympathetic case, and you've repeatedly spoken about family. Do you mean family, or could you include designated heirs, like the Ray Charles foundation? What might that mean?

Andrew: We may need to think differently about those who inherit intestate and those who don't.

Brad Greenberg: The incentive theory of inheritance suggests that authors will create in part to benefit children. But there could be a labor theory of inheritance: this was the authors, like the children, and it goes to the children. In addition, is this really about IP, or just copyright?

Andrew: Copyright and right of publicity. My take is more of the labor than the incentive theory.

Q: Why does the right publicity survive death?

Andrew: Jennifer Rothman has a very good paper on this. Right of publicity is labelled as property, and property descends, so in some states it descends.

Peter DiCola: I enjoy the presentation, and I ask not to upset the applecart, but what might the First Amendment tell us about these arguments about importance of controlling meaning?

Andrew: I don't think these insights should change fair use outcomes, but my concern is that heirs' motivations are okay, especially in light of how they work in other cases. The emotional appeals are not inherently problematic. (Although I have some problems with the purity rationale).

Jake Linford: Is this project normative as well as descriptive?

Andrew: It started more descriptive, but normatively, I see no problem. Prescriptively, perhaps we could ask authors to be more clear about how their intent at registration / protection, for example.

Giancarlo: Is there space for a moral rights style argument here? 

Andrew: Perhaps attribution is the best moral rights claim.

Giancarlo: Is there a mechanism is the composers of Blurred Lines had said no? Can you make the heirs grant a license?

Andrew: Blurred Lines is a declaratory judgment action - the derivative authors brought the case to foreclose liability.

Tim: The estate's emotional appeal in the Taurus complaint may have been somewhat strategic, trying to deal with the perception of greedy, rent-seeking heirs by promising to give money to sick children.

 

 

The Future of Housing

In February 2015 I participated in a fascinating conference at Washburn University School of law called "The Future of Housing: Equity, Stability, and Sustainability."  The conference covered three distinct but interrelated problems that our system of housing must face and overcome in the near future. (Articles from that symposium can be found here).  Since participating in that February conference, nearly every day I am struck anew by how vital it is that we as a nation craft effective solutions to housing challenges.

First, we are facing a crisis of de facto housing segregation and inequity in this country. Today, fifty years after the creation of HUD and 47 years after the passage of the Fair Housing Act, housing discrimination and the effects of racially-determined disparate policies regarding homeownership continue to plague our society. Current housing patterns are as equally segregated as they were back in 1968 when the Fair Housing Act was passed.  The New York Times reported on Sunday that "[e]conomic isolation is actually growing worse across the county, as more and more minority families find themselves trapped in high-poverty neighborhoods without decent housing, schools or jobs, and with few avenues of escape." As the article explains, housing disparity in this country came about not by accident but by deliberate design among all sectors of the housing market, private lenders, private property sellers, and - most disturbingly - the federal government agencies tasked with growing homeownership for the nation. The Federal Housing Administration very much served as an "architect" of segregation in the 1930s and 40s, conditioning mortgage funding on neighborhood racial homogeneity (and - even then - granting funding almost exclusively to white homebuyers). These policies were also reflected in other housing initiatives that shaped the landscape of housing today - in particular the GI bill that significantly grew homeownership in this country, but only for whites. Efforts to combat housing inequities today are hamstrung by a cumbersome "disparate impact" jurisprudence (see Professor Rigel Oliveri's article here) and the reality that it is harder to un-do a nation's housing patterns built on segregation than it would have been not to have the segregation-creating policies to begin with.  At least this summer the Supreme Court refrained from further limiting the scope of the Fair Housing Act in the Inclusive Communities case, but that alone is unlikely to lead to housing parity.

In addition to the continuing need to address housing inequity, our country still must re-establish (or establish for the first time, depending on your perspective), a stable residential mortgage market.  In the aftermath of the 2008-to-present Financial Crisis sparked by the 2007 subprime mortgage meltdown, much has been written and said about allocation of blame. To date, however, we still have an incomplete picture of how to solve systemic financial instability going forward. Professor David Reiss has made a recent, insightful contribution to the stability question in his recent article, Underwriting Sustainable Homeownership: The Federal Housing Administration and the Low Down Payment Loan, wherein he advocates that the Federal Housing Administration be preserved, but that its underwriting approach be significantly re-worked in order to create a more efficient and effective home finance system.

In addition to equity and stability issues, we must continue to bear in mind the challenge of housing sustainability. Volatile gas prices and disenchantment with suburbia (see here and here, for example) are now calling into question longstanding assumptions about zoning, neighborhood design, and community housing goals.  Automobile dependence, large-footprint houses, and suburban communities perhaps should become anachronisms as our housing policy modernizes and recognizes realities of sprawl, pollution, and suburban population de-connectedness (food for thought: see here and here).  

These challenges are not easily overcome. How can this country solve the problem of entrenched housing segregation patterns, particularly without problematic government mandate?  How can market volatility be eradicated when we continue to have financial institutions (both government sponsored and private) that today are not only "too big to fail," but are even BIGGER than ever before? And is it really possible to reconsider and possibly reverse patterns of development that are encouraged (or required) by legislation (from the local to the federal level) and enshrined in centuries of the common law? 

I leave you with these questions, in the hopes that together we can craft solutions and build a better future of housing.

I have so very much enjoyed this stint as a guest blogger at prawfsblawg. Thank you for this opportunity. And thanks to all of you who are working - in all the various important subject matter areas - toward positive developments for our law and our society.

 

New Jersey’s Legislature Takes a “Grave” Misstep

Other than fellow “property law geeks,” not many people may wonder about property rights in cemeteries, but it is a surprisingly complex and varied topic about which I’ve pondered and about which Professor Tanya Marsh of Wake Forest has developed national expertise.  She has recently written the definitive casebook on cemetery law (co-authored by recent law school graduate Daniel Gibson), has launched a venture with the Urban Death Project to work for “ecologically beneficial meaningful death care” worldwide, and has recently been quoted in the national media with respect to death and internment issues.  Monday, in a short but completely compelling piece on Huffington Post, Professor Marsh took the New Jersey legislature to task for passing a law limiting churches’ ability to manufacture and sell tombstones, vaults, and private mausoleums.

As Professor Marsh clearly explains, creation and care for tombstones in church-owned and operated cemeteries is a religious practice. After all “rituals that mark the transition from life to death are a central part of most modern religions.” (I’d go even further and say that such rituals have always been a central part of all religions.)  But this new New Jersey law, Bill 3840, that was signed into law by Governor Chris Christie in March 2015, limits churches’ ability to fully participate in those rituals – even on their own land and on behalf of their own members. The law seems to be a blatant anti-competitive, special-interest-group spearheaded “win” by the Monument Builders of New Jersey, who agitated for government assistance to preserve their de facto monopoly on manufacturing graves, memorials and vaults.  Not only does this law serve no state interest at all – let alone a compelling one – it violates religious freedom in an essential and inexcusable way. Professor Marsh sums it up thus:

This law is an amazing act by the New Jersey legislature and governor. It was adopted at the behest of a group of private market participants for a reason no more noble than to protect themselves from competition. This blatantly anti-competitive effort is even more stunning because the product at issue–headstones and memorial tablets–are not regulated. No license is required to manufacture or sell them. Literally anyone in New Jersey can manufacture and sell tombstones, vaults, and private mausoleums–everyone, that is, except religious organizations and non-profit corporations that own or manage cemeteries.

Happily for those who care about justice and religious freedom and economic liberty, the Archdiosese of Newark, assisted by the Institute for Justice, have brought a lawsuit against the State of New Jersey, seeking to have the law struck down. There are several asserted grounds pursuant to which the court could invalidate the law, including violations of Due Process, Equal Protection, the Privileges and Immunities Clauses, and the Contracts Clause (Art. 1, Section 1) of the Constitution. 

Lien Priority Rules!

Property law luminaries R. Wilson Freyermuth and Dale A. Whitman have published a concise and powerful article in the July/August edition of the ABA’s Probate & Property magazine that is both clarifying and compelling with respect to the continuingly contentious issue of residential real estate lien priority.

The priority contest between first mortgage lenders and homeowner’s associations was a dormant (or even non-existent) issue until the Foreclosure Crisis of 2008. But the Foreclosure Crisis changed the context of residential real estate lien priority questions in two ways:

• First, home values plummeted and for the first time, a significant number of homes were “underwater” – meaning that the value of the home was less than the amount of loans secured by liens thereon. When an asset’s value covers the full face amount of all liens, lien priority doesn’t much matter in terms of whether or not a lienholder will be paid (even though, of course, it still significantly governs procedure and effect of foreclosure of liens).  When an asset’s value fails to cover the amount of its liens, however, the question of priority becomes crucial. In this environment of scarcity, the first in line gets paid, and the later in line may not. 

• Second, the sheer volume of mortgage loan defaults increased ten-fold, overwhelming the judicial system and the foreclosure departments of banks and servicers. The massive increase in number of defaulted loans (together with the widespread confusion that resulted from over-zealous loan securitization and avoidance of traditional mortgage assignment through the use of MERS – which is a topic for another day) led to previously unimagined delays in foreclosure and a huge increase in the number of homes facing foreclosure, particularly in certain states and communities where the mortgage defaults clustered.  When lienholders delay foreclosure, priority very much matters because liens with higher priority can foreclose and wipe out junior liens.

These two significant context changes arising from the Financial Crisis have not fully abated, even seven years later.  And so, today, priority rules very much matter to any holders of residential real estate liens.

Homeowner Associations are one type of lienholder that is unfairly harmed by this combination of underwater mortgages and high quantity of loan default/foreclosure delay.  In approximately 30 states, a mortgage lien has complete priority over HOA liens, and foreclosure delay coupled with failure to pay association dues can lead to community financial disaster.  Sometimes HOAs are vilified in the media and in popular parlance, but it remains true that even if you hate the concept of an HOA, it is supremely unfair to have financially responsible people living in a neighborhood end up paying their defaulting neighbors’ “fair share” of community common costs.

In approximately 20 other states, statutes (including the state’s version of the Uniform Condominium Act or the Uniform Common Interest Ownership Act) have granted a limited priority to association liens, typically in the amount of six months of association dues.  When mortgage foreclosures were relatively rare and occurred relatively promptly, HOAs merely waited for a mortgage lender to foreclose and then took the 6-months worth of unpaid assessments off the top of the lender’s foreclosure recovery.  When the Foreclosure Crisis hit, it was unclear how this priority would work in cases where a 1^st mortgage lender had delayed foreclosure. Could an association independently foreclose its limited priority lien and obtain 6-months worth of back assessments?  If so, what would be the effect of that foreclosure if the 1^st mortgage lender failed to redeem its interest by paying off that super-priority portion of the association lien? (See Community Collateral Damages: A Question of Priorities discussing a description of the problem circa 2010).

In 2012, a Washington Court of Appeals held that the limited priority HOA lien acted like any other lien with a higher priority, meaning that the HOA could foreclose its lien with property notice to junior lienholders (including the holder of the first mortgage), and this foreclosure would operate to extinguish the first mortgage lien. Summerhill Village Homeowners Ass’n v. Roughly, 270 P.3d 639 (Wash Ct. App. 2012). Two years later, the DC Court of Appeals and the Nevada Supreme Court agreed with this interpretation. Chase Plaza Condo. Ass’n, Inc. v. J.P. Morgan Chase Bank, N.A., 98 A.3d 166 (D.C. Ct. App. 2014); SFR Investments Pool 1, LLC v. U.S. Bank, N.A. 334 P.3d 408 (Nev. 2014).  The Joint Editorial Board for Uniform Real Property Acts also endorsed this view, stressing that treating the limited priority portion of a HOA’s lien as a lien with “true” priority was essential to strike “an equitable balance between the need to enforce collection of unpaid assessments and the obvious necessity for protecting the priority of the security interests of lenders.” 

Enter yet a THIRD context change resulting from the Financial Crisis: The conservatorship of Fannie Mae and Freddie Mac. On September 6, 2008, the Federal Housing Finance Authority (FHFA) placed Fannie Mae and Freddie Mac (which are Government Sponsored Enterprises or GSEs) into federal conservatorship.  This unprecedented move likely saved residential mortgage lending as we know it, but has fundamentally changed the players involved in the residential mortgage market.  Back in 2008 and 2009, it appeared that FHFA conservatorship was some form of bankruptcy and possibly even a federal wind-down of Fannie Mae and Freddie Mac, but the GSEs have bounced back into the black and today are even turning a profit (now for the government).  The FHFA shows no sign of turning the reins back over to shareholders or otherwise ending the now seven-year-old conservatorship of the GSEs.

What does the FHFA conservatorship of Fannie Mae and Freddie Mac have to do with the association-mortgage lender lien priority question? Well, in cases where Fannie and Freddie are the secondary mortgage lender for a first mortgage lien, the FHFA now claims it has the power to stop or invalidate foreclosures of liens that are above GSE first mortgages in priority according to state law. That means, for example, that even though Nevada has held that the limited priority portion of a HOA’s lien is a true super-priority lien that extinguishes a first mortgage lien if that lienholder fails to redeem its interest in foreclosure (meaning: if the first mortgage holder doesn’t pay off the nine months of unpaid association dues before the HOA forecloses), that Fannie and Freddie can simply opt out of Nevada’s laws regarding lien priority and enforcement. 

FHFA’s argument that a lien with higher priority than a Fannie/Freddie interest cannot be foreclosed without its consent arises from the language of 12 U.S.C. §4617(j)(3):

No property of the Agency shall be subject to levy, attachment, garnishment, foreclosure, or sale without the consent of the Agency, nor shall any involuntary lien attach to the property of the Agency. 

Similar language in the FDIC statute has been held to preclude foreclosure of super-priority state tax liens on property of banks put into FDIC receivership. FHFA reasons, therefore, that liens prior to Fannie Mae or Freddie Mac mortgages can only be validly foreclosed with FHFA consent.

Freyermuth and Wilson do a masterful job dissecting and destroying this argument. I would encourage everyone to read their thorough and compelling analysis. The “Readers Digest” version of their argument is as follows: 

1. FDIC receivership is a qualitatively different context than FHFA conservatorship of the GSEs because FDIC receivership is short-term. FDIC receivership is a form of bank bankruptcy, and thus the consent provision operates as a merely temporary stay.  The FHFA conservatorship, on the other hand, has gone on the better part of a decade now, and it shows no sign of stopping. In Matagorda County v. Russell Law, the case that interpreted the FDIC statute as establishing FDIC consent as a prerequisite to effective foreclosure of a priority lien, the court carefully explained that a temporary delay in the ability to foreclose did not impact 5^th Amendment rights of the lienholder, but the court did note that “unmitigated delay, coupled with diminishment of distinct investment-backed expectations may, at some point” amount to an uncompensated taking. 19 F.3d 215, 224-25 (5^th Cir. 1994)(emphasis in original).
2. Stays such as the automatic stay in bankruptcy are also qualitatively different than the stay in the FHFA context because FHFA decisions with respect to GSE conservatorship are non-reviewable. The FHFA has long claimed that its actions as a conservator of the GSEs are not subject to judicial review, and the Second Circuit confirmed this in Town of Babylon v. Federal Housing Finance Agency, 699 F.3d. 221 (2d Cir. 2012). Other circuits have followed suit. Thus, whereas a lienholder hamstrung by bankruptcy’s automatic stay can seek relief under the Code (for example, under §363 or through appellate review), there is no avenue to contest the FHFA’s failure to consent to a foreclosure of an HOA lien on property burdened by a Fannie or Freddie mortgage. FHFA consent, therefore, can be given or withheld in FHFA’s sole and absolute discretion.
3. During the past several years, FHFA has evidenced its intent and consent to be bound to state lien priority law in multiple ways and contexts. For example, Fannie and Freddie servicing guidelines specifically instruct its servicers to pay off priority liens and a promise to reimburse the servicers for doing so. As Freyermuth and Wilson aptly point out, there would be no need for or purpose to this instruction if the priority liens could not be foreclosed without FHFA consent.  FHFA has also consistently operated as if it were bound by state law lien priority and enforcement rules in making arguments in various lawsuits wherein priority contests were decided.
4. Finally, Freyermuth and Wilson point out that it is not at all clear that even the FDIC consent provision applies to private parties. The 5^th Circuit, for one, has specifically ruled that the provision requiring consent to foreclosure of prior liens is specific and limited to tax liens held by local governments and does not extend to private entities. FDIC v. McFarland, 243 F.3d 876 (5^th Cir. 2001). Because HOAs are private entities, their liens would thus be unaffected by the cited statutory provision requiring prior FHFA consent to foreclose, even if that provision were interpreted the same way.

Freyermuth and Wilson conclude:

The notion that FHFA and the GSEs can thumb their noses at time-honored state law priority rules is deeply offensive. The GSEs themselves have, in the past, consistently acted as though they were fully bound by those rules. From the inception of the uniform Fannie Mae-Freddie Mac 1-4 family mortgage and note instruments, for example, the GSEs have always been careful to obtain reviews by local counsel to ensure that the documents conformed to the varying laws of the individual states. They have asserted no federally preemptive right to disregard state law. Their claim to the power to ignore state priority law under HERA is unexpected. It is not justified by any emergency because—whatever the exigencies of the mortgage crisis—the procedure that allows an otherwise-first mortgage lender to protect its lien from destruction by the foreclosure of a prior owners’ association lien is perfectly clear and simple to employ. Any such destruction is a consequence of nothing more than Fannie’s or Freddie’s servicer being asleep at the switch. There is no reason the homeowners’ association should be punished for the servicer’s carelessness; rather, Fannie or Freddie should seek reimbursement from the servicer for such losses. The authors hope and believe the courts will understand this and will continue to hold the GSEs to the normal standards of state priority law.

I couldn’t agree more.

 

Extending Unequal Second Amendment Rights

Stories like this one - a 62 year old African-American man is tackled to the ground in a Tampa Wal-Mart after a white man saw him bringing a (legal) firearm into the store - have me wondering how to think about the idea of extending Second Amendment rights in a world where we can pretty well predict, ex ante, that they will not be equally available to all citizens.  We can reasonably expect this sort of citizen self-help given that a big part of the case for arming all citizens is that they'll use their guns to intervene before bad things happen.  But given past experience, we can also expect that race will also play a part in whether police officers decide to stop citizens based only on their visible possesion of a firearm. 

We already know that there is a vast privacy gap between African-Americans and whites in the sense that Blacks are far more likely to be subject to a stop-and-frisk than whites.  (And it's hard to make the case that this gap is based on higher frequency of suspicious conduct when, for instance, we see that both New York and Philly police were finding contraband in well fewer than 10% of their street stops.)  Then there's Driving While Black.  I think it's fair to say that African-Americans and whites don't get equal benefit from the Fourth Amendment.

And that's a sticky problem.  Under current law, there isn't much you can do except to change police conduct from within.  Courts don't have a lot of sway.  Evidence suppression doesn't work for people who aren't arrested and nobody can count on getting compensation for a fruitless search.  That's why people like Michelle Alexander are looking to public debate and activism as a possible solution.

With the expansion of the Second Amendment, we have a chance to think more about the problem early on.  Although many states have long provided easy access to carry permits, the new, more muscular Second Amendment will likely lead to an expansion of gun carry rights.  But it seems likely that these new rights will not be extended equally.  First, though the permits themselves will be granted using formally neutral rules, provisions such as prohibiting permits for convicted felons will  embed historical racial disparities in arrest, prosecution, and conviction.   Theres more, however.  In my mind,  the right to carry a gun includes more than the right not be convicted for doing so; it also ought to include  the right to carry a gun and not get stopped and searched for doing so.  In that respect, I fear we won't deliver equal rights.  

And those disparities only reflect the burdens imposed by the state.  It doesn't even touch about the fact that private citizens may be unwilling to tolerate the equal extension of gun possession rights.  As long as people consider African-American + gun as a crime in progress, which was the Wal-Mart case - a gun carry permit will never confer upon African-Americans the same freedom to carry.

So what to do?  One possibility is to say: it's inappropriate to extend rights to one population if every population can't receive an equal benefit.  The contrary view is to see the Second Amendment just like the Fourth Amendment: a right which society will have to struggle to enforce equally but which, given its constitutional basis, ought to be extended as far as possible immediately.  (And of course most Second Amendment advocates will argue that there is no extension going on here - only a much-delayed enforcement of an existing right.)  But is there a third way?  Could we view it as a property right which is impaired when a person is subject to a search?  Might there be a novel Fifth Amendment claim here?  Could we impose a tax on guns that is used to fund a statutory compensation scheme?  Is there a way, other than the exclusionary rule, to disincentive police over-reach?  (Something like Richard  Myers' Fourth Amendment Small Claims Court?)

This is all half-baked, but it's a problem that troubles me.  I'd love thoughts.

The New Cognitive Property & Human Capital Law

Intellectual property is all about the bargain, no absolutes. But below the radar, a patchwork of law and contract is operating to expand the types of knowledge and information that become propertized. My new article, The New Cognitive Property: Human Capital Law and the Reach of Intellectual Property, forthcoming Texas Law Review 2015 is now up on ssrn. Here is the abstract and as always, I would love to get your thoughts and comments:

Contemporary law has become grounded in the conviction that not only the outputs of innovation – artistic expressions, scientific methods, and technological advances – but also the inputs of innovation – skills, experience, know-how, professional relationships, creativity and entrepreneurial energies – are subject to control and propertization. In other words, we now face a reality of not only the expansion of intellectual property but also cognitive property. The new cognitive property has emerged under the radar, commodifying intellectual intangibles which have traditionally been kept outside of the scope of intellectual property law. Regulatory and contractual controls on human capital – post-employment restrictions including non-competition contracts, non-solicitation, non-poaching, and anti-dealing agreements; collusive do-not-hire talent cartels; pre-invention assignment agreements of patents, copyright, as well as non-patentable and non-copyrightable ideas; and non-disclosure agreements, expansion of trade secret laws, and economic espionage prosecution against former insiders – are among the fastest growing frontiers of market battles. This article introduces the growing field of human capital law, at the intersections of IP, contract and employment law, and antitrust law, and cautions against the devastating effects of the growing enclosure of cognitive capacities in contemporary markets.

SEALS

Think about proposing programming for the annual meeting, or participating in a junior scholars workshop. And if you are ever interested in serving on a committee, let Russ Weaver (the executive director) know. The appointments usually happen in the summer, but he keeps track of volunteers all year long.

Intellectual Property Infringement as Vandalism (Part 1)

In addition to empirical work in intellectual property, another area that has been keeping me occupied is the intersection between IP and criminal law. A few years ago, I wrote an article entitled The Puzzle of Criminal Sanctions for Intellectual Property Infringement, 24 Harvard Journal of Law and Technology 469 (2011), in which I explored why we have criminal sanctions for copyright and trademark infringement but not for patent violations. Earlier this year, I published a paper called The High Cost of Low Sanctions, 66 Florida Law Review 157 (2014), that examined how low sanctions can lead undesirable laws to be passed and can eventually morph into high sanctions, an analysis whose focus was partly on copyright law. I then moved on to study, in an article called Intellectual Property and the Presumption of Innocence that is forthcoming in the William & Mary Law Review next year, the constitutional dimension of intellectual property criminal cases. I argued that prosecutors should have to prove that every element of such crimes, including the jurisdictional element, has been met beyond a reasonable doubt before convictions can occur. Most recently, I turned my attention to the relationship between the criminal (and civil) sanctions in intellectual property and those that we observe in property. This project, co-authored with Robert E. Wagner, is entitled Intellectual Property Infringement as Vandalism, and I would like to take the opportunity to describe it further here.

One of the recurring questions in scholarship is whether intellectual property qualifies as property and, as a correlative matter, whether IP infringement is theft. Content owners significantly push this analogy, including in heavy-handed ads that seek to remind people not to “steal” songs or movies. Meanwhile, critics have chipped away at the theft label. They have argued that when an object is stolen, the owner is entirely deprived of it, whereas IP owners maintain integral copies of their works when infringement takes place. Unlike in the case of theft, the intellectual property owner can also continue to sell copies of said work to willing buyers, if the market will bear it. Furthermore, to the extent the owner suffers a loss at the hands of the IP infringer, that loss is difficult to calculate. Not every infringer would have bought the work had he lacked the opportunity to infringe. At the same time, nobody can say with certainty about herself—even assuming perfect honesty—which works she would have bought in a zero-infringement world because the impulse to rationalize one’s actions in this setting is strong.

The sphere that discusses intellectual property infringement is thus mostly split between two camps. One of them believes that infringement is theft and concludes that if it is theft, the criminal sanctions and harsh civil sanctions that we have on the books are warranted. The other side denies that infringement is theft, sometimes downplays the gravity of infringement behavior, and regularly believes that the level of sanctions that American law provides is unjustified. We argue in our paper that the dichotomy that these two camps endorse is faulty, and that the question of whether intellectual property infringement parallels violations of property law requires much more nuanced analysis before it can influence the calibration of sanctions for intellectual property infringement. We seek to show that there is little meaningful difference between intellectual property infringement and property violations, but that the question of whether infringement is theft has led to the creation of an unnecessarily confusing and polarized discussion framework. While many scholars are correct to state that intellectual property infringement is not and cannot be literally the same as theft for the reasons briefly delineated above, such infringement bears significant similarities to and few distinctions from lesser property-related offenses such as vandalism or in some cases trespass. 

If one accepts the idea that IP infringement does at times parallel property violations, albeit not necessarily theft per se, the startling realization emerges that IP laws actually may punish wrongdoers more harshly than property law punishes defendants for equivalent offenses. After creating an analytical model to determine the content of “equivalence” in this context, we demonstrate that adopting a truly property-oriented IP legal regime may actually mandate a view of lowered criminal and civil sanctions. I will explore the ideas from this paper in more detail in future posts.

Related articles

Is intellectual property infringement a property crime?

Manta & Wagner on Intellectual Property Infringement as Vandalism

Is Yours One of the 45 Law Schools to Which it is Worth Going: A Look at the Broken Market for Legal Education

As those of you who have read my earlier posts (and I hope you have) know everything I’m writing on legal education takes as a premise that the entire system of financing higher education is broken and that we, as a society, are borrowing against our future by making college, let alone graduate and professional schools, financially prohibitive to those who otherwise have the interest and ability to pursue it.     But as bad as the debt to employment ratio is for many law students right now it is made worse by a misperception of a uniform level of financial stress, a uniform kind of desirable job, and a uniform market for legal services.   These misperceptions are making the market for legal education inefficient  yet this inefficiency is supported by a social norm that higher must be better  (yes, Wikipedia--Prof. Ellickson don't rescind my property grade)--and as a result causing hardship for prospective law students and law schools alike.

 On Monday, fearless leader of the Law Professor blogs network, Professor Paul Caron, in our flagship, Taxprof Blog  highlighted this working paper by  Kelsey Webber who “does the math” and concludes that there are only 45 law schools worth attending at sticker price.    That may sound better than the critics who conclude that there are no law schools work attending, but it is based on the same flawed assumptions.

 Like all “works in progress” there’s lot to pick at—starting with the premise that any law student anywhere is paying “sticker price,” but over the next five days, or so, I’m not going to pick at the paper but rather am going to challenge the generalizations it reflects.    I’m going to focus on law’s status as a highly regionalized profession and on the differences that have always existed between schools that historically sent a big chunk of their students to large firms and schools that never did.   

 And I’m going to address a lurking elephant in the living room that is contributing to the misery—students pursuing legal educations often do so not out of a sense of vocation but rather as a hazy path to a good income.  Nothing wrong with that—but it interferes with an efficient, market in which law students would flock to regions not suffering from economic downturn and to law schools offering attractive combinations of low tuition/strong financial aid.   

 I’m not here to blame students for decisions they make at age 20 with limited available information.  I’m just pointing out that this idea of a universal hierarchy of law schools perpetuated by US News rankings has fueled the suffering and distress in the regions where there is little hope of getting a job that would make law school a sound investment.  I'm not blaming the messenger, I'm suggesting that they don't work in law the way they work for Clinical Psychology Programs, Engineering Schools or even Medical Schools where higher ranked programs (regardless of location) are closely linked to better job prospects.

 I’m also going to address some measurement issues that assume a “big law” view of the world.   So, for example, while lack of a big law job 9 months out of law schools is catastrophic because traditionally those were sewn up by the end of the second year summer or certainly by graduation, it means far less outside big law where students are seldom even considered until they have passed the bar-something that won’t happen until five or six months after graduation.   And in general, what it means in relation to whether law school was “worth it” depends entirely on the size and shape of the financial hole law school creates.  And that varies a lot.

At the other end, I’m going to dispute how safe a bet these 45 schools actually are for every student interested in becoming a lawyer.  These are all great schools.   The students attending them worked hard to get there, and have every right to enjoy the status they confer, but, again, law is highly regionalized and I plan to vigorously dispute the pernicious paradigm that all higher ranked law schools are better for all law students than all lower ranked law schools. 

 

To be continued.

The Canadian ALPS

O Canada. O wordplay. For the title of this post refers not to the glorious snow-capped Canadian rockies (which are sometimes, though apparently not terribly often, referred to as the "Canadian Alps"), but rather the soon forthcoming Annual Meeting of the Association for Law, Property, and Society (hence, ALPS, get it?), which will be held this Friday and Saturday, May 2-3, at the University of British Columbia in Vancouver.

ALPS had its origins as a small property scholarship workshop that I was fortunate to be invited to when it was first held down at Chapman Law School in early 2008. Since then, different iterations of the conference have been held more or less yearly and the event has ballooned into this year's major event, which will feature a couple hundred attendees, with around 150 presentations over the course of two action-packed (or at least property-scholarship-packed days). Keynotes to be given by Joe Singer and Andre van der Walt. Property-related field trips. Mixers. Canada. You get the picture.

Two points, one small and one more general, about ALPS.

First, for those who can't attend, I'll be live-tweeting the event here. I can't promise any Tushnet-level detailed play by play of the proceedings, but I'll assay to comment on the proceedings when and where relevant. 

Second, I have a particular interest in this edition of ALPS because I was part of the program committee. Along with Shelley Saxer of Pepperdine and Sally Richardson of LSU, we sorted the submissions, organized them substantively, and put them into an order that had to balance thematic coherence with everyone's scheduling preferences. 

This was a lot of work (especially because the conference was big this year--easily the most attendees ALPS has ever had), but it was interesting and fun too, and I'm glad I was part of the team effort. I hadn't served on a program committee before, and it turned out to be a great way to get a sense of what people in the field from all over the world are working on, and to get a satellite-level notion of the lines along which contemporary property scholarship breaks down.

Junior scholars in particular could benefit from serving on the program committee of a major conference in their field. I wish I'd had the chance to do this in the first couple of years I was teaching. Not only is it a good way to get an instant crash-course in what kind of scholarship is happening in your area, but it's also an ideal means for meeting and making connections with people with similar or related scholarly interests (not to mention being the kind of service to the academy that looks good on a tenure application). 

Off to Vancouver! I may see some of you property profs there. Otherwise, I'll blog at you all when I get back, unless I get eaten by a polar bear or decide to join a hockey team or some other Canadian cliche.

"Shadows" and "Innocence," copyright and performance

Earlier, I wrote about the Ninth Circuit’s recent Garcia decision, which is turning out to be the copyright Ishtar* of 2014. One take on what is so rank about the opinion is that it flouts a basic copyright principle that performances (separately from the works they are based on) are not copyrightable.

But earlier this month, just after Garcia was decided, the District of Nevada issued a far less remarked-on opinion entering summary judgment in favor of Teller (the silent, shorter member of the famed Penn & Teller duo), who argued that a YouTube video by Dutch magician Gerard Dogge infringed Teller’s copyright in his illusion “Shadows.” 

At first glance, it’s hard to tell these cases apart. If Garcia was wrongly decided because (in large part) it erroneously held that performances are copyrightable, then shouldn’t Teller have lost as well? The answer is no, but it requires a closer look at the circumstances of these deceptively different cases. And the value of taking that closer look is to parse out more carefully what does, and does not, work about the “performance is not copyrightable” aphorism. More below the fold.

It’s worthwhile to give a quick sense of the infringement in Teller. Teller’s “Shadows” is a very elegant and affecting illusion that begins with a rose on a stand with a light in front of it causing a shadow of the rose to be projected onto a screen behind it. Teller then appears, and cuts away the petals of the rose’s shadow, and when he does so, each corresponding petal on the actual rose falls as well. In Dogge’s video, he performs a virtually identical illusion with nearly identical set dressing and materials (indeed, the name of his illusion is “The Rose and Her Shadow”), though there are some slight variations (Teller uses a rose in a vase, while Dogge’s is in a bottle; Teller’s and Dogge’s performances end with different performative flourishes).

That said, the way to reconcile Garcia’s wrongness with Teller’s (relative) okayness lies in the nature of the latter’s asserted copyright interest. Teller registered his work, “Shadows,” as a dramatic work (actually, "dramatic pantomime" in the registration certificate) with the Copyright Office in 1983 (though he had been performing the illusion since 1976). The registration comprises a detailed description of “Shadows” to the minutest detail. By contrast, Garcia’s purported copyright in “Innocence of Muslims” derived solely from whatever originality her performance added to the underlying words written by the screenwriter. 

Moreover, Teller’s registration of “Shadows” also clarifies and simplifies his authorship status with respect to the work. He is solely listed as the dramatic work’s author, because he is—the entirety of “Shadows” is the product of his creative mind alone. Again by contrast, Garcia’s authorship status with respect to “Innocence” is a wreck. She is at best one of many joint authors of the work, though her relative contribution to the final product is vanishingly slim.

Still, these two cases raise a puzzle: Is performance copyrightable or isn’t it? I don’t think we need to get too Clintonian about this (i.e., no need to default to “it depends on what ‘performance’ means” hair-splitting). Teller didn’t hold that performances are generally copyrightable. It held that Dogge’s YouTube video amounted to an unauthorized public performance of Teller’s copyrighted dramatic work.

If you want to get really technical about it, Teller’s claim was not that Dogge’s video was substantially similar to Teller’s performance of “Shadows” (indeed, there are many different performances of “Shadows,” though they are all nearly identical), but rather that it was similar to the dramatic work “Shadows” that was embodied in the copy Teller filed with the Copyright Office back in ’83. A performance is something that you can do with a work, just as you can reproduce or adapt or distribute copies of it, it’s not the work itself, and only works are copyrightable.

Throughout this post, I’ve been saying that Teller seems basically right. The reason I’m equivocal lies in one part of the opinion that went largely unremarked. The court remarked that the defendant’s work was substantially similar to Teller’s in part because “both performances are based on the incredibly unique concept of a performer cutting parts of a rose’s shadow, thereby cutting the corresponding parts of a real rose.”

Putting aside the court’s problematic usage of “performance” and “performer”, what raises a red flag about this passage is the court’s suggestion that Teller’s copyright extends past his specific expression of the particular dramatic work articulated in the deposit copy he included with his copyright registration, and applies generally to the “concept” embodied in his dramatic work.

This phrasing seems to flout copyright’s good old idea/expression dichotomy, though as with all idea/expression issues, the distinction is a hard one to draw. I’m OK with the outcome in Teller because Dogge’s video mimicked Teller’s work down in detail with only a few exceptions. But one could imagine variation on “Shadows” that are not as slavish in their copying. Consider a variant where a garrulous magician cut the petals from the projected shadow of a sunflower, causing the real thing to fall. Or more abstractly, imagine a version where a talkative illusionist came out and cut the limbs off of the projected shadow of the human effigy of some great historical villain (Hitler, Stalin, Donald Sterling), causing the limbs on the actual figure to fall off. I think the latter two would be far enough from Teller’s work to be allowable, even though they are based on the “incredibly unique concept” that animates “Shadows.”

Finally, if Teller is (mostly) rightly decided, does that mean that magic tricks are copyrightable, contra the major premise of Jacob Loshin’s really cool article on informal means of protecting illusions in the magician community? No way. What Teller owned was the copyright in a dramatic work that happened to contain a magic trick. The underlying idea that animates the specific expression of the performance remains, in my opinion if not the D-Nev’s, fair game. 

*This 1987 movie, featuring Warren Beatty and Dustin Hoffman lost in the Sahara Desert, was generally considered unspeakably awful and became a legendary Hollywood bomb. This tends to be my go-to reference for Hollywood disasters because, unlike Waterworld or Cutthroat Island or Heaven’s Gate, I actually saw Ishtar in the theater when I was a kid. God knows why. Maybe it was some form of punishment.

A Typology of Authorship in Highly Collaborative Works

To paraphrase Anna Karenina for the kajillionth time, all copyright scholars think Garcia was wrongly decided,* but every copyright scholar thinks so in their own way. When the Ninth Circuit held a couple months back that an actress has a “copyright interest” in the film in which she briefly performed, the (understandably) apoplectic reaction was as entertaining as the decision was mysterious. I’m on board with the general reception that the Garcia opinion was the copyright equivalent of sitting on a whoopee cushion, so instead of beating that long-deceased equine, I will instead explore a related issue raised by the case.

Copyright’s notion of authorship works great when we’re dealing with the classic, solo Romantic author: Some genius artist sits alone in a room painting a masterpiece all of her own invention, and—boom—thanks to section 201(a), the copyright in that work vests in her, making her the author of the work for the duration of the copyright, and the owner of the work until she transfers her copyright.

But a much harder question arises when we complicate the story of authorship to include multiple collaborators on a project. The solo writer or painter is clearly the author of their work, but when we imagine a fashion photograph involving a photographer, model, makeup people, and numerous technicians, the notion of authorship becomes far murkier. This is, then, one of the major issues raised by Garcia: how do we allocate authorship when many people make expressive contributions to a final creative product?

So this post seeks neither to praise Garcia (obv.) or to bury it (that’s been done amply and adequately already). Instead, below the fold, I want to develop a typology of the different kinds of creative contributions people make to works, and how these different kinds of contributions might give rise to what we call copyright authorship. Importantly, this is not a normative claim that all of the contributors in these classes are or should be entitled to joint or freestanding copyrights, but merely to organize and make sense of the different kinds of contributions to works that could plausibly be understood to be the result of creative authorship.

First is what I will call visionaries. This is a grandiose term because I can’t at present think of a less pretentious one, but I mean it simply to refer to the person who is in charge of the overall vision of a highly collaborative work of authorship—the director of a film, the producer of a sound recording, and perhaps the photographer of a sophisticated, artistic photograph (hence there will be no rehashing of the Ellen’s-selfie debacle here).

The visionary comes closest to the person who fits the Romantic notion of authorship of a work. The director of a film, for example, typically has the initial vision of and the most creative control over the content of the entire film. Hence courts have tended to conclude that (presuming we are to regard works as unitary rather than comprised of many different subworks by many different artists, which Garcia surprisingly called into question) the person exercising this visionary function is the presumptive author of a highly collaborative work. E.g., Burrow-Giles v. Sarony (U.S. 1884) (holding that Napoleon Sarony was the author of a famous photograph of Oscar Wilde because Sarony determined the setting, lighting, subject placement, and other features of the work).

Second, consider performers—actors in films, models in photographs, singers and session musicians in sound recordings). It was the Garcia court’s willingness to consider performers as authors of works that was so jarring to settled understandings of copyright (and also to the Copyright Office, which had rejected Garcia’s application for a copyright in the same performance that the Ninth Circuit held was protected).

I share the intuition that something seems very wrong about extending Garcia a copyright in her performance. But what complicates this is that I don’t have that same intuition in the context of sound recordings.** It does not seem obviously wrong to me that singers and musicians should not be the owner of the sound recordings they create at a studio. Their performances vivify the otherwise highly abstracted musical works on which they are based, and comprise the substance of the recorded sounds themselves. The seeming plausibility that musical performers might have a copyright in their sound recordings makes it a little harder to reject out of hand the notion that dramatic performers can never have a copyright interest in the audiovisual works to which they contribute.

The third category is the technician. This is the person who actually causes sounds or images to be fixed in the tangible medium of expression that is required for federal copyrightability—the cinematographer in film, the sound engineer in a recording studio, or the person taking a photograph (modernly, this is usually the visionary as well, but this was not always the case—Napoleon Sarony, for example, never touched a camera in his life).

A colleague once pointed out to me a formalist argument for why such technicians should have authorial status. The work in photographic works, audiovisual works, and sound recordings is pretty much indistinguishable from the fixation. So for a sound recording, the work is the actual sounds fixed in the studio’s digital audio tape. By this logic, then, the person who is actually creating the work is the person who is actually fixing the sounds (or in the case of other works, fixing the images).

This argument works well when the technician also makes crucial creative decisions about the work. The best example is the photographer. Eddie Adams or Manny Garcia (no relation to the “Innocence of Muslims” actress—as far as I know, anyway) are both the visionaries who imagine their photos (to the extent possible with photojournalism, which typically requires spontaneous creation) as well as the technicians who execute the fixation of their creative vision. Sound recordings are a harder case. Some sound engineers make creative contributions, while others act at the direction and discretion of producers. And the case where this makes the least sense is the cinematographer, who exercises great technical skill to operate the camera but who typically acts in the service of realizing the director’s creative vision (again, there are exceptions—Spielberg, for example, takes a relatively greater technical role in his films than most Hollywood directors).

The fourth and final category is the writer. This category will be populated only where the highly collaborative work is derivative of some other work—a screenplay, a musical work—so would exclude works like a painstakingly posed photograph. And it is beyond obvious that in order to create the film or sound recording at all, the creator of the derivative must get a license, either through bargaining (in the case of a film) or through section 115’s compulsory license provisions (in the case of a sound recording). But the fact of acquiring a license does not diminish the central role that the writer’s contribution plays in the creative impact of films or sound recordings. It just means that here, unlike with other categories, the copyright ownership issues are reasonably well demarcated and understood.

These categories—not meant to be exhaustive, but just illustrative—comprise four different ways that one might contribute to a highly collaborative work in a creative way that approaches copyright’s notion of authorship. One could contribute an overall guiding vision, or provide an original and electric performance, or supply the work’s underlying narrative structure, or contribute technical expertise in a thoughtful way that contributed to the aesthetic success of the final creative product.

The problem with acknowledging this multiplicity of forms of creative contribution for the purposes of law, though, is that copyright is ill-suited to manage the descriptive reality of authorship in highly collaborative works.*** This may suggest that Garcia is flawed pragmatically more than doctrinally. There may be some plausibility to the idea that a performance could be copyrighted, but the practical implications of going down that rabbit hole are just too messy to contemplate. So while the Romantic notion of locating authorship of all works in a single individual—visionary, technician, or whoever—may not square with the need to have a manageable notion of authorship (and, related, ownership). Hence this may be one rare instance in which Romanticism and pragmatism are on the same page.

*In all fairness, there were apparently a handful of Garcia supporters (other than members of industry groups benefited by the decision’s outcome).

**Based solely on casual empiricism, I think others share this intuition. I always ask my class (before we get into what law actually says about these things) who they think the author of a movie should be, and most people answer "director." But when I ask them who the author of a sound recording should be, the most common instinctive response is "the vocalist." No love for the producer, I guess.

***This may be a problem endemic to all property, actually. Real property law does ok with the idea of limited co-ownership, but once the owners of a given plot become too numerous, management problems and devaluation kick in. This is a particular problem for familial or tribal holdings over time.

A salience-bias defense of marginal law reforms

Hey y’all. It’s always good to be back guesting at Prawfs. I’m looking forward to sharing thoughts about property—physical, intellectual, and otherwise—over the course of the next month. I’ll kick it off with a news item that caught my eye today: The UK just announced a forthcoming reform to its copyright law. Among other things, British citizens and subjects are now free to—wait for it—make personal copies of legally acquired copies of digital media (e.g., eBooks, CDs) for format-shifting or backup purposes.

This aspect of the British copyright reform strikes me as a perfectly good and sensible idea (as did its other features, like broadening the UK notion of fair use), but response to it sounded more in the register of “meh” or “so what?” than “hallelujah.” After all, this part of the revision legalized conduct that most people assumed was already legal (and may indeed be legal in other countries with broader notions of users’ rights), was certainly widely underenforced (because it doesn’t make a lot of sense to spend resources breaking into people’s homes to see if they’ve made a nefarious illicit backup CD copy of, say, Fartbarf’s “Dirty Power”*), and was, in any event, largely a moot point thanks to the increasing marginality of the relevant technologies (because, as my students helpfully point out to me when I refer to this medium for experiencing music, who uses CDs anymore, Grandpa?).

And yet I think there is something interesting about the UK’s move, not so much for the substantive impact on copyright law or user practices, but about a strategy for how and why we may want to reform laws generally. I explore this notion below the fold.

The major justification for these reforms (which grew out of the very thoughtful Hargreaves Report, which, for what it’s worth, could be a model for US copyright reform, in the vanishingly unlikely event that any congressfolks are reading this) is simply that it makes sense to update law to reflect actual practices. By one estimate, 85% of people in the UK assumed that making personal use copies was already legal, and the practice is already widespread. On this explanation, the personal-use element of the UK's copyright reform is well-taken but inconsequential, like fixing a spelling error that didn’t really confuse anyone about the meaning of a sentence.

But there’s another, broader, reason why this reform might be good even—perhaps especially—for the kind of copyright industries who were likely to resist it. This kind of conspicuous gap between social norms and practices on one hand and regulation on the other can be an embarrassment to the law that exacts outsized costs in terms of credibility. The reason that law/norm disjunctures can be especially problematic is that non-specialists may generalize about the entire law based on one conspicuous silly or outdated provision. This is a species of salience bias or the availability heuristic. Observing one particularly notable example about a place or, say, a body of law can falsely lead us to believe we have a true sense of its overall character. 

The UK group Consumer Focus made just such a leap in this setting, pointing out that the illegality of innocuous conduct like making personal backup copies had caused the credibility of all “UK copyright law to fall through the floor.” This move—deriving the character of an entire body of law from its worst provisions—is not limited to copyright. A roughly analogous phenomenon is the tendency of laypeople to assume that when one (purportedly) guilty man goes free, that the criminal law system is generally very lenient—despite the overwhelming rates of conviction for accused criminals.

This is sort of like synechdoche in law—using a part, and especially a flawed or discordant part—to represent the whole. And what it means for law reform, and in particular the reform of statues like the Copyright Act, is that law/norm disjunctures may be more problematic than is usually appreciated. We generally tend to think that these kind of disparities between law on the books and actual practices are bad because of the people they unwittingly regulate. Out of date laws could impose sanctions for conduct that has become widely, imposing outsized penalties on unsuspecting people for trivial violations. But the UK example reminds us that the law/norm gap may be a major problem for law itself, especially in light of the tendency of lay observers to infer from a single out-of-step provision that an entire regulatory structure is flawed.

*Yes I used the name of this band in this illustration for amusement (mainly my own). But also yes, there actually is a band called Fartbarf, and perhaps more surprisingly, they actually have appeal once the juvenile humor value of their name fades, assuming that you’re into 80s-inflected synth-pop performed by a bunch of guys in gorilla masks. And hey, isn’t everyone?

Nope, Mormons aren't successful because of their legacy of nineteenth-century wealth

Unless you live in a remote cabin without an internet connection you’ve heard that Amy Chua and Jeb Rubenfeld have authored a book, The Triple Package, that purports to explain the economic success of certain ethnic and religious groups – Cubans, Nigerians, Mormons, Jews, some Asian groups, south Asian Indians, and Iranians – in terms of a particular constellation of culturally ingrained outlooks that lead to successful striving.  By and large respectable liberal opinion is outraged.  The consensus is that Chua and Rubenfeld’s argument is silly and probably racist in some way.

I have no particular sympathy for The Triple Package.  I haven’t read the book, but from what I’ve seen it strikes me as a pop-psychology gimmick rather than a serious social explanation.  I am sympathetic to the idea that culture matters when it comes to economic outcomes, but I find it’s often invoked as a kind of deus ex machina.  I have much stronger sympathies with thinkers like Douglas North, who give explanatory pride of place to institutions.  So, I’ve no brief for Chua and Rubenfeld, even though my knees don’t jerk in synch with respectable liberal opinion. 

I am, however, both a practicing Latter-day Saint and a student (of sorts) of Mormon history.  Hence, what has been most interesting to me about The Triple Package has been the way that Mormonism has played out in the argument over the book’s thesis.  Enter Daria Roithmayr.  In a hostile review on Slate, she argues that the true explanation for differing economic outcomes across groups lies largely in their initial endowment of wealth, although she is willing to admit room for other factors at the margins.  On the Mormons, she writes:

It’s not just that Mormons have developed a “pioneer spirit” or that they believe that they can receive divine revelations, as Triple Package would have us believe. It’s more that the first Mormons started with enough money to buy a great deal of land in Missouri and Illinois. They then migrated to Utah, where Brigham Young and his followers essentially stole land from the Shoshone and Ute tribes, refusing to pay what the tribes demanded, and petitioning for the government to remove them. Beyond thousands of acres of free land, early political control over Utah was helpful.

Hence, Mormon success, such as it is, is due mainly, according to Roithmayr, to the Mormons’ initial endowment of wealth.  The problem with this claim is that it is wrong.  Roithmayr’s review is not primarily about Mormons, of course, and within a 1600-word article historical nuance goes out the window.  The problem with Roithmayr’s claim, however, is not that it lacks nuance.  It’s that it is flat wrong. 

Roithmayer invokes nineteenth-century Mormon history, which can be divided into two periods. From 1830 to 1847, the Mormons were centered in the eastern United States, first in New York, then Ohio, Missouri, and Illinois.  The second period spans 1847-1890, when the Mormons moved en mass to the Great Basin, settled Utah and the surrounding territories, and fought a long battle with the federal government over polygamy that they eventually lost.  So during these periods did the Mormons benefit from huge windfalls of wealth that set future Latter-day Saints on the road to economic success?

No.

The early coverts to Mormonism tended to be very poor.  Joseph Smith, the religion’s founder, came from an impoverished family of New Englanders trying desperately and ultimately unsuccessfully to make it in upstate New York.  Their creditors got the family farm, to which they never had clear title.  Most converts came from similar backgrounds.  In Missouri the Mormons tried to create their own settlements by squatting on federal land, improving it, and then hoping to purchase it from the federal government when Congress passed one of its periodic pre-emption statutes.  (Prior to the Homestead Act of 1862 the federal government demanded payment from those who wished to get title to government land.)  When it became apparent that Congress was going to pass a pre-emption statute, non-Mormon elites in Missouri organized mob violence against the Mormons, who were driven from the state.  Their improved land ended up in the hands of the leaders of the mob who in due course bought the land from the federal government.

In Illinois, the foundation for Mormon settlement was laid by a large purchase of land from a land speculator.  This purchase was financed on credit by non-Mormon investors on the east coast that were betting (unsuccessfully as it turned out) on the long-term success of Mormons in Illinois. The initial speculator, however, did not have good title to much of the land that he “sold,” the Mormons were unable to repay the accrued debt, and Joseph Smith and the church were driven into bankruptcy.  To be sure, some Mormons in outlying settlements were able to acquire property independently, but Mormon settlment in Illinois ultimately floated on sea of debt rather than resting on a foundation of wealth.  In 1844, a non-Mormon mob murdered Joseph Smith, and thereafter violence against the Mormons increased.  Eventually the bulk of the Mormons abandoned Illinois, in most cases selling what property they had in fire sales to finance the purchase of a few wagons.  The failure of the Illinois period to produce a pool of Mormon wealth was exacerbated by the fact that after Smith’s murder the Mormon church splintered.  Many Mormons remained in Illinois, ultimately leaving Mormonism altogether or founding various splinter sects, the largest of which is now called the Community of Christ.  The Mormons that followed Brigham Young west were disproportionately English converts from the slums of Birmingham and were likely to be among the poorest Latter-day Saints. 

But what about Utah?  Didn’t the Mormons get all this wealth out there?

Not really. 

It is true that the Mormons, like all white American settlers, benefited at the expense of Native Americans.  However, the land that they acquired in the Great Basin was extremely marginal.  It’s a very arid region that is difficult to farm.  Indeed, the Mormons were only able to farm it because their intensely cooperative approach to settlement allowed them to create extensive irrigation networks and provided risk pooling in a marginal setting.  Even so, the early settlement of Utah was marked by extreme poverty on the part of the Mormons (something frequently remarked upon by non-Mormon visitors) and periodic brushes with starvation.  If the value of land acquired in 1850 by one’s ancestors was a primary determinant of economic performance today the descendants of Mormon pioneers should be impoverished relative to those descended from settlers in Iowa or Kansas. 

What about Mormon political power in Utah?  Didn’t that translate into wealth in the nineteenth century? 

Nope. 

Mormons tried to use their dominance of Utah territory to create a utopian religious commonwealth that they called Deseret or Zion.  In the early stages of settlement this intense cooperative ethos benefited Mormons greatly.  It allowed them to settle very marginal land and fend off starvation.  However, for much the period it probably operated as an impediment to economic growth.  The central goal of Brigham Young and his successors was economic self-sufficiency.  As is generally the case, however, the push for autarky probably exacerbated poverty rather than alleviating it.  The Mormons poured tremendous effort into ultimately doomed projects like growing cotton in the red-rock country of Southern Utah, introducing silk culture along the Wasatch Front, and trying to compete with the furniture manufacturing centers in the East after the coming of the railroad.  To support these efforts, the church tried to cartelize the Mormon economy and pushed for boycotts of “Gentile” businesses.  These efforts, coupled with polygamy, created chronic political and legal conflict in Utah, which tended to suppress investment and development.

In fairness to Roithmayr, I have spent nearly as many words in this blog post responding to a paragraph or two about Mormonism as she spent in her entire review of Chua and Rubenfeld’s book.  Still, Mormon history is one of my interests, and I think Roithmayr gets it wrong, not just in terms of the nuances but in terms of the central claims that need to be true to support her argument.  I know nothing about the economic history of Nigerian or Cuban immigrants, but to the extent that one wishes to explain current economic outcomes in terms of economic endowments a century or more previous, Mormons are not a good example.  On this point, I suspect that Roithmayr’s argument is driven mainly by the assumptions of luck egalitarianism and critical race theory rather than a clear reading of Mormon economic history.

Repealing the Federal Eminent Domain Power

Ilya Somin notes the renewed House action on the Private Property Rights Protection Act, a federal bill that would eliminate funding for economic development takings like those that would be forbidden by the Kelo dissent.  As Ilya also notes, the bill seems unlikely to become law, but the fact that there is any activity at all is a sign that at least some members of Congress would like to cast a symbolic vote for narrowing eminent domain authority, even if it's an authority that the judiciary has upheld.

If so, may I suggest a new way for members of Congress to do that?  By repealing the federal eminent domain power.  Since 1875, the Supreme Court has held that the federal government has the power to take land through eminent domain.  But as I explain at length in the most recent issue of the Yale Law Journal, that decision was probably wrong as an original matter, and was certainly inconsistent with the very widespread understanding and tradition from the Founding until the Civil War.  Congress repeatedly avoided using eminent domain (except in the District and territories); when it needed land, the states took it.  Even the Supreme Court agreed.

The most that can be said for the modern understanding is that the Supreme Court has upheld it.  But the supporters of the Private Property Rights Protection Act have shown that they're willing to pursue their own views of the proper scope of eminent domain, even if the judiciary would uphold a broader one.  So perhaps

If that's too radical, there's an alternative.  Current federal law doesn't require any specific Congressional authorization for a federal taking.  Under 40 U.S.C. 3113:

An officer of the Federal Government authorized to acquire real estate for the erection of a public building or for other public uses may acquire the real estate for the Government by condemnation, under judicial process, when the officer believes that it is necessary or advantageous to the Government to do so.

At a minimum, the House could propose a bill repealing this statute, and requiring that exercises of constitutionally dubious federal eminent domain authority be specifically authorized by Congress.

Immovable ladders, the Church of the Holy Sepulchre, and property rights

This piece, from Slate, by "Atlas Obscura," is wonderful.  Was "Andy" striking back at the heavy hand of status-quo bias, trespassing, stealing, occupying, or -- like that French archeologist in Raiders of the Lost Ark, messing with things best left alone?

Book Club: Even More on Midlevel Principles in IP Law - Response to Bracha

In a previous post I explained the concept of midlevel principles in IP law. In this post I respond to a couple of detailed points made in a very insightful post on this topic by Oren Bracha. Oren has a number of interesting things to say, but his critique has two main points: (1) the conservative bias of midlevel principles; and (2) the fuzzy nature of midlevel principles, a product of their origin in a (hypothetical) consensus-building procedure.

(1) The conservative bias: I think there are two senses of "conservative." In my view, what are conserved are meta-themes that derive from but transcend specific practices. These themes do not uniformly point to results that are "conservative" in the other sense -- tending to preserve the status quo; continuing with trends currently in place. Let me illustrate with two specific examples. When Wendy Gordon introduced the idea of "fair use as market failure," she tied together a number of emerging themes in copyright law and connected them with a large body of thought (including caselaw) that came before. But her ideas -- based largely on what I would call the efficiency principle, though surely infused also with considerations of proportionality, nonremoval (public domain), and perhaps even dignity -- were not conservative with respect to outcomes. In fact they created a revolution in consumer or user rights, by shifting the focus from the copyright owner's interests, the amount copied, etc., to higher-level issues such as transaction costs and the nature of markets for IP-protected works. 

A second example is eBay. The majority opinion, based on traditional equity doctrine (as codified in the Patent Act), was conservative in the sense that it deployed well-known rules. The Kennedy concurrence had a richer policy discussion, which centered (in my view) on the proportionality principle. The basic idea was that sometimes the automatic injunction rule gives patent owners "undue leverage" in negotiations; and that equity was flexible enough to take this into account. I see this as the embodiment of a very general principle, one that finds expression in many areas of IP law, from the rules of patent scope (enablement, written description, claim interpretation, etc.) to substantial similarity in copyright law, and so on. Again the discussion "conserved" on meta-principles by deploying a familiar theme from the body of IP law. But the outcome was not therefore necessarily conservative in the sense of preserving the staus quo. The status quo heading into the case was the automatic injunction rule. And that was rejected in favor of a more flexible approach.

(2) The fuzz factor: Oren's second point is that the midlevel principles just do not seem to have the requisite level of granularity to resolve difficult problems in IP policy. This leads him to conclude that the only way to gain true resolution is to engage each other at the (admittedly contentious) level of our foundaional commitments.

Here I would advert to the master for some guidance. John Rawls, in A Theory of Justice, describes a detailed multi-stage procedure by which fair institutions can be established. In the course of the discussion he says this about the problem of fuzziness:

"[O]n many questions of social and economic policy we must fall back upon a notion of quasi-pure procedural justice: laws and policies are just provided that they lie within the allowed range, and the legislature, in ways authorized by a just constitution, has in fact enacted them. This indeterminacy in the theory of justice is not in itself a defect. It is what we should expect. Justice as fairness will prove a worthwhile theory if it defines the range of justice more in accordance with our considered judgments than do existing theories, and if it singles out with greater sharpness the graver wrongs a society should avoid." (A Theory of Justice, sec. 31, pp. 200-201).

So foundational consensus will inevitably be general. But that does not mean that citizens cannot engage each other in contentious argument at more operational, implemenetation-oriented stages. The way I see things, the midlevel principles are expansive enough to cut through the generality required to agree on them. (Note that this pluralistic sensibility is a product not of the early Rawls of A Theory of Justice but of the later Rawls of Political Liberalism.) These principles admit of sharper disagreement and a deeper level of engagement than Oren seems to believe. Perhaps they require greater elaboration than my brief treatment made possible. But they are not in my view fatally vague as a vocabulary of policy debate.

I should add one additional point. Oren notes my emphasis in JIP on the complete independence of foundational commitments and midlevel principles. I have begun to rethink that a bit, based in large part on a thoughtful critique of this aspect of the book by David H. Blankfein-Tabachnick of Penn State Law School. His critique and my response are both still in process and are forthcoming in the California Law Review, so I do not want to say too much. But suffice it to say that I have rethought the "complete independence" thesis a little bit. I can see that in a few rare instances, where policy issues are in equipoise, resort to one's ultimate commitments -- the foundations of the field as one sees them -- may be useful and even necessary. So, to close with Oren's wonderful imagery, after the flash of white light on the road to Damascus, the rider surely does remount and head on down the road. But he or she is changed utterly at some level -- and that change is bound to peek out, now and then, in the clinch.

Book Club: Justifying IP -- Midlevel Principles: Response to Jonathan Masur

In this post I respond to some comments on my book (abbreviated "JIP") by Jonathan Masur. It is not surprising to me that Jonathan takes aim at Part II of JIP, in which I introduce and explain what I call the midlevel principles of IP law. It seems whenever the book is addressed in depth (most notably at a full-day conference at Notre Dame organized by Mark McKenna; and a number of discussions at a conference on the Philosophy of IP rights at San Diego convened by Larry Alexander), this is the topic that seems to stir up the greatest interest.

Before I turn to Jonathan's specific points, let me say a word about what I mean by midlevel principles. Basically, these are meta-themes in IP law that mediate between pluralist foundational commitments and detailed doctrines and case outcomes. They are meant to serve as the equivalent of shared basic commitments in the “public” and “political” sphere as described by Rawls in his book Political Liberalism (2005). That is, midlevel principles supply a shared language, a set of conceptual categories, that are consistent with multiple diverse foundational commitments. They are more abstract, operate at a higher level, than specific doctrines and case outcomes; but they are pitched in a language that is distinct from that of foundational commitments. They create, as I say in JIP, a shared public space in which abstract (non-case-specific) policy discussions can take place. The payoff is this: a committed Kantian can conduct a sophisticated policy argument with a firm believer in the Talmudic (or Muslim, or utilitarian) basis of IP law about the proper scope of fair use in copyright, or the proper length of the term for patent protection, or what should be required to prove that a trademark has been abandoned. The argument can proceed without the Muslim needing to convert the Kantian or utilitarian to a religious worldview, and without the Kantian talking others out of the view that religious texts provide a set of workable guiding principles for right behavior. Diverse people can – and indeed, often do! – speak in terms of an appropriate public domain (i.e., the nonremoval principle); a fair reward for creators (the proportionality principle); the importance of moral rights (the dignity principle); or the cheapest way to offer legal protection at the lowest net social cost (the efficiency principle). All without the conversation devolving into fights over ultimate commitments.

Jonathan Masur recognizes the versatility of the midlevel principles. And he acknowledges that although these principles are fully consistent with utilitarian foundations, the IP system as a whole has failed to fully implement the policies called for by those with a thorough commitment to utilitarian foundations. As he puts it:

"The problem, as Merges correctly describes it, is that IP doctrine, as implemented by courts and other parties, has failed to advance the economic aims that it set out. This is an empirical judgment, and quite possibly a correct one."

As Masur notes, I have come to believe that utilitarian foundations are inadequate in the IP field. The data required by a comprehensive utilitarian perspective are simply not in evidence in this field -- at least not yet. Put simply, I do not think we can say with the requisite degree of certainty that IP systems create net positive social welfare. Yet I still had the intuition that IP rights are a valuable social institution. Which is what led me to search for alternate foundations. Hence Part I of JIP, in which I describe foundational commitments growing out of the ideas of Locke, Kant and Rawls. These deontic conceptions provide a better set of foundational commitments for the IP field, in my view. Others of course disagree, which is why the midlevel principles are so important as a shared policy language for those with divergent foundational commitments.

Masur notes the lack of empirical support for utilitarian IP foundations, but says in effect that deontic foundations do not provide much of an alternative. As he puts it,

"But what is the comparable standard by which a deontic conception of IP is to be judged? What would it mean for IP doctrine in practice not to have properly advanced Lockean or Kantian ethics? How could anyone tell? The problem—or, more accurately, the advantage for Kant and Locke—is that those approaches are purely theoretical and do not generate testable predictions. Economic theory has foundered on a set of tests that cannot be applied to the alternatives Merges proposes."

The way I see things, Jonathan has conflated two separate issues here. The first is whether IP can be justified at all. The second is how well any particular IP system is performing, given that there is a basic consensus that there should be such a system in the first place. The first issue is where foundational commitments come in. The second is operational; it is a question more of "how" or "how well" as opposed to "whether." (I address this in more detail in an article forthcoming in the San Diego Law Review, "The Relationship Between Foundations and Principles in IP Law.")

Seen in this light, there is no need for empirical tests to prove the viability of Lockean, Kantian, and/or Rawlsian foundations for the field. The only question that needs to be answered is whether a body of IP law can be envisioned that is consistent with these systems of philosophical thought. If so, the foundational question has been successfully answered. Then it's on to the operational level -- designing actual institutions and rules to implement a workable IP system. In my view this is where the efficiency principle comes into play: one important design principle for IP law is and should be getting from our IP system the greatest social benefit at the lowest net cost (as best we can estimate these values). Efficiency is an operational (midlevel) principle, in other words. It does not (and in my view cannot) justify the existence of the field. But it can serve us well in crafting the detailed operations of the field -- once we decide, consistent with ultimate commitments, that it makes sense to have such a field in the first place.

The Virtual Honesty Box

As a fan of comic book art, I'm often thrilled to encounter areas where copyright or trademark law and comic books intersect. As is the case in other media, the current business models of comic book publishers and creators has been threatened by the ability of consumers to access their work online without paying for it. Many comic publishers are worried about easy migration of content from paying digital consumers to non-paying digital consumers. Of course, scans of comics have been making their way around the internet on, or sometimes before, a given comic's onsale date for some time now. As in other industries, publishers have dabbled with DRM, and publishers have enbraced different (and somewhat incompatible) methods for providing consumers with authorized content. Publishers' choices sometimes lead to problems with vendors and customers, as I discuss a bit below.

While services like Comixology offer a wide selection of content from most major comics publishers, they are missing chunks of both the DC Comics and Marvel Comics catalogues. DC entered a deal to distribute 100 of its graphic novels (think multi-issue collections of comic books) exclusively via Kindle. Marvel Comics subsequently struck a deal to offer "the largest selection of Marvel graphic novels on any device" to users of the Nook. 

Sometimes exclusive deals leave a bad taste in the mouths of other intermediaries. DCs graphic novels were pulled from Barnes & Noble shelves because the purveyor of the Nook was miffed. Independent publisher Top Shelf is an outlier, offering its books through every interface and intermediary it can. But to date, most publishers are trying to make digital work as a complement to, and not a replacement for, print.

Consumers are sometimes frustrated by a content-owner's choice to restrict access, so much so that they feel justified engaging in "piracy." (Here I define "piracy" as acquiring content through unauthorized channels, which will almost always mean without paying the content owner.) Some comics providers respond with completely open access. Mark Waid, for example, started Thrillbent Comics with the idea of embracing digital as digital, and in a manner similar to Cory Doctorow, embracing "piracy" as something that could drive consumers back to his authorized site, even if they didn't pay for the content originally.

I recently ran across another approach from comic creators Leah Moore and John Reppion. Like Mark Waid, Moore and Reppion have accepted, if not embraced, the fact that they cannot control the flow of their work through unauthorized channels, but they still assert a hope, if not a right, that they can make money from the sales of their work. To that end, they introduced a virtual "honesty box," named after the clever means of collecting cash from customers without monitoring the transaction. In essence, Moore and Reppion invite fans who may have consumed their work without paying for it to even up the karmic scales. This response strikes me as both clever and disheartening.

I'll admit my attraction to perhaps outmoded content-delivery systems -- I also have unduly fond memories of the 8-track cassette -- but I'm disheartened to hear that Moore and Reppion could have made roughly $5,500 more working minimum wage jobs last year. Perhaps this means that they should be doing something else, if they can't figure out a better way to monetize their creativity in this new environment. Eric Johnson, for one, has argued that we likely don't need legal or technological interventions for authors like Moore and Reppion in part because there are enough creative amateurs to fill the gap. The money in comics today may not be in comics at all, but in licensing movies derived from those comics. See, e.g., Avengers, the.

I hope Mark Waid is right, and that "piracy" is simply another form of marketing that will eventually pay greater dividends for authors than fighting piracy. And perhaps Moore and Reppion should embrace "piracy" and hope that the popularity of their work leads to a development deal from a major film studio. Personally, I might miss the days when comics were something other than a transparent attempt to land a movie deal.

As for the honesty box itself? Radiohead abandoned the idea with its most recent release, King of Limbs, after the name-your-price model adopted for the release of In Rainbows had arguably disappointing results: according to one report, 60% of consumers paid nothing for the album. I can't seen Moore and Reppion doing much better, but maybe if 40% of "pirates" kick in a little something into the virtual honesty box, that will be enough to keep Moore and Reppion from taking some minimum wage job where their talents may go to waste.

Breaking the Net

Mark Lemley, David Post, and Dave Levine have an excellent article in the Stanford Law Review Online, Don't Break the Internet. It explains why proposed legislation, such as SOPA and PROTECT IP, is so badly-designed and pernicious. It's not quite clear what is happening with SOPA, but it appears to be scheduled for mark-up this week. SOPA has, ironically, generated some highly thoughtful writing and commentary - I recently read pieces by Marvin Ammori, Zach Carter, Rebecca MacKinnon / Ivan Sigal, and Rob Fischer.

There are two additional, disturbing developments. First, the public choice problems that Jessica Litman identifies with copyright legislation more generally are manifestly evident in SOPA: Rep. Lamar Smith, the SOPA sponsor, gets more campaign donations from the TV / movie / music industries than any other source. He's not the only one. These bills are rent-seeking by politically powerful industries; those campaign donations are hardly altruistic. The 99% - the people who use the Internet - don't get a seat at the bargaining table when these bills are drafted, negotiated, and pushed forward. 

Second, representatives such as Mel Watt and Maxine Waters have not only admitted to ignorance about how the Internet works, but have been proud of that fact. They've been dismissive of technical experts such as Vint Cerf - he's only the father of TCP/IP - and folks such as Steve King of Iowa can't even be bothered to pay attention to debate over the bill. I don't mind that our Congresspeople are not knowledgeable about every subject they must consider - there are simply too many - but I am both concerned and offended that legislators like Watt and Waters are proud of being fools. This is what breeds inattention to serious cybersecurity problems while lawmakers freak out over terrorists on Twitter. (If I could have one wish for Christmas, it would be that every terrorist would use Twitter. The number of Navy SEALs following them would be... sizeable.) It is worrisome when our lawmakers not only don't know how their proposals will affect the most important communications platform in human history, but overtly don't care. Ignorance is not bliss, it is embarrassment.

Cross-posted at Info/Law.

Six Things Wrong with SOPA

America is moving to censor the Internet. The PROTECT IP and Stop Online Piracy Acts have received considerable attention in the legal and tech world; SOPA's markup in the House occurs tomorrow. I'm not opposed to blacklisting Internet sites on principle; however, I think that thoughtful procedural protections are vital to doing so in a legitimate way. Let me offer six things that are wrong with SOPA and PROTECT IP: they harm cybersecurity, are wildly overbroad and vague, enable unconstitutional prior restraint, undercut American credibility on Internet freedom, damage a well-working system for online infringement, and lack any empirical justification whatsoever. And, let me address briefly Floyd Abrams's letter in support of PROTECT IP, as it is frequently adverted to by supporters of the legislation. (The one-word summary: "sellout." The longer summary: The PROTECT IP letter will be to Abrams' career what the Transformersmovie was to that of Orson Welles.)

1. Cybersecurity - the bills make cybersecurity worse. The most significant risk is that they impede - in fact, they'd prevent - the deployment of DNSSEC, which is vitally important to reducing phishing, man-in-the-middle attacks, and similar threats. Technical experts are unanimous on this - see, for example, Sandia National Laboratories, or Steve Crocker / Paul Vixie / Dan Kaminsky et al. Idiots, like the MPAA's Michael O'Leary, disagree, and simply assert that "the codes change." (This is what I call "magic elf" thinking: we can just get magic elves to change the Internet to solve all of our problems. Congress does this, too, as when it includes imaginary age-verifying technologies in Internet legislation.) Both bills would mandate that ISPs redirect users away from targeted sites, to government warning notices such as those employed in domain name seizure cases. But, this is exactly what DNSSEC seeks to prevent - it ensures that the only content returned in response to a request for a Web site is that authorized by the site's owner. There are similar problems with IP-based redirection, as Pakistan's inadvertent hijacking of YouTube demonstrated. It is ironic that at a time when the Obama administration has designated cybersecurity as a major priority, Congress is prepared to adopt legislation that makes the Net markedly less secure.
2. Wildly overbroad and vague- the legislation (particularly SOPA) is a blunderbuss, not a scalpel. Sites eligible for censoring include those:
   •  
     • primarily designed or operated for copyright infringement, trademark infringement, or DMCA § 1201 infringement
     • with a limited purpose or use other than such infringement
     • that facilitate or enable such infringement
     • that promote their use to engage in infringement
     • that take deliberate actions to avoid confirming high probability of such use

   If Flickr, Dropbox, and YouTube were located overseas, they would plainly qualify. Targeting sites that "facilitate or enable" infringement is particularly worrisome - this charge can be brought against a huge range of sites, such as proxy services or anonymizers. User-generated content sites are clearly dead. And the vagueness inherent in these terms means two things: a wave of litigation as courts try to sort out what the terminology means, and a chilling of innovation by tech startups.

3. Unconstitutional prior restraint - the legislation engages in unconstitutional prior restraint. On filing an action, the Attorney General can obtain an injunction that mandates blocking of a site, or the cutoff of advertising and financial services to it - before the site's owner has had a chance to answer, or even appear. This is exactly backwards: the Constitution teaches that the government cannot censor speech until it has made the necessary showing, in an adversarial proceeding - typically under strict scrutiny. Even under the more relaxed, intermediate scrutiny that characterizes review of IP law, censorship based solely on the government's say-so is forbidden. The prior restraint problem is worsened as the bills target the entire site via its domain name, rather than focusing on individualized infringing content, as the DMCA does. Finally, SOPA's mandatory notice-and-takedown procedure is entirely one-sided: it requires intermediaries to cease doing business with alleged infringers, but does not create any counter-notification akin to Section 512(g) of the DMCA. The bills tilt the table towards censorship. They're unconstitutional, although it may well take long and expensive litigation to demonstrate that.
4. Undercuts America's moral legitimacy - there is an irreconciliable tension between these bills and the position of the Obama administration - especially Secretary of State Hillary Clinton - on Internet freedom. States such as Iran also mandate blocking of unlawful content; that's why Iran blocked our "virtual embassy" there. America surrenders the rhetorical and moral advantage when it, too, censors on-line content with minimal process. SOPA goes one step farther: it permits injunctions against technologies that circumvent blocking - such as those funded by the State Department. This is fine with SOPA adherents; the MPAA's Chris Dodd is a fan of Chinese-style censorship. But it ought to worry the rest of us, who have a stake in uncensored Internet communication.
5. Undercuts DMCA - the notice-and-takedown provisions of the DMCA are reasonably well-working. They're predictable, they scale for both discovering infringing content and removing it, and they enable innovation, such as both YouTube itself and YouTube's system of monetizing potentially infringing content. The bills shift the burden of enforcement from IP owners - which is where it has traditionally rested, and where it belongs - onto intermediaries. SOPA in particular increases the burden, since sites must respond within 5 days of a notification of claimed infringement, with no exception for holidays or weekends. The content industries do not like the DMCA. That is no evidence at all that it is not functioning well.
6. No empirical evidence - put simply, there is no empirical data suggesting these bills are necessary. The content industries routinely throw around made-up numbers, but they have been frequently debunked. How important are losses from foreign sites that are beyond the reach of standard infringement litigation, versus losses from domestic P2P networks, physical infringement, and the like? Data from places like Switzerland suggests that losses are, at best, minimal. If Hollywood wants America to censor the Internet, it needs to make a convincing case based on actual data, and not moronic analogies to stealing things off trucks. The bills, at their core, are rent-seeking: they would rewrite the law and alter fundamentally Internet free expression to benefit relatively small yet politically powerful industries. (It's no shock two key Congressional aides who worked on the legislation have taken jobs in Hollywood - they're just following Mitch Glazier, Dan Glickman, and Chris Dodd through the revolving door.) The bills are likely to impede innovation by the far larger information technology industry, and indeed to drive some economic activity in IT offshore.

The bills are bad policy and bad law. And yet I expect one of them to pass and be signed into law. Lastly, the Abrams letter: Noted First Amendment attorney Floyd Abrams wrote a letter in favor of PROTECT IP. Abrams's letter is long, but surprisingly thin on substantive legal analysis of PROTECT IP's provisions. It looks like advocacy, but in reality, it is Abrams selling his (fading) reputation as a First Amendment defender to Hollywood. The letter rehearses standard copyright and First Amendment doctrine, and then tries to portray PROTECT IP as a bill firmly in line with First Amendment jurisprudence. It isn't, as Marvin Ammori and Larry Tribe note, and Abrams embarrasses himself by pretending otherwise. Having the government target Internet sites for pre-emptive censorship, and permitting them to do so before a hearing on the merits, is extraordinary. It is error-prone - look at Dajaz1 and mooo.com. And it runs afoul of not only traditional First Amendment doctrine, but in particular the current Court's heightened protection of speech in a wave of cases last term. Injunctions affecting speech are different in character than injunctions affecting other things, such as conduct, and even the cases that Abrams cites (such as Universal City Studios v. Corley) acknowledge this. According to Abrams, the constitutionality of PROTECT IP is an easy call. That's only true if you're Hollywood's sockpuppet. Thoughtful analysis is far harder.

Cross-posted at Info/Law.

Copyright and Your Face

The Federal Trade Commission recently held a workshop on facial recognition technology, such as Facebook's much-hated system, and its privacy implications. The FTC has promised to come down hard on companies who abuse these capabilities, but privacy advocates are seeking even stronger protections. One proposal raised was to provide people with copyright in their faceprints or facial features. This idea has two demerits: it is unconstitutional, and it is insane. Otherwise, it seems fine.

Let's start with the idea's constitutional flaws. There are relatively few constitutional limits on Congressional power to regulate copyright: you cannot, for example, have perpetual copyright. And yet, this proposal runs afoul of two of them. First, imagine that I take a photo of you, and upload it to Facebook. Congress is free to establish a copyright system that protects that photo, with one key limitation: I am the only person who can obtain copyright initially. That's because the IP Clause of the Constitution says that Congress may "secur[e] for limited Times to Authors... the exclusive Right to their respective Writings." I'm the author: I took the photograph (copyright nerds would say that I "fixed" it in my camera's memory). The drafters of the Constitution had good reason to limit grants of copyright to authors: England spent almost 150 years operating under a copyright-like monopoly system that awarded entitlements to a distributor, the Stationer's Company. The British crown had an excellent reason for giving the Company a monopoly - the Stationer's Company implemented censorship. Having a single distributor with exclusive rights gives a government but one choke point to control. This is all to say that Congress can only give copyright to the author of a work, and the author is the person who creates / fixes it (here, the photographer). It's unconstitutional to award it to anyone else.

Second, Congress cannot permit facts to be copyrighted. That's partly for policy reasons - we don't want one person locking up facts for life plus seventy years (the duration of copyright) - and partly for definitional ones. Copyright applies only to works of creative expression, and facts don't qualify. They aren't created - they're already extant. Your face is a fact: it's naturally occurring, and you haven't created it. (A fun question, though, is whether a good plastic surgeon might be able to copyright the appearance of your surgically altered nose. Scholars disagree on this one.) So, attempting to work around the author problem by giving you copyright protection over the configuration of your face is also out. So, the proposal is unconstitutional.

It's also stupid: fixing privacy with copyright is like fixing alcoholism with heroin. Copyright infringement is ubiquitous in a world of digital networked computers. Similarly, if we get copyright in our facial features, every bystander who inadvertently snaps our picture with her iPhone becomes an infringer - subject to statutory damages of between $750 and $30,000. Even if few people sue, those who do have a powerful weapon on their side. Courts would inevitably try to mitigate the harsh effects of this regime, probably by finding most such incidents to be fair use. But that imposes high administrative costs, and fair use is an equitable doctrine - it invites courts to inject their normative views into the analysis. It also creates extraordinarily high administrative costs. It's already expensive for filmmakers, for example, to clear all trademarked and copyrighted items from the zones they film (which is why they have errors and omissions insurance). Now, multiply that permissions problem by every single person captured in a film or photograph. It becomes costly even to do the right thing - and leads to strategic behavior by people who see a potential defendant with deep pockets.

Finally, we already have an IP doctrine that covers this area: the right of publicity (which is based in state tort law). The right of publicity at least has some built-in doctrinal elements that deal with the problems outlined above, such as exceptions when one's likeness is used in a newsworthy fashion. It's not as absolute as copyright, and it lacks the hammer of statutory damages, which is probably why advocates aren't turning to it. But those are features, not bugs.

Privacy problems on social networks are real. But we need to address them with thoughtful, tailored solutions, not by slapping copyright on the problem and calling it done.

Cross-posted at Info/Law.

Choosing Censorship

Yesterday, the House of Representatives held hearings on the Stop Online Piracy Act (it's being called SOPA, but I like E-PARASITE tons better). There's been a lot of good coverage in the media and on the blogs. Jason Mazzone had a great piece in TorrentFreak about SOPA, and see also stories about how the bill would re-write the DMCA, about Google's perspective, and about the Global Network Initiative's perspective.

My interest is in the public choice aspect of the hearings, and indeed the legislation. The tech sector dwarfs the movie and music industries economically - heck, the video game industry is bigger. Why, then, do we propose to censor the Internet to protect Hollywood's business model? I think there are two answers. First, these particular content industries are politically astute. They've effectively lobbied Congress for decades; Larry Lessig and Bill Patry among others have documented Jack Valenti's persuasive powers. They have more lobbyists and donate more money than companies like Google, Yahoo, and Facebook, which are neophytes at this game. 

Second, they have a simpler story: property rights good, theft bad. The AFL-CIO representative who testified said that "the First Amendment does not protect stealing goods off trucks." That is perfectly true, and of course perfectly irrelevant. (More accurately: it is idiotic, but the AFL-CIO is a useful idiot for pro-SOPA forces.) The anti-SOPA forces can wheel to a simple argument themselves - censorship is bad - but that's somewhat misleading, too. The more complicated, and accurate, arguments are that SOPA lacks sufficient procedural safeguards; that it will break DNSSEC, one of the most important cybersecurity moves in a decade; that it fatally undermines our ability to advocate credibly for Internet freedom in countries like China and Burma; and that IP infringement is not always harmful and not always undesirable. But those arguments don't fit on a bumper sticker or the lede in a news story.

I am interested in how we decide on censorship because I'm not an absolutist: I believe that censorship - prior restraint - can have a legitimate role in a democracy. But everything depends on the processes by which we arrive at decisions about what to censor, and how. Jessica Litman powerfully documents the tilted table of IP legislation in Digital Copyright. Her story is being replayed now with the debates over SOPA and PROTECT IP: we're rushing into decisions about censoring the most important and innovative medium in history to protect a few small, politically powerful interest groups. That's unwise. And the irony is that a completely undemocratic move - Ron Wyden's hold, and threatened filibuster, in the Senate - is the only thing that may force us into more fulsome consideration of this measure. I am having to think hard about my confidence in process as legitimating censorship.

Cross-posted at Info/Law.

De-lousing E-PARASITE

The House of Representatives is considering the disturbingly-named E-PARASITE Act. The bill, which is intended to curb copyright infringment on-line, is similar to the Senate's PROTECT IP Act, but much much worse. It's as though George Lucas came out with the director's cut of "The Phantom Menace," but added in another half-hour of Jar Jar Binks. 

As with PROTECT IP, the provisions allowing the Attorney General to obtain a court order to block sites that engage in criminal copyright violations are, in theory, less objectionable. But they're quite problematic in their particulars. Let me give three examples.

First, the orders not only block access through ISPs, but also require search engines to de-list objectionable sites. That not only places a burden on Google, Bing, and other search sites, but it "vaporizes" (to use George Orwell's term) the targeted sites until they can prove they're licit. That has things exactly backwards: the government must prove that material is unlawful before restraining it. This aspect of the order is likely constitutionally infirm.

Second, the bill attacks circumvention as well: MAFIAAFire and its ilk become unlawful immediately. Filtering creep is inevitable: you have to target circumvention, and the scope of circumvention targeted widens with time. Proxy services like Anonymizer are likely next.

Finally, commentators have noted that the bill relies on DNS blocking, but they're actually underestimating its impact. The legislation says ISPs must take "technically feasible and reasonable measures designed to prevent access by its subscribers located within the United States" to Web sites targeted under the bill, "including measures designed to prevent the domain name of the foreign infringing site (or portion thereof) from resolvingto that domain name's Internet protocol address." The definitional section of the bill says that "including" does not mean "limited to." In other words, if an ISP can engage in technically feasible, reasonable IP address blocking or URL blocking - which is increasingly possible with providers who employ deep packet inspection - it must do so. The bill, in other words, targets more than the DNS.

On the plus side, the bill does provide notice to users (the AG must specify text to display when users try to access the site), and it allows for amended orders to deal with the whack-a-mole problem of illegal content evading restrictions by changing domain names or Web hosting providers.

The private action section of the bill is extremely problematic. Under its provisions, YouTube is clearly unlawful, and neither advertising or payment providers would be able to transact business with it. The content industry doesn't like YouTube - see the Viacom litigation - but it's plainly a powerful and important innovation. This part of E-PARASITE targets sites "dedicated to the theft of U.S. property." (Side note: sorry, it's not theft. This is a rhetorical trope in the IP wars, but IP infringement simply is not the same as theft. Theft deals with rivalrous goods. In addition, physical property rights do not expire with time. If this is theft, why aren't copyright and patent expirations a regulatory taking? Why not just call it "property terrorism"?)

So, what defines such a site? It is:

1. "primarily designed or operated for the purpose of, has only limited purpose or use other than, or is marketed by its operator or another acting in concert with that operator for use in, offering goods or services in a manner that engages in, enables, or facilitates" violations of the Copyright Act, Title I of the Digital Millennium Copyright Act, or anti-counterfeiting laws; or,
2. "is taking, or has taken, deliberate actions to avoid confirming a high probability of the use of the U.S.-directed site to carry out the acts that constitute a violation" of those laws; or, 
3. the owner "operates the U.S.-directed site with the object of promoting, or has promoted, its use to carry out acts that constitute a violation" of those laws.

That is an extraordinarily broad ambit. Would buying keywords, for example, that mention a popular brand constitute a violation? And how do we know what a site is "primarily designed for"? YouTube seems to have limited purpose or use other than facilitating copyright infringement. Heck, if the VCR were a Web site, it'd be unlawful, too. 

The bill purports to establish a DMCA-like regime for such sites: the IP owner provides notice, and the site's owner can challenge via counter-notification. But the defaults matter here, a lot: payment providers and advertisers must cease doing business with such sites unless the site owner counter-notifies, and even then, the IP owner can obtain an injunction to the same effect. Moreover, to counter-notify, a site owner must concede jurisdiction, which foreign sites will undoubtedly be reluctant to do. (Litigating in the U.S. is expensive, and the courts tend to be friendly towards local IP owners. See, for example, Judge Crotty's slipshod opinion in the Rojadirecta case.)

I've argued in a new paper that using direct, open, and transparent methods to censor the Internet is preferable to our current system of "soft" censorship via domain name seizures and backdoor arm-twisting of private firms, but E-PARASITE shows that it's entirely possible for hard censorship to be badly designed. The major problem is that it outsources censorship decisions to private companies. Prior restraint is an incredibly powerful tool, and we need the accountability that derives from having elected officials make these decisions. Private firms have one-sided incentives, as we've seen with DMCA take-downs. 

In short, the private action measures make it remarkably easy for IP owners to cut off funding for sites to which they object. These include Torrent tracker sites, on-line video sites, sites that host mash-ups, and so forth. The procedural provisions tilt the table strongly towards IP owners, including by establishing very short time periods by which advertisers and payment providers have to comply. Money matters: WikiLeaks is going under because of exactly these sort of tactics. 

America is getting into the Internet censorship business. We started down this path to deal with pornographic and obscene content; our focus has shifted to intellectual property. I've argued that this is because IP legislation draws lower First Amendment scrutiny than other speech restrictions, and interest groups are taking advantage of that loophole. It's strange to me that Congress would damage innovation on the Internet - only the most powerful communications medium since words on paper - to protect movies and music, which are relatively small-scale in the U.S. economy. But, as always with IP, the political economy matters. 

I predict that a bill like PROTECT IP or E-PARASITE will become law. Then, we'll fight out again what the First Amendment means on the Internet, and then the myth of America's free speech exceptionalism on-line will likely be dead.

Cross-posted at Info/Law.

The Pirates' Code

There have been a number of attempts to alter consumer norms about copyright infringement (especially those of teenagers). The MPAA has its campaigns; the BSA has its ferret; and now New York City has a crowdsourced initiative to design a new public service announcement. At first blush, the plan looks smart: rather than have studio executives try to figure out what will appeal to kids (Sorcerer's Apprentice, anyone?), leave it to the kids themselves.

On further inspection, though, the plan seems a bit shaky. First, it's not actually a NYC campaign: the Bloomberg administration is sockpuppeting for NBC Universal. Second, why is the City even spending scarce taxpayer funds on this? Copyright enforcement is primarily private, although the Obama administration is lending a helping hand. Third, is this the most effective tactic? It seems more efficient to go after the street vendors who sell bootleg DVDs, for example - I can buy a Blockbuster Video store's worth of movies just by walking out the front door of my office. 

Yogi Berra (or was it Niels Bohr?) said that the hardest thing to predict is the future. And the hardest thing about norms is changing them. Larry Lessig's New Chicago framework not only points to the power of norms regulation (along the lines of Bob Ellickson), but suggests that norms are effectively free - no one has to pay to enforce them. This makes them attractive as a means of regulation. The problem, though, is that norms tend to be resistant to overt efforts to shift them. Think of how long it took to change norms around smoking - a practice proven to kill you - and you'll appreciate the scope of the challenge. The Bloomberg administration should save its resources for moving snow this winter...

What Commons Have in Common

Thanks to Dan and the Prawfs crew for having me! Blogging here is a nice distraction from the Red Sox late-season collapse.

I thought I'd start with a riddle: what do roller derby, windsurfing, SourceForge, and GalaxyZoo have in common?

Last week, NYU Law School hosted Convening Cultural Commons, a two-day workshop intended to accelerate the work on information commons begun by Carol Rose, Elinor Ostrom, and Mike Madison / Kathy Strandburg / Brett Frischmann. All four of the above were presented as case studies (by Dave Fagundes, Sonali Shah, Charles Schweik, and Mike Madison, respectively). Elinor Ostrom gave the keynote address, and sat in on most of the presentations. It's exciting stuff: Mike, Kathy, and Brett have worked hard to adapt Ostrom's Institutional Analysis and Development framework to analysis of information commons such as Wikipedia, the Associated Press, and jambands. Yet, there was one looming issue that the conferees couldn't resolve: what, exactly, is a commons?

The short answer is: no one knows. Ostrom's work counsels a bottom-up, accretive way to answer this question. Over time, with enough case studies, the boundaries of what constitutes a "commons" become clear. So, the conventional answer, and one supported by a lot of folks at the NYU conference, is to go forth and, in the spirit of Clifford Geertz, engage in collection and thick description of things that look like, or might be, commons.

As an outsider to the field, I think that's a mistake.

What commons research in law (and allied disciplines) needs is some theories of the middle range. There is no Platonic or canonical commons out there. Instead, there are a number of dimensions along which a particular set of information can be measured, and which make it more or less "commons-like." Let me suggest a few as food for thought:

1. Barriers to access - some information, like Wikipedia, is available to all comers; other data, like pooled patents, are only available to members of the club. The lower the barriers to access, the more commons-like a resource is. 
2. State role in management - government may be involved in managing resources directly (for example, data in the National Practitioner Data Bank), indirectly (for example, via intellectual property laws), or not at all. I think a resource is more commons-like as it is less managed by the state.
3. Ability to privatize - information resources are more and less subject to privatization. Information in the public domain, such as Shakespeare's plays, cannot be privatized - no one can assert rights over them (at least, not under American copyright law). Some information commons protected by IP law cannot be privatized, such as software developed under the GPL, and some can be, such as software developed under the Apache License. The greater the ability to privatize, I'd argue, the less commons-like.
4. Depletability - classic commons resources (such as fisheries or grazing land) are subject to depletion. Information resources can be depleted, though depletion here may come more in the form of congestion, as Yochai Benkler argues. Internet infrastructure is somewhat subject to depletion, while ideas or prices are not. The greater the risk of depletion,the less commons-like.

Finally, why do we care about the commons? I think that commons studies are a reaction to the IP wars: they are a form of resistance to IP maximalism. By showing that information commons are not only ubiquitous, but vital to innovation and even a market economy, legal scholars can offer a principled means of arguing against ever-increasing IP rights. That makes studying these resources - and, hopefully, putting forward testable theories about what are and are not attributes of a commons - vital to enlightened policymaking.

(Cross-posted to Info/Law.)

What Makes it Okay for Reporters to Trespass After Disasters?

Brian Williams, reporting in April 2011 from tornado-ravaged Tuscaloosa, Alabama. In the bottom image, Williams is bending over to inspect a bride-and-groom cookbook apparently given to the newlyweds who had occupied the house. I should say that, in this particular clip, Williams seemed to know so much about the residents, it's plausible they were consulted and gave permission. (Top image from an NBC Special Report, next two images from Charlie Rose.)

Am I alone in being bothered by the fact that so many television news reporters, on the scene of a natural disaster, consider themselves at liberty to traipse through people's ruined homes and buildings, rifling through what they find there?

I recall after the Tuscaloosa tornado in April 2011, Brian Williams went into some home – or what was left of it – and found a DVD of University of Alabama football in the remains of someone's home. He picked it up and attempted to say something poignant about it on camera. It struck me – why does he think he has the right to do that?

Maybe television reporters sometimes get permission from owners before they go into homes or buildings. It's possible Williams did in that circumstance. But I certainly doubt that's the custom and practice. A common lack of permission also seems evidenced by the way reporters often speculate about who may have lived there and what may have happened.

As my fellow torts professors know, the law of trespass to land is quite strict. No damages are needed to make out a claim. And there's no need for bad intent. Plain-old going on to someone's land is actionable. That doctrine reflects our society's deeply felt commitment to the integrity of a person's land and domicile.

I'd bet most evening news viewers imagine there's some sort of legal privilege for reporters to do this. But, of course, there's not. Unless they've gotten permission from the lawful possessor, it's trespassing. It's also invasive. Of course it's not exactly the same as News of the World's phone hacking, but it is certainly similar.

I know, of course, why it's not a scandal. It's not done surreptitiously. Moreover, there's now a well established practice of post-disaster rummaging by TV news crews. We've become inured to it. Granted, it's also probably harmless. In fact, it's not hard to argue that it's beneficial, since we generally consider it to be a good thing when the journalistic press offers in-depth reporting on issues of public interest. But I'm not convinced that makes it right.

 

The Ikea Effect and Locke's Theory of Property

I'm reading Predictably Irrational a behavioral economics popularization by Dan Ariely. I was struck by how much Ariely's exposition of irrational human attitudes toward ownership tracks John Locke's theoretical justification for private ownership of property. Ariely writes:

[T]he more work you put into something, the more ownership you begin to feel for it. Think about the last time you assembled some furniture. Figuring out which piece goes where and which screw fits into which hole boosts the feeling of ownership. ... I can say with a fair amount of certainty that pride of ownership is inversely proportionally to the ease with which one assembles the furniture ...
(Predictably Irrational, p. 175)

Ariely calls this the "Ikea effect." For me, living with a bunch of furniture I got from Ikea about 10 years ago, I would say the Ikea effect is that the more time I wasted assembling the furniture back then, the greater is my present-day desire to destroy it with an aluminum baseball bat. But anyway, check out what Locke says:

Though the earth, and all inferior creatures, be common to all men, yet every man has a property in his own person: this no body has any right to but himself. The labour of his body, and the work of his hands, we may say, are properly his. Whatsoever then he removes out of the state that nature hath provided, and left it in, he hath mixed his labour with, and joined to it something that is his own, and thereby makes it his property.
(Second Treatise of Civil Government, ch. 5)

Perhaps this suggests that Locke's theoretical justification may have been driven less by detached logic and more by intuition springing from irrational impulse.

(Photo and composite by me; Locke engraving from public domain.)

Why Teach the Rule Against Perpetuities?

It is always a profound, sensual pleasure to be back guesting at Prawfs, especially so near the occasion of this inimitable site’s glorious sixth (!) anniversary.  I will begin this guest stint with a question that is particularly salient for property profs, though anyone who has experienced first-year property may relate. 

The question is:  Why should property professors teach the Rule Against Perpetuities (RAP)?  Most readers will likely recall the hoary RAP from their 1L property course.  The rule, which has its roots in the Duke of Norfolk’s Case (1682), expresses a simple principle against excessive dead-hand control of property (usually land) transfers, albeit in terms that are famously challenging to understand.  Thomas Grey’s may be the most familiar formulation: No interest in land is valid unless it must vest, if at all, within 21 years of the end of some life in being at the time of the transfer.

The RAP is notorious as one of the most difficult, if not the most difficult, concepts students traditionally learn in law school (I'm not sure this is right, but it's certainly the RAP's reputation).  In Lucas v. Hamm (1961), the California Supreme Court held that the RAP was so confusing that drafting an instrument that violated the Rule could not be a basis for attorney malpractice.  The Rule's confounding nature also plays a central role in the major plot twist of the 1981 neo-noir film Body Heat.

There are some plausible reasons to be skeptical that the RAP belongs on a modern property syllabus.  First, many states have abolished the RAP by statute, so it’s not even law in many jurisdictions.  Moreover, the RAP is complex enough that teaching it well takes, I’ve found, at least four full class-hours, and given that property is often hard enough to cover (at least if you have only four credits to do it), this time could be allocated to other issues that people may find more instinctively interesting or important.

These are reasonable arguments, but having thought about them a lot, I still think it is worthwhile and spend some time teaching the RAP in my property class.  I explain the reasons for this choice, and what it may mean about law pedagogy more generally, below the fold.

There are some reasons I’ve heard others advance for teaching the RAP that are non-starters.  One colleague explained that he teaches the RAP because it’s a rite of law school passage, creating an experience that all law professionals can look back on one day with a rueful smile as they reflect on the rigors of law school.  I don’t buy this one.  Given the high cost of tuition, we owe students better justifications for taking up class time than simply preferring to indulge in a hazing ritual.  Getting rid of the RAP in a given class may mean that all lawyers cannot commiserate about the fertile octogenarian or the unborn widow, but this seems like a pretty thin consideration if teaching it doesn’t bring any meaningful advantages.

Another reason often suggested for teaching the RAP is that it continues to appear on the MBE section of the bar, and given its complexity, students need an early introduction to it.  This justification inveighs in favor of covering the RAP, albeit pretty weakly.  I’m not against the idea that class should, to some extent, provide a basis for material that will be tested on the bar, but law school courses are about much, much more than bar prep, so merely invoking the notion that a subject will be on the bar doesn’t weigh very heavily in this respect.

I am unpersuaded by the objections to teaching the RAP, and actually believe it's an important and useful subject for 1Ls. Part of the reason is substantive.  The RAP is not as important as it used to be, given some states' abolishing it, but it remains the law in many states (including California, where most of my students will practice).  And even though boilerplate savings clauses may provide a ready tool for accounting for the RAP, it still remains necessary to consider its implications for property transactions, particularly in the context of trusts and estates. 

But the more important reason has more to do with pedagogy than substance.  I teach the RAP because of, not despite, its notorious difficulty, and because facing (and, hopefully, overcoming) this difficulty can be an important instructive experience for law students.  It is true that understanding the RAP isn’t easy.  I struggled with it in law school and when I teach it in first-year property, I still review the subject matter extensively to refresh my facility with it.  But it is not true that understanding the RAP is impossible.  As I tell my students, it’s like a crossword puzzle:  at the beginning, it’s all blank space and obscure clues, but with the right amount of concentration and work, what once seemed impossibly foreign actually becomes comprehensible. 

This is the bigger point:  A common misapprehension is that the point of law school is just to transmit information about the blackletter content of substantive rules.  This is, of course, really only part of the story.  If telling students about rules were the whole point of law school, we might as well just read from a BarBri outline.  Especially in the first year, when courses are pitched at a higher level of generality, the point of courses is not only to deliver the content of the law, but also to hone skills that college increasingly fails to impart:  critical thinking and close reading; understanding and application of complex rule systems; and the ability to patiently and thoughtfully engage the kinds of intellectual challenges that lie at the core of any legal problem.

I teach the RAP because it provides excellent training in all of these skills.  Understanding the RAP requires students to parse the language of the rule; comprehend it through repeated application; and to invest significant time concentrating on these tasks.  This is especially true in light of the Rule’s notorious difficulty.  Mastering the RAP is both a classic exercise in training the mind to think legally as well as an object lesson in the rewards of engaging complex rule structures.  Once you’ve run a marathon, a mere 10K is no sweat (or so I assume).  Similarly, students who conquer the RAP earn the sense of self-belief that inheres in conquering any significant challenge, so that the myriad other intellectual challenges of law school and beyond will seem less daunting by comparison.

Shawn Bayern's Conveyance Interpreter

My FSU colleague, the incomparable Shawn Bayern, is generously circulating an instructional tool for those who teach property.  Here's how wunderprawf Al Brophy describes and reacts to this new teaching tool over at the Property Prof Blog.

I've been worried for some time about computers taking over; here's more evidence of it....

Shawn Bayern of Florida State University has a web program that is a "conveyance interpreter" that diagrams grants of estates ("To A for life, but if he becomes a lawyer, then to B for 21 years" and so on). The program uses a "context-free grammar" to understand the language of the conveyance, and then it generates an image that maps out the resulting property interests. Shawn borrowed the style of the images from diagrams that Andrea Peterson, his Property professor at Berkeley, used in class. In fact, Shawn wrote it when he was a property student.

I've been playing with it some this morning --- and I have to report that it's pretty darn cool. Just in time for the start of the new year. This could be the new teaching tool of the season! Hours and hours of fun just waiting you and your students.

For instance, [above you can see] the diagram Shawn's program drew for the grant "to A for life, then to B and her heirs if B survives A."  The "conveyance interpreter" is available here.

The fact that we're one step closer to our jobs being taken over by computers is a story for another time.

Now, Shawn, where's the program to evaluate the rule against perpetuities?

 

 

Final July 2010 Posting on Nazi-looted Art Trafficking

A document I recently saw for the first time really opened my eyes to the amount of trafficking in Nazi-looted art into U.S. museums.  It was a report completed by art historian Laurie A. Stein that was mentioned in the final report of the Bergier Commission, an Independent Commission of Experts established by the Swiss Parliament to study the role of Switzerland in trafficking during World War II.  The Bergier Report came out in March 2002.  To my knowledge, Ms. Stein's report has never been published, but last year was given by the Swiss government to Raymond J. Dowd, a claimants' lawyer in the Bakalar and Grosz litigation, which he discusses often on his blog.  Because of how sensitive this is, I will use quite restrained language. 

Ms. Stein's report indicates that research to date has only scratched the surface of the "extraordinary breadth of traffic in art to the United States that was occurring in the Nazi era."  Ms. Stein stated that "the myths of American museum directors and collectors purchasing art in the 1930's through Swiss sources, in order to rescue it from the National Socialists, need to be reconsidered."  She added:  "It must be remembered that while Europe went to war, America was still conducting business as usual, even in the cultural arena--defining new museum collecting policies, mounting exhibitions, and building private collections from the best possible art available on the market." 

The report focuses mostly on art channeled into U.S. museums via Nazi sales of "degenerate art" taken from German museums to auction in Switzerland (as advertised in Art News in New York) to raise foreign currency.  Some art world insiders could not resist the temptation to scoop up a masterpiece for a bargain despite knowing that the net effect would be to "transform works of art into armaments."  Many of those masterpieces eventually would come to be sold or donated to U.S. museums.  There are some big names implicated by the report as having handled or ultimately received this art - the Museum of Modern Art, the Fogg Art Museum, Curt Valentin, "this country's most influential figure in the development of modern art", and Joseph Pulitzer, Jr., to name just a very few names recognizable to a wide cross section of Prawfs readers. 

The report supports the hypothesis that the high-profile dealers and collectors who facilitated the transactions likely are many of the same individuals who trafficked in Switzerland in art taken from Jews in forced and duress sales.  To highlight the breadth of the issue, Ms. Stein wrote:  "The range and constancy of recently-arrived works being offered and acquired by Americans evidences that the United States became a welcoming homeland for confiscated and looted art, and Switzerland became probably the most important conduit country for the rush of American art collecting during the era."  According to the report, "[i]t is clear that there was much more dealing between American-based buyers . . . either in front of the auction block or behind the scenes, than has been recognized up until now."

So, in conclusion, the Nazi-looted art problem will not disappear any time soon.  As heirs become aware of their possible claims and start to research, we can expect more litigation.  One can only hope that the Nazi-looted art commission about to be born within the Department of State has an extraordinary impact within the United States and beyond in terms of truth and justice.  There is still a long road ahead, but we owe it to Truth and Memory to continue. 

Nazi-looted Art - Modern Claims

I promised some info on modern litigation concerning Nazi-looted art.  Here is a link to a chart, which shows how the tide in Nazi-looted art claims has completely shifted since a major win for claimants in the United States Supreme Court in 2004.  Some profs may remember Republic of Austria v. Altmann, 541 U.S. 677 (2004), a Foreign Sovereign Immunities Act case in which a Holocaust survivor in her eighties prevailed (ultimately in arbitration in Vienna) against the claim of a foreign government, supported by the Bush administration, that federal courts lack jurisdiction over a foreign sovereign that possesses Nazi-looted art.  

 

Gustav Klimt, Adele Bloch-Bauer I, 1907

The chart summarizes how since then in every other Nazi-looted art case, except the one with the most egregious facts, the courts have rejected the restitution claims, typically on procedural grounds such as a federal construction of a state statute of limitations or on the affirmative defense of laches.  These cases appear to reflect either a categorical refusal to permit fact finding or – worse – a de facto presumption that survivor’s and heirs’ claims to Nazi-looted art are  invalid.

So eager have some museums and private collectors in this country been to remove the dark cloud of the Nazi past from their title to disputed artworks that many of them have gone to court as plaintiffs seeking swift dismissal without addressing the merits of rightful ownership.  For example, in Toledo Museum of Art v. Ullin, 477 F. Supp. 2d 802 (N.D. Ohio 2006), a district judge actually held that the statute of limitations ran in 1943, before the Allies had landed on the beaches of Normandy, let alone defeated the Wehrmacht and liberated survivors in work camps and mass killing centers.

It may be time to update the chart again soon.  Here is some info on the face that launched a thousand claims, Portrait of Wally by Egon Schiele, which is set for trial July 26 in the Southern District of New York and reportedly is close to settlement.

 

Egon Schiele's Portrait of Wally, 1912
 

History of U.S. Executive Policy Since WWII

My first post focused on the most recent Nazi-looted art appeal in the United States, which was filed in the United States Court of Appeals for the Second Circuit.  To put this appeal into context, an analysis of federal court cases adjudicating Nazi-looted art claims since 2004 demonstrates a de facto presumption against the legitimacy of these claims.  I will lay out a summary of the other cases in question in my next (third) post. 

This post will focus on the history of U.S. executive policy.  Dismissing such claims without reference to the complex historical factors delaying assertion of owners’ claims violates foreign policy goals pursued by the United States and the Allies during and immediately after World War II, and in recent diplomatic breakthroughs in 1998, 2000, and 2009.  This executive policy is the subject of this post.  Historical context dating back to 1933 will be provided in my fourth post. 

In the normal course of judicial administration touching on foreign policy, federal judges typically defer to determinations of policy matters by the executive branch.  For example, in 1949 this Court ruled inadmissible the statements of a Jewish victim of Nazi persecution describing his brutal imprisonment by the Nazis that led him to “transfer” major assets under duress, on the ground that to do so would denigrate a foreign country.  Bernstein v. N. V. Nederlansche-Amerikaansche Stoomvaart-Maatschappij, 173 F.2d 71 (2d Cir. 1949).  In 1952, however, as will be familiar to any international law professor, Jack B. Tate, Acting Legal Advisor in the Department of State, clarified:

 

[The U.S.] Government’s opposition to forcible acts of dispossession of a discriminatory and confiscatory nature practiced by the Germans on the countries or peoples subject to their controls . . . [and] the policy of the Executive, with respect to claims asserted in the United States for restitution of such property, is to relieve American courts from any restraint upon the exercise of their jurisdiction to pass upon the validity of the acts of Nazi officials.  

26 Dept. St. Bull. 984-85 (1952) (the “Tate letter”).  Once the Second Court was fully informed of the government’s views of coerced “transactions” during the Nazi era in Germany, it promptly reversed its previous ruling in the same case.   Bernstein v. N.V. Nederlansche-Amerikaansche Stoomvaart-Maatschappij, 210 F.2d 375, 376 (2d Cir. 1954).

 

U.S. diplomats led efforts to warn other countries against looting in the landmark London Declaration of January 5, 1943, 8 Dept. St. Bull. 21 (1952), which “declare[d] invalid any [coerced] transfers of, or dealings with, property . . . whether such transfers or dealings have taken the form of open looting or plunder, or of transactions apparently legal in form, even when they purport to be voluntarily effected.”  Immediately after the war, the Nuremberg Tribunal evaluated detailed evidence of coerced sales, and the plunder of art was declared a war crime and is so recognized today.  At Nuremberg, it was perfectly clear to the fact finders who had done what and to whom.  For example, Alfred Rosenberg, head of infamous Einsatzstab Reichsleiter Rosenberg (“ERR”) art looting unit, was convicted and sentenced to death by hanging. 

Shortly thereafter in Bonn and Vienna it was equally clear that, in order to rejoin the human family, Germany and Austria had to repudiate all spurious “transactions” of the entire Nazi era, including art “deals” that were really seizures.  E.g., Restitution of Identifiable Property; Law No. 59, 12 Fed. Reg. 7983 (Nov. 29, 1947) (Military Government Law 59).  Thus, the model chosen was a restitution model for individual claims, and these claims were not subsumed in reparations paid after the war, which were limited as we made room for the Marshall Plan.

Current foreign policy requires deference like this Court gave to the Tate letter.  Diplomats from the State Department, particularly Ambassador Stuart Eizenstat, played a leading role in securing public commitment by the forty-four nations that adopted the Washington Conference Principles on Nazi-Confiscated Art and the Terezín Declaration, which emerged from the international conference hosted by the Czech Republic in June 2009.  These declarations call for effective, fact-based resolution of Nazi-looted art claims.  Principle eleven of the Washington Principles encourages nations “to develop national processes to implement these principles, particularly as they relate to alternative dispute resolution mechanisms for resolving ownership issues.”  The Terezín Declaration states in its principles under the heading “Nazi-Confiscated and Looted Art”:

3. . . . [W]e urge all stakeholders to ensure that their legal systems or alternative processes . . . facilitate just and fair solutions with regard to Nazi-confiscated and looted art, and to make certain that claims to recover such art are resolved expeditiously and based on the facts and merits of the claims and all the relevant documents submitted by all parties. Governments should consider all relevant issues when applying various legal provisions that may impede the restitution of art and cultural property, in order to achieve just and fair solutions, as well as alternative dispute resolution, where appropriate under law.  (Emphasis added)

 

To give credit when due, this development in foreign policy was sparked in no small measure by Guidelines issued by the Association of American Museum Directors (“AAMD”) in June 1998.  Thus, it is quite shocking that U.S. museums are asserting statute of limitations and laches defenses, often as plaintiffs, and distorting the historical record and law in the process.  

  My next post will lay out the progression of cases since the 2004 Altmann victory in the United States Supreme Court and subsequent restitution of the Gustav Klimt Adele Bloch-Buaer II, a portrait of a relative of the claimant formerly known as Austria’s Mona Lisa.  This progression shows that federal courts do not seem to be giving Nazi-looted art cases the fair assessment they deserve. 

Thanks for the Invitation - My Topic: Historical Cultural Property Claims

Thanks to Dan Markel and everyone else at PrawfsBlawg for the invitation to write this month.  Since 1999, I’ve been working as a practitioner and then an academic on Holocaust-era claims.  My posts will focus on cultural property law, a subset of property law and international law. 

Co-counsel, Prof. Edward McGlynn Gaffney, Jr., and I filed this amicus brief within the last ten days on behalf American Jewish Congress, Commission for Art Recovery and the following Jewish community leaders, Holocaust educators, artists and art historians, and legal scholars and practitioners dedicated to the promotion of alternative dispute resolution:  Filippa Marullo Anzalone, Yehuda Bauer, Michael J. Bazyler, Bernard Dov Beliak, Michael Berenbaum, Donald S. Burris, Judy Chicago and Donald Woodman, Talbert D’Alemberte, Marion F. Desmukh, Hedy Epstein, Hector Feliciano, Irving Greenberg, Grace Cohen Grossman, Marcia Sachs Littell, Hubert G. Locke, Carrie Menkel-Meadow, Arthur R. Miller, Carol Rittner, John K. Roth, Lucille A. Roussin, William L. Shulman, Stephen D. Smith and Fritz Weinschenk. 

Prawfs readers may recognize Profs. Anzalone, Bazyler, D’Alemberte, Menkel-Meadow, Miller and Roussin.

This Second Circuit appeal concerns the dismissal of Grosz v. The Museum of Modern Art (MoMA).  Too many of us, unfortunately including a fair number of federal judges, seem to presume that claims to property taken long ago must be time-barred under some legal doctrine.  That presumption, however, is blocking our ability to bring sunlight to the dark, hidden history of the vastness of Nazi-looting, the art market’s greed in secretly snapping up bargains and the fact that claimants often were unable to make claims in the post-war period.  Too many in the art community would have us believe that the fact that Nazis plundered more art than any other regime in history, surpassing even Napoleon, remained a mystery until academics and lawyers turned their attention to newly opened archives in the mid-1990s.  This simply is not true, and it is directly relevant to whether purchasers acted in good faith and whether claimants could have identified their property claims and asserted them before now. 

United States diplomats from the State Department played a leading role in securing public commitment by the forty-four nations that adopted the Washington Conference Principles on Nazi-Confiscated Art in 1998 and the Terezín Declaration, which emerged from the international conference hosted by the Czech Republic in June 2009.  These declarations call for effective, fact-based resolution of Nazi-looted art claims – not defeating them in court on statute of limitations grounds.  

The brief captures the current hostile climate for claims to Nazi-looted art, wherein museums are trampling the conciliatory and transparency touchstones in the Washington Principles, Terezin Declaration and their own guidelines while convincing federal courts to accept distorted versions of historical fact going back to 1933 and contravene consistent executive branch policies dating back from today to 1943. 

 

Some American museums and others have managed to convince our federal courts that claims to Nazi-looted art are not worthy of treatment on the merits – grossly distorting the historical record in the process.  Some courts seem to have been convinced that enemies of the Third Reich could all freely engage in voluntary property and business transactions up until the passage of the Nuremberg Laws or even as late as 1938.  This brief uses irrefutable historical evidence to demonstrate the falsity of this position and that the art world had contemporary knowledge of the massive infection of the art market with “flight art” starting in 1933. 

 

In the Grosz case, the district court, in contradiction to Fed. R. Ev. 408, took snippets of settlement discussions completely out of context to improperly rule that MoMA Director Glenn Lowry refused the claim before MoMA clearly did so, such that the plaintiffs missed their court filing window under New York’s “demand and refusal” rule by a few months.  This ruling flies in the face of the court’s express finding that Lowry’s language was “almost certainly designed to entice plaintiffs to continue negotiating and to prevent the dispute from becoming public or escalating into litigation.”  The court’s ruling calls out for application of the equitable doctrines of tolling and estoppel and de-incentivizes good faith negotiation while incentivizing museums to draw out negotiations in the hopes that plaintiffs will miss the limitations cut-off.

 

This ruling guts executive policy since 1943.  Executive policy clearly acknowledges the length to which the Nazis went to mask aryanizations and forced sales of real and personal property as voluntary transactions and calls for their un-winding (London Declaration, Tate Letter, Military Government Law 59, Nuremberg Trials, etc.).  Moreover, recent U.S.-led efforts achieved the support of 44+ nations of declarations signed in Washington (1998), Vilnius (2000) and Terezín (2009) supporting resolution of Nazi-looted art claims via ADR premised on liberal access to provenance (ownership history) records to air the factual merits.  Association of American Museum Directors (AAMD) and American Association of Museums (AAM) Guidelines mirror these standards. 

 

MoMA, trampling over the declarations and guidelines, refuses to disclose provenance records relevant to the case, much less resolve the claim on the merits, despite Lowry’s 1998 testimony to Congress stating that MoMA and the museum community support transparency and MoMA’s words on its own web site stating that MoMA’s archives are open to all serious researchers.  The court seems to have pre-judged the case at the motion to dismiss stage, characterizing evidence about the tainted history of the paintings at issue as “rank hearsay” despite logical inferences to be drawn from the true historical context, endorsing MoMA’s protestations of confidentiality and inappropriately accepting MoMA's statute of limitations arguments mischaracterizing settlement communications. 

 

This case concerns paintings by George Grosz, who fled Germany in 1933 and was later declared an “enemy of the State” by the Nazi regime.  He left his art with Jewish art dealer Alfred Flechtheim, who also later fled.  The historical record documents that his galleries were aryanized.  MoMA bought one of Grosz’ paintings in 1947, and another in 1954.  Two "red flag" names identified as traffickers by the Art Looting Investigation Unit of the Office of Strategic Services, which would be familiar to any provenance researcher, appear in the provenances of the paintings at issue.  Not caring does not equate to not knowing.

 

Unfortunately, this case is not unusual.  More to come in my next post.  In the meantime, here's my web page if you'd like to contact me.

Property at the Park

Since becoming a parent, I’ve encountered a whole new realm of social norms involving children in public spaces in my neighborhood, Brooklyn Heights.  E.g., the playground rules technically bar food and drink, but both are commonplace and accepted.  It’s totally fine to forget a park acquaintance mom’s name, but socially embarrassing to forget her child’s name.  Stay in the swing as long as you want until there is someone identifiable waiting; then the first-in must be the first-out, within about 3 minutes.  (I am, admittedly, still learning the ropes here so for any Brooklyn Heights parents, my apologies if I’ve gotten any of these norms wrong.)   

One set of norms that particularly intrigues me relates to toddler toys at the park.  A local park, Cadman Plaza, features a large open field with no play equipment.  Children arrive with all manner of toys (scooters, baby strollers, balls, etc.).  In typical toddler fashion, the owner of the toy will generally use it for a few minutes, then lose interest and become obsessed with another child’s toy.  The norm seems to be that, unless small enough to be secreted away in a stroller basket and so stowed, toys become common property open to the use of other toddlers as long as the “owner” toddler isn’t presently using the toy.  I specify here toddler because this norm does not appear to extend to baby toys or “big kid” toys.  Thus, it is not ok for a toddler to take a baby’s rattle from the baby’s blanket or for a big kid to take another big kid’s stroller out for a spin.  The toddler norm seems designed to accommodate the mobility and short attention span of toddlers as well as their failure to appreciate “mine” vs. “yours,” and to avoid turning the park space into a series of fraught “no” encounters.  It also seems to reflect a view of these bright shiny toys as a honeytrap for the toddler set.  In other words, if you bring a bright shiny toy to the park and set it alluringly out in my toddler’s line of site, it is akin to entrapment.

These norms regarding park toy use remind me faintly of the attractive nuisance doctrine in tort which requires (real) property owners to exercise reasonable care with respect to child trespassers under certain conditions.  The property owner’s rights are limited primarily out of recognition of the diminished capabilities of children.  (It also seems to me that there might be some analogous instances in property law where property rights become similarly limited under certain circumstances (property profs?).) 

The conditions that the Restatement requires to invoke the attractive nuisance doctrine follow, with my annotations indicating how they likewise seem to be satisfied in the park/toy scenario described above.  So my very limited observation as a result of this exercise – it is mildly interesting, for purposes of thinking about the relationships between norms and law, to note that the requirements for invoking a legal rule that limits (real) property rights are (perhaps unsurprisingly) similar to those that underlie a social norm limiting (personal) property rights.

Restatement (Second) of Torts § 339 (1965)

Artificial Conditions Highly Dangerous To Trespassing Children

A possessor of land is subject to liability for physical harm to children trespassing thereon caused by an artificial condition upon the land if

(a) the place where the condition exists is one upon which the possessor knows or has reason to know that children are likely to trespass [toy bringers know other children are likely to be at the park], and

(b) the condition is one of which the possessor knows or has reason to know and which he realizes or should realize will involve an unreasonable risk of death or serious bodily harm to such children [toy bringers know that bright shiny toys pose an unreasonable risk of attempts at expropriation], and

(c) the children because of their youth do not discover the condition or realize the risk involved in intermeddling with it or in coming within the area made dangerous by it [toddlers don’t understand private property yet, “mine” vs. “yours”], and

(d) the utility to the possessor of maintaining the condition and the burden of eliminating the danger are slight as compared with the risk to children involved [sharing the toy or not bringing it at all is much easier than forcing everyone else to keep their toddlers away from the toy], and

(e) the possessor fails to exercise reasonable care to eliminate the danger or otherwise to protect the children [notably, if a toy is secreted way in a stroller, it doesn’t fall within the “mine is yours” park norm].

Property As/And Constitutional Settlement

I've posted a new paper with this title to SSRN.  The article addresses the constitutionality and propriety of governments settling constitutional issues or claims by disposing of public properties through various forms of privatization or by taking the subject properties.  Settlement-by-disposition has occurred with increasing frequency in Establishment Clause contexts.  Salazar v. Buono, which was argued in October and may be decided early next year, is an example.  Public forum properties such as streets and parks have also been disposed of in order to settle constitutional controversies.  Settlement-by-disposition is neither a new phenomenon, nor one limited to the sometimes contentious public display of religious symbols.  In addtion to the foregoing, consider Boumediene v. Bush, in which Justice Kennedy pointedly reminded federal officials that the power granted by the Constitution to acquire and dispose of federal territories does not carry with it the power to "switch the Constitution on or off at will."

The article traces the practice of settlement-by-disposition to the civil rights era, when officials devised a variety of creative dispostions in an effort to avoid integration.  Decisions from the 1960s and 1970s revealed no clear answer to the question whether officials could dispose of constitutional claims by disposing of public properties.  Some lower courts stretched the nascent state action doctrine and equal protection principles to prevent dispositions that were plainly intended to thwart integration orders.  But other courts, including the Supreme Court in a decision involving the disposition of public swimming pools, permitted officials to dispose of properties even though the result was to negate integration.  The Court did resist dual school system and other sham dispositions in the public education context.  But it was never forced to decide whether officials could simply close the public schools entirely in the face of desegregation mandates; although such proposals were made by segregationist public officials, southern parents and officials ultimately rejected the idea.    

In the aftermath of the oral arguments in Buono, some media and commentators seemed rather disappointed that the case might be decided on mere "property" grounds rather than on the Establishment Clause merits.  But I think settlement-by-disposition is actually the most significant aspect of the case, not least because this practice has implications far beyond the "donut hole" in the Mojave.  As Nelson Tebbe recently posed the fundamental question:  "When should we allow governments to deploy private-law rules in order to circumvent public-law obligations?"  I propose a general framework for thinking about and analyzing the constitutionality and propriety of settlement-by-disposition, one that draws upon the lessons of the civil rights experience.  The framework focuses on the fiduciary duties owed by public officials with regard to the critical assets subject to disposition.  The trust analogy I propose is not perfect.  But it responds directly to the danger that settlement-by-dispositon can be used to render constitutional liberties discretionary.    

 I invite those interested to read the draft, and of course would welcome any comments.    

Too Late

There is one more coda in what is probably the most-controversial-office-park-development in recent memory, the  Pfizer facility that ousted Susette Kelo from her house in New London, Connecticut.  The Hartford Courant reports:

Pfizer Inc. will shut down its massive New London research and development headquarters and transfer most of the 1,400 people working there to Groton, the pharmaceutical giant said Monday.

Susette Kelo's house has since been relocated elsewhere in New London.  I wonder if she will be allowed to move it back.

Disneyland and property rights in tickets

Due to a family matter, I had to head down to Los Angeles last week, so naturally my wife and I took our two little boys to Disneyland as well.  While there, the following two possibly analogous incidents occurred that got me thinking about property rights in tickets.

The first was that we decided to go on California Soarin' (in California Adventures), which is kind of a flight simulator ride with a big curved screen and suspended roller coaster-like seats that tilt with the picture to enhance the feeling of motion.  It's a popular ride, so the line gets long, and it's also one of the rides that Disney offers "Fastpass" to mitigate lines for those willing to work.  The way Fastpass works is that you insert your park entry card into a machine near the ride, and the machine gives you back your entry card and a ride ticket.  The catch is that the ride ticket lets you bypass the "standby" line only for a one-hour period, and that one-hour period is in the future.  So, if you visited the Fastpass machine at 10 am, you might be given a return window of 12 noon to 1 pm.

Anyway, we decided to brave the approximately 45 minute stand-by line, but as we were walking up to the end of the line, a woman approached us, asked if we were going to ride Soarin', and when we said we were, she gave us her Fastpass tickets, which we about to become valid.  Woo hoo!  So instead of having to wait 45-55 minutes, we bypassed the long line and had about a 5 minute wait (basically for the designated simulator to clear out).  I'll get to the potential issues involved in a moment.

The second incident occurred later that same day.  As we were exiting the park (well before closing time), a young woman approached us and asked if we were leaving.  When we said we were, she asked, "Can I have your tickets?"  Naturally, we refused.  It would have been pointless, since the regular Disneyland tickets require a valid hand-stamp for re-entry that day, and you can only get a hand-stamp if you've already been in a park, which of course requires that you already have had a ticket.

Nevertheless, the woman's request struck me as quite wrong for reasons beyond the pragmatic.  It would represent revenue loss to Disneyland, since the only other way she could get in would be to buy a ticket.  But then I started wondering about how I was able to Fastpass the Soarin' ride.  The lawyerly side of me could respond that there was no revenue loss to Disneyland, since the Fastpasses are free (but you essentially can only have one active at a time).  Therefore the situations are completely different.  And from Disneyland's perspective, I would think that is right.  On the other hand, I suppose the other customers waiting in the stand-by line might have had a complaint, since we (marginally) extended their wait, which would not have happened had we gone through the stand-by line.  Then again, the customers were no worse off than if the original Fastpassing woman had used her Fastpass instead of giving it to us, and one can wonder why those customers would care who imposed the marginal increase in wait time. . . .

The Vacuous Private Law of Homeowners' Associations (Below the Fold) After Vacuous Reflections About My Vacuous Life

Here we are, back for the fourth summer stint on PrawfsBlawg.  It's hard to believe, when Dan first invited me to do this, in July, 2006, I was an outsider to the legal academy looking in (per Bob Uecker, "gosh, they're having fun in there.")  Also, Twitter was unknown.  Twitter has done a lot to focus my blogging, because, call me an old whatever, but I can't believe anybody gives two hoots about the mundane details of my life, whether by blog entry or tweet, something I wasn't considering back in 2006 while in a New Orleans carwash watching what looked like melted rainbow sherbet ooze all over my car.  Steve Bainbridge seems to be able to get away with food and wine, but he seems to know what he's talking about.  I try to maintain a connection to something legal (or, if not legal, funny). 

If I were inclined to vacuous reflections about life, however, I would extol the pleasures of not of litigating, but of home brewing beer, a subject touched upon in these parts recently.  My son, Matthew, and I are on our  third batch of the summer, having invested $100 in the basic tools of the trade.  Our first 43 bottles were an Irish stout recipe, which we named "Max and Annie's Jewish Stout," after our two dogs.  We've since moved on to "Max and Annie's Michigan Porcupine Pale Ale" (a Sierra Nevada Pale Ale recipe), and "Charlevoix Steam Beer," which is presently fermenting in the crawl space where it is cool.  Our plan is to lay down a carboy full of mead for a full year in a few weeks.  This is a stretch but the legal connection is that I can't post the labels, because I am positive at least the second two violate a whole raft of copyright and trademark rights.

But enough of me.  Let's go below the fold where YOU can hear me whine about the governance of homeowner's associations.

We spend the summers in Charlevoix, Michigan, where we bought a lot sixteen years ago, and built a house twelve years ago.  In Michigan, there is something called a "site condominium," which is basically another way of imposing regulations in a subdivision of free-standing homes, and that's what we have.  There are thirty-six lots, and common elements, which consist of two roads and landscaping, and a beach lot with a removable "Brock Dock" through which residents not on the lakeshore itself have access to the lake.  You own your own lot and house in fee simple absolute, but the lot is established pursuant to a master condominium deed, which contains the property rules, and which incorporates a set of recorded bylaws, which establish the five-person Board of Directors (classified board - two and three seat classes, elected for two years) and the architectual review board, empower the collection of assessments for the maintenance of the common elements, and set use restrictions such as no short-term leasing, no open garage doors, and no boats, trailers, RVs, etc. left in the driveways.

If you want to experience the thrills of corporate governance in a microcosm, do as I have done and be a member of the condominium association Board of Directors for going on fifteen years.  I would have resigned long ago, except that nobody is as anal about the record-keeping as I am, and so I've been the secretary (and now webmaster) for all these years.  The lesson I take from the experience, as a legal theorist, is the tenuous (vacuous?) relationship among (a) the actual private law of the association as reflected in its governing documents, (b) what people think their actual rights are, and (c) how, when it comes to asserting and defending one's interests as between the law and the lore (or custom), a foolish consistency is the hobgoblin of little minds (see Prawfs guest blogger Brian Tamanaha on Law as a Means to an End).   Take, for example, a matter of no small interest:  the ability to see the lake from your living room if you have a house that is not on the lakeshore.  There are local zoning rules that define setbacks, as well as an architectural review board within the condominium association, but it has been almost impossible to restrain the lakeshore residents from building setback to setback (i.e., very large homes on relatively small lots), so that the space between the houses is a mere sixty feet, filled with fast growing (and kind of ugly) white pines that the original developer planted at the lot lines to keep the place from looking like a landing strip.  But there is no legal right anywhere in the documentation that says you have a property right in your view of the lake.  The only way to control this is through community controls on landscaping (which doesn't help with the stuff that was here before) or an appreciation of the Prisoner's Dilemma we find ourselves living in, and the ensuing need to cooperate.  Nevertheless, I find myself educating a neighbor every year on the fact that there is no legal right to a "view corridor" as it has come to be known.  If there were, I would have already done something about the forest of scrubby white pines that block my view.

Then there is the question of the separation of ownership and management.  We just issued a rule to the effect that there were to be no permanent firepits built on the beach.  You can have fires, but you have to use a portable firepit (they exist), which means that you clean up after yourself, and there's no lingering hot embers for a kid to fall into.  My publication of this rule prompted the following "Berle and Means" response from a neighbor (otherwise, a very nice person - beware the pitfalls of the inference one draws from e-mail):  "Does the board act and make rules based on the good of the people that live here?"  

Well, I could go on, but there is shameless self-promotion yet to be written.

A Casual Casebook: The Canon of American Common Law

This summer I am planning to put together a casebook that is for leisurely reading, rather than a law-school course. My tentative title is "The Canon of American Common Law." 

It is an idea of mine that started with the thought that it would be exciting to give a special award to the first-year law student with the highest combined grade-point average in the three common law courses: Contracts, Property, and Torts. A good name would be the Holmes Award. But what would be a suitable prize? A perfect token, I thought, would be a book of the classic common-law cases. I think such a book would also be nice to have available for casual students of the law – people who would like to do some exploring in the law – but who are not looking for three years of law school.

Below is my very-rough draft table of contents, along with a list of “on the bubble” cases that are deserving, but that I might leave out to keep the size of the book manageable. I would be very grateful for your comments. Do any of the cases fail to qualify as classics? Am I grievously leaving something out? Am I close to closing in on a canonical list? Or am I way off?

Contracts:

Wood v. Boynton

Webb v. McGowin

Raffles v. Wichelhaus (The Peerless Case)

Hamer v. Sidway

Lucy v. Zehmer

Wood v. Lucy, Lady Duff-Gordon

Hawkins v. McGee

Peevyhouse v. Garland Coal & Mining Co.

Hadley v. Baxendale

Property:

Ghen v. Rich

Pierson v. Post

Brown v. Voss

Hannah v. Peel

Moore v. Regents of the University of California

Vanna White v. Samsung Electronics America, Inc.

State v. Shack

Boomer v. Atlantic Cement Co.

Torts:

Vosburg v. Putney

Garratt v. Dailey

Fisher v. Carrousel Motor Hotel, Inc.

Ploof v. Putnam

Katko v. Briney

Vincent v. Lake Erie Transportation Co. 

Byrne v. Boadle

Palsgraf v. Long Island R.R. Co.

Summers v. Tice

Tarasoff v. Regents of University of California

U.S. v. Carroll Towing Co.

Vaughan v. Menlove

Rylands v. Fletcher

Escola v. Coca-Cola Bottling Co. of Fresno

On the bubble:

Dougherty v. Salt

Taylor v. Caldwell

Brown v. Kendall

I de S et ux. v. W de S

Indiana Harbor Belt. R. Co. v. American Cyanamid Co.

Lumley v. Gye

MacPherson v. Buick Motor Co.

Stone v. Bolton

You’ll notice there are a few English cases in the mix, but they are ones that, I think, are nonetheless, classics of American common law, generally because of their entrenchment in the American 1L curriculum.

Also, you’ll notice I have not included any U.S. Supreme Court cases. That’s another casual-casebook project – but a worthy one. I plan to take that up separately.