[Senate Hearing 107-866]
[From the U.S. Government Publishing Office]
S. Hrg. 107-866
SOVEREIGN IMMUNITY AND THE PROTECTION OF INTELLECTUAL PROPERTY
=======================================================================
HEARING
before the
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
__________
FEBRUARY 27, 2002
__________
Serial No. J-107-62
__________
Printed for the use of the Committee on the Judiciary
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COMMITTEE ON THE JUDICIARY
PATRICK J. LEAHY, Vermont, Chairman
EDWARD M. KENNEDY, Massachusetts ORRIN G. HATCH, Utah
JOSEPH R. BIDEN, Jr., Delaware STROM THURMOND, South Carolina
HERBERT KOHL, Wisconsin CHARLES E. GRASSLEY, Iowa
DIANNE FEINSTEIN, California ARLEN SPECTER, Pennsylvania
RUSSELL D. FEINGOLD, Wisconsin JON KYL, Arizona
CHARLES E. SCHUMER, New York MIKE DeWINE, Ohio
RICHARD J. DURBIN, Illinois JEFF SESSIONS, Alabama
MARIA CANTWELL, Washington SAM BROWNBACK, Kansas
JOHN EDWARDS, North Carolina MITCH McCONNELL, Kentucky
Bruce A. Cohen, Majority Chief Counsel and Staff Director
Sharon Prost, Minority Chief Counsel
Makan Delrahim, Minority Staff Director
C O N T E N T S
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STATEMENTS OF COMMITTEE MEMBERS
Page
Brownback, Hon. Sam, a U.S. Senator from the State of Kansas..... 38
Cantwell, Hon. Maria, a U.S. Senator from the State of Washington 80
Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah...... 85
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont. 1
WITNESSES
Bender, Paul, Professor, Arizona State University College of Law
and Counsel to Meyer & Klipper, PLLC, Washington, D.C.......... 40
Kirk, Michael K., Executive Director, American Intellectual
Property Law Association, Arlington, Virginia.................. 22
Peters, Marybeth, Register of Copyrights, U.S. Copyright Office,
Washington, D.C................................................ 10
Rogan, James E., Under Secretary of Commerce for Intellectual
Property and Director, U.S. Patent and Trademark Office,
Washington, D.C................................................ 5
Schraad, Keith, Western Regional Director, National Information
Consortium, Lawrence, Kansas; accompanied by William Patrie,
Legal Counsel for the National Information Consortium,
Lawrence, Kansas............................................... 27
Thro, William E., General Counsel, Christopher Newport
University, Newport News, Virginia............................. 31
QUESTIONS AND ANSWERS
Responses of Paul Bender to questions submitted by Senator Leahy. 64
Responses of Paul Bender to questions submitted by Senator Hatch. 65
Responses of Marybeth Peters to questions submitted by Senator
Hatch.......................................................... 68
Responses of William E. Thro to questions submitted by Senator
Leahy.......................................................... 70
Responses of William E. Thro to questions submitted by Senator
Hatch.......................................................... 75
SUBMISSIONS FOR THE RECORD
American Bar Association, Charles P. Baker, Chair, Section of
Intellectual Property Law, Chicago, Illinois, letter........... 77
Biosource, Inc., Marc Andelman, President, Worcester,
Massachusetts, letter.......................................... 78
Business Software Alliance, Robert Holleyman, II, President and
CEO, Washington, D.C., letter.................................. 79
Chamber of Commerce of the United States of America, R. Bruce
Josten, Executive Vice President, Government Affairs,
Washington, D.C., letter and attachment........................ 81
Dry, Carolyn, February 19, 2002, letter.......................... 83
Gray Matter LLC, Lorin Brennan, Manager, Newport Beach,
California, letter............................................. 84
Intellectual Property Owners Association, Herbert C. Wamsley,
Executive Director, Washington, D.C., letter................... 86
International Trademark Association, Niles Victor Montan,
President, Washington, D.C., letter............................ 86
Mittel, Robert E., Mittel Asen LLC, Portland, Maine, letter...... 88
Motion Picture Association, Jack Valenti, Chairman and Chief
Executive Officer, Washington, D.C., letter.................... 89
Professional Photographers of America, David P. Trust, Chief
Executive Officer, Atlanta, Georgia:
February 25, 2002, letter.................................... 89
April 2, 2002, letter........................................ 90
Software & Information Industry Association, Ken Wasch,
President, Washington, D.C., letter............................ 91
SOVEREIGN IMMUNITY AND THE PROTECTION OF INTELLECTUAL PROPERTY
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WEDNESDAY, FEBRUARY 27, 2002
United States Senate,
Committee on the Judiciary,
Washington, D.C.
The committee met, pursuant to notice, at 10:28 a.m., in
Room SD-226, Dirksen Senate Office Building, Hon. Patrick J.
Leahy, Chairman of the Committee, presiding.
Present: Senators Leahy and Brownback.
OPENING STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM
THE STATE OF VERMONT
Chairman Leahy. The committee will come to order. And I
thank everybody for being here. The delay, as Under Secretary
Rogan understands, when the lights go on, we have votes on, and
in typical precision our 10 o'clock vote began at about quarter
after, so I apologize for that.
It is good to have you all here, because we are going to
focus on a pair of Supreme Court cases from 1999, what they
mean for our national system of intellectual property,
referring of course to Florida Prepaid v. College Savings Bank
and its companion case College Savings Bank v. Florida Prepaid.
The Supreme Court ruled in these cases that States and their
institutions cannot be held liable for damages for patent
infringement and other violations of the Federal intellectual
property laws, even though those same States can and do enjoy
the full protection of the laws for themselves.
The Florida Prepaid cases were both decided by the same 5
to 4 majority of the justices. The slim majority of the Court
threw out three Federal statutes that Congress passed
unanimously in the early 1990s, to reaffirm that the Federal
patent, copyright and trademark laws apply to everyone,
including the States. I should note that Senator Hatch was one
of the two principal sponsors of these statutes in the Senate,
along with former Senator DeConcini.
About four months after what I believe was a very activist
Court ruling in the Florida Prepaid cases, I introduced a bill
that responded to the Court's decisions. The Intellectual
Property Protection Restoration Act of 1999 was designed to
restore Federal remedies for infringements of intellectual
property rights by the States.
It has been nearly three years since the Court issued its
decisions, and this hearing is actually overdue. I believe
there is an urgent need for the Congress to address this issue,
for two reasons.
First, the decisions open up a huge loophole in our Federal
intellectual property laws. The Supreme Court actually created
significant new law. If we truly believe in fairness, we cannot
tolerate a situation in which some participants in the
intellectual property system get legal protection, but are told
they do not have to adhere to the law themselves. They can get
the benefits with none of the obligations. If we truly believe
in the free market, we cannot tolerate a situation where one
class of market participants have to play by the rules and
others do not. As the Senator from Pennsylvania said in August
1999 in a floor statement that was highly critical of these
decisions, he said, they ``leave us with an absurd and
untenable state of affairs,'' where ``States will enjoy an
enormous advantage over their private sector competitors.''
This concern is not just abstract. Consider this. In one
recent copyright case the University of Houston was able to
avoid any liability by invoking sovereign immunity. The
plaintiff in that case, a woman named Denise Chavez, was unable
to collect a nickel in connection with the University's
unauthorized publication of her short stories. Just a short
time later, another public university funded by the State of
Texas is suing Xerox for copyright infringement.
There are other reasons why we should respond. Over the
past decade in a series of 5 to 4 decisions that might be
called examples of judicial activism, the current Supreme Court
majority has overturned Federal legislation with a frequency
unprecedented in American constitutional history. In doing so,
the Court has more often than not relied on notions of State
sovereign immunity that have little if anything to do with the
text of the Constitution.
Some of us have liked some of the results, some have liked
others, but that is not the point. You have an activist Court
that is whittling away at the legitimate constitutional
authority of the Federal Government. We are faced with a
choice. We can respond in a careful measured way by reinstating
our democratic policy choices in legislation crafted to meet
what the Court currently claims are its objections. Or we can
run away, abdicate our democratic policy-making duties to the
unelected Court and go down in history as the incredibly
shrinking Congress. I pose what the alternatives are. You can
probably guess which way I feel.
Just last week the Court decided to intervene in another
copyright dispute to decide whether Congress went too far in
1998 when we extended the period of copyright protection for an
additional 20 years. Many of us on the committee cosponsored
that legislation, and it passed unanimously in both the House
and the Senate. A decision that the legislation is
unconstitutional could place further limits on congressional
power. Some would say that the Supreme Court has decided that
it can ignore Congress, can ignore the electorate, and really
set itself up as an amazingly activist Court, certainly the
most activist in my lifetime.
In November of last year I introduced the Intellectual
Property Protection Restoration Act of 2001, S. 1611. It builds
on my earlier proposal. I am proud to have the House leaders on
intellectual property issues, Representatives Coble and Berman,
as the principal sponsors of the House bill. And we have
support from such organizations as the American Bar
Association, the American Intellectual Property Law
Association, the Intellectual Property Owners Association, the
International Trademark Association, the Professional
Photographers of America Association, and the Chamber of
Commerce.
I have a lot more on here, but to save time I will put my
full statement in the record, and a statement from Senator
Hatch will also be placed in the record.
And I would emphasize we are having this hearing to assure
American inventors and investors and our foreign trading
partners that as State involvement in intellectual property
becomes ever greater in the new information economy, U.S.
intellectual property rights are backed by legal remedies. I
want to emphasize the international ramifications here.
American trading interests have been well served by our strong
and consistent advocacy of effective intellectual property
protections in treaty negotiations. These efforts can be
jeopardized by the loophole in U.S. intellectual property
enforcement the Supreme Court has created, and I want to get us
back to a case where we have not arbitrary fiats from across
the street, but rather well thought-out and well-crafted
legislation that follows not only the Constitution, but
constitutional history.
[The prepared statement of Senator Leahy follows:]
Statement of Hon. Patrick J. Leahy, a U.S. Senator from the State of
Vermont
I want to welcome everyone to today's hearing on sovereign immunity
and the protection of intellectual property. Thank you all for coming.
Today's hearing will focus on a pair of Supreme Court cases from
1999 and what they mean for our national system of intellectual
property protection. I am referring to Florida Prepaid v. College
Savings Bank and its companion case, College Savings Bank v. Florida
Prepaid. The Court ruled in these cases that States and their
institutions cannot be held liable for damages for patent infringement
and other violations of the federal intellectual property laws, even
though they can and do enjoy the full protection of those laws for
themselves.
The Florida Prepaid cases were both decided by the same five-to-
four majority of the justices. This slim majority of the Court threw
out three federal statutes that Congress passed, unanimously, in the
early 1990s, to reaffirm that the federal patent, copyright, and
trademark laws apply to everyone, including the States. I should note
that Senator Hatch was one the two principal sponsors of these statutes
in the Senate, along with former Senator DeConcini.
About four months after the Court ruled in the Florida Prepaid
cases, I introduced a bill that responded to the Court's decisions. The
Intellectual Property Protection Restoration Act of 1999 was designed
to restore federal remedies for infringements of intellectual property
rights by States.
Today's hearing is overdue; it has been nearly three years since
the Court issued its decisions in the Florida Prepaid cases. I believe
that there is an urgent need for Congress to respond to those
decisions, for two reasons.
First, the decisions opened up a huge loophole in our federal
intellectual property laws. If we truly believe in fairness, we cannot
tolerate a situation in which some participants in the intellectual
property system get legal protection but need not adhere to the law
themselves. If we truly believe in the free market, we cannot tolerate
a situation where one class of market participants have to play by the
rules and others do not. As Senator Specter said in August 1999, in a
floor statement that was highly critical of the Florida Prepaid
decisions, they ``leave us with an absurd and untenable state of
affairs,'' where ``States will enjoy an enormous advantage over their
private sector competitors.''
This concern is not just abstract. Consider this. In one recent
copyright case, the University of Houston was able to avoid any
liability by invoking sovereign immunity. The plaintiff in that case, a
woman named Denise Chavez, was unable to collect a nickle in connection
with the University's alleged unauthorized publication of her short
stories. Now, just a short time later, another public university funded
by the State of Texas is suing Xerox for copyright infringement.
The second reason why Congress should respond to the Florida
Prepaid decisions is that they raise broader concerns about the roles
of Congress and the Court. Over the past decade, in a series of five-
to-four decisions that might be called examples of ``judicial
activism,'' the current Supreme Court majority has overturned federal
legislation with a frequency unprecedented in American constitutional
history. In doing so, the Court has more often than not relied on
notions of State sovereign immunity that have little if anything to do
with the text of the Constitution.
Some of us have liked some of the results; others have liked
others; but that is not the point. This activist Court has been
whittling away at the legitimate constitutional authority of the
federal government. At the risk of sounding alarmist, this is the fact
of the matter: We are faced with a choice. We can respond--in a careful
and measured way--by reinstating our democratic policy choices in
legislation that is crafted to meet the Court's stated objections. Or
we can run away, abdicate our democratic policy-making duties to the
unelected Court, and go down in history as the incredible shrinking
Congress.
Just last week, the Court decided to intervene in another copyright
dispute, to decide whether Congress went too far in 1998, when we
extended the period of copyright protection for an additional twenty
years. Many of us on the Committee cosponsored that legislation, and it
passed unanimously in both Houses. A decision that the legislation is
unconstitutional could place further limits on congressional power.
In November of last year, I introduced the Intellectual Property
Protection Restoration Act of 2001, S.1611, which builds on my earlier
proposal. I am proud to have the House leaders on intellectual property
issues, Representatives Coble and Berman, as the principal sponsors of
the House companion bill, H.R. 3204. Our approach has garnered broad
support from such organizations as the American Bar Association, the
American Intellectual Property Law Association, the Intellectual
Property Owners Association, the International Trademark Association,
the Professional Photographers of America Association, and the Chamber
of Commerce.
This bill has the same common-sense goal as the three statutes that
Senator Hatch championed a decade ago and the Supreme Court overturned:
To protect intellectual property rights fully and fairly. But the
legislation has been re-engineered, after extensive consultation with
constitutional and intellectual property experts, to ensure full
compliance with the Court's new jurisprudential requirements.
Most importantly, our bill presents States with a choice. It
creates reasonable incentives for States to waive their immunity in
intellectual property cases, but it does not oblige them to do so.
States that choose not to waive their immunity within two years after
enactment of the bill would continue to enjoy many of the benefits of
the federal intellectual property system; however, like private parties
that sue States for infringement, States that sue private parties for
infringement could not recover any money damages unless they had waived
their immunity from liability in intellectual property cases.
This arrangement is clearly constitutional. Congress may attach
conditions to a State's receipt of federal intellectual property
protection under its Article I intellectual property power just as
Congress may attach conditions on a State's receipt of federal funds
under its Article I spending power. Either way, the power to attach
conditions to the federal benefit is part of the greater power to deny
the benefit altogether. And no condition could be more reasonable or
proportionate than the condition that in order to obtain full
protection for your federal intellectual property rights, you must
respect those of others.
I hope we can all agree on the need for corrective legislation. A
recent GAO study confirmed that, as the law now stands, owners of
intellectual property have few or no alternatives or remedies available
against State infringers--just a series of dead ends. I commend Senator
Hatch for initiating that GAO study when he was Chairman of the
Committee.
We need to assure American inventors and investors, and our foreign
trading partners, that as State involvement in intellectual property
becomes ever greater in the new information economy, U.S. intellectual
property rights are backed by legal remedies. I want to emphasize the
international ramifications here. American trading interests have been
well served by our strong and consistent advocacy of effective
intellectual property protections in treaty negotiations and other
international fora. Those efforts could be jeopardized by the loophole
in U.S. intellectual property enforcement that the Supreme Court has
created.
I look forward to hearing from our witnesses, and again thank you
all for coming.
Mr. James Rogan is the Under Secretary of Commerce of
Intellectual Property and Director of the U.S. Patent and
Trademark Office, formerly in the House of Representatives,
where among other things he was a member of the Judiciary
Committee, Subcommittee on Courts and Intellectual Property. He
has the distinction of having served in every branch of State
Government, as a prosecutor, a judge and a legislator. Being a
prosecutor is the best job anybody could have, and Under
Secretary Rogan, please come forward.
And Marybeth Peters is the Register of Copyrights. She has
held that position since 1994, has been with the Copyright
Office since 1966, has taught copyright as an adjunct at the
University of Miami and at Georgetown, has written and spoken
extensively on copyright matters, and is probably one of the
best-known people before this committee. And, Ms. Peters,
please come forward.
And why do we not start with you, Secretary Rogan?
STATEMENT OF JAMES E. ROGAN, UNDER SECRETARY OF COMMERCE FOR
INTELLECTUAL PROPERTY AND DIRECTOR OF THE UNITED STATES PATENT
AND TRADEMARK OFFICE, WASHINGTON, D.C.
Mr. Rogan. Mr. Chairman, thank you. In fact, in listening
to your repetition of my biography, I noted to Marybeth that I
am now on my second go-round in an Executive Branch job. So
hopefully I will have merited the confidence of this committee,
and especially you, Mr. Chairman, for the courtesies that you
extended me last year. I appreciate your support, and before I
begin I wanted to thank you once again.
Chairman Leahy. Well, I am pleased that you were willing to
take the position you have. I think the President made a wise
choice, and I am glad to have you here.
Mr. Rogan. Thank you, Mr. Chairman. After 9 months in the
private sector, I only wish my wife would join you with that
delight.
[Laughter.]
Mr. Rogan. Anyway, turning to the issue at hand, Mr.
Chairman, I also want to congratulate you and Senator Hatch for
the leadership both of you have shown on this rather complex
issue concerning State sovereign immunity. The Supreme Court's
Florida Prepaid decisions pose critically important issues for
our Nation's intellectual property system, and it is gratifying
to see that Congress is concerned about the situation and
looking to bipartisan solutions.
In the time since I was confirmed as Under Secretary for
Intellectual Property, I have surveyed many in the IP community
about the State sovereign immunity problem. These conversations
have made clear that the inequitable impacts resulting from
Florida Prepaid decisions need to be addressed. State and State
institutions are active and invaluable participants in the
Federal intellectual property system. University hospitals and
research centers patent their latest innovations. State public
television and radio stations produce copyrighted programming.
And State universities have valuable merchandising rights in
the marks associated with their sport teams. As State entities
become increasingly involved in commerce, particularly through
the educational and research sectors, they naturally desire to
protect and enforce their own intellectual property rights.
Presently, however, under the Florida Prepaid decisions,
they are shielded from real accountability if they infringe on
the intellectual property rights of others. This inequity skews
our system of IP protection. The Florida Prepaid decisions also
had implications for enforcing America's intellectual property
abroad. IP protection is critical for U.S. exports with about
one-half now dependent on some form of protection.
As we advocate stronger enforcement abroad to secure these
assets, we must also demonstrate our respect for intellectual
property rights here at home. That means providing robust means
of enforcement against any infringer.
Mr. Chairman, our reading of the Supreme Court's Florida
Prepaid decisions suggests that a legislative remedy is
appropriate. While the administration is not yet prepared to
endorse any particular bill, we very much appreciate your
introduction of S. 1611 as a basis for discussion of these
issues.
The administration trusts that the hearings involving
representatives of private and State holders of intellectual
property, legal experts in IP and State immunity, and the
administration, will enable this committee to fashion
appropriate legislative remedies. To that end the U.S. PTO and
the administration look forward to continuing to work with you
and the members of this distinguished committee to ensure that
the rights of all IP owners are protected through equitable and
robust enforcement.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Rogan follows:]
Statement of James E. Rogan, Under Secretary of Commerce for
Intellectual Property, Director of the U.S. Patent and Trademark
Office, Washington, D.C.
Chairman Leahy and Members of the Committee, it is a pleasure to
join your discussion of State sovereign immunity and its impact on the
enforcement of intellectual property rights. I want to thank you and
Senator Hatch for the leadership you have shown on this very complex
issue. Like both of you, I recognize that the Supreme Court's decisions
in 1999 on State sovereign immunity pose a critically important issue
for intellectual property policy.
Intellectual property owners view the current situation as
inequitable. In their view, State institutions profit from federally
protected intellectual property and are permitted to bring suit to
protect their own intellectual property, but are shielded from monetary
damages as defendants. This inequity skews our system of intellectual
property protection, because the penalties in place to discourage
infringement do not apply to State entities. The Administration shares
some of these concerns.
However, the subject of today's hearing rests at a critical
intersection of two fundamental Constitutional principles. On the one
hand, the Eleventh Amendment recognizes that each State is a sovereign
entity in our federal system. On the other hand, Article 1, Section 8
of the Constitution creates the foundation for our intellectual
property system by granting Congress ``the power to promote the
progress of science and useful arts, by securing for limited times to
authors and inventors the exclusive right to their respective writings
and discoveries.''
The Commerce Department supports the objective of ensuring that
owners of intellectual property rights have a proper remedy when a
State infringes upon those intellectual property rights. As such, we
believe that a legislative answer to the questions raised by the
Florida Prepaid cases is appropriate. At the same time, however, we
respect the Supreme Court's decisions on federalism. We support this
committee's efforts to strike a balance between these competing
interests in carefully crafting responsive legislation.
The Florida Prepaid Cases
In the 1980's and 1990's, however, the Supreme Court ruled that
Congress must make explicit its intent to abrogate sovereign immunity.
Under this test, the language of many statutes that had been assumed to
abrogate sovereign immunity (such as the Patent Act, the Lanham Act,
and the Copyright Act) failed to achieve that purpose. Intellectual
property owners then feared that States might be immune to suits for
damages under federal intellectual property laws.
In order to make explicit its intent to abrogate State sovereign
immunity in such infringement suits, Congress enacted the Patent and
Plant Variety Remedy Clarification Act (1992), the Trademark Remedy
Clarification Act (1992), and the Copyright Remedy Clarification Act
(1990). However, in a 1996 decision, Seminole Tribe v. Florida, 517
U.S. 44 (1996), the Supreme Court ruled that Congress may authorize
suits against States in Federal court only pursuant to its authority
under section 5 of the Fourteenth Amendment and not pursuant to any
power under Article I of the Constitution.
In 1999, the U.S. Supreme Court applied this same reasoning in two
opinions addressing the right of States to assert sovereign immunity in
suits concerning federally protected intellectual property. In Florida
Prepaid Postsecondary Education Expense Board v. College Savings Bank,
527 U.S. 627, the Court held that States could assert sovereign
immunity to shield themselves from suits under the Patent Act. The
Court recognized that Congress has the power to abrogate sovereign
immunity under section 5 of the Fourteenth Amendment. However, the
Court reasoned that Congress' passage of the Patent and Plant Variety
Protection Remedy Clarification Act in 1992 did not validly abrogate
State sovereign immunity. The Court cited two reasons for this
conclusion. First, Congress had failed to sufficiently identify State
infringements of patents that constituted conduct transgressing the
Fourteenth Amendment's substantive provisions.
Second, Congress had failed to tailor its legislative abrogation of
State sovereign immunity to remedy or prevent such Constitutional
violations.
In a companion case, College Savings Bank v. Florida Prepaid
Postsecondary Education Expense Board, 527 U.S. 666, the Court
considered whether States can be sued for unfair competition under
Sec. 43(a) of the Lanham Act (15 U.S.C. 1125(a)) where the Trademark
Remedy Clarification Act had: (1) amended Sec. 43(a) by defining ``any
person'' to include State and State instrumentalities; and (2)
expressly abrogated State sovereign immunity for Sec. 43(a) suits.
Again, the Court held that Trademark Remedy Clarification Act had not
validly abrogated the State sovereign immunity and concluded that
Florida had not voluntarily waived its sovereign immunity through its
activities in interstate commerce. While the Court has not directly
considered whether States enjoy sovereign immunity against claims of
either trademark or copyright infringement, the Florida Prepaid cases
have been interpreted by both courts and commentators as leading to
that conclusion.
In my conversations with intellectual property owners, I have
learned that they find the current situation post-Florida Prepaid to be
unfair. States and State institutions are active participants in the
federal intellectual property system, with extensive patent and
trademark holdings. Yet, while they enjoy all the rights of an
intellectual property plaintiff, they are shielded from significant
accountability as infringers of the intellectual property of others.
In light of this potential problem, Senator Hatch asked the General
Accounting Office (GAO) last year to research and prepare a report to:
determine the extent to which States have been accused of intellectual
property infringement; identify the alternatives or remedies available
to protect intellectual property owners against State infringement
after the Florida Prepaid ruling; and obtain the views of the
intellectual property community on what States could and should do, if
anything, to protect intellectual property owners against infringement.
The GAO discovered fifty-eight lawsuits brought against States for
intellectual property infringement since 1985. Although the GAO labeled
this number as ``few,'' this finding provides some evidence of the
extent to which States have been accused of violating the intellectual
property laws. Until 1999, the States were thought to be liable for
damages for infringing another's intellectual property. Because of this
potential liability, State entities had every reason to avoid
infringement, to negotiate settlements or to enter into licensing
arrangements.
Furthermore, based on self-reporting by State attorneys general and
State universities, the GAO found that most State entities handle
accusations of intellectual property infringement through
administrative processes. If the majority of such accusations are
handled through such processes, then the fifty-eight cases filed in
court represent only a small number of the total accusations against
States.
In reality, too little time has elapsed since the 1999 Florida
Prepaid decisions for the GAO to statistically gauge whether immunity
from suits for damages has led to States relaxing their standards for
the use of intellectual property. Given all of these considerations, 58
cases naming States as defendants may be evidence of a much larger
problem.
In addition to the fifty-eight allegations of infringement by
States, the GAO report revealed an absence of any viable alternative
remedy against State infringement. The GAO lists a number of legal
theories under which an intellectual property owner might be able to
seek monetary damages in State courts. But the potential usefulness of
any of these theories is largely unknown. The intellectual property
laws of the United States have been carefully crafted to provide
appropriate incentives to authors and inventors. Requiring an
intellectual property owner to resort to untested legal theories in
State courts in order to remedy an infringement damages the integrity
of the U.S. intellectual property system.
Furthermore, 28 U.S.C. section 1338 gives federal courts exclusive
jurisdiction over any civil action arising under any Act of Congress
relating to patents, plant variety protection, copyrights, mask works,
and designs. The federal courts have original jurisdiction over
trademark infringement suits and over unfair competition claims when
joined with a substantial and related claim under the copyright,
patent, plant variety protection or trademark laws. The Copyright Act
preempts all State legal rights that are equivalent to any of the
exclusive rights in the Copyright Act after January 1, 1978. Thus, it
is difficult to imagine any sufficient and practical alternative State
remedy for State infringement of a copyright. All actions relating to
patent and trademark applications are heard either through an
administrative body in the USPTO or a federal court and are appealable
only to a federal court. Finally, many States will have sovereign
immunity in their own courts as well as in federal courts.
Consequently, the alternatives to bringing an infringement suit against
a State in federal court are, at best, uncertain.
The Florida Prepaid decisions may also have implications for
enforcing America's intellectual property rights abroad. As the
Committee is well aware, intellectual property protection is critical
for U.S. exports, with about one-half of all of our exports dependent
on some form of intellectual property protection. In fact, America
loses more than $11 billion a year just from international software
piracy alone. To combat this problem, we are reaching out to our
foreign trading partners to encourage their support for strong
intellectual property laws and enforcement systems. However, as we
advocate strong enforcement abroad, we must also demonstrate our
respect for intellectual property rights here at home and provide
robust means of enforcement against any infringer.
Legislative Options
Because the Florida Prepaid decisions raised a critical issue of
intellectual property policy, the U.S. Patent and Trademark Office
(USPTO) has been closely examining this matter since the decisions were
issued in 1999. This includes participating in an informal discussion
group on the cases with private industry, the Copyright Office, and
House and Senate staff as well as hosting an all-day conference in
March 2000 in cooperation with American Intellectual Property Law
Association (AIPLA) and the Intellectual Property Section of the
American Bar Association (ABA). The conference studied various
legislative options and constitutional issues that face the
intellectual property community in the wake of the Florida Prepaid
decisions. At the conference, scholars, State representatives, and
intellectual property owners focused their attention on three basic
routes for State liability in intellectual property cases: the
abrogation approach, injunctive relief under the Ex Parte Young
doctrine, and waiver of State immunity in exchange for participation in
some federal program.
The Abrogation Approach
Mr. Chairman, Section 5 of your Bill, S. 1611, would abrogate State
sovereign immunity in cases where a State's infringement rises to the
level of a constitutional violation under the Due Process Clause or the
Takings Clause, and where the State cannot demonstrate that its own
procedures are adequate to remedy such violations. While this limited
abrogation would appear to be constitutional under Florida Prepaid, it
is unclear to what extent Section 5 of the bill would address the full
range of State infringements of intellectual property. As Florida
Prepaid indicates, however, a broader abrogation statute would raise
quite serious constitutional questions: it would, at a minimum, need to
be crafted as a remedy or disincentive that is proportional and
congruent to those instances of State infringement that are, in fact,
unconstitutional.
The Injunctive Relief Approach
In light of the constitutional problems inherent in crafting an
abrogation statute that would reach all instances of State
infringement, legal scholars have suggested two other approaches to
balancing State sovereign immunity against the concerns of intellectual
property owners: (1) injunctive relief under the Ex Parte Young
doctrine and (2) requiring a waiver of sovereign immunity as a
condition of receiving some federal benefit.
Based on the GAO's findings, it appears that members of the
intellectual property community believe it is possible to go to federal
court to get an injunction against a State preventing future
infringement. In Ex Parte Young, the Supreme Court ruled that Eleventh
Amendment immunity does not bar certain suits seeking declaratory and
injunctive relief against State officers in their official capacities.
209 U.S. 123 (1908). Supreme Court decisions have clarified that the Ex
Parte Young exception to State sovereign immunity must be interpreted
narrowly and cannot be applied so as to allow all federal court actions
against State officers in their official capacities to proceed. See
e.g., Edelman v. Jordan, 415 U.S. 651 (1974). Therefore, under Ex Parte
Young, it may be possible to bring suit against a State official for
injunctive relief to stop continuing intellectual property
infringement. It may not be possible, however, to obtain monetary
damages. (Although a suit for money damages may be prosecuted against a
State official in his individual capacity for unlawful conduct fairly
attributable to the officer himself, such relief must come from the
officer personally rather than from the State treasury, and therefore
is not often an adequate or appropriate remedy for State infringement.)
Based on our discussions with the intellectual property community, we
believe that intellectual property owners would prefer a remedy that
would allow them to collect monetary damages from the State for
infringement. Intellectual property owners feel that the availability
of monetary damages would provide a stronger disincentive to
infringement.
The Waiver Approach
The third possible approach is to seek a waiver of State sovereign
immunity. State officials are unlikely to voluntarily waive sovereign
immunity because doing so is not in the State's interest. Therefore,
much attention has been given to whether Congress can craft legislation
that will, in a constitutionally sound manner, prompt States to waive
their sovereign immunity in intellectual property suits. Congress may
want to look carefully at the possibility of eliciting waivers of
sovereign immunity in exchange for the States' ability to benefit from
the federal intellectual property system. To avoid Constitutional
difficulties, we believe that there must be clear notice to the States
of how participation triggers waiver. There may be other complexities
and Constitutional questions that need further examination as well.
Mr. Chairman, your bill offers one model for addressing these
issues - a carefully crafted model that deserves close attention as we
move forward in this discussion. As noted above, section 5 of S. 1611
would abrogate State sovereign immunity in cases where a State's
infringement constituted a constitutional violation under the Due
Process Clause or the Takings Clause, and where the State cannot
demonstrate that its own procedures are adequate to remedy such
violations. Section 4 of the bill would clarify that actions, including
Ex Parte Young suits, can be brought against State officials. And under
section 3 of S. 1611, a State could not obtain damages in federal
courts for infringements of its patents, trademarks or copyrights
unless the State had waived its immunity in federal court in any action
for ``infringement of intellectual property protected under Federal
law.'' The Commerce Department supports the objective of ensuring that
owners of intellectual property rights have a proper remedy when a
State infringes upon those intellectual property rights. The
Administration believes that legislation to achieve that objective must
(1) be consistent with the Constitution, (2) properly respect the roles
of the States in our Federal system, and (3) facilitate creation of and
commerce in intellectual property. While the Administration is not yet
prepared to endorse a particular bill, we appreciate very much your
introduction of S. 1611 as a basis for discussion of these issues. We
believe that hearings involving representatives of private holders of
intellectual property, States, State holders of intellectual property,
the Administration, and legal experts in intellectual property and in
State immunity, will enable this Committee to fashion appropriate
legislation for further consideration.
Before closing, I raise one technical issue with respect to S.
1611. If S. 1611 or comparable legislation is pursued, the USPTO would
recommend that plant variety protection and integrated circuit designs
be added to the category of intellectual property for which States can
obtain no infringement damages unless the States waive sovereign
immunity. Although a State would be required to waive its sovereign
immunity in infringement suits involving all types of federally
protected intellectual property in order to obtain patent, trademark,
or copyright damages, it is not clear under the current draft bill that
a State owner of a semiconductor chip design or plant variety would be
required to waive immunity in order to obtain damages for infringement
of this intellectual property. Mr. Chairman, we would be happy to work
with your staff to add the appropriate text ensuring that States owning
integrated circuit designs or protected plant varieties be held to the
same standards as States owning other forms of intellectual property.
Conclusion
The Administration believes that, as State instrumentalities become
increasingly involved in commerce, particularly through the educational
and research sectors, they must accept the responsibility that comes
with their desire to protect and enforce their own intellectual
property rights. The federal government accepts that it may be liable
for money damages if it infringes intellectual property rights. Indeed,
while the federal government is precluded by statute from asserting
copyright domestically on works created by its employees, the federal
government can be held liable for copyright infringement. 28 U.S.C.
Sec. 1498 (2002).
Similarly, the federal government can be held liable for patent and
trademark infringement and has, in fact, been ordered to pay damages
for patent infringement. See, e.g. Hughes v. U.S., 271 F.3d 1060 (CAFC
2001). In light of Florida Prepaid, the States are not subject to the
same liability as the federal government. Our reading of the Supreme
Court's decisions in the Florida Prepaid cases suggests that a
legislative remedy is appropriate to address this concern.
Mr. Chairman, the USPTO and the Administration look forward to
continuing to work with you and the members of this distinguished
Committee to ensure proper protection for intellectual property.
Chairman Leahy. Thank you very much.
Ms. Peters?
STATEMENT OF MARYBETH PETERS, REGISTER OF COPYRIGHTS, UNITED
STATES COPYRIGHT OFFICE, WASHINGTON, D.C.
Ms. Peters. Mr. Chairman, thank you for inviting the
Copyright Office to present its views on this important issue.
Let me begin by thanking you, Mr. Chairman, for your leadership
in this area.
You began work to rectify the imbalance created by the
Supreme Court's June 1999 ruling shortly after the decisions
were announced. You consulted extensively with all interested
parties, kept an open mind throughout that process, and you
went to great lengths to accommodate all concerns. The result
is a carefully-balanced bill providing copyright owners with
effective tools to restore their ability to obtain appropriate
remedies for infringement by States while remaining within
Congress's constitutional authority. The Copyright Officer
strongly supports S. 1611.
Copyright owners are unable to obtain monetary relief under
the Copyright Act against a State, a State entity or a State
employee unless the State waives its immunity. And the
availability of monetary awards in State courts is highly
doubtful.
The ability of copyright owners to protect their property
and to obtain complete relief when their rights are violated is
central to the balance of interest in the Copyright Act. By
denying that opportunity to copyright owners in cases where the
infringes are within the umbrella of a State's sovereign
immunity, the Supreme Court's rulings dilute the incentive for
authors, for performers and producers to create and disseminate
works for the benefit of the public.
I do not accept the proposition that copyright owners must
or should endure future infringements without adequate and just
remedies. If the Supreme Court's decisions have effectively
blocked Congress from directly abrogating the State's immunity
except in the narrowest of circumstances, then it is
appropriate for Congress to consider other legislative
responses such as those in S. 1611, providing incentives to
States to waive immunity voluntarily by conditioning the
receipt of a gratuity from the Federal Government on such
waiver. Only in this way can the proper balance and basic
fairness be restored.
Your layered approach, designed to protect copyright owners
with the best chance of getting their day in court is a
balanced approach, respectful of States and carefully crafted
to comply with the most recent Supreme Court rulings, contains
three main components: a system designed to encourage States to
waive their immunity from Federal Court suits seeking monetary
relief for infringement of intellectual property. It does this
by granting the benefit of fully enforceable intellectual
property rights only to those states that do so. Second, there
is a carefully circumscribed abrogation of State sovereign
immunity in the intellectual property field to provide a remedy
against States that choose not to waive their immunity. And
finally, a codification of the judicially-made rule that
notwithstanding a State's sovereign immunity, the employees of
a State may be enjoined by a Federal court from engaging in
illegal action.
I believe the most important part of the bill is the waiver
provisions, which would deny States that do not waive their
immunity, the ability to recover monetary relief when they seek
to enforce their own intellectual property rights. Where a
State waives its immunity, it can seek monetary relief. This
approach is reasonable, proportionate and appropriate.
I am hopeful that this incentive will be successful. States
derive significant revenue from commercial exploitation of
their intellectual property. The price of being unable to
obtain monetary relief for the infringement of future
intellectual property should give States good cause to consider
accepting the bargain that Congress offers with this
legislation. It is only logical to expect that without an
alteration of the status quo, infringements by States are
likely to increase, especially in our digital online
environment.
The Supreme Court's rulings and the rights of States must
surely be respected, but the current state of affairs is unjust
and unacceptable, and it is appropriate for Congress to use its
authority to prevent State sovereign immunity from becoming a
tool of injustice. This bill does that, and I look forward to
its enactment.
[The prepared statement of Ms. Peters follows:]
Statement of Marybeth Peters, Register of Copyrights, U.S. Copyright
Office, Washington, D.C.
Mr. Chairman, Senator Hatch, Members of the Committee, good
morning. It is always a pleasure to appear before this Committee and I
thank you for inviting the Copyright Office to present its views today
on this very important issue.
I would like to begin by thanking you, Mr. Chairman, for your
leadership in this area. You began working on legislation to rectify
the imbalance created by the Supreme Court's June, 1999 rulings almost
immediately after the decisions were announced. You consulted
extensively with my office, other agencies, the intellectual property
community, legal scholars, another interested parties. In that process,
you kept an open mind to all views and went to great lengths to
accommodate all concerns that were raised. The product of your efforts,
S. 1611, the Intellectual Property protection Restoration Act, is a
carefully balanced bill. It provides copyright owners with effective
tools to restore their ability to obtain appropriate remedies for
infringement by States while remaining, I believe, within Congress'
constitutional authority. The Copyright Office supports enactment of S.
1611.
I. Background
The broadened interpretation of state sovereign immunity and its
resulting application to remedies available under the Copyright Act is
a relatively recent phenomenon. The United States enacted the first
Copyright Act in 1790. There is no judicial decision in the ensuing 172
years that failed to subject States to the full range of remedies
available under the copyright Act on the grounds of sovereign immunity.
Then, in 1962, the United States Court of Appeals for the Eighth
Circuit dismissed a copyright infringement suit against a state agency
on sovereign immunity grounds.\1\ However, that case did not usher in a
new era for state sovereign immunity. Just two years later, the Supreme
Court issued its ruling in Parden v. Terminal Railway of Alabama
(Parden) in which it held that ``when a State leaves the sphere that is
exclusively its own and enters into activities subject to congressional
regulation, it subjects itself to that regulation as fully as if it
were a private person or corporation.'' \2\
---------------------------------------------------------------------------
\1\ Wihtol v. Crow 309 F.2d 777 (8th Cir. 1962).
\2\ 377 U.S. 184, 196 (1964).
---------------------------------------------------------------------------
Over time, the decision in Parden was gradually eroded. More than
twenty years after Parden, in Atascadero State Hospital v. Scanlon
(Atascadero),\3\ the Court reversed itself on the legislative
requirements necessary to find congressional intent to abrogate state
sovereign immunity. The Court held that in the instant case, the
Eleventh Amendment barred recovery from the States because a ``general
authorization for suit in federal court is not the kind of unequivocal
language sufficient to abrogate the Eleventh Amendment.'' \4\ Rather,
what is required for congressional abrogation of state sovereign
immunity is that the federal statute be ``unmistakably clear'' that
States are included in the defendant class.\5\
---------------------------------------------------------------------------
\3\ 473 U.S. 234 (1985).
\4\ Id. at 246.
\5\ Id. at 242.
---------------------------------------------------------------------------
The decision in Atascadero created great uncertainty as to which
federal laws were unmistakably clear in their intent to subject States
to liability and which were not. Applying this standard to the
Copyright Act, some courts held in favor of the States' immunity,\6\ to
the great distress of copyright owners.
---------------------------------------------------------------------------
\6\ See Woelffer v. Happy States of America, Inc., 626 F. Supp. 499
(N.D. Ill. 1985); BV Engineering v. UCLA, 657 F. Supp. 1246 (C.D. Cal
1987), aff'd, 858 F.2d 1394 (9th Cir. 1988), cert. den., 109
S. Ct. 1557 (1989).
---------------------------------------------------------------------------
In 1987, Congress requested that the Copyright Office produce a
report on the current state of the law in the area of the enforcement
of copyright against state governments. On June 27, 1988, the Copyright
Office submitted its report, Copyright Liability of States and the
Eleventh Amendment. That report noted that copyright owners ``caution
that injunctive relief is inadequate--damages are needed. And if states
are not responsible for remunerating copyright owners, as are all other
users subject to limited statutory exceptions, proprietors warn that:
marketing to states will be restricted or even terminated; prices to
other users will increase; and the economic incentives, even ability,
to create works will be diminished.'' Given these concerns and the
analysis of the case law as it stood at that time, the report concluded
that ``copyright proprietors clearly demonstrate the potential for
immediate harm to them.''
In 1990, Congress responded to the situation created by the ruling
in Atascadero by enacting the descriptively-named Copyright Remedy
Clarification Act (CRCA).\7\ That law added provisions to Title 17
which clearly provide that States ``shall not be immune, under the
Eleventh Amendment of the Constitution. . .or any other doctrine of
sovereign immunity, from suit in Federal Court. . .for a violation of
the exclusive rights of a copyright owner. . . .'' \8\ This clear
statement left little doubt that Congress intended to make States
liable for infringement and to abrogate their sovereign immunity. Thus,
once again, the apparent uncertainty about the immunity of States from
suits for damages for copyright infringement was removed. A similar law
for patents and one for trademarks were enacted two years later.
---------------------------------------------------------------------------
\7\ Pub. L. No. 101-553
\8\ 17 U.S.C. Sec. 511.
---------------------------------------------------------------------------
That brings us to the Supreme Court's triad of opinions on June 23,
1999.\9\ It is worth noting that all three of these cases were decided
by the same 5-4 vote and all three engendered strong dissenting views.
---------------------------------------------------------------------------
\9\ College Savings Bank v. Florida Prepaid Postsecondary Educ.
Expense Bd., 527 U.S. 666 (1999) (College Savings); Florida Prepaid
Postsecondary Educ. Expense Bd. v. College Savings Bank, 527 U.S. 627
(1999) (Florida Prepaid); Alden v. Maine, 527 U.S. 706 (1999) (Alden).
---------------------------------------------------------------------------
The decision in Alden undergirded the other two decisions. In that
case,John Alden and other employees of the State of Maine filed suit in
state court in Maine against that state for violation of the overtime
provisions of the Fair Labor Standards Act, a federal law. The U.S.
Supreme Court affirmed the decision of the Maine Supreme Judicial Court
that the State's sovereign immunity barred the suit, holding that:
the States' immunity from suit [in the State's own courts and
in federal courts] is a fundamental aspect of the sovereignty
which the States enjoyed before the ratification of the
Constitution, and which they retain today . . . except as
altered by the plan of the Convention or certain constitutional
Amendments.\10\
---------------------------------------------------------------------------
\10\ Id at 713.
In the second of the June 23 cases, College Savings, the Court
considered whether Congress had the authority to abrogate state
sovereign immunity from lawsuits under section 43(a) of the Lanham Act.
Under the Court's earlier holding in Seminole Tribe of Florida v.
Florida,\11\ there is only one source of constitutional authority from
which Congress may abrogate state immunity: the enforcement power in
Section 5 of the Fourteenth Amendment.\12\
---------------------------------------------------------------------------
\11\ 517 U.S. 44 (1996).
\12\ College Savings at 670.
---------------------------------------------------------------------------
The Fourteenth Amendment instructs in relevant part that ``No State
shall . . . deprive any person of . . . property, without due process
of law.'' \13\ Because the Court held that College Savings did not
allege deprivation of a property right within the meaning of the
Fourteenth Amendment, the avenue of congressional abrogation of state
immunity was closed.\14\
---------------------------------------------------------------------------
\13\ U.S. Const., amend. XIV.
\14\ College Savings at 673.
---------------------------------------------------------------------------
Next, the Court turned to the question of implied state waiver of
immunity. Invoking the precedent of Parden, Petitioner College Savings
sought to show that Florida had impliedly waived its immunity by
participating in a scheme that is enforceable in federal court.\15\ Not
only did the Court reject this argument, but it overruled Parden and
renounced the doctrine of implied waiver of state immunity.\16\
---------------------------------------------------------------------------
\15\ Id. at 676.
\16\ Id. at 680.
---------------------------------------------------------------------------
The Court's holding requires that a state's waiver be explicit and
voluntary in order to be effective. However, Congress may provide
incentives to the State by conditioning use of its discretionary
authority such as that found in the Spending Clause and the Compact
Clause on state waiver.\17\
---------------------------------------------------------------------------
\17\ Id. at 686-87.
---------------------------------------------------------------------------
In the third of the three opinions issued on June 23, Florida
Prepaid, the Court considered whether Congress had the authority to
abrogate state sovereign immunity from lawsuits under the Patent Act.
The Court acknowledged that patents are property within the meaning of
the Fourteenth Amendment.\18\ However, the Court held that the
legislative enactment at issue in this case did not fall within
Congress' Fourteenth Amendment power for three reasons.
---------------------------------------------------------------------------
\18\ Florida Prepaid at 637.
---------------------------------------------------------------------------
First, Congress ``must identify conduct transgressing the
Fourteenth Amendment's substantive provisions, and must tailor its
legislative scheme to remedying or preventing such conduct.'' \19\ The
Court found that Congress failed to meet this burden because it did not
identify a pattern of patent infringement by states.\20\
---------------------------------------------------------------------------
\19\ Id. at 639.
\20\ Id.
---------------------------------------------------------------------------
Second, the Court recognized that patent infringement by a state is
not a violation of the Fourteenth Amendment if the state provides a
remedy, that is, due process.\21\ Because the statute was drafted to
apply to all States,without regard to state-provided remedies, the
Court held that it went beyond the power conveyed by the Fourteenth
Amendment.\22\
---------------------------------------------------------------------------
\21\ Id. at 642-43.
\22\ Id. at 646-47.
---------------------------------------------------------------------------
Third, the Court noted that ``a state actor's negligent act that
causes unintended injury to a person's property does not `deprive' that
person of property within the meaning of the Due Process Clause.'' \23\
Because a claim for patent infringement requires no showing of intent
in order for the plaintiff to prevail, the Court held that the
legislative enactment a tissue in this case was again overbroad.
---------------------------------------------------------------------------
\23\ Id. at 645 (Citing Daniels v. Williams 474 U.S. 327, 328
(1986)).
---------------------------------------------------------------------------
Although the Supreme Court has not ruled directly on the
constitutionality of the CRCA, the Fifth Circuit applied the Supreme
Court's recent rulings in Chavez v. Arte Publico Press (Chavez).\24\
That case involved a suit by an author claiming copyright infringement
of her book by the University of Houston, a state university.
---------------------------------------------------------------------------
\24\ 204 F.3d 601 (5th Cir. 2000).
---------------------------------------------------------------------------
The court followed the analysis in Florida Prepaid, first inquiring
whether Congress identified a pattern of infringement by States. While
noting that the legislative history in support of the CRCA, which
included the 1988 report of the Copyright Office, was somewhat more
substantial than that of the PRCA, the court found that the record was
still inadequate to support the legislative enactment. Second, the
court noted that in adopting the CRCA, Congress ``barely considered the
availability of state remedies for infringement.'' \25\ That the
legislative history did not meet requirements the Court articulated a
decade after the law was enacted is not surprising. Thus, the Fifth
Circuit refused to enforce the CRCA.
---------------------------------------------------------------------------
\25\ Id. at 606.
---------------------------------------------------------------------------
The same result was reached in another Fifth Circuit case,
Rodriguez v. Texas Comm'n on the Arts,\26\ in a brief opinion that
presumably is based upon the same rationale as that circuit's decision
in Chavez. Given the current Supreme Court precedent, it is difficult
to find fault with the ruling in Chavez, and we believe that the CRCA
would most likely be held unconstitutional by the current Supreme
Court.
---------------------------------------------------------------------------
\26\ 199 F.3d 279 (5th Cir. 2000).
---------------------------------------------------------------------------
Thus, like the recent, brief periods in the early 1960's and the
late1980's, we are again faced with the issue of state sovereign
immunity being interpreted and applied in a manner which inhibits the
proper functioning of the Copyright Act.
The most recent development has been a report issued by the General
Accounting Office, at the request of Senator Hatch, which surveyed
there cent legal landscape for the number of infringement actions
against states and the availability of remedies for infringements by
States.\27\ That report reached the conclusions that there are
relatively few infringements of intellectual property rights by States
and that there are few if any remedies available to right holders whose
rights are infringed.
---------------------------------------------------------------------------
\27\ Intellectual Property: State Immunity in Infringement Actions,
GAO-01-811 (Sept. 2001).
---------------------------------------------------------------------------
That report also contains the text of a letter that the Copyright
Office sent to the GAO regarding the study and report. In that letter
we expressed no surprise at the relatively low number of infringements
found.We were not surprised because we recognized the difficulties in
obtaining accurate and complete records of claims against states and
the relatively recent phenomenon of state sovereign immunity trumping
copyright liability. We believe, however, that even a few acts of
infringement by States, if unremedied, should be sufficient to justify
congressional abrogation of state sovereign immunity. Moreover, the
Congress is entirely within its authority to condition the exercise of
its discretionary authority to provide a State what amounts to a
federal gratuity on a waiver of sovereign immunity by that State
regardless of the extent of a record of known infringements.
II. The Current Imbalance
At the outset, we acknowledge that the problems addressed by S.
1611 apply to all forms of intellectual property. However, as Register
of Copyrights,my remarks will be confined to intellectual property
covered by Title 17of the U.S. Code. The effect of the Court's 1999
decisions is that copyright owners are unable to obtain monetary relief
\28\ under the Copyright Act against a State, state entity, or state
employee unless the State waives its immunity. The availability of
monetary awards through lawsuits filed in state courts is highly
doubtful.\29\ Actions such as takings claims and tort are not designed
to apply to intellectual property and courts may not be willing to
expand those areas of law. Further, the States have immunity in their
own courts as well as in Federal court,\30\ so the State would have to
waive its immunity in any event.
---------------------------------------------------------------------------
\28\ Monetary relief for copyright infringement may consist of some
combination of actual damages, defendant's profits, statutory damages,
litigation costs, and attorney's fees. 17 U.S.C. Sec. Sec. 504,505.
\29\ Id. at 613-24.
\30\ Id. at 23-24; Alden at 712.
---------------------------------------------------------------------------
The ability of copyright owners to protect their property and to
obtain complete relief when their rights are violated is central to the
balance of interests in the Copyright Act. By denying that opportunity
to copyright owners in cases where the infringers are under the
umbrella of a State's sovereign immunity, the Supreme Court's decisions
dilute the incentive for authors, performers, and producers to create.
If the diminution of incentives to create results in a diminution of
creative output, as may reasonably be assumed, the American economy and
culture will be poorer for it.
We would like to think that States and State employees will respect
the copyright laws despite the unavailability of any monetary remedy
when they infringe, but we are concerned that in light of the Supreme
Court's 1999rulings the available legal remedies will be insufficient
to ensure that result.
We do not mean to suggest by this that States and their employees
are any less willing to abide by the law than the American public as a
whole.However, recent experiences in the internet environment suggest
that some segments of the public do not view copyright as sacrosanct.
Further, logic dictates that if a segment of people will not be held
fully accountable for certain actions, they may be less likely to
restrict themselves in those actions. As it was stated in Federalist
No. 51, albeit in a different context, ``[i]t may be a reflection on
human nature, that such devices should be necessary to control the
abuses of government. . . .If men were angels, no government would be
necessary. If angels were to govern men, neither external nor internal
controls on government would be necessary.''
In sum, we do not accept the proposition that copyright owners must
or should endure future infringements without an adequate and just
remedy. If the Supreme Court's decisions have effectively blocked
Congress from directly abrogating the State's immunity, then it is
appropriate for Congress to consider other legislative responses, such
as those in this bill--providing incentives to States to waive their
immunity voluntarily by conditioning the receipt of a gratuity from the
Federal Government on such waiver. Only in this way can the proper
balance, and basic fairness,be restored.
III. Elements of S. 1611
The Copyright Office is gratified that you have undertaken to
remedy this situation, Mr. Chairman. S. 1611, is a layered approach,
designed to provide copyright owners with the best chance of getting
their day in court. It is also a balanced approach, respectful of
States and carefully crafted to comply with the most recent Court
rulings.
S. 1611 contains three main components: a system designed to
encourage States to waive their immunity from federal court suits
seeking monetary relief for infringement of intellectual property by
granting the benefit of fully enforceable intellectual property only to
those States that do so, a carefully circumscribed abrogation of State
sovereign immunity in the intellectual property field to provide a
remedy against States that choose not to waive their immunity, and a
codification of the judicially-made rule that notwithstanding a State's
sovereign immunity,the employees of a State may be enjoined by a
Federal court from engaging in illegal action.
A. Incentive to Waive
The bill provides significant incentives for a State to waive its
immunity, but does so in a way that is inherently proportional and fair
to the States and copyright owners. The bill is designed so that a
State which chooses not to waive its immunity from monetary damages in
intellectual property infringement cases is unable to obtain damage
awards when it seeks to enforce its own intellectual property rights.
If a State does waive its immunity, then it obtains the benefit of
being able to seek monetary relief. This approach is reasonable,
proportionate, and appropriate.
We are optimistic that this incentive will be successful in
encouraging states to level the playing field by waiving their
immunity. States derive significant revenue from the commercial
exploitation of their intellectual property. The price of being unable
to obtain monetary relief for the infringement of future intellectual
property should give States good cause to consider accepting the
bargain that Congress offers with this legislation. Of course, States
would have even greater incentive to waive their immunity if their
ability to obtain injunctive relief was also conditioned on such
waiver. But out of concern for not crossing the line between
encouragement to the States and coercion of the States, Mr.Chairman,
you elected to follow a symmetrical approach--to deny a State exactly
what is denied to other right holders if the State refuses to waive its
immunity. We respect that choice, and I believe that the bill can
effectively accomplish its goals as written.
We feel confident that the bill is within Congress' constitutional
authority. The Supreme Court has made clear that the sovereign immunity
of a State is ``a personal privilege which it may waive at its
pleasure.'' \31\ Further, the Court wrote that Congress may properly
seek to induce States to waive their immunity by conditioning ``the
denial of a gift or gratuity. . .'',\32\ such as approval of an
interstate compact \33\ or its grant of funds to a State,\34\ on such
waiver. That is precisely what this bill does.
---------------------------------------------------------------------------
\31\ College Savings, at 675 (Quoting Clark v. Barnard, 108 U.S.
436, 447 (1883)).
\32\ College Savings at 687.
\33\ Petty v. Tennessee-Missouri Bridge Comm'n 349 U.S. 275 (1950).
\34\ South Dakota v. Dole, 483 U.S. 203 (1987).
---------------------------------------------------------------------------
The Constitution grants to Congress the authority ``To promote the
Progress of Science and useful Arts, by securing for limited Times to
Authors and Inventors the exclusive Right to their respective Writings
and Discoveries. . . .'' \35\ Of course, we recognize this as the
authority by which Congress may provide copyright protection for
qualifying works. This authority is entirely permissive. Congress may
choose not to extend copyright protection at all, it may extend that
protection subject to certain conditions, or it may extend that
protection only to certain classes of authors. A particularly relevant
example is the choice that Congress has made to withhold copyright
protection from ``any work of the United States Government. . . .''
\36\ Similarly, Congress may withhold copyright protection from any
work of any state government. That it has chosen not to do so to date
represents a gift from the Congress to the States. And, as the Supreme
Court has opined, Congress may condition the grant of such a gratuity
upon a State's waiver of its sovereign immunity in the directly related
field of suits for monetary relief under the Federal intellectual
property laws.\37\
---------------------------------------------------------------------------
\35\ U.S. Const. Art I, sec. 8.
\36\ 17 U.S.C. Sec. 105.
\37\ See supra, note 17.
---------------------------------------------------------------------------
The fact that Congress has allowed States to enjoy copyright
protection for their works for so long in no way alters the fact that
such protection remains a gift from the Federal Government or
diminishes its constitutionally granted discretion to change that
policy. S. 1611 would effectuate a change in that policy, offering
States an opportunity to receive full copyright protection for their
works in the future in exchange for waiver of sovereign immunity to
infringement claims.
This system is closely analogous to the changes made by the
Telecommunications Act of 1996. That Act altered the long-standing
regime of federal acquiescence to state regulation of local telephone
service. The Act provided that a State could continue to play a role in
such regulation, but conditioned that gratuity on a waiver by the State
of its immunity to suits arising under the procedures set forth in the
Act. This condition has been challenged in federal court and upheld by
four of the five appeals courts to hear such cases.\38\
---------------------------------------------------------------------------
\38\ See MCI Telecomms. Corp v. Illinois Bell Tel. Co. 222 F.3d 323
(7th Cir. 2000); Southwestern Bell Tel Co. v. Brooks Fiber
Communications of Okla., Inc., 235 F.3d 493 (10th Cir.
2000); Southwestern Bell Tel. Co. v. Public Util. Comm'n, 208 F.3d 475
(5th Cir. 2000); but see Bell Atlantic MD, Inc. v. MCI
Worldcom, Inc., 240 F.3d 279 (4th Cir. 2001), T3cert.
granted, 121 S. Ct 2448 (2001).
---------------------------------------------------------------------------
B. Abrogation
While we are optimistic that most States will waive their immunity
under the system this bill provides, there is a distinct possibility
that some States, perhaps more than a few, will not. In that case, it
is necessary to provide copyright owners with at least a chance to have
their day in court. You were therefore wise, Mr. Chairman, to have
included the second element of the bill; a provision for the abrogation
of state sovereign immunity, pursuant to Congress' authority under the
Fourteenth Amendment.
The Supreme Court's decision in Florida Prepaid leaves Congress
almost no lee way to accomplish an abrogation of State sovereign
immunity that will place copyright owners on the same footing they were
prior to the Court's ruling. Not only must Congress have an extensive
record of infringements, but the record must also include proof that
adequate remedies in state court are not available, and possibly also
that the infringements were willful.\39\ This standard appears nearly
impossible to reach. We are baffled at the Court's apparent decision
that the Fourteenth Amendment requires the denial of copyright owners'
constitutional rights at epidemic proportions before it allows Congress
to fully restore those rights.
---------------------------------------------------------------------------
\39\ See supra, notes 19-23.
---------------------------------------------------------------------------
Nonetheless, Mr. Chairman, you made full use of the few tools left
to you in this area. The result is an abrogation provision that traces
the outlines of the Fourteenth Amendment precisely. The Court has held
that such narrowly-tailored abrogations do not require the support of
the factual record that broader abrogations would.\40\ Unfortunately,
the burden of establishing a constitutional violation merely shifts to
the individual right holder/plaintiff. Thus, the abrogation provision
in this bill is helpful only to those who can meet these additional
burdens of proof beyond what is normally necessary to establish a prima
facial case of infringement. In the final analysis, given the
restrictions the Court has placed on Congress' exercise of its
Fourteenth Amendment authority, we believe that this is the best
abrogation provision that courts will sustain under the precedent of
Florida Prepaid.
---------------------------------------------------------------------------
\40\ Kimel v. Florida Board of Regents, 528 U.S. 62, 81 (2000).
---------------------------------------------------------------------------
B. Codification of Injunctive Relief
The third and final element of the bill is a codification of the
judicially-made rule that notwithstanding the State's immunity, state
employees may be enjoined by Federal courts from engaging in illegal
activity, such as infringement of copyrights. This doctrine was first
articulated by the Supreme Court in Ex Parte Young.\41\ The reasoning
the Court followed was that state employees are covered by the umbrella
of the State's sovereign immunity only to the extent they are acting
within the scope of their official duties. Because a state employee may
not violate Federal law in carrying out his duties, if he does so, he
is by definition operating outside the scope of his official duties.
And because he is acting outside the scope of his official duties, he
is no longer protected by the State's sovereign immunity and the court
may enjoin him from that activity.\42\
---------------------------------------------------------------------------
\41\ 209 U.S. 123 (1908).
\42\ Id. at 159-60.
---------------------------------------------------------------------------
Despite the long-standing recognition of this doctrine, some fear
that the recent judicial supercharging of state sovereign immunity may
be extended to nullify this venerable rule. Thus, we believe that it is
wise to codify this doctrine in federal law.
IV. Conclusion
It is only logical to expect that without an alteration of the
status quo, infringements by States are likely to increase. Only
Congress has the power to remedy the existing imbalance. The Supreme
Court's rulings and the rights of States must surely be respected, but
the current state of affairs is unjust and unacceptable. It is
appropriate for Congress to use its authority to prevent state
sovereign immunity from becoming a tool of injustice. S. 1611 achieves
the necessary goals within the constitutional limits and I look forward
to its enactment.
Chairman Leahy. Well, thank you very much, Ms. Peters.
Nobody is more protective of State sovereignty than I. I
appreciate very much the fact that our own State of Vermont is
able to make many decisions for itself, and whether others like
it or not, we have that ability. But I also believe very much
if you own property, somebody should not be able to steal it,
and if you own a copyright, if you put your work into it,
someone should not be able to just take it. You put yourself
into it. You have value in that. The same as if you drive your
car on a State road, somebody cannot just walk over and say,
``I am from the State,'' and take it. By the same token, the
States, of course, want to protect their own things. If they
have a State University that spent a great deal of money in
developing a medical procedure or developing a mechanical
procedure or something else, they want to be able to protect
their investment, but they should not have it--it should not be
an either/or. They should be able to protect their investment,
but then they have to be responsive to other people's
investments.
I am wondering, speaking of that, if I might ask, Mr.
Rogan, can you give us any estimate of how many patents and
trademarks are currently owned by States and State
institutions?
Mr. Rogan. Mr. Chairman, we actually had tried to look at
that quickly, and found that our databases just are not set up
to retrieve all of that information. It would actually involve
a hand-held search. Although I did take the liberty of bringing
a bit of data that we did have available. This actually, I
think, came from the GAO report that this committee had
requested from a year or so ago. There is an indication on page
42 and 43 that State institutions of higher education had in
force, at the end of 1999, almost 12,000 patents, so that is
over two years ago.
Those institutions also had, as of February of last year,
over 2,000 registered trademarks, and over 650 pending
applications, and finally, with respect to copyrights over the
last 20 years, there were over 32,000 registrations. So you can
see that even in those dated figures, the amounts we are
talking about are fairly substantial.
Chairman Leahy. So this is not just an academic exercise.
We are talking about a great number of them. But yet, I believe
that same GAO study mentions a relatively small number of cases
of infringement by the States. Does that indicate in any way
that legislation in this area is not necessary?
Mr. Rogan. I do not think so, Mr. Chairman. In fact,
looking at the GAO study, my recollection was it surveyed back
from 1985. The Florida Prepaid cases did not even come down
until 1997, so essentially, for the bulk of the period
reviewed, there was a period of time where there was an
expectation that intellectual property rights had to be
reciprocally respected, and so I am not sure you can look at
those numbers pre 1997 and make any determination as to whether
what the GAO determined was a limited number is essentially a
fair snapshot of the environment we are in right now, and since
1999 it has probably been too close in time for us to get a
fair legal analysis.
Chairman Leahy. I cannot help but think if you have a State
that--if they are looking at it and say, ``Well, we have
immunity, but we are going to be good guys here. We will talk
to a property owner, intellectual property owner, and we will
let them have a licensing deal with us.'' But basically a case
like that, the State has all the leverage. I mean they could
say, ``If you are licensing this property or this intellectual
property to a corporation at $5 per whatever unit, well, you
can license it with us, but it would be $1 per unit.'' Now, if
they have sovereign immunity, there is not much that the
intellectual property owner could do about that, is there?
Mr. Rogan. I think you probably carry the same bias for
Vermont that I carry for my home State of California in not
expecting our home States or the other States to be sitting
around looking for ways to become intellectual property
pirates. However, the sheer uncertainty of the remedies
available now for intellectual property owners creates a skewed
environment, that as I said in my testimony, calls for a
legislative remedy.
And I think that Ms. Peters is absolutely right when she
says that merely looking to possible injunctive relief without
monetary damages really takes any enforcement provision, any
meaningful enforcement provision for the copyright owner out of
the mix.
Chairman Leahy. Well, I understand the administration's
position that Florida Prepaid has created an inequitable
situation, and there should be a legislative solution, but at
some point the administration has got to endorse something, a
particular piece of legislation, when it has been three years
since Florida Prepaid. I think it was two years ago PTO had an
all-day conference to look at some of the different options. It
has been four months since I introduced this legislation. I
mean, are you guys in favor of it or opposed to it?
Mr. Rogan. Mr. Chairman, I can assure you, when the
administration decides which vehicle is the best one to
approach, you will be the first one to know.
Chairman Leahy. Well, right now this is the only vehicle.
Mr. Rogan. And that is why we think it is a good starting
point, Mr. Chairman.
Chairman Leahy. Well, I would hope the day would come that
the administration might take a position on it, because we are
going to have to move something. I mean if you do not take a
position on it, we could end up in a limbo, and nobody is
helped by that. We have an awful lot of concerned parties
ranging from the ABA to the Chamber of Commerce, the
Professional Photographers, to everybody else who are saying,
``Do something.'' This is not a Democratic or Republican issue.
This is just a good common sense issue. We have got to--I mean
I hear all kinds of suggestions. One says that Congress should
withhold Federal funding for academic research grants to
institutions of higher education, unless there is a State
agreement to waive sovereign immunity. I think our colleges and
universities in many instances are strapped for those kind of
funds anyway, and I am reluctant to withhold that as a method
of operation.
Do you have a feeling on that?
Mr. Rogan. Mr. Chairman, first, with respect to your
previous comments, as you know, Florida Prepaid came down I
think about two years before this administration came into
existence. I have been on the job for about 9 weeks I think.
There are an awful lot of stakeholders in various areas that we
would like to hear from. But clearly we agree with you in the
sense that there is an inequity that has been created. Just
what is the perfect fix, I am not quite sure what that is.
Chairman Leahy. I do not know to beat that, but we can keep
on it. You and I know each other well enough, I would hope you
just pick up the phone and call me as you see areas that the
administration is getting interested in, and please just do
that because I do want to move something on this.
And, Ms. Peters, I would assume that you might have a
feeling about whether we should do a carrot and stick approach
in the form of withholding money from universities or colleges.
How do you feel about that?
Ms. Peters. I honestly think that is not the better way to
go. Actually, the virtue of S. 1611 is that there is a direct
nexus between the conditional benefit and the subject of the
desired waiver, so that copyright owners can get monetary
damages if the States waive, and the States can get monetary
damages also. So there is a real nexus and a real
proportionality to your solution. I think that putting it with
Federal funds, the nexus is further away from the benefit. And
I think there is a problem with Federal funds because your
solution, once enacted, it is over. But when you have Federal
funds, there is a question with regard to whether or not the
Federal funds and the waiver carry forward, or whether or not
you have to enact legislation every year in order to accomplish
the result that you want. So that would not be a way that we
would like to see you go.
Chairman Leahy. Let me ask you about another area because
you deal with international matters on this too. This sudden
move by the Supreme Court in articulating this new vision of
State sovereign immunity, does that create difficulties for us
in our international intellectual property relations?
Ms. Peters. Certainly. The United States is the largest
owner of intellectual property, and it is something that we
gain a lot of money from, from exports. And we ask countries
around the world to provide adequate and effective protection.
And since we are the one who is asking that, they are certainly
looking at us for the example, and already one of the countries
that we are negotiating with raised the issue of the Supreme
Court's decision as a possible source of noncompliance with
TRIPS.
But for me the real issue that having this loophole gives
countries an opportunity, in other words, and excuse to not
rise to the level of adequate and effective protection that
they should have, and we should basically have a law that meets
the requirements that we are seeking in others.
Chairman Leahy. How many copyrighted works do States own, a
lot?
Ms. Peters. They probably own a tremendous number, although
we cannot document it that way. Unlike patents and trademarks,
copyright is created upon the actual fixing of a work. So there
are unpublished unregistered works. Even with regard to
registrations, it is really hard to search them because you do
not know who is a State entity and who is not, even with
universities. As pointed out in the GAO report, Auburn is a
State university, but Cal Tech is not. We did do a survey of
our records, just looking at four-year, no other, four-year
State colleges and universities, and Secretary Rogan referred
to the 32,000 just in monographs. That did not cover serials,
it did not cover all other types of works. I think States, in
their variety of activities in the educational arena, the
hospital arena, the university presses, the radio stations,
they own a tremendous amount of copyrighted works, though I am
not sure that it is necessarily as important to them
commercially as perhaps patents and trademarks.
Chairman Leahy. Is Congress constitutionally required to
let the States create, own, and enforce intellectual property
right?
Ms. Peters. Is the Congress?
Chairman Leahy. Do we have to let States create, own,
enforce intellectual property rights?
Ms. Peters. Could you do something like you do to the U.S.
Government works; could you deny protection to State works? You
certainly have that power.
Chairman Leahy. Well, I thank you. We will be continuing to
work on this.
I want to submit a number of questions for the record, a
number of letters, statements by other senators.
But I want to move legislation of this nature this year.
And I want the President to sign it. I want our intellectual
property owners to know what the playing field is, and I want a
level playing field. I want States to be able if they create
intellectual property, they have the rights for it. After all
the taxpayers paid for it, the taxpayers should get the benefit
of it. But if private parties are working, on their own they
deserve the protection.
So let us work together, let us keep in touch on this, but
we have a short session ahead of us, and this is one thing that
I think will have some strong bipartisan support, and we should
try to get it passed. So thank you both for being here.
Mr. Rogan. Thank you, Mr. Chairman.
Chairman Leahy. Somebody mentioned that--I do not know
where anybody ever got the impression that sometimes there are
contentious hearings here in the Judiciary Committee, but I
thought this one has been very easygoing.
[Laughter.]
Chairman Leahy. Mike Kirk is Executive Director of the
American Intellectual Property Law Association, and before
doing that, he served as Deputy Assistant Secretary of Commerce
and Deputy Commissioner of Patents and Trademarks, capping off
a career of more than 30 years in USPTO. While there he led and
served on numerous U.S. Government intellectual property
delegations. He was the Chief U.S. negotiator on the TRIPS
agreement. Of course, no stranger to this committee.
Keith Schraad is the Western Regional Manager of National
Information Consortium. That is a Kansas-based eGovernment
company. He is a native of Kansas. He is a former aide to
Senator Bob Dole. A State Senator yourself, were you not, in
the 11th District?
Mr. Schraad. That is correct.
Chairman Leahy. I know that Senator Brownback wanted to be
here to introduce you, and he is held up at another thing, but
he made it very clear that he wanted you to be here, and of
course, Senator Brownback is a valued member of this committee,
and we want to have you here.
William Thro is General Counsel at Christopher Newport
University, Virginia's newest public university. He is Special
Assistant Attorney General for the Commonwealth of Virginia. He
has represented institutions of higher education as an
Assistant Attorney General in Colorado and Virginia, served as
Interim General Counsel at Old Dominion University, written
extensively on issues of sovereign immunity and handled
numerous cases involving sovereign immunity issues, and Mr.
Thro, we are delighted to have you here.
Paul Bender is a Professor of Law at Arizona State
University College of Law. He is counsel to Meyer & Klipper, a
Washington, D.C. law firm, a well-respected firm. He has served
as Assistant to U.S. Solicitors General Archibald Cox and
Thurgood Marshall, General Counsel to the Federal Commission on
Obscenity and Pornography, and most recently as Principal
Deputy Solicitor General under Solicitor General Drew Days. He
has argued more than 20 cases before the U.S. Supreme Court,
and has written extensively in the areas of constitutional law
and civil rights.
I go through these various backgrounds as a way of saying
how much I appreciate that all of you would take the time to
come here to the Judiciary Committee.
We will start with you, Mr. Kirk.
STATEMENT OF MICHAEL K. KIRK, EXECUTIVE DIRECTOR, AMERICAN
INTELLECTUAL PROPERTY LAW ASSOCIATION, ARLINGTON, VIRGINIA
Mr. Kirk. Thank you, Mr. Chairman. AIPLA appreciates your
efforts to develop a constitutionally sound solution to the
inequities and unfairness presented by the inability of
intellectual property owners to enforce their rights against
States and State entities. We believe that S. 1611 is a
balanced and appropriate response to the Eleventh Amendment
sovereign immunity shield available to States that infringe
Federal intellectual property rights.
As the previous panel noted, until relatively recently, it
was perceived by IP rights owners that States were liable for
the infringement of their rights. Following the Atascadero
decision in 1985 that congressional intent to abrogate had to
be explicitly and unambiguously stated, Congress reacted and
adjusted the Federal intellectual property laws to provide such
clear language. Seven years later, however, the Supreme Court
once again shifted the goal post in Seminole, ruling that the
Eleventh Amendment restricts judicial power under Article III,
and that Article I cannot be used to circumvent the
constitutional limitations placed on Federal jurisdiction. The
Court completed the evisceration of Congress's earlier effort
to hold States accountable for infringing Federal IP rights in
College Savings and Florida Prepaid.
While severely circumscribing Congress' options to enact
legislation to abrogate sovereign immunity against suits by
private parties to enforce their IP rights, the Court in
College Savings did leave open an approach involving voluntary
waiver. The Court acknowledged that Congress could condition
the grant of a gratuity to States upon their taking certain
action that Congress could not require them to take.
S. 1611 adopts this approach. It offers States the right to
obtain damages in suits to enforce their IP rights if they
voluntarily waive their sovereign immunity to suits by private
parties to enforce their IP rights against the States.
Certainly Congress can exercise its Article I powers to promote
the general public well-being by encouraging States to
participate fully in the Federal intellectual property system.
The wisdom of S. 1611 is further underscored by the GAO
report requested by Senator Hatch. We agree fully with the
comments made by Under Secretary Rogan that the fact that only
58 lawsuits were found is not surprising, given the fact that
for most of the recent history, it was thought that
intellectual property rights were enforceable against the
States. While we would not argue that States will knowingly
infringe intellectual property rights of others, too little
time has really passed between College Savings and Florida
Prepaid and now to fully judge that impact.
Let me say one word about the international ramifications
of these cases that you raise with Ms. Peters. This involves
the potential vulnerability of the United States under the
TRIPS agreement. One of the most significant contributions to
the protection of intellectual property internationally was the
inclusion in TRIPS of provisions for effectively enforcing
intellectual property rights. This was a very significant
breakthrough, obligating member nations to have the authority
to order a party to desist from infringement and to have the
authority to order the infringer to pay the right holder
damages adequate to compensate for the injury suffered because
of an infringement.
There was no question whether the enforcement and other
obligations of TRIPS will apply to subdivisions of members
(States in our context). The obligations would apply unless an
exception was crafted into the text. There are specific
exceptions to TRIPS obligations in Article 31(b) and 44.2 that
extend to members at the Federal level. This was not the case
with respect to subdivisions or States. Since Congress had
addressed the problems in Atascadero during the Uruguay Round,
there was no reason for the United States to seek exceptions
for States to the rules set forth for enforcing intellectual
property rates. A failure of the United States to fully meet
its TRIPS obligations not only risks the possibility of an
adverse dispute settlement decision, it also sets a regrettable
example for other nations whose laws we seek to improve, as Ms.
Peters noted.
For these reasons: fairness, equity and self-interest,
AIPLA strongly supports S. 1611. We look forward to working
with this committee to make that bill a reality.
Thank you.
[The prepared statement of Mr. Kirk follows:]
Statement of Michael K. Kirk, Executive Director, American Intellectual
Property Law Association, Arlington, Virginia
I am pleased to have the opportunity to present the views of the
American Intellectual Property Law Association (AIPLA) on S. 1611, the
``Intellectual Property Protection Restoration Act of 2001.''
The AIPLA is a national bar association of more than 13,000 members
engaged in private and corporate practice, in government service, and
in the academic community. The AIPLA represents a wide and diverse
spectrum of individuals, companies and institutions involved directly
or indirectly in the practice of patent, trademark, copyright, and
unfair competition law, as well as other fields of law affecting
intellectual property. Our members represent both owners and users of
intellectual property.
We appreciate your efforts, Mr. Chairman, to develop a
constitutionally-sound solution to the inequities and problems
presented by the inability of intellectual property owners to enforce
their rights against States and State entities. You initiated this
process with the introduction of S. 1835, the Intellectual Property
Protection Restoration Act of 1999 shortly after the Supreme Court's
decision in College Savings Bank v. Florida Prepaid Postsecondary
Education Expense Board, 527 U.S. 666 (1999) and Florida Prepaid
Postsecondary Education Expense Board v. College Savings Bank, 527 U.S.
627 (1999). The discussion and debate which this legislation generated
have resulted in what we believe is a balanced and appropriate response
to the Eleventh Amendment sovereign immunity shield available to States
that infringe property rights.
BACKGROUND
Prior to 1985, it was generally perceived by patent, trademark and
copyright owners, rightly or wrongly, that States were liable for the
infringement of their rights (Lemelson v. Ampex Corp., 372 F. Supp. 708
(N.D.Ill. 1974); Mills Music Inc. v. State of Arizona, 591 F.2d 1278
(9th Cir 1979)). In Lemelson, the court, relying upon Parden v.
Terminal Railway Co., 377 U.S. 184 (1964), ruled that, in granting
Congress the exclusive right to grant patents, the states had largely
surrendered their sovereign immunity to patent suits and allowed the
recovery of damages.
In 1985, however, the Supreme Court held in Atascadero State
Hospital v. Scanlon, 473 U.S. 234 (1985) that Congressional intent to
abrogate State sovereign immunity must be explicitly and unambiguously
stated in the language of the statute itself. In that case, the
plaintiff charged that a state hospital had refused to hire him solely
because of his physical handicaps in violation of the Rehabilitation
Act of 1973. In rejecting plaintiff's suit, the Supreme Court found
neither an unequivocal waiver by the state of its Constitutional
immunity nor an unequivocal expression by Congress of its intention to
abrogate the Eleventh Amendment. Shortly after Atascadero, courts began
applying its reasoning to the patent and copyright laws (Chew v.
California, 893 F.2d 331 (Fed. Cir. 1990); BV Engineering v. UCLA, 858
F.2d 1394 (9th Cir. 1988)).
Congress moved quickly to remedy this newly-identified omission in
the federal intellectual property laws. The Copyright Remedy
Clarification Act (CRCA) (Pub. L. 101-533), enacted in 1990, based its
abrogation of State sovereign immunity on Article I, Sec. 8, cl.8. The
CRCA was followed in 1992 by the Patent and Plant Variety Protection
Clarification Act (PRA) (Pub. L. 102-560) and the Trademark Remedy
Clarification Act (TRCA) (Pub. L. 102-561) which abrogated State
sovereign immunity by reliance on Article I, Sec. 8, cl.8 and Article
I, Sec. 8, cl.3 respectively, as well as Sec. 5 of the 14th Amendment.
Congress relied on Pennsylvania v. Union Gas Co., 491 U.S. 1 (1989)
in basing its abrogation of State sovereign immunity on Article I in
the three Clarification Acts. Union Gas involved a third party
complaint against the State under the Comprehensive Environmental
Response, Compensation and Liability Act to recover costs associated
with the clean up of a coal tar deposit. In a plurality decision, the
Court had ruled that the Commerce Clause gave Congress the power to
abrogate States' immunity (though the majority did not agree on the
reasoning). In a dissent, four Justices disagreed that the Commerce
Clause provided such authority.
Seven years later, however, the Supreme Court ruled in Seminole
Tribes of Fla. v. Florida, 517 US 44 (1996) that the Eleventh Amendment
restricts the judicial power under Article III and that Article I
cannot be used to circumvent the Constitutional limitations placed on
federal jurisdiction. Seminole involved a suit under the Indian Gaming
Regulatory Act to compel the State to negotiate in good faith a compact
allowing certain gaming activities. The Court observed that Congress'
authority to abrogate State sovereign immunity had been found only in
two Constitutional provisions: the Commerce Clause and the Fourteenth
Amendment. Stating that never before Union Gas had the Court held that
its Article III jurisdiction could be expanded by other than the 14th
Amendment, the Court found Union Gas to be based on a misreading of
precedent, wrongly decided, and overruled it.
With this pillar of the TRCA removed, the Court in College Savings
quickly dispensed with any suggestion that these legislative responses
to Atascadero could be grounded in Congress' Article I powers. The
Court in College Savings then considered whether Florida Prepaid had
constructively waived its immunity under Parden v. Terminal Railway
Co., 377 U.S. 184 (1964). It ruled that Congress did not have the power
to effect a constructive waiver of a State's Eleventh Amendment
immunity, expressly overruling Parden.
In Florida Prepaid, the Court considered whether the PRA could be
founded on the Fourteenth Amendment's protection against deprivation of
property without due process of law. Relying on the test it enunciated
in City of Boerne v. Flores, 521 US 507 (1997), that the propriety of
any Sec. 5 legislation ``must be judged with reference to the
historical experience . . . it reflects,'' the Court ruled that the PRA
could not be so justified. The Court relied heavily on the lack of
examples in the Congressional hearings of States hiding behind their
Eleventh Amendment sovereign immunity as well as the scarcity of
evidence that patentees were left without a remedy under state law.
Thus, the options available to Congress to enact legislation to
abrogate state sovereign immunity against suits by private parties to
enforce their patent, copyright and trademark rights, while not
entirely eliminated, have been severely circumscribed by the Supreme
Court's rulings. As noted by Professor Daniel J. Meltzer, the
application of the Supreme Court's precedents in Florida Prepaid might
lead one `to surmise that the majority's powerful commitment to the
proposition that states should not be liable at the behest of private
parties may shape its application of related constitutional doctrine'
(Notre Dame Law Review, page 1011, Vol. 75:3 (2000)).
Nonetheless, the Court in the College Savings case did leave open
the prospect for an approach involving voluntary waiver by a State of
its sovereign immunity. In rejecting College Savings Bank's argument
that Florida Prepaid had impliedly or constructively waived its
immunity from Lanham Act suit, the Court in the College Savings case
acknowledged that Congress may `condition the grant of funds to the
states upon their taking certain action that Congress could not require
them to take, and that acceptance of the funds entails an agreement to
the actions.' (South Dakota v. Dole, 483 U.S. 203 (1987) (an act
authorizing the withholding of a percentage of federal highway funds to
any State where alcoholic beverages were sold to any person younger
than 21 found to be Constitutional even if Congress could not regulate
drinking ages directly); see also Petty v. Tennessee-Missouri Bridge
Comm'n, 359 U.S. 275 (1959) (the grant of approval by Congress of the
creation of an interstate compact (where the approval required a
consent to suit) was considered a gratuity)).
S. 1611
The elegance of S. 1611 is that its major premise is to offer
States a gratuity--the right to obtain damages in suits to enforce
their patent, copyright and trademark rights--if they voluntarily waive
their sovereign immunity to suits by private parties to enforce their
patent, copyright and trademark rights against the waiving state.
Certainly Congress can exercise its Article I powers in a manner
calculated to promote the general public purpose of stimulating the
creation of intellectual property and consumer choice by encouraging
States to participate in the Federal intellectual property system.
In this respect, the incentive to waive in S. 1611 is considerably
weaker than the incentive to waive in its predecessor, S. 1835. In the
earlier bill, a State would have been totally precluded from acquiring
a Federal intellectual property right unless it waived its sovereign
immunity to suits arising under those laws. A strong argument can be
made that the level of inducement for States to waive their sovereign
immunity in S. 1835 was comfortably within ``the appropriate powers of
Congress'' (Florida v. Mellon, 273 U.S. 12 (1927) (an 80% credit
against a federal estate tax for payments on State inheritance taxes
which induced 36 States to amend their laws upheld as valid)). While
both bills proceed on the basis of offering States a gratuity--rights
under the Federal intellectual property laws to which states have no
entitlement--the differences are noted to emphasize the fairness of S.
1611. Under S. 1611, Congress is giving States the right to obtain
patents, copyrights, and trademarks and to obtain injunctive relief in
federal courts even if they never waive their sovereign immunity.
We are aware that some rights holders would go further and deny
non-waiving States the ability to obtain injunctive relief to enforce
their Federal intellectual property rights. While clearly this would
enhance the incentives for States to waive their sovereign immunity and
which for that reason has obvious attractions, we do not ask for this
added incentive at this time. It is our hope that the proportional
incentive reflected in SEC. 3 will be sufficient to encourage States to
waive their sovereign immunity. Should this incentive not prove
adequate, however, we believe there is considerable latitude short of
totally denying States the right to obtain federal intellectual
property rights as proposed in S. 1835.
We also appreciate the codification in SEC. 4 of S. 1611 of the
Supreme Court's decision in Ex parte Young, 209 US 123 (1908) that the
Eleventh Amendment does not preclude an action against a state official
to enjoin the official from doing an act he had no legal right to do.
Specifically, SEC. 4 enshrines the right of a patent, copyright or
trademark holder to obtain remedies against an officer or employee of a
State to the same extent that such remedies would be available against
a private individual. While the injunctive relief Congress extends to
non-waiving States to enforce their Federal intellectual property
rights under S. 1611 is perhaps a more effective remedy than an Ex
parte Young suit against a state official, the two remedies can be
argued to be rough equivalents.
We also support SEC. 5 of S. 1611 which seeks to comport with the
Supreme Court's more narrow construction of Congressional power to
abrogate sovereign immunity after College Savings and Florida Prepaid.
It provides that Constitutional due process and takings violations of
intellectual property rights are actionable. SEC. 5's exclusion of
treble or other enhanced damages for either a due process or a takings
violation should contribute to ensuring that ``Congress' means are
proportionate to ends legitimate'' under the Fourteenth Amendment (City
of Boerne v. Flores, 521 U.S. 507 (1997).
We especially endorse paragraph (c)(2) of SEC. 5 which places the
burden of proof upon a State to prove that it provides an adequate
remedy for any deprivation of intellectual property rights suffered by
a rights holder. The court in Florida Prepaid, relying on Parratt v.
Taylor, 451 U.S. 527 (1981) and Hudson v. Palmer, 468 U.S. 517 (1984)
held that ``only where the State provides no remedy, or only inadequate
remedies, to injured patent owners for its infringement of their patent
could a deprivation of property without due process result.'' Where a
State defends a Constitutional violation of an intellectual property
owner's right on the basis that the owner has adequate state remedies,
certainly it is fair to require that State to disclose what those
adequate remedies are.
The wisdom of S.1611 is further underscored by the Report of the
General Accounting Office. In June 2000, then Judiciary Committee
Chairman Hatch requested the GAO to conduct a review of State Eleventh
Amendment immunity in intellectual property infringement actions to
identify the extent and outcome of such actions. The GAO released the
results of its study this past September. As one might expect, the GAO
did not find extensive evidence of infringement of federal intellectual
property rights by States and state entities, identifying only 58
lawsuits in which a State was a defendant. This is not surprising,
however, in light of the recent history of the enforceability of
federal intellectual property rights against States which clearly
demonstrates that States and state entities have been (or were at least
thought to be) liable for infringing such rights. Moreover, while we
would not argue that States and state entities knowingly infringe the
intellectual property rights of others, too little time has passed
since College Savings and Florida Prepaid to fully judge their impact.
We believe that it is for these reasons that GAO was unable to find
large numbers of state infringements.
In summary, AIPLA finds S. 1611 to be a thoughtful and carefully-
crafted response to the problems facing intellectual property owners in
the post-College Savings and Florida Prepaid era.
THE NEED FOR EQUITY
Having observed that GAO uncovered relatively limited evidence of
past infringements of intellectual property rights by States for the
reasons noted, we nonetheless believe that the post--College Savings
and Florida Prepaid climate is highly inequitable and will get more so.
State institutions can create, protect and profit from federally
protected intellectual property. A 1999 Licensing Survey by the
Association of University Technology Managers (AUTM) found that its
member institutions (which are both State and private institutions)
introduced 417 new products in 1999 and received $40.9 billion from
licensing health care, software, and agricultural products as well as
research reagents and tools used by industry and academia. AUTM members
filed 5,545 patent applications (up 15% over 1998) and received 3,661
patents (up 14% from 1998). Tellingly, academic institutions received
an equity interest in 243 transactions in 1999 and reported holding
equity interests in a total of 886 start-up companies at the end of
1999.
In addition, state institutions, particularly universities, have
scores of federally-protected trademarks which they are becoming
increasingly aggressive in enforcing according to testimony given by
former USPTO Director, Q. Todd Dickinson, before the House Judiciary
Subcommittee on the Courts and Intellectual Property on July 27, 2000.
At that same hearing, the Register of Copyrights, Marybeth Peters,
testified that state colleges and universities had obtained copyright
registrations for over 32,000 monographs since 1978. Clearly, states
are obtaining increasing numbers of federal intellectual property
rights which they presently can fully enforce in the federal court
system.
But these same states that profit and benefit from obtaining and
enforcing their intellectual property rights in the federal system can
avoid any financial exposure when they infringe the intellectual
property rights of others. This blatant inequity was well stated by the
court in New Star Lasers v. Regents of California litigation, Supp. 2d
1240 (E.D. Cal. 1999). The University of California had settled
litigation in Massachusetts involving a patent held by the university,
but when New Star Lasers sought a declaratory action invalidating that
same patent, the University of California argued that it should have
sovereign immunity. The court observed: `The Regents wish to take the
good without the bad. The court can conceive of no other context in
which a litigant may lawfully enjoy all the benefits of a federal
property or right, while rejecting its limitations.'
While S. 1611 would not require states to waive their sovereign
immunity, it would provide reasonable incentives for them to
voluntarily do so, thereby encouraging the elimination of the existing
inequitable situation among states and their non-immune competitors.
Fairness demands at least this much.
INTERNATIONAL RAMIFICATIONS
There is another cloud on the horizon resulting from the College
Savings and Florida Prepaid decisions: the potential vulnerability of
the United States under the Agreement on Trade-Related Aspects of
Intellectual Property Rights or TRIPs. One of the most significant
contributions to the protection of intellectual property
internationally was the inclusion in TRIPs of provisions for
effectively enforcing intellectual property rights in member states,
both internally and at the border. This was a very significant
breakthrough, obligating member nations to Ahave the authority to order
a party to desist from infringement@ (Article 44.1) and ``to have the
authority to order the infringer to pay the right holder damages
adequate to compensate for the injury . . . suffered because of an
infringement . . .'' (Article 45.1)
There was no question of whether the enforcement and other
obligations of TRIPs would apply to subdivisions of members (States in
the context of the United States): the obligations would apply unless
an exception was crafted into the text. There are specific exceptions
to TRIPs' obligations that extend to members at the Federal level.
Article 31(b) excuses governments from seeking a voluntary license
prior to using a patented invention in cases of public non-commercial
use. Article 44.2 allows remedies for unauthorized government use to be
limited to payment of remuneration. This is not the case with
subdivisions or States. Since Congress had enacted the CRCA, PRA, and
TRCA before the end of 1992, there was no reason when the negotiations
concluded in 1993 for the United States to seek exceptions for States
to the rules set forth for enforcing intellectual property rights.
A failure of the United States to fully meet its TRIPs obligations
not only risks the possibility of an adverse dispute settlement
decision, it also sets a regrettable example for other nations whose
laws we seek to improve. As noted by former Director Dickinson ``In
fact, in the World Trade Organization's TRIPs Council, the United
States has already been asked formally about the Florida Prepaid
decisions, whether `States and state agencies cannot be sued in federal
court for [intellectual property] infringements' and to `explain how
the United States complies with Article 44(2)' of TRIPs.'' (Hearing,
House Judiciary Subcommittee on the Courts and Intellectual Property,
July 27, 2000) Again, S. 1611 will not guarantee compliance with these
obligations, but it offers attractive incentives for states to enter
fully into the Federal intellectual property system.
CONCLUSION
For these reasons--fairness, equity, and self-interest--we believe
S. 1611 should be endorsed by this Committee. We do not doubt that
improvements can be made, but we find S. 1611 to be an acceptable
remedy to the problems created by College Savings and Florida Prepaid.
We look forward to working with this Committee to make S. 1611 a
reality.
Chairman Leahy. Thank you very much, Mr. Kirk.
Mr. Schraad.
STATEMENT OF KEITH SCHRAAD, WESTERN REGIONAL DIRECTOR, NATIONAL
INFORMATION CONSORTIUM, LAWRENCE, KANSAS, ACCOMPANIED BY
WILLIAM PATRIE, LEGAL COUNSEL FOR NATIONAL INFORMATION
CONSORTIUM, LAWRENCE, KANSAS
Mr. Schraad. Thank you, Chairman Leahy, for the opportunity
to testify before this committee today. I am accompanied today
by our legal counsel, William Patrie, in the event that you
have legal questions, but I am happy here to testify about our
actual experiences in this matter.
As a former State Senator, I understand and am very
sympathetic to the needs of State Government. At the same time
the interests of private companies, who create at great
expense, copyrighted works for use by State Governments must
also be protected. The interests of States and copyright owners
need not and should not be in conflict.
NIC is an eGovernment business. We are a Kansas company.
Together with the State of Kansas in 1991 we developed the
first self-supporting online access to State Government. We
continue to work with that State and 15 others, as well as
counties and cities in 28 different States.
We work behind the scenes with our government clients to
create and maintain Internet-based portals, delivering
electronic government services to constituents. Through our
experience working with States over the years, we have
developed a component system of software development which
permits reuse for all of our State clients. This free use
ensures higher reliability since the components have been
repeatedly tested. It also serves to reduce costs. We do not
have to reinvent the wheel for each State, and States do not
have to pay for a completely customized software solution.
It is a good situation for all parties, but only so long as
we maintain copyright in the software. Our contracts carefully
ensure that we retain our copyright, while protecting the
State's interest through a generous license. Given our limited
client base we go to great lengths to keep our clients happy.
We have to in order to survive. We thrive only by being the
best partner that State Government ever had.
Georgia is the first client that we have sued in our entire
10-year history, and we did so with tremendous reluctance. It
is bad business to sue your clients, and it is counter to
everything we built our company on, healthy long-term
partnerships. Litigation is also expensive. As a small company,
we, like many companies, have been affected by the current
economy. Allocating scarce resources to suing a client is at
the bottom of our list of priorities.
We had a great relationship with Georgia for 4 years, 11
months and 30 days of a 5-year contract. On the day before that
contract expired, the State claimed that they, not us, owned
the software that we had developed for them. The State also
threatened to sue us for infringement if we used our own
material, and told us that if they did consent to our use, we
would then have to pay them royalties for using our own
software.
This is completely inconsistent with our contract, but
completely consistent with the agenda that Georgia's new chief
technology officer, who took over in the last year of our
contract with Georgia, has advocated publicly. Secure in
Georgia's sovereign immunity, he has been quite vocal about
creating a pool of software that can be shared among all the
States, all of whom enjoy sovereign immunity.
We tried for over 6 weeks after our contract ended to work
out an agreement. We repeatedly offered Georgia a perpetual
royalty-free license to use our software for all internal
online Georgia State purposes. All we asked in return is that
Georgia acknowledge that we were the copyright owners of our
software. Georgia refused. We were, therefore, forced to file
suit.
Due to the Supreme Court's sovereign immunity decisions, we
filed a very simply one-count Ex Parte Young claim for
declaratory judgment that we owned our software. The State took
a scorched-earth approach in answering our complaint. Not only
did it challenge our ownership, but it also asserted four
counterclaims, two Federal and two State. The two State claims
seek monetary damages. The damages, of course, which we are
prohibited from seeking.
In a final insult, the State simultaneously moved to
dismiss our claim on sovereign immunity grounds.
We have been forced to spend a tremendous amount of time
and money protecting the core asset of our company, our
software, resources that could be better used helping other
States serve their citizens.
However meritorious or unmeritorious Georgia's plan for a
common state pool of copyrighted works immune from damages
under sovereign immunity, will significantly harm if not
destroy not only our business, but those of all software
developers working with the States.
As I speak to you today, we have hope that we will be able
to reach a satisfactory agreement with Georgia, but the fact
remains that because of sovereign immunity, Georgia fought with
virtual impunity, while we are forced to fight with one hand or
two tied behind our back.
Sovereign immunity substantially increased the cost and
complexity of our litigation, unfairly increased the risk to
our business, and emboldened Georgia in a way that it would not
have been emboldened without immunity.
We do not seek an advantage over our State clients, only a
level playing field. We appreciate your efforts to create that
necessary balance. Thank you.
[The prepared statement of Mr. Schraad follows:]
Statement of Keith Shraad, Western Regional Director, National
Information Consortium, Lawrence, Kansas
Introduction
On behalf of the National Information Consortium (NIC), I
appreciate the opportunity to testify in support of S. 1611, ``The
Intellectual Property Protection Restoration Act of 2001.'' Legislation
is urgently needed to prevent States from misusing the sovereign
immunity protections granted under recent Supreme Court decisions. I
can testify from personal experience that misuse has occurred.
Qualification
I am currently Regional Manager for NIC, a Kansas-based eGovernment
company. I was born and raised in Kansas. I was an aide to former
Senate Majority Leader Bob Dole, and was an elected State Senator in
Kansas, representing the 11th Senate District in Johnson County, a
suburb of Kansas City.
As a former State Senator, I have seen the other side. I am very
sympathetic to the needs of State governments. Nevertheless, the
interests of private companies who create, at great expense,
copyrighted works for use by State governments, must also be protected.
Our current legal situation is unbalanced, unfair, and leads to states
taking advantage of their immunity from damages.
NIC's Business
NIC is in the Government business. We are a Kansas company.
Together with the State of Kansas, in 1991 we developed the first self-
supporting on-line access to State government. We continue to work with
the State of Kansas and 15 others, as well as counties and cities in a
total of 28 states. Sustainable eGovernment was born not in the dot-com
frenzy of Silicon Valley, but in the heartland of America.
We work behind the scenes with our government clients to create and
maintain their Internet-based portals, delivering electronic government
services to constituents. We employ a common look and feel to the
websites in order to make them appealing and easy to use.
Through our experience over the years working with States, we have
developed a component approach to software development which permits
re-use and adaptive re-use of those components. This re-use ensures
higher reliability since the components have been repeatedly tested. It
also reduces costs.
If NIC were required to develop from scratch software for each of
its State clients, the costs and time required would be prohibitive. It
is, therefore, imperative to NIC's success that NIC own copyright in
the software it develops. At the same time, in order to ensure that its
State clients derive maximum benefit and flexibility, should a State
terminate its contract with NIC, NIC grants the State a perpetual,
free, non-exclusive license to use, within the State for state
purposes, the project software, as well as the right to make future
modifications. Until the present dispute with the State of Georgia,
this arrangement has proved highly satisfactory to NIC and its State
clients.
Given our limited client base, we go to great lengths to keep our
clients happy. We have to in order to survive. We thrive only by
becoming the best partner each State government has ever had. Each
state officer typically belongs to a national association of similar
state officers. For example, all state Chief Information Officers
belong to the National Association of States' Chief Information
Officers, called NASCIO. The same is true for secretaries of state,
purchasing officers, and really, any state officer you can think of.
For most of those organizations, there are only fifty members, one for
each state. So word travels fast among such organizations, good or bad,
with companies such as ours.
The Georgia Dispute
In 1996, under a perceived threat of abolition of the GeorgiaNet
Authority by the Georgia legislature due to GeorgiaNet's unsatisfactory
performance in providing eGovernment services on-line, NIC was brought
in to quickly remake and refocus the GeorgiaNet under a one-year
contract that was extended four times for what became a five-year
contract period. I was the successor to the original NIC manager of
this project and thus have first hand knowledge about it. The existing
Georgia staff had little experience and thus NIC engaged in
considerable training of Georgia's staff.
As with almost all State websites NIC has developed or remade, the
GeorgiaNet was supported entirely without tax dollars, relying on user
fees to fund itself. The NIC-designed system contributes approximately
$14 million annually to the Georgia treasury, after cost deductions,
including payment of NIC's fees. It also won numerous awards, including
#1 (by the Center of Digital Government) among all states for the
state's use of technology; 2000 Best of the Web, 2d Place by Government
Technology magazine; 1999 Best of the Web, 2d Place, Government
Technology magazine; 1998 Best of the Web, 3d Place, Government
Technology magazine.
Near the end of NIC's contract with Georgia, the Georgia Technology
Authority (successor to the GeorgiaNet Authority) received a new
director, Larry Singer, who also serves as Georgia's Chief Information
Officer. Mr. Singer brought strong and controversial views about
copyright to his position and to the existing NIC-Georgia contract,
which he had no role in negotiating. Mr. Singer has been vocal in
creating a software-sharing cooperative among states, which would
require that the States own the software developed for them by private
companies, including NIC. NIC's contract with Georgia is an obstacle to
Singer's plan since it did not transfer to or vest rights in Georgia.
In June 2001, NIC was informed that it would no longer be providing
services to Georgia at the end of its five-year contract. At Singer's
request, NIC supplied Georgia with its usual terms for licensing the
existing NIC software which included a perpetual, royalty-free license
to use our software for all on-line government purposes inside Georgia,
as originally provided in our contract. We did not hear back from
Singer. On September 12, 2001, the last business day of the five-year
contract, NIC received a letter from Singer, claiming for the first
time that NIC had performed its work for Georgia as a ``work for hire''
(and that NIC's software was therefore owned by Georgia, not NIC).
Singer also stated that if NIC wanted to use its own software, it would
need Georgia's permission and would have to pay Georgia license fees.
Georgia also claimed the right to license NIC's software to third
parties.
Despite these startling claims and what NIC believed to be an
intentional misreading of the contract, NIC provided Georgia with NIC's
source code and worked throughout the weekend with Georgia's staff in
order to ensure a smooth transition. NIC spent countless hours getting
Georgia's employees up to speed on operation of the sites.
NIC also retained counsel to attempt a settlement. Counsel informed
us that due to recent Supreme Court decisions on sovereign immunity, we
would not be able to collect damages, but would be limited to
declaratory and injunctive relief under Ex Parte Young. The lack of
ability to collect damages is a significant disincentive in bringing
any litigation. Moreover, NIC was greatly concerned about the effect
litigation against one of its State clients would have on both existing
and potential future State clients. NIC was, therefore, highly
reluctant to bring suit.
As a result, NIC engaged in six weeks of intensive correspondence,
phone calls, and negotiations. NIC offered once again to grant Georgia
a perpetual, free-non-exclusive license to use NIC's software within
the Georgia system, coupled with a right to make future modifications.
All NIC asked in return was that Georgia acknowledge NIC's exclusive
right to market NIC's own software outside of Georgia. Georgia refused
and still refuses. NIC therefore had no choice but to file a
declaratory judgment action. NIC believes that sovereign immunity
played a very important role in Georgia's recalcitrance.
NIC's Simple Complaint
Mindful of its relations with other States and out of a desire to
settle the matter amicably, NIC took a minimalist approach to its
complaint. NIC asserted a single claim for declaratory judgment of
ownership of its own software under Ex Parte Young. A copy of that
complaint is attached as Appendix 1. NIC did not ask for a single penny
from Georgia, only for acknowledgment that we owned what we created.
Georgia's Counterclaim and Motion to Dismiss
Georgia took a scorched earth approach to NIC's simple declaratory
judgment action. Attorney General Baker, on behalf of Georgia
Technology Authority, not only answered NIC's single claim complaint,
but asserted four counterclaims, including two state claims for
monetary damages. A copy of the answer and counterclaims are attached
as Appendix 2. Then, in a separate motion on behalf of himself, the
Attorney General, the same day, asserted sovereign immunity as a
defense. See Appendix 3. We have opposed this motion. See Appendix 4.
Unfairness of Georgia's Actions
NIC is appalled, as it trusts Congress will be, by Georgia's
behavior. Having obtained the full benefit of the five-year contractual
bargain, Georgia at the last minute laid claim to ownership of NIC's
software, threatened NIC with litigation if it licensed its own
software without Georgia's permission, and demanded license fees. When
NIC attempted to settle the matter short of expensive litigation,
Georgia refused, and then escalated the stakes even more by filing
aggressive counterclaims, including requests for money damages, damages
which it well knew NIC is denied under sovereign immunity, even while
it was simultaneously asserting claiming sovereign immunity for its
actions. Since the suit was initiated, Georgia has shifted its legal
theories numerous times as the facts turn out to be contrary to its
original answer and counterclaims.
Legislation is Urgently Needed
Georgia is the first client we have sued and we did so with
tremendous reluctance. It's bad business to sue clients. It's counter
to everything we've built our company on: a healthy, long-term
partnership. Litigation is also expensive. As a small company, we, like
many companies, have been affected by the current economy. Allocating
scarce resources to suing a client is at the bottom of our list of
priorities.
The present law encourages Georgia to take advantage of the lack of
a level playing field. We have been forced to spend a tremendous amount
of time and money protecting the core asset of our company, our
software, against a baseless claim by a State, whose Chief Technology
Officer is on a jihad against our company and private copyright in
general. Sovereign immunity significantly helps him in that effort. It
has forced us to waste valuable resources which could better be used
helping other States serve their citizens. However meritorious or
unmeritorious, Georgia's plan for a common state pool of copyrighted
works immune from damages under sovereign immunity will significantly
harm, if not destroy, not only our business, but those of all software
developers working with states.
As I speak to you today, we have some hope that we will be able to
reach a satisfactory settlement with Georgia. But the fact remains that
because of sovereign immunity, Georgia fought with virtual impunity,
while we were forced to fight with one or both hands tied behind our
back. Sovereign immunity substantially increased the cost and
complexity of our litigation, unfairly increased the risk to our
business, and emboldened Georgia in a way that it would not have been
emboldened without immunity.
NIC therefore supports S. 1611 and urges passage.
Thank you for the opportunity to testify.
Chairman Leahy. Thank you, Mr. Schraad.
Mr. Thro.
STATEMENT OF WILLIAM E. THRO, GENERAL COUNSEL, CHRISTOPHER
NEWPORT UNIVERSITY, NEWPORT NEWS, VIRGINIA
Mr. Thro. I want to begin by thanking you, Chairman Leahy,
for giving me an opportunity to speak before you today.
Although I am speaking as a scholar of sovereign immunity and
as someone who has litigated sovereign immunity issues on
behalf of State universities, I am not representing Virginia
Attorney General Kilgore. But nevertheless, I think it is
imperative that you hear from someone who both embraces the
Court's current sovereign immunity jurisprudence, and at the
same time has experience representing institutions of higher
education in Federal Court litigation.
Quite simply, with all due respect, Mr. Chairman, I believe
that Senate Bill 1611 is flawed in two respects. First, from a
policy perspective, I believe it addresses a problem that quite
simply does not exist. The GAO report found very little
evidence that the States were infringing upon intellectual
property rights. As I think everyone has conceded, it is too
short after the Florida Prepaid decisions to really make any
judgments about what the States have done in the new era, but I
think we can assume that all states like Vermont, like
Virginia, like Mr. Rogan's State of California, will try and
act in good faith and will not go out and intentionally
infringe.
Moreover to the extent that the infringement of
intellectual properties might constitute a taking under the
Fifth Amendment of the Constitution, there is of course a
remedy available.
But I would like to talk more about what I see as the
constitutional problems with 1611. Quite frankly, I believe
that under the Supreme Court's current jurisprudence, 1611 will
be declared unconstitutional.
In order to explain the basis of my view, I think it is
important that first we begin with the assumption that the
Court seems to have adopted that the States are in fact
sovereign entities. They share sovereignty with the National
Government. Sovereignty is divided between the States and the
National Government, and the sovereignty of the States is an
essential aspect of our constitutional system, much like the
separation of powers between the Executive and the Legislative
Branch.
With that assumption, we then easily come to the conclusion
that there are certain things that the Federal Government
cannot do to interfere with the State sovereignty. For example,
Congress could not force a State to move its State Capital, but
instead would have to respect the State's choices as to where
the State Capital would be.
There are two basic problems from a constitutional
standpoint with this legislation. First, in Kimel v. Florida
Bd. of Regents, the Supreme Court said that Congress's powers
under Article I of the Constitution do not include the power to
subject the States to suit by private parties. Yet that is
exactly what this legislation does. Using the Article I
Intellectual Property Clause, this legislation attempts to say
to the States that they have a choice of either waiving their
sovereign immunity or giving up their right to enforce their
intellectual property rights. Second, and perhaps more
significantly, I believe this legislation violates the Doctrine
of Unconstitutional Conditions. Under that doctrine, the State
cannot force an individual to surrender his or her
constitutional rights as a condition of receiving a public
benefit. Yet that is exactly what this legislation does. It
says to the States, ``You must surrender your sovereign
immunity as the price of enforcing the intellectual property
rights which you already have.''
This I believe it is severely constitutionally flawed, and
I will be happy to take any questions.
Chairman Leahy. Even South Dakota v. Dole would not apply?
Mr. Thro. South Dakota v. Dole does not apply to this
instance, Mr. Chairman, because South Dakota v. Dole is a
Spending Clause case. It has to do with conditions that are
imposed upon the State as a condition of receiving Federal
funds.
As you noted, one approach might be to say that no State
university could receive Federal research funds unless that
State waived its sovereign immunity. As you hinted, and as Ms.
Peters pretty much explicitly said in her response, there are
severe problems with that, notably that it is probably
unrelated to the purpose for which the grant is given, and also
it is coercive. One of the exceptions carved out in South
Dakota v. Dole was if the grant of money was so great that the
State really had no choice but to comply with the grant, it
ceased being a gratuity and became a form of coercion. And I
believe that if you were to say State universities, ``If you
wish to receive Federal research funds, you must waive
sovereign immunity,'' that would be unconstitutionally
coercive, and I believe your----
Chairman Leahy. Under your views if Christopher Newport
University, for example, wanted to make tee shirts and put,
say, Ralph Lauren's logo name on them, made money out of this,
they could do that, and nobody could do anything about it. On
the other hand, if Ralph Lauren wanted to make tee shirts and
put Christopher Newport University on it, they could sue Ralph
Lauren.
Mr. Thro. Well, first, Mr. Lauren would be able to go into
Federal Court and to get an injunction against my president,
Paul Trible, your former colleague, to prohibit him from having
tee shirts with the Ralph Lauren mark, assuming, of course,
that the Ralph Lauren mark, that we were infringing. So he
would be able to stop it. He would not be able to get money
damages. With respect to----
Chairman Leahy. On the other hand, Christopher Newport
University could get money damages.
Mr. Thro. Yes, we could get money damages from Mr. Lauren,
yes. Absolutely.
[The prepared statement of Mr. Thro follows:]
Statement of William E. Thro,\1\ General Counsel, Christopher Newport
University
At the outset, I would like to thank Chairman Leahy and the members
of the Committee for inviting me to testify before you today. Although
I am speaking as a scholar of sovereign immunity and as someone who has
litigated sovereign immunity issues rather than as an official
representative of Virginia Attorney General Kilgore, I think it is
imperative that this Committee hear the views of someone who embraces
the Court's current sovereign immunity and who has represented state
agencies and state institutions of higher education in litigation.
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\1\ The views expressed in this testimony are the personal views of
Mr. Thro and do not necessarily represent the views of the Honorable
Jerry W. Kilgore, Attorney General of the Commonwealth of Virginia, or
the Rector and Visitors of Christopher Newport University.
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Quite simply, I believe that Senate Bill 1611 has flaws from both a
policy perspective and a constitutional perspective. With respect to a
policy perspective, Senate Bill 1611 attempts to resolve a problem that
does not exist. The General Accounting Office study found that there
were only a few dozen lawsuits against the States over a fifteen-year
period and most of those cases were resolved in favor of the States. In
short, the objective evidence shows fifty States are not engaged in a
widespread practice of abusing intellectual property rights. There is
no need for this body to enact legislation that benefits a narrow
special interest while burdening the taxpayers of the fifty States.
However, while I think Senate Bill 1611 is unwise public policy,
the major thrust of my remarks today is its constitutional flaws. Quite
simply, I believe that the Supreme Court has adopted a constitutional
theory of ``dual sovereignty'' and that Senate Bill 1611 violates the
fundamental tenants of ``dual sovereignty.'' In order to explain my
position, it is first necessary to articulate what I mean by the
Supreme Court's jurisprudence of dual sovereignty. Having accomplished
that, I will demonstrate why Senate Bill 1611 is contrary to the
Court's current jurisprudence of dual sovereignty.
I. THE COURT'S JURISPRUDENCE OF DUAL SOVEREIGNTY
The Supreme Court's current jurisprudence begins with the
assumption that when the original thirteen colonies declared their
independence in 1776, they effectively created thirteen sovereign
nations.\2\ Each State retained the ``Full Power to levy War, conclude
Peace, contract Alliances, establish Commerce, and to do all other Acts
and Things which Independent States may of right do.'' \3\ Indeed, The
Articles of Confederation explicitly recognized that each State
``retains its sovereignty, freedom, and independence, which is not by
this confederation expressly delegated to the United States, in
Congress assembled.'' \4\ In sum, before the ratification of the United
States Constitution, the States were sovereign entities.\5\
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\2\ See Declaration of Independence (``these United colonies are
and of right ought to be free and independent states'').
\3\ See Id.
\4\ Articles of Confederation, art. II.
\5\ See Blatchford v. Native Village of Noatak, 501 U.S. 775, 779
(1991).
---------------------------------------------------------------------------
The adoption of the Constitution in 1788 brought about a
transformation.\6\ Although the People could easily have transferred
all sovereignty vested in the States to the new National Government,
they did not do so. Moreover, while the People could have allowed the
States to retain all sovereignty and, thus, made the United States
nothing more than a compact among States, they did not do so. Instead,
the People, for the first time in the history of government, divided
sovereignty between two separate sovereigns.\7\ As Justice Kennedy
observed:
---------------------------------------------------------------------------
\6\ Under the terms of the Constitution, it went into effect when
nine of the thirteen States ratified it, but only for those States that
had ratified it. New Hampshire became the Ninth State to ratify in the
spring of 1788. Virginia and New York subsequently ratified before the
National Government became operational in April of 1789. North Carolina
ratified late in 1789 and Rhode Island consented in 1970.
\7\ As the Court explained:
Although the Constitution established a National Government with
broad, often plenary authority over matters within its recognized
competence, the founding document ``specifically recognizes the States
as sovereign entities.'' Various textual provisions of the Constitution
assume the States' continued existence and active participation of the
fundamental processes of Governance. The limited and enumerated powers
granted to the Legislative, Executive, and Judicial Branches of the
National Government, moreover, underscore the vital role reserved to
the States by the constitutional design. Any doubt regarding the
constitutional role of the States as sovereign entities is removed by
the Tenth Amendment, which, like the other provisions of the Bill of
Rights, was enacted to allay lingering concerns about the extent of the
national power. The Amendment confirms the promise implicit in the
original document: ``The powers not delegated to the United States by
the Constitution, nor prohibited by it to the States, are reserved to
the States respectively, or to the people.''
Alden v. Maine, 527 U.S. 706, 713-14 (1999)(citations omitted).
The Framers split the atom of sovereignty. It was the genius of
their idea that our citizens would have two political
capacities, one state and one federal, each protected from
incursion by the other. The resulting Constitution created a
legal system unprecedented in form and design, establishing two
orders of government, each with its own direct relationship,
its own privity, its own set of mutual rights and obligations
to the people who sustain it and are governed by it.\8\
---------------------------------------------------------------------------
\8\ U.S. Term Limits v. Thornton, 514 U.S. 779, 838 (1995)
(Kennedy, J. concurring).
---------------------------------------------------------------------------
Justice Kennedy's idea of dividing power between dual sovereigns is
not new. As early as 1768, John Dickinson, in Letters From A
Pennsylvania Farmer, suggested that sovereignty was divided between the
British Parliament and the Colonial Legislatures.\9\ James Madison,
writing in The Federalist, made the same point when he stated:
---------------------------------------------------------------------------
\9\ See Alfred H. Kelly, Winfred A. Harbison, & Herman Belz, The
American Constitution: Its Origins and Development 48-51 (6th ed.
1985).
``In the compound republic of America, the power surrendered by
the people is first divided between two distinct governments,
and then the portion allotted to each subdivided among distinct
and separate departments. Hence, a double security arises to
the rights of the people. The different governments will
control each other, at the same time that each will control by
itself.\10\
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\10\ The Federalist No. 51, at 291 (James Madison) (Clinton
Rossiter ed. 1961, 1999 prtg.)
In other words, as the Court observed in 1992, ``the Constitution
protects us from our own best intentions: It divides power among
sovereigns and among branches of government precisely so that we may
resist the temptation to concentrate power in one location as an
expedient solution to the crisis of the day.'' \11\ Although the States
surrendered many of their sovereign powers to the new National
Government, they retained ``a residuary and inviolable sovereignty.''
\11\ That the Constitution divides power between dual sovereigns, the
States and the National Government, is reflected throughout the
Constitution's text particularly in the Constitution's conferral upon
Congress of not all-governmental powers, but only discrete, enumerated
ones.\13\ Thus, ``the States retain substantial sovereign powers under
our constitutional scheme, powers with which Congress does not readily
interfere.'' \14\
---------------------------------------------------------------------------
\11\ New York v. United States, 505 U.S. 144, 187 (1992).
\12\ Printz v. United States, U.S. 898, 918-19 (1997).
\13\ See id. at 919.
\14\ Gregory v. Ashcroft, 501 U.S. 452, 461 (1991).
---------------------------------------------------------------------------
This division of sovereignty between the States and the National
Government is preserved and reinforced by the Constitution's
structure.\15\ These structural limitations, which are above and beyond
the limitations imposed by the text of the Bill of Rights or other
constitutional provisions, restrict the power of the National
Government so as to preserve the sovereignty of the States and vice
versa.\16\ Thus, although the Constitution gives vast power to the
National Government, the National Government remains one of enumerated,
hence limited, powers.\17\ For example, in recent years, the Court,
relying exclusively on the structural limitations of the Constitution,
has struck down the National Government's attempts to require the
States to pass particular legislation,\18\ commandeer state and local
officials to enforce federal law,\19\ force the States to adhere to
Congress' interpretation of substantive constitutional rights,\20\ and
regulate local matters under the guise of interstate commerce.\21\
Conversely, while the Constitution recognizes the sovereign character
of the States, it also limits the States. These structural limitations
on the States have led the Court to invalidate the States' attempts to
impose term limits on members of Congress,\22\ discourage the migration
of people between the States by giving lower welfare benefits to new
residents,\23\ undermine the Nation's foreign policy,\24\ and exempt
themselves from generally applicable regulations of interstate
commerce.\25\ In sum, both sovereigns are limited by the Constitution's
structure.\26\ Indeed, ``that those limits may not be mistaken, or
forgotten, the constitution is written.'' \27\
---------------------------------------------------------------------------
\15\ As the Supreme Court Recently Noted:
The federal system established by our Constitution preserves the
sovereign status of the States in two ways. First, it reserves to them
a substantial portion of the Nation's primary sovereignty, together
with the dignity and essential attributes inhering in that status. The
States ``form distinct and independent portions of the supremacy, no
more subject, within their respective spheres, to the general authority
than the general authority is subject to them, within its own sphere.''
Second, even as to matters within the competence of the National
Government, the constitutional design secures the founding generation's
rejection of ``the concept of a central government that would act upon
and through the States'' in favor of ``a system in which the State and
Federal Governments would exercise concurrent authority over the
people-who were, in Hamilton's words, `the only proper objects of
government.' '' In this the founders achieved a deliberate departure
from the Articles of Confederation: Experience under the Articles had
``exploded on all hands'' the ``practicality of making laws, with
coercive sanctions, for the States as political bodies.''
The States thus retain ``a residuary and inviolable sovereignty.''
They are not relegated to the role of mere provinces or political
corporations, but retain the dignity, though not the full authority, of
sovereignty.
Alden v. Maine, 527 U.S. 706, 714-15 (1999).
\16\ For a more detailed discussion of this point, see generally J.
Harvie Wilkinson III, Federalism for the Future, 74 S. Ca. L. Rev. 523
(2001). Chief Judge Wilkinson notes that the Court's so called
``federalism'' jurisprudence has restricted both the National
Government and the States.
\17\ See McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316, 405 (1819).
\18\ See New York v. United States, 505 U.S. 144 (1992).
\19\ See Printz v. United States, 521 U.S. 898 (1997).
\20\ See City of Boerne v. Flores 521 U.S. 507 (1997).
\21\ See United States v. Morrison, 529 US.598 (2000); United
States v. Lopez, 514 U.S. 549 (1995).
\22\ See U.S. Term Limits v. Thornton, 514 U.S. 779 (1995).
\23\ See Saenz v. Roe, 526 U.S. 489 (1999).
\24\ See Crosby v. National Foreign Trade Council, 530 US.363
(2000).
\25\ See Reno v. Condon, 528 US.141 666 (2000)
\26\ Although a majority of the Court seems to agree with this
proposition, the individual justices approach these issues in subtly
different ways. See generally Byron Dailey, Note, The Five Faces of
Federalism: A State-Power Quintet Without a Theory, 62 Ohio St. L.J.
1243 (2001)
\27\ Marbury v. Madison, 5 U.S. (1 Cranch) 137, 176 (1803)
---------------------------------------------------------------------------
One of these structural limitations imposed by the Constitution is
the sovereign immunity of both the National Government \28\ and the
individual States in the Union.\29\ As the Supreme Court recently
observed:
---------------------------------------------------------------------------
\28\ Marbury v. Madison, 5 U.S. Blue Fox, 525 U.S. 255,260 (1999)
\29\ See Alden v. Main, 527 U.S. 706, 713-15 (1999).
the sovereign immunity of the States neither derives from nor
is limited by the terms of the Eleventh Amendment. Rather, as
the Constitution's structure, and its history, and the
authoritative interpretations by this Court make clear, the
States' immunity from suit is a fundamental aspect of the
sovereignty which the States enjoyed before the ratification of
the Constitution, and which they retain today (either literally
or by virtue of their admission into the Union upon an equal
footing with the other States) except as altered by the plan of
the Convention or certain constitutional Amendments. . .\30\
---------------------------------------------------------------------------
\30\ Id at 713.
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In effect, the preservation of sovereign immunity is essential to
the continued existence of the States as sovereign entities and the
continued existence of the States as sovereign entities is essential to
the structure of the American constitutional system.\31\
---------------------------------------------------------------------------
\31\ As the Supreme Court observed:
Underlying constitutional form are considerations of great
substance. Private suits against nonconsenting States--especially suits
for money damages--may threaten the financial integrity of the States.
It is indisputable that, at the time of the founding, many of the
States could have been forced into insolvency but for their immunity
from private suits for money damages. Even today, an unlimited
congressional power to authorize suits in state court to levy upon the
treasuries of the States for compensatory damages, attorney's fees, and
even punitive damages could create staggering burdens, giving Congress
a power and a leverage over the States that is not contemplated by our
constitutional design. The potential national power would pose a severe
and notorious danger to the States and their resources.
A congressional power to strip the States of their immunity from
private suits . . . would pose more subtle risks as well. ``The
principle of immunity from litigation assures the states and the nation
from unanticipated intervention in the processes of government.'' When
the States' immunity from private suits is disregarded, ``the course of
their public policy and the administration of their public affairs''
may become ``subject to and controlled by the mandates of judicial
tribunals without their consent, and in favor of individual interest.''
While the States have relinquished their immunity from suit in some
special contexts--at least as a practical matter--this surrender
carries with it substantial costs to the autonomy, the decisionmaking
ability, and the sovereign capacity of the States.
A general federal power to authorize private suits for money
damages would place unwarranted strain on the States' ability to govern
in accordance with the will of their citizens. Today, as at the time of
the founding, the allocation of scarce resources among competing needs
and interests lies at the heart of the political process. While the
judgment creditor of the State may have a legitimate claim for
compensation, other important needs and worthwhile ends compete for
access to the public fisc. Since all cannot be satisfied in full, it is
inevitable that difficult decisions involving the most sensitive and
political of judgments must be made. If the principle of representative
government is to be preserved to the States, the balance between
competing interests must be reached after deliberation by the political
process established by the citizens of the State, not by judicial
decree mandated by the Federal Government and invoked by the private
citizen. ``It needs no argument to show that the political power cannot
be thus ousted of its jurisdiction and the judiciary set in its
place.''
Id. at 714-15 (citations omitted).
---------------------------------------------------------------------------
Given the importance of the States to ``the delicate equilibrium
that is dual sovereignty,'' \32\ it is impossible to equate the States
with the private parties that own intellectual property. The States, as
sovereign entities, play a vital role in the governance of the Republic
and the ultimate preservation of freedom. If the State treasury can be
raided by powerful groups interested only in profits or if valuable
State resources must be devoted to defending frivolous lawsuits on the
merits, then the ability of the State to provide education, roads, and
other essential services is undermined. Although the well-being of a
corporation is of great concern to its employees and shareholders, the
well-being of the States is of great concern to all citizens. Because
the States and the private parties are not analogous, there is no need
to level the playing field. Indeed, to suggest otherwise is to ignore
the vital and unique role of the States.
---------------------------------------------------------------------------
\32\ South Carolina State Ports Auth v. Federal Maritime Comm'n 243
F.3d 165, 179 (4th Cir. 2001), cert. granted, 122 S. Ct. 392 (2001).
---------------------------------------------------------------------------
II. HOW SENATE BILL 1611 VIOLATES THE SUPREME COURT'S DUAL SOVEREIGNTY
JURISPRUDENCE
Having presented a brief and general overview of the constitutional
theory of dual sovereignty, I would like to turn to how Senate Bill
1611 contradicts the Supreme Court's dual sovereignty. In other words,
I would like to explain why I believe that Senate Bill 1611 is
unconstitutional. There are two reasons for my conclusion.
First, ``Congress' powers under Article I of the Constitution do
not include the power to subject States to suit at the hands of private
individuals.'' \33\ Indeed, the Court, in holding that the mere
participation in interstate commerce was not a waiver of sovereign
immunity, observed:
---------------------------------------------------------------------------
\33\ Kimel v. Florida Bd. of Regents, 528 U.S. 62, 80 (2000)
Recognizing a congressional power to exact constructive waivers
of sovereign immunity through the exercise of Article I powers
would also, as a practical matter, permit Congress to
circumvent the anti abrogation holding of Seminole Tribe.
Forced waiver and abrogation are not even different sides of
the same coin--they are the same side of the same coin. . . .
There is little more than a verbal distinction between saying
that Congress can make Florida liable to private parties for
false or misleading advertising in interstate commerce of its
prepaid tuition program, and saying the same thing but adding
at the end ``if Florida chooses to engage in such
advertising.'' \34\
---------------------------------------------------------------------------
\34\ College Savings Bank v. Florida Prepaid Postsecondary Educ.
Expense Fund, 527 U.S. 666, 683-84 (1999) (citations omitted).
---------------------------------------------------------------------------
In other words, although Congress may use its powers under Sec. 5
of the Fourteenth Amendment to abrogate sovereign immunity,\35\ it may
not use Article I powers to exact waivers of sovereign immunity from
the States. Congress may not say that if the States wish to engage in a
particular activity or to enforce the States' legal property rights,
then the States have waived sovereign immunity.
---------------------------------------------------------------------------
\35\ See Fitzpatrick v. Bitzer, 427 U.S. 445, 456 (2976).
---------------------------------------------------------------------------
Yet, that is exactly what Senate Bill 1611 does. This Bill uses the
Article I intellectual property clause \36\ to force the States to
choose between waiving sovereign immunity and enforcing the State's
legitimate intellectual property rights. If my institution, Christopher
Newport University, wishes to stop the unauthorized use of our name and
logo on t-shirts, then we must agree to give up our best defense to
frivolous lawsuits designed to exact a quick settlement from the deep
pocket of the State treasury. If, as the Supreme Court held, Congress
cannot abrogate the sovereign immunity of the States for intellectual
property claims, then Congress cannot accomplish the same objective
through forced waiver.
---------------------------------------------------------------------------
\36\ See U.S. Const. art. I, Sec. 8, cl. 8.
---------------------------------------------------------------------------
Of course, it is theoretically possible to change Senate Bill 1611
so that it uses Sec. 5 of the Fourteenth Amendment, rather than the
Article I intellectual property clause, to strip the States of their
sovereign immunity. However, as a practical matter, this cannot be
done. In recent cases, the Court has repeatedly emphasized that, before
the Sec. 5 power can be invoked, Congress must make findings that the
States themselves have engaged in a pattern of unconstitutional
conduct. As the General Accounting Office report unequivocally
demonstrates, this is not the case.
Second, Senate Bill 1611 violates the doctrine of unconstitutional
conditions. Quite simply, this doctrine holds that ``the government may
not require a person to give up a constitutional right . . . in
exchange for a discretionary benefit conferred by the government . .
.'' \37\ For example, the government generally may not require a
property owner to give up a portion of his property rights as a
condition of receiving a building permit.\38\ The reason for such a
doctrine is clear. If government ``may compel the surrender of one
constitutional right as a condition of its favor, it may, in like
manner, compel surrender of all. It is inconceivable that guaranties
embedded in the Constitution of the United States may be thus
manipulated out of existence.'' \39\ Moreover, while the doctrine
generally applies in the context of individual rights, it should be
equally applicable to the fundamental aspects of a States' sovereignty.
This is particularly true given the importance of the States'
sovereignty to maintaining the constitutional balance. Thus, Congress
may not require the surrender of the States' sovereignty as a condition
of receiving a benefit from the National Government.\40\
---------------------------------------------------------------------------
\37\ Dolan v. City of Tigard, 512 U.S. 374, 385 (1994).
\38\ See Id at 394-95. Of course, such conditions can be imposed if
it can be demonstrated that (1) there is an ``essential nexus'' between
the permit condition and a legitimate interest of government; and (2)
there is a rough proportionality between the condition and the impact
of the new project. See Id. at 386.
\39\ Frost & Frost Trucking Co. v. Railroad Comm'n, 271 U.S. 583,
594 (1926).
\40\ Of course, some of the lower federal courts have held that
Congress may require the States to waive sovereign immunity a condition
of receiving federal funds. See, e.g. Cherry v. University of
Wisconsin, 265 F.3d 541 (7th Cir. 2001); Jim C. v. United States, 235
F.3d 1079 (8th Cir. 2000) (en banc), cert. denied 121 S. Ct. 2591
(2001); Sandoval v. Hagan, 197 F.3d 484 (11th Cir. 1999), rev'd on
other grounds sub nom. Alexander v. Sandoval, 121 S. Ct. 1511 (2001);
Litman v. George Mason University, 186 F.3d 544, 557 (4th Cir. 1999)
(Litman II), cert. denied, 120 S. Ct. 1220 (2000); In re Innes 529 U.S.
1037 (2000). But see Koslow v. Pennsylvania, 158 F. Supp. 2d 539, 542,
543-44 (E.D. Pa. 2001); Pugliese v. Arizona Dep't of Health & Human
Serv., 147 F. Supp. 2d 985, 990-91 (D. Ariz. 2001). to date, the
Supreme Court has not addressed the question.
However, if the Supreme Court were to uphold required waivers,
then, of all practical purposes, the holdings of the recent cases
reviving sovereign immunity would be eviscerated. To illustrate,
because the standard for abrogation pursuant to Sec. 5 of the
Fourteenth Amendment is so high, Congress generally will not be able to
abrogate sovereign immunity. Yet, Congress can easily pass a statute
that requires the States to waive sovereign immunity as a condition of
receiving federal funds. Indeed, through the enactment of 42 U.S.C.
Sec. 2000d-7, Congress has already done this for many anti-
discrimination statutes. Thus, if the Court were to approve such
required waivers, it seems almost inevitable that Congress would soon
require waivers for all federal claims. In sum, the law of sovereign
immunity would return to its pre-Seminole Tribe status.
---------------------------------------------------------------------------
Yet, this is exactly what Senate Bill 1611 requires. The States
learn that unless they surrender their sovereign immunity, they will be
``sanctioned'' by losing all ability to enforce their intellectual
property rights. Threatening to exclude the State from enforcing its
legitimate intellectual property rights transforms the supposed
``choice'' into outright coercion. As the Court, observed:
In the present case, however, what Congress threatens if the
State refuses to agree to its condition is not the denial of a
gift or gratuity, but a sanction: exclusion of the State from
otherwise permissible activity. Justice Breyer's dissent
acknowledges the intuitive difference between the two, but
asserts that it disappears when the gift that is threatened to
be withheld is substantial enough. Perhaps so, which is why, in
cases involving conditions attached to federal funding, we have
acknowledged that ``the financial inducement offered by
Congress might be so coercive as to pass the point at which'
pressure turns into compulsion.' In any event, we think where
the constitutionally guaranteed protection of the States'
sovereign immunity is involved, the point of coercion is
automatically passed--and the voluntariness of waiver
destroyed--when what is attached to the refusal to waive is the
exclusion of the State from otherwise lawful activity.\41\
---------------------------------------------------------------------------
\41\ College Savings Bank, 527 U.S. at 687 (emphasis added)
(citation's omitted).
---------------------------------------------------------------------------
If it is unconstitutional for Congress to exclude the States from
otherwise lawful activity as a ``sanction'' for refusing to waive
sovereign immunity, then it is equally unconstitutional to exclude the
States from enforcing their legitimate intellectual property rights as
a ``sanction'' for refusing to waive sovereign immunity.
CONCLUSION
At the end of day, Senate Bill 1611 has significant policy and
constitutional problems. From a policy perspective, it attempts to
solve a problem that is largely non-existent. From a constitutional
perspective, it undermines the principles of ``dual sovereignty.'' By
using Article I to bring about a waiver of sovereign immunity, it
contradicts recent Supreme Court precedents. By forcing the States to
choose between waiving sovereign immunity and being able to enforce
their own intellectual property rights, it violates the doctrine of
unconstitutional conditions.
Chairman Leahy. Senator Brownback, as I said earlier, is a
valued member of this committee, and was tied up with another
matter when I introduced Mr. Schraad, and I want to yield to
Senator Brownback.
STATEMENT OF HON. SAM BROWNBACK, A U.S. SENATOR FROM THE STATE
OF KANSAS
Senator Brownback. Thank you very much, Senator Leahy, Mr.
Chairman. Thank you for holding the hearing. And I welcome a
fellow Kansan, Keith Schraad. He is with the group National
Information Consortium that is providing some leading edge e-
technology, eGovernment solutions, and I am delighted to have
him here.
Mr. Chairman, I have a full statement to put in the record.
I am delighted you are holding the hearing. It is a complex
topic. I think it is an important one. I was pleased to see how
you are moving this topic on forward. I appreciate you
accommodating my home town--I should say home State, it feels
like hometown--witness that is here, and also the question on
what you are putting forward, to try to fashion a legislation
remedy in light of the Supreme Court decision. I think it is an
important way in what you are doing here.
So I just ask unanimous consent this full statement be
included in the record, and I want to apologize to the
witnesses for not being able to stay for more of the hearing.
[The prepared statement of Senator Brownback follows:]
Statement of Hon. Sam Brownback, a U.S. Senator from the State of
Kansas
Thank you Mr. Chairman for holding this important hearing. The
question of whether or not a state should abide by the same laws as a
private individual or company in the area of intellectual property
rights has been a complex one for both Congress and the Courts.
But before I get to the issue, allow me to first commend you, Mr.
Chairman, for the quality and depth of the witnesses you've invited for
this hearing and for your work in this area. I'm especially pleased
that we have a native Kansan, Keith Schraad, testifying before this
Committee on behalf of a Kansas company, the National Information
Consortium or NIC. You may be surprised to know Mr. Chairman that NIC
is just one of many leading technology companies that one can find
among the wheatfields of Kansas.
There are two sides this issue and both are compelling. For
individuals and companies who make the investment and take the risk in
creating new products and services, their property rights are at stake
when a state infringes upon their intellectual property. States on the
other hand also want to protect their sovereignty under the
Constitution and want to assert their intellectual property rights
especially in the context of private/public partnerships where
ownership issues may not be as clear.
This inherent conflict demands congressional action. Especially in
the context of the digital revolution where exact copies and
reproductions can be made, this is an important economic issue for
individuals and companies trying to compete in the marketplace. The
question is how to fashion a legislative remedy in light of recent
Supreme Court decisions that struck down previous attempts to bring
clarity to the issue.
I believe Chairman Leahy's bill is a good attempt to find some
compromise solution without running afoul of the constitutional issues
highlighted by the Supreme Court in Seminole Tribe and the Florida Pre-
Paid cases.
I would also like to add that this matter has repercussions which
extend far beyond the domestic realm. The US is one of the leading
proponents for the enforcement of intellectual property rights
throughout the world. That's why it cannot afford to be inconsistent in
its own observance of intellectual property rights. Through
international agreements such as TRIPS and NAFTA, the United States has
vigorously challenged international institutions and other nations to
adopt and enforce more extensive intellectual property laws. When
states assert sovereign immunity for the purpose of infringing upon
intellectual property rights, it damages the credibility of the United
States internationally, and could possibly even lead to violations of
our treaty obligations. Any decrease in the level of enforcement of
intellectual property rights around the world is likely to harm
American businesses, because of our position as international leaders
in industries like pharmaceuticals, information technology, and
biotechnology.
Again, Mr. Chairman, thank you for holding this hearing and for
accommodating a witness from my home state of Kansas.
Chairman Leahy. I appreciate you being here, and I also
appreciate your suggestion on Mr. Schraad, and it has been very
helpful.
And we have one more witness before we go into questions,
of course, and that is Mr. Bender.
STATEMENT OF PAUL BENDER ON BEHALF OF THE PROPERTY OWNERS
REMEDY ALLIANCE, WASHINGTON, D.C.
Mr. Bender. Thank you, Chairman Leahy and Senator
Brownback, and thank you, Chairman Leahy especially for your
leadership on this issue and moving this bill to solve what
most of the witnesses and yourself have said is a really
important and dangerous situation of unfairness.
I am here representing the Property Owners Remedy Alliance,
PORA, which is an ad hoc alliance of a group of copyright
owners and associations of copyright owners that cover a very
large range of copyrightable material, music, performance,
films, software, publishing. We strongly support the passage of
Senate Bill 1611 because it is necessary to remedy the
unfairness that has been mentioned.
An additional example of that we just learned about
yesterday. The State of Maryland had infringed, has infringed a
software copyright and we are negotiating with the copyright
owner, and acknowledge $270,000 in damages, and recently, just
within the last few days, instead of continuing with those,
what seemed to be good-faith negotiations, suddenly wrote a
letter and said, ``We have sovereign immunity, we are not going
to talk about damages any more.'' And we will talk about
perhaps a license for the future, but as you recognized, their
bargaining position on that license price is a very strong one
because they cannot be sued for damages.
Congress faced this situation once before in 1985 in the
Atascadero case. The Supreme Court held that if Congress wanted
to abrogate immunity, it had to do so really explicitly,
assuming that Congress could abrogate immunity using its
Article I powers, and lower courts began to hold that
intellectual property suits could not be maintained against
states because the abrogation was not explicit enough.
So Congress enacted, in order to remedy exactly the
unfairness you are dealing with today, Congress enacted a
series of remedies clarification acts. Now, in 1999, as you
pointed out, the Supreme Court has changed the rules of the
game again, and said, ``Well, even if you make it completely
explicit, the abrogation is not constitutional unless it is to
remedy violations of the Fourteenth Amendment.''
The need for the legislation is even greater than it was in
1990 given the enormous transformation of informational
technology through the digital process, which makes it much
easier to infringe intellectual property. And the really
substantial increase in States both using others' intellectual
property and commercially exploiting their own intellectual
property, and so you have the situation, as you pointed out,
where a State can at one and the same time, without this
legislation, sue others for damages for violating the State's
property and assert immunity against the claims against it, and
the property can be exactly the same kind of property.
We think that 1611 is both an effective, will be an
effective and is a completely constitutional way of dealing
with this. It has three parts, and I think all three parts are
important. It abrogates State immunity in cases where the State
infringement constitutes a constitutional violation, a
deprivation of property without due process of law, or taking
without just compensation.
In its 1999 trilogy the Supreme Court invited Congress to
enact that kind of legislation, and no such legislation exists
today. That is legislation specifically making the States
liable for deprivations of property without due process through
the infringement of intellectual property.
So the constitutionality of that part, since it turns on
the plaintiff showing a constitutional violation, it seems to
me is unquestioned.
Then the bill also explicitly recognizes the continued
existence of the Ex Parte Young doctrine. I think that is
really important also, although the Ex Parte Young doctrine has
been there for a long time, because in Seminole the Supreme
Court said that if Congress passed a comprehensive remedial
scheme, Ex Parte Young might not apply, and it is really
important for the Congress to say that it wants Ex Parte Young
to continue to apply.
And as to the waiver provision, which I think is central
and really important, to me the important thing there is that
Congress is not taking anything away from the States. It is
simply conditioning the States obtaining a future benefit on
the States' waiving their immunity, so that they participate in
the electoral property systems on the same basis as other
people. So I disagree with Mr. Thro that there is any
deprivation here of any rights that the States have. And we are
talking about Federal intellectual property rights which are
granted by Congress, that Congress does not have to grant, and
the bill is prospective only. And so it will simply say to
States, ``If in the future you want to get Federal rights for
your future property, then you have to participate in the
system on the same basis as private people.''
The one substantive suggestion we would make is that the
committee seriously consider adding to the remedies bar a
provision that says that the States cannot get injunctive
relief as well as damages. I think that Congress has the power
to do that. And I think it is unfair--it is not as unfair as
the present situation, but it is still unfair to permit the
States to get injunctions without being liable for damages,
whereas no private property participating in this system can do
that. So we would suggest that you consider that, because that
seems to me a substantial aspect of unfairness as well.
Thank you very much.
[The prepared statement of Mr. Bender follows:]
Statement of Paul Bender, Professor , Arizona State University College
of Law Counsel to Meyer & Klipper, PLLC
Mr. Chairman, the Property Owners Remedy Alliance (PORA) welcomes
the opportunity to present its views on your bill, S. 1611, the
``Intellectual Property Protection Restoration Act of 2001.'' PORA's
members greatly appreciate your and Mr. Hatch's interest in this
important issue, as well as the time and effort that Committee staff
has devoted to crafting this important legislation.
PORA is an ad hoc group composed of a number of copyright-based
companies and trade associations.\1\ Copyrights are at the core of the
business of PORA's members. They market copies--or license the public
performances--of millions of copyrighted works. They often sell or
license works to States and their instrumentalities, which are
prodigious users of copyrighted materials.
---------------------------------------------------------------------------
\1\ PORA's members include the American Society of Composers,
Authors, and Publishers; Broadcast Music, Inc.; the Business Software
Alliance; The McGraw-Hill Companies; the Motion Picture Association of
America; National Music Publishers' Association; the Recording Industry
Association of America; Reed Elsevier Inc.; the Software and
Information Industry Association; the West Group; and AOL Time Warner
Inc.
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In 1990, with the support of many of PORA's current members,
Congress passed the Copyright Remedy Clarification Act (CRCA) as a
response to Supreme Court cases. The CRCA--and its subsequent patent
and trademark counterparts--were enacted to redress the inequity of a
situation where states as intellectual property owners may avail
themselves of the full array of remedies as plaintiffs, but enjoy
immunity to damage awards as defendants. In 1999, the Supreme Court
moved the goalposts yet again in a series of sovereign immunity
decisions that resulted in the Fifth Circuit's striking down the CRCA
two years ago. The Supreme Court's decisions and their progeny have
immunized States from damage awards when they infringe the federal
intellectual property rights of others, while leaving them free to
obtain all statutory remedies--including injunctions and damages--when
their own intellectual property rights are violated. This is the exact
same situation that existed in 1990. Thus, the reasons that we are here
are not substantive so much as technical.
State immunity from money damage awards for copyright violations is
of great concern to copyright owners--especially at a time when the
digital revolution is dramatically increasing the scope and gravity of
the piracy threat copyright owners face. PORA's members are grateful to
the Committee for the responsiveness that it has shown in enacting
prophylactic legislation in the past--such as the Digital Millennium
Copyright Act, the NET Act and the Digital Theft Deterrence and
Copyright Damages Improvement Act of 1999--to deal with new piracy
threats caused by digital technology. PORA views S. 1611 as part and
parcel of these legislative efforts.
We believe that an effective and constitutional sovereign immunity
bill should have three components: (1) a provision that provides an
incentive for states to voluntarily waive their immunity in exchange
for access to the full remedies under the intellectual property system;
(2) a provision abrogating state sovereign immunity for constitutional
violations; and (3) codification of the Ex parte Young doctrine, which
permits injunctions against state officials. S. 1611 contains all three
of these important elements.
For this reason, we strongly support S. 1611. Additionally, We urge
the Committee, however, to carefully consider strengthening the
`remedies bar' to preclude the award of injunctions or damages to non-
waiving states. An amendment of this nature will strengthen the
incentive for states to make themselves full and equal participants in
the marketplace.
Mr. Chairman, the Property Owners Remedy Alliance (PORA) welcomes
the opportunity to present its views on your bill, S. 1611, the
``Intellectual Property Protection Restoration Act of 2001.'' PORA's
members greatly appreciate your interest in this important issue, as
well as the time and effort that you and your staff have devoted to
crafting this important legislation. We also want to thank Senator
Hatch for his long-standing interest in this issue, dating back to the
original Copyright Remedy Clarification Act in the 101st Congress.
PORA is an ad hoc group composed of a number of copyright-based
companies and trade associations. It's members include the American
Society of Composers, Authors, and Publishers; Broadcast Music, Inc.;
the Business Software Alliance; The McGraw-Hill Companies; the Motion
Picture Association of America; National Music Publishers' Association;
the Recording Industry Association of America; Reed Elsevier Inc.; the
Software and Information Industry Association; the West Group; and AOL
Time Warner Inc. PORA was formed in early 2000 in response to the
Supreme Court's 1999 sovereign immunity decisions, Florida Prepaid
Postsecondary Education Expense Board v. College Savings Bank \2\ and
College Savings Bank v. Florida Prepaid Postsecondary Education Expense
Board.\3\ These and other decisions \4\ have created a fundamentally
unfair situation in which States remain immune from financial
responsibility for any harm that their infringements cause to copyright
owners, while at the same time being free to obtain all statutory
remedies--including injunctions and damages--against those who trespass
on their rights. The inequity of States being able to play by two sets
of rules caused Congress to change the law in 1990, and these new
decisions make it even more important that it does so today.
---------------------------------------------------------------------------
\2\ 527 U.S. 627 (1999).
\3\ 527 U.S. 666 (1999).
\4\ See, e.g., Chavez v. Arte Publico Press, 204 F.3d 601 (5th Cir.
2000); Rodriguez v. Texas Comm'n on the Arts, 199 F.3d 279 (5th Cir.
2000).
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Copyrights are at the core of the business of PORA's members. They
market copies--or license the public performances--of millions of
copyrighted works. They often sell or license works to States and their
instrumentalities, which are prodigious users of copyrighted materials.
As a result, State immunity from money damage awards for copyright
violations is of great concern to copyright owners--especially at a
time when the digital revolution is dramatically increasing the scope
and gravity of the piracy threat copyright owners face. In the past few
years, Congress has recognized repeatedly the threat posed to copyright
owners by new digital technology and has acted accordingly.\5\
Enactment of remedial legislation in light of the Supreme Court's 1999
sovereign immunity decisions is entirely consistent with these past
congressional efforts.
---------------------------------------------------------------------------
\5\ In light of the threat posed to copyright owners by digital
technology, Congress enacted the Digital Millennium Copyright Act, Pub.
L. No. 105-304, 112 Stat. 2860 (1998), which, in part, makes it illegal
to circumvent copy protection technology, or to alter copyright
management information. In 1997, Congress passed the No Electronic
Theft Act, Pub. L. No. 105-147, 111 Stat. 2678 (1997), in order to fill
a gap in U.S. law regarding the criminal liability of those who engage
in harmful copyright infringement for non-commercial purposes. The
legislative history of that Act reveals congressional concern that
additional penalties were needed to combat electronic copyright piracy.
See generally H.R. Rep. No. 105-339, at 4 (1997). Most recently,
Congress enacted the digital Theft deterrence and copyright Damages
Improvement Act of 1999, Pub. L. No. 106-160, 113 Stat. 1774, which
significantly increases that statutory damages for copyright
infringement as a means of deterring copyright piracy in a digital
environment. See H.R. Rep. No. 106-216, at 3 (1999) (noting that
``copyright piracy of intellectual property flourishes, assisted in
large part by today's world of advanced technologies,'' and that ``the
potential for this problem to worsen is great. By the turn of the
century the Internet is projected to have more than 200 million users.
. . .'').
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Our members' goal is to secure the passage of federal legislation
that: (1) eliminates the inherent unfairness of the present situation,
in which States and their instrumentalities--which are increasingly
participating as competitors in the commercial marketplace--are able to
enjoy the full benefits of the copyright law without shouldering one of
its most important responsibilities; and (2) complies with the newly
articulated constitutional boundaries established by the Supreme Court
while effectively protecting rightsholders against State violations of
their copyrights.\6\
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\6\ While our comments are offered from the perspective of
copyright owners, we recognize that other federal intellectual property
owners have been adversely affected by these decisions and we urge the
enactment of legislation that protects the interests of patent and
trademark owners as well.
---------------------------------------------------------------------------
PORA urges the enactment of legislation that would:
Condition the availability to States of certain judicial remedies
under the federal intellectual property system on State waivers of
sovereign immunity from suit for state infringements from private
intellectual property rights;
Abrogate State sovereign immunity when State infringements of
federal statutory rights also violate constitutional rights; and
Codify the doctrine of Ex parte Young,\7\ thereby affirming the
continued availability of injunctive and monetary relief against State
officials who violate federal intellectual property laws.
---------------------------------------------------------------------------
\7\ 209 U.S. 123 (1908).
---------------------------------------------------------------------------
Mr. Chairman, we are pleased that S. 1611 contains provisions
addressing each of these important goals and PORA therefore strongly
supports your bill. In our testimony, we will explain why we support
the inclusion of these provisions in S. 1611. We will also suggest one
particular, substantively important enhancement to the text of S. 1611
regarding the scope of remedies denied non-waiving States that we
believe will improve the bill, and urge the Committee to give careful
consideration to this suggested change. We will first discuss the legal
and constitutional developments that have made S. 1611 a necessity in
the first place.
I. The 101st Congress and the Copyright Remedy Clarification Act
In November of 1990, President George Bush signed into law the
Copyright Remedy Clarification Act (CRCA).\8\ Drafted in response to a
number of federal court decisions,\9\ that legislation expressly
abrogated state sovereign immunity from money damage awards in
copyright infringement suits. Two years after passage of the CRCA,
Congress enacted its patent and trademark counterparts: the Patent and
Plant Variety Protection Clarification Act (PRA) \10\ and the Trademark
Remedy Clarification Act (TRCA).\11\
---------------------------------------------------------------------------
\8\ Pub. L. No. 101-553, 104 Stat. 2749 (1990).
\9\ In 1985, the Supreme Court decided Atascadero State Hospital v.
Scanlon, 473 U.S. 234 (1985), holding that a federal law seeking to
abrogate State sovereign immunity must contain ``unequivocal statutory
language'' evincing Congress' intent to abrogate immunity and must
specifically include States within the class of defendants subject to
statutory remedies. Subsequently, a number of federal courts determined
that the Copyright Act lacked the necessary ``unequivocal statutory
language.'' See, e.g., BV Engineering v. UCLA 858 F.2d 1394 (9th Cir.
1988), cert. denied, 489 U.S. 1090 (1980).
\10\ Pub. L. No. 102-560, 106 Stat. 4230 (1992).
\11\ Pub. L. No. 102-542, 106 Stat. 3567 (1992).
---------------------------------------------------------------------------
When it passed the CRCA in 1990, the 101st Congress believed that
it had the power to abrogate State immunity under Article I, Section 8,
Clause 8 of the Constitution--the Patent/Copyright Clause. In reaching
this conclusion, Congress relied on the Supreme Court's decision in
Pennsylvania v. Union Gas Co.\12\ in which the Court by a 5-4 vote
ruled that Congress could use its Article I powers to abrogate State
immunity if Congress made its intention to abrogate unmistakably clear.
When the 102nd Congress enacted the PRA and the TRCA in 1992, it
referenced two Article I powers (the Patent/Copyright and Commerce
Clauses), as well as its authority under Section 5 of the Fourteenth
Amendment, as the constitutional basis for the legislation.
---------------------------------------------------------------------------
\12\ 491 U.S. 1 (1989).
---------------------------------------------------------------------------
Now, twelve years later, the 107th Congress finds itself revisiting
this issue because, in the interim, the United States Supreme Court has
changed the constitutional landscape in a way that has frustrated
Congress' purpose in enacting the CRCA, PRA and the TRCA. Thus, in a
real sense, the task before this Committee is technical in nature: to
draft a new law to fill the gap in State responsibility created by
these judicial rulings--a law that meets the Court's newly articulated
constitutional understanding and is an effective means of deterring
State infringements of federal intellectual property rights and
compensating those who are the victims of such violations.
The reasons that prompted Congress to enact the CRCA in 1990 (and
the PRA and TRCA in 1992) remain compelling today. It is instructive to
review briefly the history surrounding the enactment of the CRCA.
Congress began its work in this area in 1987, by requesting and
receiving from the United States Copyright Office a study examining
State immunity from infringement actions.\13\ Specifically, Congress
asked the Copyright Office to examine two issues: (1) the practical
problems relative to the enforcement of copyright law against State
entities; and (2) the presence, if any, of unfair business practices by
copyright owners vis-a-vis State governments.\14\ The Copyright
Office's detailed examination revealed that copyright owners had
suffered and would continue to suffer harm if Congress did not abrogate
State immunity from suit for State copyright infringements.\15\
---------------------------------------------------------------------------
\13\ United States Copyright Office, Copyright Liability of States
and the Eleventh Amendment (1988) [hereinafter Copyright Office Repot].
\14\ Letter from Representatives Kastenmeier and Moorhead, Chairman
and Ranking Minority Member, Subcomm. of Courts, Civil Liberties and
the Admin. of Justice of the House Comm. on the Judiciary, to Ralph
Oman, Register of Copyrights (August 3, 1987), reprinted in Copyright
Office Report, supra note 13; see also id. at iii-iv, 5.
\15\ See copyright Office report, supra note 13, at vii, 103; H.R.
Rep. No. 101-282, at 8 (1989); S. Rep. No. 101-305, at 10 (1990).
---------------------------------------------------------------------------
The Copyright Office Report uncovered evidence of unremedied State
copyright infringements. Those who filed comments with the Office
``almost unanimously chronicled dire financial and other repercussions
that would flow from State Eleventh Amendment immunity from damages in
copyright infringement suits.'' \16\ The Copyright Office concluded
that ``copyright owners have demonstrated that they will suffer
immediate harm if they are unable to sue infringing States in federal
court for money damages.'' \17\
---------------------------------------------------------------------------
\16\ Copyright Office Report, supra note 13, at vii, 103; H.R. Rep.
No. 101-282, at 8 (1989); S. Rep. No. 101-305, at 10 (1990).
\17\ Copyright Office Report, supra not 13, at vii.
---------------------------------------------------------------------------
Congress' own consideration of the issue confirmed the Copyright
Office's findings and conclusions. This Committee declared that
``[s]tate immunity from damages critically impairs creative incentives
and business investments in the country's copyright businesses that
deal with State entities.'' \18\ Similarly, the House Judiciary
Committee concluded that ``actual harm has occurred and will continue
to occur if this legislation is not enacted.'' \19\ Congress also
recognized that the harm emanating from State copyright immunity was
not limited to copyright owners. The Senate Report recognized that
``[i]t is not only business enterprises that are hurt by State
infringements, but individuals, primarily students and public colleges
and universities, who pay the price of State immunity through higher
prices and lower quality of materials.'' \20\ Thus, when Congress
passed the CRCA, it acted on a record that documented the seriousness
of the problem and the need for prompt legislative intervention in
response to recent court decisions holding States immune from damages
in copyright cases because of the failure of existing legislation to
abrogate state immunity.\21\
---------------------------------------------------------------------------
\18\ S. Rep. No. 101-305, at 9 (1990). The Senate Judiciary
Committee also noted that ``[c]ontinued State immunity from damage
suits will result in such adverse consequences as increases in the
prices charged non-State users, diminution in the economic incentive to
create new works, and decline in the quantity an quality of published
works.'' Id at 10.
\19\ H.R. Rep. No. 101-282, at 8 (1989).
\20\ S. Rep No. 101-305, at 9 (1990). In addition, Congress
received testimony that State immunity from damage actions adversely
impacts individual authors whose markets center on college campuses.
See id.
\21\ These cases contravened earlier decisions holding States
subject to damage awards in copyright infringement cases. Compare BV
Engineering v. UCLA, 858 F.2d 1394 (9th Cir. 1988) (1979 copyright
Act--pre-CRCA--held not to abrogate Eleventh Amendment immunity) with
Mills Music, Inc. v. Arizona, 591 F.2d 1278 (9th Cir. 1979) (claim of
Eleventh Amendment immunity rejected). When it enacted the CRCA,
Congress was aware of a number of other copyright infringement suits
brought in federal court against States. See, e.g., Richard Anderson
Photography v. brown, 852 F.2d 114 (4th Cir. 1988), cert. denied, 489
U.S. 1033 (1989); Lane v. First Nat'l Bank of Boston, 871 F.2d 166 (1st
Cir. 1989); Howell v. Miller, 91 F. 129 (6th Cir. 1898); Cardinal
Indus., Inc. v. Anderson Parrish, Inc., 230 U.S.P.Q. (BNA) 678 (M.D.
Fla. 1986); Johnson v. University of Virginia, 606 F. Supp. 321 (W.D.
Va. 1985); Woelffer v. Happy States of America, Inc., 626 F. Supp. 499
(N.D. Ill. 1985).
---------------------------------------------------------------------------
Several additional factors motivated Congress in enacting the CRCA.
First, the 101st Congress was deeply troubled by the fact that
sovereign immunity confers an unfair commercial advantage on States and
their instrumentalities. It permits States to operate by two sets of
rules: one when their copyrights are infringed and another when they
infringe the copyrights of others. When States are victims of
infringement, they have at their disposal all of the remedies available
under the Copyright Act; when States infringe, however, they are
shielded from a key copyright remedy--monetary damages. The 101st
Congress \22\ concluded that States thus unfairly received a ``free
ride'' by being able to obtain all of the benefits conferred by the
copyright law without bearing one of its most important
responsibilities.\23\
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\22\ The Senate Judiciary Committee stated the issue in these
terms:
The current state of law has resulted in the anomalous situation
that public universities can infringe copyrighted material of private
universities [and for that matter, of private parties] without
liability for damages, but private universities cannot similarly
infringe with impunity on the works created by public institutions.
Thus, UCLA can sue USC for damages from copyright infringement but USC
cannot collect damages from UCLA [Moreover, f]or a copyright proprietor
who sells his or her products to educational institutions, it is
puzzling that State schools cannot be sued for damages for their
systematic unauthorized copying, but private institutions can be. A
substantial segment of these companies' market is beyond the reach of
the most important remedy provided by the Copyright Act.
S. Rep No. 101-305, at 9 (1990).
\23\ See generally H.R. Rep. No. 101-282, at 10 (1989); S. Rep No.
101-305, at 6 n.3 (1990). Less than two years ago, the ranking member
of the House Judiciary Subcommittee on courts and Intellectual Property
echoed this concern:
[I]t is our goal as well as our responsibility to ensure that our
intellectual property system remains fair and balanced, while still
being constitutional in the eyes of the Supreme Court. To the extent
that the law protects the intellectual property of one class of actors,
but does not correspondingly require that class of actors to respect
intellectual property right of others, the law is distinctly unfair and
imbalanced. Oversight Hearing on ``State Sovereign Immunity and the
Protection of Intellectual Property'' Before the house Comm. on the
Judiciary, Subcomm. on Courts, the Internet, and Intellectual Property
106th Cong. (2000) (statement of Rep. Berman) available at http://
www.house.gov/judiciary/courts.htm.
---------------------------------------------------------------------------
The 101st Congress' concern over this unfair situation was
heightened by its recognition that States are frequent and important
users and owners of copyrighted works. With respect to State uses of
copyright materials, a former Register of Copyrights told the 101st
Congress:
States and their instrumentalities are major users of copyrighted
material of all sorts--not only the familiar forms of printed books and
periodicals but the whole range of creative expression in the 1980's:
dance and drama, music and sound recordings; photographs and
filmstrips; motion pictures and video recordings; computer software and
chips; pictorial and graphic material, maps and architectural plans,
and so forth, ad infinitum. State exploitation of copyrighted works is
by no means limited to uses that can be called educational or
nonprofit. They include publishing enterprises, computer networks, off-
air-taping, public performance and display, radio and television
broadcasting and cable transmissions, to name only the most obvious
[examples]. . . .\24\
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\24\ See Copyright Remedy Clarification Act: Hearing on H.R. 1131
Before the House Comm. on the Judiciary, Subcomm. on Courts,
Intellectual Property, and the Admin. of Justice, 101st Cong. (1989)
(statement of Barbara Ringer).
---------------------------------------------------------------------------
Moreover, the 101st Congress knew that, unlike the federal
government which cannot generally assert copyright in the works of its
employees,\25\ States are free to claim copyright in works created by
their employees and to reap the commercial benefits that result from
such rights.\26\
---------------------------------------------------------------------------
\25\ 17 U.S.C. Sec. 105 (``Copyright protection under this title is
not available for any work of the United States Government, but the
United States Government is not precluded from receiving and holding
copyrights transferred to it by assignment, bequest, or otherwise.'')
\26\ A number of courts have ruled, however, that neither the
federal government nor States can claim copyright protection in
judicial opinions, State statutes, legislative histories and similar
official documents. See Wheaton v. Peters, 33 U.S. 591 (1834) (holding
that reporters of Supreme Court decisions cannot claim copyrights in
those decisions); Building Officials & Code Adm. v. Code Technology
Inc., 628 F.2d 730 (1st Cir. 1980) (giving reasons why copyright in a
womk such as a building code might not be fully maintained after that
work is officially adopted by the State as law); see also M. Nimmer and
D. Nimmer, Nimmer on Copyright, Sec. 5.06. Nonetheless, some States
continue to assert copyright or copyright-like protection in official
documents.
---------------------------------------------------------------------------
Second, while acknowledging the importance of Ex parte Young
injunctions as a remedial tool under the copyright law, Congress
concluded that injunctive relief, standing alone, was inadequate to
protect the interests of copyright owners against State infringers.\27\
---------------------------------------------------------------------------
\27\ See S. Rep. 101-305, at 12 (1990) (``Injunctive relief for
copyright violations does not provide adequate compensation or
effective deterrence for copyright infringement . . . . Injunctions
only prohibit future infringements and cannot provide compensation for
violations that have already occurred.''). See also H.R. Rep. No. 101-
282, at 8 (1989) (``[injunctive relief] . . . deters only future
conduct, and does not compensate for past harm.'').
---------------------------------------------------------------------------
Third, the 101st Congress knew that because federal courts have
exclusive jurisdiction over federal copyright cases, sovereign immunity
means ``the choice [in copyright cases] is . . . between the federal
forum and no forum.'' \28\
---------------------------------------------------------------------------
\28\ BV Engineering v. UCLA, 858 F.2d 1394, 1400 (9th Cir. 1988).
The same is true today. See 28 U.S.C. Sec. 1338(a).
---------------------------------------------------------------------------
The reasons that drove enactment of the CRCA in 1990 are, if
anything, even stronger in 2002. State use of copyrighted works is even
more frequent than twelve years ago. This is certainly true on college
campuses; public institutions currently house nearly 80% of the
students attending institutions of higher learning in the United
States.\29\ Copyrighted software is used in every university setting,
public or private. Moreover, State university systems' Intranets
(computer networks linking classrooms, libraries, media centers and
dormitory rooms) now make it possible for a university to distribute
copies or performances of copyrighted works to unlimited numbers of
faculty, students, and even members of the general public.
---------------------------------------------------------------------------
\29\ Although we have not yet obtained state-by-state statistics,
the gross numbers below indicate the nationwide scope of state employee
and student populations. For example, as of Fall, 1995, nearly 80% of
higher education students were enrolled in public institutions-11.1
million out of 14.2 million. U.S. Dept of Educ., Digest of Educational
Statistics 1997, Table 172. Over the past half century the percentage
of students enrolled in public vs. private has increased dramatically.
In fact, in 1947, a roughly equal number of students were enrolled in
public and private institutions of higher learning. Id. In addition, as
of July, 1999, according to the Bureau of Labor Statistics, the number
of state employees is 4.7 million. U.S. Bureau of Labor Statistics,
Aug., 1999. Moreover, as of the fall of 1993, 71% of all non-graduate
student instructors in institutions of higher learning were employed by
public versus private institutions. U.S. Dept of Educ., Digest of
Educational Statistics 1997, Table 225 (1997).
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The problems posed today by State immunity are not limited to the
university environment. Copyrighted software, music, motion pictures,
sound recordings and other works are used by many State departments and
agencies. Computer software programs are found in virtually every
governmental entity performing specialized tasks or general office
administration functions. Copyright users include State departments of
education, taxation, and transportation.
Finally, in assessing the unfairness of the current state of the
law, it is also critical to take into account the fact that today
States are major owners of intellectual property. As owners, they
increasingly act not as sovereigns, but as commercial competitors. For
example, in Florida Prepaid, the State allegedly infringed College
Savings' patent in a program when it offered a competing service using
the patented method. Moreover, like corporations in the public sector,
States have begun to centralize the management of their intellectual
property assets so that they may successfully exploit their
creations.\30\
---------------------------------------------------------------------------
\30\ See infra note 31 (noting a nonexhaustive list of states that
have created entities to market State intellectual property more
effectively).
---------------------------------------------------------------------------
In addition, for years many States have aggressively registered
their works with the Copyright Office and they continue to do so. This
point was underscored in 2000 by the Register of Copyrights in
testimony before the House Judiciary Subcommittee on Courts and
Intellectual Property:
We do have some sense of the extent to which States make use of the
Copyright Office's registration function. The Copyright Office reviewed
the registrations issued to four-year state colleges and universities
for monographs since 1978. Over 32,000 such registrations were found.
That is an average of 645 registrations for each State. Put
differently, on average the Copyright Office has issued a registration
for a work by a State (not including State entities other than four-
year colleges and universities, and not including serials) once every
twelve calendar days for the last twenty-two years. Clearly, States are
availing themselves of the copyright protection provided by federal
law.\31\
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\31\ Oversight Hearing on ``State Sovereign Immunity and the
Protection of Intellectual Property'' Before the House Comm. on the
Judiciary, Subcomm. on Courts, the Internet, and Intellectual Property,
106th Cong. (2000) (Testimony of Marybeth Peters) available at http://
www.house.gov/judiciary/courts.htm. It is worth noting that these
numbers do not take into account the innumerable unregistered
copyrights that States are free to exploit. Cf. 17 U.S.C. Sec. 408(a).
Moreover, at the same hearing, the head of the Patent and Trademark
Office told the House Judiciary Subcommittee on Courts, the Internet,
and Intellectual Property:
We have done some initial research into the extent of state
holdings of intellectual property. For example, we know that public
colleges and universities--that is, state institutions--acquired over
13,000 U.S. patents between 1969 and 1997--roughly 60% of the total
22,551 patents issued to all institutions of higher learning during the
period. As a rough calculation, state academic institutions received
approximately 2.5% of all U.S. utility patents issued to non-federal
government, U.S. entities in 1997 and 1998. It is important to note
that these figures count only issued. patents where the assignor at the
time of issuance was identifiably a state college, university, or
research institution. In addition, these numbers do not count the
patents held by state hospitals, state agricultural services, and the
like.
Our initial look at trademark registrations suggests that state
institutions, particularly universities, have scores of federally-
protected trademarks--which they are--note and more aggressively
protecting. In short, the States enjoy an enormous collection of
federally-granted intellectual property rights, each and every one of
which will be enforced by federal courts.
Oversight Hearing on ``State Sovereign Immunity and the Protection
of Intellectual Property'' Before the House Comm. on the Judiciary,
Subcomm. on Courts, the Internet, and Intellectual Property, 106th
Cong. (2000) (Testimony of Todd Dickinson) (July 27, 2000) available at
http://www.house.gov/judiciary/courts.htm In addition, State
governments have begun to set up corporations for the purpose of
commercially exploiting intellectual property created at their
institutions of higher learning, and State laws have begun directing
and empowering State instrumentalities to exploit creative works and
inventions. See, e.g., 2001 Pa. Laws 77, Sec. Sec. 1701 et seq. (2001)
(establishing biotechnology research centers, and nonprofit
corporations to operate those centers, with the apparent goal of
attracting venture capital and implementing the commercial development
of new research discoveries); Haw. Rev. Stat. Sec. 307-3 (2001)
(establishing the Research Corporation of the University of Hawaii);
Va. Code Ann. Sec. 2.2-2221 (2001) (setting forth the powers of the
Innovative Technology Authority); Ariz. Rev. Stat. Sec. 15-1635 (2001)
(giving Arizona Board of Regents power to organize corporations and to
``enter into research and development agreements [etc.] . . .
concerning the research, development, production, or storing or
marketing of new products developed or to be developed through
university research ''); see also http://www.yamacraw.cor:, (describing
a multimillion dollar fund created by Georgia designed to encourage
investment through public/private partnerships that exploit
intellectual property).
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Furthermore, universities increasingly are moving away from the
practice of allowing professors, rather than the State or the
university, to claim copyright in faculty-created works. This
development is motivated in part by the upsurge in the commercial value
of technologically-oriented faculty creations such as computer software
and multimedia works.\32\
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\32\ See Sunil R. Kulkarni, All Professors Create Equally: Why
Faculty Should Have Complete Control Over the Intellectual Property
Rights In Their Creations, 47 Hastings L. J. 221 (Nov. 1995); see also
Robert A. Gorman, The Rights of Faculty as Creators and Users, Academe,
May-June 1998, at 14-18.
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Today, States are routinely reaping all the benefits of the
Copyright Act--without having to expose themselves to financial
liability for their infringing acts. This disparity creates an
inequitable situation in the intellectual property marketplace. It
should be corrected. S. 1611 would help do just that.
II. The CRCA, the PTA and the TRCA Under Constitutional Attack
In Seminole Tribe of Florida v. Florida \33\ the Supreme Court
overruled the Union Gas case, upon which Congress had relied in
enacting the CRCA, the PRA, and the TRCA. In Seminole Tribe, the Court
held that Congress could not use its Article I powers to abrogate State
immunity from suit for violation of legislation passed pursuant to
Congress' Article I powers.\34\ This surprising decision removed
Article I as a basis for the CRCA, PRA and TRCA. After Seminole Tribe,
the constitutionality of these statutes turned on whether they could be
sustained under either Section 5 of the Fourteenth Amendment or under
the so-called Parden doctrine,\35\ under which States could waive their
sovereign immunity by participating voluntarily in certain commercial
activities.
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\33\ 517 U.S. 44 (1996).
\34\ See id.
\35\ See Parden v. Terminal Ry. of Ala. State Docks Dep't, 377 U.S.
184 (1964).
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Ultimately, the PRA, CRCA and the TRCA (to the extent it abrogated
State immunity for false advertising claims) were found
unconstitutional. In June 1999, the Supreme Court invalidated the PRA
and the false advertising provisions of the TRCA in Florida Prepaid
Postsecondary Education Expense Board v. College Savings Bank \36\ and
College Savings Bank v. Florida Prepaid Postsecondary Education Expense
Board.\37\ In addition to finding that neither the PRA nor the
challenged portions of the TRCA were proper exercises of Congress'
Section 5 power, the Court overruled the Parden doctrine as well.
Subsequently, relying on the two College Savings Bank cases, two
separate panels of the United States Court of Appeals for the Fifth
Circuit voided the CRCA.\38\
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\36\ 527 U.S. 627 (1999).
\37\ 527 U.S. 666 (1999).
\38\ See Chavez v. Arte Publico Press, 204 F.3d 601 (5th Cir.
2000), and Rodriguez v. Texas Comm'n on the Arts, 199 F.3d 279 (5th
Cir. 2000).
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At the same time that the Court handed down the two College Savings
Bank cases, June 23, 1999, it also decided Alden v. Maine.\39\ In
Alden, the Court held that Congress could not use its Article I powers
to subject nonconsenting States to private suits for damages in State
court. Taken together, Seminole Tribe and Alden mean that Congress
cannot rely on its Article I powers to abrogate State sovereign
immunity from suit in either State or federal court. Because of the
critical place they occupy in the current sovereign immunity landscape,
each of these three post-Seminole Tribe decisions--the two College
Savings rulings and Alden--warrant some further elaboration.
---------------------------------------------------------------------------
\39\ 527 U.S. 706 (1999).
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a. florida prepaid postsecondary education expense board v. college
savings bank (``the patent case'')
In Florida Prepaid,\40\ the Supreme Court, by a 5-4 vote, struck
down the PRA. Relying on the PRA, College Savings Bank had filed a
patent infringement suit against defendant, Florida Prepaid, alleging
that the defendant had infringed College Savings Bank's patent in the
financing methodology used in its college savings program. After the
Supreme Court handed down Seminole Tribe, the defendant moved to
dismiss the suit. The district court denied the motion \41\ and the
Court of Appeals for the Federal Circuit affirmed.\42\ The Supreme
Court, however, reversed.
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\40\ 527 U.S. 627 (Fed. Cir. 1999).
\41\ 948 F. Supp. 400 (N.J. 1996).
\42\ 148 F.3d 1343 (1998).
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At the outset, the Court held that, because Seminole Tribe
prohibited Congress from abrogating State sovereign immunity pursuant
to its Article I powers, the PRA could not be sustained under either
the Commerce or Patent/Copyright Clauses. Next, although the Court
recognized that Congress has the power to abrogate State immunity by
enacting ``appropriate legislation'' under Section 5 of the Fourteenth
Amendment,\43\ it determined that the PRA was not a proper exercise of
Congress' Section 5 power. Several aspects of the Court's Section 5
discussion bear special mention.
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\43\ As it had in Seminole Tribe, 517 U.S. at 59, the Court
reaffirmed its holding in Fitzpatrick v. Bitzer, 427 U.S. 445 (1976),
that Section 5 of the Fourteenth Amendment permitted Congress to
abrogate State sovereignty in order to enforce rights protected by the
Amendment. Florida Prepaid, 527 U.S. at 636-37.
---------------------------------------------------------------------------
First, the majority found that patents are property for purposes of
the Due Process Clause:
Patents . . . have long been considered a species of property .
. . . As such, they are surely included within the ``property''
of which no person may be deprived by a State without due
process of law. And if the Due Process Clause protects patents,
we know of no reason why Congress might not legislate against
their deprivation without due process under Sec. 5 of the
Fourteenth Amendment.\44\
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\44\ Florida Prepaid, 527 U.S. at 642 (emphasis added) (internal
citations omitted).
Second, the Court noted that, while patents are property for
purposes of the Due Process Clause, that clause does not protect
against every State patent infringement. It only encompasses those
infringements that unconstitutionally deprive patent owners of their
property such as infringements that deprive owners of property without
due process of law. The Court further seemed to hold that due process
is violated only if intentional acts of infringement occur for which
the State has failed to provide an adequate State remedy.\45\
---------------------------------------------------------------------------
\45\ See 527 U.S. at 646-47.
---------------------------------------------------------------------------
Third, the Court found that the PRA was not ``appropriate
legislation'' under Section 5 because (1) it included all statutory
infringements, not only those infringements that amount to
constitutional violations, and (2) Congress had made no record showing
a need for it to reach beyond constitutional violations in order to
protect constitutional rights. The Court noted in this connection that:
In enacting the Patent Remedy Act . . . Congress identified no
pattern of patent infringement by the States, let alone a
pattern of constitutional violations. Unlike the undisputed
record of racial discrimination confronting Congress in the
voting rights cases . . . Congress came up with little evidence
of infringing conduct on the part of the States. The House
Report acknowledged that ``many states comply with patent law''
and could provide only two examples of patent infringement
suits against the States. The Federal Circuit in its opinion
identified only eight patent-infringement suits prosecuted
against the states in 110 years between 1880 and 1990 . . . .
At most, Congress heard testimony that patent infringements by
States might increase in the future . . . and acted to head off
this speculative harm.\46\
---------------------------------------------------------------------------
\46\ Florida Prepaid, 527 U.S. at 640-41 (internal citations
omitted). Justice Stevens wrote a dissenting opinion joined by Justices
Souter, Ginsburg and Breyer. The dissent criticized the majority for
retroactively imposing a heavy evidentiary burden on Congress:[T]his
Court has never mandated that Congress must find ``widespread and
persistent deprivation of constitutional rights'' . . . in order to
employ its Sec. 5 authority. It is not surprising, therefore, that
Congress did not compile an extensive legislative record analyzing the
due process (or lack thereof) that each state might afford for a patent
infringement suit retooled as an action in tort. In 1992, Congress had
no reason to believe it needed to do such a thing; indeed, it should
not have to do so today.Florida Prepaid, 527 U.S. at 660 (Stevens, J.,
dissenting) (internal citation omitted).
---------------------------------------------------------------------------
b. college savings bank v. florida prepaid postsecondary education
expense board (``the trademark case'')
In College Savings Bank v. Florida Prepaid Postsecondary Education
Expense Board, 527 U.S. 666 (1999), the Court sustained the Third
Circuit's decision \47\ that the portions of the Trademark Remedy
Clarification Act (TRCA), which subject States to suits under Section
43(a) of the Lanham Act \48\ for false and misleading advertising, are
unconstitutional.\49\
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\47\ 131 F. 3d 353 (3rd Cir. 1997).
\48\ 15 U.S.C. Sec. 1125(a).
\49\ Section 43(a) creates a private cause of action against
``[a]ny person'' who uses false descriptions or makes false
representations, in commerce. The TRCA amends 43(a) to define ``any''
person to encompass ``any State, instrumentality of a State, or
employee of a State or instrumentality of a State acting in his or her
official capacity.'' 15 U.S.C. Sec. 1125(a)(2). The TRCA also amends
the Lanham Act to make explicit that such State entities ``shall not be
immune, under the eleventh amendment of the Constitution of the United
States or under any other doctrine of sovereign immunity, from suit in
Federal court by any person, including any governmental or
nongovernmental entity, for any violation [of this Act]'' and that
remedies shall be available against such State entities ``to the same
extent as such remedies are available . . . in a suit against [a non-
state entity.]'' 15 U.S.C. Sec. 1122(b)-(c).
---------------------------------------------------------------------------
In College Savings, the bank alleged that Florida Prepaid had
violated Section 43(a) of the Lanham Act by making misstatements about
Florida Prepaid's postsecondary tuition savings plan in its brochures
and annual report.\50\ Florida Prepaid moved to dismiss the case on the
basis that the State's sovereign immunity barred the suit. Both the
District Court for the District of New Jersey and the Court of Appeals
for the Third Circuit agreed.\51\ The Supreme Court granted certiorari
and affirmed by a 5-4 vote.\52\
---------------------------------------------------------------------------
\50\ See College Savings, 527 U.S. at 670-71.
\51\ See College Savings Bank v. Florida Prepaid Postsecondary
Education Board, 948 F. Supp. 400 (D. N.J. 1996), affd, 131 F.3d 353
(3`d Cir. 1997).
\52\ 527 U.S. 666 (1999) (Scalia, J.).
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The Court rejected the petitioner's assertion that the TRCA was
valid Section 5 legislation. It found that neither the right to be free
from a business competitor's false advertising about the competitor's
own product, nor a general right to be secure in one's business
interests, constituted ``property'' for due process purposes.\53\
Because no deprivation of property occurred, the Court saw no need to
inquire ``whether the prophylactic measure taken under purported
authority of Sec. 5 . . . was genuinely necessary to prevent violation
of the Fourteenth Amendment.'' \54\ The Court acknowledged, however,
that the Lanham Act may protect other interests that qualify as
property under the Due Process Clause: ``The Lanham Act may well
contain provisions that protect constitutionally cognizable property
interests--notably, its provisions dealing with the infringement of
trademarks, which are the `property' of the owner because he can
exclude others from using them.'' \55\
---------------------------------------------------------------------------
\53\ See College Savings, 527 U.S. at 673. (``The Lanham Act's
false-advertising provisions . . . bear no relationship to any right to
exclude; and Florida Prepaid's alleged misrepresentations concerning
its own products intruded upon no interest over which petitioner had
exclusive dominion.'').
\54\ College Savings, 527 U.S. at 673.
\55\ Id. at 673.
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The Court then addressed the argument that the State of Florida had
voluntarily waived its immunity from federal court jurisdiction in
false advertising cases. Finding that Florida Prepaid had not expressly
consented to suit in federal court, the Court considered whether the
law could be sustained under the constructive-waiver doctrine
enunciated in Parden.\56\ After asserting that the Court had narrowed
Parden over the years, Justice Scalia's opinion for the Court
``drop[ped] the other shoe'' and expressly overruled Parden's
constructive waiver doctrine.\57\
---------------------------------------------------------------------------
\56\ 377 U.S. 184 (1964).
\57\ College Savings, 527 U.S. at 680.
---------------------------------------------------------------------------
Finally, the College Savings Bank Court suggested the possibility
that Congress could constitutionally use its Spending Clause power to
require a State to waive its immunity from suit in order to receive its
federal funds, as long as ``the financial inducement offered by
Congress [is not] so coercive as to pass the point at which `pressure
turns into compulsion.'' ' \58\
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\58\ Id. at 687.
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c. alden v. maine
Alden v. Maine \59\ presented the Court with the question whether
Congress can use its Article I powers to subject nonconsenting States
to private suits for damages in State court.
---------------------------------------------------------------------------
\59\ 527 U.S. 706 (1999).
---------------------------------------------------------------------------
In Alden, a group of probation officers sued the State of Maine,
alleging that it had violated the overtime provisions of the Fair Labor
Standards Act of 1938 (FLSA).\60\ Relying on Seminole Tribe, the
district court dismissed the lawsuit on sovereign immunity grounds, and
the Court of Appeals for the First Circuit affirmed.\61\ Subsequently,
the probation officers brought the same claim in Maine State court,
which also dismissed on sovereign immunity grounds. The Maine Supreme
Court affirmed,\62\ and the United States Supreme Court granted
certiorari.\63\
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\60\ 29 U.S.C. Sec. 201 et seq.
\61\ See Mills v. Maine, 853 F. Supp. 551 (D. Me. 1994), affd, 118
F.3d 37 (1st Cir. 1997).
\62\ Alden v. Maine, 715 A.2d 172 (Me. 1998).
\63\ See 527 U.S. 706 (1999).
---------------------------------------------------------------------------
By another identical 5-4 division, the Court held that the State
immunity from suit recognized in Seminole Tribe applied in State as
well as federal court.\64\ Thus, after Alden, even if Congress were to
give State courts concurrent jurisdiction over federal patent or
copyright statutory infringement suits,\65\ nonconsenting States would
nonetheless be immune from such actions.
---------------------------------------------------------------------------
\64\ Id.
\65\ During deliberations on the CRCA, Congress expressly
considered a proposal to give State courts concurrent copyright
jurisdiction, but rejected that idea because such State court
jurisdiction would be at odds with the uniform system of copyright
protection that was a key goal of Congress in enacting the Copyright
Revision Act of 1976. Such concurrent jurisdiction ``creates the
potential for differing standards and results . . . . H. R. Rep. No.
101-282, at 9 (1989).
---------------------------------------------------------------------------
The combination of these three Supreme Court decisions set the
stage for the invalidation of the CRCA.
d. chavez v. arte publico press
Several months after the Supreme Court rendered its opinions in the
two College Savings Bank cases and Alden, the Fifth Circuit found the
CRCA invalid in Chavez v. Arte Publico Press.\66\ The litigation in
Chavez commenced in 1993, when an author, Denise Chavez, filed suit
against the University of Houston Press--a State entity--for copyright
infringement arising out of a dispute regarding her publishing
agreement with the University. Previously, a Fifth Circuit panel had
found the CRCA to be constitutional in Chavez v. Arte Publico
Press.\67\ That decision was based on the subsequently discarded Parden
constructive-waiver theory. The Supreme Court vacated and remanded for
reconsideration in light of Seminole Tribe.\68\ After a second panel
decision,\69\ the case was again remanded to the panel \70\ for
reconsideration in light of College Savings Bank and Florida Prepaid.
The Fifth Circuit panel then held that the CRCA ``was doomed'' in light
of Florida Prepaid.\71\
---------------------------------------------------------------------------
\66\ 204 F.3d 601 (5th Cir. 2000). A separate panel of the Fifth
Circuit also found the CRCA to be unconstitutional in Rodriguez v.
Texas Comm'n on the Arts, 199 F.3d 279 (5th Cir. 2000). Rodriguez
involved a claim that the State of Texas had violated plaintiffs
copyright by using his design for State license plates without
authorization. Relying on College Savings Bank, the court, in a very
brief opinion, found the copyright claim to be indistinguishable from
the patent claim in College Savings Bank and held the PRA
unconstitutional.
\67\ 59 F.3d 539 (5th Cir. 1995).
\68\ University of Houston v. Chavez, 517 U.S. 1184 (1996).
\69\ Chavez v. Arte Publico Press, 157 F.3d 282, 287 (5th Cir.
1998).
\70\ Chavez v. Arte Publico Press, 180 F.3d 674 (5th Cir. 1999).
\71\ Chavez v. Arte Publico Press, 204 F.3d 601 (5th Cir. 2000).
---------------------------------------------------------------------------
III. Congress' Legislative Options After The College Savings Bank and
Alden Cases
Congress must now assess how it can respond to these decisions in a
constitutional and effective manner. Despite the fact that Congress can
no longer use its Article I powers to abrogate State sovereign
immunity, we believe that Congress has sufficient tools at its disposal
to fashion legislation that fits within the contours of the Court's
recent decisions and also effectively implements Congress' desire to
remove the harm to copyright owners caused by States' freedom to
infringe copyrighted works without having to pay damages.
As noted above, in PORA's view, any forthcoming legislation should:
Condition the State's ability to obtain judicial
remedies available under the federal intellectual property
system on State waivers of sovereign immunity from suit in
federal court for state infringements of private intellectual
property rights;
Abrogate State sovereign immunity in suits brought to
redress unconstitutional infringements of federal intellectual
property rights; and
Codify the doctrine of Ex parte Young, thereby
affirming the availability of injunctive and monetary relief in
infringement suits brought against state officials and
employees.
a. conditioning certain federal intellectual property benefits on state
waivers of sovereign immunity
Mr. Chairman, we agree with you that it is critical that any
forthcoming legislation should contain a ``waiver'' provision that
conditions a State's ability to obtain judicial remedies under the
federal intellectual property system on the State's waiver of its
sovereign immunity from such remedies. We believe that Congress has
power to condition a State's ability to obtain a federal judicial
remedy upon the State's waiver of its own immunity.
1. The Remedies Bar
Section 3 of S. 1611 would deny a non-waiving State the ability to
recover monetary damages when it sues to protect its own intellectual
property rights, but leave it free to obtain injunctions.\72\ We
wholeheartedly agree that non-waiving States should not be eligible to
obtain money damages. While we strongly support this provision of the
bill, we respectfully question whether permitting States to retain
their sovereign immunity while still allowing them to obtain injunctive
relief is fair or would provide many States with a sufficient reason to
waive their immunity. For that reason, we urge the Committee to give
careful consideration to amending S. 1611 so as to bring both
injunctive relief and damages within the remedies bar for non-waiving
States.
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\72\ As discussed below, under certain circumstances the ``remedies
bar'' would affect non-State pplaintiffs as well.
---------------------------------------------------------------------------
In deciding whether to expand the reach of the remedies bar to
include injunctions, we urge you to keep in mind that S. 1611--unlike
S. 1835, from the prior Congress--does not condition a State's
ownership of intellectual property rights on a waiver of its sovereign
immunity. Rather, under S. 1611, non-waiving States would be free both
to obtain these rights and to exploit them in the marketplace.\73\ We
propose only that they (or their assignees) lose the ability to obtain
judicial remedies unless the State waives its immunity from such
remedies.
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\73\ With respect to copyrights, States would be afforded Copyright
in their original works and would be free to register those works at
any time after creation.
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2. Straightforward Process
College Savings and Florida Prepaid made clear that a waiver of
State sovereign immunity must be both knowing and voluntary.\74\ Thus,
the waiver provision must offer States a clear and unambiguous choice
between waiving their immunity from suit or foregoing access to certain
judicial remedies. The waiver provision must clearly spell out the
consequences for the State in making this choice. We believe that
Section 3 of S. 1611 achieves that goal.
---------------------------------------------------------------------------
\74\ See College Savings, 527 U.S. at 679-681.
---------------------------------------------------------------------------
S. 1611 also sets forth in clear and straightforward language the
procedural steps governing the waiver process. Most importantly, the
bill:
Specifies that, if a State chooses to waive its
immunity, the waiver is to be made in accordance with the
constitution and laws of the State; and
Gives States a reasonable amount of time--up to two
years--to make the decision to waive without any risk of losing
existing rights.
3. Safeguards Against End-Runs
We share your goal of incorporating language into the voluntary
waiver provision to help prevent ``end runs'' around the remedies bar
applicable to non-waiving States. We certainly do not want States to be
free to easily evade making the choice required by the Act. A non-
waiving State should therefore be subject to the remedies bar,
regardless of whether it acquired ownership by being the author of the
work (by virtue of its creation by an employee or pursuant to a valid
work-made-for-hire agreement),\75\ or by exclusive license or
assignment.
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\75\ Section 101 of the Copyright Act allows a commissioning party
of a work to be deemed the author of a work if the work falls within
certain specified categories. See 17 U.S.C. 101.
---------------------------------------------------------------------------
We also agree that this bar should not only affect States bringing
suits, but also those plaintiffs who exclusively license or assign
works to or from the State under certain circumstances. Otherwise, for
example, a State could evade the bar by assigning its exclusive rights
to a private party for a one-time payment. Without an anti-end-run
provision, the private party would, on the State's behalf, have access
to all available remedies. By barring remedies where the State ``is or
was at anytime the legal or beneficial owner,'' \76\ S. 1611 provides a
useful way to thwart unfair circumvention of the remedies bar.
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\76\ Section 502(a) of the Copyright Act gives.the ``legal or
beneficial owner'' standing to sue for infringement. See 17 U.S.C.
502(a). Thus, copyright suits typically arise in two situations. The
first involves the legal owner, or the person who holds title to the
rights. The second category enables someone who used to own the rights
to sue, if she retains a beneficial interest in the rights-for example,
in the form of a continuing royalty obligation. Thus, an author who
assigned a copyright to a publishing house for a continuing royalty
would no longer be the legal owner, but would not have to watch her
asset evaporate if the publisher decided not to bring suit. If,
however, the author assigns the copyright for a one-time payment, the
author is neither the beneficial nor the legal owner and has no
standing to sue for infringement. See Hearn v. Meyer, 664 F. Supp. 832,
840-41 (S.D.N.Y. 1987); Cavallo, Ruffolo & Fargnoli v. Torres, 1988
U.S. Dist. LEXIS 16881 (C.D. Cal. 1988).
---------------------------------------------------------------------------
At the same time, we agree that the bill should not unfairly
prejudice private parties; Section 3 of your bill appears to achieve
that important goal. It makes the remedies bar inapplicable in two
instances where to do otherwise would be extremely unfair to a private
party where: (1) applying the remedies bar ``would materially and
adversely affect a legitimate contract based expectation that was in
existence before January 1, 2002"; and (2) a downstream bona fide
purchaser of an intellectual property right did not know that a State
was once the legal or beneficial owner of that right.
b. abrogation of immunity in suits based on constitutional violations
1. The Scope of Abrogation
Section 5 of the Fourteenth Amendment gives Congress the power to
remedy unconstitutional State deprivations of life, liberty and
property through ``appropriate legislation'' and in the past few years,
the Supreme Court has repeatedly stated that Congress has the power to
abrogate State immunity by invoking this authority.\77\ Yet, in College
Savings and Florida Prepaid, the Court voided congressional efforts to
do this, holding that the federal laws involved were not
``appropriate'' legislation under Section 5.
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\77\ See, e.g., Seminole Tribe, 517 U.S. at 59 (1996); Flores, 521
U.S. 507, 507-508 (1997); Florida Prepaid, 527 U.S. at 635-39
(Rehnquist, J.); College Savings, 527 U.S. at 669-70 (Scalia, J.).
---------------------------------------------------------------------------
We believe that, by closely adhering to the Court's opinions--
particularly that in Florida Prepaid--Congress can craft a
constitutional and effective abrogation provision.
As S. 1611 recognizes, the key to fashioning an appropriate
abrogation provision is to have it remove State immunity only in those
cases where State infringements constitute unconstitutional
deprivations of the property rights of intellectual property owners.
Thus, unlike the CRCA which applied to all State copyright
infringements, S. 1611 is expressly limited to unconstitutional
violations of federal intellectual property rights--i.e., those
violations that violate either the due process or the takings clause.
Such an approach directly follows the central teaching of Florida
Prepaid that not every infringement of a federal intellectual property
right violates the Fourteenth Amendment.
In July 2000, before the House Judiciary Subcommittee on Courts,
the Internet, and Intellectual Property, Harvard Law School Professor
Daniel Meltzer suggested enactment of this form of abrogation
legislation.\78\ At that time, and again in a subsequent law review
article,\79\ Professor Meltzer suggested that such a form of abrogation
was not dependent upon Congress making a record of widespread
unconstitutional activity by States:
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\78\ See Oversight Hearing on ``State Sovereign Immunity and the
Protection of Intellectual Property'' Before the House Comm. on the
Judiciary, Subcomm. on Courts, the Internet, and Intellectual Property,
106th Cong. (2000) (Testimony of Professor Daniel Meltzer) available at
http://www.house.gov/judiciary/ courts.htm.
\79\ See Daniel Meltzer, Overcoming Immunity: The Case of Federal
Regulation of Intellectual Property Rights, 53 Stan. L. Rev. 1331
(2001).
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I do not read these recent decisions as holding that any
exercise of Section 5 power is valid only upon such a showing
of widespread violations; that showing is demanded, rather,
only when the congressional measure reaches broadly to regulate
conduct that is not independently unconstitutional. For in each
of the cases in which the Supreme Court has found a federal
statute regulating the States to fall beyond the scope of
Section 5 power, the enactment regulated at least some conduct
that itself did not violate Section 1 of the Fourteenth
Amendment. Thus, in Florida Prepaid, for example, the Court
found that the statute--by regulating patent infringement that
was unintentional, and whether or not state post-deprivation
remedies were available--regulated conduct that did not itself
constitute a deprivation of due process. Where Congress does
reach beyond regulating actual constitutional violations, these
recent decisions clearly require a strong showing of
legislative need . . . . By contrast, the proposed legislative
measure just discussed would be tailored so that it, unlike the
statutes recently invalidated by the Court, extends only to
instances of constitutional violations. Such a measure is more
easily viewed as ``remedial,'' and in my view the validity of a
statute that merely regulates unconstitutional conduct itself
should not require an additional showing of widespread
violations by the states. Examination of the record of state
violations is significant only when a statute reaches well
beyond the scope of constitutional violations.\80\
---------------------------------------------------------------------------
\80\ Id. at 1347-48 (emphasis added).
---------------------------------------------------------------------------
At least one federal appeals court has acted in a manner consistent
with S. 1611's treatment of abrogation and Professor Meltzer's
suggested approach. In Cherry v. University of Wisconsin System Board
of Regents,\81\ the Seventh Circuit upheld Congress' abrogation of
state sovereign immunity from suits brought under the federal Equal Pay
Act (EPA). In finding the congressional abrogation under the EPA to be
constitutional, the appeals court, citing Kimel v. Florida Board of
Regents,\82\ noted that ``the lack of [evidentiary] support in the
legislative record 'is not determinative of the Sec. 5 inquiry'' '
\83\ and went on to distinguish the situation in Cherry from recent
Supreme Court rulings where the Court found the absence of evidence
critical:
---------------------------------------------------------------------------
\81\ 265 F. 3d. at 541 (7th Cir. 2001).
\82\ 528 U.S. 62,73 (2000).
\83\ Cherry, 265 F.3d at 553.
---------------------------------------------------------------------------
But unlike the statutes at issue in City of Boerne, Kimel,
Florida Prepaid, and Garrett, all of which pervasively prohibit
constitutional State action, the EPA `prohibits very little
constitutional conduct.' Precisely because the EPA essentially
targets only unconstitutional gender discrimination, the
importance of congressional findings of unconstitutional State
action is `greatly diminished.' (emphasis added) (internal
citations omitted).\84\
---------------------------------------------------------------------------
\84\ Id. at 553.
---------------------------------------------------------------------------
In its recent decisions, the Supreme Court has held that State
infringements are unconstitutional only if: (1) they are intentional or
non-negligent; and (2) the State provides no adequate remedy for them.
S. 16l1 makes specific reference to the inadequacy-of-remedies element
of unconstitutionality, but not to the scienter element.\85\ While we
believe that a case can be made for including express reference in the
statute to both elements, in our view it is especially important that
the statute make clear that the State, not the plaintiff, has the
burden of demonstrating that it provides an adequate remedy and that
this determination should be made by the judge in the federal
proceeding.\86\ Section 5(d)(2) of S. 1611 correctly places this
critical burden on the State or its instrumentality.
---------------------------------------------------------------------------
\85\ With respect to the scienter issue, the legislative history
should indicate that it would be overly burdensome and restrictive to
require the plaintiff to show that the State knew that the harm
amounted to a constitutional violation. See Oversight Hearing on
``State Sovereign Immunity and Intellectual Property'' Before the House
Comm. on the Judiciary, Subcomm. on Courts, the Internet, and
Intellectual Property, 106th Cong. (2000) (Testimony of Professor
Daniel Meltzer) available at http://www.house.gov/judiciary/courts.htm.
\86\ Federal courts routinely examine the adequacy of State
remedies in areas much more central to the State's power as a
sovereign. For example, under the Tax Injunction Act, 28 U.S.C.
Sec. 1341, the District Courts may enjoin the levy or collection of any
tax where no ``plain, speedy and efficient'' remedy exists under State
law. See generally Annotation, Supreme Court's construction and
application of Tax Injunction Act (28 USCS Sec. 1341, and similar
predecessor provisions), restricting Federal District Courts from
interfering with assessment, levy, or collection of state taxes, 132 L.
Ed. 2d 997 (1999). Other forms of review of the adequacy of State
remedies occur routinely in the habeas corpus context. In both the tax
and the habeas areas, the State's sovereign interest is far stronger
than in the intellectual property context where the Constitution gives
Congress exclusive control over the extent of those rights and the form
they might take.
---------------------------------------------------------------------------
2. The Breadth of the Evidentiary Record
As Professor Meltzer observes, although perhaps not
constitutionally necessary, it is advisable for Congress to ``assemble
the most complete record possible of instances in which state
governments have violated federal intellectual property laws and,
beyond that, of instances in which those violations appear also to
constitute violations of the Due Process Clause.'' \87\ In part to help
develop such a record, in June 2000, then-Chairman Hatch requested that
the GAO undertake a study \88\ that, among other things, would compile
instances of alleged State infringements of intellectual property
rights.\89\
---------------------------------------------------------------------------
\87\ Daniel Meltzer, Overcoming Immunity: The Case for Federal
Regulation of Intellectual Property, 53 Stan. L. Rev. 1331 at 1353
(2001).
\88\ Letter from Sen. Orrin G. Hatch, Chairman, United States
Senate Committee on the Judiciary, to Mr. David Walker, Comptroller
General, General Accounting Office (June 23, 2000) (on file with the
author). Specifically, Chairman Hatch requested that the GAO examine:
(1) the extent to which States have been the subject of claims of
patent, trademark, or copyright infringement in the past,
(2) the remedies-including waiver of sovereign immunity-that States
have adopted or employed to protect intellectual property owners
against state infringements, and
(3) the extent to which States are participating in the Federal
intellectual property system as intellectual property owners.
Id. Chairman Hatch also asked GAO ``to gather information from the
states and the intellectual property community on the role that states
do or should play in protecting the rights of intellectual property
owners.'' Id.
\89\ PORA has attempted to gather evidence of the manner in which
States are using the federal copyright system. For example, SIIA, one
of PORA's members, undertook a review of its records in order to
determine whether and to what extent State entities were believed to be
infringing its members' copyrights. SIIA was extremely conservative in
determining which entities were ``state entities.'' Because of its
confidentiality agreements, SIIA cannot reveal the identity of the
parties in these matters, and can make this information available only
in the aggregate. In the six years covered by the review, SIIA
identified 77 matters involving infringements by State entities. Of
these 77 matters, approximately 50% involved State institutions of
higher learning. The other 50% consisted of State hospitals, bureaus,
public service commissions, and other instrumentalities. In the
overwhelming majority of cases, no litigation actually resulted. After
SIIA learns of a possible infringement, it contacts the infringing
entity to request an audit of its existing software, and attempts to
bring that entity into compliance with the law. The SIIA study covers
only those matters reported to SIIA. Drawing on PORA's experience in
dealing with both private and public entities, we have no doubt that a
far greater number of infringements than SIIA detected go undetected
and unreported. In addition, SIIA reports that on more than one
occasion, a State threatened legal sanctions against SIIA for
attempting to either: (1) enjoin further infringing acts; or (2) obtain
damages for unauthorized use of software.
---------------------------------------------------------------------------
In September 2001, GAO issued its report entitled ``Intellectual
Property: State Immunity in Infringement Actions.'' As to instances of
past state infringements, GAO was able to document 58 instances of
unauthorized use of intellectual property by a State since 1985.\90\
GAO based its findings on a review of published case law and a survey
of the States.
---------------------------------------------------------------------------
\90\ United States General Accounting Office, Intellectual
Property: State Immunity in Infringement Actions, at 7 (2001) (Rep. No.
GAO-01-0811) [hereinafter GAO Report].
---------------------------------------------------------------------------
While GAO felt compelled to characterize the number of accusations
of state infringements as ``few,'' \91\ this characterization fails to
take into account a number of critical factors. First, GAO itself
acknowledged that it faced substantial difficulties in attempting to
come up with an accurate assessment of all past accusations of state
infringements of intellectual property, in part because ``there are no
summary databases providing such information.'' \92\ In addition, GAO
acknowledged that:
---------------------------------------------------------------------------
\91\ Id. at 7.
\92\ Id.
---------------------------------------------------------------------------
``The published case law is an incomplete record,
because (1) both the federal and state courts report only those
cases in which decisions were rendered and (2) state courts
usually report only appellate decisions. Thus, lawsuits that
were dropped or settled by any court prior to a decision as
well as those decided by state trial courts might not appear in
the published case law'';\93\
---------------------------------------------------------------------------
\93\ Id.
---------------------------------------------------------------------------
Accusations set forth in cease and desist letters are
often resolved administratively, do not result in the filing of
a lawsuit, and thus are not reflected in published case
law;\94\ and
---------------------------------------------------------------------------
\94\ Id. at 7-8.
---------------------------------------------------------------------------
Some lawsuits are not easily identified as either involving (1)
unauthorized use of intellectual property, or (2) a state entity that
could claim sovereign immunity.\95\
---------------------------------------------------------------------------
\95\ Id. at 8. Given these inherent difficulties, GAO sought to
supplement its database of accusations of state infringements by
surveying state institutions of higher education and state attorneys
general. Id. at 8-9. Thirty-six of the 50 attorneys general and 99 out
of 140 institutions responded to GAO's survey. But, as acknowledged by
GAO, the responses to these surveys ``offered no assurance that we had
identified all the accusations . . . as the respondents themselves did
not always have such information.'' Id. at 9.
---------------------------------------------------------------------------
Second, in reviewing GAO's findings, it is imperative to keep in
mind two critical factors: (1) too short a period of time has elapsed
since the decisions by the Supreme Court and the Fifth Circuit to
assess whether they will result in changed State practices; and (2)
States were considered fully liable for copyright infringement for the
vast majority of the last twenty-five years. This latter point deserves
some elaboration.
Until the Court's 1986 decision in Atascadero,\96\ it was widely
understood that when Congress passed the 1976 Copyright Revision Act,
it intended States to be liable for their acts of infringement just
like any other party, except in those circumstances where they were
expressly exempted from liability. This was, for example, the view set
forth in the House and Senate Committee Reports on the CRCA.\97\ It was
also the position of Representative Kastenmeier, who chaired the House
Judiciary Subcommittee involved in the consideration of both the CRCA
and the 1976 Act,\98\ and of the Registers of Copyrights at the time of
the passage of the CRCA and the 1976 Act.\99\
---------------------------------------------------------------------------
\96\ 743 U.S. 234 (1985).
\97\ See H.R. Rep. No. 101-282, at 5 (1989); S. Rep. 101-305, at 5
(1990).
\98\ See H.R. Rep. No. 101-282, at 11 (1989) (statement of Rep.
Kastenmeier) (quoting 135 Cong. Rec. E525).
\99\ In response to a question from Chairman Kastenmeier as to
whether it was her understanding that States were and knew that they
were liable for infringement under the 1976 Act, Barbara Ringer, former
Register of Copyrights, replied: ``Absolutely.'' H.R. Rep. No. 101-282,
at 6 (1989) (quoting Copyright Remedy Clarification Act and Copyright
Office Report on Copyright Liability of States: Hearings on H.R. 1131
Before the Subcomm. on Courts, Intellectual Property, and the Admin. of
Justice of the House Comm. on the Judiciary, 101st Cong. 97 (1989));
see also Id., at 6 (statement of Ralph Oman, Register of Copyrights).
---------------------------------------------------------------------------
This general understanding of the 1976 Act's reach was not drawn
into question until after the Supreme Court's decision in Atascadero.
Indeed, just prior to Atascadero, one federal court ruled that the 1976
Act had effectively abrogated State copyright immunity.\100\ After
Atascadero, federal courts started reaching the opposite result.\101\
This change from full State liability to immunity was short-lived,
however. As noted above, the 101st Congress moved quickly after
Atascadero, and, in November, 1990, the CRCA became law. As a result,
between late 1990 and the Supreme Court's 1999 decisions, States were
once again subject to the full panoply of remedies available under the
Copyright Act.
---------------------------------------------------------------------------
\100\ Johnson v. University of Virginia, 606 F. Supp. 321, 324
(W.D. Va. 1985).
\101\ See, e.g., BV Engineering v. UCLA, 858 F.2d 1394, 1396-1398
(9th Cir. 1988); Richard Anderson Photography v. Brown, 852 F.2d 114,
118 (4th Cir. 1988).
---------------------------------------------------------------------------
In sum, from 1976 until 1985, and from 1990 until at least 1999,
States have necessarily operated under the assumption that they were
fully liable for copyright infringements. The States may just be
beginning to grasp the potential impact of the College Savings Bank
decisions in the copyright context. It is entirely reasonable for the
107th Congress to conclude that State infringements will become
commonplace in the absence of the enactment of remedial legislation by
Congress--especially given the ease with which digital copies can be
made and disseminated and the growth of State university and agency
Intranets.\102\ When viewed against this background, one can better
understand why the Patent and Trademark Office did not view the 58
documented cases identified by GAO as few in number,\103\ and the
Copyright Office \104\ expressed no surprise at the number of cases
identified in the GAO's report.
---------------------------------------------------------------------------
\102\ In this regard, Congress may take notice of the number of
takedown notices under Section 512 of the DMCA issued to state
institutions.
\103\ See Letter from Nicholas P. Godici, Acting Under Secretary of
Commerce For Intellectual Property and Acting Director of the United
States Patent and Trademark Office, to Jim Wells, Director, National
Resources and Environment, General Accounting Office (September 5,
2001), reprinted in GAO Report at 69.
\104\ See letter from David Carson, General Counsel, United States
Copyright Office, to Jim Wells, Director, National Resources and
Environment, General Accounting Office (August 28, 2001) reprinted in
GAO Report at 72. (Noting that in the Copyright Office's view, too
little time had passed since the Supreme Court's rulings to assess
possible increases in infringing activity and that ``from the enactment
of the first Copyright Act in 1790 until the Supreme Court's decisions
in June, 1999, States had good reason to believe that they were subject
to the full range of remedies if they infringed a copyright.'') In
addition, the Copyright Office agreed with the shortcomings that the
GAO had acknowledged with respect to the methodology GAO employed:
[T]he public case law is an inadequate record of infringement
litigation because it includes only reported cases, and the surveys of
the state attorneys general, universities and bar associations are
limited by the inability of the respondents to identify all claims of
infringement or even lawsuits alleging infringement by States or State
entities. For these reasons we are not surprised that this study
yielded relatively few examples of infringements by States.
Id.
---------------------------------------------------------------------------
3. Due Process and Takings Violations
PORA agrees that the new statute should expressly provide for
abrogation of State immunity in suits for State infringements that
constitute violations of either the Due Process or the Takings Clauses.
In our view, Section 5 of S. 1611 wisely sets forth these two bases for
abrogation in separate provisions so that the statute's severability
clause can preserve one should the other be held unconstitutional.
4. Congressional Review of the Adequacy of State Remedies
In his opinion for the Court in Florida Prepaid, Chief Justice
Rehnquist chided Congress for not thoroughly examining the availability
of State remedies with respect to patent infringements.\105\ In the
CRCA context, however, Congress had before it, as part of the Copyright
Office Report, the aforementioned Congressional Research Service study.
That study revealed the very limited, inconsistent nature of State
remedies available to copyright owners victimized by State
infringements.\106\ A more recent analysis of the sovereign immunity
practices in fourteen States made by an amicus curiae in Florida
Prepaid demonstrated the limited, haphazard remedies those States
afford for State patent infringements (and presumably for State
copyright infringements as well).\107\ In the same vein, the recent GAO
report concluded that intellectual property owners have few
alternatives or remedies against state infringement remaining after
Florida PrepaId.\108\
---------------------------------------------------------------------------
\105\ ``Congress. . . barely considered the availability of state
remedies for patent infringement and hence whether the States' conduct
might have amounted to a constitutional violation under the Fourteenth
Amendment.'' Florida Prepaid, 527 U.S. at 643.
\106\ Copyright Office Report, supra note 13, at CRS 1-23.
\107\ Brief of Amicus Curiae Association of American Railroads
(AAR) in Support of Respondents, Florida Prepaid Postsecondary
Education Expense board v. College Savings Bank, No. 98-531 at
[appendix] la-19a (1999) (AAR Brief). ``Based on the state law existing
at the time of enactment, Congress could easily have found that some
states did not provide adequate process to parties injured by a state's
patent infringement. In some cases, state legal remedies for patent
infringement were nonexistent, while in others, they were seriously
questionable or otherwise inadequate.'' AAR Brief at 13.
\108\ See GAO Report, supra note 90, at 2. (Intellectual property
owners appear to have few proven alternatives or remedies against state
infringement available if they cannot sue the states for damages in
federal court.'')
---------------------------------------------------------------------------
The GAO report recognizes that a State currently cannot be sued for
damages in federal court except in the unlikely event that the State
waives its Eleventh Amendment immunity.\109\ Absent such a waiver, the
GAO states accurately that the intellectual property owner is limited
to seeking an injunction in federal court against the infringing
official. GAO correctly terms such injunctions as an ``incomplete
remedy.''
---------------------------------------------------------------------------
\109\ See Id. at 15. In this regard, the GAO noted that it did not
identify any cases in which state defendants in infringement cases had
waived their immunity in federal court. Thus, without the type of
incentive built into S. 1611, it should not be anticipated that such
waivers will be forthcoming.
---------------------------------------------------------------------------
With regard to the state court proceedings, the GAO's study
questioned whether litigants would obtain damage awards in such cases
because of a number of factors: federal preemption of state claims;
exclusive federal court jurisdiction over federal patent and copyright
(but not trademark) claims; the absence of recognized causes of action
under state laws; and the fact that, in addition to their Eleventh
Amendment immunity, States typically enjoy immunity from suit in their
own courts via statutory or constitutional provisions.\110\
---------------------------------------------------------------------------
\110\ See Id. at 3.
---------------------------------------------------------------------------
5. Recital of Congressional Authority
We urge that the statute, or at least the accompanying legislative
history, state in unambiguous and unequivocal terms that Congress is
relying on its 14th Amendment enforcement powers in abrogating State
sovereign immunity. The Court's treatment of the just compensation
issue in Florida Prepaid \111\ raises some concern that, in the future,
the Court may formally break away from its ``no recital'' rule \112\
and require Congress expressly to refer to the relevant constitutional
provisions when seeking to enact ``appropriate'' remedial legislation
under Section 5 of the 14th Amendment. To avoid any such problem here,
Congress should clearly and explicitly state its reliance on its
Section 5 power to enforce the due process and takings clauses.
---------------------------------------------------------------------------
\111\ In Florida Prepaid, the majority refused to consider the Just
Compensation Clause as a basis for upholding the PRA because Congress
had explicitly invoked its Article I and Due Process Clause powers and
had made no reference to the Just Compensation Clause. Florida Prepaid,
527 U.S. at 642 n. 7.
\112\ Prior to Florida Prepaid, long-standing precedent held that
Congress is not required to recite the source of the constitutional
power on which it relies. See Woods v. Cloyd W. Miller Co., 333 U.S.
138, 144 (1948) (``(t)he constitutionality of action taken by Congress
does not depend on recitals of the power which it undertakes to
exercise''). Accord EEOC v. Wyoming, 460 U.S. 226, *243 n. 18 (1983).
Under this precedent, it was of no consequence that Congress did not
allude expressly to Section 5 when it enacted the CRCA, but did
explicitly invoke Section 5 when it passed the PRA.
---------------------------------------------------------------------------
6. ``Property'' For Purposes of the Due Process and Takings Clauses
The Court's Florida Prepaid and College Savings decisions leave
little doubt that copyrights, patents and, presumably, trademarks are
considered property for purposes of the Due Process Clause.
Nonetheless, out of an abundance of caution, the accompanying
legislative history should: (1) refer to the Court's discussion of the
``property'' issue in both Florida Prepaid and College Savings; and (2)
review the general treatment in law of intellectual property as
property.\113\
---------------------------------------------------------------------------
\113\ For example, the legislative history might set forth
Congress' understanding that property is properly viewed as a bundle of
rights which, in general, have three characteristics-the right to
assign, the right to exclude others from use and the right to inherit-
and that copyrights, patents and trademarks possess all three of these
characteristics. Cf. College Savings, 527 U.S. at 673 (casting
trademarks as property); Florida Prepaid, 527 U.S. at 642 (casting
patents similarly). With respect to copyrights, see, e.g., Holmes v.
Hurst, 174 U.S. 82, 84-86 (1899) (describing the ancestry of copyright
in the common law as a species of property); Paige v. Banks, 80 U.S.
608, 614 (1871) (``Independent of any statutory provision the right of
an author in and to his unpublished manuscripts is full and complete.
It is his property . . . .''); Mitchell Bros. Film Group v. Cinema
Adult Theater, 604 F.2d 852, 858 n. 8 (5th Cir. 1979) (stating that
``the large amounts of capital presently invested in disseminating
information and thought in newspapers, magazines, books, movies, and
other forms of copyrightable material would flow elsewhere if there
were no property right to protect the value of these investments.'')
(emphasis added).
---------------------------------------------------------------------------
c. codification of the ex parte young doctrine
S. 1611 properly calls for the codification of the Ex parte Young
doctrine. Under this doctrine, an injured party can sue to enjoin a
State official from violating federal law, even though the State itself
remains immune from suit. In Ex parte Young, the Court held that State
officials are stripped of any sovereign immunity when they perform acts
that violate valid federal law:
If the Act which the state Attorney General seeks to enforce be
a violation of the Federal Constitution, the officer in the
proceeding under such enactment comes into conflict with the
superior authority of that Constitution, and he is in that case
stripped of his official or representative character and is
subject in his person to the consequences of his individual
conduct.\114\
---------------------------------------------------------------------------
\114\ 209 U.S. at 159-160.
---------------------------------------------------------------------------
The Court has frequently alluded to the Ex parte Young doctrine as
a means by which private parties can obtain relief against State
officials for violations of federal law. Most recently, the Court in
Alden v. Maine, citing Ex parte Young, noted that sovereign immunity
``does not bar certain actions against State officers for injunctive or
declaratory relief.'' \115\ Nonetheless, two recent Court decisions,
Seminole Tribe of Florida v. Florida,\116\ and Idaho v. Coeur d'Alene
Tribe of Idaho,\117\ have raised concerns that, in some situations, the
doctrine may not continue to provide the scope of relief it has
afforded private parties in the past.
---------------------------------------------------------------------------
\115\ Alden, 527 U.S. at 757.
\116\ 517 U.S. 44 (1996).
\117\ 521 U.S. 261 (1997).
---------------------------------------------------------------------------
In Seminole Tribe, the Court found the doctrine inapplicable where
Congress creates a detailed remedial scheme for the enforcement of a
particular federal right. In such instances, the Court ``hesitates'' to
allow a different and potentially broader remedial path under Ex parte
Young.\118\ Thus, there is concern that the more elaborate the remedial
scheme accompanying a federal statute, the less likely a court will be
to find the doctrine applicable. To avoid that result here, Section 4
of S. 1611 simply codifies the Ex parte Young doctrine so as to ensure
its continued applicability in the future.
---------------------------------------------------------------------------
\118\ See Seminole Tribe, 517 U.S. at 74.
---------------------------------------------------------------------------
In Idaho v. Coeur d'Alene Tribe of Idaho, the Court found the Ex
parte Young doctrine inapplicable to ``special circumstances''
affecting a State's sovereignty.\119\ Moreover, two members of the
Court stated that, in their view, the Court should engage in an
exacting case-by-case review before approving an Ex parte Young
injunction.\120\ Chief Justice Rehnquist and Justice Kennedy opined
that each potential grant of Ex parte Young jurisdiction should be
evaluated by balancing the interests served by permitting federal
jurisdiction against a State's interests in keeping the federal forum
closed.\121\ Section 4 of S. 1611 is designed to: (1) prevent future
judicial reliance on a ``special sovereignty'' exemption to the
doctrine; and (2) preclude the adoption by a Court majority of a case-
by-case approach in intellectual property infringement cases.
---------------------------------------------------------------------------
\119\ 521 U.S. 261 (1997).
\120\ Id. at 280.
\121\ Id. at 278.
---------------------------------------------------------------------------
CONCLUSION
Mr. Chairman, PORA supports the enactment of a constitutional and
effective response to the Supreme Court's 1999 sovereign immunity/
intellectual property decisions. Your bill, S. 1611, contains the three
components that we believe should be part of any forthcoming
legislation in this area--waiver, constitutional abrogation and
codification of the Ex parte Young doctrine. We also believe that the
effectiveness of the bill's waiver provision can be enhanced by
precluding non-waiving States from obtaining damages and injunctions
when they bring intellectual property infringement suits. We urge the
Committee to act favorably on this legislation and to take the steps
necessary to help ensure its enactment in the 107th Congress.
Chairman Leahy. So you disagree with Mr. Thro's opinion
regarding the--let me ask you a couple of things, and you, I
answering this, may want to respond to some of the arguments
Mr. Thro has made. You have followed the Supreme Court for a
long time. I saw in your resume you were the Supreme Court note
editor of the Harvard Law Review, the clerk for Justice
Frankfurter. You have been in the Office of the U.S. Solicitor
General. Taught constitutional law for many years. So how do
you look at the Court's new sovereign immunity jurisprudence?
Are you surprised at what appears to be a lack of deference
they have shown to Congress or what?
Mr. Bender. A number of things. It is really startling
because it just comes out of the blue. It has no textual
foundation, and it comes from a Court which people have thought
was a court that was not an activist court, as you said, and I
completely agree, that the invention of this sovereign immunity
jurisprudence, without any textual basis is about as activist a
step as the Court has ever taken.
And another aspect of what the Court has been doing
recently--and I think this is really an important
characteristic of the Court--is that they seem to have decided
that it is really important to show control over Congress, and
the normal kind of deference that we have been used to seeing
on the Court's part toward congressional legislation just is
not there any more. You could see it perhaps most prominently
in a case like Morrison, striking down as unconstitutional part
of the Violence Against Women Act, where you had explicit
congressional findings that violence against women, gender
motivated violence, had a substantial effect on interstate
commerce. That is the kind of finding which we were brought up
to think the Court would always defer to. It was not just
offhand. It was based on lots of hearings, and it was quite
explicit. And yet the Court said, ``That is what you think, and
we will decide whether this is substantial enough effect upon
commerce.''
The Court's entry into that field again is startling and
also dismaying, because our experience with that in the early
part of the 20th century was a very unhappy one, the Court
striking down State and Federal legislation because of a
disagreement over a matter of social policy. And it really is
dismaying to see the Court getting into that area again. So
both in terms of invention of doctrines that I did not think
anybody thought existed, especially in light of the Supremacy
Clause. The Supremacy Clause seems to be a text that is
directly contrary to the Supreme Court's 1999 trilogy, and yet
they do not make reference to it.
Chairman Leahy. After all the discussions about activist
Supreme Courts, I have not seen anything quite this activist,
and especially some of these pieces of legislation. I have sat
through hour upon hour upon hour of hearings, and know that
there have been hours beyond that. The Court, which lives in,
by choice, is a very rarified atmosphere, made that decision on
30 minutes worth of arguments and the briefs that were filed.
It is an interesting view of things. But it is the law. I
respect it. I mean no matter how wacky the decision of the
Supreme Court might seem to me--that is non-legal terminology--
I respect the Court's decision as being the law of the land,
but that does not mean that I feel that I do not have the right
to suggest ways to change it.
Mr. Bender. Well, that is what I think is so good about
1611, is that it completely adheres to the Supreme Court's
rules, no matter whether you think the Court is right or wrong,
I think it is your obligation, all of our obligation to conform
to what they said, and I think 1611 does that. It follows the
Court's suggestion abrogation, that Congress can abrogate for
constitutional violations. It puts into a statute explicitly Ex
Parte Young, which is the Court's doctrine, and does it for a
reason that the Court said Congress should respond do. That is,
if you are setting up remedies in an area and you want Ex Parte
Young to continue to apply, say so in the legislation, and it
does that. And it conditions the Federal benefit, intellectual
property rights, on the State's waiving its immunity from
remedies under those rights, and that seems to me to be a
completely reasonable condition on a Federal benefit. It is not
a taking away from the State anything. It is simply saying,
``You want to enter this system, you need to do so on the same
basis as other people. If you do not want to enter the system,
you do not have to enter the system.''
So I think it conforms to the Court's rules in every
respect, and we hope that it will solve the problem.
Chairman Leahy. Thank you very much. Let me ask Mr. Kirk,
because unlike the Supreme Court we have to deal with some of
the real world issues caused by this, and I am thinking of the
international ramifications of the Florida Prepaid decisions.
After all, the United States is the largest economy in the
world. It is involved in international commerce in virtually
ever state, and our laws and our abilities to enter into
international agreements on our laws is extremely important. I
wonder if you think that the loophole created by these
decisions could make it more difficult for the U.S. to advocate
the really effective enforcement of intellectual property
rights in other countries.
Mr. Kirk. Mr. Chairman, absolutely. We heard from Ms.
Peters indicating that there has already been this question
raised in one bilateral discussion. Former Director Dickinson,
in the year 2000, in testifying on this, indicated that one of
the members of the TRIPS agreement had questioned the United
States about whether or not it was in full compliance with
TRIPS due to the College Savings, Florida Prepaid cases. What
this hole does is it takes away the moral high ground of the
United States to urge other nations to protect intellectual
property as strongly as we would like to see I protected, and
as strongly as we should protect it here ourselves, and as long
as this is out there, we are giving those nations an out to use
to point to, to obfuscate what we are trying to achieve.
Chairman Leahy. I ask the question because during this week
I will be meeting with some of the CEOs during this week and
next of some of our largest holders of intellectual property
involved in a lot of international dealings. Each one of them,
I know just from past experience, are going to talk to me about
the concerns of piracy and unauthorized use of their product in
other parts of the world. On the one point you want
international commerce for a number of reasons, both for own
good, but often for good of the other countries, but you do not
want international piracy, and especially when it gets into--
well, just take the entertainment world. Music, movies, things
of that nature, we are talking about billions upon billions of
dollars. Piracy, which becomes even easier in a digital age,
becomes more pervasive, actually becomes a lot better and a lot
more effective in digital age, with everything from pirating
software to pirating entertainment. At the same time it is
incumbent upon us and our trade negotiators and even the
President of the United States, often in meetings with other
leaders, to argue against piracy, to have the kind of
protections that can be uniform and forceful so this does not
happen. So that is why I asked the question. I share your
feeling, that this creates a real problem for us, and I have
been told, both publicly in testimony today, but also privately
by a lot of our negotiators in the administration that it
creates a problem for them.
Now, Mr. Schraad, we mentioned this morning the GAO study
that identified, my notes say 58 lawsuits since January 1985,
in which a State was a defendant in an action involving the
unauthorized use of intellectual property. They issued this
report September 2001. Do you know whether your lawsuit against
the State of Georgia is reflected in that study?
Mr. Schraad. Mr. Chairman, it would not be. Our suit was
filed in November of that same year, so after that report.
Chairman Leahy. In my legislation, I create this incentive
for States that waive their immunity in intellectual property
cases. If they waive their immunity within two years after
enactment of the bill, then they get all the benefits of the
Federal intellectual property system. If they choose not to
waive their immunity, they would be denied the ability to
recover money damages when their own intellectual property is
infringed.
Now, let us say you are back there, Senator Schraad, in the
Kansas legislature, and this bill was signed into law. What do
you think your response would be as a State legislator?
Mr. Schraad. I think I would have to be supportive of it. I
mean, after all, Mr. Chairman, I think that one of the
responsibilities of a State legislator is to encourage its
constituents to follow the law, and that includes copyright
law. So I think that for a State to use sovereign immunity as a
shield that would allow them to violate that very same law
would be--it would not seem fair to me.
Chairman Leahy. Because I think this question is going to
be raised more and more, and I want states to have the benefit
of their own intellectual property rights. If my State
university uses whatever combination of money, private money
and State money to develop a technique to--or to develop
software, develop whatever else on their own, and they have got
something that is not only usable for them, but they might be--
the University of Kansas might want to buy it, and the
University of Texas or anywhere else, but also maybe the XYZ
Corporation, then they ought to be able to get paid for that,
and they ought to be able to license it and be protected on it.
But on the other hand, if the XYZ Corporation has developed
that, I do not think they should be able to just rip it off and
use it, and say, ``Hey, sovereign immunity.''
Now, Mr. Thro was talking about the importance of dual
sovereignty in our constitutional system, and I must say, Mr.
Thro, I agree with much of what you said. I come from a very
small State, the second population, the second smallest in the
country, but it is a proud State. We are the 14th State in the
Union. The history is both New Hampshire and New York wanted
Vermont, so we declared ourselves as an independent republic,
and then said we would be willing to join the Union. Thomas
Jefferson told George Washington in a letter that he thought
that might not be a bad idea because he knows the nature of
Vermonters. It would start a war to get in our way. And having
won some of the major Revolutionary War battles on Lake
Champlain and elsewhere, this was not an idle threat.
So we care about our State. Now, we sometimes do things
that people might think are a little bit out of the mainstream.
I cannot think of anything recently, but I am sure we have.
But an argument that States should not have to play be the
same rules as private rules, I do not agree with that when you
are talking about an intellectual property context. If a state
is going to participate in our IP system, whether by patenting
or licensing their own inventions, or by stealing the
intellectual property of somebody else, Mr. Schraad's company
or anything else, they are not performing a sovereign
governmental function. I think they are participating in the
market, and they ought to be subject to the same rules of the
markets. If they act as market participants, not as sovereigns,
why should they not be subject to the same rules as anybody
else? I mean this is like, you know, a church might have
certain constitutional privileges on taxation and everything
else, but if they said, ``We are going to buy a Holiday Inn
franchise and put it up in our parking lot and make money on
it,'' all of a sudden the rules are a little bit different. I
mean, why should it not be the same with a State?
Mr. Thro. Because I do not think you can properly analogize
the States to private parties. The States----
Chairman Leahy. Whoa, whoa, whoa, whoa. If they are out
there buying, selling intellectual property, if they are trying
to keep protected in their own rights in that, if they want to
say that the next state cannot rip off something that they have
a copyright, why are they not acting as private parties?
Mr. Thro. I think the better analogy is to the other
sovereign, to the National Government itself, and just as the
National Government can make determinations as to whether or
not it is going to assert copyright over, say, U.S. Supreme
Court reports, and whether or not to enforce its various
patents and other intellectual properties, the States, as
sovereigns, have the right to waive sovereign immunity, to
decide whether or not they wish to assert copyright and patent
rights over products which are produced with State resources,
and the policy on that of course varies among the 50 States.
The better analogy is not to the private parties, but to the
other sovereign, the National Government.
Chairman Leahy. But you mean so they can walk in and say,
``Look, I want all the rules and protections because it
benefits me, but if you want to walk in that same court, you
can go straight to hell because I am a sovereign?''
Mr. Thro. In effect----
Chairman Leahy. I mean it is a nice deal if you can get it.
I just do not--I see something a little bit inherently unfair.
Let us put it another way. You have the William Thro software
company, and you are working to design something, and you have
it designed, and the Commonwealth of Virginia is doing the same
thing. And they just take a look at yours and say, ``We can
save a whole lot of time here. We will just reverse engineer
what the William Thro Corporation did, and we will market it at
12 percent less. And we are going to copyright it.''
Mr. Thro. I think under those circumstances I would have a
claim for a constitutional violation. What you have just
described is no different than the Commonwealth of Virginia
saying, ``We are going to take your house,'' which is also my
property, at least to the extent that I have any equity in it.
The Constitution itself----
Chairman Leahy. But they can do that under certain
circumstances.
Mr. Thro. They can, but they must give me compensation for
it. And just as if the Commonwealth of Virginia took my new
software in the manner that you just described, which I believe
would be a constitutional violation, I would be entitled to
compensation. Now, whether compensation would be the same as
what I could get under the Federal intellectual property
remedies, I think is an open question, but they could not just
take my property any more than they could just take my house.
To do so is a constitutional violation and the Constitution
itself, in the Fifth Amendment and also in the 14th Amendment's
Due Process Clause, makes the States liable for just
compensation when they take the property of someone for a
public purpose, such as taking a farm to build a road.
Chairman Leahy. As a vendor, do you want to hop into this
one?
Mr. Bender. Yes. Well, one thing that Mr. Thro stated which
I think cuts in favor of your bill rather than against it, is
that the right analogy is the Federal Government. The Federal
Government does not claim property and cannot claim property in
its employees' creations. And if you took that analogy, you
would say the States could not claim property either, and I
think it is completely within Congress's power, since it is a
Federal benefit, to not give the States that. So I do not think
there is anything wrong with saying to the States, ``Look, we
do not have to give you intellectual property rights at all. We
are willing to give them to you, but you have to do them on the
same terms as everyone else.''
With regard to the takings point, it might be that the
Supreme Court will ultimately say that, the Takings Clause can
be used to deal with a lot of these infringements. The problem
is we just do not know that, and we probably will not know that
for a long time. In the College Savings Bank trilogy the Court
refused to consider the takings ground.
By the way, another example of the changing attitude of the
Court, normally in the past, the Court has considered all
constitutional bases on which legislation might be premised,
even if Congress did not mention those bases. Here the Court
said, in College Savings Bank, ``Well, there might be a takings
violation, a takings problem here, but we are not going to
consider it because Congress did not say it was acting under
the Takings Clause.'' We do not know what the Court is going to
do with that. Conceivably, it might turn out in 10 years that
the Takings Clause would solve most of these problems, but in
the interim everything would be uncertain, and so I think it is
wise to put in the waiver provision in order to encourage
States to enter the system on the same basis as everyone else
so that you do not have to explore the difficulties of takings.
And even with regard to the a due process violation, the
Court is unclear about exactly what amounts to a due process
violation. An example that you gave of the State knowing that
something was copyrighted and deliberately taking it may or may
not be a constitutional violation under the Court's present
jurisprudence. The unknown is whether the State has to not only
know that what it is taking is copyrighted, but know that the
copyright is valid and what it is taking constitutes an
infringement. That is, that they have to make a legal judgment
in order to violate the Constitution, and the Court is unclear
about that as well.
So the waiver provision makes those things much less
important. If you are left just with abrogating for
constitutional violations the rules would be extremely unclear,
and it would be up to the Court over the next years to clarify
those.
Chairman Leahy. Thank you. Well, I guess I am going to let
you have that as the last word.
But I also want all of you to know that the record stays
open. Certainly, you see your own testimony. If you look at
that and you think that there is something that you meant to
have said, add a citation or clarify the point when you get
your testimony. This is not a ``gotcha'' kind of a hearing.
Just be sure and add that. Just note that you are adding
something to it.
I appreciate the amount of time all of you have taken, and
also all the amount of time you have taken with Ms. Katzman in
my office, who has spent a tremendous amount of time putting
this hearing together, which I also appreciate.
But thank you for doing that. Look at what we have here. Do
not hesitate, any one of you, to add further material for this.
I do want the legislation. I do want constitutional
legislation. I do want also though to put us in the position
where if we are going to be negotiating with 100 plus other
countries on enforcement of our intellectual property laws, I
want to make sure we are able to do it in the strongest
possible way.
So we stand in recess and I thank you all very much.
[Whereupon, at 11:46 a.m., the committee was adjourned.]
[Questions and answers and submissions for the record
follow.]
QUESTIONS AND ANSWERS
Responses of Paul Bender to questions submitted by Senator Leahy
Question 1: In your view, is Congress constitutionally required to
let States create, own, and enforce intellectual property rights?
Please explain your response.
Answer: Congress is not constitutionally required to enact any
federal intellectual property laws, nor is it required to give the
States the ability to create, own and enforce federal intellectual
property rights under those laws. Congress has the power, if it wishes,
to create such rights pursuant to Article I, Section 8, clauses 3 and 8
of the Constitution, but it has no obligation to do so. Moreover, when
Congress does decide, as it has, to establish federal intellectual
property rights, it need not extend these rights to governmental
materials. Congress has, for example, made federal statutory copyright
protection unavailable for works of the United States government. See
17 U.S.C. Sec. 105. Congress could accord similar treatment to the
works of State governments.
Question 2: Please elaborate on your hearing response to Mr. Thro's
constitutional analysis of S. 1611. In particular, how do you response
to Mr. Thro's arguments that S. 1611 (1) impermissibly forces states to
waive their sovereign immunity and (2) violates the doctrine of
unconstitutional conditions.
Answer: S. 1611 does not force States to waive their sovereign
immunity. Pursuant to S. 1611, any State may, if it wishes, retain its
full immunity simply by declining to waive it. Rather than forcing the
States into waiver or any other action, S. 1611 gives the States the
option of participating in the federal intellectual property system on
the same basis as all other participants. States remain entirely free
to choose to not to participate. If they do, their immunity remains in
full force.
The defect in Mr. Thro's analysis lies in his incorrect assumption
that States have an inherent right to federal intellectual property
protection. He reasons from this assumption that S. 1611 would require
the States to choose between forfeiting that inherent property right or
waiving their constitutional sovereign immunity right.
States, however, have no inherent right to federal intellectual
property protection--such protection is a federal benefit that Congress
may or may not choose to make available to individuals, entities and
governmental units. Nor is any unconstitutional condition imposed by
offering States the opportunity to obtain the benefits of the federal
intellectual property system on the same basis as those benefits are
unconstitutional ``depends on whether government may properly demand
sacrifice of the ed. 1988). The requirement that States that wish to
obtain to benefits of the federal intellectual property system agree to
bear the responsibilities of that system is both reasonable and proper.
Question 3: Please explain why you believe that the constitutional
abrogation provision of S. 1611 need not be supported by the type of
extensive record of violations that the Court has found necessary to
support abrogation of sovereign immunity in other contexts.
Answer: The abrogation provision of S. 1611 removes State sovereign
immunity only for specific, proven violations of the Fourteenth
Amendment. Section 5 of the Fourteenth Amendment expressly gives
Congress the power to provide appropriate remedies for such violations.
Section 5 remedies may override State immunity because the Fourteenth
Amendment was specifically intended to permit Congress to limit State
action. See Fitzpatrick v. Bitzer, 427 U.S. 445 (1976). Congress'
Section 5 enforcement authority therefore clearly extends to the
provision of remedies imposed directly on the States for proven,
specific State constitutional violations.
The cases in which the Supreme Court has held that congressional
abrogation of State sovereign immunity must be supported by a record of
constitutional violations have, by contrast, involved federal
legislation that sought to abrogate State immunity for all violations
of the statute in question, not merely for unconstitutional violations
of that statute. In those circumstances-i.e., where the abrogating
legislation seeks to provide remedies for State actions that are not
themselves unconstitutional-the Court has required a legislative record
of constitutional violations in order to ensure that the Congressional
response is appropriate and proportional to the constitutional problem.
City of Boerne v. Flores, 521 U.S. 507 (1997). No such requirement
exists where the remedies provided by Congress apply only to specific,
proven State Fourteenth Amendment violations.
Responses of Paul Bender to questions submitted by Senator Hatch
Question: As I understood your testimony, Professor Bender, the
operative question for Congress is not whether members of Congress
agree with the Court's sovereign immunity/intellectual property
decisions, but whether the legislation as drafted is consistent with
those rulings. Is that correct?
Answer: Whether or not one agrees with the Supreme Court's 1999
sovereign immunity decisions, the task before Congress is to craft
legislation that is consistent with those decisions. S. 1611 is fully
consistent with the Court's sovereign immunity decisions and can be
supported by Senators who agree with the Court's sovereign immunity
jurisprudence. S. 1611's abrogation provision follows the Court's
Florida Prepaid and College Savings decisions that Congress may
abrogate State immunity for specific, proven State violations of the
Fourteenth Amendment. S. 1611's codification of the doctrine of Ex
parte Young, 209 U.S. 123 (1908), conforms to the Court's view that
Congress may decide whether or not a new statutory remedial scheme is
to supplant the Ex parte Young remedy. See Seminole Tribe of Fla. v.
Fla., 517 U.S. 144 (1997). Finally, S. 1611's voluntary waiver
provisions are consistent with the Court's repeated holdings that
States may, if they wish, waive their immunity so long as they do so
knowingly and voluntarily.
Question 1: Some have suggested that no legislation is needed
because rights holders can obtain injunctive relief against an
offending state actor. Please indicate whether you agree and explain
why you believe such injunctive relief is or is not adequate.
Answer: There are two critical reasons why Ex parte Young
injunctions are not standing alone-an adequate remedy for rights
holders whose works are infringed by States.
First, injunctions by themselves do not adequately protect the
interests of rights holders. This is the conclusion that the 101th
Congress reached when it enacted the Copyright Remedy Clarification Act
in 1990. The legislative history of that Act is replete with statements
underscoring that conclusion. For example, this Committee found that:
Injunctive relief for copyright violations does not provide
adequate compensation or effective deterrence for copyright
infringement. . . . Injunctions only prohibit future infringements and
cannot provide compensation for violations that already occurred. S.
Rep. No. 101-305, at 12 (1989).
The reasons that motivated the 101th Congress to conclude that
injunctions are not, alone, an adequate remedy are equally applicable
today. In fact, it is fair to say that the inability to obtain money
damages is even more problematic today than in 1990. Today, the
Internet enables immediate worldwide distribution of copyrighted works.
Rights holders whose markets are eviscerated by digital piracy can take
little solace in an injunction that takes effect after the damage is
done. Well before the digital sea change, Congress recognized that
compensation to copyright owners was of sufficient importance that it
created a statutory damage system compensating the owner even when the
plaintiff cannot establish the fact or amount of damages.
Second, as discussed in greater length in my written statement, it
is unfair for rights holders to be limited to injunctive relief against
States while States can avail themselves of the full panoply of
remedies available under the Copyright Act, including money damages as
well as injunctions. States are major users and owners of copyrighted
works. States register their own works with the Copyright Office, and
have formed private-public partnerships to exploit their intellectual
creations. As the recent University of Texas case shows,\1\ they will
aggressively use the courts to seek monetary compensation when they
believe their rights have been infringed. When States infringe rights,
however, property owners currently cannot obtain similar monetary
compensation. The unfairness of the current legal situation is
highlighted by the predicament of businesses like Mr. Schraad's that
cannot recover damages against the State even if substantial economic
harm has been caused by their property being placed in software `pools'
to be shared among a number of State ``clients'' without authorization.
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\1\ See The Wall Street Journal (Feb. 12 2002).
Question 2: Professor Bender suggested that S. 1611 could be
improved by an amendment that did not allow states that do not waive
their sovereign immunity to be able to sue for either damages or
injunctions. Would the provisions be a good or a bad idea on public
policy grounds? Would it make any difference in the constitutionality
of the bill? And would such a provision be better drafted to state that
non-waiving states will simply not have access to the federal courts to
enforce property rights?
Answer: Precluding non-waiving States from obtaining injunctions as
well as damages is sound public policy, for several reasons. Although
injunctions are not, by themselves, adequate remedies in many
situations, they are an important component of an adequate remedial
scheme. Conditioning the right to obtain injunctions on the State's
waiver of sovereign immunity will therefore provide an important reason
for States to choose to participate fully and equally in the federal
intellectual property system. On the other hand, if States can continue
to obtain injunctions while simultaneously asserting their immunity
from damages, they will unfairly enjoy a privilege open to no other
participant in that system.
Congress need not permit States to participate at all in the
federal intellectual property system. Having decided to permit State
participation, Congress may, in order to avoid unfairness, require all
participants in the system, including States, to participate on the
same basis-to enjoy the same benefits only while being subject to the
same responsibilities. Congress cannot require State participation in
the federal intellectual property system, but it can refuse to permit
States to participate unless they do so on an equal basis. Conditioning
a State's ability to obtain declaratory or injunctive relief on its
waiver of immunity from damages would not, therefore, create any
constitutional doubts.
The provision we recommend-barring non-waiving States from
obtaining injunctive relief against threatened or ongoing
infringements-should also include a ban on declaratory relief against
an alleged infringer of federal intellectual property rights. Such a
provision could be drafted so as completely to bar access to federal
court, rather than to bar access to specified remedies. There may,
however, be situations in which a non-waiving State should
appropriately have federal court access. One such situation may occur
where state officials are threatened with suit for an alleged
infringement. If the State believes that its officials' conduct does
not constitute an infringement, the State might wish to seek a federal
declaratory judgment to that effect. There seems no reason to bar a
non-waiving State from such wholly defensive relief:
If the Committee agrees with our suggestion of adding injunctive
and declaratory relief to the remedies not available to non-waiving
States, we would be happy to work with the Committee to craft language
that accomplishes that result.
Question 3: If Congress can confer federal intellectual property
protections to States, can it condition application for federal
protection at the USPTO or Copyright Office on waiver of immunity?
Would it be preferable on policy grounds to structure such a condition
as an application provision, as part of the federal application and
review process, or simply as a substantive statutory condition to be
raised and decided only in litigation?
Answer: As discussed above, Congress can prospectively refuse to
grant non-waiving States copyright protection. It can, therefore,
condition the ability to apply for federal intellectual property rights
on a waiver of state immunity. But PORA believes that the route
followed in S. 1611-denying remedies rather than the ability to apply
for benefits-is the better approach.
In PORA's view, there are three main problems with tying the waiver
to the application for federal benefits. The first involves the
existing differences in state immunity laws. Some States permit waiver
of the state's immunity by the state attorney general. Others, like
West Virginia, require an amendment to the state constitution. Under
the latter type of system, a registration for a copyright purporting to
waive the State's immunity probably would not effectively bind the
State.
Second, tying the waiver to the application would result in
different treatment for copyrights, on one hand, and patents on the
other. Whereas copyright protection attaches upon fixation, patent
protection requires the acceptance of an application by the Patent and
Trademark Office. Thus, if waiver were tied to the application for
protection, copyright owners could claim protection and exploit their
works, but patent applicants could not.
Third, as was recognized during the discussion regarding S. 1835 in
the 106th Congress, tying waiver to the application process could
impose significant additional administrative burdens on the PTO and
Copyright Offices.
Question 4: Mr. Schraad discussed his company's dispute with the
State of Georgia. How would S. 1611, as now drafted, help Mr. Schraad's
company in that dispute? Are there ways to modify S. 1611 so that it
would better help them and similarly situated companies?
Answer: S. 1611 might help Mr. Schraad's company in several
respects. In the short term, S. 1611 would permit the recovery of
damages from non-waiving States for constitutional violations. Thus, if
Georgia were shown to have violated the company's constitutional
rights, and no adequate state remedy was shown to exist in Georgia,
monetary damage recovery would be available under S. 1611. S. 1611
would also ensure that Mr. Schraad and others like him could obtain
injunctions against future infringing acts through codification of the
Ex parte Young doctrine. The greatest long term help that S. 1611 would
offer to companies like Mr. Schraad's is that if States like Georgia
choose to participate in the federal intellectual property system on a
full and equal basis, Mr. Schraad's company will become able to obtain
the full range of statutory remedies for any future infringements.
Question 5: Is there any way for States to provide adequate
remedies against State infringement in an intellectual property system
that is almost wholly federal?
Answer: PORA does not believe the States can grant adequate
remedies for copyright infringement. When Congress enacted the 1976
copyright revision, it expressly intended to create a uniform system of
copyright protection and foresaw two benefits of particular relevance:
(1) avoiding the practical difficulties of enforcing an author's rights
under a different regime in every State; and (2) aiding the United
States in international copyright negotiations. See H. Rep. No. 94-
1476, at 129 (1976). For these reasons, Congress rejected granting
concurrent jurisdiction to state courts when it enacted the Copyright
Remedy Clarification Act in 1990. See H. Rep. No. 102-282, at 9 (1989).
In pursuance of Congress' desire for uniformity, Section 301 of the
Copyright Act preempts all state causes of actions that involve the
subject matter of copyright and that provide rights equivalent to those
provided by the federal Copyright Act. Any attempt to permit adequate
state remedies for copyright infringement would require significant
modification of this preemption provision, with consequent damage to
the uniformity objective. Moreover, since state legal principles in
this area have been preempted for many years, the content of those
state principles would be highly uncertain if they were to be revived
now solely for purposes of permitting actions against States. The
adequacy of such State remedies would vary from State to State and
would continue to be speculative for a considerable period of time.
Responses of Marybeth Peters to questions submitted by Senator Hatch
Question 1: Some have suggested that no legislation is needed
because rights holders can obtain injunctive relief against an
offending state actor. Please indicate whether you agree and explain
why you believe such injunctive relief is or is not adequate.
Answer: The Copyright Office does not believe that injunctive
relief alone is sufficient relief for copyright owners and therefore
strongly believes that legislation is necessary and appropriate.
Injunctive relief is only a useful remedy to prevent future
infringement of the same work. While an injunction will prevent future
infringements, it provides no remedy for infringements that have
already taken place. If the infringement involves only a one-time
copying, an injunction is irrelevant because the copy has already been
made and the sale of a legitimate product displaced. Similarly,
infringements may go on for extended periods of time without the
knowledge of but to the great detriment of the copyright owner.
Copyright owners whose works have been misappropriated are entitled to
compensation for their losses. Finally, injunctions provide no
deterrent to infringement. If no monetary remedies are available, a
potential infringer knows that the only consequence of being caught is
an order to stop and therefore has little incentive to avoid
infringement.
Question 2: Professor Bender suggested that S. 1611 could be
improved by an amendment that did not allow states that do not waive
their sovereign immunity to be able to sue for either damages or
injunctions. Would the provisions be a good or a bad idea on public
policy grounds? Would it make any difference in the constitutionality
of the bill? And would such a provision be better drafted to state that
non-waiving states will simply not have access to the federal courts to
enforce property rights?
Answer: The proposal to condition injunctive relief as well as
monetary relief on waiver of sovereign immunity by States is based on a
desire to increase the incentive for States to waive. We are optimistic
that conditioning monetary relief alone will be successful in
encouraging States to level the playing field by waiving their
immunity. States derive significant revenue from the commercial
exploitation of their intellectual property. The price of being unable
to obtain monetary relief for the infringement of future intellectual
property should give them good cause to consider accepting the bargain
that Congress offers with this legislation.
Of course, States would have even greater incentive to waive their
immunity if their ability to obtain injunctive relief was also
conditioned on such waiver. And we believe that Congress would be
within its constitutional authority to do just that. However, we
recognize that the current Supreme Court gives great deference to state
prerogatives and that a strengthening of the incentives in S. 1611
would also increase the chances that the legislation would be found
unconstitutional as an impermissible compulsion of States.
We are supportive of S. 1611 and believe it contains the right
balance and structure. However, if such an amendment were to be made to
S. 1611, the Copyright Office believes that it would most easily and
effectively be drafted as a limitation on remedies, stating that non-
waiving states may not obtain injunctions or monetary relief as a
remedy to infringement of works created after the enactment of the
bill.
Question 3: If Congress can confer federal intellectual property
protections to States, can it condition application for federal
protection at the USPTO or Copyright Office on waiver of immunity?
Would it be preferable on policy grounds to structure such a condition
as an application provision, as part of the federal application and
review process, or simply as a substantive statutory condition to be
raised and decided only in litigation?
Answer 3: The Constitution grants to Congress the authority ``To
promote the Progress of Science and useful Arts, by securing for
limited Times to Authors and Inventors the exclusive Right to their
respective Writings and Discoveries. . . .'' \1\ Of course, we
recognize this as the authority by which Congress may provide copyright
protection for qualifying works. This authority is entirely permissive.
Congress may choose not to extend copyright protection at all, it may
extend that protection subject to certain conditions, or it may extend
that protection only to certain classes of authors. A particularly
relevant example is the choice that Congress has made to withhold
copyright protection from ``any work of the United States Government. .
. .''\2\ Similarly, Congress may withhold copyright protection from any
work of any state government. That it has chosen not to do so to date
represents a gift from the Congress to the States. And, as the Supreme
Court has opined, Congress may condition the grant of such a gratuity
upon a State's waiver of its sovereign immunity in the directly related
field of suits for monetary relief under the Federal intellectual
property laws.\3\
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\1\ U.S. Const. Art. I, sec. 8.
\2\ 2 17 U.S.C. Sec. 105.
\3\ College Savings Bank v. Florida Prepaid Postsecondary Educ.
Expense Bd., 527 U.S. 666, 686-87 (1999).
---------------------------------------------------------------------------
The structure of such a condition would surely be better as a
substantive statutory condition rather than as a condition of
application. S. 1611 follows the substantive statutory condition model
with the result that the bill is clear, understandable, and comports
with current Supreme Court precedent. Placing the focus of the
condition on the application process, on the other hand, would be
confusing to applicants, difficult for the intellectual property
agencies to implement, ambiguous to right holders, and ultimately
unproductive.
It is no simple matter to ask applicants to indicate whether they
are state entities or state employees acting within the scope of their
duties who fall within the umbrella of that state's sovereign immunity
and, if so, whether their state has effectively waived its sovereign
immunity to suits for monetary relief for infringements of federal
intellectual property. Many of those applicants will be confused by
this question. Those who think it has no relevance to them may simply
ignore it. Those who are using old registration application forms may
not even know of a new requirement to answer this question.
Currently, the Copyright Office will accept an application using
any form it has used since 1978. Adding a sovereign immunity question
would require us to reject all previous application forms. To
illustrate how substantial a problem that would pose for applicants,
when the Copyright Office raised the application fee by $10 in 1999,
despite substantial public education efforts well in advance of the
effective date of the increase, the Office experienced insufficient fee
submissions for over half the applications filed for months after the
fee increase took effect. For each application which fails to include
or answer a new sovereign immunity question, the examiner will need to
contact the applicant for additional paperwork. Given that the
Copyright Office processes over 600,000 registrations every year, the
scope of this problem becomes clear.
The longstanding practice in the Copyright Office is to accept at
face value the factual assertions of the applicant regarding the
identity of the author, the nature of the authorship, the date of
publication, and so on, unless there is something in the application or
on the face of the work that appears to contradict those assertions.
The applicant is the person in the best position to know these facts
and we rely on them to do so accurately. Of course, there are penalties
for the rare case of material misrepresentation. We do not
independently research and verify the identity of every author or other
such assertions, nor do we have the resources to do so.
The status of the author as a state entity and the waiver status of
the relevant State are not facts that the person preparing the
application, who may be a paralegal or an other employee with limited
knowledge and authority--is in a good position to know. With the
addition of a requirement that applicants make these judgements, the
Office would then be faced with the choice of accepting at face value
the assertions regarding sovereign immunity regardless of their
unreliability or of conducting its own investigation.
For the Copyright Office to conduct its own investigation would
involve the impossible task of evaluating which applicants are in fact
state entities or which state employees acting within the scope of
their duties fall within the umbrella of that state's sovereign
immunity. For example, how is an examiner to know whether either the
Pennsylvania State University or the University of Pennsylvania or both
meet these criteria? How is an examiner to know whether a particular
junior college or vocational school is considered a state entity, when
the rules vary from State to State? Is the applicant employed by a
State, and if so, was the work in question created as part of the
applicant's official duties? Has a given State waived its immunity and
is that waiver legally effective? Even those who may be employed by a
state institution are not likely to be familiar with the status of that
institution vis-a-vis sovereign immunity and are even less likely to
know whether their state has waived its immunity in the necessary
manner and scope. In order responsibly to implement a waiver condition
as an application provision, the Office would have to try to make
determinations on all of these examples and infinitely more. Mistakes
and inconsistencies would be inevitable, to the detriment of right
holders.
At a time when we are trying to streamline the registration
process, imposing such a requirement will only complicate and elongate
the process, with little benefit to be gained in exchange for the
burdens of implementation.
Whether the conditioned protection is part of the application
process or not, the final authority regarding the status of
registrations will be the courts. It will be left to them to determine
whether an author is within the umbrella of state immunity and whether
that State has effectively waived it immunity. Resolution of these
issues is fact-specific and can best be accomplished on a case-by-case
basis by a court--the institution best suited to engage in
determination of the facts and application of the law. Given this, we
believe it is far preferable to leave the matter entirely to the courts
rather than to create a complicated and confusing process that would,
in any event, be only a prelude to ultimate resolution by the courts.
Question 4: Mr. Schraad discussed his company's dispute with the
State of Georgia. How would S. 1611, as now drafted, help Mr. Schraad's
company in that dispute? Are there ways to modify S. 1611 so that it
would better help them and similarly situated companies?
Answer 4: Literally speaking, S. 1611 as drafted would not help Mr.
Schraad because the bill has no retroactive application and Mr.
Schaad's dispute has already arisen. However, if S. 1611 becomes law,
people in the future who are similarly situated to Mr. Schaad will
enjoy the full range of remedies for infringement under the Copyright
Act against any State which has chosen to waive its immunity in light
of the incentives in S. 1611.
Congress could amend S. 1611 so that it is explicitly retroactive.
However, such an amendment would likely generate substantial
controversy and would probably increase the likelihood that the law
will be found unconstitutional. Accordingly, the Copyright Office does
not recommend such an amendment.
Question 5: Is there any way for States to provide adequate
remedies against State infringement in an intellectual property system
that is almost wholly federal?
Answer 5: In order for States to provide adequate remedies, the
federal copyright and patent laws would have to be amended to allow
States to grant jurisdiction to state courts to hear cases brought
under those laws. To be effective, the States would also have to waive
their sovereign immunity in their own state courts.
This scenario is undesirable given the lack of expertise among
state court judges in intellectual property. It would also be
problematic because there would be no effective avenue for federal
judicial review of state court decisions. The result would inevitably
be an inconsistent application of copyright and patent laws. Given that
all these negative aspects would accompany a system which still
depended on the waiver of sovereign immunity by States, the Copyright
Office believes that the remedies should remain in federal court and
the focus should be on convincing States to waive their immunity.
Question 6: Are you aware of any further cases on matters relevant
to the scope of the General Accounting Office study on this matter that
have arisen since that report was issued last fall?
Answer 6: No. The Office does not collect information relating to
assertions of sovereign immunity by States or allegations of copyright
infringement by States.
Question 7: Is there any other issue or comment you would like to
add for the completeness of the hearing record?
Answer 7: No.
Responses of William E. Thro to questions submitted by Senator Leahy
Question 1: In your view, is Congress constitutionally required to
let States create, own, and enforce intellectual property rights?
Please explain your response
Answer: If Congress exercises its powers over intellectual
property, then I believe that Congress is constitutionally required to
let the States create, own, and enforce intellectual property rights.
To explain, the Article I intellectual property clausel \1\ gives
Congress exclusive power over intellectual property. There is no
requirement that Congress use its powers over intellectual property.
Congress could decide that no person or entity will be allowed to
create, own, or enforce intellectual property rights.
---------------------------------------------------------------------------
\1\ See U.S. Const. art. I, Sec. 8, cl. 8.
---------------------------------------------------------------------------
Of course, if Congress chooses to use its powers over intellectual
property, it is limited by the Constitution. For example, Congress
could not forbid Roman Catholics from creating, owning, or enforcing
intellectual property rights. Such a restriction would violate the
First Amendment.
Moreover, if the Constitution limits the exercise of the
intellectual property power, then the Constitution precludes Congress
from undermining the inherent sovereignty of the States. Quite simply,
except where it is necessary to enforce the substantive guarantees of
the Fourteenth Amendment, Congress may not undermine the inherent
sovereignty of the States.
This limitation, which is derived from the structure of the
Constitution, is just as much a part of the Constitution as the First
Amendment or any other restriction on the powers of the National
Government.
Finally, if the inherent sovereignty of the States limits the
intellectual property power, then Congress may not prohibit the States
from creating, owning, or enforcing intellectual property rights. To do
so would be no different from saying that Roman Catholics cannot
create, own, or enforce intellectual property rights.
Question 2: Much of your argument for why States should be immune
from infringement lawsuits seems to rest on the assumption that all
such lawsuits against the States are frivolous. For example, in your
written testimony, you called sovereign immunity ``a State's best
defense to frivolous lawsuits designed to exact a quick settlement from
the deep pocket of the State treasury.'' Assume for a moment that an
intellectual property owner has a non-frivolous infringement claim
against a State. As a policy matter, why should the State be immune
from suit?
Answer: As an initial matter, I fear that you have misunderstood
certain aspects of my written testimony. I did not mean to suggest that
all or even most of the small number of intellectual property suits
against the States were frivolous. Obviously, there are some claims
that do have merit. Rather, I simply meant to point out that the
States, as deep pocket entities that cannot go bankrupt, are frequently
subjected to frivolous claims from parties desiring a quick and
lucrative settlement. This is true not only in the context of
intellectual property, but with respect to other areas of the law as
well. I am sure that any of the State Attorneys General would agree
with that point. Moreover, one of the best defenses to such suits is
sovereign immunity. The litigation can be disposed of quickly and with
little cost to the taxpayers. I am sure that the Attorneys General
would agree with me on that point as well.
Before turning to your question on policy, I would like to address
a more fundamental question. That question is which sovereign, the
States or the National Government, is best empowered to make policy
judgments about the sovereign immunity of the States. Senate Bill 1611
implicitly assumes that the National Government can best make that
policy judgment. I respectfully disagree. I believe that the State
Legislatures are the best qualified to make policy judgments about the
sovereign immunity of the States. Similarly, I believe that Congress,
not the State Legislatures, is best qualified to make policy judgments
about the sovereign immunity of the National Government. In short, each
sovereign's legislature should decide its policy with respect to
sovereign immunity.
Of course, allowing the States to decide would make things more
difficult for the owners of intellectual property. It is far easier to
convince Congress that Georgia should be liable to Mr. Schraad's
company then it is to convince the Georgia Legislature that tax money
should be diverted from health care and schools to pay Mr. Schraad's
company. Based on the States' responses to tort claims, it seems safe
to assume that the States would have a variety of responses. Some
States would waive their sovereign immunity and others would refuse.
Many would partially waive, imposing a limit on the amount of damages
or dictating special procedures for suits. While this lack of
uniformity would be frustrating, it is the price that our society pays
for preserving liberty through a federal system.
Once it is determined which sovereign will decide the policy issues
related to the sovereign immunity of the States, then I think the
policy arguments for immunity are clear. Perhaps, the Supreme Court
itself gave the best explanation when it observed:
Underlying constitutional form are considerations of great
substance. Private suits against nonconsenting States-
especially suits for money damages-may threaten the financial
integrity of the States. It is indisputable that, at the time
of the founding, many of the States could have been forced into
insolvency but for their immunity from private suits for money
damages. Even today, an unlimited congressional power to
authorize suits in state court to levy upon the treasuries of
the States for compensatory damages, attorney's fees, and even
punitive damages could create staggering burdens, giving
Congress a power and a leverage over the States that is not
contemplated by our constitutional design. The potential
national power would pose a severe and notorious danger to the
States and their resources.
A congressional power to strip the States of their immunity
from private suits ... would pose more subtle risks as well.
``The principle of immunity from litigation assures the states
and the nation from unanticipated intervention in the processes
of government.'' When the States' immunity from private suits
is disregarded, ``the course of their public policy and the
administration of their public affairs'' may become ``subject
to and controlled by the mandates of judicial tribunals without
their consent, and in favor of individual interests.'' While
the States have relinquished their immunity from suit in some
special contexts-at least as a practical matter this surrender
carries with it substantial costs to the autonomy, the
decisionmaking ability, and the sovereign capacity of the
States.
A general federal power to authorize private suits for money
damages would place unwarranted strain on the States' ability
to govern in accordance with the will of their citizens. Today,
as at the time of the founding, the allocation of scarce
resources among competing needs and interests lies at the heart
of the political process. While the judgment creditor of the
State may have a legitimate claim for compensation, other
important needs and worthwhile ends compete for access to the
public fisc. Since all cannot be satisfied in full, it is
inevitable that difficult decisions involving the most
sensitive and political of judgments must be made. If the
principle of representative government is to be preserved to
the States, the balance between competing interests must be
reached after deliberation by the political process established
by the citizens of the State, not by judicial decree mandated
by the Federal Government and invoked by the private citizen.
``It needs no argument to show that the political power cannot
be thus ousted of its jurisdiction and the judiciary set in its
place.'' \2\
---------------------------------------------------------------------------
\2\ Alden v. Maine, 527 U.S. 706, 714-15 (1999) (citations omitted)
I believe that all of the Court's concerns are reasons why
sovereign immunity should be preserved.
In addition to the Court's concerns, I think there are two other
policy arguments. First, this problem is largely non-existent. While
Mr. Schraad's narrative about his company's experience in Georgia
certainly is egregious, the fact remains that it appears to be one of a
very few isolated incidents. As the General Accounting Office report
confirms, there are only a few cases of the States allegedly infringing
intellectual property rights. Congress should not attempt to strip all
of the States of their immunity simply because of a few incidents.
Second, the States should not be treated differently than foreign
nations. Under current law, foreign nations, including those in the
``Axis of Evil'' are immune from intellectual property suits in the
federal courts. If Iraq can escape liability to Mr. Schraad's company,
should not the taxpayers of Georgia be equally immune?
Question 3: You have argued that Senate Bill 1611 is
unconstitutional because ``Congress may not require the surrender of
States' sovereignty as a condition of receiving a benefit from the
National Government.'' But several existing federal statutes do just
that. For example, as a condition of receiving federal funds, States
must comply with various nondiscrimination requirements that may be
enforced by private parties in federal court. E.g. 42 U.S.C. Sec. 2000-
d-7. Is it your view that these statutory schemes are also
unconstitutional?
Answer: I believe that those statutes that require the States to
waive their sovereign immunity as a condition of receiving federal
funds or some other federal benefit are unconstitutional. I recognize
that my view is, at the moment, very much the minority view and is
embraced by only four judges on the Eighth Circuit, a few District
Court judges, and a handful of legal academics. However, I also
recognize that the issue has never been decided by the Supreme Court.
At present, the issue of requiring the States to waive sovereign
immunity is before the Third, Ninth, and Tenth Circuits. There is a
strong possibility that a case from the Sixth Circuit will be heard by
the Supreme Court next term. When the Court eventually hears such a
case, I am confident that the Court will invalidate those statutes that
impose such a requirement.
Having embraced a distinctly minority position and engaged in the
always perilous task of predicting future Supreme Court decisions, I
would like to briefly explain the basis for my position.
First, the Court's pronouncements on the subject are, at best,
ambiguous. To explain, those who disagree with me and believe that
Congress may require the States to waive sovereign immunity generally
base their position on a portion of the College Savings Bank decision
where the Court stated:
The United States points to two other contexts in which it
asserts we have permitted Congress, in the exercise of its
Article I powers, to extract ``constructive waivers'' of state
sovereign immunity. In Petty v. Tennessee-Missouri Bridge
Comm'n, we held that a bistate commission which had been
created pursuant to an interstate compact (and which we assumed
partook of state sovereign immunity) had consented to suit by
reason of a suability provision attached to the congressional
approval of the compact. And we have held in such cases as
South Dakota v. Dole that Congress may, in the exercise of its
spending power, condition its grant of funds to the States upon
their taking certain actions that Congress could not require
them to take, and that acceptance of the funds entails an
agreement to the actions. These cases seem to us fundamentally
different from the present one. Under the Compact Clause,
States cannot form an interstate compact without first
obtaining the express consent of Congress; the granting of such
consent is a gratuity. So also, Congress has no obligation to
use its Spending Clause power to disburse funds to the States;
such funds are gifts. In the present case, however, what
Congress threatens if the State refuses to agree to its
condition is not the denial of a gift or gratuity, but a
sanction: exclusion of the State from otherwise permissible
activity. Justice Breyer's dissent acknowledges the intuitive
difference between the two, but asserts that it disappears when
the gift that is threatened to be withheld is substantial
enough. Perhaps so, which is why, in cases involving conditions
attached to federal funding, we have acknowledged that ``the
financial inducement offered by Congress might be so coercive
as to pass the point at which 'pressure turns into compulsion.'
'' In any event, we think where the constitutionally guaranteed
protection of the States' sovereign immunity is involved, the
point of coercion is automatically passed-and the voluntariness
of waiver destroyed--when what is attached to the refusal to
waive is the exclusion of the State from otherwise lawful
activity.\3\
---------------------------------------------------------------------------
\3\ College Sav. Bank, 527 U.S. at 686-87 (citations omitted).
---------------------------------------------------------------------------
This suggestion that Congress can require a waiver of sovereign
immunity as a condition of receiving federal funds has led many Courts
of Appeals to conclude that the States or state agencies have waived
their sovereign immunity as a condition of receiving federal funds or
some other federal benefit.\4\ Conceivably, Congress could overturn all
of the recent sovereign immunity decisions simply by saying that if the
States wish to receive federal funds or some other federal benefit,
then the States must waive their sovereign immunity.
---------------------------------------------------------------------------
\4\ See, e.g. Cherry v. University of Wisconsin, 265 F.3d 541 (7th
Cir. 2001); Jim C. v. United States, 235 F.3d 1079 (8th Cir. 2000) (en
banc), cent. denied, 121 S. Ct. 2591 (2001); Sandoval v. Hagan, 197
F.3d 484 (11th Cir. 1999), rev'd on other grounds sub nom. Alexander v.
Sandoval, 121 S. Ct. 1511 (2001); Litman v. George Mason University,
186 F.3d 544, 557 (4th Cir. 1999) (Litman II), cert. denied, 120 S. Ct.
1220 (2000); In re Innes, 184 F.3d 1275, 1282-83 (10th Cir. 1999),
cert. denied sub nom. Kansas State Univ. v. Innes, 529 U.S. 1037
(2000). As the Tenth Circuit, deciding a case involving the
Telecommunications Act of 1996, explained:
[Flor a constructive waiver of sovereign immunity to be valid under
College Savings Bank, it must be altogether voluntary and not forced
from a state by Congress. A constructive waiver is voluntary only where
Congress threatens a state with the denial of a ``gift or gratuity'' if
the state refuses to consent to suit in federal court. Where Congress
threatens a state with a ``sanction'' if it refuses to consent to suit,
then the waiver is no longer freely given. In addition, it may be that
the difference between a gift and a sanction disappears when the gift
Congress threatens to withhold is large enough.
To illustrate its holding in College Savings Bank, the Court
distinguished the legitimate conditions Congress placed on states in
Petty v. Tennessee- Missouri Bridge Comm'n and South Dakota v. Dole,
from the forced waivers in Parden and the case at bar. In Petty, the
Court held that a bistate commission created pursuant to an interstate
compact ``had consented to suit by reason of a suability provision
attached to the congressional approval of the compact.'' In Dole, the
Court held ``that Congress may, in the exercise of its spending power,
condition its grant of funds to the States upon their taking certain
actions that Congress could not require them to take, and that
acceptance of the funds entails an agreement to the actions.''
The College Savings Bank court explained that the bistate
commission's waiver was valid because, under the Compact Clause of the
U.S. Constitution, states may not form an interstate compact without
the consent of Congress. The granting of consent therefore is a
gratuity. Similarly, ``Congress has no obligation to disburse funds to
the States; such funds are gifts.''
In contrast, in both Parden and the case before the Court, Congress
did not threaten the denial of a gift or gratuity if the states refused
to waive their constitutional sovereign immunity. Instead, in both
Parden and College Savings Bank, Congress threatened a sanction:
``exclusion of the State from otherwise permissible activity.''
Specifically, the federal statute in Parden required Alabama to waive
its immunity or give up its ability to own and operate a railroad in
interstate commerce. In College Savings Bank, the TRCA required Florida
to waive its immunity or give up its ability to engage in the business
of advertising and selling a for-profit educational investment vehicle.
The voluntariness of a waiver is destroyed ``when what is attached to
the refusal to waive is the exclusion of the State from otherwise
lawful activity.''
MCI Telecom. Corp. v. Public Serv. Comm'n of Utah, 216 F.3d 929,
937 (10fl' Cir. 2000), cert. denied, 121 S. Ct. 1167 (2001)(citations
omitted). In other words, if the National Government tells the State
that it must waive sovereign immunity or be punished, the required
waiver is unconstitutional. However, if the National Government informs
the State that it must waive as condition of receiving a benefit, and
the inducement is not coercive, then the waiver is constitutional.
---------------------------------------------------------------------------
Yet, there is another portion of College Savings Bank that appears
to command the exact opposite result. Specifically, the Court observed:
Recognizing a congressional power to exact constructive waivers
of sovereign immunity through the exercise of Article I powers
would also, as a practical matter, permit Congress to
circumvent the antiabrogation holding of Seminole Tribe. Forced
waiver and abrogation are not even different sides of the same
coin--they are the same side of the same coin.... There is
little more than a verbal distinction between saying that
Congress can make Florida liable to private parties for false
or misleading advertising in interstate commerce of its prepaid
tuition program, and saying the same thing but adding at the
end ``if Florida chooses to engage in such advertising.'' \5\
---------------------------------------------------------------------------
\5\ College Savings Bank v. Florida Prepaid Postsecondary Educ.
Expense Fund, 527 U.S. 666, 683-84 (1999) (citations omitted).
In other words, Congress cannot overrule the Court's recent
sovereign immunity decisions simply by saying that if the States want
money or intellectual property rights, they must waive sovereign
immunity. As the Court observed in a later case, ``Congress' powers
under Article I of the Constitution do not include the power to subject
States to suit at the hands of private individuals'' \6\
---------------------------------------------------------------------------
\6\ Kimel v. Florida Bd. of Regents, 528 U.S. 62, 80 (2000)
---------------------------------------------------------------------------
In sum, College Savings Bank appears to contradict itself. On the
one hand, it seems to endorse the view that Congress may force the
States to waive sovereign immunity as a condition of receiving a
federal benefit. On the other hand, it appears to say that Congress
cannot use its Article I powers to force the States to waive sovereign
immunity and thereby undermine the antiabrogation holding of the recent
sovereign immunity decision. At some point, the Court will have to
resolve this contradiction. When it does, I believe that it will
reaffirm the idea that Congress cannot use its Article I powers to
effectively overrule the anti-abrogation decisions.
Second, forcing a State to choose between waiving its sovereign
immunity and losing federal funds or the right to enforce its
intellectual property rights is unconstitutionally coercive.\7\
Although the Supreme Court has recognized that ``Congress may, in the
exercise of its spending power, condition its grant of funds to the
States upon their taking certain actions that Congress could not
require them to take,'' \8\8 the Court has also recognized that ``the
financial inducement offered by Congress might be so coercive as to
pass the point at which 'pressure turns into compulsion.'' ' \9\ Thus,
the Supreme Court has acknowledged that some ``choices'' imposed by
Congress' exercise of its Spending Clause power are unconstitutionally
coercive.\10\ I believe that forcing a State to choose between federal
funds for a specific purpose and sovereign immunity or between
asserting its intellectual property rights and sovereign immunity
crosses the line and is coercive.
---------------------------------------------------------------------------
\7\ See Frost & Frost Trucking Co. v. Railroad Comm'n, 271 U.S.
583, 594 (1926) (If government ``may compel the surrender of one
constitutional right as a condition of its favor, it may, in like
manner, compel a surrender of all. It is inconceivable that guaranties
embedded in the Constitution of the United States may thus be
manipulated out of existence.'').
\8\ College Savings Bank, 527 U.S. at 686
\9\ South Dakota v. Dole, 483 U.S. 208, 211 (1987) (quoting Steward
Machine Co. v. Davis, 301 U.S. 548, 590 (1937)).
\10\ See College Savings Bank, 527 U.S. at 687 (``In any event, we
think where the constitutionally guaranteed protection of the States'
sovereign immunity is involved, the point of coercion is automatically
passed--and the voluntariness of waiver destroyed--when what is
attached to the refusal to waive is the exclusion of the State from
otherwise lawful activity.'').
---------------------------------------------------------------------------
Responses of William E. Thro to questions submitted by Senator Hatch
Question 1. Do you believe any federal legislation providing some
remedy for infringement against the States would be constitutional? Why
or why not.
Answer: First, if Congress made an explicit finding that most
States were engaging in a pattern of constitutional violations, then it
would be constitutional for Congress, in the exercise of its powers
under Sec. 5 of the Fourteenth Amendment, to abrogate sovereign
immunity for all States and provide some remedy for infringement. In
order to accomplish this, Congress would have to find that the States
were engaged in a consistent pattern of depriving owners of their
intellectual property without due process of law and without paying
just compensation. If Congress found that only a few States were
engaged in such practices, then I think it would be constitutional to
abrogate the sovereign immunity for the offending States.
Second, as I stated in my written testimony and in response to
Chairman Leahy's written questions, I do not believe that Congress may
use its Article I powers to exact a waiver of sovereign immunity from
the States. If sovereign immunity is to be diminished, Congress must
act pursuant to Sec. 5 of the Fourteenth Amendment.
Additional Questions
Question 1: Some have suggested that no legislation is needed
because rights holders can obtain injunctive relief against an
offending state actor. Please indicate whether you agree and explain
why you believe such injunctive relief is or is not adequate.
Answer: If the doctrine of Ex Parte Young \11\ allows the issuance
of an injunction against a state actor who is violating intellectual
property rights, then the injunctive relief is adequate. I take this
position because I believe that severe cases of infringement by the
State constitute a ``taking'' of property under the Fifth Amendment
and, thus, the owner is entitled to just compensation. Given the
possibility that the owner can recover under the Fifth Amendment, I see
no need to allow an additional damages remedy.
---------------------------------------------------------------------------
\11\ 209 U.S. 123 (1908).
Question 2: Professor Bender suggested that Senate Bill 1611 could
be improved by an amendment that did not allow States that do not waive
their sovereign immunity to be able to sue for either damages or
injunctions. Would such a provision be a good or bad idea on policy
grounds? Would it make any difference in the constitutionality of the
bill? And would such a provision be better drafted to state that non-
waiving States cannot get injunctions or damages as a remedy or that
non-waiving States simply will not have access to the federal courts to
enforce intellectual property rights?
Answer: As I have stated previously, I believe that any attempt by
Congress to use its Article I powers to diminish the sovereign immunity
of the States is unconstitutional. Thus, I think Professor Bender's
proposal has no impact on the bill's constitutionality.
Question 3: If Congress can confer federal intellectual property
protections to the States, can it simply deny States all federal
intellectual property rights or, less drastically, can it condition
application for federal protection to the USPTO or Copyright Office on
a waiver of immunity? Would it be preferable on policy grounds to
structure such a condition as an application provision, as part of the
federal application and review process, or simply as a substantive
statutory condition to be raised and decided only in litigation?
Answer: As I explained in response to a similar written question
from Chairman Leahy, assuming that Congress exercises its powers over
intellectual property, then I believe that Congress is constitutionally
required to let the States create, own, and enforce intellectual
property rights.
Moreover, I believe that requiring the States to surrender
sovereign immunity in order to obtain or enforce intellectual property
rights violates the doctrine of unconstitutional conditions. Quite
simply, this doctrine holds that ``the government may not require a
person to give up a constitutional right . . . in exchange for a
discretionary benefit conferred by the government.'' \12\ For example,
the government generally may not require a property owner to give up a
portion of his property rights as a condition of receiving a building
permit.\13\ The reason for such a doctrine is clear. If government
``may compel the surrender of one constitutional right as a condition
of its favor, it may, in like manner, compel surrender of all. It is
inconceivable that guarantees embedded in the Constitution of the
United States may be thus manipulated out of existence.'' \14\
Moreover, while the doctrine generally applies in the context of
individual rights, it should be equally applicable to the fundamental
aspects of a States' sovereignty. This is particularly true given the
importance of the States' sovereignty to maintaining the constitutional
balance. Thus, Congress may not require the surrender of the States'
sovereignty as a condition of receiving a benefit from the National
Government.
---------------------------------------------------------------------------
\12\ Dolan v. City of Tigard, 512 U.S. 374,385 (1994).
\13\ See Id at 394-95. Of course, such conditions can be imposed if
it can be demonstrated that (1) there is an ``essential nexus'' between
the permit condition and a legitimate interest of government; and (2)
there is a rough proportionality between the condition and the impact
of the new project. See Id. at 386.
\14\ Frost & Frost Trucking Co. v. Railroad Comm'n, 271 U.S. 583,
594 (1926).
Question 4: Mr. Schraad discussed his company's dispute with the
State of Georgia. How would Senate Bill 1611, as now drafted, help Mr.
Schraad's company in that dispute? Are there ways to modify Senate Bill
1611 so that it would better help them and similarly situated
companies?
Answer: Because I believe that Senate Bill 1611, as currently
drafted, is unconstitutional, I do not believe it would help Mr.
Schraad at all. Georgia would simply get the new law declared
unconstitutional and then get Mr. Schraad's suit dismissed on sovereign
immunity grounds. Assuming that I am wrong and that Senate Bill 1611 is
constitutional, then Mr. Schraad's company could recover money from
Georgia's State Treasury. While this would be helpful to Mr. Schraad's
company, it would mean a diversion of funds away from schools, health
care, police protection, and the myriad of other necessary services
provided by the State of Georgia.
I also want to emphasize my belief that Mr. Schraad's company does
not need Senate Bill 1611 in order to achieve justice. Assuming that
the facts are exactly as Mr. Schraad has told this Committee, then the
State of Georgia has ``taken'' the company's property and the company
is entitled to just compensation under the Fifth Amendment.
Question 5: Is there any way for States to provide adequate
remedies against state infringement in an intellectual property system
that is almost wholly federal?
Answer: At present, all intellectual property cases must be brought
in federal court. Congress could allow state courts to hear
intellectual property claims against the States. If Congress took this
step, then many States might choose to waive their sovereign immunity
and allow suits in their own courts.
Question 6: Are you aware of any further cases on matters relevant
to the scope of the General Accounting Office study on this matter that
have arisen since that report was issued last fall?
Answer: Based on my communications with the other members of the
Education Section of the Virginia Attorney General's Office and with my
colleagues at state universities in other States, I am unaware of any
further cases. I also want to emphasize my belief that the General
Accounting Office study demonstrates that this alleged problem is
almost non-existent.
Question 7: Is there any other issue or comment you would like to
add for the completeness of the hearing record?
Answer: While I am honored that you have invited me to share my
views regarding the constitutionality of this proposal I really think
it is necessary for this Committee to hear from many other people
before it can make an objective judgment. The action being contemplated
is nothing less than a significant diminishment of a fundamental aspect
of the State's sovereignty. It is not an action to be taken lightly and
it is at least as important as the confirmation of a judge to a federal
appellate court.
Yet, despite the obvious importance of this issue, this Committee
only held one hearing that lasted less than two hours and involved six
witnesses, only one of whom was critical of the bill. There is
absolutely no objective evidence indicating that this is a real
problem. Mr. Schraad's anecdotal evidence has gone unchallenged because
no one has been invited to present the State of Georgia's side of the
story. Before this Committee assumes that Georgia has acted illegally,
if not unconstitutionally, and, as a result, diminishes the sovereignty
of every State, Georgia should have an opportunity to be heard.
Although witnesses have asserted that the States violate intellectual
property rights, no one has discussed the extraordinary steps that
state universities and state agencies take to prevent their employees
from engaging in infringement. While the General Accounting Office
report finds that the States are suing almost as frequently as they are
being sued, no one has been invited to discuss blatant examples of the
private sector infringing upon the States' intellectual property rights
or what steps the private sector takes to insure that they do not
violate the States' intellectual property rights. Before this Committee
approves legislation that will allow private parties to raid the
coffers of the States, it should hear from the Governors and state
legislators about the impact on local revenues. Similarly, state
attorneys general and counsel for state universities should be invited
to address the impact of increased litigation on their offices.
Although foreign governments are immune from intellectual property
suits, no one has been invited to explain why they should be immune and
the States should not. While Professor Bender did an outstanding job of
presenting the view that, such legislation is constitutional and while
I did my best to present the opposite view, the fact remains that, this
Committee has not heard from many of the leading constitutional
scholars.
In sum, before this Committee takes such a monumental step, I
believe it is imperative to hear from a wide variety of other groups
and interests.
SUBMISSIONS FOR THE RECORD
American Bar Association
Chicago, Illinois, 60611
February 22, 2002
Hon. Patrick Leahy
Chairman, Committee on Judiciary
United States Senate
Washington, DC 20510
Dear Mr. Chairman:
This letter is being written to express the support of the American
Bar Association for the enactment of S. 1611, the ``Intellectual
Property Protection Restoration Act,'' which you introduced on November
1, 2001.
The ABA is convinced that Congress must deal with the situation
created by the decisions of the United States Supreme Court in Florida
Prepaid Postsecondary Education Expense Board v. College Savings Bank
and College Savings Bank v. Florida Prepaid Postsecondary Education
Expense Board, and the ABA believes that S. 1611 is an appropriate and
well reasoned response. Those decisions nullified laws enacted in 1990
and 1992 to affirm congressional intent that States not be immune from
suit for acts' of infringement of intellectual property rights. As a
result of these decisions, States now enjoy the full range of
protection of federal intellectual property laws for their own patents,
copyright, trademarks, and other intellectual property, while at the
same time they are free to infringe IP rights of others without fear of
suit for damages.
S. 1611 would remedy this untenable situation by placing States on
an equal footing with other intellectual property owners. Recovery of
damages for infringement of its own intellectual property rights would
be denied to a State unless it has waived immunity from suit for its
own acts of infringement of privately-owned intellectual property
rights.
The ABA supported congressional efforts a decade ago to clarify
States' liability for infringement of intellectual property rights,
and. we support your current efforts to restore a level playing field
for all owners of intellectual property. States should of course have
access to legal remedies under federal intellectual property laws to
protect state-owned intellectual property. At the same time, fairness
dictates that when a State infringes rights of others, it be subject to
those same legal remedies. The American, Bar Association believes that
S. 1611 provides the framework to restore that fan and balanced
approach. and we support its enactment.
Sincerely,
Charles P. Balder
Chair, Section of Intellectual Property Law
Biosource, Inc.
Worcester, MA 01607
March 3, 2002
Chairman Patrick Leahy
Committee on the Judiciary
SD-224 Senate Dirksen Building
Washington DC 20008
Honorable Chairman,
I am glad that there are hearings on Sovereign Immunity. That was
why the people of The United States threw out the British.
Biosource developed the flow through capacitor in the basement of
my house in Worcester, MA. This technology was initially commercialized
to market in a self-funded manner, together with my licensee Sabrex.
The Sabrex facility is a graffiti covered warehouse in a bad part of
San Antonio. Biosource is currently a recipient of a DARPA contract to
enhance this technology for broader water purification and seawater
desalination use. We no longer operate from a basement.
The University of California through Lawrence Livermore National
Laboratory (LLNL, which it operates, has done grave harm to my company
and to this technology. Advice of counsel indicates that, while it
would be possible to sue them, there would be little to no remedy,
because the University of California would simply assert Sovereign
immunity, In other words, we would be free to spend what little money
we have for nothing. I believe that parties injured by the University
of California should have recourse to remedy through the courts. I
dislike the idea of alternative dispute resolution mediated by the
perpetrators.
Harm done to Biosource includes:
Libel of Biosource and usurpation of the flow through
capacitor technology in the press. LLNL also claims invention
of the flow through capacitor. Joe Farmer is both the
``inventor'' and was LLNL's spokesperson. He was quoted in
``Technology Transfer Business'' magazine as calling me a
charlatan. I had neither met nor talked to him at the time.
LLNL accepted an R&D 500 award for this technology from R&D
magazine, and has been featured in such publications as
Business Week.
Misrepresentation of Patent Rights. Patent law
requires that known, relevant, prior art be reported to the
patent examiner. Farmer called me a charlatan while his patent
was still being examined. Yet, the University of California
failed to cite my half dozen or so prior art patents.
Unfortunately, the examiner failed to catch this. LLNL
continues to develop narrow patents that cannot be practiced
against Andelman in what must be an expensive attempt to
reinvent the wheel. For example, the file wrapper of a second
continuation in part patent shows that the examiner rejected
their patent about six times against myself, until the patent
issued with useless narrow claims that cannot be practiced
without infringing upon Andelman,
Misrepresentation in License Agreements. LLNL
continues to represent that they invented this technology and
has actively been seeking to license it, thereby sidetracking
investment that would have gone to Biosource. LLNL licensed a
small Arizona Company, called Far West Group. This company has
succeeded in sublicensing several large corporations for
millions of dollars in total. One large company, ABB, walked
away with nothing from their $1 MM Investment in Far West Group
after learning about Andelman. Biosource has yet to raise
investment from private industry. I believe that Biosource
license agreements and business opportunities have been
derailed, never happened, or set back due to LLNL.
Patent Infringement and sale of inferior, unauthorized
equipment. We have put LLNL on notice that practice of the
Farmer patent would infringe one or more Andelman patents. LLNL
has directly sold inferior, unauthorized flow through capacitor
equipment to valuable customers, including large water
districts in California. Their version of this technology is
made without my approval and supervision, did not work well,
and should not have been sold in this form. This has worked to
sour the engineering community on the technology.
Harm Done To Everyone Includes:
This is a water purification technology. I believe there could be a
whole Senate hearing on the stunning lack of effort in this field. DOE
is steward of nuclear waste currently seeping into aquifers the size of
a Great Lake, Water and energy are interrelated. One cannot talk about
conservation of one without the other. Over a billion people are facing
a water shortage. The University of California chose to be an elephant
muddying the water.
Bayh-Dole:
Lastly, I believe that a root of this problem lies in Bayh-Dole.
Government funded work should be put into the public domain. This would
raise the bar to innovation and strengthen the patent system,
Currently, the patent system is plagued with many minor, derivative
patents, which impede commercialization. This can only play into the
hands of the CEO's who are working for Wall Street, as opposed to
developing new products for the benefit of the customer, shareholder,
or employee. The fact that the transistor was not patented did not
impede its commercialization.
Thank you again for the opportunity to be of service to this
committee.
Sincerely yours,
Marc Andelman
President
Business Software Alliance
Washington, D.C. 20036
February 25, 2002
The Hon. Patrick Leahy
Chairman
Committee on the Judiciary
U.S. Senate
Washington, DC 20510
Dear Chairman Leahy,
On behalf of the members of the Business Software Alliance,* I
write in support of S. 1611, the Intellectual Property Protection
Restoration Act of 2001.
---------------------------------------------------------------------------
* The Business Software Alliance is the voice of the world's
software and Internet industry before governments and with consumers in
the international marketplace. Its members represent the fastest
growing industry in the world. BSA educates computer users on software
copyrights; advocates public policy that fosters innovation and expands
trade opportunities; and fights software piracy. BSA members include
Adobe, Apple, Autodesk, Bentley Systems, Borland, CNC Software/
Mastercam, Compaq, Dell, Entrust, IBM, Intel, Intuit, Macromedia,
Microsoft, Newtwook Associates, Novell, Sybase, Symantec, and UGS.
---------------------------------------------------------------------------
S.1611 is important to a fair and effective system of protection
for intellectual property. To the envy of the rest of the world, the
copyright laws in place in this country have helped foster the creation
of software programs that are incomparably productive, valuable and
popular. They have done so, in part, by securing the basic principle
that it is more expensive to violate the copyright laws than to comply
with them. As the Supreme Court itself has recognized, that principle
is essential to promoting respect for and compliance with those laws.
S. 1611 will ensure that it remains in place.
The Supreme Court's recent decisions, immunizing state entities
from monetary damages, removes the financial incentive to comply with
copyright requirements. When a private business is deciding whether to
acquire licenses for the software it needs--or simply make illegal
copies--its potential exposure to monetary damages renders the latter
option a bad business risk. But when a state entity, even one competing
with the private business, faces the same decision, it need not factor
in any financial exposure at all. Fairness issues aside, this system
encourages non-compliance.
In 2000, BSA estimates that software publishers lost $2.6 billion
dollars in U.S. sales due to the unauthorized reproduction or
distribution of software. A substantial percentage of these losses are
attributable to workplace copying. Without incentives for voluntary
compliance by state entities, those lost sales will only rise, along
with the associated harms to R&D investment, employment, and tax
revenue. Ironically, monetary damages are important, not because rights
owners seek to recover money from violators, but because they lessen
the need to file suit in the first place by increasing voluntary
compliance.
BSA joins the written statement and testimony submitted by the
Property Owners Remedy Alliance, including the suggested change to one
provision of S.1611 offered therein. I look forward to working with you
in order to ensure that this legislation passes during this session of
Congress.
Sincerely,
Robert Holleyman, II
President and CEO
Statement of Hon. Maria Cantwell, a U.S. Senator from the State of
Washington
Thank you, Mr. Chairman for holding this hearing. The issue before
the committee today is not only important to intellectual property
holders but also challenges this Committee and the Congress to properly
exercise its powers to enact laws that support innovation while
providing equal treatment for both state-run and private sector
entities. I am cognizant of the constitutional framework within which
we must craft our efforts. I am also concerned with any negative
impacts that legislative proposals might have on the academic
community. I look forward to exploring these issues with our witnesses
with an eye towards supporting innovation and resolving current
inequities in the marketplace.
The U.S. Constitution gives Congress the power to enact laws to
give to authors and inventors certain rights in their creations for a
limited time. In addition to encouraging new inventions and creative
works, our system of strong intellectual property rights has created
jobs, generated billions of dollars in revenue, and enriched the lives
of the American people and the world. Our intellectual property laws
have provided incentive to inventors and intellectual property owners
by giving them the ability to enforce their rights against infringement
in Federal court and recoup their investments. The issue of sovereign
immunity is relatively new in the context of intellectual property law.
If some actors in the marketplace are immune from infringement
liability, the system may be less effective in achieving its goals. So
I am concerned with the course that the Supreme Court has charted, and
look forward to working with the Chairman to correct that course.
Congress first acted to clarify state sovereignty conflicts in
intellectual property cases in the early 1990's. Congress passed three
``Remedy Clarification'' acts clarifying its intent to abrogate state
sovereign immunity--providing that no state could claim immunity from
copyright, patent, or trademark infringement under the 11th amendment.
In passing this legislation, Congress sought to clarify the law
providing that all potential infringing parties were to be treated
similarly.
Then in the late 1990s, the Supreme Court decided three cases that
limited Congress' authority to abrogate state sovereign immunity in the
context of patent and trademark law, Seminole Tribe of Florida v.
Florida, Florida Prepaid Postsecondary Education Expense Board v.
College Savings Bank, and College Savings Bank v. Florida Prepaid
Postsecondary Education Expense Board. Subsequently, the 5th Circuit
held that the Copyright Remedy Clarification Act does not abrogate
state sovereign immunity. Taken together, these decisions essentially
voided the three clarifying laws that Congress enacted in the early
1990's.
Currently, states are able to bring suit against those who infringe
their intellectual property rights, while claiming immunity from
similar suits against them. Unless some significant policy concern
overcomes equity in application, those who infringe upon the
intellectual property rights of another should be equally subject to
federal infringement suits. Further, to be effective and provide proper
incentives to innovation, I believe that intellectual property laws
should be applied equally to all players in the market.
I want to note a broader concern. The Supreme Court decisions
driving our need to legislate in this area reflect an extremely
disconcerting shift in the Supreme Court's perspective on the
respective roles of Congress and the Court. We have an obligation to
those who have elected us to preserve the appropriate Constitutional
role of Congress.
The Supreme Court's decisions at issue today have produced a
complex and daunting legal landscape, one that forces us to move
forward carefully and within the proper constitutional framework. I am
confident that balance and equity can be brought back to this legal
setting, and I appreciate the Chairman's efforts to resolve this
problem in a manner sensitive to both state interests and the interests
of other intellectual property owners.
I look forward to hearing the witnesses today and exploring the
constitutional challenges that face this committee.
U.S. Chamber of Commerce
Washington, D.C. 20062-2000
February 13, 2002
Hon. Patrick J. Leahy
Chairman,
Senate Judiciary Committee
United States Senate
Washington, DC 20510
Dear Mr. Chairman:
I am writing on behalf of the United States Chamber of Commerce
(``U.S. Chamber''), the world's largest business federation,
representing more than three million businesses and organizations of
every size, sector and region, to express our strong support for
legislation that would end the threat of intellectual property
infringement by states and state agencies.
As a result of the Supreme Court's decision in Florida Prepaid
Postsecondary Educ. Expense Br. v. College Savings Bank, 119 S. Ct.
2199 (1999), the states and state employees possess the unfair ability
to infringe the intellectual property rights of holders of patents,
trademarks and copyrights under federal law while at the same time
using those very same federal laws to safeguard the considerable volume
of patents, trademarks and copyrights held by them. Legislation is
needed that would require states to waive their sovereign immunity from
suits against them in federal court for infringement of intellectual
property rights that are protected by federal law before they could
seek legal relief for infringement of their own patents, trademarks and
copyrights. Furthermore, there should be legal remedies against states
that violate the due process or takings rights of intellectual property
owners.
The U.S. Chamber supports strong protection for intellectual
property owners under the patent, trademark and copyright laws. Such
protection stimulates investment and fosters innovation, thereby
assuring a continuing stream of new products and services. Many states
have chosen to participate in the commercial marketplace. Those that do
must be held to the same standards as all participants in that
marketplace and must not be allowed to use their sovereign immunity to
shield conduct which, if engaged in by any other market participant,
would be considered illegal.
We urge your Committee to address this issue and correct a serious
imbalance that has developed regarding the protection afforded by the
country's intellectual property laws.
Sincerely,
R. Bruce Josten
Executive Vice President
Government Affairs
Statement of R. Bruce Josten, Executive Vice President for Government
Affairs, U.S. Chamber of Commerce, Washington, D.C.
Thank you Chairman Leahy, Senator Hatch, and Members of the
Committee, for this opportunity to provide comments on this very
important issue. My name is Bruce Josten and I am Executive Vice
President for Government Affairs at the U.S. Chamber of Commerce. The
US. Chamber represents more than 3 million businesses and organizations
of every size, sector and region.
Our members are deeply concerned about the ability of states and
state entities, such as state universities, to use their Constitutional
protection from lawsuits to freely infringe upon the copyright, patent,
and trademark rights of others, while at the same time taking full
advantage of copyright, patent and trademark protection for their own
intellectual property. This bill would not permit the states to have it
both ways: if they want copyright, patent, and trademark protection,
they must expressly waive their sovereign immunity.
Background
For over ten years, Congress has been attempting to remedy a series
of unfortunate Supreme Court decisions that began in 1962. Under these
decisions, the principle of sovereign immunity, in the context of
intellectual property, has come to mean that the owners of patents,
trademarks, and copyrights cannot sue states even when the state
infringes those intellectual property rights. This is an abuse of the
states' Constitutional protection from stir.
It had been widely thought that when a state engages in an activity
that can properly be regulated by Congress, it impliedly consented to
suit in Federal court.\1\ This principle has been eroded over the years
and today states can. use their Constitutional sovereign immunity
protection, even for non governmental activities, such as unfairly
competing with patent owners and infringing their patents.
---------------------------------------------------------------------------
\1\ Parden v. Terminal Railway of Alabama, 377 U.S. 184 (1964).
---------------------------------------------------------------------------
The U.S. Chamber and its members are deeply concerned about this
situation. The system of patent, trademark, and copyright protection in
the United States encourages investment in invention and innovation.
Such protection assures innovative companies and individuals that they
will stand to reap the financial rewards if their new product or
service finds favor in the marketplace. However, when a substantial
group of parties, such as states and state agencies, can disregard
these protections, the intellectual property protections are eroded.
The prospect of state infringement of intellectual property rights
will have an adverse effect on the level of investment in research and
development of new products and services. Companies will be reluctant
to invest the necessary funds in the development of new products when
they know that a state or state agency can appropriate that product or
service to their own use, without licensing the technology or paying
royalties. As states increasingly face budget shortfalls, the
likelihood of their ventures into patented or copyrighted commercial
ventures increases.
States have not shied away from taking advantage of their unfair
status in the marketplace. According to testimony by Marybeth Peters,
Register of Copyrights, in a hearing before the House Judiciary
Committee on this subject in July 2000, four-year state colleges and
universities have registered over 32,000 monographs since 1978 and this
does not include scholarly journals, magazines, newsletters, and
computer programs.
Similarly, the US. General Accounting Office reported to this
Committee last September' that state institutions of higher learning
hold nearly 12,000 patents and 2,700 trade'' in addition to the 32,000
copyrights.
State universities often obtain their patents with federal funding.
They protect and license these patents the same as would any other
patent holder. The U.S. Camber and its members believe that the states
cannot continue to have it both ways. If they participate in the
commercial marketplace, they must abide by the rules that apply ;to
everyone.
We recognize that some states, as a matter of policy, seek licenses
and attempt to avoid infringement. However, so long as the threat of
infringement remains real and not theoretical, the chilling effect will
continue.
The Pending Legislation
The bill now under consideration does not attempt to abrogate state
sovereign immunity. Rather, it requires stares to expressly waive their
immunity if they want to be able to sue to protect their own patents,
trademarks and copyrights. In addition, the legislation provides
remedies against officers or employees of a state or state agency for
unlawful infringement, including monetary damages, declaratory and
injunctive relief, costs, attorneys' fees and destruction of infringing
articles. Furthermore, the legislation creates liability on the part of
the states and state agencies if they violate the rights of
intellectual property owners in such a way as to violate their due
process or unlawful takings rights under the Constitution. Relief under
this section of the legislation would include actual damages, profits,
statutory damages and fees, but would not include treble damages.
This approach is rational and reasonable. It narrowly tailors the
solution to the problem while avoiding the Constitutional shortcomings
that have undermined past efforts at legislation. Rather than broadly
abrogating the states' sovereign immunity protection, it gives the
states an incentive to expressly waive their sovereign immunity. The
case of Alden v. Maine, 119 S. Ct--2240 (1999), established that states
may waive their immunity and that Congress may provide incentives for
such waivers. This legislation offers an incentive--the right to sue to
protect intellectual property owned by the states--in exchange for the
waiver of immunity when the state or state agencies are charged with
infringement. It is a fair and equitable solution.
The U.S. Chamber of Commerce enthusiastically supports this
legislation and urges the Committee to favorably act upon it.
February 19, 2002
Senator Patrick Leahy
Chairman
Senate Judiciary Committee
SD-224 Senate Dirksen Building
Washington D.C. 20510
Dear Senator Leahy,
I write regarding your hearing on Sovereign Immunity and the
Protection of Intellectual Property.
I am a university professor at a public university and a small
business owner. Although my training is in architecture, I conduct
research in the area of self-healing materials--materials that have
wide application in concrete structures such as buildings and airport
runways, in composites such as aircraft wings, and in many other areas.
In 1989, I applied for my first patent in this area., and I have
subsequently obtained several patents on my inventions U.S. Pat numbers
5,561,173 and 5,575,841 and 5,660,624 and 5,803,963 and 5,989,334. The
university for which I work waived it rights in the technology, giving
me all rights to commercialize it and keeping only the right to use it
for internal University purposes.
In August of 1999, I learned that two faculty members at my
University had obtained research grants on my patented ideas and were
seeking to exploit their work commercially using University funds. I
informed the University of the problem and asked the University to stop
supporting grant proposals that were based on my patented ideas,
especially where the granting agencies had not been made aware of my
rights in the area. Rather than resolving the problem, the University
has used the shield of sovereign immunity to continue working in this
area. For example, the University approved a proposal to DARPA for a
$10-15 million center that would use my inventions. After I notified
DARPA, I was told by the contract manager that DARPA had decided not to
fund any work on this topic. As another example, the University chose
this year to back an application on the technology to a government
agency for an approximately $10 million center, and have sought the
involvement of many large commercial entities. I was told second hand
by someone from a faculty committee looking into this problem, that the
Vice Chancellor for Research at the University told them that the
university was immune from lawsuits on patent matters and therefore
could and would ignore the issue.
I believe that this is an attempt by the University to circumvent
the United States patent system and to get to commercial market in a
way others could not. The University's projects involve research toward
commercial ends and use the cover of sovereign immunity to do what a
private company can-not do because of my patent coverage. It appears
that the University would use sovereign immunity to get a tread-start
on my technology, waiting to be the first to market once my patents
expire. A ,private company could not do this, and the University should
not either.
I have tried to get attorneys to take my case. However, no lawyers
that I have met want to take on a case costing $500,400 to $1,000,000
if they can only get an injunction and no damages because of the
University's sovereign immunity. That is especially true when they are
facing the deep pockets of a large public university.
I plead for your intervention. I am person with a small company who
has spent $100,000 of my own money to obtain patent coverage on this
technology to which the University promised me I had the rights. I now
find that at every turn the University and these researchers block me
and my access to research funds and company involvement. They ignore my
patent rights in the invention and instead seek large grants and
commercial involvement in my patented technology. You can see the
injustice of the University's use of sovereign immunity and its heavy-
handed and unethical application against an individual with a small
business.
Sincerely,
Carolyn Dry, Ph.D.
Gray Matter LLC
Newport Beach, California
March 6, 2002
Senator Patrick Leahy,
Chairman,
Senate Judiciary Committee
224 Dirksen Office Building
Washington, D.C. 20510
Re: S. 1611, ``Intellectual Property Protection Restoration Act of
2001''
Dear Chairman Leahy:
I am writing to support enactment of S. 1611, the ``Intellectual
Property Protection Restoration Act of 2001.''
As a principal in a software development firm that relies on the
protection of federal copyright, patent and trademark law, I am
concerned about the Supreme Court's decision Florida Prepaid
Postsecondary Educational Expense Board v. College Savings Bank, 527
U.S. 627 (1999) and the disparity it creates between commercial
entities, who are subject to federal infringement remedies, and state
entities, who are not.
Recent amendments to state law allow conduct by licensees that
infringe an intellectual property owner's rights under federal law. For
commercial licensees, intellectual property owners can sue for
infringement in federal court to protect their rights. For state
entities, however, that avenue is now closed due to Florida Prepaid. As
the GAO reports, many states do not waive sovereign immunity against
suit for infringement and related tort claims. The recent changes to
state law now make even breach of contract actions, for which states do
waive sovereign immunity, unavailable as well.
Examples of these changes include:
Assignment: Under federal law, a non-exclusive intellectual
property license is not assignable without consent of the licensor.
State law now says that most restrictions on assignment of a non-
exclusive license are unenforceable. For example, if our company were
to license software at a reduced price to a state entity ``for
education use only'' and the state entity were then to make an
unauthorized assignment in the commercial market, we would have no
remedies for breach of the license under state law. Florida Prepaid
would deny us access to federal courts to pursue an infringement claim
as well.
Use after cancellation: Under federal law, if we terminate a
license, all silblicenses are terminated as well. This right is
essential to protect our trademark, since continued use by a
sublicensee after such a termination could constitute ``naked
licensing,'' invalidating our mark. State law now says that a
``licensee in the ordinary course of business'' can continue exercising
intellectual property rights after its licensor's rights are
terminated. If one of our licensees makes an unauthorized sublicense to
a state entity that qualifies as a ``licensee in the ordinary course of
business'' and the licensee's rights are then terminated, the state
entity can continue using our software even though it knows it has no
rights. We cannot invoke breach of contract remedies in state court,
and cannot seek remedies for infringement in federal court due to
Florida Prepaid.
Pirated Copies: State law now provides that if software
``customarily is considered part of goods,'' it is treated as
``goods.'' Under state law, a person with a ``voidable'' title to
goods, such as a bailee or a consignee, can transfer good title to a
``good faith purchaser for value'' even if the delivery was procured by
criminal larceny. Under federal law, an unauthorized sale of such
software by a bailee or consignee would be an infringement. However, if
the buyer is a state entity that qualifies as a ``good faith purchaser
for value,'' under state law the software owner cannot sue in state
court for breach of the consignment agreement even if the delivery was
procured by larceny. Florida Prepaid now denies access to federal court
for any infringement remedies as well.
Many of our dealings are international. There is a also a question
whether the U.S. can remain in compliance with its international
obligations, such under the TRIPS Agreement, the WIPO Copyright Treaty,
the Trademark Law Treaty and the proposed Patent Law Treaty. Among
other things, these agreements require recognition of effective
remedies for infringement. If U.S. law does not provide effective
remedies against infringement by state entities, then continued U.S.
compliance with its treaty obligations may be in doubt.
The General Accounting Office Report has presented a thoughtful
report that examines lawsuits against state entities for intellectual
property infringement. While lawsuits are certainly evidence of
infringement, the inquiry need not end there. As the Court said: ``It
is this conduct then--unremedied . . . infringement by the States--that
must give rise to the Fourteenth Amendment violation that Congress
[seeks] to redress.'' Florida Prepaid at 527 U.S. 640 (emphasis added).
To the GOA's list of unavailable tort remedies for infringement against
state entities, one must now add the unavailability of breach of
contract remedies against state entities that license intellectual
property.
There is mounting conflict between the requirements of federal
intellectual property law and state law. For commercial parties,
intellectual property owners can protect their rights by an
infringement suit in federal court. Due to Florida Prepaid, that is not
possible against a state entity, and state law remedies are
increasingly inadequate as well. Legislation like S. 1611 is urgently
needed to correct a significant and growing problem.
Very truly yours,
Lorin Brennan,
Manager
Statement of Hon. Orrin G. Hatch, a U.S. Senator from the State of Utah
Thank you, Mr. Chairman. First, let me thank you for holding this
important hearing today. On the day the Supreme Court issued its
decision in the Florida Prepaid and College Savings Bank cases in 1999,
you and I both pledged to work together to find an appropriate response
to the court that would fairly protect the rights of American
innovators and creators. Continuing that process, today we will have a
discussion of the issues and of your proposed legislation, S. 1611. I
also want to commend your enthusiastic leadership on this important and
complex property rights issue.
You will recall that as part of the fact-finding process the Court
suggested we undertake in fashioning future legislation, I requested
that the General Accounting Office make a study of the factual
background and options available to us. They issued a report on their
findings in September of last year. I would ask that their report,
Intellectual Property: State Immunity Infringement Actions, be included
in the Record of this hearing so as to be included formally in the
Congressional fact-finding process.
In brief, Mr. Chairman, while their process relied largely on self-
reporting, and was therefore not probably exhaustive, what the GAO
found includes the following: First, States very often own intellectual
property and benefit from the federal protection of such intellectual
property. Second, that for most of the 15 years reviewed, most
commentors believed States were liable for infringing intellectual
property rights. Third, that despite this widespread belief, at least
58 active cases were brought against States for infringement and
perhaps hundreds of matters dealt with short of litigation. Fourth,
very few, and perhaps no remedies now exist for redress against a State
or state entity that is violating someone's intellectual property
rights.
Mr. Chairman, this state of affairs is unfair. I applaud you for
seeking to address this imbalance in our intellectual property system
and for holding this hearing today. I understand your legislation seeks
to be clearly within the bounds the Supreme Court has set for such
legislation. I hope, Mr. Chairman, that we might continue to work
together so that we can be sure that, while we can be comfortable with
any final legislation's constitutionality, we can also be certain that
it will be effective in protecting these important property rights and
in restoring a substantial amount of the fairness that has been lost
since 1999. We must ensure that our creators and innovators are
provided adequate and effective protection for their works. That is
what our Constitution empowers this body to do and we have not
hesitated in recognizing the need to do so.
In sum, Mr. Chairman, I hope that we will be able to continue to
work together to make the federal intellectual property system as fair
and as successful as it has been previous to these decisions, and I
look forward to the testimony the Committee receives today.
IPO Association
Washington, D.C. 20037
February 19, 2002
Hon. Patrick J. Leahy Chairman
Committee on the Judiciary
United States Senate
224 Dirksen Senate Office Building
Washington, DC 20510
Dear Mr. Chairman:
I am writing on behalf of Intellectual Property Owners Association
to express our strong support for S. 1611, the Intellectual Property
Protection Restoration Act of 2001.
Intellectual Property Owners Association (IPO) represents companies
and individuals who own patents, trademarks, copyrights and trade
secrets. Our members obtain about 30 percent of patents that are
granted to U.S.: nationals and federally register thousands of
trademarks each year. Our nearly 100 corporate members are largely
U.S.-based technology and consumer products firms.
1PO has been a strong advocate for an effective U.S, intellectual
property system. Our members know that for this system to' function
properly, the right to receive patents, trademarks, and copyrights must
be accompanied by a requirement to respect them. S--1611 seeks to
ensure just that.
By encouraging a waiver of sovereign immunity, S. 1611 attempts to
place States on equal footing with private parties, Quite simply, a
State cannot sue for damages on State-owned intellectual property
without submitting to the possibility of being sued for damages. This
common sense solution should eliminate the State infringement loophole
and make a strong statement for respecting intellectual property rights
worldwide.
We thank you for introducing this legislation and look forward to
working with you on its further consideration.
Sincerely,
Herbert C. Wamsley
Executive Director
International Trademark Association
Washington, D.C. 20036
February 4, 2002
Hon. Patrick Leahy,
Chairman
Committee on the Judiciary
United States Senate
Washington, D.C. 20510
Re: S. 1611, the ``Intellectual Property Protection Restoration Act
of 2001''
Dear Chairman Leahy:
I am writing to lend the support of the International Trademark
Association (``INTA'') to S. 1611, the ``Intellectual Property
Protection Restoration Act of 2001.'' This bill is a fair and effective
measure that would restore federal remedies for violations of
intellectual property rights by states. INTA, the world's largest
organization dedicated exclusively to the protection of trademarks and
to their preservation as valuable tools for consumer protection,
respectfully requests that this letter be made part of the record for
the hearing on federal remedies for state violations of intellectual
property rights,
The matter of state abrogation of sovereign immunity has been of
substantial concern to owners of private intellectual property rights
in light of recent Supreme Court opinions on the Eleventh Amendment to
the U.S. Constitution and federalism, and, Mr. Chairman, INTA very much
appreciates your leadership on this issue. INTA has worked with other
members of the intellectual property community and your staff to
develop legislation that would as a matter of fairness and in the
interest of consumer protection hold states and state entities to the
same principles of law as the private sector. After all, states and
their agencies often present themselves as valid commercial entities
that compete with private sector enterprises. Examples of state
commercial activity include the sale of goods and services, with the
ability to sue for breach of contract, and, most importantly with
respect to trademark law, registration of trademarks on the Principal
and Supplemental Registers of the U.S. Patent and Trademark Office.
We are especially pleased to see that S. 1611 places trademarks as
coequal partners with patents and copyrights in the waiver arrangement
set forth in the bill. We agree with your position that like patents
and copyrights, trademarks are a form of property that falls within the
scope of the Fourteenth Amendment. From bath a common law and statutory
perspective, it is clear that the scope of protection afforded to
trademarks is determined by more than the metes and bounds of the
goodwill attached to them.
Contrary to the view of some commentators that trademark law should
reach only the intangible goodwill attached to particular marks, the
common law always has protected coined, arbitrary, and suggestive marks
from the inception of their use and without a requirement that their
owners demonstrate actual goodwill.\1\ Likewise, a senior user of a
mark may, under certain circumstances, enforce its rights even in
geographic areas in which a junior user has cultivated goodwill in its
own mark first.\2\ It is thus apparent that trademark protection and
goodwill were not necessarily congruent concepts under the common law
even prior to the passage of the Lanham Act.
---------------------------------------------------------------------------
\1\ See, e.g., Blisscraft of Hollywood v. United Plastics Co., 294
F.2d 694, 700 (2d Cir. 1961) (``The presumption that a fanciful word or
mark becomes distinctive and identifies the source of goods on which it
is used immediately after adoption and bona fide first use is basic in
trademark law.'').
\2\ See United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90
(1918); Hanover Star Milling Co. v. Metcalf, 240 U.S. 403 (1916); see
also Davidoff Extension S.A. v. Davidoff Comercio E Industria Lida.,
747 F. Supp. 122 (D.P.R. 1990).
---------------------------------------------------------------------------
Statutory provisions of the Lanham Act, including the Act's
constructive notice and nationwide priority provisions reinforce the
common law rule by requiring a mark owner whose use began after the
issuance of a senior user's registration to forfeit its goodwill in the
face of a challenge by the senior user, even if the junior user adopted
its mark in good faith.\3\ The legislative abrogation of the goodwill
model is even more apparent in the Trademark Law Revision. Act of 1988
(``TLRA''), in which Congress adopted the intent-to-use system after
consultation with the trademark community.\4\ Under this regime,
claimants filing intent-to-use applications may, depending on the
length of the application process, secure priority of rights in their
marks that can predate by years the actual goodwill that accompanies
the ultimate use of the marks in commerce.\5\ Finally, both the express
text and the legislative history of the Federal Trademark Dilution Act
of 1995 (``FTDA'') \6\ clearly reflect an intent to protect not merely
the public from the risk of confusion that is the hallmark of the
traditional infringement cause of action, but also mark owners'
investments as well.
---------------------------------------------------------------------------
\3\ See generally 15 U.S.C. Sec. Sec. 1057(c), 1072; see also
Foxtrap, Inc. v. Foxtrap, Inc., 671 F.2d 636 (D.C. Cir.1982); Howard
Stores Corp. v. Howard Clothing Inc., 308 F. Supp. 70 (N.D. Ga. 1969).
\4\ See Pub. L. No. 100-667, 102 Stat. 3935 (1988).
\5\ See 15 U.S.C. Sec. 1051(b)-(d).
\6\ See Id. Sec. 1125(c).
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INTA does not mean to suggest, of course, that the right to exclude
conferred by a property ownership in a trademark is absolute or that it
should be.\7\ This does not, however, prevent trademarks from being
property rights any more than copyright law's fair use doctrine
precludes copyrights from property status.\8\
---------------------------------------------------------------------------
\7\ See, e.g., 15 U.S.C. Sec. 1115(b)(4) (authorizing ``fair
descriptive uses'' even of words covered by incontestable federal
registrations); see also Stop the Olympic Prison v. United States
Olympic Committee, 489 F. Supp. 1112 (S.D.N.Y. 1980) (holding use of
the ``Olympic'' trademarks by political protesters subject to first
Amendment protection).
\8\ See College Sav. Bank v. Florida Prepaid Post-Secondary Expense
Bd., 119 S. Ct. 2219, 2224 (1999) (``The Lanham Act may well contain
provisions that protect constitutionally cognizable property
interests--notably its provisions dealing with infringement of
trademarks, which are the property of the owner becaase he can exclude
others from using them.'').
---------------------------------------------------------------------------
Mr. Chairman, INTA appreciates that S. 1611 gives due consideration
to the settled expectations of mark owners in their ability to protect
the property rights represented by their brands, whether against the
states or other market participants. We also gratefully acknowledge
your efforts and that of staff to develop legislation that would create
a level playing field between private entities and states that own
intellectual property. INTA looks forward to working towards the
passage of a measure that would effectively protect all forms of
intellectual property rights.
Sincerely,
Nils Victor Montan
President
Mittel Asen LLC,
Attorneys at Law
Portland, ME 04112-0427
Hon. Patrick Leahy
Committee on Judiciary
SD-224
Dirksen Building
Washington DC 20510
Hon. Orrin Hatch
Committee on the Judiciary
SD-152
Dirksen Building
Washington DC 20510
Dear Chairman Leahy and Senator Hatch:
I represent Julie Harrington who has been employed by the State of
Maine at the Northern Maine Juvenile Detention Facility as a teacher
and administrator. Ms. Harrington has written and installed a piece of
software used for inmate tracking.
Ms. Harrington has filed a suit for copyright infringement of that
software against the State of Maine and several state employees in the
United States District Court for the District of Maine, Dkt. No. 02-25-
B-H. Although the State has yet to file its answer, we believe the
state will assert its Eleventh Amendment immunity.
This case was filed well after the conclusion of the GAO study on
the subject. of Eleventh Amendment immunity in the area of intellectual
property. However, to amplify on the statistics appearing in the
report, I consulted with the Maine State Law Library. A search of its
historical legislative database was conducted by Library staff. The
search indicates the following.
There have been 53 bills introduced in the last 10 years through
which a waiver of sovereign immunity for actions in state court was
sought. No bills were introduced seeking a waiver of sovereign immunity
for actions filed in federal court. Of those 53 bills, only four of
those bills had even partial success.
A bill was recently introduced seeking a waiver of sovereign
immunity in federal court on behalf of Ms. Harrington. Its author is
Rep. Anita Haskell, of Milford, Maine.
On behalf of Ms. Harrington, I ask that the Senate approve S. 1611
so that people like herself can obtain adequate compensation of their
intellectually property.
Very truly yours,
Robert E. Mittel
Motion Picture Association
Washington, D.C. 20006
February 26, 2002
Dear Pat
I want to take just a moment to thank you, Mr. Chairman, the
Ranking Republican, Senator Hatch, and your other Judiciary Committee
colleagues for taking rip the ``Intellectual Property Protection
Restoration Act'' (S. 1611). As you know, the MPAA strongly 5uhports
your efforts to redress the inequities rendered by the Suprerne Court's
recent Florida Prepaid decisions, which effectively immunized states
from liability for state infringements of private intellectual property
rights. We believe S. 1611 is appropriate, timely, and much deeded
legislation, and I encourage you to move swiftly toward its enactment.
MPAA member companies are among the leading producers and
distributors of motion pictures in the United States. Collectively our
companies produce and distribute roughly 90 percent of the filmed
entertainment in the theatrical, television, and horne video markets.
State-owned entities--schools, libraries, public agencies, even
prisons--are significant consumers of these products, including through
purchase or licensing of copies and public performance rights.
Increasingly, these entities are acting not just as consumers, but also
as competitors in the marketplace, as was the case with the alleged
patent and trademark infringements in the Florida Prepaid cases.
Unfortunately, in its efforts to limit Congress' Article I powers
to abrogate State sovereign immonity, the Supreme Court has created an
anomalous situation wherein states--unlike the Federal Government--are
free to enjoy Federal intellectual property protection and to exploit
that protection against private parties, including to their own
competitive advantage, but are left free from obligation to respect the
intellectual property rights of private parties. This is an inequity
that cries out for congressional attention, as it did over a decade
ago, in 1990, when the Judiciary Committee first took up, and Congress
passed, the Copyright Remedy Clarification Act (CRCA) to level the
playing field in this area.
Fortunately, in limiting Congress' Article I powers, the Supreme
Court has not in any way suggested that Congress cannot, or should not,
act to maintain a level playing field in the exploitation of Federally-
granted intellectual property rights. In fact, quite to the contrary,
the Florida Prepaid cases provide valuable guidance in terms of the
several ways in which Congress may properly exercise its legitimate
authority to that end. we believe that S. 1611 reflects a faithful
adherence to the lessons of Florida Prepaid and the cases that preceded
it, and we commend your thoughtful study of these issues and the care
with which you have crafted the provisions of this legislation.
Again, thank you for your attentive efforts in this area. We look
forward to continuing to work with you to ensure timely enactment of
this important legislation.
With affection
Jack Valenti
Chairman, Chief Executive Officer
Professional Photographers of America
Atlanta, GA 30303
February 25, 2002
Hon. Patrick Leahy
Chairman,
Senate Judiciary Committee
224 Dirksen Building
Washington, DC 20510
Mr. Chairman, Senator Hatch and members of the Committee:
On behalf of Professional Photographers of America and its 14,000
members working in all fields of photography and imaging, thank you for
the opportunity to be heard regarding the Intellectual Property
Protection Restoration Act of 2001. As the world's largest and oldest
trade association for professional photographers, the protection of our
members' work from illegal copying is of primary concern.
Unfortunately, the Supreme Court's nullification of Congressional
Acts designed to prevent States and their agencies from seizing the
intellectual property of photographers, artists and inventors without
any form of compensation has created an environment where States may
freely trample on the rights of citizens.
In addition to violating the right of individuals to be secure in
their property, the current state of affairs permits States to
economically harm small businesses--the very backbone of our national
economy. In general, photographers do not derive the majority of their
income from the initial creation of photograph. Instead, their income
comes from licensing the images they create for a set purpose, period
of time or presentation to a specific audience. This arrangement,
created by market forces, allows photographers to profit from their
work and makes high-quality images more affordable to those clients who
require only limited usage of a particular image. Without adequate
protection from copyright infringements, this system no longer
functions properly.
Since State governments and their agencies have been placed above
the reach of federal intellectual property laws, they have no incentive
to compensate an artist for his or her endeavors. These governments
have both the opportunity and ability to steal the creative efforts of
both those who do business with them directly, and of those whose work
can be viewed on the Internet. In addition to the direct harm from lost
sales, such ability dilutes the ability of photographers to earn income
by licensing these works to others.
Ironically, while States and their agencies are free to ignore the
patents, trademarks and copyrights of individual citizens and
businesses, works created by States are given full protection of the
law. The net effect of the current legal environment is a chilling of
the individual's incentive to promote the progress of the useful arts
and sciences, which runs counter to the entire purpose of the
Constitution's copyright clause.
Fortunately, this gaping hole in intellectual property protections
can be easily patched. The Intellectual Property Protection Restoration
Act, with its careful construction that stays within the boundaries set
by the Supreme Court, is an excellent opportunity for Congress to right
this wrong and restore the longstanding ability of individuals to
protect themselves from State infringements.
We respectfully urge the committee to remedy this unequal
protection of the law and restore the protections of all patent,
copyright and trademark owners from infringement by State governments
by approving Senate 1611.
Again, we thank the committee for this opportunity.
Respectfully submitted,
David P. Trust
Chief Executive Officer
Professional Photographers of America
Atlanta, GA 30303
April 2, 2002
Hon. Patrick Leahy
Chairman,
Senate Judiciary Committee
224 Dirksen Building
Washington, DC 20510
Mr. Chairman, Senator Hatch and members of the Committee:
As part of our testimony regarding S. 2031, the Intellectual
Property Protection Restoration Act of 2002, we offer the stories of
three photographers who have been the victims of infringement by a
state government or one of its divisions:
1. According to photographer Ken Meade of Hillsboro, Illinois, he
created images of a state resort park for the Illinois Department of
Tourism in 1989. Originally, the images were used according to the
agreement between the photographer and the state. However, in 1998, the
same year that states were given sovereign immunity in copyright suits,
Illinois reused the images in a new brochure without securing
permission of the copyright owner or offering payment for the
additional usage. When questioned about the images, the State claimed
ownership of the images.
2. David Boyce of Portage, Michigan reports that he was in a local
camera store and noticed a clerk making copies of professionally made
high school senior portraits. Being one of the store's ``regulars,''
Mr. Boyce asked what the employee was doing. She said she was making
the copies for Western Michigan University. According to Mr. Boyce, he
then examined the photographs, and all of them were marked as being
copyrighted by their respective photographers. Mr. Boyce pointed out
that making such copies violated the law. The clerk agreed but said the
University had given her permission to make the copies. The clerk then
produced a letter from the University stating that they were aware of
the copyright laws and regulations and they would take responsibility
for infringement.
3. According to John D. Landry Jr., of Landry Studio in Carencro,
Louisiana he created 360-degree panoramic photographs during a football
game between the University of Southwest Louisiana (now known as UL-
Lafayette) and the University of Alabama at Cajun Field in Lafayette,
Louisiana. Dan McDonald, USL Athletic Information Director, asked to
see the images for the purpose of reviewing them with the school's
athletic director the head coach. They were supplied a contact sheet,
with the copyright notice attached. Without the photographer's
knowledge or consent, the University copied an image from the contact
sheet and printed the image on the season tickets for the next (1991)
football season.
Intellectual property owners should not be forced to live in fear
that they have no recourse if a state government destroys their ability
to derive economic gain from their artistic and creative labors.
Bearing that in mind, we urge passage of S. 2031, so that photographers
and other intellectual property holders may once again have adequate
remedies for copying by state governments.
Respectfully submitted,
David P. Trust
Chief Executive Officer
Software & Information Industry Association
Washington, DC 20005-4095
March 4, 2002
Chairman Leahy
Committee on the Judiciary
United States Senate
Washington, DC 20510
Dear Mr. Chairman:
The Software & Information Industry Association (SIIA) hereby
requests that the following letter and attachments be included in the
record for the hearing before the Senate Judiciary Committee on S.
1611, the Intellectual Property Protection Restoration Act held on
February 27th, 2002.
SIIA is the principal trade association of the software and
information industry and represents over 800 high-tech companies that
develop and market software and digital content for business,
education, consumers, the Internet, and entertainment. Hundreds of
these companies look to SIIA to protect their intellectual property
rights around the world. SIIA combines strong antipiracy education and
enforcement efforts through such programs as its piracy hotline (1-
800388-7478), the Certified Software Manager course, SPAudit, KeyAudit,
the Software Management Guide, videos, posters and other educational
and audit materials. Information on SIIA and its wide range of
antipiracy activities can be found at www.siia.net.
SIIA supports immediate enactment of legislation that would level
the playing field between state entities and other intellectual
property owners. State entities should not be able to benefit from the
patent, copyright and trademark laws as owners of intellectual property
but not be liable for damages for infringing the intellectual property
rights of others. SIIA appreciates the efforts of Chairman Leahy and
his staff to resolve this problem. We support S. 1611 and urge its
immediate consideration and enactment.
Following the Supreme Court's decisions in Florida Prepaid v.
College Savings, SIIA's antipiracy division undertook a review of its
records to determine whether and to what extent State entities were
infringing our members' copyrights. SIIA was extremely conservative in
determining which entities were ``state entities.'' If there was any
doubt whether an entity was a state entity that entity was excluded
from our study. Further, we only included in our study obvious and
flagrant instances of piracy. We are able to make this determination
largely because after SIIA learns of a possible infringement, we audit
the infringing entity's computers. The audit helps us conclusively
determine what software exists on an entity's computers and how much of
that software is licensed and how much is illegal.
In the six years covered by the review,\1\ we identified at least
77 matters involving infringements by State entities. Of these 77
matters, approximately 50% involved State institutions of higher
learning. The other 50% consisted of State hospitals, bureaus, public
service commissions, and other instrumentalities. In the overwhelming
majority of cases, no litigation actually resulted. This helps bolster
assertions made by the U.S. Copyright Office and U.S. Patent and
Trademark Office and others that the results published in the GAO
report do not accurately reflect the amount of intellectual property
infringement engaged in by state entities because many--if not most--
instances of intellectual property infringement never find their way
into the courts. Moreover, the SIIA study covers only those matters
reported to SIIA. We have no doubt that a far greater number of State
infringements than we are made aware of go undetected and unreported.
---------------------------------------------------------------------------
\1\ Because of confidential settlement agreements, we cannot reveal
the identity of the parties in these matters, and can make this
information available only in the aggregate.
---------------------------------------------------------------------------
The Florida Prepaid decision has had a dramatic and adverse effect
on our ability to combat software piracy by state entities. The most
recent example of this occurred this past Monday, February 25, 2002.
Through a confidential source, SIIA was alerted to the piracy of
hundreds of computer software programs on computers owned by Spring
Grove Hospital Center in Baltimore, Maryland. With Spring Grove's
approval, SIIA audited their computers to determine the extent of the
piracy. The audit revealed several hundred thousand dollars worth of
unlicensed software, which the hospital acknowledged.
For more than a year SIIA and Spring Grove Hospital attempted to
work out a settlement. This settlement was to involve a monetary sum to
be paid by Spring Grove Hospital ranging anywhere from three quarters
of a million dollars to a quarter of a million dollars, with SIIA and
the hospital negotiating in good faith toward a reasonable settlement.
Although the actual amount of monetary damages at issue in this case
might be disputed, it is evident that the amount was large and directly
related to the amount of software piracy taking place in their
facilities. Also, as is the case with all SIIA settlement agreements,
any settlement agreement with Spring Grove would have required them to
legitimately license the software.
On Monday, February 25th, SIIA's antipiracy department received a
letter from Spring Grove Hospital asserting their 11th Amendment
immunity and referencing the Florida Prepaid and Rodriguez cases. (see
Attachment A) They now refuse to pay any monetary damages. So, although
Spring Grove Hospital has all but admitted wrong doing and appeared
potentially willing to settle the case for hundreds of thousands of
dollars in damages, once they discovered this giant loophole in the law
they took full advantage of it.
This case illustrates the unfairness of the Court's sovereign
immunity decisions. Effectively, the State gets at least one free
infringement-no matter how large the damage. The State went from
potentially paying a sum of at least a quarter million dollars for the
infringed software to zero. They made no offer to pay for licenses that
they would need to make their use of the software legitimate. Moreover,
without the threat of damages, it is unlikely that the State would
agree to an audit in the first instance, which is the primary way that
we determine the extent of piracy at a given location. The current
state of the law virtually forces SIIA to sue for an injunction first,
and ask questions later.
This is just one example. There are many others. In fact, after
discovering software piracy by a state entity in New Hampshire, that
state entity threatened legal sanctions against SIIA for attempting to
either: (1) enjoin further infringing acts; or (2) obtain damages for
unauthorized use of software. (see Attachment B). The results in these
cases exemplifies the types of problems enforcing the intellectual
property rights of our members. It also completely undercuts the
incentive for states to monitor their copyright compliance. It is
precisely this kind of inequity that Congress attempted to remedy when
it passed the CRCA in 1990, and that we are asking the Committee to
remedy.
Thank you again for all your work in this very complex area of the
law and thank you for this opportunity to submit our comments into the
record. If you need more information on our study or these two cases,
please feel free to contact SIIA Intellectual Property Counsel, Keith
Kupferschmid by e-mail at [email protected] or by phone at (202) 789-
4442.
Sincerely,
Ken Wasch
President
-