SPEAKERS CONTENTS INSERTS
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66–710
2000
STATE SOVEREIGN IMMUNITY AND PROTECTION OF INTELLECTUAL PROPERTY
HEARING
BEFORE THE
SUBCOMMITTEE ON
COURTS AND INTELLECTUAL PROPERTY
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
JULY 27, 2000
Serial No. 99
Printed for the use of the Committee on the Judiciary
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For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
COMMITTEE ON THE JUDICIARY
HENRY J. HYDE, Illinois, Chairman
F. JAMES SENSENBRENNER, Jr., Wisconsin
BILL McCOLLUM, Florida
GEORGE W. GEKAS, Pennsylvania
HOWARD COBLE, North Carolina
LAMAR S. SMITH, Texas
ELTON GALLEGLY, California
CHARLES T. CANADY, Florida
BOB GOODLATTE, Virginia
STEVE CHABOT, Ohio
BOB BARR, Georgia
WILLIAM L. JENKINS, Tennessee
ASA HUTCHINSON, Arkansas
EDWARD A. PEASE, Indiana
CHRIS CANNON, Utah
JAMES E. ROGAN, California
LINDSEY O. GRAHAM, South Carolina
MARY BONO, California
SPENCER BACHUS, Alabama
JOE SCARBOROUGH, Florida
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DAVID VITTER, Louisiana
JOHN CONYERS, Jr., Michigan
BARNEY FRANK, Massachusetts
HOWARD L. BERMAN, California
RICK BOUCHER, Virginia
JERROLD NADLER, New York
ROBERT C. SCOTT, Virginia
MELVIN L. WATT, North Carolina
ZOE LOFGREN, California
SHEILA JACKSON LEE, Texas
MAXINE WATERS, California
MARTIN T. MEEHAN, Massachusetts
WILLIAM D. DELAHUNT, Massachusetts
ROBERT WEXLER, Florida
STEVEN R. ROTHMAN, New Jersey
TAMMY BALDWIN, Wisconsin
ANTHONY D. WEINER, New York
THOMAS E. MOONEY, SR., General Counsel-Chief of Staff
JULIAN EPSTEIN, Minority Chief Counsel and Staff Director
Subcommittee on Courts and Intellectual Property
HOWARD COBLE, North Carolina, Chairman
F. JAMES SENSENBRENNER, Jr., Wisconsin
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ELTON GALLEGLY, California
BOB GOODLATTE, Virginia
WILLIAM L. JENKINS, Tennessee
EDWARD A. PEASE, Indiana
CHRIS CANNON, Utah
JAMES E. ROGAN, California
MARY BONO, California
HOWARD L. BERMAN, California
JOHN CONYERS, Jr., Michigan
RICK BOUCHER, Virginia
ZOE LOFGREN, California
WILLIAM D. DELAHUNT, Massachusetts
ROBERT WEXLER, Florida
BLAINE MERRITT, Chief Counsel
VINCE GARLOCK, Counsel
DEBBIE K. ROSE, Counsel
ALEC FRENCH, Minority Counsel
EUNICE GOLDRING, Staff Assistant
C O N T E N T S
HEARING DATE
July 27, 2000
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OPENING STATEMENT
Coble, Hon. Howard, a Representative in Congress From the State of North Carolina, and chairman, Subcommittee on Courts and Intellectual Property
WITNESSES
Dickinson, Todd, Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office, United States Department of Commerce
Lemley, Professor Mark A., Boalt Hall School of Law, University of California at Berkeley
Meltzer, Professor Daniel J., Harvard Law School, Harvard University
Peters, Marybeth, Register of Copyrights, Copyright Office of the United States, Library of Congress
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Dickinson, Todd, Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office, United States Department of Commerce: Prepared statement
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Leahy, Hon. Patrick, a U.S. Senator From the State of Vermont: Prepared statement
Lemley, Professor Mark A., Boalt Hall School of Law, University of California at Berkeley: Prepared statement
Meltzer, Professor Daniel J., Harvard Law School, Harvard University: Prepared statement
Peters, Marybeth, Register of Copyrights, Copyright Office of the United States, Library of Congress: Prepared statement
STATE SOVEREIGN IMMUNITY AND PROTECTION OF INTELLECTUAL PROPERTY
THURSDAY, JULY 27, 2000
House of Representatives,
Subcommittee on Courts and
Intellectual Property,
Committee on the Judiciary,
Washington, DC.
The subcommittee met, pursuant to notice, at 9:04 a.m., in Room B–352, Rayburn House Office Building, Hon. Howard Coble [chairman of the subcommittee] presiding.
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Present: Representatives Howard Coble, Howard L. Berman, and F. James Sensenbrenner.
Staff present: Blaine Merritt, chief counsel; Vince Garlock, counsel; Debbie Rose, counsel; Eunice Goldring, staff assistant; Alec French, minority counsel; Sam Garg, minority counsel.
OPENING STATEMENT OF CHAIRMAN COBLE
Mr. COBLE. Good morning, ladies and gentlemen. The subcommittee will come to order.
Today we will discuss State sovereign immunity and the protection of intellectual property. To the great benefit of the United States, the authors of the Constitution understood how the creative arts and sciences would be valuable to the American people, both financially and culturally. The Constitution gives Congress the power to enact laws that give authors and inventors rights in their respective creations for a limited time.
Congress has enacted such laws since 1790, resulting in the development of American intellectual property that is the envy of the world. It is one of the top U.S. exports, generates billions of dollars in revenue, creates jobs, and enriches the lives of the American people and the world. Since the enactment of the first intellectual property laws, it was universally understood that these laws applied to the States which could be subject to suit in Federal court for damages resulting from infringement.
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Historically, Congress assumed its article I powers enabled it to abrogate State sovereign immunity under the 11th amendment. However, after the Supreme Court ruled that the intent to abrogate based on article I must be explicitly evident in the relevant statute, some district courts held that the 1976 Copyright Act did not effectively abrogate State sovereign immunity.
To close this loophole, Congress enacted three laws between 1990 and 1992 to abrogate State sovereign immunity: the Copyright Remedy Clarification Act, the Patent and Plant Variety Protection Remedy Clarification Act, and the Trademark Remedy Clarification Act. In 1993, the Copyright Remedy Clarification Act was challenged. Before the fifth circuit made a final ruling, the Supreme Court handed down several decisions that had a direct impact on the case.
In Seminole Tribe of Florida v. Florida, the Court overruled previous case law and held that Congress could not use its article I powers to abrogate State sovereign immunity. In Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank, the Court voided the Patent and Plant Variety Protection Remedy Clarification Act. While the Court held that abrogation was possible under the Enforcement Clause of the 14th amendment, the act was not a proper exercise of that power.
Finally, in College Savings Bank v. Florida Prepaid Postsecondary Education Expense Board, the Court voided the Trademark Remedy Clarification Act to the extent it abrogated State immunity with regard to false advertising claims. Based on these rulings, the fifth circuit subsequently held that the Copyright Remedy Clarification Act was unconstitutional.
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The import of these decisions is very serious for intellectual property owners since States now have the ability to infringe copyrights, patents, and trademarks with impunity. These potential infringements add up to millions of dollars of lost revenue to intellectual property owners.
Adding to the unfairness of the situation is the fact that States can and do own copyrights, patents, and trademarks. A State may bring an infringement suit in Federal court against a private individual, but a private individual may not sue that State for the same transgression. This result creates an uneven playing field and otherwise conflicts with the spirit of article I, section 8 of the Constitution.
In conclusion, this hearing is not intended to focus on a definitive solution to this problem, rather, it represents the first step in doing so. The hearing is intended to educate the subcommittee about this important issue, its background, the implications of current case law on the subject, and those efforts to find a solution to the problem of consistently protecting intellectual property rights in a constitutionally permissible manner.
I am now pleased to recognize the ranking member, Mr. Berman from California.
Mr. BERMAN. Well, thank you very much, Mr. Chairman, for holding the hearing, for rescheduling the hearing to 9 o'clock to accommodate the fact that I have a markup in the Immigration Subcommittee that I have to be at—and because of that will have to leave here probably around 10:15 or 10:30. We have compiled a very impressive list of witnesses on an important subject.
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The whole constitutional implications of the issues raised by the recent court decisions you discussed requires serious and careful study, and I am glad you gathered such knowledgeable and highly credentialed witnesses to guide us through the complex details.
From 1989 to 1992, the subcommittee had several meetings, hearings, and markups to discuss essentially the same issue. Back then, we were reacting to the Atascadero and Shu decisions which indicated that existing Federal law did not constitute an appropriate abrogation of State sovereign immunity against suits for intellectual property infringements. To achieve an appropriate abrogation, we considered in the past the Copyright Remedy Clarification Act, the Patent Remedy Act, and the Trademark Remedy Clarification Act. We are now, once again, faced with judicial holdings that States are immune from suit for intellectual property infringements due to deficiencies in relevant Federal laws.
In the recent College Savings, Florida Prepaid, and Chavez decisions, the Supreme Court and the fifth circuit found that the TRCA, the PRA, and the CRCA do not represent appropriate abrogations of State sovereign immunity from suit. As a result of these recent decisions, we find ourselves today embarking down the same road we traveled during the 101st and 102nd Congresses. It is a road that we must proceed down with great care.
The Supreme Court and several courts of appeal used some of the legislative record created during the 101st and 102nd Congresses as support for striking down those three laws. For example, in the College Savings case, the Supreme Court quoted then Chairman Kastenmeyer's statement at a hearing, ''We do not have any evidence of massive or widespread violation of patent laws by the States, either with or without this immunity.''
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From this and similar statements, the court concluded that the legislative record of the Patent Remedy Act contained indications that the extent of previous patent infringement by States had not yet risen to emergency levels.
I might just add I find it funny how the court looks at the legislative history in order to turn it against us sometimes, but in the cases where it would lead to an interpretation that the court might not like, they view it with a great deal of disdain.
But based partly on the court's conclusion, the court decided that the PRA was not an appropriate exercise of Congress' power to enforce by appropriate legislation the 14th amendment prohibition against State deprivation of property without due process of law. In other words, because it saw insufficient evidence of States' depriving citizens of their intellectual property, the State concluded that the PRA was substantive, not remedial in nature, and thus not appropriate enforcement legislation under section 5 of the 14th amendment.
The chairman has appropriately designed this hearing to avoid the possibility of creating an adverse legislative record. Our witnesses will explain the legal theories behind the recent court decisions, the policy implications that result from those decisions, and the extent to which States utilize the intellectual property system. However, in order to avoid the pitfalls I mentioned, I do not expect that the hearing today will discuss the extent of State infringements or the inadequacy of State remedies.
I would like to make it clear from the outset that we are not out to get the States for infringement. Rather, it 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 rights of others, the law is distinctly unfair and imbalanced.
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Those decisions created such unfairness and imbalance in Federal law. After those decisions, States can infringe the intellectual property rights of others with virtual impunity, while still enforcing their own intellectual property rights against all others. This situation is made doubly unfair by virtue of the fact that States often engage in for-profit enterprise and direct competition with private actors. States run publishing houses, radio stations, restaurants, and hospitals, develop drugs, medical technologies, and commercial software products, and sell a variety of merchandise. To the extent that they do not have to license or otherwise pay for intellectual property rights when running these businesses, States have a competitive advantage over private actors. That is not right, even though my alma mater, University of California, would be among the largest of these owners of intellectual property. Furthermore, to the extent that States can enforce their intellectual property rights against competitors but need not fear infringement suits themselves, States have an additional competitive advantage.
I think we have to go back to the drafting board on this issue and craft a constitutionally permissible statute that requires States to respect the intellectual property rights of private actors. I understand that several promising approaches have already emerged. I am not wedded to any particular approach, but the waiver idea does seem particularly elegant and fair, essentially telling States that you can't have your cake and eat it too.
I hope our witnesses can illuminate the advantages and disadvantages of these approaches from both constitutional and practical perspectives.
Thank you, Mr. Chairman.
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Mr. COBLE. I thank the gentleman.
Our first witness will be the Honorable Todd Dickinson, who is an Under Secretary of Commerce for Intellectual Property and Director for the U.S. Patent and Trademark Office, Department of Commerce. Mr. Dickinson earned his B.S. degree in chemistry from Allegheny College and a J.D. from the University of Pittsburgh.
We have your written statement, Mr. Dickinson, and if could confine your comments to on or about 5 minutes, we would be appreciative.
STATEMENT OF TODD DICKINSON, UNDER SECRETARY OF COMMERCE FOR INTELLECTUAL PROPERTY AND DIRECTOR OF THE UNITED STATES PATENT AND TRADEMARK OFFICE, UNITED STATES DEPARTMENT OF COMMERCE
Mr. DICKINSON. Thank you very much, Mr. Chairman, and thanks to you and Mr. Berman and your staff for accommodating me this morning. As you pointed out, I have 300 folks waiting for me over in Crystal City to talk about business method patents. So it is a kind of a busy day for intellectual property.
Mr. COBLE. If the gentleman would yield, Mr. Berman, before you came, I thanked these folks for accommodating their schedule to work with us, and I hope no one has been unduly inconvenienced.
Mr. BERMAN. And if you want to get into business method patents here, we can do that.
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Mr. DICKINSON. I have got a whole day on that today.
I also want to thank my colleague, Register of Copyrights Marybeth Peters, who we work with so closely, for letting me precede her today. She is a widely recognized expert in this fields and extremely knowledgeable, and you are certainly saving the best for later on. But I am pleased to be with you as well to discuss this question of State sovereign immunity and its impact on the enforcement on federally protected intellectual property rights.
The Supreme Court's 11th amendment decisions last year in Florida Prepaid and College Savings Bank pose critically important issues for intellectual property policy. They have produced, to say the very least, a complex and daunting legal landscape.
Our goal from the intellectual property perspective is to ensure that the States and the State instrumentalities are subject to sufficient enforcement mechanisms to deter infringement and adequately protect intellectual property. It may be stating the obvious, but there is no point in passing effective legislation that the Supreme Court will ultimately find infirm under the Constitution. Moreover, there is no point in passing legislation that will pass constitutional muster but won't give effective remedies against intellectual property infringement.
So we have two primary concerns in this regard, although I need to make clear at the outset that my remarks don't necessarily reflect the administration's position. They reflect the USPTO's position.
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First, the post Florida Prepaid situation is clearly inequitable and provides a potential windfall for States at the expense of the America's inventors, large and small. States benefit from an enormous collection of federally granted intellectual property rights, each and every one of which is protected and enforced by Federal courts. Yet while they enjoy all the rights of intellectual property owners and plaintiffs, they are now shielded from significant financial liability as intellectual property users or defendants, creating rather extraordinary potential inequity, some of which Mr. Berman has pointed out, but to cite, for example, the possibility that a State university teaching assistant could download copyrighted textbooks or patented computer software for distribution to their students. We understand that, at a minimum, 2.5 percent of all utility patents issue to State academic institutions, and that doesn't count non-profits, affiliated organizations, State hospitals, and the like.
Second, if left unaddressed, the Florida Prepaid decisions could make it more difficult for the United States to advocate strong intellectual property protection internationally. When we criticize another country for having insufficient enforcement protection against patent, trademark, and copyright infringers, that country may point out that we have no financial penalties at all with the infringers of a State university, a hospital, or a government office. As a result, countries that have intellectual property laws that are weak or inconsistent with the TRIPS agreement could become increasingly resistant to American pressure to improve their laws.
In order to address these problems, the USPTO has been looking for ways to ensure that States and State instrumentalities are subject to sufficient enforcement mechanisms to deter infringement and adequately protect intellectual property.
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Last March, for example, we hosted a conference on the subject in cooperation with the American Intellectual Property Law Association and the Intellectual Property Section of the ABA. The conference included a number of high-powered legal thinkers, including Professors Meltzer and Lemley, whom you will hear from later today.
Based upon the outcome of this conference as well as other discussions among interested parties, we believe some legislative response to the Florida Prepaid cases is appropriate. Accordingly, we have focused attention on three basic options for State accountability in intellectual property cases: first, injunctive relief under Ex parte Young; second, the abrogation of State immunity from damage suits through the power given to Congress by section 5 of the 14th amendment; and, third, a waiver of State immunity in exchange for participation in certain Federal programs. Let me comment briefly on each of these three options.
With respect to Ex parte Young, the USPTO is likely to recommend in our upcoming report on the March conference that Congress formally reaffirm by statute that the doctrine be available for intellectual property suits.
In the area of abrogation, while we would support a thorough review of this option, we are also likely to recommend that Congress not attempt as broad an abrogation as was struck down in the Florida Prepaid cases until further meaningful empirical work has been done on the extent of State violations of intellectual property rights and the nature of remedies available to private intellectual property owners in State courts.
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With respect to waivers of State immunity, the panelists at our March conference gave considerable attention to participation in certain Federal spending programs could be conditioned on a waiver of sovereign immunity. The administration, however, is not convinced of the desirability of putting such conditions on any key Federal spending programs. Instead, we are likely to recommend that Congress look very carefully at the possibility of eliciting waivers of sovereign immunity in exchange for the State's ability to participate in the Federal intellectual property system. In that regard, Senator Leahy's bill, in particular, offers one model for such a waiver system, a model that deserves careful attention as we move forward in the discussions and debate.
While waiver, abrogation, and Ex parte Young are the big three theories for holding States liable for IP infringement, other options may also be considered. They include looking at the possibility of qui tam suits or adjusting State liability for IP infringements so it better parallels that of the Federal Government.
Mr. Chairman, the USPTO and the administration look forward to working with you and your staffs, as well as your Senate counterparts, as we thoroughly examine all of these options. We are hopeful that together we can resolve the problems raised by Florida Prepaid and ensure that States and State instrumentalities are subject to sufficient enforcement mechanisms to deter infringement and to protect intellectual property rights.
Thank you very much.
[The prepared statement of Mr. Dickinson follows:]
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PREPARED STATEMENT OF TODD DICKINSON, UNDER SECRETARY OF COMMERCE FOR INTELLECTUAL PROPERTY AND DIRECTOR OF THE UNITED STATES PATENT AND TRADEMARK OFFICE, UNITED STATES DEPARTMENT OF COMMERCE
Mr. Chairman, Members of the Subcommittee, it is a pleasure to be here today to discuss state sovereign immunity under the Eleventh Amendment and its impact on the enforcement of federally-protected intellectual property rights.
I want to thank you, Mr. Chairman, and the ranking member of the Subcommittee for organizing today's hearing. I believe that the Supreme Court's decisions last year on state sovereign immunity pose a critically important issue for intellectual property policy. I also want to recognize Senator Hatch's and Senator Leahy's leadership on this issue. In fact, the very first question I faced in my confirmation hearing was from Senator Hatch about the Florida Prepaid decisions. Moreover, Senator Leahy has already introduced legislation to address the effect of these Supreme Court decisions—something I will talk about further today.
Professors Daniel Meltzer from Harvard and Mark Lemley from UC Berkeley, both of whom have participated in the USPTO's efforts in this area, will be offering testimony shortly. They are so knowledgeable about the legal doctrines involved that any discussion of the constitutional and jurisprudential problems from me would be neither as succinct nor as clear as what these scholars will have to say. Accordingly, I would like to focus my remarks on describing the Administration's efforts in this area, what we see as the major issues, and our hopes for action in the next Congress. Let me be clear that my remarks do not necessarily reflect the Administration's position, however, as the USPTO continues to consult within the Administration on sovereign immunity issues.
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To summarize briefly, our goal from the intellectual property (IP) perspective is to ensure that the States and state instrumentalities are subject to sufficient enforcement mechanisms to deter infringement and adequately protect IP. It may be stating the obvious, but there's no point in passing effective legislation that the Supreme Court will ultimately find infirm under the Constitution. Moreover, there is no point in passing legislation that will pass constitutional muster, but not give effective remedies against intellectual property infringements.
The Florida Prepaid Cases
In 1999, the U.S. Supreme Court issued a series of opinions addressing the right of States to assert sovereign immunity. Two of these cases directly concerned Federal intellectual property statutes. In Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank, 119 S. Ct. 2199 (1999), a 5–4 majority of 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.
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In a companion case, College Savings Bank v. Florida Prepaid Postsecondary Education Expense Board, 119 S. Ct. 2219 (1999), the Court considered whether states can be sued for unfair competition under §43(a) of the Lanham Act (15 U.S.C. 1125(a)) where the Trademark Remedy Clarification Act (TRCA) had: (1) amended §43(a) by defining ''any person'' to include state and state instrumentalities; and (2) expressly abrogated state sovereign immunity for §43(a) suits. The same 5–4 majority as in Florida Prepaid held that TRCA 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, and the Attorney General has determined, and informed Congress, that the current legislative record will no longer support a defense of the constitutionality of the abrogation provisions in the current copyright and trademark statutes.(see footnote 1)
The Florida Prepaid and College Savings cases (the Florida Prepaid decisions) followed the Court's earlier ruling in Seminole Tribe v. Florida, 517 U.S. 44 (1996), which established 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 Article I power. These results have produced, to say the least, a complex and daunting legal landscape.
The Administration's Efforts
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The U.S. Patent and Trademark Office (USPTO) has been looking at the problems arising from the Florida Prepaid decisions since last fall. This includes participating in an informal discussion group on the cases with private industry, the Copyright Office, and both House and Senate staff, among others and hosting an all-day conference on March 31, 2000, in cooperation with American Intellectual Property Law Association (AIPLA) and the Intellectual Property Section of the American Bar Association (ABA). The conference discussed the various legislative options and constitutional issues that face the intellectual property community in the wake of the Florida Prepaid decisions. I'm proud to say that we assembled probably the most high-caliber collection of legal thinkers yet to congregate in one room to discuss these cases.
Our panelists on March 31 included Professors Meltzer and Lemley, who will be addressing the Subcommittee later in this hearing. In addition, the conference's scholars included Erwin Chemerinsky from USC; Rochelle Dreyfuss from NYU; Daniel Farber from the University of Minnesota; Jane Ginsburg from Columbia; Marci Hamilton from Cardozo Law School; Tom Lee from Brigham Young; Peter Menell from Berkeley; and Ernie Young from the University of Texas. People who follow legal academic journals may note an outpouring of law review articles on the Florida Prepaid cases now and in the coming months(see footnote 2)—and a large chunk of that scholarship is from law professors who participated in the conference and who are continuing to provide advice to the USPTO on this issue. To ensure that the States' perspective was adequately represented, we also had the Solicitors-General of New York and Kansas as well as the Supreme Court counsel of the National Association of Attorneys-General on our panel.
In addition to the panelists, the conference had approximately 100 attendees. Most intellectual property trade associations(see footnote 3) and many individual companies were represented at the conference, including Dow Chemical, Glaxo Wellcome, McGraw-Hill, Merck, Reed Elseveier, and Time/Warner. There were also attendees from several state institutions (George Mason University, State of South Dakota Regents, University of Maryland, Virginia Polytechnic), as well as from the State of Texas Attorney General's Office and the Wisconsin Department of Justice. Attendees affiliated with the Federal Government came from the Court of Federal Claims, the Senate Judiciary Committee staff, the House Judiciary Committee staff, the Copyright Office, the Federal Trade Commission, the Department of Commerce, the Department of Education, and the National Institutes for Health.
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The USPTO will be issuing a report summarizing the ideas and proposals discussed at the conference and making some initial recommendations on how to address the legal landscape created by the Florida Prepaid decisions. A lot of energy and thought is going into that report. Therefore, let me talk a little bit about what the USPTO's thinking is, why the Administration believes that Congressional action in this area is warranted, and how we currently see the general framework of a solution.
Why the Administration Believes that Congressional Action is Warranted
As a first principle, the Administration is committed to work with Congress to ensure that States and state entities are liable, in some form, for money damages when they infringe federally-protected intellectual property. At the same time, we are committed to respecting the Court's views of federalism and the majority's interpretation of the Eleventh Amendment and other Constitutional sovereign immunity doctrines.
We have two important reasons to believe that States and state entities should be liable for money damages when they infringe federally-protected intellectual property. First, the post-Florida Prepaid situation is inequitable and presents a potential windfall for states. Second, if left unaddressed, the Florida Prepaid decisions could make it more difficult for the United States to advocate strong intellectual property protection internationally.
An Inequitable Situation
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We view the present, post-Florida Prepaid situation as very inequitable. State 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 financial liability as intellectual property defendants.
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.(see footnote 4) 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 more 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.
We believe that there is a real inequity that state institutions profit from federally-protected intellectual property and can be plaintiffs in the federal intellectual property system, but can avoid most of the liability of being defendants. This is the same sense of equity that underpinned Judge Shubb's recent decision in the New Star Lasers v. Regents of California litigation, 63 F.Supp. 2d 1240 (E.D. Cal. 1999). In that case, the University of California had settled litigation in Massachusetts over a patent held by the university. Then, when New Star Lasers sought a declaratory action invalidating the UC patent, the University of California argued that it should have sovereign immunity. Judge Shubb's opinion is worth quoting:
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''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.'' Id. at 1244.
This, then, is the issue. States now enjoy all the prerogatives of being the owners of federally-protected property, but aren't obliged to give the same respect to the property of others.
At the same time, we have to recognize that the federal government bears some responsibility for making the states possessors of large portfolios of intellectual property. Indeed, we bear that responsibility proudly. Since the Bayh-Dole Act was passed in 1980, the federal government has encouraged (and underwritten) acquisition of intellectual property by state institutions. Of course, at the time Bayh-Dole was passed, it was believed that state instrumentalities were amenable to damage suits for violation of intellectual property on the same terms as private actors, so there was no awareness that we were entitling the state entities to be plaintiffs in damage suits for federally-protected intellectual property while permitting them to avoid being defendants.
The Bayh-Dole Act represents a major success story in American technology policy, providing a mechanism for commercializing the results of government-sponsored research through the patent system. Prior to Bayh-Dole, hundreds of valuable inventions from federally-funded research had been shelved, due to lack of industry involvement and an incentive for further investment to bring the inventions to commercial application. Under Bayh-Dole, patent rights resulting from federally-funded research accrue to universities and research centers undertaking the research. The irony is that many of those universities and research centers are State instrumentalities which now enjoy sovereign immunity under the Florida Prepaid cases.
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I mention this because there are proposals to condition the ability of state institutions to obtain federal protection for intellectual property on their waiver of sovereign immunity. I believe that this is a reasonable and equitable approach. However, we must make sure that it does not significantly disrupt our country's extraordinarily successful system of federal funding of research and development, with the subsequent commercialization of research results by the private sector. A legislative solution which elicits state waiver of sovereign immunity in exchange for the right to own federally-protected intellectual property must respect, and be in harmony with, the commercialization goals of the Bayh-Dole legislation.
International Concerns
A second area of concern for the Administration is how the Florida Prepaid decisions affect our ability to promote intellectual property rights globally. Simply put, the Florida Prepaid decisions could make it more difficult for the United States to advocate effective enforcement of intellectual property rights in other countries.
Although the Florida Prepaid analysis is based on Constitutional issues concerning the balance of power in our federal system, we cannot expect foreign officials to be conversant in the subtleties of American constitutional law. Officials in other countries are likely to say, ''what is good for the goose, is good for the gander.'' For example, if the state superintendent of schools in California or Texas or Iowa were to order 100,000 copies of a third grade textbook to be printed without any risk of monetary damages in a suit by the publisher, how can the United States complain when there is rampant photocopying of textbooks of the campus of a public university in a foreign country? If the highway department in Ohio or South Dakota or Florida can use a patented form of bridge construction without any financial liability for infringement, it is more difficult for the United States to complain about patent infringements by another government's highway or health department. When we criticize another country for having financial penalties against patent, trademark, and copyright infringers that are too low, that country may point out that we have no financial penalties at all when the infringer is a state university, hospital, prison, or government office.
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In short, other countries might use the Florida Prepaid decisions to justify aspects of their own intellectual property laws, such as compulsory licensing, which the United States has criticized. Armed with awareness of the Florida Prepaid decisions, countries that have intellectual property laws that are weak and/or inconsistent with the Trade-Related Aspects of Intellectual Property Rights (TRIPs) Agreement could become increasingly resistant to American pressure to improve those laws.(see footnote 5)
At the extreme, some countries may even argue that the post-Florida Prepaid situation puts us in violation of our own TRIPs obligations to provide effective enforcement. 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.(see footnote 6) For these reasons, we think that some legislative response to the Florida Prepaid cases is appropriate.
What is to be Done?
The very nature of the Florida Prepaid decisions has focused attention on three basic routes for state liability in intellectual property cases: injunctive relief under Ex parte Young, abrogation of state immunity from damage suits through the power given to Congress by Section 5 of the Fourteenth Amendment, and waiver of state immunity in exchange for participation in some federal program. The USPTO is now consulting with the Department of Justice and additional agencies and parties on these matters. In the meantime, I would be happy to share the preliminary thoughts of the USPTO on each of these three approaches, and on other possible mechanisms that Congress may wish to consider.
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Ex Parte Young
Ex parte Young relief is still available against state infringements of intellectual property. Nonetheless, based on the views of our conference panelists, we are likely to recommend that Congress' intent that the doctrine be available for intellectual property suits be reaffirmed.
Abrogation
On the topic of abrogation, we are likely to recommend that Congress not attempt as broad abrogation as was struck down in the Florida Prepaid cases until further, meaningful empirical work has been done on: (1) the extent and nature of state violations of intellectual property; and (2) the nature of remedies available to private intellectual property owners in state courts. In this respect, we welcome the request Senate Judiciary Chairman Hatch made to the General Accounting Office to work on both these issues.
At the same time, we are also very interested in the thoughtful and creative proposal Senator Leahy has put forward in S. 1835—which provides what might be called ''limited'' abrogation—allowing a case-by-case determination by federal district courts as to whether the conditions have been met for abrogation of Eleventh Amendment immunity under Section 5 of the 14th Amendment.
Waiver
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In light of the Court's reaffirmation of South Dakota v. Dole, 483 U.S. 203, 107 S. Ct. 2793, 97 L. Ed.2d 171 (1987) and Petty v. Tennessee-Missouri Bridge Commission, 359 U.S. 275, 79 S. Ct. 785, 3 L. Ed.2d. 804 (1959), much attention has been given to whether Congress can craft legislation that will prompt states to waive their sovereign immunity in intellectual property suits without being unduly coercive. At our March conference, the panelists gave considerable attention as to how participation in some federal spending programs could be conditioned on waiver of sovereign immunity.
The Administration, however, is not convinced of the desirability of putting such conditions on any key federal spending program. Instead, we are likely to recommend that Congress look carefully at the possibility of eliciting waivers of sovereign immunity in exchange for the states' ability to participate in 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.
Senator Leahy's bill offers one model for such a waiver system—a model that deserves careful attention as we move forward in this discussion. Let me also say that we appreciate Senator Leahy's staff including both the USPTO and the Copyright Office in discussing different aspects of his proposal for a waiver system. Many of the people in this room are familiar with a draft revision of S. 1835, which the Senator's staff has been circulating and which includes input from the USPTO and the Copyright Office. We look forward to working with the House members in the same process of developing and refining legislation on these issues, and to the Department of Justice's involvement in providing its views on how best to address the Constitutional questions.
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Conclusion
While waiver, abrogation, and Ex parte Young are the ''big three'' theories for holding states liable for intellectual property infringements, we may also have to consider other options. For example, those options might include looking at the possibility and Constitutionality of qui tam suits. Another possibility is adjusting state liability for intellectual property infringements so that it better parallels that of the federal government.
Mr. Chairman, that is a final point worth emphasizing. The States are now in an enviable position of having their cake and eating it too. We don't think that the State governments and state universities are full of people who are suddenly going to start running on ''pro-piracy'' platforms or engaging in wholesale, intentional piracy. But States instrumentalities are becoming more and more involved in commerce—particularly through the educational and research sectors. 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 liable for copyright infringement.
Thank you very much.
Mr. COBLE. Thank you, Mr. Dickinson.
Mr. Dickinson, do you believe there is any way to resolve the problems you have outlined aside from an act of Congress or legislation?
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Mr. DICKINSON. Mr. Chairman, I would have to submit I really haven't thought if that is possible, indeed. I think that the Supreme Court has spoken very clearly on this, and they have spoken now on more than one occasion. So I would expect that it will, indeed, take an act of Congress.
Mr. COBLE. In your testimony, you mentioned that the solicitors general from New York and, I think, Kansas participated in the PTO conference. How did they respond to the issue, and have any other State government or university officials communicated with the PTO regarding this issue?
Mr. DICKINSON. The solicitors general from various States were important participants in these conferences because they obviously are officers of the court. They are legal officers who are concerned about enforcing these rights, but they are also officers of their individual States. I would have to characterize their participation as careful listening. They engaged on the issues. I think they are very sensitive to the questions which have been raised, and I would expect that as you go forward with the deliberations, they will be a help to you in crafting an appropriate response.
Mr. COBLE. Have other government or university officials communicated as well with PTO?
Mr. DICKINSON. We have had some communication from other States and State officers. I would have to also say that there are some State officers who have communicated formally and informally about their concern in this regard, particularly State universities.
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Mr. COBLE. Thank you, sir.
The gentleman from California?
Mr. BERMAN. Thank you, Mr. Chairman.
I am just curious about a couple of things. The issue of withholding Federal money, it seems to me when a majority of the House lets the fees that patent applicants pay into the system actually stay with that office, once we achieve that majority, then maybe we can start looking at——[Laughter.]
Mr. DICKINSON. We call that preaching to the choir.
Mr. BERMAN. We have a hard time keeping our own money, much less grabbing anybody else's.
You mentioned qui tam suits. I have a particular interest in that legislation. I am just curious how—tell me the theory here.
Mr. DICKINSON. As I understand the theory, Congressman, the United States Government would act on behalf of its citizens to enforce the intellectual property rights which it grants, and because the 11th amendment only forbids suits by individuals against States, the United States Government could, in essence, substitute themselves for the individuals and bring an action on their behalf to enforce the rights which the U.S. Government has granted to them.
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Mr. BERMAN. Say that one more time.
Mr. DICKINSON. As I understand it—and I am not an expert here, I will have to admit, and some other witnesses may be better at this than I. But as I understand it, the United States Government could substitute or bring an action on behalf of a citizen to enforce the rights which they have granted to that citizen.
Mr. BERMAN. It is the flip side of the qui tam. It is the U.S. Government acting on behalf of an individual in bringing the action.
Mr. DICKINSON. That is the way I understand it. Let me double-check. Have I got that right?
Well, let me clarify that a little bit. The citizen would bring the suit on behalf of the United States to enforce the right which the United States has granted to that citizen. My understanding is that Professor Lemley will likely address that in much more detail later.
Mr. BERMAN. All right. Could you spell out your notion of Congress sort of providing the injunctive remedy and the extent to which one could talk about compensatory damages for contempt of injunctive relief?
Mr. DICKINSON. Well, my understanding of the injunctive relief opportunity is that it flows from the Ex parte Young case that says that the individual can seek equitable relief and seek an injunction against the State for the infringement.
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You raise a good question about what would happen if the injunction is granted and the State continues to violate the injunction, and then are there damages available for that contempt, I guess you would say. I honestly don't know the answer to that.
Mr. BERMAN. Okay. And then my last question: Do the majority of the scholars at your symposium—I understand you didn't have any kind of process for determining consensus. In fact, you didn't want that.
Mr. DICKINSON. That is correct.
Mr. BERMAN. But can you offer an opinion on whether you had some sense of what approach the majority viewpoint seemed to be?
Mr. DICKINSON. My understanding is that most of the discussion focused on the waiver question, which you raised earlier, as I think you characterized it as an elegant solution, potentially elegant solution. I think that was where a lot of the discussion was, indeed, focused.
Mr. BERMAN. Thank you, Mr. Chairman.
Mr. COBLE. I thank the gentleman.
Thank you, Mr. Dickinson.
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Mr. DICKINSON. Thank you, Mr. Chairman.
Mr. COBLE. Our next witness is our friend from the Copyright Office, Honorable Marybeth Peters, unknown to none of us. She serves as Register of Copyrights for the United States Copyright Office. Ms. Peters has also served as acting general counsel to the Copyright Office and as chief of both the Examining and Information and Reference Divisions. She has served as well as a consultant on copyright law to the World Intellectual Property Organization and authored The General Guide to the Copyright Act of 1976.
Ms. Peters, it is good to have you back with us.
STATEMENT OF MARYBETH PETERS, REGISTER OF COPYRIGHTS, COPYRIGHT OFFICE OF THE UNITED STATES, LIBRARY OF CONGRESS
Ms. PETERS. Thank you. Mr. Chairman, Congressman Berman, I thank you for your inviting me to appear before the subcommittee today. It is always a pleasure to testify before you, and I appreciate the opportunity to present the views of the Copyright Office on State sovereign immunity from suits arising from infringement of intellectual property rights.
We can probably all agree that when a State infringes a copyright or another Federal intellectual property right, the State should be held accountable for that infringement, just like anyone else. For most of our history, it has been assumed that States enjoyed no special immunity from suits for infringement of intellectual property rights, but in the past 15 years, those assumptions have been called into question as the Supreme Court has breathed new life into the doctrine of sovereign immunity. My written statement contains a review of that evolution; however, I will leave most of that discussion to the scholars on the next panel.
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As both of you stated, last year in the Florida Prepaid and College Savings cases, the Court held that provisions of the patent law and the Lanham Act permitting suits for damages against States were unconstitutional. Specifically, the Court ruled that Congress exceeded its authority when it abrogated sovereign immunity in this context. These rulings dramatically curtailed congressional discretion by erecting very high barriers to congressional exercise of its 14th amendment authority: requiring Congress to compile a record of widespread infringement by States which provide no alternative remedy. Even then, the abrogation must be tailored to remedy no more than is demonstrated in the legislative history.
The Court also struck down precedent which allowed courts to infer waiver of sovereign immunity based on State participation in Federal programs or systems. However, Congress is left with the option of enticing States to waive their immunity with the carrot of what the Court calls gratuities.
A court of appeals followed suit this year and held that Congress' abrogation in 1990 of State immunity in copyright suits is also unconstitutional. My office certainly participated in that, and today's hearing seems like deja vu because, in 1988, we issued a report on this very same subject.
So today we find ourself in a situation where States can infringe copyrights, patents, and trademarks with impunity, while still enjoying the full protection of the Federal intellectual property laws for their own works. The only remedy that copyright owners now have against the States is injunctive relief under the reasoning of a 1908 case, Ex parte Young, that Commissioner Dickinson referred to. Obviously this provides only limited relief. A copyright owner cannot be compensated for previous acts by a State. It can only stop future acts.
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One thing is clear. States readily and frequently avail themselves of protection under the Copyright Act. Four-year State colleges and universities have registered over 32,000 monographs since 1978. That is an average of 645 registrations for each State. Put differently, on average, a work by a State has been registered at least once every 12 days for the last 22 years. This does not include registrations of periodicals. I said monographs. So it doesn't include scholarly journals, magazines, newsletters, computer programs, things like that. It also doesn't include other educational institutions such as 2-year schools, technical or vocational schools, nor does it include other agencies such as travel and tourism bureaus.
Anticipating the Court's rulings, early last year the Copyright Office began to investigate possible responses. After the court ruled, several Members of Congress, including you, Mr. Chairman, asked that we suggest legislative approaches. In doing so, we were guided by two equally important principles: constitutionality and effectiveness. A proposal that fails either of these criteria is of little value.
My statement contains a review of different alternatives that we considered. I will only discuss the two that we thought were the most promising. The most promising is that Congress could condition States' exercise of Federal intellectual property rights on their waiver of sovereign immunity for infringement suits. There is a symmetry to this approach in that it places States in the same position as other intellectual property owners. It is clear and it is fair, and there is a compelling proportionality and a nexus between the problem and the remedy.
We have heard concerns that the Court may view this approach as coercing a State to waive, thus robbing the waiver of its required voluntary nature. However, I believe that the case law supports this approach, and I know of no authority to the contrary.
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Another approach is that Congress could attempt, once again, to abrogate State immunity. We are less confident about this approach. The court's requirement necessitates either extensive, time-consuming, and burdensome findings by Congress or a provision drafted so narrowly that it might be impractical for individual litigants. Nevertheless, if a successful abrogation provision can be crafted and defended, it could provide the most complete solution.
S. 1835, the Intellectual Property Protection Restoration Act, introduced last year by Senator Leahy, takes these approaches. He—Senator Leahy—took a lead on this issue by introducing a most thoughtful piece of legislation in a very complex area of the law, and I certainly compliment him for all his efforts. Like Senator Leahy's bill, the recommendations that I forwarded to Congress earlier this year contain a waiver of protection provision coupled with an abrogation provision.
In conclusion, it is only logical that unless Congress acts, infringements by States are likely to increase, and we know that only Congress has the power to remedy the existing unfairness and imbalance. I strongly urge that Congress do this. The Supreme Court's ruling and States' rights must be respected, but the current state of affairs is unjust and unacceptable.
Congress should act to prevent the successful assertion of State sovereign immunity in intellectual property suits where it has become a tool of injustice.
Thank you.
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[The prepared statement of Ms. Peters follows:]
PREPARED STATEMENT OF MARYBETH PETERS, REGISTER OF COPYRIGHTS, COPYRIGHT OFFICE OF THE UNITED STATES, LIBRARY OF CONGRESS
Mr. Chairman, Congressman Berman, Members of the Subcommittee, thank you for inviting me to appear before the Subcommittee today. It is always a pleasure to testify before this Subcommittee, and I appreciate the opportunity to present my views on the important issues of state sovereign immunity from suits for infringement of intellectual property rights.
We can probably all agree that when a State, or a State agency or an officer or employee of a State acting in an official capacity, infringes a copyright or another federal intellectual property right, the State should be held accountable for that infringement just as any other person or entity would be. For most of our history, it has been assumed that the States enjoyed no special immunity from suits for infringement of intellectual property rights, but in the past fifteen years those assumptions have been called into question as the Supreme Court has breathed new life into the doctrine of sovereign immunity. Last year, the Court held that provisions of the patent law and the Lanham Act permitting suits for damages against States were unconstitutional, and the Court offered little reason to hope that the analogous provision in the Copyright Act could be found constitutional. This year a court of appeals held that the copyright law provision is unconstitutional, and today we find ourselves in a situation where States can infringe copyrights, patents, and trademarks with impunity.
Today I would like to provide you with some background information to explain how we arrived at the current unsatisfactory situation. I will then describe the current state of the law. Finally, I will offer a preview of some of the alternatives Congress may wish to consider if, as I believe it should, it decides to take action in response to the recent decisions of the Court.
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I. BACKGROUND
The doctrine of sovereign immunity is an ancient legal principle, dating back to feudal Europe, when power flowed from the King down through the nobility and very little trickled down to the peasantry. It is rooted in the premise that to submit to the jurisdiction of a court implies that one is subservient or inferior to the power of that court. To understand this, one must recall that in feudal times courts were not judicial bodies as we have come to understand them in the United States today, but rather the courts of a King or feudal Lord, often presided over by the King or Lord himself. Thus, even a court of the King, which derived its authority from the King himself, could not exercise any authority over the King unless the King should consent.
Because the American model of government presumes the opposite of feudal structures, that power flows up from the people to the States and to the Federal Government, the application of sovereign immunity is far less intuitive. Indeed, the modern application of this doctrine is controversial precisely because it is fundamental to the relationship of the government to the people and of the Federal Government to the States. It is the latter relationship which we are considering today. The specific question raised by the topic of today's hearing is: are States permitted (and if so, should they be permitted) to run afoul of valid federal laws protecting intellectual property without subjecting themselves to the monetary liability to which all others are vulnerable?
In the United States, state sovereign immunity is articulated by the Eleventh Amendment to the Constitution.(see footnote 7) The Eleventh Amendment was adopted in 1795, but its true meaning remains a subject of much discussion. Last year the Supreme Court breathed new life and vitality into the doctrine of state sovereign immunity. In June of 1999, the Supreme Court handed down a trio of rulings that, taken together, dramatically altered the landscape of the enforceability of federal law with regard to States.(see footnote 8) In order to fully appreciate the context of these rulings, it is necessary to review the prior precedent and developments in the law.
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The United States passed its first Copyright Act in 1790. There is no decision in the ensuing 172 years that invoked sovereign immunity to exempt States from any of the remedies available under the Copyright Act. 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.(see footnote 9) However, that case did not usher in a new era of sovereign immunity.
Just two years later, the Supreme Court issued its ruling in Parden v. Terminal Railway of Alabama (Parden).(see footnote 10) In that case, employees of a state-owned railroad sued the State of Alabama in federal court under the Federal Employees' Liability Act (FELA). FELA specifically created a cause of action in federal court against ''every common carrier by railroad'' for damages suffered by employees from job-related personal injuries.
In addressing Alabama's sovereign immunity defense, the Court engaged in a three-step analysis. First, the Court discussed whether Congress intended to subject States to suit under FELA. The Court reasoned that the express language of the statute created a cause of action against ''every common carrier,'' and absent express language to the contrary, a statutory exception for States should not be presumed. Thus, the Court determined that Congress did intend to subject States to suit in federal court under FELA.
Second, the Court considered whether Congress had the power to subject a State to suit in federal courts notwithstanding the Eleventh Amendment. The Court found that in giving Congress the power to regulate interstate commerce, the States had surrendered any sovereign immunity that would impede that regulation. Therefore, in acting under its Commerce Clause power, Congress could abrogate state sovereign immunity.
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Finally, the Court queried whether Alabama's operation of a railroad in interstate commerce after its waiver of sovereign immunity implied that the State had consented to suit in federal court under FELA. Finding that it did, the Court 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.''(see footnote 11)
Because the Copyright Act, in language very similar to FELA, provided for suit against ''anyone''(see footnote 12) who infringed a copyright, the decision in Parden left little doubt that States could be sued for copyright infringement.
Over time the decision in Parden was gradually eroded. More than twenty years after Parden, in Atascadero State Hospital v. Scanlon (Atascadero),(see footnote 13) the Court reversed itself on the legislative requirements necessary to find congressional intent to abrogate state sovereign immunity. In that case, a disabled person sued a state hospital in federal court for alleged employment discrimination. The suit was brought pursuant to the Rehabilitation Act of 1973, a statute which the Court assumed had been enacted under the authority of Section 5 of the Fourteenth Amendment. The statute provided for remedies against ''any recipient of Federal assistance,'' a class that arguably included States.
The Court recognized Congress' power to abrogate a State's immunity in circumstances in which ''the usual constitutional balance between the States and the Federal Government does not obtain.''(see footnote 14) The Court went on to hold 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.''(see footnote 15) 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.
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Under this more stringent test, the language of many statutes that had been assumed to abrogate sovereign immunity, including the Copyright Act, the Patent Act, and the Lanham Act, failed to achieve that purpose. Thus, there was reason to believe that States might be immune to suits for damages under the Copyright Act and the other federal intellectual property laws.
The Supreme Court issued another significant ruling in 1989 in Pennsylvania v. Union Gas Co. (Union Gas).(see footnote 16) That case involved a suit by a private company against the State for third-party liability under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) to recover certain costs to clean a spill of coal tar into a creek.
The Court considered two questions. First, did CERCLA clearly abrogate state sovereign immunity? The Act provided for the liability of ''persons'' and included within its definition of that term, ''States.'' This provision, along with the presence in the Act of language excepting States from liability in particular circumstances, satisfied the Court that the law was unmistakably clear in its intent to make States liable in all but the excepted instances. Thus, the Court quickly concluded that CERCLA did properly purport to abrogate state sovereign immunity.
The second question the Court considered was whether Congress had authority to enact such an abrogation. CERCLA was enacted pursuant to Congress' Article I, Section 8 authority, specifically, the Commerce Clause. A plurality of the Court found that ''to the extent that the States gave Congress the authority to regulate commerce, they also relinquished their immunity where Congress found it necessary, in exercising this authority, to render them liable.''(see footnote 17)
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This ruling strengthened the hand of copyright owners. However, the uncertainty arising from the Atascadero decision remained.
As a result of that uncertainty, Congress acted. In 1990 Congress enacted the descriptively-named Copyright Remedy Clarification Act (CRCA).(see footnote 18) That law added to Title 17 provisions which state in clear terms that remedies for infringement are available against States, and 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. . . .''(see footnote 19) These clear statements 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 substantial portion of the legislative history of the CRCA, which would later become critical, was a June, 1988 report produced by the Copyright Office entitled ''Copyright Liability of States and the Eleventh Amendment.'' That report surveyed the legal history of the Eleventh Amendment and applied contemporary Supreme Court jurisprudence to copyright infringement suits against States. As part of that application, the report cited several instances of alleged copyright infringement by States that had been brought to the Office's attention. Additionally, a Congressional Research Service survey of waivers of sovereign immunity by States and the extent of those waivers was appended to the Copyright Office report.
Congress followed the CRCA in 1992 with the Trademark Remedy Clarification Act(see footnote 20) (TRCA) and the Patent and Plant Variety Remedy Clarification Act(see footnote 21) (PRCA). These acts were nearly identical to the CRCA. Taken together, the three acts appeared to settle the issue of state liability for infringement of intellectual property.
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The series of positive developments for intellectual property owners ended with the enactment of the TRCA and the PRCA. What followed was a series of highly controversial decisions, almost all by a highly charged 5–4 vote.
Four years after the TRCA and PRCA were enacted, the Court handed down its ruling in Seminole Tribe of Florida v. Florida (Seminole Tribe).(see footnote 22) That case involved a suit by an Indian tribe under the Indian Gaming Regulatory Act to compel the State of Florida to engage in good faith negotiations with the Tribe. The Act was adopted pursuant to Congress' Article I, Section 8 authority: the Indian Commerce Clause.
The Court considered the same two issues it had considered in Union Gas. The first was whether Congress has ''unequivocally expresse[d] its intent to abrogate [state] immunity.''(see footnote 23) The Act left little room for discussion. It instructed that district courts would have jurisdiction to hear cases arising from the failure of a State to engage in good faith negotiations. Obviously, only States could be defendants in such actions and therefore Congress, in enacting this provision, clearly intended the States' immunity to be abrogated. The Court reached this conclusion quickly.
The second issue was whether Congress had authority to enact such an abrogation. At the outset of its analysis, the Court noted that ''we have found authority to abrogate under only two provisions of the Constitution . . . the Fourteenth Amendment . . . [and] the Interstate Commerce Clause. . . .''(see footnote 24) Because the Act being reviewed was adopted pursuant to Article I authority, the Union Gas decision was strong support for the constitutionality of the Act in this case. However, by a 5–4 vote the Court reversed itself and overruled Union Gas, finding that ''the background principle of state sovereign immunity embodied in the Eleventh Amendment is not so ephemeral as to dissipate when the subject of the suit is an area, like the regulation of Indian commerce, that is under the exclusive control of the Federal Government.''(see footnote 25) Thus, after Seminole Tribe, Congress had only its authority under Section 5 of the Fourteenth Amendment as a valid source of power to abrogate state sovereign immunity.
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This ruling cast a shadow on the constitutionality of the CRCA, PRCA and TRCA. Those laws were most intuitively exercises of Congress' Article I power. Now, in order to sustain the CRCA, PRCA and TRCA, it was necessary to find sufficient authority in the Fourteenth Amendment, which subjected those laws to a much higher level of scrutiny. In his dissent in Seminole Tribe, Justice Stevens noted the potential for the Court's decision to disrupt numerous fields of federal law because ''it prevents Congress from providing a federal forum for a broad range of actions against States, from those sounding in copyright and patent law, to those concerning bankruptcy, environmental law, and the regulation of our vast national economy.''(see footnote 26)
The Supreme Court turned to the scope of Congress' Fourteenth Amendment authority the following year in City of Boerne v. Flores (City of Boerne).(see footnote 27) In that case, the Supreme Court was faced with the constitutionality of the Religious Freedom Restoration Act (RFRA), which Congress had enacted to overrule a previous Court decision and apply the strict scrutiny test to State and local laws of general applicability that had an incidental effect on the free exercise of religion. RFRA had been enacted pursuant to Congress' power under Section 5 of the Fourteenth Amendment. The case was brought under RFRA by a Roman Catholic Archbishop to contest the denial of a permit to expand a church building by the Historic Landmark Commission of the city of Boerne.
The issue before the Court was whether RFRA was a valid exercise of Congress' Fourteenth Amendment authority. By a vote of 6–3, the Court found that it was not because it read RFRA as seeking to alter the substantive meaning of the Fourteenth Amendment and the Free Exercise Clause of the First Amendment.
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The design of the Amendment and the text of §5 are inconsistent with the suggestion that Congress has the power to decree the substance of the Fourteenth Amendment's restrictions on the States. Legislation which alters the meaning of the Free Exercise Clause cannot be said to be enforcing the Clause. Congress does not enforce a constitutional right by changing what the right is. It has been given the power ''to enforce,'' not the power to determine what constitutes a constitutional violation.(see footnote 28)
The Court went on to expound upon what standards Congress must adhere in order to remain within the bounds of its Fourteenth Amendment power. The key to this analysis is that ''[t]here must be a congruence and proportionality between the injury to be prevented or remedied and the means adopted to that end.''(see footnote 29)
While this was not a sovereign immunity case, it is crucial to sovereign immunity analysis because, after Seminole Tribe, Congress may abrogate state sovereign immunity only pursuant to the Fourteenth Amendment. Thus, this case set the stage for the courts to review the constitutionality of the CRCA and parallel legislation concerning patents and trademarks.
That brings us to the Supreme Court's triad of opinions on June 23, 1999. 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. The decision in Alden v. Maine (Alden)(see footnote 30) undergirded the other two decisions. In that case, John Alden and other employees of the State of Maine filed suit in federal court against that state for violation of the overtime provisions of the Fair Labor Standards Act, a federal law. In light of the Supreme Court's decision in Seminole Tribe, the District Court dismissed the action. The dismissal was upheld by the Court of Appeals.
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Petitioners then filed the same action in state court in Maine. The state trial court dismissed the suit on grounds of sovereign immunity and the Maine Supreme Judicial Court affirmed. The United States Supreme Court also affirmed.
The Court's holding in this case went well beyond the routine recognition that a State is a sovereign entity that maintains an immunity to lawsuits by private parties to which it has not consented. The Court's holding is important because of the broad applicability of state sovereign immunity to the State's own courts as well as to the federal courts.
Specifically, the Court reasoned that the Eleventh Amendment was not the origin of state sovereign immunity. Rather,
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.(see footnote 31)
In this view, then,
[t]he Eleventh Amendment confirmed rather than established sovereign immunity as a constitutional principle; it follows that the scope of the States' immunity from suit is demarcated not by the text of the Amendment alone but by fundamental postulates implicit in the constitutional design.(see footnote 32)
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The Court's conclusion that Congress can abrogate a state's sovereign immunity only in narrow circumstances owes it origins to this view. ''Although the sovereign immunity of the States derives at least in part from the common-law tradition, the structure and history of the Constitution make clear that the immunity exists today by constitutional design.''(see footnote 33) The Court continued that:
[t]he federal system established by our Constitution preserves the sovereign status of the States in two ways. First, it reserves to them [through the Tenth Amendment] a substantial portion of the Nation's primary sovereignty, together with the dignity and essential attributes inhering in that status. . . . 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.''(see footnote 34)
A preponderance of the opinion of the Court purports to demonstrate, through numerous references, the historical accuracy of its view of the origins of state sovereignty. Interestingly, the Court did not extend respect for a State's sovereign immunity into the realm of another State's courts.(see footnote 35)
The Court concluded its opinion with an implicit recognition of the potential for states to profit unfairly from its ruling. Thus, the Court noted several limits on its holding. First, states may waive their immunity and Congress may provide incentives for such waiver, as provided in South Dakota v. Dole (483 U.S. 203 (1987).(see footnote 36) Second, the immunity ''bars suits against States, but not lesser entities. The immunity does not extend to suits prosecuted against a municipal corporation or other governmental entity which is not an arm of the State.''(see footnote 37) Additionally, injunctive and declaratory relief are not precluded by state immunity.(see footnote 38) Clearly, this leaves the States with a tremendous opportunity to evade federal law. The Court provided cold comfort in its declaration that ''[w]e are unwilling to assume the States will refuse to honor the Constitution or obey the binding laws of the United States.''(see footnote 39)
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In the second of the June 23 cases, the Court applied the principles of its recent decisions to the TRCA in College Savings Bank v. Florida Prepaid Postsecondary Educ. Expense Bd (College Savings).(see footnote 40) In that case, College Savings Bank sued the State of Florida for false advertising in federal court under section 43(a) of the Lanham Act. In light of the Supreme Court's decision in Seminole Tribe, the District Court granted Florida's motion to dismiss on sovereign immunity grounds. The Third Circuit affirmed. The Supreme Court also affirmed.
The Court considered two avenues through which College Savings' claim could survive state immunity. First, that Congress had abrogated state immunity through enactment of the TRCA. Second, that by participating in the scheme of the Lanham Act, States have waived their immunity by implication.(see footnote 41)
The Court first turned to the question of whether the TRCA abrogated state sovereign immunity. As I have already outlined, current Supreme Court precedent admits only one source of constitutional authority from which Congress may abrogate state immunity: the enforcement power in Section 5 of the Fourteenth Amendment.(see footnote 42)
The Fourteenth Amendment instructs in relevant part that ''No State shall . . . deprive any person of . . . property, without due process of law.''(see footnote 43) 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.(see footnote 44) The Court did not hold that trademarks are not property. Just the opposite, in fact:
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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 because he can exclude others from using them.(see footnote 45)
However, the Court recognized that College Savings was not suing for trademark infringement, but for misrepresentation. The right to be free from misrepresentation is not, the Court held, a property right within the meaning of the Fourteenth Amendment.(see footnote 46)
Next, the Court turned to the question of implied state waiver of immunity. Invoking the precedent of Parden, College Savings sought to show that Florida had impliedly waived its immunity by participating in a scheme that is enforceable in federal court.(see footnote 47) Not only did the Court reject this argument, but it overruled Parden and renounced the doctrine of implied waiver of state immunity.(see footnote 48)
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.(see footnote 49) Nonetheless, the Court apparently disapproves of the use of at least some Commerce Clause authority in this manner:
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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. . . . [W]e 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.(see footnote 50)
In a companion case, the third of the three opinions issued on June 23, Florida Prepaid Postsecondary Educ. Expense Bd. v. College Savings Bank, (Florida Prepaid),(see footnote 51) College Savings Bank sued the State of Florida in federal court, claiming patent infringement. Despite the Supreme Court's ruling in Seminole Tribe, the District Court denied Florida Prepaid's motion to dismiss. The District Court held that Congress had abrogated the State's immunity in this case by virtue of the PRCA.(see footnote 52) The Federal Circuit affirmed. The Supreme Court reversed.
The question presented was whether Congress' attempt to abrogate state sovereign immunity was valid. The Court considered this question under the two-part test articulated in Seminole Tribe:
first, whether Congress has ''unequivocally expresse[d] its intent to abrogate the immunity,'' . . . and second, whether Congress has acted ''pursuant to a valid exercise of power.''(see footnote 53)
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The first part of the test was met easily, as the statute was very clear on the point. The second part of the test, however, was not met to the Court's satisfaction.
As noted above, current Supreme Court precedent admits only one source of constitutional authority from which Congress may abrogate state immunity: the enforcement power in Section 5 of the Fourteenth Amendment. It was on this basis that College Savings Bank sought to have the statute upheld. The Court acknowledged that patents are property within the meaning of the Fourteenth Amendment.(see footnote 54) Thus, the Fourteenth Amendment's provision that ''No State shall . . . deprive any person of . . . property, without due process of law'' was potentially applicable to patent infringement. However, the Court held that the legislative enactment at issue in this case did not fall within Congress' Fourteenth Amendment power for several reasons.
First, as the Court held in City of Boerne, Congress ''must identify conduct transgressing the Fourteenth Amendment's substantive provisions, and must tailor its legislative scheme to remedying or preventing such conduct.''(see footnote 55) The Court found that Congress failed to meet this burden because it did not identify a pattern of patent infringement by states.(see footnote 56)
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.(see footnote 57) 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.(see footnote 58)
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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.''(see footnote 59) 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 at issue in this case was again overbroad.(see footnote 60)
This decision applied the general rule articulated in City of Boerne, and the high barriers erected by that application spelled almost certain doom for the CRCA, which is closely analogous to the PRCA that the Court struck down in Florida Prepaid. However, a glimmer of hope for CRCA's survival was provided by Justice Stevens' dissent. In acknowledging that the legislative history of the PRCA did not meet the Court's newly articulated standards, Justice Stevens noted that:
The legislative history of [the CRCA] includes many examples of copyright infringement by States . . . Perhaps most importantly, the House requested that the Register of Copyrights prepare a study, which he [sic] described in his transmittal letter as, ''a factual inquiry about enforcement of copyright against state governments . . . This report contains comments from industry groups, statistics, and legal analysis relating to copyright violations, actual and potential, by States.''(see footnote 61)
Although the Supreme Court has not ruled directly on the constitutionality of the CRCA, the Fifth Circuit applied the Supreme Court's recent rulings early this year in Chavez v. Arte Publico Press (Chavez).(see footnote 62) That case involved a suit by an author claiming copyright infringement of her book by the University of Houston, a state university.
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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 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.''(see footnote 63) 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.
The same result was reached in another Fifth Circuit case, Rodriguez v. Texas Comm'n on the Arts,(see footnote 64) 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 most likely is now bad law.
II. THE CURRENT SITUATION
Copyright owners have but one arrow left in their quiver to prevent or deter infringement of their intellectual property rights by States. That arrow is injunctive relief against particular employees of the State. Although the doctrine of state sovereign immunity has been dramatically strengthened in recent years, the Court has thus far retained the injunctive relief available under the reasoning of a 1908 case, Ex parte Young.(see footnote 65) The reasoning behind this rule is that when a state official acts in violation of valid federal law, that official is by definition acting outside the scope of his official duties because a State clearly cannot lawfully authorize one of its employees to act in violation of valid federal law. And, an employee of a State is cloaked with the State's immunity only when acting within the scope of his duties. Therefore, an employee of a State who acts in violation of a valid federal law is not immune and may be enjoined from that activity.
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The Ex parte Young doctrine provides only limited relief, however, because it provides no compensation for the damages already inflicted upon a copyright owner due to past infringement by a State. Moreover, given the Court's movement in recent years, one might question whether this doctrine will remain in force.
The practical question that is begged by the legal analysis is: are the States taking advantage of their immunity to infringe copyrights? Given the legal structure that the Supreme Court has erected, one might very well expect the answer to be in the affirmative. And it may very well be so. Unfortunately, the extent of State infringements is largely unknown at this time, only a year after the decisions in Florida Prepaid, College Savings and Alden. Information on infringements by States has not traditionally been collected, nor is it conveniently available from a single or few sources. Merely reviewing dismissed court cases would overlook a potentially large number of cases never brought because potential plaintiffs see such a suit as futile in the face of the Court's rulings. The question may only be answered, if at all, by a comprehensive study, and even then there is a substantial possibility that numerous complaints that were never brought to court are virtually impossible to find. In effect, it may be logistically impossible to satisfy the Court's demands for legislative findings to support abrogation of state sovereign immunity. What appears certain is that so long as States remain immune from suits for damages from infringements of copyrights and other intellectual property rights, States are likely to be tempted to infringe and the number of actual infringements by States is likely to increase.
Another subject for which a study would be necessary to ascertain the scope of the problem is the availability of alternative state remedies that would satisfy due process. This information is significantly easier to obtain than alleged infringements because, of course, state law is readily available to innumerable researchers throughout the country. It is our presumption that such measures are largely unavailable. We believe this for several reasons. First, based on the CRS report appended to the 1988 Copyright Office study ''Copyright Liability of States and the Eleventh Amendment,'' few States appeared to have waived their immunity for copyright infringement suits in federal court. Moreover, copyright infringement suits may be heard only in federal court, so even if a State has waived immunity in its own courts, they would not offer a proper forum in which the infringement claim could be brought. Finally, State remedies are largely preempted by the Copyright Act. Nonetheless it remains an open question whether the Court would find that a substitute state remedy, such as an action for the uncompensated taking of private property or an action in tort, would not run afoul of preemption and also would satisfy the Fourteenth Amendment's requirement of due process.
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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(see footnote 66) 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.
III. POSSIBLE SOLUTIONS
Although the purpose of this oversight hearing is to explore the nature of the problem rather than to consider legislation to remedy the problem, it is important that this Subcommittee understand what alternatives Congress will have when, as I hope it will do, it decides to redress the imbalance created by the recent decisions of the Supreme Court in this area. Let me make it clear that I believe Congress should act. I recognize that the legislative calendar makes such action highly unlikely this year, and I also understand that many parties crucially interested in this issue believe that further study is required before an effective legislative response can be identified. An effective solution may be difficult to reach in light of the constraints placed upon Congress by the current majority on the Supreme Court.
But legislation should be considered in the next Congress, and I hope that this hearing serves as a valuable first step in that process. Although the Supreme Court has created formidable constitutional impediments to abrogation of States' sovereign immunity, neither the Court nor, I believe, anybody else has asserted that States should not be held accountable when they infringe copyrights, patents or trademarks. As I have already mentioned, States take advantage of the copyright laws by owning valuable copyrights, as reflected in their registration practice. I believe the same is true with respect to patents and trademarks. Why should States be able to enjoy the benefits of federal intellectual property protection if they are not subject to the same burdens that govern other participants in the federal intellectual property system? And even if a State were to decide not to take advantage of copyright, patent and trademark law, should not a State be held responsible for the harm it causes to a copyright owner—or to a patent or trademark owner—when it becomes an infringer?
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Several months before the Court handed down its opinions in Florida Prepaid, College Savings and Alden, the Copyright Office (anticipating unfavorable outcomes) began to investigate the options for legislative responses to holdings invalidating the abrogation of sovereign immunity. After the Court ruled, several Members of Congress, including the Chairman of this Subcommittee, asked that we suggest legislative approaches to this problem. In doing so we were guided by two equally important principles: constitutionality and effectiveness. A proposal that fails either of these criteria is of little value.
One option that was considered was to amend 28 U.S.C. §1338(a) to permit suits against States in state courts. The Supreme Court's decision in Alden, that state immunity in state courts is equal to state immunity in federal courts, virtually eliminates the effectiveness of this option. States still have the ability to block the courthouse door to copyright owners. Permitting suit in state courts would be an improvement only to the extent States have waived their immunity in their own courts.(see footnote 67) It is not known how many (if any) States fall into that category. Further, those that do could simply revoke that waiver and defeat this maneuver.
There are also certain drawbacks to this approach, even if it were effective. The current exclusive federal jurisdiction to hear copyright cases under 28 U.S.C. §1338 reflects a congressional determination that the copyright system would function more effectively if relatively uniform decisions could be achieved. If state courts are permitted to hear copyright cases, the potential would exist for at least 50 different interpretations of the same federal statutory provision. Although the final decision rendered in the state court system would be reviewable by the U.S. Supreme Court, the Court would only be able to take a very small fraction of the cases in order to resolve conflicting interpretations.
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Additionally, state court judges at all levels have virtually no experience with the copyright law. Even if state courts were given jurisdiction to hear copyright cases against the States, the volume of cases could be expected to be fairly low, affording state court judges little opportunity to gain experience.(see footnote 68)
Another option we considered is to condition States' receipt of certain federal funds on a waiver of immunity for infringement suits. The leading case for determining the validity of such an enactment is South Dakota v. Dole.(see footnote 69) That case set forth a four-part test:
The exercise of the spending power must be in pursuit of the general welfare;
The condition must be unambiguous, enabling the States to exercise their choice knowingly;
The conditioned spending must be related to the Federal project or program; and
The condition must not be barred by other constitutional provisions.
The first two conditions are satisfied easily. The third is not easily satisfied. Unlike driving and highway funds, copyrights do not easily relate to federal spending.(see footnote 70) Some have suggested tying waiver of immunity to federal spending on higher education, but this would be politically unpopular, and I would not support legislative action that would penalize our colleges and universities by withholding needed funds simply because state legislatures are unwilling to waive their sovereign immunity. We have not found any case law regarding spending-conditioned waiver of state sovereign immunity, but the Court's decisions in both Alden and College Savings explicitly refer to the spending power as a legitimate means of inducing voluntary State waiver. However, if the Court finds the amount of money conditioned to be so great as to become coercive, it may strike down the condition. There is little or no guidance on what qualifies as coercive in the case law. One legislative drawback of this option is that it might require re-enactment in appropriations legislation every year.
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A third option is to empower a federal agency to bring actions against States for violating copyright rights of private parties. State sovereign immunity does not extend to suits brought by the United States. Thus, federal agencies could, at least theoretically, be used to circumvent that immunity.
There are numerous problems with this approach. First, any agency charged with enforcing copyrights against States would probably require significant resources to conduct such actions. During a period when Congress places great emphasis on fiscal discipline, it seems unlikely that such an agency would be adequately staffed and funded.
Second, under the doctrine of Ex Parte Young, a private litigant can bring an action against a state officer to obtain prospective injunctive relief against continuing violations of federal law.(see footnote 71) In the copyright context that means that an individual can stop a continuing infringement by a State, but has no remedy for the State's past infringements. Unless a structure can be devised whereby the federal agency can obtain damages for past infringements and turn them over to copyright owners, it is difficult to see any advantage to enforcement by a federal agency that cannot already be obtained under Ex Parte Young. Such a structure might have been available in the form of a qui tam suit, where an individual is authorized to pursue a right of action of the Federal Government. However, the use of qui tam suits to circumvent state sovereign immunity is of questionable constitutionality, and the Supreme Court recently noted that ''there is 'a serious doubt' on that score.''(see footnote 72)
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Third, past rulings of the Supreme Court cast doubt on whether an effort to substitute a federal agency for the copyright owner in order to circumvent state sovereign immunity would be upheld. In New Hampshire v. Louisiana,(see footnote 73) the Supreme Court dealt with a situation very close to the one contemplated by this option. In that case, several individuals with creditor claims against the State of Louisiana assigned those rights to the State of New Hampshire. Their hope was that New Hampshire would be able to proceed against Louisiana where individuals were met with the roadblock of sovereign immunity. The Court did not allow the scheme to prevail, holding that ''one State cannot create a controversy with another State . . . by assuming the prosecution of debts ow[ed] by the other State to its citizens.''
Similarly, in North Dakota v. Minnesota,(see footnote 74) North Dakota sued Minnesota for damages to state and private property as a result of flooding caused by Minnesota's rerouting of a river. The Court noted that the farmers whose lands were damaged contributed to a fund to pay for this litigation and that those contributors would share in any damages award. Citing New Hampshire v. Louisiana, the Court dismissed the claims for damage to private property on grounds of sovereign immunity.
Further, citing these cases, the Supreme Court held in Hawaii v. Standard Oil Co.(see footnote 75) that:
[a]n action brought by one State against another violates the Eleventh Amendment if the plaintiff State is actually suing to recover for injuries to designated individuals.(see footnote 76)
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It is uncertain whether the Federal Government could succeed in championing the cases of individuals where States could not. However, these decisions cast serious doubt on the constitutionality of this option.
Fourth, expansion of the role of the Federal Government in a sphere that has heretofore been the sole concern of private litigants runs counter to recent trends in government. It would be difficult to defend the use of taxpayer money to litigate on behalf of multi-million dollar corporations. Of course, if the Supreme Court has left no other option for the effective enforcement of intellectual property rights, the justification might be easier to find.
A fourth option is for Congress to abrogate state sovereign immunity by appropriately-tailored legislation under Section 5 of the Fourteenth Amendment. As noted above, the Supreme Court's decision in Florida Prepaid severely limits the application of this option. In order to adopt a strong abrogation provision that would still be within the limitations of Florida Prepaid, the legislation would have to be tailored to meet three criteria.
First, Congress must establish a strong record of infringement by States. If, as would be desirable, the legislation were to include patent and trademark, a record of infringement by States of those rights must be established as well. As noted above, this record is not currently available. Second, the abrogation must be drafted so that it applies only to States that do not provide a remedy or some form of due process to an aggrieved copyright owner. Such remedies need not be equivalent to the standards of Title 17. This option therefore carries with it a risk of undermining national uniformity of copyright protection. It is unclear whether the abrogation must be flexible so as to apply only to States that provide no remedy at the time a particular suit is brought (or for the entire duration of a suit), or whether the availability of remedies at the time of enactment permanently defines the scope of the abrogation. Third, the abrogation may only extend to non-negligent infringement by a State. Additionally, an abrogation provision drafted so as to maximize its chances of surviving judicial scrutiny by requiring individual plaintiffs to demonstrate a deprivation of property without due process, thus obviating the need for extensive legislative findings, might be impractical for individual litigants and thus ineffective.
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A fifth option is to condition States' exercise of federal intellectual property rights, including copyright, patent and trademark rights, on a waiver of sovereign immunity for infringement suits. In College Savings, the Court overturned Parden and completely eliminated the implied waiver doctrine. This option, therefore, would have to be structured to induce States affirmatively to waive their sovereign immunity, most likely by state statute. This could be accomplished by rendering state works ineligible for protection in the absence of an express waiver by the State of its immunity in copyright infringement cases. The incentive for States to waive their immunity could be made even stronger by tying the issues of copyright, patent, and trademark infringement together. There is a symmetry to this approach. It is clear and salable, with a compelling proportionality and nexus between the problem and the remedy.
There is language in the majority opinion in College Savings that could be read as a dicta commentary suggesting that if Congress conditions State's access to protections under a law enacted pursuant to the Commerce Clause on waiver of state immunity, such waiver is not voluntary and thus not valid. However, the better reading of the relevant language is that implied waiver is inherently involuntary but that where Congress clearly gives the State a choice, so long as the choice is not coercive, a State's choice to explicitly waive its immunity is effective.
There is little case law on express waiver, and what little there is focuses on whether or not an express waiver occurred, rather than on the State's motivation in waiving immunity. In other contexts of waivers of constitutional rights or immunities, the Court has looked to the circumstances surrounding the waiver and, on occasion, found the waiver to be ineffective where it was essentially coerced. This option arguably contains an element of coercion because it conditions States' enforcement of intellectual property rights on a waiver of immunity.
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Some may view this approach as overly coercive, although the Copyright Office has not yet heard a legal argument that persuasively supports that view. There are two strong counter-arguments: First, this approach is no more coercive than the unilateral abrogation of State immunity in current law. While that law is probably unenforceable in light of the Court's rulings, it was nonetheless adopted with the support of many current Members of Congress. Unlike abrogation, States would be given a real choice between waiving immunity or accepting the consequences. As discussed below, many States may take the latter course. Second, there is a strong nexus between the consequences of not waiving immunity and the problem that a waiver is intended to solve. In the absence of waiver, copyright owners are deprived of their rights. This approach merely imposes the same result on non-waiving States. The issue is one of fundamental fairness.
It is far from a foregone conclusion that States will uniformly waive their immunity under this approach. Many States may conclude that immunity from copyright infringement suits serves their interests better than the a