Copyright Owners’ Putative Interests in Privacy, Reputation, and Control: A Reply to Goold

Patrick Goold’s interesting new article, Unbundling the “Tort” of Copyright Infringement[1] (“Unbundling”) centers on a key lack of clarity that Professor Goold perceives in the cause of action for copyright infringement. The lack of clarity, he argues, afflicts threshold definitions of what constitutes actionable copying.

Under federal copyright law, to prove infringement the plaintiff copyright owner usually must first persuade the finder-of-fact that the plaintiff owns a valid copyright and that the defendant factually used the copyrighted work in one of the ways governed by statute.[2] Then the plaintiff must prove something more.[3] The copyright owner also bears what might be called a normative burden: The plaintiff must prove that the defendant has engaged in “improper appropriation”[4] by using the plaintiff’s copyrighted work to produce something “substantially similar”[5] to the plaintiff’s work of authorship.[6] Later, the copyright owner may also need to struggle with a normative claim by the defendant that her use of the plaintiff’s expression, even if “substantial,” should be permitted as “fair.”[7]

As Goold notes,[8] courts do not reliably define the normative part of the plaintiff’s cause of action in the same way. The terms “substantially similar” or “improper appropriation” receive somewhat varying interpretations. A related difficulty that Goold identifies typically arises on the defense side: He perceives inconsistency in how courts distinguish “fair” from “unfair” uses.[9] In Unbundling, Goold suggests that more clarity would result if the judiciary would follow his recommendations and identify within copyright infringement several individual, if currently inchoate, tort causes of action.[10]

Goold in previous work has made good use of tort doctrine to explore copyright law,[11] and his new project has intriguing possibilities. Today’s federal copyright statute runs for many pages that are often dense with complex language, yet its details nevertheless fail to resolve many cases. Sometimes fraying or uncertainty in core concepts is responsible for this failure. Similarly hoping to increase clarity, Pamela Samuelson is unpacking many of the ways that courts employ copyright’s “merger” doctrine.[12] She, along with other scholars, has begun unbundling and identifying several distinct defenses hiding behind the label “fair use.”[13] Given copyright’s many unsolved puzzles, determining whether the “substantial similarity” or “improper appropriation” aspect of infringement can be unbundled is a route that certainly has promise.

Unbundling argues that copyright infringement appears to be a unitary tort, but that it actually contains within itself five unarticulated subtorts. Goold suggests that if in fact we could unpack copyright into its component concerns, a “gallery of wrongs”[14] of the type other torts possess, there might well be a distinct-infringement test for each type of infringement.[15] Thus, he argues that discerning the different subtorts within the copyright-infringement bundle could help judges choose, and lawyers anticipate, the appropriate test for identifying infringing uses. This is an advance, so far as I know, over prior applications of the unbundling method in copyright scholarship.

He suggests that the standard copyright-owner interest in revenue be divided into two subtorts: protection from unauthorized consumer copying and protection from competitors diverting one’s potential customers. In addition, Goold suggests that within copyright lie three additional causes of action geared to protect copyright owners’ interests in privacy, in reputation, and in controlling “rivalrous”[16] uses.[17]

The five subtorts that Goold offers are: (1) consumer copying, which he identifies as the primary “wrong” with which copyright law is concerned,[18] followed by (2) diversion of customers by competitors,[19] (3) invasion of expressive privacy,[20] (4) injury to artistic reputation,[21] and (5) breach of creative control (by which he means interference with a rivalrous use).[22] For mainstream interpretations of copyright, Goold’s first two initial categories—customer copying and competitor/publisher diversion—are the standard concerns that copyright courts address. The other three are more controversial than the article indicates.

Of those three, a right to control rivalrous uses probably has the strongest claim to being based in the case law. Unfortunately, that right has probably inescapable definitional weaknesses that make it dangerously susceptible to expansion. The subtort to redress reputation injury flowing from misattribution of authorship has some intriguing possibilities, though its feasibility is also questionable (though for different reasons). As for the invasion of privacy subtort, it goes strongly against the grain of some recent copyright cases.

My own view is that Goold overstates the explanatory role of tort law.[23] But even were that not the case, the courts need to reach some kind of “settled” understanding on these various interests before a cause of action is created or definitively rejected, and that no such consensus on the three matters mentioned yet exists, whether they are viewed as forms of tort or otherwise. Goold’s work may nevertheless be an important step toward reaching closure on these and other open questions in copyright law.

Let us take the five categories of Goold’s subtorts in order.

I. Consumer Copying

Copyright’s familiar concerns lie with commercially significant copying by competitors and consumers. It is this commercial recompense that an author hopes for, and that serves as incentive for production. Goold takes an unconventional approach, though, dividing consumer from competitor copying.

Goold’s first major innovation is to put consumer copying as the copyright’s central tort within a tort, and to designate publisher diversion of consumers as a secondary concern of copyright law. This elevation of consumers as copiers is profoundly ahistorical. The United States borrowed its initial copyright scheme largely from the English Statute of Anne, which in turn evolved out of battles among publishers.[24] In the United States, the first federal Copyright Act prohibited only the unconsented “printing, reprinting, publishing and vending” of the copyrighted work.[25] As a physical matter in 1790, consumers could neither print nor reprint. Consumers might copy longhand, but that was unlikely to be commercially significant.

Copyright law’s focus on publisher behavior persisted well into the twentieth century, even after the start of modern home copying technology. For example, when in 1972 sound recordings were made federally copyrightable, Congress went out of its way to explain that home copyists could continue to safely use their tape recorders to make permanent copies of their favorite songs because (says the legislative history) copyright law only addresses commercial copying.[26] At least in 1972, Congress seemed to envisage no possible liability for private behavior, whether the private behavior was copying a work or performing or adapting it.[27] Only when the home product was physically replicated and sold commercially would copyright law take action.

Goold’s paper addresses a world greatly changed since 1972. The progress of home reprographic and distribution technology, in the form of computers, tape recorders, video recorders, internet linkages, and the rest, has been so rapid as to make a profound difference in consumer abilities to create, obtain, and transmit copyrighted material.

Goold implies the law has also greatly changed. Indeed, Congress has paid increasing attention to consumer copying and transmission. One example is copyright’s criminal provisions. In 1978, private copying for noncommercial purposes was essentially free from criminal sanction.[28] In recent years, however, amendments to the criminal law provisions have largely eliminated that safe haven.[29] Another change lies in Congress not only permitting copyright owners to physically encrypt their digital work, but also backing up the encryption with federal penalties for bypass.[30]

Yet Goold overstates by placing consumer copying at the center of 2017 copyright law. Congress made its last major overhaul of federal copyright law in 1976, and the vast majority of the 1976 provisions remain intact. Admittedly, there have been several high-profile suits concerning peer-to-peer networks, and the district courts have seen a flood of “idiosyncratic” suits[31] seeking to milk disproportionate statutory damages from downloaders.[32] But the latter suits, though numerous, are not a reliable focus for assessing copyright policy.[33] Putting them aside, the vast majority of copyright litigation addresses copying and adaptation by commercial companies and republishers, not copying by consumers. The shift of focus to consumer copying might be justified given the drastic increase in potential commercial significance that consumer behaviors now have, but Goold offers no sustained argument to that effect,[34] and no convincing evidence that consumer copying constitutes a more significant infringement than commercial copying does. If we are to ignore a doctrine’s historical roots, we expect some exploration of the costs and benefits of doing so.

It is hard to see what Goold gains by prioritizing consumer copying. He wants to solve problems in articulating the tests for infringement and fair use, but he exchanges those puzzles for one of the most debated questions in copyright today—whether and under what conditions a failure to pay a license fee should weigh against a private person’s claim to “fair use” treatment.[35] That hardly seems a profitable exchange. As set forth in Unbundling, this new subtort requires, among other things, “[a]pplying the basic incentive-access policy calculus,” under which a court decides whether “specific uses [are] of the type where wealth redistribution [is] necessary to ensure optimal incentives.”[36] And that is only one question in the infringement inquiry.

II. Competitor Diversion of Customers

For most of the copyright bar, Goold’s second proposed category—publisher diversion of customers—is the core of copyright law. So identifying this category is useful primarily in the context of a panoply of meaningful choices; its value depends on the value of how well its competing concepts are set out.

One correction needs to be made to Goold’s explanation of customer diversion by competitors. His article gives an example of this subtort using two lighthouses that steal each other’s customers.[37] The example might easily be misunderstood to suggest that copyright makes actionable any kind of commercial harm that involves competitors selling similar products or services, regardless of the presence or absence of borrowing. Goold should be wary of using an example that may lead readers to overlook the particular kind of causation that is essential to copyright.

A copyright plaintiff must prove that a defendant has somehow used the plaintiff’s work in a way that made a difference to the defendant[38]: Unless free riding on the plaintiff’s work was a “but-for cause” of what the defendant produced or did, no liability arises. There is a requirement that the defendant’s product borrow something from the plaintiff’s work.

This two-lighthouse example might be appropriate were Goold writing about patent law, which does empower suit against independent inventors who happen to provide a product identical to what is patented. By contrast, to make Goold’s example fit copyright law, one lighthouse would have to be taking advantage of the other’s efforts or resources in some way. But in Goold’s actual example, one lighthouse makes no use of anything owned by or produced by the other. In his example as constituted, the only causal link is one of harm. Harm is neither necessary nor sufficient to meet copyright’s causal link. What satisfies copyright’s “copying” element is not harm done to a plaintiff’s market, but rather some benefit the defendant has reaped that is causally due to his or her use of the plaintiff’s work. There is no free riding between the two lighthouses. And while proof of free riding is far from sufficient to prove copyright infringement, it remains an essential component of the prima-facie case.

III. Redress of Privacy Invasions

The third role Goold attributes to copyright is protection against privacy invasions.[39] This is particularly problematic. A myriad of cases reject privacy and other dignitary roles for federal copyright, as will be shown below. It is possible these cases are wrong, but Goold seeks to provide a descriptive account of copyright law.[40] Of particular relevance is the en banc decision of the Ninth Circuit that “the protection of privacy is not a function of the copyright law.”[41]

Until the 1976 Copyright Act became effective in 1978, private and otherwise unpublished manuscripts were largely handled by state rather than federal copyright. Only a few categories of unpublished material were even eligible for federal registration. 

Certainly, in 1978, federal copyright law expanded to embrace all unpublished works, so long as they were written down, tape-recorded, or otherwise “fixed.”[42] But this expansion of federal reach did not change federal policy. The key document, the House Report for the 1976 Copyright Act, gives a number of reasons for bringing unpublished works into federal copyright, most having to do with simplicity, administrability, and uniformity.[43] Nowhere is there a hint that federal copyright was meant to adopt any privacy or dignity concerns that states may have injected into their common law or statutory protections for local authors.[44] Further, when post-1978 courts began giving too much deference to the desires of authors to control the first publication of their words, Congress responded by dialing down the deference owed.[45]

Conceivably Goold can make privacy hay out of our country’s accession to the Berne Convention, which caused changes in federal copyright law[46] that arguably introduced personal and emotional concerns into certain subparts of federal law.[47] However, the Berne changes are in tension with America’s iconoclastic free speech tradition, so trying to make them the foundation for a privacy cause of action within copyright will be (or at least should be) an uphill battle.

Goold is right that some federal copyright cases hint that privacy is a legitimate copyright concern. But doctrinal development, demands of internal consistency, and copyright policy lean predominantly the other way. For example, consider the difficulty of inserting privacy concerns into copyright law in light of the historic distinction between ownable expression and unprotectable ideas and facts.[48] The Supreme Court has indicated that this freedom to copy facts may be essential to copyright’s constitutionality.[49] Therefore, no copyright cause of action would lie for uncomfortable facts gleaned from even the most private diary. In addition, a host of differences between copyright law and privacy rights would make it difficult to know how to shape a privacy claim in copyright law. Common law privacy rights are personal, so that, for example, they usually expire upon death,[50] whereas copyright not only survives an author’s death, but can be owned by someone other than the creator.

IV. Artistic Reputational Injury Occasioned by Misattribution of Altered Work

This may well be the most promising new sub-tort in Goold’s arsenal. Before discussing it, let us lay some groundwork.

Copyright is sometimes casually equated with plagiarism, but one of the distinctions between the two lies in the role that reputation plays. Plagiarism results from inaccurate attribution of authorship, usually by someone seeking an improper boost for his or her reputation (or grade) by making unacknowledged use of others’ language. Lack of attribution is the core of the wrong in plagiarism, and proper attribution is its cure.

In copyright, attribution has almost the opposite effect. Proper attribution tends to make copyright infringements more harmful rather than less, as identifying the true author of what an infringer is selling is likely simply to increase the infringer’s profit.

Say, for example, that someone without authorization mass-produces and sells a best-selling Stephen King novel. Sales of the infringing version without King’s name would be lower than the volume of sales that would result if the infringer accurately put King’s name on the cover. Similarly, if someone without authorization translates King’s novel into Spanish, this behavior too will infringe rights held by the copyright owner,[51] and again using King’s name would increase sales. Should the unauthorized translator name herself as sole author of the Spanish-language novel, sales are likely to be modest.

Goold does not fall into the trap of equating copyright with plagiarism. Goold’s article thus plays a valuable role by focusing on one narrow kind of reputational injury: that which flows from producing a degraded or distorted version of the plaintiff’s work and attributing it to plaintiff. An example might be the translator just mentioned: If she made drastic changes to Stephen King’s plot or characters, and nevertheless attributed the quite different work to King, his reputation as a skillful writer might suffer.

But even as to that fact pattern, the article leaves many issues unaddressed. Perhaps most obvious is the danger that the reputation inquiry will collapse into inquiries into whether the second work is truly of lesser quality than the copied work. There are many hazards, some of them sounding in the First Amendment, given that it may see judges involve themselves in deciding what counts as a ‘worthy’ or ‘unworthy’ adaptation of a work of art.[52]

Admittedly, joining the Berne Convention required the United States to adopt the so-called “moral rights” of attribution and integrity,[53] which involve reputation. Congress, however, has been leery of importing such inquiries into American law. The legislation implementing those rights, the Artists Visual Rights Act of 1990 (“VARA”),[54] is quite narrow. Among other limits, it does not give so-called rights of attribution or integrity to literary works or music, or to “any poster, map, globe, chart, technical drawing, diagram, model, applied art, motion picture or other audiovisual work, book, magazine, [or] newspaper.”[55] In this and other ways, Congress cabined the reputational and integrity rights within limits so strong as to make the rights almost useless.[56]

This narrowness should not surprise us. Fair use and the First Amendment are about searching for truth, not securing reputations against ridicule. In fact, in a major copyright opinion, the Supreme Court held that the very human desire to avoid being ridiculed is a reason that favors giving parodists a very free rein to quote and distort the copyrighted oeuvres they ridicule.[57]

VARA distinguishes ownership of integrity and moral rights from ownership of copyright.[58] Moreover, as Judge Frank Easterbrook has argued, the narrowness of VARA suggests Congress does not want broad moral rights inserted into copyright law generally.[59] Explicit limits should not be casually contravened by inserting a reputational right into the general infringement action “through the back door.”[60]

Goold needs to give greater attention to the practical consequences of embracing this sub-tort. The Supreme Court has refused to embrace attribution issues in federal trademark law[61] largely because of “serious practical problems.”[62] The Court rejected attribution inquiries despite plausible support for attribution questions in the statutory language of the trademark statute and despite the fact that giving consumers accurate information about source is a crucial concern of trademark law. One of the Court’s primary concerns was that a legal requirement of accurate attribution might require litigants and judges to engage in a fruitless “search for the source of the Nile and all its tributaries.”[63]

However suggestive it might be, the Supreme Court’s trademark opinion does not compel the exclusion of attribution issues from copyright law. In fact, the trademark dispute had focused on the labeling of a work in the public domain, and the Court opined that public-domain works were likely to present more difficult authorship issues than works whose copyrights are still valid.[64]

Nevertheless, given the accretive nature of culture, identifying the authors of works still in valid copyright can also be immensely difficult. Consider a child’s copyrighted stuffed toy, based on a copyrighted animated movie, which was based on a copyrighted story in English, which in turn was based on a copyrighted Russian-language version of a Ukrainian folk tale.

Conceivably there are ways to make explicit copyright recognition of the reputation/attribution issue somewhat feasible for literary works and other works not eligible for VARA (though VARA’s own limits raise doubts about doing so). For example, detailed rules might ameliorate some line-drawing problems, such as how to distinguish between authorial and non-authorial contributions to a work.[65] And Goold is correct that there have been hints in some copyright cases that courts will be particularly unsympathetic to defendants who not only make unauthorized changes to a work but also name the horrified copyright owner as its author. All told, of the three new sub-torts Goold advances (privacy, control, and reputation), this reputational sub-tort is the most normatively promising.

V. The Right of Creative Control

This last sub-tort on Goold’s list, involving creative control, is particularly controversial when it is asserted in a context where the alleged lack of control interferes with no identifiable commercial plan or activity of the copyright owner.[66] Yet the notion may have staying power. Some kinds of control—such as the right to be the sole maker of a movie or other derivative work, or the right of first publication—do have the commercial resonance that can matter to incentives.

Still, a ‘right of control’ per se would be intolerably expansive. To proffer it requires detailed specification of limits. For example, on a normative level, one can doubt whether copyright should curtail harmless and speech-related behavior simply because the sequence of words, sounds, images or symbols are being deployed in a way their author doesn’t like. On a descriptive level, I do not see strong support for a right to control harmless behavior in the cases or statute. Much of the evidence is to the contrary. For example, Goold draws support from an early piece by Register David Ladd,[67] but Ladd’s views were largely opposite to those the contemporaneous Supreme Court adopted.[68]

The Constitutional purpose of copyright is to provide economic incentives.[69] A ‘right of control’ sub-tort severed from economic harm has a weak connection to incentives.

Conclusion

Goold’s article clears some necessary territory. However, too much underbrush remains to justify the article making recommendations as to how courts should actually proceed.

One can understand scholars feeling pressure to find and announce solutions, particularly while “improper appropriation” in copyright law remains highly problematic. Over seventy years have passed since negligence law received from Judge Learned Hand a clear structure for its somewhat parallel category, “unreasonable behavior.”[70] (As if to rub it in, Judge Hand opined on a crucial distinction in copyright that “[n]obody has ever been able to fix that boundary, and nobody ever can.”[71]) And lack of conceptual clarity leads to some jarring results.[72] Yet most infringement litigation proceeds along unsurprising paths.

As for “fair use,” no emergency threatens there either. Scholarship has refined the doctrine’s contours, and recent caselaw has made fair use liberties available to a wide range of publicly valuable but unauthorized applications of copyrighted work. Thus, for example, Goold quotes Larry Lessig’s famous quip from 2004 that fair use amounts to a mere “right to hire a lawyer,”[73] though Goold concedes in the footnotes that not all share this view. Fair use has changed greatly since—so greatly that some commentators argue that the doctrine transitioned “from weak reed to powerful shield in a decade’s time[.]”[74]

Unbundling is a notable venture for a new scholar. It shows a range of knowledge and an independent cast of mind. Admittedly, I remain unpersuaded by its particular effort to make visible the hidden causes of action that lie within federal copyright, particularly when Goold argues for protecting reputation, privacy, and a broad right to control—three issues not directly concerned with commercial incentives. These three interests have some basis in the statute and caselaw, but their substantive support is sufficiently weak that I am puzzled by Goold’s choice to focus on them. Nevertheless, his basic method—investigating whether a variety of distinct interests are being protected by copyright law, and assessing whether their several natures might mandate specialized tests for infringement or assessing fair use—is one that many in the field could profitably emulate.

By disentangling various distinct interests that are often bundled together in a blurry and confusing way in copyright cases, Goold places an important set of questions on the agenda of copyright judges, legislators, and commentators: Are these interests that copyright law does or should serve? If not, how would unambiguously excluding them change current copyright practice? If, by contrast, copyright does or should explicitly embrace them, what changes could be triggered by unambiguously recognizing these interests, particularly regarding the infringement inquiry and weighing the fair use factors? Goold’s article gives urgency and clarity to this important set of inquiries.

 

 


*Copyright © by Wendy J. Gordon 2017. Wendy J. Gordon is William Fairfield Warren Distinguished Professor at Boston University and Professor of Law at the BU School of Law.

I thank my husband, Michael Zimmer, for his superb editorial eye; Oren Bracha for his perceptive comments; the University of Texas School of Law at Austin for its generous hospitality while I worked on this piece; and Alexander Piala (UT class of 2018) for his excellent research assistance. In addition, I am grateful to the wondrous resources of BU’s Pappas Law Library, particularly the good offices of Stefanie Weigmann and Shira Megerman.

[1]Patrick R. Goold, Unbundling the “Tort” of Copyright Infringement, 102 Va. L. Rev. 1833, 1833–34 (2016) [hereinafter Goold, Unbundling].

[2]Making use of the copyrighted work is usually known as “actual copying” or “copying in fact.” “Copying in fact” or “actual copying” are terms of art. They address whether someone has factually borrowed or used the copyrighted work in question. In this context, the opposite of “copying” is relying solely on other sources or on independent creation. (In this broad sense of “copying,” to read a copyrighted book chapter over the radio is to “copy” it. In some other contexts, however, to “copy” may literally mean “to reproduce.”) Although to “copy” (in the context of the plaintiff’s case in chief) means essentially “to use,” not all unauthorized uses of copyrighted work are unlawful. For example, the Copyright Act gives everyone the liberty to copy ideas. 17 U.S.C. § 102(b) (2012). For another example, while the Act gives copyright owners some rights over public performance, the Act does not reach private performance. Id. § 106(4). Thus reading a copyrighted book aloud in one’s living room cannot violate the performance right. Id. See also id. § 101 (definition of “publicly”).

[3]VMG Salsoul, LLC v. Ciccone, 824 F.3d 871, 877 (9th Cir. 2016) (noting that “proof of actual copying is insufficient to establish copyright infringement . . .”).

[4]For courts using this terminology, see, for example, Muller v. Anderson, 501 F. App’x 81, 83 (2d Cir. 2012) (“[T]he plaintiff must prove . . . improper appropriation.”); Walker v. Time Life Films, 784 F.2d 44, 48 (2d Cir. 1986) (“Walker must show . . . that his expression was ‘improperly appropriated’ . . . .” (quoting Hoehling v. Universal City Studios, 618 F.2d 972, 977 (2d. Cir. 1980)); Arnstein v. Porter, 154 F.2d 464, 468 (2d Cir. 1946) (noting the plaintiff must show that “the copying . . . went so far as to constitute improper appropriation”).

[5]For courts employing this terminology, see, for example, Almeda Mall, L.P. v. Shoe Show, 649 F.3d 389, 391 (5th Cir. 2011) (concluding that “the trade name SHOE SHOW is not substantially similar to THE SHOE DEPT. . . .”); Cavalier v. Random House, 297 F.3d 815, 822 (9th Cir. 2002) (“Copying may be established by showing that the infringer had access to plaintiff’s copyrighted work and that the works at issue are substantially similar in their protected elements.”); Warner Bros. v. Am. Broad. Cos., 720 F.2d 231, 239 (2d Cir. 1983) (“The basic issues concerning the copyright infringement claim are whether the Hero and Superman works are substantially similar so as to support an inference of copying . . . .”).

[6]Infringement can occur through producing an unauthorized physical reproduction, an unauthorized derivative work, or an unauthorized public performance. 17 U.S.C. § 106(1), (2), (4), (6). In addition, a defendant can infringe by distributing or publicly displaying an unlawfully made copy or even, under some circumstances, by distributing or publicly displaying a lawfully made copy the defendant does not own. See id. § 106(3) (distribution right) as modified by id. § 109(a) (first sale doctrine). See also id. § 106(5) (public display right) as modified by id. § 109(c). Additional causes of action exist under the statute, but they are best seen as paracopyright and distinct from copyright infringement per se. See, e.g., id. §§ 1201–04 (civil and criminal penalties applicable to, inter alia, unauthorized circumvention of physical copy-restraints such as encryption).

[7]Id. § 107 (“[T]he fair use of a copyrighted work . . . is not an infringement of copyright.”). See generally Wendy J. Gordon, Excuse and Justification in the Law of Fair Use: Transaction Costs Have Always Been Only Part of the Story, 50 J. Copyright Soc’y U.S.A. 149 (2003) (common law flavored introduction to the complex “fair use” doctrine).

[8]Goold, Unbundling, supra note 1, at 1836–37.

[9]Id. Fair use doctrine is a vehicle for evaluating whether a substantial borrowing might, in the context of a particular fact pattern, nevertheless be normatively entitled to go forward without permission and payment. The fair use doctrine can render even exact copies noninfringing. 17 U.S.C. § 107 (listing “multiple copies for classroom use” as a possible focus for fair use); Sony Corp. of Am. v. Universal City Studios, 464 U.S. 417, 449–51 (1984) (home videotaping of entire TV programs can be fair use when done for purposes of time-shifting).

Goold is quite right that ordinarily “fair use” arises in a defendant’s case, and that the defendant will usually bear some or all of the burden of persuasion. Goold, Unbundling, supra note 1, at 1836. However, the statute itself does not identify “fair use” as an affirmative defense. Rather, the Copyright Act’s key provision on fair use, 17 U.S.C. § 107 (2012), says only that fair uses are “not an infringement of copyright,” a phrase that could be legitimately interpreted to place a burden of proving unfair use on plaintiffs as part of their case in chief. In some cases, some portion of a burden to prove unfair use has indeed been placed on plaintiffs, whether implicitly or explicitly.

The right to make fair uses of others’ work is an important part of the public’s liberties to use others’ copyrighted expression. This set of liberties is sometimes identified with “users’ rights.” See CCH Canadian Ltd. v. Law Soc’y of Upper Can., [2004] 1 S.C.R. 339, 364 (Can.) (“User rights are not just loopholes.” (quoting David Vaver, Copyright Law 171 (2000)).

[10]Goold, Unbundling, supra note 1, at 1838, 1898.

[11]See Oren Bracha & Patrick R. Goold, Copyright Accidents, 96 B.U. L. Rev. 1025, 1027–1029 (2016). This article explores how copyright law should treat defendants who, after a good faith but fruitless attempt to locate and pay any copyright holders, take the risk of publishing, and then learn they have copied a substantial amount of copyrighted material. One might say such defendants have “accidentally” copied a copyrighted work, a metaphor that Bracha and Goold take seriously and deploy to good effect.

[12]Pamela Samuelson, Reconceptualizing Copyright’s Merger Doctrine, 63 J. Copyright Soc’y U.S.A. 417, 417–19 (2016).

[13]See, e.g., Pamela Samuelson, Unbundling Fair Uses, 77 Fordham L. Rev. 2537, 2539–41 (2009) (arguing that the success of fair use defense falls into common patterns); Lydia Pallas Loren, Redefining the Market Failure Approach to Fair Use in an Era of Copyright Permission Systems, 5 J. Intell. Prop. L. 1, 7–8, 16–18 (1997) (recognizing fair use rights as expansive and exploring how fair use doctrine impacted rights given to the copyright owner and user over time); Wendy J. Gordon, Fair Use as Market Failure: A Structural and Economic Analysis of the Betamax Case and its Predecessors, 82 Colum. L. Rev. 1600, 1627–35 (1982) (exploring fair use as a response to, inter alia, high transaction costs, external benefits, noncommercial uses, nonmonetizable values, and antidissemination motives).

[14]Goold argues that copyright infringement is oddly “singular,” as opposed to the multiple causes of action that characterize other areas of tort. Goold, Unbundling, supra note 1, at 1838–39. He also contends that copyright lacks the explicit “gallery of wrongs” structure found in many other areas of tort. Id. at 1855–56. These claims are puzzling.

First, much of the activity denominated “copyright infringement” is socially useful and not morally wrongful in itself; the “wrong” lies in disobeying the law which requires the purchase of a license. To label every breach of law a “wrong” is technically a correct usage, but the usage nevertheless dilutes the force of the word.

Second, copyright has a full (one might say over-full) gallery of distinct breaches, full of detailed differences. The Copyright Act sets out many subcategories of copyright infringement that it explicitly distinguishes, both in terms of types of works protected, 17 U.S.C. § 102(a), and in terms of the typology of rights that attach to owning a particular kind of work, id. §§ 106, 106A. The Act then makes each type of work and type of right subject to particularized exemptions and defenses. Id. §§ 108–122. A good illustration of the lines the statute draws can be seen by comparing the acts that can infringe copyright in a “sound recording” with the acts that can infringe copyright in a “musical work.” Id. §§ 102(a), 106, 114. The copyright statute thus certainly seems to display a “gallery” of causes of action.

Nevertheless, the importance of Goold’s point depends neither on whether copyright infringement is a ‘wrong’ in a meaningful sense, nor on the question of whether copyright infringement is unitary or internally diverse. All Goold needs to show is that making some additional distinctions among types of breach would be useful. That question his article skillfully raises.

[15]Goold, Unbundling, supra note 1, at 1838–39.

[16]Id. at 1870–71. Intangible patterns like works of authorship are usually considered nonrivalrous because, as Goold explains, “one person’s use does not affect the use of another.” Id. at 1870. Despite the possibility of infinitely replicating a book or song, physical inexhaustibility does not guarantee that one person’s use will not affect another person’s profit. Goold essentially tries to identify occasions on which the rivalrous aspect predominates. For further discussion of what might constitute a “rivalrous use,” and of the category’s ambiguities, see Part IV.

[17]I am glad Goold did not propose a subtort to vindicate publisher, as distinct from authorship, interests. In my view, publishers’ claims under copyright should be related to the publishers’ role in incentivizing creative expression, and no deference should be paid in copyright cases to supporting publishers’ noncreative activities. See Wendy J. Gordon, Authors, Publishers and Public Goods: Trading Gold for Dross, 36 Loy. L.A. L. Rev. 159, 197–198 (2002).

[18]Goold, Unbundling, supra note 1, at 1857.

[19]See id. at 1860.

[20]See id. at 1865.

[21]See id. at 1867.

[22]See id. at 1869.

[23]Copyright reflects the influence of a number of common law doctrines to which Goold gives little serious attention—for example, unjust enrichment law (also known as restitution) provides for recovery to volunteers who confer benefits without contract. Such cases provide significant insight into when and why the common law might be unwilling to require beneficiaries to pay for benefits others create. Yet Goold dismisses the relevance of restitution law, largely on the ground that giving it analogic significance “would potentially justify [copyright] owners claiming reward every time the work is enjoyed.” Id. at 1854. Goold’s position is deeply puzzling, given that unjust enrichment law gives recovery far more sparingly than does tort law. See, e.g., Wendy J. Gordon, Of Harms and Benefits: Torts, Restitution, and Intellectual Property, 21 J. Legal Stud. 449, 450 (1992) (discussing how duties “to guard against harm are far more common than duties to provide or pay for benefits”). Goold cites some of my work on this topic, but fails to explain adequately why he disagrees about the influence restitution law would have. Goold, Unbundling, supra note 1, at 1854 n.150.

[24]See Oren Bracha, Owning Ideas: The Intellectual Origins of American Intellectual Property, 1790–1909, 36–42, 58 (2016).

[25]Copyright Act of 1790, 1 Stat. 124 (1790) (repealed 1802).

[26]117 Cong. Rec. 34,748–49 (1971) (“Mr. KAZEN: Am I correct in assuming that the bill protects copyrighted material that is duplicated for commercial purposes only? Mr. KASTENMEIER: Yes.”).

[27]Jessica Litman, Campbell at 21/Sony at 31, 90 Wash. L. Rev. 651, 662 (2015).

[28]As initially enacted in 1976, Section 506 provided, in pertinent part, that criminal penalties applied to someone who “infringes a copyright willfully and for purposes of commercial advantage or private financial gain.” An Act for the General Revision of the Copyright Law, Pub. L. No. 94-553, § 506, 90 Stat. 2586 (1976).

[29]First, the original term, “private financial gain,” has recently been redefined to expand the reach of the criminal provisions. Today, 17 U.S.C. § 101 (2012) states, “The term ‘financial gain’ includes receipt, or expectation of receipt, of anything of value, including the receipt of other copyrighted works.”

Second, criminal liability under the copyright statute has been expanded to include, inter alia, behavior such as bypassing encryption. See id. §§ 1201, 1204. Third, Section 506 itself covers additional activity that consumers might well engage in, including “the reproduction or distribution, including by electronic means, during any 180–day period, of 1 or more copies or phonorecords of 1 or more copyrighted works, which have a total retail value of more than $1,000.” Id. § 506(a)(1)(B).

[30]See, e.g., id. § 1204 (creating criminal penalties for violation).

[31]Matthew Sag, IP Litigation in U.S. District Courts: 1994–2014, 101 Iowa L. Rev. 1065, 1077 (2016).

[32]Id. at 1075–80. The primary goal of these suits is “creating an independent litigation revenue stream that is unrelated to compensation for the harms of infringement and that is unconcerned with deterrence.” Id. at 1076. There also had been a wave of suits against end-users “to ‘educate’ the public about filesharing and to reinforce that education with deterrence.” Id. Those suits essentially ended in 2008. Id. at 1075[MD to edit this part]ucat”nce”,5–76olation)idn’is view.case)hat not available in the westlaw/lexis version].o analyzing the cla.

[33]Id. at 1077 (“[P]olicymakers should be cautious about extrapolating from current trends in this context. . . .”). In my view, Congress and the courts are more likely to pull back these suits, which essentially abuse the system, than to treat them as a model.

[34]Goold, supra note 1, at 1857–59.

[35]See, e.g., Wendy J. Gordon, The Concept of “Harm” in Copyright, in Intellectual Property and the Common Law 452, 477–80 (Shyamkrishna Balganesh ed., 2013) (discussing whether failure to pay license fees constitutes a harm under various theories); Loren, supra note 13, at 6 (discussing rejection of fair use claims where the copyright owners established licensing systems).

[36]Goold, supra note 1, at 1858. See also id. passim.

[37]Goold, supra note 1, at 1860. Aside from the problem of identifying “customers” who would pay for a non-excludable good such as a shining light, the hypothetical does not involve any copying, borrowing, free-riding, or other use of the first lighthouse’s resources by the newcomer lighthouse. This cannot be a copyright example, then, for copyright suits cannot proceed without proof that the defendant has gained something from the plaintiff’s work. See, e.g., Wendy J. Gordon, Copyright and Tort as Mirror Models: On Not Mistaking for the Right Hand What the Left Hand Is Doing, in Comparative Law and Economics 311, 323–25 (Theodore Eisenberg & Giovanni B. Ramello eds., 2016) (discussing “copying” element in cause of action as requiring evidence that defendant gained output, defined broadly as appearance, quantity and cost of production, after coming into contact with plaintiffs work). Goold places little emphasis on the example; he is simply doing a rhetorical turn on a classic public-goods illustration. But just a sentence or two before the example, he commits real error, in stating that the reason why copyright law allows suit against publishers has nothing to do with a desire to allow authors to “internalize” some of the benefits their efforts give others. Goold reserves that concern with internalizing only for consumer copying. Goold, supra note 1, at 1859–60.

[38]See Sheldon v. Metro-Goldwyn Pictures Corp., 81 F.2d 49, 53 (2d Cir. 1936) (“[I]t makes no difference how far the play was anticipated by works in the public demesne [public domain] which the plaintiffs did not use.”). In a now-classic formulation, the Second Circuit emphasized that the key factual question in copyright is “whether the defendants actually used” the copyrighted work. Id. at 53. The court notes that:

. . . [I]f by some magic a man who had never known it were to compose anew Keats’s Ode on a Grecian Urn, he would be an “author,” and, if he copyrighted it, others might not copy that poem, though they might of course copy Keats’s. . . . [J]ust as he is no less an ‘author’ because others have preceded him, so another who follows him, is not a tort-feasor unless he pirates his work . . . .

Id. at 54 (emphasis added) (citations omitted). A plaintiff cannot complain of copying by the defendant, so long as the copying is not from the plaintiff’s work. Id. at 54.

[39]Goold, Unbundling, supra note 1 at 1865.

[40]Id. at 1898–99.

[41]Garcia v. Google, Inc., 786 F.3d 733, 745 (9th Cir. 2015) (en banc) (quoting Bond v. Blum, 317 F.3d 385, 395 (4th Cir. 2003)). This statement about privacy is arguably dicta, but was nevertheless a matter to which the opinion gave serious consideration. The en banc court continues:

“To the contrary, the copyright law offers a limited monopoly to encourage ultimate public access to the creative work of the author.” Bond v. Blum, 317 F.3d 385, 395 (4th Cir. 2003); see also Monge v. Maya Magazines, Inc., 688 F.3d 1164, 1177 (9th Cir. 2012) (quoting Bond and “pointedly” noting copyright cases are analyzed “only under copyright principles, not privacy law”)

Likewise, authors cannot seek emotional distress damages under the Copyright Act, because such damages are unrelated to the value and marketability of their works.

Id. at 745.

[42]See 17 U.S.C § 301 (2012) (pre-empting state copyright law); id. § 102.

[43]See H.R. Rep. No. 94-1476, at 129–31 (1976).

[44]Id.

[45]In 1992, the fair use provision was amended to decrease the negative impact of a work’s being unpublished; the statute now states that “[t]he fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors.” 17 U.S.C § 107.

[46]See, e.g., Visual Artists Rights Act of 1990 (“VARA”), title VI of the Judicial Improvements Act of 1990, Pub. L. No. 101–650, § 603 (a), Dec. 1, 1990, 104 Stat. 5128 (1990) (primarily codified at 17 U.S.C. §§ 101 & 106A). These sections comprise the key portions of VARA, which was part of the US effort to implement its earlier accession to the Berne Convention.

[47]But see 17 U.S.C § 104(c) (discussing effect of accession to Berne Convention and noting that rights “shall not be expanded or reduced by virtue of, or in reliance upon, the provisions of the Berne Convention, or the adherence of the United States thereto.”).

[48]See id. § 102(b); Feist Publications.v. Rural Tel. Serv. Co., 499 U.S. 340, 356 (1991) (“Section 102(b) is universally understood to prohibit any copyright in facts.”).

[49]Eldred v. Ashcroft, 537 U.S. 186, 219–21 (2003).

[50]See, e.g., Hendrickson v. Cal. Newspapers, 48 Cal.App.3d 59, 62 (Cal. Ct. App. 1975) (“It is well settled that the right of privacy is purely a personal one . . . . the right does not survive but dies with the person”).

[51]The affected rights appear in: 17 U.S.C. § 106(1) (reproduction), § 106(2) (preparing derivative works), and § 106(3) (distribution to the public). See 17 U.S.C. § 106.

[52]The canonical caution to judges on this topic belongs to Justice Holmes: “It would be a dangerous undertaking for persons trained only to the law to constitute themselves final judges of the worth of pictorial illustrations, outside of the narrowest and most obvious limits.” Bleistein v. Donaldson Lithographing Co., 188 U.S. 239, 251 (1903).

[53]Berne Convention for the Protection of Literary and Artistic Works, art. 6bis, ¶(1), Sept. 9, 1886.

[54]The Visual Artists Rights Act of 1990, title VI of the Judicial Improvements Act of 1990, Pub. L. No. 101–650, 104 Stat. 5089, 5123–33 (1990) (primarily codified at 17 U.S.C. §§101 & 106A).

[55]17 U.S.C. § 101 (definition of “work of visual art,” with an additional provision defining what “[a] work of visual art does not include”).

[56]See id. § 106A. See also the remarkably narrow definition of the type of work covered by the attribution and integrity right. Id. at § 101 (definition of “work of visual art”).

[57]Campbell v. Acuff-Rose Music, 510 U.S. 569, 592 (1994).

[58]17 U.S.C. §106A(b) & (e)(2).

[59]Lee v. A.R.T. Co., 125 F.3d 580, 582–83 (7th Cir. 1997) (“It would not be sound to use § 106(2) to provide artists with exclusive rights deliberately omitted from the Visual Artists Rights Act.”).

[60]Id. at 582 (criticizing a theory “about what counts as a derivative work,” because adopting the theory would imply that “the United States has established through the back door an extraordinarily broad version of authors’ moral rights, under which artists may block any modification of their works of which they disapprove”).

[61]Dastar Corp. v. Twentieth Century Fox Film Corp, 539 U.S. 23, 36–37 (2003) (refusing to allow plaintiffs to use the Lanham Act—the federal trademark statute—to try questions regarding proper attribution of authorship).

[62]Id at 35.

[63]Id. at 36.

[64]Id. at 35. (“Without a copyrighted work as the basepoint, the word ‘origin’ has no discernable limits.”) Yet difficulties in determining authorial origin can arise regardless of a work’s legal status; even copyrighted works often contain multiple sources. Also, Dastar has been generally applied to bar trademark claims of false authorial attribution in cases involving copyrighted works as well as those involving public-domain works. See, e.g., Antidote Int’l Films v. Bloomsbury Publ’g, PLC, 467 F. Supp. 2d 394, 398 (S.D.N.Y. 2006) (holding that Dastar bars false advertising claims concerning authorship).

[65]For example, Congress or the courts might spell out how much ‘new matter’ must be added before a claim of attribution is warranted, for example, or how to treat a copyright owner’s claim that involves misattribution when the actual creator is not the person who owns the copyright. However, Goold’s advice against formal recognition of the sub-torts could make it difficult to specify such rules. Goold, Unbundling, supra note 1, at 1895–98 (recommending against statutory implementation).

[66]Sony Corp. of Am. v. Universal City Studios, 464 U.S. 417, 451 (1984) (discussing how lack of commercial harm weighted heavily in giving fair use treatment to home copyists of television programs).

[67]David Ladd, The Harm of the Concept of Harm in Copyright: The Thirteenth Donald C. Brace Memorial Lecture (Apr. 13, 1983), in 30 J. Copyright Soc’y U.S.A. 421, 422 (1983).

[68]Sony, 464 U.S. at 451.

[69]The Constitution gives Congress power to grant to authors and inventors exclusive rights over their works in order to “promote the Progress of Science and useful Arts.” U.S. Const. art. I, § 8, cl. 8.

[70]United States v. Carroll Towing Co., 159 F.2d 169, 173 (2d Cir. 1947) (“[T]he owner’s duty, as in other similar situations, to provide against resulting injuries is a function of three variables: (1) The probability that [a boat tethered at a mooring] will break away; (2) the gravity of the resulting injury, if she does; (3) the burden of adequate precautions.”). Judge Hand’s BPL test (so named for his variables: burden, probability, and loss) may not answer all questions, but it has stayed at the center of negligence discussions for over a half-century.

[71]Nichols v. Universal Pictures Corp., 45 F.2d 119, 121 (2d Cir. 1930). The boundary in question divides ideas (which the law makes freely copyable) from expression (over which copyright owners have some legal rights of control). See 17 U.S.C. § 102(b) (2012). Part of the purpose of determining “substantial similarity” or “improper appropriation” is to decide if the defendant has copied only ideas (which is permitted and indeed encouraged) or if the defendant has also copied expression.

[72]See, e.g., Wendy J. Gordon, How Jury in the ‘Blurred Lines’ Case was Misled (March 17, 2015, 2:30 PM), http://www.newsweek.com/jury-blurred-lines-case-was-misled-314856 (exploring jury finding of infringement in the Blurred Lines case). Goold cites to rulings in the Blurred Lines case. Goold, Unbundling, supra note 1, at 1835 n.4 (citing Williams v. Bridgeport Music, No. LA CV13-06004 JAK, 2015 WL 4479500, at *1–2 (CD. Cal. July 14, 2015)) (determining, inter alia, that the defendants’ motion for a new trial should be denied)).

[73]Goold, Unbundling, supra note 1, at 1837 (quoting Lawrence Lessig, Free Culture: How Big Media Uses Technology and the Law to Lock Down Culture and Control Creativity 187 (2004)).

[74]Rebecca Tushnet, Content, Purpose, or Both?, 90 Wash. L. Rev. 869, 872–73 (2015) (discussing doctrinal improvements in the strength of fair use since Lessig wrote).

Reorganizing Organizational Standing

Introduction

On January 23, 2017, the Citizens for Responsibility and Ethics in Washington (“CREW”) sued President Trump, alleging Emoluments Clause[1] violations.[2] One of the most peculiar aspects of the case is standing: the organization alleges it has been injured by the violations because of its “mission of . . . ensuring the integrity of government officials” and because it “has expended a significant amount of time and resources since the election educating the public about the Foreign Emoluments Clause and” Trump’s alleged violations thereof.[3] Many commentators expressed instinctual skepticism about this injury,[4] but under lower court precedent CREW’s standing is bona fide. That is because the lower federal courts have disfigured one enigmatic Supreme Court case to effectively remove all Article III limitations for well-lawyered advocacy organizations.

Although it is well established that Article III both (A) prohibits individuals from litigating ideological injury[5] and (B) provides that organizations cannot get standing on easier terms,[6] the lower courts are permitting the latter to base injury on their “mission” and thus obtain “standing on terms that the Supreme Court has said individuals cannot.”[7] In particular, the lower courts have fashioned a two-pronged organizational standing test asking whether the group has (1) identified an activity that conflicts with its mission and (2) made volitional counter-expenditures in response.[8] The lower courts suppose the Supreme Court’s decision in Havens Realty v. Coleman compels this result in deed if not in word. For decades that view has prevailed. This essay explains this doctrine’s incompatibility with Article III, dispels the myth about Havens, and then evaluates CREW’s standing under a proper organizational test.

Part I catalogs organizational standing jurisprudence. Following the Supreme Court, the lower courts claim that organizations can get standing in only two ways. But a more useful taxonomy of their approach in fact recognizes three. An organization has standing to sue (1) on behalf of its members if one of them has standing, (2) when it possesses the kind of “direct stake” that would suffice for an individual, and (3) pursuant to the lower courts’ mission-based miscreation (hereinafter “mission advancement standing”). This final category is illegitimate.

Part II explains why. According weight to the first prong—mission conflict—violates the rule that “standing is not measured by the intensity of the litigant’s interest or the fervor of his advocacy.”[9] Regarding prong two—expenditures—a volitional outlay made without a preexisting viable harm is a noncognizable “self-inflicted injur[y].”[10] One wonders, then, how the lower courts became so lost. They cite one—and only one—Supreme Court case as authorization: Havens Realty v. Coleman.

Part III detaches Havens from the lower courts’ fabrication. Although Havens is an enigma it does not authorize this doctrine. Havens concerned an organization that operated a housing counseling service and identified suitable apartments for local, poor citizens. The case arose when a local apartment lied to one of the organization’s counselees regarding property vacancies on account of the man’s race, effectively unraveling the organization’s counseling. Essentially, “what [the organization] used its own resources, [and] information . . . to build up, [the apartment’s] racist lies tore down.”[11] Contra the lower courts’ doctrine, mission was irrelevant and volitional expenditures did not establish injury.

Part IV provides a path forward, identifying a constitutionally grounded inquiry to determine whether an organization may have standing irrespective its members. One hallmark unifies the inquiry: instead of asking, as the lower courts have, how the organization spent resources, the question is whether the organization was injured irrespective of these volitional expenditures. This Part closes by evaluating CREW’s standing under this test.

I. Organizational Standing Categories

It is a common refrain among the lower courts that organizational standing exists in two forms. While they pay homage to that notion they do not follow it. The Supreme Court has recognized two forms—permitting organizational suit “both [1] as a representative of its members if one of them has standing and [2] on its own behalf” pursuant to “the same inquiry as in the case of an individual”[12]—but this dichotomy fragments in the lower courts. Indeed, they let “organizations get standing on terms that the Supreme Court has said individuals cannot”[13]—plainly the two-category adage is incomplete. This Part presents three to enable greater analytical clarity.

A. The Constitutional Categories

The first category—so called representational standing—need not occupy us. That doctrine recognizes that an organization can bring suit as a representative of its members if at least one member has standing and some prudential considerations are met.[14] This category is immaterial to the problem addressed herein because the organization’s standing necessarily turns on evaluation of an individuals’ standing. A court conducting this inquiry may err, of course, but it will err within the constitutionally permissible framework.

In the second category, an organization may obtain standing pursuant to “the same inquiry as in the case of an individual.”[15] To distinguish more easily with the other categories, I call this category “direct stake” organizational standing.[16] It recognizes that an organization may suffer injury even if no individual member does. Some examples are necessary.

First consider the canonical Sierra Club v. Morton. There, the U.S. Forest Service sought to develop public land for a ski resort. The Sierra Club—an organization that alleged “a special interest in the conservation and the sound maintenance of the national parks”—sued to block the development.[17] It brought suit on its own behalf, supposing its “longstanding concern with and expertise in [environmental] matters were sufficient to give it standing.”[18] The Court found otherwise. Sierra Club had no special relation with the park, thereby lacking “individualized injury.”[19] The Court also reasoned that if Sierra Club’s theory sufficed, there would remain “no objective basis upon which to disallow a suit by any other bona fide ‘special interest’ organization.”[20] The Supreme Court closed with the admonishment that standing cannot be based on a mere “organizational interest in [a] problem.”[21]

The high court’s counter-example (and its only other meaningful foray into direct stake standing, save Havens) is Village of Arlington Heights v. Metropolitan Housing Development Corporation.[22] There, a religious order sought to develop its land for low income housing. It contracted with the plaintiff, Metropolitan Housing Development Corporation (“MHDC”), for the construction, executing a land-lease with MHDC and an accompanying sale agreement covering other property.[23] The latter was contingent upon MHDC’s success in convincing the Village of Arlington Heights to rezone the development land for multifamily housing.[24] At a town hearing on the rezoning, some locals expressed race-based disapproval, anticipating that the development would integrate the overwhelmingly white town.[25] Rezoning was denied and MHDC brought suit on its own behalf.

Because there was “little doubt” MHDC had standing, the Court’s discussion was brief.[26] But the Court’s direct stake organizational standing cases are few, so its analytical bases for standing merit emphasis. First, the Court held MHDC suffered cognizable “economic” injury. It did not unpack that harm, but its seems plain: MHDC lost money preparing the construction which the town prohibited, and it had a financial (that is, non-philanthropic) incentive (the contingent land sale agreement) for this construction in the first instance. But the Court also found a second type of injury: namely, it noted MHDC’s “interest in making suitable low-cost housing available in areas where such housing is scarce” could suffice—regardless of “economic” harm—and that this interest suffered cognizable harm because the Village blocked MDHC’s “specific project,” that is, the harm possessed “the essential dimension of specificity.”[27]

I return to this second injury shortly but for now three observations are critical. First, economic injury to an organization can suffice. Second, economic harm is not equivalent with spending money (otherwise, MHDC’s second injury would also have been economic)—instead, there must be a financial impetus for spending money (to MHDC, the contingent land sale agreement). Third, a blockade to an organization’s ability to pursue lawful, philanthropic activity can also suffice, but “specificity” is a critical consideration in this regard.

B. Mission Advancement Standing

Finally, the lower courts have fashioned a doctrine asking whether the defendant’s “allegedly unlawful activities injured the plaintiff’s interest in promoting its mission” and “whether the plaintiff used its resources to counteract that injury.”[28] One would think Sierra Club would warn the courts off this path. I submit that more sophisticated lawyering muddies the otherwise plain comparison. In any event, an illustration is necessary.

Consider the D.C. Circuit’s Abigail Alliance v. Von Eschenbach.[29] That case involved the FDA’s three-phase drug approval process. Drugs which pass phase one are “sufficiently safe for substantial human testing” albeit “not yet proven to be safe and effective to the satisfaction of the FDA” and therefore not yet marketable.[30] On average, completing the second and third phases takes six years.[31] The Abigail Alliance for Access to Development Drugs (“the Alliance”), requested that the FDA allow the terminally ill to purchase drugs that have only passed phase one. The FDA declined and the Alliance thereafter brought suit on its own behalf.

The Alliance’s injury claim was that it had a mission of assisting people in “accessing potentially life-saving drugs” and that FDA’s denial forced it to “divert significant time and resources” on addressing the agency’s “unduly burdensome requirements.”[32] The court accepted without scrutiny that the Alliance’s mission was “impeded” and that “this injury [wa]s directly attributable to FDA policies.”[33] And, notwithstanding its recognition that an organization is not injured “by expending resources to challenge [a] regulation itself,”[34] the court found standing based on the Alliance’s performing that very act.

It’s worth pausing here briefly to compare the Alliance to MHDC. First, the Alliance did not allege economic injury. Regarding philanthropic injury, the Alliance (unlike, perhaps, a sick individual) was—unlike MHDC—not blockaded from anything. And even if that were not true, there was plainly no specificity. Indeed, it is not plain how specificity could arise. It is not as if, contrary to logic, the organization itself was denied the right to imbibe unapproved drugs.

This essay is too brief to more comprehensively chronicle the lower courts’ misadventures, but mission advancement standing is indeed pervasive. For some of the most fascinating examples, see the cases below.[35]

II. Mission Advancement Standing’s Illegitimacy

Mission advancement’s standing has the principal feature of allowing organizations to enter the federal courts on terms “individuals cannot.”[36] It is ipso facto illegitimate because, for organizations, the Supreme Court has instructed lower courts to “conduct the same inquiry as in the case of an individual.”[37] This Part takes the analysis further, explaining that even absent that clear command, the lower courts’ doctrine is unconstitutional.

To establish cognizable injury the Supreme Court requires four conditions be satisfied. The plaintiff must establish (1) “invasion of a legally protected interest”—i.e., a legal violation—that is (2) “concrete,” (3) “particularized,” and (4) “actual or imminent.”[38] In the mission advancement context the mission conflict and expenditure prongs are, ostensibly, meant to fill in for the “concrete” and “particularized” requirements. But the defendants action must satisfy concreteness and particularization; actions fully within the plaintiff’s control, such as crafting a mission and spending money, cannot do that work.[39]

The lower courts’ elevation of prong one is particularly odd in light of Sierra Club. As noted earlier, sophisticated lawyering is likely responsible for the change; organizations now decorate their complaints with greater detail and precision; i.e., we protect animals and the government’s failure to do the same has forced us, against our wishes, to devise alternative animal welfare projects.[40] But standing is more than a pleading game.[41] And mission conflict’s irrelevance runs deeper than Sierra Club. Take, for instance, Diamond v. Charles, in which a physician—Dr. Diamond—sought to defend an abortion ban when the state declined to do so.[42] To establish injury Diamond claimed that as a physician he had a “special professional interest” in medical standards as applied to abortions.[43] But the Court recognized this was no more than a “cloaked” interest in seeing the law enforced and obeyed.[44] As such his suit was one to “vindicate value interests”[45]—an “abstract concern” insufficient for Article III.[46] And that jurisdictional bar, the Court explained, applies “with even greater force” when a private plaintiff attempts to compel a state to either “create” or “retain” a legal framework through which it makes enforcement decisions.[47]

That “greater force” no doubt applies in such a context because ideological challenges to government action strike at the core of Article III’s separation of powers foundation. The “case-or-controversy” requirement is a “fundamental limit[] on federal judicial power in our system of government.”[48] It prescribes a boundary on what might otherwise be a limitless ability to make or interpret law;[49] the judiciary may only exercise this awesome power in the context of a limited and concrete case. As a corollary, a plaintiff cannot enter federal court based on the supposed “injury” incurred by observing governmental conduct with which she simply disagrees.[50] But the mission conflict prong presupposes just the opposite, and the lion’s share of cases under this doctrine relate to government activity.

Once mission conflict is stripped away, all that remains in the lower courts’ test is naked resource expenditure. The Supreme Court has rejected injury on this basis as well, most recently in Clapper v. Amnesty International.[51] There the Court found the individual plaintiffs’ primary injury argument—that the NSA may be intercepting their electronic communications—too speculative for standing.[52] The plaintiffs argued alternatively that, even if the government’s alleged spying was uncertain, the plaintiffs’ money spent in fear of this non-injury created standing.[53] Along those lines the plaintiffs claimed “the threat of surveillance sometimes compels them to avoid certain e-mail and phone conversations, to talk in generalities rather than specifics, or to travel so that they can have in-person conversations.”[54] In other words, the non-injury forced expenditures. But the Court considered none truly forced.

Recognizing that the plaintiffs did not face a cognizable threat of impending surveillance, the costs they incurred to avoid the surveillance were wholly “self-inflicted.”[55] They could not
manufacture standing by choosing to make expenditures” based on an injury that was not in fact occurring.[56] “If the law were otherwise, an enterprising plaintiff would be able to secure a lower standard for Article III standing simply by making an expenditure based on” an alleged injury that was insufficient in the first place.[57]

Clapper is the most recent in a precedential line holding that “no action of the parties can confer subject matter jurisdiction upon a federal court.”[58] To that end, “feigned or collusive” suits are not viable;[59] a plaintiff cannot “sue himself,”[60] initiate suit at the defendant’s request,[61] or enlist his kin as defendant in a contrived suit.[62] Put simply, a party cannot create a “[c]ase” or “[c]ontroversy”[63] when, without their scheming, this constitutional prerequisite would be absent. But mission advancement standing invites such scheming in hyperdrive. Instead of authorizing collusive suits it permits an enterprising organization to create standing without a collaborator.[64] Instead of paying an ally to contrive a suit an organization can, upon identifying activity it finds distasteful, spend that money on almost anything.

III. Distinguishing Havens Realty

Havens Realty v. Coleman[65] is oft-cited as authorizing mission advancement standing. Havens is admittedly enigmatic, but the bottom line is that it is neither a mission advancement case nor an application of Village of Arlington Heights. The injury recognized falls between the two, but I submit that it represents “direct stake” organizational standing’s outer boundary and does not authorize the lower courts’ doctrine.

Havens presents three knots to untangle. First, I explain that the organizational plaintiff did not establish standing through volitional expenditures (nor a mission conflict—a feature the Court never mentioned). Although the Court mentioned “drain[ed]” resources,[66] that drain occurred as an effect of a viable injury. In other words, the lower courts have Havens absolutely backwards, basing injury on volitional expenditures whereas in Havens an injury drained resources. Second, given my claim that expenditures were not the injury, I explain what actually injured the organization. Third, I discuss why the Supreme Court nonetheless considered the resource drain relevant.

A. The Organization’s Expenditures Did Not Establish Injury

Havens concerned an apartment complex owned by defendant Havens Realty.[67] The plaintiff organization—Housing Opportunities Made Equal (“HOME”)—provided housing counseling services in Havens’ geographic area and investigated housing discrimination.[68] The case arose when Havens told a black HOME counselee—individual plaintiff Paul Coles—that it had no vacancies.[69] At around the same time HOME sent black and white “testers,”—employees disguised as prospective renters—to Havens to determine whether it was denying housing discriminatorily.[70] It was: only HOME’s white tester was apprised of openings.[71] HOME, Coles, and the testers all filed suit. To establish its standing HOME asserted the now infamous mischief-making line: “Havens had frustrated the organization’s counseling and referral services, with a consequent drain on resources.”[72]

The Court held that because Havens’ “steering practices have perceptibly impaired HOME’s ability to provide counseling and referral services for low- and moderate-income home-seekers, there can be no question that the organization has suffered injury in fact.”[73] That is, this nebulous (and clarified, below) “impairment” of HOME’s counseling and referral services established “concrete and demonstrable injury”[74] without regard to subsequent expenditures (much less mission). The Court’s following line is what has generated the confusion: “with the consequent drain on the organization’s resources” Havens’ act “constitute[d] far more than simply a setback to [HOME’s] abstract social interests.”[75]

What does that mean? That, although HOME suffered some indeterminate harm when Havens lied to Coles, it was only cognizably injured because it spent money afterwards? That interpretation, adopted by the lower courts, gets the chronology backwards. In this regard the Court’s use of “consequent” is critical. Webster’s defines the word to mean “something produced by a cause or necessarily following from a set of conditions.”[76] Any money spent after the harm would not be consequent because it did not necessarily follow from Havens’ lie. HOME’s own volition intervened. To have been the “consequence” of the lie their status as “drained” must have been set the instant Havens lied. The Court, then, was referring to pre-illegality expenditures.

This may seem counterintuitive: how could the illegality ‘drain’ resources already spent? The explanation turns on the distinction between “expenditure” and “drain.” “Expended” has a neutral connotation whereas “drained” is pejorative, indicating waste. The neutral act attains this negative connotation not through any choice of the organization, but through the actions the defendant visits upon it. Before the illegality, the expenditures were made consistent with HOME’s goals. But they were “drained” once Coles is lied to and denied housing—that is, illegally denied the counseling services’ object.

But, just as critically, the pre-illegality expenditures alone did not constitute injury. HOME’s activities were not impaired until Havens’ illegality effected (i.e., drained) them. The connection between the expenditure and the subsequent illegal act is critical; both conditions were necessary for HOME’s standing and neither in isolation would suffice. We know pre-illegality expenditures could not alone suffice because Havens involved a separate plaintiff who alleged injury on precisely those terms. HOME’s white tester—R. Kent Willis—expended time investigating Havens but was nonetheless denied standing in this capacity.[77] The reasons why are obvious: he was not lied to, and, because Coles was not his client, Havens’ illegality did not drain his resources.[78]

B. Diagnosing the Injury

With the expenditure issue properly conceptualized, isolating the injury’s genesis becomes tractable. The only distinction between HOME and Willis is that HOME counseled Coles, the object of the lie. But the question remains, why did the lie establish injury? This construction of the harm does not neatly align with Arlington Heights, wherein the plaintiff organization’s noneconomic injury was based on its total inability to undertake its desired project.[79] Even post-illegality, HOME remained free to counsel anyone—Coles included—to its fullest desire.

The Court was cryptic. It held that if Havens’ lie, “as broadly alleged . . . perceptibly impaired” HOME’s activities, HOME suffered injury.[80] This abstruse passage has thoroughly confounded the lower courts, and it is easy to see why. What relevance can we attribute to the allegations’ “breadth”? And what defines “impairment”? The only explanation, on Havens’ facts, is that Havens “tore down” what HOME used its resources to “build up.”[81] Havens’ lie “unraveled” the services HOME had performed for Coles, effectively telling the counselee that HOME’s counseling was wrong.[82] HOME’s work was sabotaged, its activity of “provid[ing] truthful counseling” was “directly interfered with” when Havens lied to its counselee.[83] The temporal progression is critical; HOME performed lawful, philanthropic activity and Havens’ subsequent illegality operated directly on the beneficiary of HOME’s activity and nullified the service provided. It would be as if the Sierra Club planted trees and the U.S. Forest Service subsequently uprooted then. The sequence was not that HOME identified a racist Richmond housing provider and then counseled clients to avoid the complex.[84] This is precisely the interpretation that has eluded lower courts.

C. The Expenditures’ Relevance

Thus far I have made two points about Havens: (1) HOME’s pre- and post-illegality expenditures were neither necessary nor sufficient to establish an injury and (2) the “unraveling” of HOME’s counseling constituted injury. But alone these conclusions do not explain the Court’s reference to the “consequent drain” on HOME’s resources.[85] The Court’s antecedent Arlington Heights decision helps solve this last mystery.

Recall that in Arlington Heights MHDC’s noneconomic injury was that it was blockaded from pursuing its discrete project.[86] It is tempting to conflate MHDC’s economic injury with HOME’s drained resources instead, but the Havens Court expressly rejected this equivalency. Indeed, the Havens Court closed its “resource drain” passage by citing Arlington Heights as support for noneconomic injury.[87] That is easily explained: no financial impetus motivated Havens’ philanthropic counseling.

 

 

Havens

Arlington Heights

Economic Injury

None

Lost Prepatory Expenses on Financially Beneficial Contract

Non-Economic Injury

Unraveling of Counseling Services

Prohibition on Conducting Desired Project

 

The relevance, then, of HOME’s resource drain was to ensure that its noneconomic injury (the unraveling) contained “the essential dimension of specificity” that Arlington Heights recognized requires special attention in noneconomic injury claims.[88] To apply the Court’s modern vernacular to the Havens facts, the dimension ensured that “the invasion of [HOME’s] legally protected interest” in having its counseling services unimpeded by illegal steering was sufficiently “concrete” and “particularized”; that is, it was not “abstract” and it “affect[ed] [HOME] in a personal and individual way.”[89] For MHDC concreteness and particularization were ensured because the organization was disallowed from continuing a specific project. It was not challenging a zoning ordinance in the abstract, the effects of which may (or may not) affect it (or some other entity) at some undetermined future date. Likewise with HOME’s resource drain.

IV. Evaluating Crew’s Standing

As the foregoing illustrates, “direct stake” organizational standing knows three variations. In other words, an organization seeking standing on its own behalf can show injury in three ways. First—and most obviously—an economic injury suffices. Because standing is so obvious under in this category it is seldom litigated.

Second, an organization might have standing regardless economic injury where it can show it was prohibited from engaging in lawful activity. That explains MHDC where, even removing the financial basis for the construction, the organization nonetheless suffered injury.

Third, an organization might have standing where it can show its activities were unraveled by illegal activity—where it has performed lawful activity which the defendant subsequently nullifies or at least partially unwinds. That explains Havens, where the defendants’ unlawful conduct cancelled the organization’s philanthropic counseling. In these latter, noneconomic, categories, the courts must be especially attuned to “specificity,”[90] that is, to concreteness and particularity.[91] For example, HOME could not have alleged that Havens simply harbored racial animus—that would not be concrete. Nor could some nonlocal advocacy group, upon discovering Havens is lying to individuals unconnected to the organization, bring suit. There would be no particularization; its services would not have been unraveled.[92] To establish unraveling, then, an organization must have the proper temporal relationship to the challenged conduct and its activity must bear a concrete, particularized harm by virtue of that conduct.

With this framework established, does CREW have standing? Having likely anticipated that such high profile litigation would illuminate this problem, CREW set forth a blunderbuss of supposed harms. But none are cognizable.

CREW first alleges that it is a nonprofit[93] with the mission of ensuring government integrity and informing the public thereof.[94] Neither allegation is relevant under a proper organizational standing inquiry, although in combination the two seem to telegraph that the organization is not alleging economic harm (indeed, it presents none). CREW then proceeds to broadly allege harms that largely fall in two categories: (1) costs it incurs responding to the President’s alleged conflicts and (2) diversion of resources from projects it would prefer to pursue more vigorously.

With regard to category one, CREW alleges it has been “interviewed by and quoted in the news media”[95] regarding the President, that it has “received hundreds of questions from the news media”[96] that it has “conducted legal research”[97] on the Emoluments clause, that it will continue to “monitor [Trump]’s business interests,”[98] and that it has “hired a new senior attorney” to strengthen these efforts.[99] All of these supposed harms are nonstarters. CREW has not been prohibited from anything, and no work CREW has performed has been unraveled—indeed, CREW instead alleges that, because of President Trump, it is volitionally doing more work. There is no legal compulsion to conduct this work and to the extent any of these items could be considered injuries they are fully self-inflicted.

In category two, CREW alleges it has diverted its time and resources from other, non–Trump-related projects.[100] For example, its Trump endeavors have diverted its resources from (1) other litigation,[101] (2) “a project related to campaign finance and ethics in the states,”[102] (3) drafting comments on agency rulemakings,[103] (4) “research[ing] and publish[ing] . . . blog posts,”[104] (5) reviewing “contributions to new members of Congress,”[105] and (6) writing about the “tax returns of nonprofit groups engaged in political activities.”[106] Each allegation is equally insufficient. Once again, there is no allegation of an unraveling of, or a prohibition on, organizational activities. CREW has simply alleged volitional rearrangement of its own priorities. Because CREW has no claim to injury from Trump’s conflicts notwithstanding expenditures, these diversions constitute an attempt to “manufacture standing by choosing to make expenditures.”[107]

CREW closes with two Hail Marys. First, that Trump’s conflicts will make it harder to “protect from corrupt and unethical manipulation” other “innocent and unaware third parties.”[108] This is a frivolous attempt at standing on behalf of others who themselves have in fact suffered no injury.[109] But finally, as its last effort, CREW stumbles on an injury perhaps cognizable, albeit not to CREW. It alleges that President Trump’s commercial competitors “also are injured.”[110] That may be true, but none are a party to CREW’s lawsuit and none can remedy CREW’s absent injury.

 

 


[1]U.S. Const. Art. I, § 9, cl. 8.

[2]Complaint at ¶¶ 25–50, Citizens for Responsibility and Ethics in Washington v. Trump, No. 17-cv-00458 Dkt No. 1 (S.D.N.Y. Jan. 23, 2017) (hereinafter CREW Complaint).

[3]CREW Complaint ¶¶ 52–53.

[4]See Jonathan H. Adler, Does the Emoluments Clause Lawsuit Against President Trump Stand a Chance?, Wash. Post (Jan. 23, 2017), https://perma.cc/9U9Y-QTAL (“CREW’s arguments for standing are a stretch.”); see also Karen Sloan, Law Profs Butt Heads Against Suit Filed Against Trump, The Nat’l L.J. (Jan. 23, 2017), https://perma.cc/AJZ3-HPNX (collecting opinions of law professors regarding CREW’s standing to bring suit).

[5]Valley Forge Christian Coll. v. Ams. United for Separation of Church and State, Inc., 454 U.S. 464, 486 (1982) (“standing is not measured by the intensity of the litigant’s interest or the fervor of his advocacy”).

[6]See Havens Realty Corp. v. Coleman, 455 U.S. 363, 378 (1982) (for organization’s standing court “conduct[s] the same inquiry as in the case of an individual”).

[7]See People for the Ethical Treatment of Animals v. U.S. Dep’t of Agric., 797 F.3d 1087, 1099 (D.C. Cir. 2015) (Millett, J., dubitante).

[8]See, e.g., Am. Soc. for Prevention of Cruelty to Animals v. Feld Entm’t, 659 F.3d 13, 25 (D.C. Cir. 2011) (asking first “whether the defendant’s allegedly unlawful activities injured the plaintiff’s interest in promoting its mission” and second “whether the plaintiff used its resources to counteract that injury”); see also, e.g., Arcia v. Fla. Sec’y of State, 772 F.3d 1335, 1341–42 (11th Cir. 2014) (reaching materially similar conclusion); Ass’n of Cmty. Orgs. for Reform Now v. Fowler, 178 F.3d 350, 360 (5th Cir. 1999) (same).

[9]Valley Forge, 454 U.S. at 486 (1982). See also Diamond v. Charles, 476 U.S. 54, 65–66 (1986).

[10]Clapper v. Amnesty Int’l, 133 S. Ct. 1138, 1152–53 (2013).

[11]People for the Ethical Treatment of Animals, 797 F.3d at 1100 (Millett, J., dubitante).

[12]Havens Realty Corp. v. Coleman, 455 U.S. 363, 378 (1982).

[13]People for the Ethical Treatment of Animals, 797 F.3d at 1099 (Millett, J., dubitante).

[14]Hunt v. Wash. State Apple Advert. Comm’n, 432 U.S. 333, 343–45 (1977); see also United Food & Commercial Workers v. Brown Grp., 517 U.S. 544, 556 n.6 (1996) (expressing that the representational standing requirement that the litigation not require an individual member’s participation is a prudential requirement); Int’l Union, United Auto., Aerospace, and Agric. Workers of Am. v. Brock, 477 U.S. 274, 286, 290 (1986) (expressing that representational standing’s germaneness requirement is, if anything, a due process consideration that is used to determine if an organization can bring a case).

[15]Havens Realty, 455 U.S. at 378.

[16]See Sierra Club v. Morton, 405 U.S. 727, 740 (1972) (using this term).

[17]Id. at 730.

[18]Id. at 736.

[19]Id.

[20]Id. at 739.

[21]Id. (quoting Envtl. Def. Fund v. Hardin, 428 F.2d 1093, 1097 (D.C. Cir. 1970)).

[22]429 U.S. 252 (1977).

[23]Id. at 256.

[24]Id.

[25]Id. at 255, 257–58.

[26]Id. at 261–263.

[27]Id. at 263 (quoting from Schlesinger v. Reservists to Stop the War, 418 U.S. 208, 221 (1974)) (emphasis added).

[28]Am. Soc. for Prevention of Cruelty to Animals v. Feld Entm’t, 659 F.3d 13, 25 (D.C. Cir. 2011).

[29]469 F.3d 129 (D.C. Cir. 2006) See also Abigail Alliance v. Von Eschenbach 445 F.3d 470, 473–74 (D.C. Cir. 2006) (prior opinion of the Court containing greater factual background).

[30]Abigail, 445 F.3d at 473 (quoting Oral Argument at 15:57–15:59, 445 F.3d 470).

[31]Id. at 474 (citing Complaint at ¶ 12, 445 F.3d 470).

[32]469 F.3d at 132–33.

[33]Id at 133.

[34]Id.

[35]Smith v. Pac. Props. and Dev. Corp., 358 F.3d 1097, 1105 (9th Cir. 2004); Ass’n of Cmty. Organizers for Reform Now v. Fowler, 178 F.3d 350, 361–62 (5th Cir. 1999); Humane Soc’y of U.S. v. U.S. Postal Serv., 609 F. Supp. 2d 85, 91 (D.D.C. 2009); Comm. for Immigrant Rights of Sonoma Cty. v. Cty. of Sonoma, 644 F. Supp. 2d 1177, 1195 (N.D. Cal. 2009).

[36]People for the Ethical Treatment of Animals v. U.S. Dep’t of Agric., 797 F.3d 1087, 1099 (D.C. Cir. 2015) (Millett, J., dubitante).

[37]See Havens Realty Corp. v. Coleman, 455 U.S. 363, 378 (1982) (when assessing an organization’s standing, courts “conduct the same inquiry as in the case of an individual”).

[38]Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1548 (2016) (quoting Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992)).

[39]See Ins. Corp. of Ir. v. Compagnie Des Bauxites, 456 U.S. 694, 702 (1982) (“[N]o action of the parties can confer subject-matter jurisdiction upon a federal court.”).

[40]See People for the Ethical Treatment of Animals, 797 F.3d at 1095–96.

[41]See Lujan, 504 U.S. at 561 (standing is more than a “mere pleading requirement[]”); United States v. Students Challenging Regulatory Agency Procedures, 412 U.S. 669, 688 (1973) (establishing standing in pleadings is “more than an ingenious academic exercise”).

[42]476 U.S. 54, 57–58 (1986).

[43]Id. at 66.

[44]Id.

[45]Id. at 66–67.

[46]Simon v. E. Ky. Rights Org., 426 U.S. 26, 27 (1976).

[47]Diamond, 476 U.S. at 65 (emphasis added).

[48]Allen v. Wright, 468 U.S. 737, 750 (1984).

[49]See Warth v. Seldin, 422 U.S. 490, 498 (1975) (Article III is “founded in concern about the proper—and properly limited—role of courts in a democratic society.”).

[50]See Valley Forge Christian Coll. v. Ams. United for Separation of Church and State, 454 U.S. 464, 485 (1982) (“Although [plaintiffs] claim that the Constitution has been violated, they claim nothing else . . . . other than the psychological consequence presumably produced by observation of conduct with which one disagrees. That is not an injury sufficient to confer standing . . . .”).

[51]133 S. Ct. 1138 (2013).

[52]Id. at 1147–50.

[53]Id. at 1150–52.

[54]Id. at 1151 (quotations and alterations omitted).

[55]Id. at 1152.

[56]Id. at 1143 (emphasis added).

[57]Id. at 1151.

[58]Ins. Corp. of Ir. v. Compagnie Des Bauxites, 456 U.S. 694, 702 (1982).

[59]Flast v. Cohen, 392 U.S. 83, 100 (1968).

[60]United States v. Interstate Commerce Comm’n, 337 U.S. 426, 430 (1949).

[61]United States v. Johnson, 319 U.S. 302, 303–05 (1943).

[62]Lord v. Veazie, 49 U.S. (1 How.) 251, 254–55 (1850).

[63]U.S. Const. art. III, § 2, cl. 1.

[64]Although, naturally, few courts admit that they are doing so, some have remarkably conceded that they permit organizations to create their own injury. See We Are Am./Somos Am., Coal. of Ariz. v. Maricopa Cty. Bd. of Supervisors, 809 F. Supp. 2d 1084, 1096 (D. Ariz. 2011) (“The purportedly voluntary nature of the organizations’ activities here does not . . . undermine their allegations of standing.”).

[65]455 U.S. 363 (1982).     

[66]Id. at 379. (Discussing the “consequent drain on the organization’s resources” when finding standing).

[67]Id. at 368.

[68]Id.

[69]Id.; see also Brief of Respondents at 4, Havens Realty v. Coleman, 455 U.S. 363 (1982) (No. 80-988) (“Coles[] [was] a black homeseeker who had sought HOME’s counseling concerning rental housing.”) [hereinafter HOME’s Brief]; see also Complaint at ¶¶ 12, 13 reprinted in Joint Appendix 15–17, Havens Realty v. Coleman, 455 U.S. 363 (1982) (No. 80-988) (Sept. 9. 1981). Although only HOME’s brief (not its complaint) says explicitly that Coles was a HOME counselee, the Havens Court was reviewing dismissal wherein it must “accept as true all material allegations of the complaint, and must construe the complaint in favor of the complaining party.” Warth v. Seldin, 422 U.S. 490, 501 (1975). For that reason it seems beyond dispute that, at this stage of the litigation, Coles’ status as a HOME counselee was a given. The Court could either reasonably infer it from the complaint or simply accept the allegation in HOME’s brief. See HOME’s Brief at 4.

[70]Havens, 455 U.S. at 368 (reflecting that HOME sent testers in March and July of 1978).

[71]Id.

[72]Id. at 369.

[73]Id. at 379.

[74]Id.

[75]Id. (emphasis added).

[76]Webster’s Ninth New Collegiate Dictionary 279 (1986) (emphasis added).

[77]Havens, 455 U.S. at 368, 374–75.

[78]One other scholar has made a similar observation, see Michael E. Rosman, Standing Alone: Standing Under the Fair Housing Act, 60 Mo. L. Rev. 547, 593 n.205 (1995) (“one fairly good piece of evidence that” HOME’s pre-illegality expenses were not its injury “is the Court’s denial of standing to the white tester”).

[79]Arlington Heights, 429 U.S. at 261–62.

[80]Havens, 455 U.S. at 379.

[81]People for the Ethical Treatment of Animals v. U.S. Dep’t of Agric., 797 F.3d 1087, 1100 (D.C. Cir. 2015) (Millett, J., dubitante).

[82]Id.

[83]Fair Elections Ohio v. Husted, 770 F.3d 456, 460 n.1 (6th Cir. 2014) (emphasis added).

[84]Some may contend that these descriptors seem overblown for the minor unraveling Havens performed on HOME’s efforts. This minor unraveling may not have sufficed for a challenge to government action, but standing in private suits is generally more permissive. See Spann v. Colonial Vill., Inc., 899 F.2d 24, 30 (D.C. Cir. 1990) (R.B. Ginsburg, J.); see also Spokeo, Inc., v. Robins, 136 S. Ct. 1540, 1551 (2016) (Thomas, J., concurring).

[85]Havens, 455 U.S. at 379.

[86]429 U.S. at 263.

[87]Havens, 455 U.S. at 379, n. 20 (“That the alleged injury results from the organization’s noneconomic interest in encouraging open housing does not effect the nature of the injury suffered” (citing Arlington Heights, 429 U.S. at 263)); see also Arlington Heights, 429 U.S. at 262–63 (“It has long been clear that economic injury is not the only kind of injury that can support a plaintiff’s standing.”).

[88]Arlington Heights, 429 U.S. at 263 (quoting from Schlesinger v. Reservists to Stop the War, 418 U.S. 208, 221 (1974); see also U.S. Parole Comm’n v. Geraghty, 445 U.S. 388, 410 (1980) (Powell, J., dissenting) (in “noneconomic injur[y]” cases, the courts must be particularly alert that plaintiff is not asserting “abstract concern with a subject—or with the rights of third parties”).

[89]Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1548 (2016) (quoting Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 & n.1 (1992)). The term “specificity” is a dated one—the Court no longer uses it—but it rather clearly encompasses both the concrete and particularity requirements. As the Court noted in Spokeo, those requirements were often conflated as one single requirement.

[90]Arlington Heights, 429 U.S. at 263 (quoting from Schlesinger, 418 U.S. at 221 (1974); see also U.S. Parole Comm’n v. Geraghty, 445 U.S. 388, 410 (1980) (Powell, J., dissenting) (in “noneconomic injur[y]” cases, the courts must be particularly alert that plaintiff is not asserting “abstract concern with a subject—or with the rights of third parties”).

[91]Spokeo, 136 S. Ct. 1540, 1548 (2016) (quoting Lujan, 504 U.S. at 560 & n.1). Supra n. 89.

[92]I note here that these categories need not necessarily be exclusive. But no other noneconomic organizational injures have, to this point, been recognized by the Supreme Court. To the extent undiscovered situations exist, the guiding light must be the “same inquiry as [for an] individual,” not the mission advancement doctrine. See Havens, 455 U.S. at 378.

[93]CREW Complaint ¶ 51.

[94]Id. ¶ 52.

[95]Id. ¶ 53.

[96]Id. ¶ 54.

[97]Id. ¶ 56.

[98]Id. ¶ 59; see also id. ¶¶ 65, 67, 71 (noting past and prospective monitoring costs).

[99]Id. ¶ 58.

[100]Id. ¶¶ 60–62.

[101]Id.

[102]Id. ¶ 63.

[103]Id. ¶ 64.

[104]Id. ¶ 68.

[105]Id. ¶ 69.

[106]Id. ¶ 70.

[107]Clapper v. Amnesty Int’l, 133 S. Ct. 1138, 1143 (2013) (emphasis added).

[108]CREW Complaint ¶ 74.

[109]See Valley Forge Christian Coll. v. Ams. United for Separation of Church and State, 454 U.S. 464, 485–87 (1982) (“Although [plaintiffs] claim that the Constitution has been violated, they claim nothing else . . . . other than the psychological consequences presumably produced by observation of conduct with which one disagrees. That is not an injury sufficient to confer standing. . . .”).

[110]CREW Complaint ¶ 76. 

Common Law vs. Statutory Bases of Patent Exhaustion

Abstract

The pending Supreme Court case Lexmark v. Impression Products reveals the full breadth of disagreement about the exhaustion doctrine in patent law. In practical terms, the doctrine could mean almost everything—a mandatory rule applicable to all domestic and international sales of patented goods—or almost nothing—an optional rule applicable only to domestic sales that patentees can easily avoid by contract. This essay shows that this breadth of disagreement arises from a more fundamental disagreement over the legal basis for the doctrine, with judges, lawyers and academics deeply divided over whether the doctrine is based on judicially fabricated common law or a specific statute. The essay reiterates and further clarifies our position, first advanced in our prior article, that the doctrine is based on statutory interpretation and is designed to avoid broad constructions of intellectual property rights that would interfere with the vast and complex body of common law rules and statutory provisions governing commercial transactions.  The essay also replies to two prior responses to our original article and concludes with a modest hope for what we think is a first necessary step toward clarity in this area: we hope that the Supreme Court will identify the legal basis for the exhaustion doctrine.

Introduction

            The pending Supreme Court case, Impression Products v. Lexmark (set for argument on March 21, 2017), poses two very important questions about the patent exhaustion doctrine: (1) whether the exhaustion doctrine is a mandatory restriction on patent rights that bars resort to infringement suits to enforce restrictions on use or resale imposed through a “conditional sale” of patented goods, and (2) whether foreign sales exhaust U.S. patent rights. Yet despite the significance of those questions, the most noteworthy feature of the litigation is that the parties, the amici, the government, and even the judges of the court below cannot agree on the most fundamental question about the doctrine: where does patent exhaustion come from? More specifically, is the doctrine a common law rule based on judicial assessments of good public policy, or is it based on an interpretation of a particular statute?

Identifying the legal basis for a doctrine seems like a natural first step in deciding disputes about the doctrine, and Impression Products presents the Supreme Court with a perfect opportunity to take that step. The en banc Federal Circuit clearly raised and addressed the issue whether patent exhaustion is based on judge-made common law or on statutory interpretation.[1] As our prior article makes clear,[2] we believe that the latter view is correct, as did the Federal Circuit. Unfortunately, as explained below, the Federal Circuit identified the wrong statutory basis for the doctrine and thus reached the wrong conclusions about its application.

In Part I of this short essay, we explain the issues in Impression Products and what’s at stake in the case. Part II addresses a response to our article written by Professors Katz, Perzanowski, and Rub (“the KPR essay”);[3] Part III replies to a separate response by Professor Hovenkamp.[4]

I.          Impression Products v. Lexmark: Theoretical Uncertainty in the Dock

Although the litigation in Impression Products v. Lexmark highlights an astounding degree of uncertainty about the legal foundation for patent exhaustion, the specific legal issues and facts of the case are quite straightforward.

The first issue in the case—the “conditional sale” issue—is whether exhaustion doctrine is a mandatory doctrine preventing patentees from using infringement actions to enforce restrictions placed on goods sold through so-called “conditional sales.”[5] Lexmark sells some of its patented ink cartridges as “Return Program Cartridges,” which sell for a discount of about 20% off the price of “Regular Cartridges” but are subject to two restrictions: the depleted cartridges (1) cannot be refilled or reused and (2) cannot be transferred to anyone but Lexmark (the purchaser can dispose of the cartridges or return them for recycling). Regular Cartridges are subject to no restrictions concerning reuse or resale. Lexmark and Impression stipulated, for purposes of litigation, that the reduced price of Return Program Cartridges “reflects the value of the property interest and use rights conveyed to the purchaser under the express terms of the conditional sale contract and conditional single-use license.”[6]

Impression Products purchases, refurbishes, and resells depleted Lexmark cartridges, including Return Program Cartridges. Because the restrictions imposed on those cartridges expressly prohibit resale, Lexmark sued Impression on the theory, supported by the Federal Circuit’s precedent Mallinckrodt, Inc. v. Medipart, Inc.,[7] that Impression’s resales are unauthorized and thus infringe Lexmark’s exclusive patent rights to control sales of its patented invention. In response, Impression argued that Lexmark’s original sales—even if conditioned— exhausted Lexmark’s patent rights and thus bar any patent infringement actions concerning subsequent uses or sales of the goods. Impression expressly concedes that “[l]ike all other market participants, patentees may use non-patent mechanisms to restrict resale or reuse of goods,”[8] so the issue in the case is only whether Lexmark can use patent infringement actions to enforce the restrictions placed on the original sales.

The second legal issue—the international exhaustion issue—is whether foreign sales exhaust U.S. patent rights. Lexmark sells its patented ink cartridges (both Return Program and Regular Cartridges) in foreign countries and has never authorized those foreign cartridges to be imported into, or sold in, the United States. Lexmark sued Impression on the theory, supported by the Federal Circuit’s precedent Jazz Photo Corp. v. International Trade Commission,[9] that Impression’s resales into the U.S. market of cartridges originally sold outside the United States were unauthorized acts of patent infringement. Impression argued that Lexmark’s foreign sales exhausted even the U.S. patent rights in the cartridges and thus subsequent importation, sales, and uses of the cartridges do not infringe Lexmark’s patent rights.

Adhering to its prior decisions in Mallinckrodt and Jazz Photo, the Federal Circuit sided with Lexmark on both issues.[10] The en banc court even extended the Mallinckrodt decision, which held infringement suits could be used to enforce restrictions on subsequent use imposed by conditional sales, so that restrictions on subsequent alienation could also be enforced by infringement actions.

As we previously stated in our article,[11] we believe that Mallinckrodt was decided incorrectly and Jazz Photo correctly, and thus, not surprisingly, we think the Supreme Court is likely to reverse the en banc court on the conditional sale issue and affirm on the international exhaustion issue. On one initial and crucial point, however, the Federal Circuit was completely correct.

Just a few pages into its legal analysis, the Federal Circuit directly addressed whether the exhaustion doctrine is based on statutory interpretation or judge-made common law. Merely raising and discussing the issue is, in our view, a hugely positive development. Modern scholarly discussions of the doctrine have tended to provide substantive policy reasons as the basis for the doctrine, with the assumption that federal judges can fabricate legal doctrine from substantive policies as a supplement to statutory law.[12] As the Federal Circuit recognized, that assumption seems wrong because, once Congress has legislated in an area, the task of the federal courts is generally “to interpret and apply statutory law, not to create common law.”[13] That general reluctance to fabricate judge-made common law in an area controlled by statute is based ultimately on separation-of-powers considerations.[14] Such a fundamental jurisprudential commitment should not be cavalierly disregarded, and patent law—an area comprehensively controlled by an entire title of the U.S. Code (Title 35)—seems like an exceptionally poor place for federal courts to begin asserting a new-found power to supplement (or even supplant) federal statutory law with judge-made common law.

That’s our compliment to the Federal Circuit—now some criticism. Although correct in holding that exhaustion must be a statutory doctrine, the court chose the wrong statute as the basis for the doctrine. It chose the statute defining patent infringement, 35 U.S.C. § 271, which generally imposes liability on anyone who “without authority makes, uses, offers to sell, or sells” or “imports into the United States” any patented invention.[15] To the Federal Circuit, the “exhaustion doctrine in the Patent Act must be understood as an interpretation of § 271(a)’s ‘without authority’ language” such that “some sales confer authority on the purchaser to take certain actions—such as selling or using the purchased article in the United States or importing it into the United States— that would otherwise be infringing acts.”[16] Because “without authority” means “without consent or permission” from the patentee, the Federal Circuit reasoned that sales made subject to conditions—for example, conditions forbidding refilling or reselling—could not be viewed as granting any kind of “authority,” “consent,” or “permission” to violate the conditions of the sale, for “a patentee does not grant authority by denying it.”[17]

 Yet Supreme Court case law never grounded the exhaustion doctrine in the phrase “without authority” but instead justified it as based on the limited domain or scope of the statutory grant of patent rights, which currently is in 35 U.S.C. § 154. Thus, in the highly important case of Keeler v. Standard Folding Bed Co., the Court clearly identified the statutory basis for its decision by quoting, in the first sentence of the opinion, Revised Statutes § 4884[18]—the predecessor statute of modern § 154. The Court’s holding was also directly based on the limited scope of the rights granted by § 4884, with the Court embracing the view that a patented product, once sold by the patentee, is “discharged of all the rights . . . attached to it, or impressed upon it, by the act of Congress under which the patent was granted.”[19]

Similarly, in the equally important case of Motion Picture Patents Co. v. Universal Film Manufacturing Co., the Court began its legal analysis by stating that the case:

requires that we shall determine the meaning of Congress when in Rev. Stats., § 4884, it provided that “Every patent shall contain . . . a grant to the patentee, his heirs or assigns, for the term of seventeen years, of the exclusive right to make, use, and vend the invention or discovery throughout the United States, and the Territories thereof.”[20]

 

The Motion Picture Patents Court repeatedly referred to its task as identifying the proper “meaning” of the statute granting exclusive patent rights.[21]

Despite this criticism of the Federal Circuit’s opinion, we have to commend the court for attempting to ground the exhaustion doctrine in statutory law, for the court’s effort will hopefully spur the Supreme Court into clarifying the exact statutory basis of the doctrine. As demonstrated by the briefing in the case, there is currently massive uncertainty on this point. The chart below[22] shows the set of possible bases for exhaustion advanced by various actors in the litigation and the effect that the legal basis has on the two issues in the case: (1) whether the doctrine is an optional or mandatory restriction on patent rights, and (2) whether foreign sales trigger the exhaustion of U.S patent rights.

[[{“fid”:”725″,”view_mode”:”full”,”type”:”media”,”attributes”:{}}]]

Not surprisingly, the legal basis for the exhaustion doctrine matters. Most obviously, if the doctrine is based on § 271(a) as the Federal Circuit held, then it would be hard to argue that sales with contractual restrictions provide the “authority” or permission necessary to violate the very restrictions imposed in the sale. In other words, the exhaustion doctrine would be just a default rule meaning almost nothing if patentees want it so.

Alternatively, if the doctrine (in whole or in part) is based on inferred limits on the scope of patent rights granted under § 154(a)(1), then it would be quite easy to hold (as the Supreme Court did in Keeler and Motion Picture Patents) that the enforcement of restrictions imposed during sales of patented goods is simply “outside” patent law. In other words, the doctrine (or at least those parts of doctrine based on § 154(a)(1)) should be mandatory, but it should not affect non-patent causes of action. Interestingly, the Respondent’s brief accepts that the Motion Picture Patents case is based on the limited scope of § 154 and that, with respect to that portion of the doctrine (the portion of the doctrine grounded in a statutory “delimit[ing]” of the patent rights granted “in § 154”), a patentee cannot opt out by withholding “authority” under § 271(a) because “the patentee cannot withhold ‘authority’ that it never had, like authority to set resale prices.”[23]

Finally, if the doctrine is pure federal common law, a variety of different results are possible depending on the Justices’ assessments of good public policy. For example, if the doctrine is based on an “affirmative policy” of federal patent law favoring “the free movement of all patented goods” (as some of Petitioner’s amici allege[24]), then the doctrine should not only be mandatory but might also render post-sale restrictions on use and resale unenforceable more generally, not merely unenforceable through infringement actions. On the other hand, the opposite result—a merely optional or “presumptive” doctrine (escapable through clear contractual language)—could be supported if the Justices agree with some of Respondent’s amici that the exhaustion doctrine serves “multiple policy objectives” including the policy of permitting patentees to “craft customized usage terms for downstream partners in the commercialization process” and to enforce those terms through infringement actions.[25] Or policy factors might point to the Solicitor General’s position, with a mandatory doctrine applied to U.S. sales but an optional or presumptive approach applied to foreign sales. The multitude of potential outcomes should, of course, be expected with a common law approach because everything turns on a judicial assessment of complex policy considerations.

            Such a huge range of possible legal bases for the doctrine does not, to put it mildly, contribute to doctrinal clarity, and if the Supreme Court fails to specify a single legal basis for the doctrine, uncertainty and litigation over the issue are likely to continue.

II. The KPR Essay: Mistakes about the Common Law and Exhaustion

Responding to the KPR essay is challenging because the essay is frequently incorrect in its presentation of our views. For example, at the very beginning of its first part, the essay poses an important question and then answers it incorrectly: “Did the common law play a role in the emergence of exhaustion? Duffy and Hynes vigorously argue it did not.”[26] The KPR essay provides no quote, paraphrase or citation to support that passage, and our article did not argue that position.

As we stated in the introduction to our article, our thesis is that “[t]he legal doctrine in the area pursues not common law policies disfavoring encumbrances or restraints on alienation, but instead the more nuanced goal of limiting the scope or domain of IP statutes to avoid displacing the law in other fields, such as general contract, property, and antitrust law.”[27] The exhaustion doctrine is not itself common law and does not itself pursue substantive common law policies. But that does not mean that the common law played no role in the development of exhaustion. The existence of common law (and later statutory law)—with intricate and variable rules concerning the enforceability of restraints on alienation and encumbrances on personal property—was important to the development of exhaustion. As we said, the “nuanced goal” of the exhaustion doctrine is to protect other areas of law, including “general contract, property, and antitrust law.”[28] And surely, the general law of contracts and property encompasses a great deal of common law.

The KPR essay does, however, afford us the welcome opportunity to explain some background about our thesis and thereby to clarify a crucial point about the relationship between the exhaustion doctrine and common law. An earlier draft of our article—indeed the version we presented in a workshop to the University of Virginia law faculty—was entitled “Common Law Conformity and the Commercial Law of Intellectual Property,” and it was expressly built around the idea that the exhaustion doctrine developed as an outgrowth of the much-maligned canon that statutes in derogation of the common law should be construed narrowly—the very canon cited by the KPR essay.[29] That version of our paper included the central insight that the exhaustion doctrine was trying to avoid displacing large swaths of commercial law, but it also suffered from three weaknesses that ultimately led us to rewrite the paper substantially.

The first and most important weakness is the ambiguity in a thesis tying the development of exhaustion to the common law. Such a thesis could mean that judges limited the scope of IP rights because they did not want to displace certain common law principles with overly broad interpretations of IP rights. But it could also mean that judges developed the exhaustion doctrine as federal common law to reach certain substantive goals, such as a supposed “affirmative policy” favoring the “free movement of all patented goods.”[30]

Both of those theses might be described as positing that exhaustion has common law origins. To us, however, they are quite different. The first thesis is close to our thesis (with the important caveat, discussed below, that judges might also be trying to avoid displacing vast bodies of statutory law too). The second thesis is quite clearly what we are rejecting. Indeed, we view the two theses as incompatible because, to the extent that exhaustion is trying to advance federal policies about the free movement of goods, it risks interfering with the common law of any state that would permit restrictions on the free movement of goods through complex contractual structures[31] or personal property encumbrances.[32] The KPR essay demonstrates the ambiguity about the different possible meanings of asserting that exhaustion has common law origins: the essay asserts both that exhaustion is based on the canon favoring preservation of the common law,[33] but also that exhaustion might sometimes “preempt” state law governing contracts and private property.[34]

A second problem is that the “common law” thesis in the earlier version of our paper did not fit especially well with what the foundational cases said. The Supreme Court cases framed their holdings as statutory interpretation but did not rely on the canon about construing narrowly statutes in derogation of the common law. Bobbs-Merrill Co. v. Straus said that the case presented “purely a question of statutory construction” and mentioned the common law only to emphasize that any common law rights to copyright were displaced by the federal copyright statute.[35] Keeler v. Standard Folding Bed Co. began its opinion by quoting in full the statutory text defining the scope of the patent grant, never mentioned the common law, and sharply distinguished between the law of contracts and “the inherent meaning and effect of the patent laws.”[36] Motion Picture Patents Co. v. Universal Film Manufacturing Co. also quoted the statutory text defining the scope of the patent grant, highlighted in italics certain words in that statute, and described its task as “interpreting this language of the statute.”[37] In sum, the more we carefully focused on the foundational cases rather than modern scholarship, the more statutory interpretation took center stage and the common law took on a lesser role.

The case law applying the exhaustion doctrine does sometimes refer to the common law’s hostility to restraints on the use or alienation of chattels, as our original article acknowledged.[38] Such passages do not pose a problem for our thesis because judges restricting the domain of a statute might be expected to discuss the bodies of law that are being preserved by interpreting the relevant statute narrowly. Thus, in FDA v. Brown & Williamson Tobacco Corp., the Supreme Court discussed the vast body of federal and state law regulating the distribution and sale of cigarettes.[39] The Court did so not to prove that the statute at issue there—the Food, Drug and Cosmetics Act—was a law regulating the sale of cigarettes, but to prove the contrary.

A third and perhaps obvious problem with justifying exhaustion as a doctrine for preserving the common law is that the doctrine also preserves the domains of state and federal statutory law regulating contracts, competition, personal property encumbrances, and insolvency. To focus on the common law is myopic. Thus, in the final version of our article, we scrupulously referred to the “general commercial law” as the body of law being protected by exhaustion. That phraseology was designed to be more comprehensive—to include both common law and statutory law. It was not designed to establish, as the KPR essay inaccurately states (again without supporting citations), a “stark dichotomy” between general commercial law and the common law.[40]

One final point: the KPR essay also accuses us of attacking straw men—that there are few if any (1) exhaustion skeptics arguing for “complete freedom to contract around exhaustion,” or (2) exhaustion proponents viewing “the doctrine as a ‘free ranging power’ to ‘allow or forbid a particular transaction.’”[41] Yet both Impression Products and the writings of the authors of the KPR essay demonstrate the reality of these positions and the degree of divergence between them.

As correctly recognized by the IP Professors’ brief filed in Impression Products (and signed by both Professors Katz and Perzanowski), the majority of the judges on the Federal Circuit held that the “exhaustion doctrine is merely a default arrangement that a patentee can change with contract terms.”[42] And it’s not just Federal Circuit judges. A group of scholars (including Professor Rub, the third author of the KPR essay) is urging the Supreme Court to affirm the Federal Circuit to “enable innovators and users to waive exhaustion by contract.”[43]

On the other side of the debate, scholars such as Professor Katz have expressly endorsed a “strong formulation” of the exhaustion doctrine under which “attempting to work around exhaustion rules” should be “invalidated in the absence of a compelling case-specific explanation as to why the work around should be upheld.”[44] Indeed, the KPR essay itself expressly acknowledges that “[e]xhaustion cannot be a doctrine that is purely designed to preserve other laws, such as contract and private property, if it might also preempt some of those other arrangements.”[45] That really is a key point of our disagreement with the KPR essay, for the exhaustion doctrine should not be preempting or invalidating non-IP legal mechanisms if, as the foundational Supreme Court cases assert, the doctrine is based on the idea that sold patented goods pass “outside” the scope of the federal statute.[46]

III. Hovenkamp and Federalism

Most of Professor Hovenkamp’s response is devoted to a “modest historical revision” of our thesis, arguing that “[the] exhaustion doctrine developed as a creature of federalism.”[47] We agree with Professor Hovenkamp that federalism played a part in the development of exhaustion doctrine in the United States. In early U.S. cases now viewed as cases on exhaustion, the courts spoke in terms of dividing areas governed by the federal law of patents and the state law of contracts and property. Even now, intellectual property law is primarily federal law, and commercial law is primarily state law. State law was even more dominant in commercial matters in the nineteenth century,[48] so any doctrine limiting the scope of federal IP rights to preserve commercial law would necessarily protect state law and thereby preserve interests in federalism.

To Hovenkamp’s modest historical revision, however, we add two modest caveats. First, even though the U.S. exhaustion doctrine developed primarily as protective of state law, the theory developed in the case law was more general—and was thus able to prevent intellectual property law from unduly encroaching not only on state law, but also on areas of federal law such as bankruptcy and antitrust.

For example, without any exhaustion doctrine, a patentee who sells goods on credit could substantially increase its rights in bankruptcy by supplementing a commercial law security interest with a non-transferable license to continue using the goods that is conditioned on the purchaser making the required payments. The Bankruptcy Code grants courts explicit powers to restructure secured loans,[49] changing the payment schedule, interest rate, and sometimes even the principal amount,[50] but it does not give courts a similar power to restructure executory contracts like patent licenses.[51] Worse still, not only would the now-bankrupt purchaser lack the power to assign the license so that another firm could use the goods, but most circuits that have examined the issue prohibit the bankrupt entity from assuming patent licenses without the patentee’s consent.[52] Thus, after bankruptcy occurs, perhaps no one—not even the original purchaser—could use the goods without the patentee’s consent. Although the license would not give the patentee the right to repossess the goods, the patentee would have quite a bit of leverage to control or prevent the normal restructuring of claims in bankruptcy because it could prevent anyone from using the goods unless the patentee receives payment in full.

Second, although federalism was important to the development of exhaustion in this country, exhaustion also developed (and still exists) in many countries that lack federalism.[53] Our original article provides a possible explanation: limiting the scope of a specialized statute is a sensible reaction to legislative specialization, for it “avoid[s] imposing substantive policies not resolved through the structured, democratic process that is the legislature.”[54] In short, the doctrine helps keep order, so that different areas of specialized law governing topics such as IP, security interests, bankruptcy, and antitrust remain distinct.

Conclusion

The KPR essay concludes that our thesis would “significantly narrow[] the perspective of what exhaustion is and what it should be.”[55] To this we plead: guilty. We believe that a narrower and more precise explanation of “what exhaustion is” would be a huge positive, for it would help the doctrine better perform its primary function of preventing IP rights from interfering with other complex areas of law.

By contrast, the KPR essay argues that, in determining “the socially desirable scope of IP exhaustion,” scholars (and possibly courts) “should explore the justifications for exhaustion, examine how strong and applicable they are nowadays and going forward, study the effects it has on initial and secondary markets for copyrighted goods, and yes—consider other legal (as well as non-legal) ways to regulate those markets.”[56] And on top of all those factors, the essay is also willing to blend together “common law and statutory interpretation”[57] without any clear framework of where one begins and the other ends. That approach seems hard to reconcile with the Supreme Court’s general jurisprudential approach to restricting the power of judges to fashion federal common law in areas controlled by federal statutes.[58] But perhaps even more importantly, it is a recipe for continued confusion in an area of law notorious for its incoherence.

As discussed in the beginning of this response, the Impression Products case is a poster child for that incoherence, and we hope that the Supreme Court takes the opportunity to provide a bit of theoretical clarity to the area. Specifically, we hope that the Supreme Court’s ultimate opinion includes a sentence stating something like: “The patent exhaustion doctrine is based on ______.” Of course, we would like to see that blank filled in with “an interpretation of the limited scope of the federal patent rights granted in 35 U.S.C. § 154(a)(1).” But our overarching point is that we really hope that the Supreme Court puts something in that blank.

 


[1] Lexmark Int’l, Inc. v. Impression Prods., Inc., 816 F.3d 721, 750–52 (Fed. Cir. 2016).

[2] John F. Duffy & Richard Hynes, Statutory Domain and the Commercial Law of Intellectual Property, 102 Va. L. Rev. 1 (2016).

[3] Ariel Katz, Aaron Perzanowski & Guy A. Rub, The Interaction of Exhaustion and the General Law: A Reply to Duffy And Hynes, 102 Va. L. Rev. Online 8 (2016) [hereinafter KPR Essay].

[4] Herbert Hovenkamp, Patent Exhaustion and Federalism: A Historical Note, 102 Va. L. Rev. Online 25 (2016).

[5] As we explain in our article, the phrase “conditional sale” described a forerunner of the modern security interest, and the Uniform Commercial Code now deems such a sale to be a sale subject to a security interest. See Duffy & Hynes, supra note 2, at 62–63; see also Lynn M. LoPucki et al., Commercial Transactions: A Systems Approach 837 (5th ed. 2012) (“The consequence [of a conditional sale] is that the buyer becomes the owner of the goods and the seller becomes a secured creditor for the price of the goods.”); Donald H. Partington, Note, Effect of the Uniform Commercial Code on Virginia Commercial Law: Conditional Sales and Article 9, 20 Wash. & Lee L. Rev. 286, 286 (1963) (“The conditional sale is one of several common law and statutory security devices merged into what is called a security interest under the secured transactions article of the Uniform Commercial Code.”).

[6] Lexmark Int’l, 816 F.3d at 727–728 (internal quotation marks omitted).

[7] 976 F.2d 700 (Fed. Cir. 1992).

[8] Brief for Petitioner at 11 n.2, Impression Prods., Inc v. Lexmark Int’l, Inc., No. 15-1189 (U.S. filed Jan. 17, 2017).

[9] 264 F.3d 1094 (Fed. Cir. 2001).

[10] Lexmark Int’l, 816 F.3d at 726–27.

[11] See Duffy & Hynes, supra note 2, at 55­–58, 47–53.

[12] See, e.g., KPR Essay, supra note 3, at 24 (listing a variety of policy factors by which the “scope [of exhaustion] should ideally be set”).

[13] Lexmark Int’l, 816 F.3d at 734 (quoting Nw. Airlines, Inc., v. Transp. Workers Union of Am., 451 U.S. 77, 95 n.34 (1981)).

[14] See City of Milwaukee v. Illinois, 451 U.S. 304, 315 (1981).

[15] 35 U.S.C. § 271(a) (2012).

[16] Lexmark Int’l, 816 F.3d at 734.

[17] Id. at 742.

[18] See 157 U.S. 659, 661 (1895) (quoting Rev. Stat. § 4884); see also 35 U.S.C. § 154 note (2012) (noting lineage from § 4884). A recent analysis of the historical origins of patent exhaustion identifies Keeler as important in the development of “[m]odern exhaustion.” Sean M. O’Connor, Origins of Patent Exhaustion: Jacksonian Politics, “Patent Farming,” and the Basis of the Bargain 44–47 (Mar. 7, 2017), https://perma.cc/WZ6C-QQY8.

[19] See Keeler, 157 U.S. at 661 (emphasis added) (internal quotation marks omitted).

[20] 243 U.S. 502, 509 (1917).

[21] See id. at 510, 513–14 (asserting that the “meaning [of the statutory words] would seem not to be doubtful if we can avoid reading into them that which they really do not contain” and asserting that the result in the case was based on the “plain meaning of the statute”).

[22] The briefs submitted in the case are located at American Bar Association, Preview of United States Supreme Court Cases, https://perma.cc/WE3M-UX4Unow permasizeded formatting to the online version] theased]we added 23 since better substantiated}. 

[23] Brief of Respondent at 14, Impression Prods., Inc. v. Lexmark Int’l, Inc., No. 15-1189 (U.S. filed Feb. 16, 2017) (emphasis omitted).

[24] See Brief of Amici Curiae Intellectual Property Professors and American Antitrust Institute in Support of Petitioner at 3, 6,  Impression Prods., Inc. v. Lexmark Int’l, Inc., No. 15-1189 (U.S. filed Jan. 24, 2017) [hereinafter IP and Antitrust Amici].

[25] See Brief of 44 Law, Economics and Business Professors as Amici Curiae in Support of Respondent at 3, Impression Prods., Inc. v. Lexmark Int’l, Inc., No. 15-1189 (U.S. Feb. 23, 2017) [hereinafter Law, Economics and Business Amici].

[26] KPR Essay, supra note 3, at 10.

[27] Duffy & Hynes, supra note 2, at 7.

[28] Id.

[29] KPR Essay, supra note 3, at 10–11.

[30] IP and Antitrust Amici, supra note 24, at 3, 6.

[31] As an example, our article cited Qualcomm’s contracting structures, which undoubtedly restrict the free movement of goods even if patent rights are exhausted after a first sale. Our article remained agnostic about whether such contracts would be enforceable under state contract law, legal under federal antitrust law, or sensible from a standpoint of economic efficiency. Prior scholarship, however, has set forth reasons why Qualcomm’s contracts may serve positive economic functions by controlling each step in the productive “value chain.” See Sean M. O’Connor, IP Transactions as Facilitators of the Globalized Innovation Economy, in Working Within the Boundaries of Intellectual Property: Innovation Policy for the Knowledge Society 203, 212–28 (Rochelle C. Dreyfuss et al. eds., 2010) (describing Qualcomm’s contracts as desirable “value chain licensing”).

[32] See Duffy & Hynes, supra note 2, at 60 (explaining that security interests under the Uniform Commercial Code can secure obligations generally and noting that the common law of some states might also permit so-called “personal property servitudes” to enforce obligations on subsequent purchasers).

[33] KPR Essay, supra note 3, at 10–11, 14–15.

[34] Id. at 22.

[35] 210 U.S. 339, 346–50 (1908) (discussing authors’ rights at common law but concluding that those “common-law rights are lost” upon publication).

[36] 157 U.S. 659, 666 Co.t 666.rd Folding Bed Co.ut aone a bit]  could is is the court’rtant to leave all three in in lieu of “h him on his research, (1895).

[37] 243 U.S. 502, 509–10 (1917) (emphasis added).

[38] Duffy & Hynes, supra note 2, at 51–52.

[39] 529 U.S. 120, 143–59 (2000).

[40] KPR Essay, supra note 3, at 21.

[41] Id. at 17 (citations omitted).

[42] IP and Antitrust Amici, supra note 24, at 2.

[43] Law, Economics and Business Amici, supra note 25, at 31–32; see also id. at 7 (arguing that exhaustion should be “generally” inapplicable to sales “made subject to conditions that are expressly communicated and otherwise lawful”).

[44] Ariel Katz, The First Sale Doctrine and the Economics of Post-Sale Restraints, 2014 BYU L. Rev. 55, 63 (2014); see also id. at 74, 101 (endorsing the “strong” version of the doctrine and arguing that contracting around the doctrine should be “presumptively invalid” and that courts should refuse to enforce contract terms limiting resales unless the IP owner “can demonstrate that the restraint is necessary and superior to other means to achieve efficiency”).

[45] KPR Essay, supra note 3, at 22.

[46] Keeler, 157 U.S. at 661; Bloomer v. McQuewan, 55 U.S. 539, 549 (1852).

[47] Hovenkamp, supra note 4, at 26.

[48] Today, federal law governs some commercial law issues such as security interests in maritime vessels (46 U.S.C. § 31301 et seq. (2012)) and aircraft (49 U.S.C.A. § 44108 (2015)). More significantly, federal bankruptcy law often alters commercial rights, but the United States did not have a lasting bankruptcy act until 1898. See David A. Skeel, Jr., Debt’s Dominion: A History of Bankruptcy Law in America 23 (2001); Charles Jordan Tabb, The History of the Bankruptcy Laws in the United States, 3 Am. Bankr. Inst. L. Rev. 5, 6, 23 (1995).

[49] See 11 U.S.C. § 1123(b)(5) (2012) (allowing the court to approve a plan of reorganization that modifies the rights of secured creditors).

[50] See id. § 506 (allowing the court to reduce the amount of a secured claim to the value of the underlying collateral); id. § 1129(b)(2)(A) (allowing a court to approve a plan based on a judicial valuation of the promised payments to the secured creditor).

[51] See id. § 365 (granting the trustee in bankruptcy, acting on behalf of the bankrupt entity, certain limited powers to assume or reject executory contracts but not granting any power to modify such contracts without the consent of the counterparty).

[52] See, e.g., N.C.P. Mktg. Grp., Inc. v. BG Star Prods., Inc., 556 U.S. 1145, 1146 (2009) (statement of Kennedy, J., respecting the denial of certiorari) (noting that most circuits will not allow the bankrupt entity to assume executory contracts that are not assignable).

[53] See Christopher Stothers, 16th Annual Conference on Intellectual Property Law and Policy of Fordham University School of Law, Patent Exhaustion: the UK Perspective (Mar. 27–28, 2008), https://perma.cc/7XMN-Q5ZP (noting that “[i]n most jurisdictions patent rights cannot be used to prevent genuine products which were put on the domestic market from being resold within that jurisdiction”).

[54] Duffy & Hynes, supra note 2, at 32.

[55] KPR Essay, supra note 3, at 24.

[56] Id.

[57] Id. at 10.

[58] See Lexmark Int’l, Inc. v. Impression Prods., Inc., 816 F.3d 721, 734 (Fed. Cir. 2016).