Proprietary rights and personal rights.
The term "proprietary rights" has a slightly broader connotation than "property rights," but both are rights that someone has against substantially everyone, rather than just against those with whom one has a special relationship. Information, for example, may be proprietary and not property. A personal right usually arises from an individual course of dealing between the right-holder and obliged person.
The term property is used to designate both a right of ownership in a thing and also that which is owned (the thing). Traditionally, property is the very maximum right that can exist in anything. Usually, it includes the rights to possess, use, bail, lease, lend, sell, alienate, give away, bequeath, hypothecate, use up, consume, destroy, and otherwise deal with the thing owned and defined as property.
Property, including intellectual property, is most sensibly viewed as a bundle of different rights ("sticks"). Different kinds of property, and especially different kinds of intellectual property, have different bundles. Owners can grant others use of some rights (sticks) and not use of others. Owners may lose or use up some rights and not others. Some acts, however – such as, perhaps, sale – can completely use up an owner's ownership and leave no property right at all in the quondam owner.
A vast literature on the legal conception of property rights traces the transition from property as (i) a "bundle of rights" that gives ownership and control of tangible assets (such as realty and chattels) to (ii) an aggregate of relational interests encompassing rights, privileges, powers, and immunities applicable to both tangible and intangible interests (such as choses in action). See, e.g., Wesley N. Hohfeld, Fundamental Legal Conceptions As Applied in Judicial Reasoning 96 (1923); Michael A. Heller, The Boundaries Of Private Property, 108 Yale L. J. 1163 (1999); J.E. Penner, The "Bundle of Rights" Picture of Property, 43 UCLA L. Rev. 711 (1996).
The medieval and ancient concept of natural law holds that certain rights are innate in human beings, and that power to own property is such a right. Such natural rights are considered superior to and unalterable by positive law. Thus, Locke declared the existence of inalienable natural rights to life, liberty, and (pursuit of) private property. (Thomas Jefferson's version of this in the Declaration of Independence became the pursuit of happiness.) The duty of government is said to be to preserve natural rights, under the supposed "social contract" between citizens and the State. This view can be traced to the Book of Samuel, in which king-citizenry covenants are formed. (Typically, however, such covenants in Samuel have a third party or perhaps third-party beneficiary: the deity. A king's breach of duty under the covenant to either other party can divest him or his dynasty of kingship. E.g., Saul in Samuel and numerous kings in Kings. The Declaration of Independence suggests that George III and Parliament flagrantly breached the social covenant implied between the people of the American colonies and the British state.)
Bentham on Personal Property – Excerpt from Jeremy Bentham, Theory of Legislation: Principles of the Civil Code
The better to understand the advantages of law, let us endeavour to form a clear idea of property.
We shall see that there is no such thing as natural property. Property is nothing but a basis of expectation: the expectation of deriving certain advantages from a thing, which we are said to possess, in consequence of the relation in which we stand towards it.
Locke on Personal Property
Excerpts from John Locke, Essay Concerning Civil Government
§ 27. Though the earth and all inferior creatures be common to all men, yet every man has a property in his own person; this nobody has any right to but himself. The labor of his body and the work of his hands we may say are properly his. Whatsoever, then, he removes out of the state that nature hath provided and left it in, he hath mixed his labor with, and joined to it something that is his own, and thereby makes it his property. It being by him removed from the common state nature placed it in, it hath by this labor something annexed to it that excludes the common right of other men. For this labor being the unquestionable property of the laborer, no man but he can have a right to what that is once joined to, at least where there is enough, and as good left in common for others.
§ 36. That labor put a distinction between them and common; that added something to them more than nature, the common mother of all, had done, and so they became his private right. ...The labor that was mine removing them out of that common state they were in, hath fixed my property in them....
§ 44. From all which it is evident that, although things of nature are given in common, yet man, by being master of himself and proprietor of his own person and the actions or labor of it, had still in himself the great foundation of property; and that which made up the great part of what he applied to the support or comfort of his being, when invention and arts had improved the conveniences of life, was perfectly his own, and did not belong in common to others.
§ 45. Thus labor, in the beginning, gave a right of property, wherever anyone was pleased to employ it upon what was common....
§ 46. Now of those good things which nature hath provided in common, hath a right, as hath been said, to as much as he could use, and had a property in all he could effect with his labor – all that his industry could extend to, to alter from the state nature had put it in, was his.
Inserted Editorial Notes on Locke
 What about the members of his immediate family? Others who depend on him for their support? What if he is a slave? A serf? Hired?
 I commingle my labor or property with something hitherto held in common – for example, I enclose the village green. Now do I own what I have commingled with mine? Explain why.
 a. It is 50,000 B.C. I am a hunter-gatherer, removing natural things from the environment by my labor. I claim to own whatever I so acquire. My cousin Ogg says that he and others of the tribe make it possible for me to exist (and thus hunt and gather) by collectively scaring away leopards and unfriendly hominids. He says that I could not hunt and gather, indeed exist very long, if not in the environment of the tribe. Therefore, Ogg says, I must share my plunder with him and the others of the tribe. I tell Ogg that's not what John Locke says (or will say, if you insist) in his Essay Concerning Civil Government. What does Ogg say in response?
b. Move on to Egypt or Mesopotamia, 2000 B.C. I am now a farm laborer. The Ruler of the State says that I continue to live only because of the support of the State. Must I therefore labor for the State? I protest. What is my alternative?
c. Update for 1600 - 2000 A.D. Consider what T. Hobbes (Leviathan), echoed by J.J. Rousseau (The Social Contract), says: man must submit to the requirements of State to escape from the coarse, brutish, nasty, and short-lived state of nature. What are my options if I disagree?
 How does all of this sensibly apply to intellectual property? To software? To adjusting rights, obligations, and liabilities between a Web page proprietor and an unauthorized downloader of the Web page's content?
Haslem v. Lockwood
Supreme Court of Errors and Appeals - Connecticut
37 Conn. 500 (1871)
Trover, for a quantity of manure; brought before a justice of the peace and appealed by the defendant to the Court of Common Pleas of the County of Fairfield; appealed by the plaintiff to the Supreme Court of Errors and Appeals.
On the trial it was proved that the plaintiff employed two men to gather into heaps, on the evening of April 6th, 1869, some manure that lay scattered along the side of a public highway, for several rods, in the borough of Stamford, intending to remove the same to his own land the next evening. The men began to scrape the manure into heaps, or about six cart-loads, left the same at eight o'clock in the evening in the street. The heaps consisted chiefly of manure made by horses hitched to the railing of the public park in, and belonging to, the borough of Stamford, and was all gathered between the center of the highway and the park; the rest of the heaps consisting of dirt, straw, and the ordinary scrapings of highways. The defendant on the next morning, seeing the heaps, endeavored without success to ascertain who had made them, and inquired of the warden of the borough if he had given permission to any one to remove them, and ascertained from him that he had not. He thereupon, before noon on that day, removed the heaps, and also the rest of manure scattered along the side of the highway adjacent to the park, to his own land.
The plaintiff and the defendant both claimed to have received authority from the warden to remove the manure before the 6th of April, but in fact neither had any legal authority from the warden, or from any officer of the borough or of the town. The borough of Stamford was the sole adjoining proprietor of the land on which the manure lay scattered before it was gathered by the plaintiff. No notice was left on the heaps or near by, by the plaintiff or his workmen, to indicate who had gathered them, nor had the plaintiff or his workmen any actual possession of the heaps after eight o'clock in the evening on the 6th of April.
Neither the plaintiff while gathering, nor the defendant while removing the heaps, was interfered with or opposed by any one. The removal of the manure and scrapings was calculated to improve the appearance and health of the borough. The six loads were worth one dollar per load. The plaintiff, on ascertaining that the defendant had removed the manure, demanded the payment for the same, which the defendant refused. Neither the plaintiff nor defendant owned any land adjacent to the place where the manure lay. The highway was kept in repair by the town of Stamford.
On the above facts the plaintiff claimed, and prayed the court to rule, that the manure was personal property which had been abandoned by its owners and became the property of the first person who should take possession of the same, which the plaintiff had done by gathering it into heaps. He further claimed that it was taken without committing a trespass, and with the tacit consent of the owners of the real estate, and that thereby it became his personal property of which he was lawfully possessed, and at least that he had acquired such an interest in it as would enable him to hold it against any person claiming under the owner.
The defendant claimed, upon the above facts, that the manure being dropped upon and spread out over the surface of the earth did not change its nature to that of personal estate, unless it was removed; and that, unless the heaps became personal property, the plaintiff could not maintain his action. The defendant further claimed, as matter of law, that if the manure was always personal estate after being scraped into heaps, the plaintiff, by leaving it from eight o'clock in the evening until noon the next day, abandoned all right of the possession which he might have had, and could not, therefore, maintain his action.
The court ruled adversely to the claims of the plaintiff and held that on the facts proved the plaintiff had not made out a sufficient interest in, or right of possession to, the subject matter in dispute, to authorize a recovery in the suit, and rendered judgment for the defendant.
The plaintiff moved for a new trial for error in this ruling of the court.
We think the manure scattered upon the ground, under the circumstances of this case, was personal property. The cases referred to by the defendant to show that it was real estate are not in point. The principle of those cases is, that manure made in the usual course of husbandry upon a farm is so attached to and connected with the realty that, in the absence of any express stipulation to the contrary, it becomes appurtenant to it. The principle was established for the benefit of agriculture. It found its origin in the fact that it is essential to the successful cultivation of a farm that the manure, produced from the droppings of cattle and swine fed upon the products of the farm, and composted with earth and vegetable matter taken from the land, should be used to supply the drain made upon the soil in the production of crops, which otherwise would become impoverished and barren.
But this principle does not apply to the droppings of animals driven by travelers upon the highway. The highway is not used, and cannot be used, for the purposes of agriculture. The manure is of no benefit whatsoever to it, but on the contrary is a detriment; and in cities and large villages it becomes a nuisance, and is removed by public officers at public expense. The finding in this case is "that the removal of the manure and scrapings was calculated to improve the appearance and health of the borough." It is therefore evident that the cases relied upon by the defendant have no application in this case.
But it is said that if the manure was personal property, it was in the possession of the owner of the fee, and the scraping it into heaps by the plaintiff did not change the possession, but it continued as before, and that therefore the plaintiff cannot recover, for he neither had the possession nor the right to the immediate possession.
The manure originally belonged to the travelers whose animals dropped it, but it being worthless to them was immediately abandoned. Whether it then became the property of the borough of Stamford which owned the fee of the land on which the manure lay, it is unnecessary to determine. If it did, the case finds that the removal of the filth would be an improvement to the borough, and no objection was made by any one to the use that the plaintiff attempted to make of it. Considering the character of such accumulations upon highways in cities and villages, and the light in which they are everywhere regarded in closely settled communities, we cannot believe that the borough in this instance would have had any objection to the act of the plaintiff in removing a nuisance that affected the public health and the appearance of the streets. At all events, we think the facts of the case show a sufficient right in the plaintiff to the immediate possession of the property as against a mere wrong doer.
The defendant appears before the court in no enviable light. He does not pretend that he had a right to the manure, even when scattered upon the highway, superior to that of the plaintiff; but after the plaintiff had changed its original condition and greatly enhanced its value by his labor, he seized and appropriated to his own use the fruits of the plaintiff's outlay, and now seeks immunity from the responsibility on the ground that the plaintiff was a wrong doer as well as himself. The conduct of the defendant is in keeping with his claim, and neither commends itself to the favorable consideration of the court. The plaintiff had the peaceable and quiet possession of the property; and we deem this sufficient until the borough of Stamford shall make complaint.
It is further claimed that if the plaintiff had a right to the property by victim of occupancy, he lost the right when he ceased to retain the actual possession of the manure after scraping it into heaps.
We do not question the general doctrine, that where the right by occupancy exists, it exists no longer than the party retains the actual possession of the property, or till he appropriates it to his own use by removing it to some other place. If he leaves the property at the place where it was discovered, and does nothing whatsoever to enhance its value or change its nature, his right by occupancy is unquestionably gone. But the question is, if a party finds property comparatively worthless, as the plaintiff found the property in question, owing to its scattered condition on the highway, and greatly increases its value by his labor and expense, does he lose his right if he leaves it a reasonable amount of time to procure the means to take it away, when such means are necessary for its removal?
Suppose a teamster with a load of grain, while traveling the highway, discovers a rent in one of his bags, and finds that his grain is scattered upon the road for the distance of a mile. He considers the labor of collecting his corn of more value than the property itself, and he therefore abandons it, and pursues his way. A afterwards finds the grain in this condition and gathers it kernel by kernel into heaps by the side of the road, and leaves it a reasonable time to procure the means necessary for its removal. While he is gone for his bag, B discovers the grain thus conveniently collected in heaps and appropriates it to his own use. Has A any remedy? If he has not, the law in this instance is open to just reproach. We think under such circumstances A would have a reasonable time to remove the property, and during such reasonable time his right to it would be protected. If this is so, then the principle applies to the case under consideration.
A reasonable time for the removal of this manure had not elapsed when the defendant seized and converted it to his own use. The statute regulating the rights of parties in the gathering of sea-weed, gives the party who heaps it upon a public beach twenty-four hours in which to remove it, and that length of time for the removal of the property we think would not be unreasonable in most cases like the present one.
In what precedents does the court find support for its opinion? What is the doctrinal or theoretical basis for the ruling?
Some Theories About the Basis of Patent Rights –
Excerpt from Address by CAFC Judge Pauline Newman
Before American Bar Ass'n, Intellectual Property Section (June 1994)
Some see the patent primarily as an economic tool; some as founded on principles of natural right and fairness; some as an obstacle to the flow of ideas and knowledge; some as a stimulus to the flow.
Much of the controversy concerning the role of patents -- much of the differences in judicial opinions, even today can be explained by the different weights placed on different theories of the patent system. The way judges -- or nations, or the Antitrust Division--look at patents depends on the value, and on the understanding, of the various facts.
The Securing of a Natural Right
Principles of natural right are fundamental to most theories of property. What about property in the products of the intellect?
When new knowledge is created, it's possessed solely by the creator. That right of possession does not arise by statute, but by the act of creation. The laws of patent and copyright secure this right--"secure" is the word in the United States Constitution -- to the creator of the knowledge. This theory of natural right was dominant in the American Revolution. In 1813 Chief Justice John Marshall wrote that patents fulfill the "great fundamental principles of right, and of property."
On this theory, the creator of an idea has the natural right to control the use and profit of the idea, even after the idea is disclosed to others. The natural right theory underlies much of the ensuing construct of intellectual property. It doesn't get much attention from economists, unless it's also viewed as an industrial policy set in the Constitution and therefore of historic interest. But I view this theory as fundamental to our national ethic.
The Labor Theory
The labor theory of property is philosophically associated with John Locke and Adam Smith. It shares the premise of human right and fundamental fairness. The labor theory holds that those who have labored in the creation of property are entitled to own the things that they created; It's a powerful theory, and underlay several revolutions.
Today there is an increased emphasis on the concept of property in all areas. In 1964 Reich talked about this in "The New Property" concept of a property right in your job, for example. It's a small step for the labor theory to recognize property rights in ideas that are developed by intellectual and economic effort.
The Property Theory
The essence of the concept of property is the right to exclude others from its possession and enjoyment. Intellectual property law applies this principle lo the intangible attributes of intellectual endeavor information, not things; for once information has been disclosed, it's no longer in the sole possession of its creator. Economists call this an appropriability problem. After the knowledge has been shared with the public, control does nut derive from possession, but solely by operation of law. The knowledge is released, but the right to profit from the knowledge is restrained by the patent.
Let's turn to some public interest theories.
The Social Welfare Theory
This is not a theory of property rights, but of social value. We must first accept the premise that technological innovation produces an overriding social benefit, in the form of jobs, goods, trade, and social stability, adding to the quality of life. On the premise that patents add economic incentive to the allocation of resources to technological innovation, patents serve the social welfare. This theory weighs heavily on the side of stable, enforceable patents: patents that are reliable when granted. We should think about what it means to patent scope and licensing practices. Will restrictions on the terms of patent licenses, and encouragement to licensees to litigate successful patents, aid the social welfare?
It's always been hard for me to understand why the Supreme Court decided in Lear, Inc. v. Adkins, 395 U.S. 653 (1969), to subordinate the integrity of contracts in order to permit licensees to challenge validity. Possible explanation takes us to the next, theory.
The Monopoly Theory
Intellectual property, like all property is a form of economic monopoly. All property functions through a right to exclude. This is the economic value of the patent. Of course it does not exclude other products competing in the same market, but only the patented product. Some monopoly theorists think that this is bad enough, especially if the relevant market can be defined by the patented product. Ears were closed to the explanation that the patent created new property.
The monopoly theory for several decades was the dominant economic (and judicial) view, and patents acquired the aura of being anticompetitive and harmful. These tensions will undoubtedly always be with us. In this area economic analysis can be most useful in understanding the competitive processes surrounding the making and commercialization of inventions.
The Market Regulation Theory
Economic theorists have described the patent right as a form of market regulation, achieved by operation of law instead of by governmental management. This theory focuses on the role of the patent system in industrial innovation, for the R&D and commercial decisions supported by the patent right are driven by market forces, not by government regulation. The theory is involved ln other forms of commercial activity, for example in the orphan drug law, where government regulation interceded because there was no patent right, to produce a patent-like market structure.
The Investment Incentive Theory
Next is a mixed legal and economic theory: the creation of a legal environment that supports private investment in technological innovation. This is the dominant effect of patent law in a market economy, for the reduction of commercial risk provides the economic incentive to commitment of capital and human resources. Although the arithmetic is usually quite complicated, the concept is elegantly simple.
The patent provides the investor with a shield from competition with the same product sold by others. Imitation pursues commercial success. It's only the profitable products that inspire imitation, usually by those who have borne neither the cost of the development nor the risk of failure. Most of the cases that I see in litigation involve copying--sometimes with modifications, but independent development is the exception.
If the investor is confident in the patent, perhaps a higher technological risk will be taken, or investment made in products whose payout is longer term or that have a lower profit margin or a smaller potential market. Once more, we see a theory in which stability in scope and interpretation; are factors in investment risk.
The Reward Theory
The reward theory views the patent as a reward for invention, which reward is reaped through exercise of the right to exclude. This theory has been around for a long time. Economists would say that through the patent the inventor appropriates the social returns to innovation.
The reward theory generally gets the blame for historical misunderstandings of patents. The judicial view that public policy requires the courts to facilitate attacks on patents appears to be based on the theory that if an invention does not technologically merit a reward, the patent should not exist. A recent illustration is the holding of the Supreme Court that the Federal Circuit must always decide the issue of validity, even if it's mooted by noninfringement, lest meritless patents continue to exist.
The reward theory assumes that the technological work would have been done anyway, and that the reward of the patent simply enhances the profits, and therefore must be earned by technological merit. This audience knows that expensive R&D may not be done at all without an economically sufficient prospect. The reward theory would disapprove of petty patents [a category of lesser patents having short terms and limited scope-see infra ch.13], for example, whereas other theories would favor the grant of innovation incentives commensurate with the quality of the contribution. The Semiconductor Chip Protection Act of 1984 [17 U.S.C. §§ 901-915] supports arguments on both sides.
Both the reward and the prospect theory place a heavy burden on the PTO as the granting agency. I agree with that burden. The patent when it is granted should be able to be relied on as a vehicle for further investment, like other property used in commerce.
Other commentators have characterized the interest in intellectual property in terms of self-expression and personality. See Wendy J. Gordon, A Property Right in Self-Expression: Equality and Individualism in the Natural Law of Intellectual Property, 102 Yale L. J. 1533 (1993); Margaret Jane Radin, Property Evolving in Cyberspace, 15 J. Law & Comm. 509 (1996). Do these concepts relate to those of Hegel? Explain how to apply these concepts specifically to recognition and allocation of property rights in computer software.
United States v. Willow River Power Co.
United States Supreme Court
324 U.S. 499 (1945)
Mr. Justice Jackson delivered the opinion of the Court.
The Willow River Power Company has been awarded $25,000 by the Court of Claims as just compensation for impaired efficiency of its hydroelectric plant caused by the action of the United States in raising the water level of the St. Croix River. Reality of damage and reasonableness of the award are not in issue. Our question is whether the damage is the result of a "taking" of private property, for which just compensation is required by the Fifth Amendment.
Willow River in its natural state was a non-navigable stream, which flowed to within a few rods of the St. Croix River, turned and roughly paralleled it for something less than a mile, and then emptied into the St. Croix. Many years ago an earth dam was thrown across the Willow about a half-mile above its natural month. A new mouth was cut across the narrow neck which separated the two rivers and a dam was built across the artificial channel close to or upon the banks of the St. Croix. Here also was built a mill, which operated under the head produced in the pool by the two dams. [For a diagram, see Notes following opinion.]
These lands and appurtenant rights were acquired by the Willow River Power Company, and were devoted to hydroelectric generation for supply of the neighborhood. Mechanical energy for generation of electrical energy was developed by water in falling from the artificial level of non-navigable Willow River to the natural level of navigable St. Croix River. The operating head varied because elevation of the tail water was governed by the fluctuating level of the St. Croix. When that river was low, the maximum head was developed, and was 22.5 feet; when the river was at flood stage, the operating head diminished to as little as 8 feet. The ordinary head available was 17 feet.
The Government, in pursuance of a congressional plan to improve navigation, in August 1938 had completed what is known as the Red Wing Dam in the Upper Mississippi, into which the St. Croix flows. This dam was some thirty miles downstream, but it created a pool which extended upstream on the St. Croix beyond respondent's plant. The water level maintained by the Government in the St. Croix was approximately 3 feet above its ordinary level at claimant's property. By thus raising the level at which tail waters must flow off from claimant's plant, the Government reduced the operating head by 3 feet, and diminished the plant's capacity to produce electric energy. The Company was obliged to supplement its production by purchase from other sources.
Loss of power was made the only basis of the award. The Court of Claims found as a fact that "The value of the loss in power as a result of the raising of the level of the St. Croix River by 3 feet was $25,000 at the time and place of taking," and it rendered judgment for that amount. Damage to land as land or to structures as such is not shown to be more than nominal and accounts for no part of the award.
The Fifth Amendment, which requires just compensation where private property is taken for public use, undertakes to redistribute certain economic losses inflicted by public improvements so that they will fall upon the public rather than wholly upon those who happen to lie in the path of the project. It does not undertake, however, to socialize all losses, but those only which result from a taking of property. If damages from any other cause are to be absorbed by the public, they must be assumed by act of Congress and may not be awarded by the courts merely by implication from the constitutional provision. The court below thought that decrease of head under the circumstances was a "taking" of such a "property right," and that is the contention of the claimant here.
It is clear, of course, that a head of water has value and that the Company has an economic interest in keeping the St. Croix at the lower level. But not all economic interests are "property rights"; only those economic advantages are "rights" which have the law back of them, and only when they are so recognized may courts compel others to forbear from interfering with them or to compensate for their invasion. The law long has recognized that the right of ownership in land may carry with it a legal right to enjoy some benefits from adjacent waters. But that a closed catalogue of abstract and absolute "property rights" in water hovers over a given piece of shore land, good against all the world, is not in this day a permissible assumption.
We cannot start the process of decision by calling such a claim as we have here a "property right"; whether it is a property right is really the question to be answered. Such economic uses are rights only when they are legally protected interests. Whether they are such interests may depend on the claimant's rights in the land to which he claims the water rights to be appurtenant or incidental; on the navigable or non-navigable nature of the waters from which he advantages; on the substance of the enjoyment thereof for which he claims legal protection; on the legal relations of the adversary claimed to be under a duty to observe or compensate his interests; and on whether the conflict is with another private riparian interest or with a public interest in navigation. The claimant's assertion that its interest in a power head amounts to a "property right" is made under circumstances not present in any case before considered by this Court.
Claimant is the owner of lands riparian to the St. Croix River, and under the law of Wisconsin, in which the lands lie, the shore owner also has title to the bed of the stream. The property right asserted to be appurtenant to claimant's land is that described in United States v. Cress, as "the right to have the water flow away from the mill-dam unobstructed, except as in the course of nature" and held in that case to be an "inseparable part" of the land. The argument here is put that the waters of the St. Croix were backed up into claimant's tail race, causing damage. But if a dike kept the waters of the St. Croix out of the tail race entirely it would not help. The water falling from the Willow must go somewhere, and the head may be preserved only by having the St. Croix channel serve as a run off for the tail waters. The run-off of claimant's water may be said to be obstructed by the presence of an increased level of Government-impounded water at the end of claimant's discharge pipes. The resulting damage may be passed on to the Government only if the riparian owner's interest in "having the water flow away" unobstructed is a legally protected one.
In 1913 this Court decided United States v. Chandler-Dunbar Co. It involved the claim that water power inherent in a navigable stream due to its fall in passing riparian lands belongs to the shore owner as an appurtenant to his lands. The Court declared that there cannot be said to arise any ownership of the river: "Ownership of a private stream wholly upon the lands of an individual is conceivable; but that the running water in a great navigable stream is capable of private ownership is inconceivable." A strategic position for the development of power does not give rise to right to maintain it as against interference by the United States in aid of navigation.
The Chandler-Dunbar case held that the shore owner had no appurtenant property right in two natural levels of water in front of its lands or to the use of the natural difference between as a head for power production. In this case the claimant asserts a similar right to one natural level in front of his lands and a right of ownership in the difference between that and the artificial level of the impounded water of the Willow River. It constituted a privilege or a convenience, enjoyed for many years, permissible so long as compatible with navigation interests, but it is not an interest protected by law when it becomes inconsistent with plans authorized by Congress for improvement of navigation.
Rights, property or otherwise, which are absolute against all the world are certainly rare, and water rights are not among them. Whatever rights may be as between equals such as riparian owners, they are not the measure of riparian rights on a navigable stream relative to the function of the Government in improving navigation. Where these interests conflict they are not to be reconciled as between equals, but the private interest must give way to a superior right, or perhaps it would be more accurate to say that as against the Government such private interest is not a right at all.
Operations of the Government in aid of navigation ofttimes inflict serious damage or inconvenience or interfere with advantages formerly
enjoyed by riparian owners, but damage alone gives courts no power to require compensation where there is not an actual taking of property. Such losses may be compensated by legislative authority, not by force of the Constitution alone.
We hold that claimant's interest or advantage in the level of the St. Croix River as a run-off for tail waters to maintain its power head is not a right protected by law and that the award below based exclusively on the loss in value thereof must be reversed.
Mr. Justice Roberts, dissenting.
I think the judgment of the Court of Claims should be affirmed. The respondent owned the land on either side of the Willow River at and above the point where its dam was constructed. Under the law of Wisconsin the respondent owned the bed of Willow River, and both by common and statute law of Wisconsin it had the right to erect and use the dam. That right was property; and such a right recognized as private property by the law of a state is one which under the Constitution the federal government is bound to recognize.
1. The following figure illustrates the location of the several dams on the Willow and Mississippi Rivers that this case involved. Red Wing Dam is the dam that the Government built on the navigable Mississippi River. The Red Wing Dam backs impounded water up via the navigable St. Croix River to the lower parts of two other dams. The lower dam is an old dam located on the non-navigable Willow River, half a mile above the point where the Willow River originally drained into the St. Croix. The actual dam of the lawsuit is located on an artificial, non-navigable channel running from the non-navigable Willow to the navigable St. Croix. This dam is near the point where the artificial channel empties into the St. Croix. The x in a circle next to this dam represents the Willow River Power Co. power plant, in which was located a turbine that drew its head of water from the channel just above the dam. The tail race of the turbine emptied just below the dam, into the navigable St. Croix.
If the power company had built its plant next to the old dam on the Willow, so that the tail race of its turbine emptied into the non-navigable Willow River, the case would have been equivalent, legally, to the Cress case. Then, the power company would have enjoyed a property right (under the theory of that case) in the head of water. That would have entitled the company to compensation for the Government's taking of that right.
On the other hand, if the power company had built its plant at a hypothetical dam on the navigable St. Croix, with the head of the turbine above the dam and the tail race below the dam and emptying into the navigable St. Croix, the case would have been legally equivalent to the Chandler-Dunbar case. Then, the power company would have had no property right and thus no right to compensation for a taking. (Since no federal statutory right to compensation existed, a combination of sovereign immunity and absence of the Fifth Amendment's anti-taking right would have been dispositive legal factors.)
The power company argued that the case was like Cress. The Government argued that Cress should be overruled. The Court distinguished Cress, said that the case was like Chandler-Dunbar, and refused to address the question whether Cress should be overruled.
It is thus seen that a spectrum of legal positions could be taken on whether there is a property right in a head of water. At one end of the spectrum is the principle that owners of riparian lands own a property right in the head of water, irrespective of whether the stream is navigable.
Then comes the rule for which the respondent argued and which Justice Roberts in dissent accepted: the owner of riparian land along a non-navigable stream (such as the Willow River) owns a property right in the head of water if the top of the head is in the non-navigable stream, irrespective of whether the bottom of the head of water is in a navigable stream (such as in the St. Croix, as here).
Next comes the combination of the Chandler-Dunbar and Cress rules followed in this case: the owner of land along a non-navigable stream (here, the Willow) owns a property right in the head of water if its bottom is in a non-navigable stream (here, the Willow), but owns none if the bottom is in a navigable stream (here, the St. Croix).
Then comes the position that the Government suggested in this case: that irrespective of where the top or bottom of the head is, there is no property right that is impaired when the Government backs up water by damming a navigable stream (such as the Mississippi).
Farther along, presumably at the other end of the spectrum, and not argued here, one might deny that a property right ever exists in any head of water.
The difficulty with the Court's position, and most or all of the other intermediate positions, is that it is very hard to resist the "slippery slope" argument: if you go so-and-so far, how can you sensibly distinguish the case from the next one along the spectrum, since the difference seems not to be based on any rational theory? (For example, how can a head of water be a property right when the bottom of the head is in a non-navigable stream and yet not be a property right when the bottom of the head is in a navigable stream? What kind of property right is that?) Did Justice Jackson succeeded in providing a rational basis for the intermediate rule adopted here?
2. The Willow River case concerns what is property in the context of a Fifth Amendment taking. The basis of the Court's decision that there was no property right was that the Government has a paramount interest in improving navigation. Would the same thing be true of a hypothetical Governmental attempt to promote progress of science and useful arts by a legislative guarantee of a right of programmers to disassemble any object code marketed in commerce? What if you delete the "commerce" limitation? The "marketed"? (Any code used in commerce.) Delete both?
3. Suppose there is no direct Governmental interest at all. Suppose that a private party A, a riparian landowner, dams a non-navigable stream in East Dakota. This decreases the head of water at an upstream dam of riparian landowner B, who sues A for nuisance. There is no statute; no land is flooded that has more than negligible value. What result? Is the State of East Dakota free to adopt any theory of property rights that it chooses? Does East Dakota violate due process, equal protection, or anything else if it refuses to recognize a property right of riparian land owners such as B in a head of water?
4. Is there a governmental interest in dissemination of knowledge about how to write software? Is such an interest, if any, paramount over private property rights? Is there a property right in knowledge or information created by private effort?
For example, suppose that I study for years how best to create menus so that users will quickly learn how to run applications programs to which the menus pertain, remember what they learned, and not be exasperated too much by the menu-using procedures. Suppose that I embody my learning in my private notes, which I keep locked in a safe. I teach courses in the subject to a few trusted students, pursuant to written agreements that they shall never divulge to others what I have taught them. I also consult extensively with major software companies, such as Nanosoft, and prepare for their applications programs menu systems that embody my learning but do not explicitly state it.
Three unfortunate events now occur:
- Most of my students are faithful disciples, but A is a conscienceless rascal; he discloses my secrets to Nanosoft, for filthy lucre. Nanosoft then stops retaining me to write its menus and stops paying my big consulting fees.
- Then, a safe cracker B breaks into my safe, photocopies my notes, and replaces the notes so that they are not taken away from the safe. She sells the photographs to Professor N, another conscienceless rascal, who then proceeds indiscriminately to teach my hard-learned secrets to anybody who will pay tuition.
- Finally, Professor M, another professorial rival and remorseless villain, purchases copies of applications programs for which I wrote the menus, and studies them to extract from them their (and my) innermost secrets, which he then bares to the world.
As a result of these events, my consulting income plummets. My sensibilities are immeasurably injured. Have my property rights been invaded? Other protected rights or interests?
The relevant acts all occurred in the State of East Dakota. Is East Dakota free to afford me redress against these outrages to my property rights and other interests? Is East Dakota free to refuse to recognize my property rights and other interests? Do any different considerations apply to the federal government?
5. Section 106 of the copyright law (17 U.S.C. § 106) gives a copyright owner the exclusive right, subject to certain limitations, to reproduce and distribute the copyrighted work. Section 271 of the patent law (35 U.S.C. § 271) gives a patentee the right, among other things, to exclude others from making, using, and selling the patented subject matter. In 28 U.S.C. § 1498 the United States waived its sovereign immunity and undertook to provide reasonable and entire compensation to patentees and copyright owners whose inventions and writings the United States used (i.e., took). Hence, private parties and the United States are monetarily liable for patent infringement and copyright infringement. Private parties, but not the United States, may be enjoined from committing patent infringement and copyright infringement. Patents and copyrights are assignable, as such.
Given the foregoing facts, are patents and copyrights property rights? Can you identify legal problems whose resolution is assisted by determining the answer to that question?
6. How do you recognize a property right when you see it? How does it differ from a relational interest? Think of some other rights and explain how a property right differs from the other kinds of right?
7. Are there different kinds of property right? How do they differ from one another? How are they similar? How would you suppose an intellectual property right differs from and is similar to other property rights? Can you define an intellectual property right by defining "intellectual" and then "property" -- and then combining the two definitions? Or is it a unitary concept--intellectualproperty or perhaps intellectualpropertyright? How does this inquiry advance our abilities to resolve controversies and balance interests?
8. Consider Jeremy Bentham's analysis of property, supra. He says property is a basis of expectation. Does he mean that if we have an expectation we therefore have a property right, or that if we have a property right we therefore have an expectation? How does Bentham's theory help us to resolve whether the United States owes money to the Willow River Power Co.? How does it help us decide whether someone has rights against another with respect to a given computer program to consider whether the right looks like a property right?
9. Is making a substantial investment a sufficient basis for creation of a property right and expectation of deriving advantage from the investment? I hire two programmers as my employees and spend $100,000 in salary and expenses so that they will write an inventory-control computer program for me to market. Do I therefore own a property right, for example, a copyright, in the computer program? Why? What is the relation between my expectation of deriving advantage and the scope of my property right? In what manner do you define the scope of a property right?
Assume that Willow River Power Co. spent $100,000 to build the dam involved in this case. Does it therefore have a property interest? In what? What is the dam worth if the United States reduces the available head of water to 1 inch?
Assume that I create a video game that I call "Star Wars," that I spend $1 million in promoting it, and that it becomes enormously popular in the United States, Europe, and the Middle East. I sell not only many copies of my video game but also caps and T-shirts marked with the name "Star Wars." The United States then establishes a missile program that it deploys against hostile Middle Eastern governments. It names the missile program "Star Wars." As a result, many people become unwilling to buy my products and my sales fall off substantially. Has the government taken a property right from me, so that I can recover in the Claims Court?
10. Does causing monetary injury to the value of someone's property create liability? Fountainbleu builds an 8-story hotel on Miami beach. Eden Roc then builds a hotel just north of Fountainbleu, spending a substantial sum for the realty and construction. Both hotels are profitable. Fountainbleu then decides to add several additional floors to the top of its hotel, which will cast a large shadow on Eden Roc's property, as well as cut off air flow and light to Eden Roc's beach. The court states:
There is no legal right to the free flow of light and air from the adjoining land. [Blockage of them] does not give rise to a cause of action even though it causes injury by cutting off the light and air and interfering with the view.
Fountainbleu Hotel Corp. v. Forty-five Twenty-five, Inc., 114 So. 2d 357, 359 (Fla. App. 1959).
Did Fountainbleu cause injury, as the court indicated? How does damnum absque injuria impact property rights? Explain the difference between having a property right and having, in that property, a legally cognizable interest that the defendant's challenged conduct invades.
11. The Supreme Court began to shift its characterization of property solely as a concept applicable to tangible assets prior to the decision in the Willow River case. Justice Holmes had written earlier in Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 414 (1922), that "property is properly viewed as value, not physical possession." Shortly before Willow River, the Court held, in United States v. General Motors Corp., 323 U.S. 373, 377-78 (1944), that compensation was due in a takings case. The General Motors Court (per Roberts, J.) observed:
[''Property'' formerly] was used in its vulgar and untechnical sense of the physical thing with respect to which the citizen exercises rights recognized by law. On the other hand, ... [the term ''property''] may have been employed in a more accurate sense to denote the group of rights inhering in the citizen's relation to the physical thing, as the right to possess, use and dispose of it. In point of fact, the construction given the phrase has been the latter. When the sovereign exercises the power of eminent domain it substitutes itself in relation to the physical thing in question in place of him who formerly bore the relation to that thing, which we denominate ownership. In other words, it deals with what lawyers term the individual's ''interest'' in the thing in question. That interest may comprise the group of rights for which the shorthand term is ''a fee simple'' or it may be the interest known as an ''estate or tenancy for years,'' as in the present instance. The constitutional provision is addressed to every sort of interest the citizen may possess."
Would the Willow River opinion's definition of "economic advantage" as a property right require a court to give broad scope to a patent for a method of distributing products via the Internet, using single-click ordering of purchases? Or does Willow River's statement that "[n]ot all economic interests are property rights" provide a helpful limiting principle? If so, what is the limiting principle? What criteria can a court distill from these Supreme Court definitions to determine the right scope to be accorded a property interest in a software patent?
12. Recently, Senator Orin Hatch, chairman at times of the Senate Judiciary Committee, which is responsible for intellectual property legislation, wrote:
The first principle of a contemporary copyright philosophy should be that copyright is a property right that ought to be respected as any other property right. ...[However] it is difficult to know with certainty the precise mix of rights and limitations that will allow us to achieve a perfect balance between encouraging creativity and ensuring availability.... [C]opyright rights should be protected, unless it can be shown that the extent of protection is hampering creativity or the wide dissemination of works.
Orin Hatch, Toward a Principled Approach to Copyright Legislation at the Turn of the Millennium, 59 U. Pitt. L. Rev. 719, 721-3 (1998). In studying the decisions that follow, consider the extent to which courts invoke Sen. Hatch's balancing test of rights and limitations to insure creativity without restricting dissemination.
Bust of Scrates
Is hampering creativity or the wide dissemination of works a sufficient escape hatch? Are other interests important enough that protecting them should trump copyright? For example, health or safety? What of a computer program that operates to identify asteroids likely to hit Earth and determines, in real time, how to aim missiles to destroy them before they get too close? What of a patent on a cure for AIDS? A surgical procedure? See City of Milwaukee v. Activated Sludge, Inc., 69 F.2d 577 (7th Cir. 1934).
13. In Euthyphro Socrates asks Euthyphro, a prosecutor, who says he prosecutes his father for causing the death of a slave because it is pious to do so, to explain what piety is. Euthyphro says that piety is what is beloved by the gods. Socrates then wants to know whether that which is pious (a) is beloved by the gods because it is pious, or (b) is deemed pious because it is beloved by the gods. That is, which comes first or causes the other? Describe how the modern analysis of property rights has advanced over this primitive approach.
Kaiser Aetna v. United States
United States Supreme Court
444 U.S. 164 (1979)
Mr. Justice Rehnquist delivered the opinion of the Court.
Through dredging and filling operations in developing a marina-style subdivision community, petitioners, the owner and the lessee of an area which included Kuapa Pond, a shallow lagoon on the island of Oahu, Hawaii, that was contiguous to a navigable bay and the Pacific Ocean but separated from the bay by a barrier beach, converted the pond into a marina and thereby connected it to the bay. The Army Corps of Engineers had advised petitioners that they were not required to obtain permits for the development of and operations in the pond, and petitioners ultimately made improvements that allowed boats access to and from the bay. Petitioner lessee controls access to and use of the pond, which, under Hawaii law, was private property, and charges fees for maintaining the pond.
The United States filed suit against petitioners to resolve a dispute as to whether petitioners were required to obtain the Corps' authorization, in accordance with the Rivers and Harbors Appropriation Act of 1899, for future improvements in the marina, and whether petitioners could deny the public access to the pond because, as a result of the improvements, it had become a navigable water of the United States. In examining the scope of Congress' regulatory authority under the Commerce Clause, the Ninth Circuit held that the pond was "navigable water of the United States," subject to regulation by the Corps, and that when petitioners converted the pond into a marina and thereby connected it to the bay, it became subject to the "navigational servitude" of the Federal Government, thus giving the public a right of access to what was once petitioners' private pond.
The nature of the navigational servitude when invoked by the Government in condemnation cases is summarized in United States v. Willow River Co.:
It is clear, of course, that a head of water has value and that the Company has an economic interest in keeping the St. Croix at the lower level. But not all economic interests are "property rights"; only those economic advantages are "rights" which have the law back of them, and only when they are so recognized may courts compel others to forbear from interfering with them or to compensate for their invasion.
We think, however, that when the Government makes the naked assertion it does here, that assertion collides with not merely an "economic advantage" but an "economic advantage" that has the law back of it to such an extent that courts may "compel others to forbear from interfering with [it] or to compensate for [its] invasion."
Here, the Government's attempt to create a public right of access to the improved pond goes so far beyond ordinary regulation or improvement for navigation as to amount to a taking. More than one factor contributes to this result. It is clear that prior to its improvement, Kuapa Pond was incapable of being used as a continuous highway for the purpose of navigation in interstate commerce. Its maximum depth at high tide was a mere two feet, it was separated from the adjacent bay and ocean by a natural barrier beach, and its principal commercial value was limited to fishing. It consequently is not the sort of "great navigable stream" that this Court has previously recognized as being incapable of private ownership. And, as previously noted, Kuapa Pond has always been considered to be private property under Hawaiian law. Thus, the interest of petitioners in the now dredged marina is strikingly similar to that of owners of fast land adjacent to navigable water.
We have not the slightest doubt that the Government could have refused to allow such dredging on the ground that it would have impaired navigation in the bay, or could have conditioned its approval of the dredging on petitioners' agreement to comply with various measures that it deemed appropriate for the promotion of navigation. But what petitioners now have is a body of water that was private property under Hawaiian law, linked to navigable water by a channel dredged by them with the consent of the Government. While the consent of individual officials representing the United States cannot "estop" the United States, it can lead to the fruition of a number of expectancies embodied in the concept of "property" - expectancies that, if sufficiently important, the Government must condemn and pay for before it takes over the management of the landowner's property. In this case, we hold that the "right to exclude," so universally held to be a fundamental element of the property right, falls within this category of interests that the Government cannot take without compensation.
This is not a case in which the Government is exercising its regulatory power in a manner that will cause an insubstantial devaluation of petitioners' private property; rather, the imposition of the navigational servitude in this context will result in an actual physical invasion of the privately owned marina. And even if the Government physically invades only an easement in property, it must nonetheless pay just compensation. Thus, if the Government wishes to make what was formerly Kuapa Pond into a public aquatic park after petitioners have proceeded as far as they have here, it may not, without invoking its eminent domain power and paying just compensation, require them to allow free access to the dredged pond.
Ruckelshaus, EPA Administrator v. Monsanto Co.
United States Supreme Court
467 U.S. 986 (1984)
Justice Blackmun delivered the opinion of the Court.
The Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) authorizes the Environmental Protection Agency (EPA) to use data submitted by an applicant for registration of a covered product (pesticide) in evaluating the application of a subsequent applicant, and to disclose publicly some of the submitted data. Under the "data-consideration" provisions of FIFRA, as amended in 1978, applicants now are granted a 10-year period of exclusive use for data on new active ingredients contained in pesticides. But all other data submitted after 1970 may be cited and considered in support of any other applicant's application for 15 years after the original submission if the applicant offers to compensate the original submitter. If the parties cannot agree on the amount of compensation, either may initiate a binding arbitration proceeding, and if an original submitter refuses to participate in negotiations or arbitration, he forfeits his claim for compensation. Data that do not qualify for either the 10-year period of exclusive use or the 15-year period of compensation may be considered by EPA without limitation.
FIFRA § 10, as amended in 1978, authorizes, in general, public disclosure of all health, safety, and environmental data even though it may result in disclosure of trade secrets. Appellee Monsanto, a company headquartered in Missouri, is an inventor, producer, and seller of pesticides, and invests substantial sums in developing active ingredients for pesticides and in producing end-use products that combine such ingredients with inert ingredients. Monsanto brought suit against the Administrator of EPA for injunctive and declaratory relief, alleging, inter alia, that the data-consideration and data-disclosure provisions of FIFRA effected a "taking" of property without just compensation, in violation of the Fifth Amendment, and that the data-consideration provisions violated the Fifth Amendment because they effected a taking of property for a private, rather than a public, purpose. The district court held that the challenged provisions of FIFRA are unconstitutional, and permanently enjoined EPA from implementing or enforcing those provisions. The Government appealed.
In deciding this case, we are faced with four questions:
(1) Does Monsanto have a property interest protected by the Fifth Amendment's Taking Clause in the health, safety, and environmental data it has submitted to EPA?
(2) If so, does EPA's use of the data to evaluate the applications of others or EPA's disclosure of the data to qualified members of the public effect a taking of that property interest?
(3) If there is a taking, is it a taking for a public use?
(4) If there is a taking for a public use, does the statute adequately provide for just compensation?
For purposes of this case, EPA has stipulated that "Monsanto has certain property rights in its information, research and test data that it has submitted under FIFRA to EPA and its predecessor agencies which may be protected by the Fifth Amendment to the Constitution of the United States." Since the exact import of that stipulation is not clear, we address the question whether the data at issue here can be considered property for the purposes of the Taking Clause of the Fifth Amendment.
This Court never has squarely addressed the applicability of the protections of the Taking Clause of the Fifth Amendment to commercial data of the kind involved in this case. In answering the question now, we are mindful of the basic axiom that property interests are not created by the Constitution. Rather, they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law.
Monsanto asserts that the health, safety, and environmental data it has submitted to EPA are property under Missouri law, which recognizes trade secrets, as defined in § 757, Comment b, of the Restatement of Torts, as property. The Restatement defines a trade secret as "any formula, pattern, device or compilation of information which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it." And the parties have stipulated that much of the information, research, and test data that Monsanto has submitted under FIFRA to EPA contains or relates to trade secrets as defined by the Restatement.
Because of the intangible nature of a trade secret, the extent of the property right therein is defined by the extent to which the owner of the secret protects his interest from disclosure to others. Information that is public knowledge or that is generally known in an industry cannot be a trade secret. If an individual discloses his trade secret to others who are under no obligation to protect the confidentiality of the information, or otherwise publicly discloses the secret, his property right is extinguished.
Trade secrets have many of the characteristics of more tangible forms of property. A trade secret is assignable. A trade secret can form the res of a trust, and it passes to a trustee in bankruptcy.
Even the manner in which Congress referred to trade secrets in the legislative history of FIFRA supports the general perception of their property-like nature. In discussing the 1978 amendments to FIFRA, the Senate Report recognized that data developers like Monsanto have a "proprietary interest" in their data. Further, the Conference Report reasoned that submitters of data are "entitled" to "compensation" because they "have legal ownership of the data."
This general perception of trade secrets as property is consonant with a notion of "property" that extends beyond land and tangible goods and includes the products of an individual's "labour and invention." 2 W. Blackstone, Commentaries *405; see generally J. Locke, The Second Treatise of Civil Government, ch. 5.
Although this Court never has squarely addressed the question whether a person can have a property interest in a trade secret, which is admittedly intangible, the Court has found other kinds of intangible interests (such as liens) to be property for purposes of the Fifth Amendment's Taking Clause. That intangible property rights protected by state law are deserving of the protection of the Taking Clause has long been implicit in the thinking of this Court:
It is conceivable that [the term "property" in the Taking Clause] was used in its vulgar and untechnical sense of the physical thing with respect to which the citizen exercises rights recognized by law. On the other hand, it may have been employed in a more accurate sense to denote the group of rights inhering in the citizen's relation to the physical thing, as the right to possess, use and dispose of it. In point of fact, the construction given the phrase has been the latter.
We therefore hold that to the extent that Monsanto has an interest in its health, safety, and environmental data cognizable as a trade-secret property right under Missouri law, that property right is protected by the Taking Clause of the Fifth Amendment.
Having determined that Monsanto has a property interest in the data it has submitted to EPA, we confront the difficult question whether a "taking" will occur when EPA discloses those data or considers the data in evaluating another application for registration. The question of what constitutes a "taking" is one with which this Court has wrestled on many occasions. It has never been the rule that only governmental acquisition or destruction of the property of an individual constitutes a taking. As has been admitted on numerous occasions, this Court has generally been unable to develop any "set formula" for determining when "justice and fairness" require that economic injuries caused by public action must be deemed a compensable taking.
The inquiry into whether a taking has occurred is essentially an ad hoc, factual inquiry. The Court, however, has identified several factors that should be taken into account when determining whether a governmental action has gone beyond "regulation" and effects a "taking." Among those factors are: the character of the governmental action, its economic impact, and its interference with reasonable, investment-backed expectations. It is to the last of these three factors that we now direct our attention, for we find that the force of this factor is so overwhelming, at least with respect to certain of the data submitted by Monsanto to EPA, that it disposes of the taking question regarding those data.
A "reasonable, investment-backed expectation" must be more than a "unilateral expectation or an abstract need." We find that with respect to any health, safety, and environmental data that Monsanto submitted to EPA after the effective date of the 1978 FIFRA amendments, Monsanto could not have had a reasonable, investment-backed expectation that EPA would keep the data confidential beyond the limits prescribed in the amended statute itself. Monsanto was on notice of the manner in which EPA was authorized to use and disclose any data turned over to it by an applicant for registration.
Monsanto argues that the statute's requirement that a submitter give up its property interest in the data constitutes placing an unconstitutional condition on the right to a valuable Government benefit. But Monsanto has not challenged the ability of the Federal Government to regulate the marketing and use of pesticides. Nor could Monsanto successfully make such a challenge, for such restrictions are the burdens we all must bear in exchange for the advantage of living and doing business in a civilized community. This is particularly true in an area, such as pesticide sale and use, that has long been the source of public concern and the subject of government regulation.
Thus, as long as Monsanto is aware of the conditions under which the data are submitted, and the conditions are rationally related to a legitimate Government interest, a voluntary submission of data by an applicant in exchange for the economic advantages of a registration can hardly be called a taking.
However, under the statutory scheme in effect during the period from October 22, 1972, through September 30, 1978, a submitter was given an opportunity to protect its trade secrets from disclosure by designating them as trade secrets at the time of submission. When Monsanto provided data to EPA during this period, it was with the understanding, embodied in FIFRA, that EPA was free to use any of the submitted data that were not trade secrets in considering the application of another, provided that EPA required the subsequent applicant to pay "reasonable compensation" to the original submitter. But the statute also gave Monsanto explicit assurance that EPA was prohibited from disclosing publicly, or considering in connection with the application of another, any data submitted by an applicant if both the applicant and EPA determined the data to constitute trade secrets. Thus, with respect to trade secrets submitted under the statutory regime in force between the time of the adoption of the 1972 amendments and the adoption of the 1978 amendments, the Federal Government had explicitly guaranteed to Monsanto and other registration applicants an extensive measure of confidentiality and exclusive use. This explicit governmental guarantee formed the basis of a reasonable investment-backed expectation. If EPA, consistent with the authority granted it by the 1978 FIFRA amendments, were now to disclose trade-secret data or consider those data in evaluating the application of a subsequent applicant in a manner not authorized by the version of FIFRA in effect between 1972 and 1978, EPA's actions would frustrate Monsanto's reasonable investment-backed expectation with respect to its control over the use and dissemination of the data it had submitted.
The right to exclude others is generally "one of the most essential sticks in the bundle of rights that are commonly characterized as property." Kaiser Aetna. With respect to a trade secret, the right to exclude others is central to the very definition of the property interest. Once the data that constitute a trade secret are disclosed to others, or others are allowed to use those data, the holder of the trade secret has lost his property interest in the data. The economic value of that property right lies in the competitive advantage over others that Monsanto enjoys by virtue of its exclusive access to the data, and disclosure or use by others of the data would destroy that competitive edge.
EPA encourages us to view the situation not as a taking of Monsanto's propertyinterest in the trade secrets, but as a "preemption" of whatever property rights Monsanto may have had in those trade secrets. The agency argues that the proper functioning of the comprehensive FIFRA registration scheme depends upon its uniform application to all data. Thus, it is said, the Supremacy Clause dictates that the scheme not vary depending on the property law of the State in which the submitter is located. This argument proves too much. If Congress can "pre-empt" state property law in the manner advocated by EPA, then the Taking Clause has lost all vitality. This Court has stated that a sovereign, by ipse dixit, may not transform private property into public property without compensation. This is the very kind of thing that the Taking Clause of the Fifth Amendment was meant to prevent.
If a negotiation or arbitration pursuant to FIFRA § 3 were to yield just compensation to Monsanto for the loss in the market value of its trade-secret data suffered because of EPA's consideration of the data in connection with another application, then Monsanto would have no claim against the Government for a taking. Since no arbitration has yet occurred with respect to any use of Monsanto's data, any finding that there has been an actual taking would be premature.
The taking here is for a public use. Congress believed that the provisions would eliminate costly duplication of research and streamline the registration process, making new end-use products available to consumers more quickly. Allowing applicants for registration, upon payment of compensation, to use data already accumulated by others, rather than forcing them to go through the time-consuming process of repeating the research, would eliminate a significant barrier to entry into the pesticide market, thereby allowing greater competition among producers of end-use products. Such a procompetitive purpose is well within the police power of Congress. Further, there is an existing remedy for just compensation event that FIFRA's arbitration remedy is inadequate.
Accordingly, we find no constitutional infirmity in the challenged provisions of FIFRA. Operation of the provisions may effect a taking with respect to certain health, safety, and environmental data constituting trade secrets under state law and designated by Monsanto as trade secrets upon submission to EPA between October 1972 and September 1978. But whatever taking may occur is one for a public use, and a Tucker Act remedy in the United States Claims Court is available to provide Monsanto with just compensation. The judgment of the district court is therefore vacated.
1. What kind of property right does Monsanto have in its pesticide data? Is it a right against the whole world or only against persons who obtain the data by improper means? To test that proposition, suppose that Smith duplicates the information by engaging in independent scientific research. Has Monsanto any legal right against Smith? Is Monsanto's right a property right under a Willow River analysis?
2. Is EPA, abetted by Congress, taking Monsanto's property or is EPA just committing an intentional tort against Monsanto? What difference does it make?
The United States has not generally waived sovereign immunity as to intentional torts, although it has waived it for negligent torts (28 U.S.C. § 1346), infringement of intellectual property rights (28 U.S.C. § 1498), and express and implied contracts (28 U.S.C. § 1491). The Tucker Act, 28 U.S.C. § 1491(a), to which the Monsanto opinion refers, provided:
The United States Claims Court [now designated the United States Court of Federal Claims] shall have jurisdiction to render judgment upon any claim against the United States founded either upon the Constitution, or any Act of Congress or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort.
Presumably, the Tucker Act claim that the Court contemplated was one founded upon the Constitution, since a taking gives rise to a claim based on the Fifth Amendment. Could you devise an implied contract claim, on the theory that the law will imply an assumpsit if there is a debt (indebitatus assumpsit)? Where is the debt? See Brown v. United States, 86 F.3d 1554 (Fed. Cir. 1996)(breach of trust claim under Tucker Act). But see Hercules, Inc.. v. United States, 516 U.S. 417 (1996)(Tucker Act does not apply to promise imputed to perform legal duty); United States v. Minnesota Mut. Inv. Co., 271 U.S. 212, 217 (1926)(contract must be implied in fact, not implied in law by equity).
3. Is the Court's reaction to EPA's preemption argument excessive? What if Congress wants fully to occupy the field of regulating commerce in pesticides? Why should Congress' scheme of regulation be subject to the vagaries of Missouri's vs. Texas' trade secret laws? If Congress passes a law like LMRA § 301, establishing a federal common law of FIFRA trade secrecy to be developed by the federal courts, would the Takings Clause lose all vitality? Would the law therefore be unconstitutional?
What of a general federal trade secret law fully occupying the field of interstate commerce affected by the subject matter of any alleged trade secret rights?
4. In Kaiser Aetna is Rehnquist, J., and even more so in Monsanto is Blackman, J., a Benthamite? A modified Benthamite? How?
Suppose that I invest a vast amount in developing my attractive Web site that instructs people in interesting and amusing things about patent and copyright law. On the home page, I place an index with links to further pages where I locate my interesting and amusing essays on specific IP topics. I also sell banner advertising on my home page and links to commercial sites (such as amazon.com) that pay me when visitors to my home page click on such a link to visit a linked site. That remorseless villain, Professor Nefarious, then places links on his Web page that are direct links to my essays. That causes users of his Web page to get to my essays without first being exposed to my home page where the banner advertising and links to commercial sites are located. This "deep linking" vastly offends me because it deprives me of my investment-backed expectations. Have I a good claim against that conscienceless scoundrel Professor Nefarious for his invasion of an enforceable property right? What would Bentham or Rehnquist or Blackmun say?
5, Suppose that Professor Nefarious operates a search engine, "FindC-Law" -- where people go to look up computer law things. He rigs his search engine so that if anyone enters "Professor Stern" as a search term, his engine routes the user to an XXX site. You can imagine what that does to my sensibilities and my investment backed expectations about my IP Web site. Has he invaded my property rights? See Playboy v. Netscape.
6. Is it sound to consider "investment-backed expectation" as a sufficient condition for existence of a property right? Is it a necessary condition? Test these propositions with examples. How should we decide whether a hitherto unknown computer- or Internet-related interest is a property right, so that its invasion (or another's interference with it) gives rise to a claim for damages and/or injunction?
Dowling v. United States
United States Supreme Court
473 U.S. 207 1985)
[Optional reading; not for discussion in class]
Justice Blackmun delivered the opinion of the Court.
The National Stolen Property Act provides for the imposition of criminal penalties upon any person who "transports in interstate or foreign commerce any goods, wares, merchandise, securities or money, of the value of $5,000 or more, knowing the same to have been stolen, converted or taken by fraud." 18 U.S.C. § 2314. In this case, we must determine whether the statute reaches the interstate transportation of bootleg phonorecords, "stolen, converted or taken by fraud" only in the sense that they were manufactured and distributed without the consent of the copyright owners of the musical compositions performed on the records.
Dowling was convicted of one count of conspiracy to transport stolen property in interstate commerce, in violation of 18 U.S.C. § 371; eight counts of interstate transportation of stolen property, in violation of 18 U.S.C. § 2314; nine counts of copyright infringement, in violation of 17 U.S.C. § 506(a); and three counts of mail fraud, in violation of 18 U.S.C. § 1341. The offenses stemmed from an extensive bootleg record operation involving the manufacture and distribution by mail of recordings of vocal performances by Elvis Presley. The evidence demonstrated that some time around 1976, Dowling, to that time an avid collector of Presley recordings, began in conjunction with codefendant Theaker to manufacture phonorecords of unreleased Presley recordings. They used material from a variety of sources, including studio outtakes, acetates, soundtracks from Presley motion pictures, and tapes of Presley concerts and television appearances.
Untilearly 1980, Dowling and Theaker had the records manufactured at a record-pressing company in Burbank, Cal. When that company later refused to take their orders, they sought out other record-pressing companies in Miami, Fla. The bootleg entrepreneurs never obtained authorization from or paid royalties to the owners of the copyrights in the musical compositions.
In the beginning, Dowling, who resided near Baltimore, handled the "artistic" end of the operation, contributing his knowledge of the Presley subculture, seeking out and selecting the musical material, designing the covers and labels, and writing the liner notes, while Theaker, who lived in Los Angeles and had some familiarity with the music industry, took care of the business end, arranging for the record pressings, distributing catalogs, and filling orders. In early 1979, however, having come to suspect that the FBI was investigating the west coast operation, Theaker began making shipments by commercial trucking companies of large quantities of the albums to Dowling in Maryland. Throughout 1979 and 1980, the venturers did their marketing through Send Service, a labeling and addressing entity, which distributed at least 50,000 copies of their catalog and advertising flyers to addresses on mailing lists provided by Theaker and Dowling. Theaker would collect customers' orders from post office boxes in Glendale, Cal., and mail them to Dowling in Maryland, who would fill the orders. The two did a substantial business: the stipulated testimony establishes that throughout this period Dowling mailed several hundred packages per week and regularly spent $1,000 per week in postage. The men also had occasion to make large shipments from Los Angeles to Minor in Miami, who purchased quantities of their albums for resale through his own channels.
The eight § 2314 counts on which Dowling was convicted arose out of six shipments of bootleg phonorecords from Los Angeles to Baltimore and two shipments from Los Angeles to Miami. The evidence established that each shipment included thousands of albums, that each album contained performances of copyrighted musical compositions for the use of which no licenses had been obtained nor royalties paid, and that the value of each shipment attributable to copyrighted material exceeded the statutory minimum. Dowling appealed from all the convictions save those for copyright infringement, and the Ninth Circuit affirmed in all respects.
Federal crimes, of course, are solely creatures of statute. Accordingly, when assessing the reach of a federal criminal statute, we must pay close heed to language, legislative history, and purpose in order strictly to determine the scope of the conduct the enactment forbids. Due respect for the prerogatives of Congress in defining federal crimes prompts restraint in this area, where we typically find a narrow interpretation appropriate. Thus, the Court has stressed repeatedly that when choice has to be made between two readings of what conduct Congress has made a crime, it is appropriate, before we choose the harsher alternative, to require that Congress should have spoken in language that is clear and definite.
Applying that prudent rule of construction here, we examine at the outset the statutory language. Section 2314 requires, first, that the defendant have transported "goods, wares, [or] merchandise" in interstate or foreign commerce; second, that those goods have a value of $5,000 or more; and, third, that the defendant "kno[w] the same to have been stolen, converted or taken by fraud." Dowling does not contest that he caused the shipment of goods in interstate commerce, or that the shipments had sufficient value to meet themonetary requirement. He argues, instead, that the goods shipped were not "stolen, converted or taken by fraud." In response, the Government does not suggest that Dowling wrongfully came by the phonorecords actually shipped or the physical materials from which they were made; nor does it contend that the objects that Dowling caused to be shipped, the bootleg phonorecords, were the same as the copyrights in the musical compositions that he infringed by unauthorized distribution of Presley performances of those compositions. The Government argues, however, that the shipments come within the reach of § 2314 because the phonorecords embodied performances of musical compositions that Dowling had no legal right to distribute. According to the Government, the unauthorized use of the musical compositions rendered thephonorecords "stolen, converted or taken by fraud" within the meaning of the statute. We must determine, therefore, whether phonorecords that include the performance of copyrighted musical compositions for the use of which no authorization has been sought nor royalties paid are consequently "stolen, converted or taken by fraud" for purposes of § 2314. We conclude that they are not.
The courts interpreting § 2314 have never required, of course, that the items stolen and transported remain in entirely unaltered form. But the cases prosecuted under § 2314 have always involved physical "goods, wares, [or] merchandise" that have themselves been "stolen, converted or taken by fraud." This basic element comports with the common-sense meaning of the statutory language: by requiring that the "goods, wares, [or] merchandise" be the same as those "stolen, converted or taken by fraud," the provision seems clearly to contemplate a physical identity between the items unlawfully obtained and those eventually transported, and hence some prior physical taking of the subject goods.
In contrast, the Government's theory here would make theft, conversion, or fraud equivalent to wrongful appropriation of statutorily protected rights in copyright. The copyright owner, however, holds no ordinary chattel. A copyright, like other intellectual property, comprises a series of carefully defined and carefully delimited interests to which the law affords correspondingly exact protections. Section 106 of the Copyright Act confers a bundle of exclusive rights to the owner of the copyright, which include the rights to publish, copy, and distribute the author's work. However, this protection has never accorded the copyright owner complete control over all possible uses of his work. For example, § 107 of the Copyright Act codifies the traditional privilege of other authors to make fair use of an earlier writer's work. Likewise, § 115 grants compulsory licenses in nondramatic musical works. Thus, the property rights of a copyright holder have a character distinct from the possessory interest of the owner of simple "goods, wares, [or] merchandise," for the copyright holder's dominion is subjected to precisely defined limits.
It follows that interference with copyright does not easily equate with theft, conversion, or fraud. The Copyright Act even employs a separate term of art to define one who misappropriates a copyright: "Anyone who violates any of the exclusive rights of the copyright owner," that is, anyone who trespasses into his exclusive domain by using or authorizing the use of the copyrighted work in one of the five ways set forth in the statute, "is an infringer of the copyright." 17 U.S.C. § 501(a). There is no dispute in this case that Dowling's unauthorized inclusion on his bootleg albums of performances of copyrighted compositions constituted infringement of those copyrights. It is less clear, however, that the taking that occurs when an infringer arrogates the use of another's protected work comfortably fits the terms associated with physical removal employed by § 2314. The infringer invades a statutorily defined province guaranteed to the copyright holder alone. But he does not assume physical control over the copyright; nor does he wholly deprive its owner of its use. While one may colloquially link infringement with some general notion of wrongful appropriation, infringement plainly implicates a more complex set of property interests than does run-of-the-mill theft, conversion, or fraud. As a result, it fits but awkwardly with the language Congress chose - "stolen, converted or taken by fraud" to describe the sorts of goods whose interstate shipment § 2314 makes criminal. And, when interpreting a criminal statute that does not explicitly reach the conduct in question, we are reluctant to base an expansive reading on inferences drawn from subjective and variable understandings.
In light of the ill-fitting language, we turn to consider whether the history and purpose of § 2314 evince a plain congressional intention to reach interstate shipments of goods infringing copyrights. Our examination of the background of the provision makes more acute our reluctance to read § 2314 to encompass merchandise whose contraband character derives from copyright infringement. Congress acted to fill an enforcement gap when in 1934 it extended the provisions of the National Motor Vehicle Theft Act to other stolen property by means of the National Stolen Property Act. Congress acted under its commerce power to assist the States' efforts to foil the roving criminal, whose movement across state lines stymied local law enforcement officials.
No such need for supplemental federal action has ever existed, however, with respect to copyright infringement, for the obvious reason that Congress always has had the bestowed authority to legislate directly in this area. Art. I, § 8, cl. 8, of the Constitution. By virtue of the explicit constitutional grant, Congress has the unquestioned authority to penalize directly the distribution of goods that infringe copyright, whether or not those goods affect interstate commerce. Given that power, it is implausible to suppose that Congress intended to combat the problem of copyright infringement by the circuitous route hypothesized by the Government. In sum, the premise of § 2314 -- the need to fill with federal action an enforcement chasm created by limited state jurisdiction -- simply does not apply to the conduct the Government seeks to reach here.
The broad consequences of the Government's theory, both in the field of copyright and in kindred fields of intellectual property law, provide a final and dispositive factor against reading § 2314 in the manner suggested. For example, in Harper & Row, Publishers, Inc. v.Nation Enterprises, 471 U.S. 539 (1985), this Court very recently held that The Nation, a weekly magazine of political commentary, had infringed former President Ford's copyright in the unpublished manuscript of his memoirs by verbatim excerpting of some 300 words from the work. It rejected The Nation's argument that the excerpting constituted fair use. Presented with the facts of that case as a hypothetical at oral argument in the present litigation, the Government conceded that its theory of § 2314 would permit prosecution of the magazine if it transported copies of sufficient value across state lines. Whatever the wisdom or propriety of The Nation's decision to publish the excerpts, we would pause, in the absence of any explicit indication of congressional intention, to bring such conduct within the purview of a criminal statute making available serious penalties for the interstate transportation of goods "stolen, converted or taken by fraud."
Likewise, the field of copyright does not cabin the Government's theory, which would as easily encompass the law of patents and other forms of intellectual property. If the intangible idea protected by the copyright is effectively made tangible by its embodiment upon the tapes, phonorecords, or films shipped in interstate commerce as to render those items stolen goods for purposes of § 2314, so too would the intangible idea protected by a patent be made tangible by its embodiment in an article manufactured in accord with
patented specifications. Thus, as the Government as much as acknowledged at argument, its view of the statute would readily permit its application to interstate shipments of patent-infringing goods. Despite its undoubted power to do so, however, Congress has not provided criminal penalties for distribution of goods infringing valid patents. Thus, the rationale supporting application of the statute under the circumstances of this case would equally justify its use in wide expanses of the law which Congress has evidenced no intention to enter by way of criminal sanction. This factor militates strongly against the reading proffered by the Government.
The language of § 2314 does not plainly and unmistakably cover petitioner Dowling's conduct; the purpose of the provision to fill gaps in state law enforcement does not couch the problem under attack; and the rationale employed to apply the statute to petitioner's conduct would support its extension to significant bodies of law that Congress gave no indication it intended to touch. In sum, Congress has not spoken with the requisite clarity.
We reverse the judgment of the court of appeals.
San Francisco Arts & Athletics, Inc. v. United States Olympic Committee
United States Supreme Court
483 U.S. 522 (1987)
[Optional reading; not for discussion in class]
Powell, J., delivered the opinion of the Court, in which Rehnquist, C.J., and White, Stevens, and Scalia, JJ., joined, and in Parts I, II, and III of which Blackmun and O'Connor, JJ., joined. O'Connor, J., filed an opinion concurring in part and dissenting in part, in which Blackmun, J., joined. Brennan, J., filed a dissenting opinion, in which Marshall, J., joined.
In this case, we consider the scope and constitutionality of a provision of the Amateur Sports Act of 1978, 36 U.S.C. §§ 371-396, that authorizes the United States Olympic Committee to prohibit certain commercial and promotional uses of the word "Olympic."
Petitioner San Francisco Arts & Athletics, Inc. (SFAA), is a nonprofit California corporation. The SFAA originally sought to incorporate under the name "Golden Gate Olympic Association," but was told by the California Department of Corporations that the word "Olympic" could not appear in a corporate title. After its incorporation in 1981, the SFAA nevertheless began to promote the "Gay Olympic Games," using those words on its letterheads and mailings and in local newspapers. The games were to be a 9-day event to begin in August 1982, in San Francisco, California. The SFAA expected athletes from hundreds of cities in this country and from cities all over the world. The Games were to open with a ceremony "which will rival the traditional Olympic Games." A relay of over 2,000 runners would carry a torch from New York City across the country to Kezar Stadium in San Francisco. The final runner would enter the stadium with the "Gay Olympic Torch" and light the "Gay Olympic Flame." The ceremony would continue with the athletes marching in uniform into the stadium behind their respective city flags. Competition was to occur in 18 different contests, with the winners receiving gold, silver, and bronze medals. To cover the cost of the planned Games, the SFAA sold T-shirts, buttons, bumper stickers, and other merchandise bearing the title "Gay Olympic Games."
Section 110 of the Amateur Sports Act, 36 U.S.C. § 380, grants respondent United States Olympic Committee (USOC) the right to prohibit certain commercial and promotional uses of the word "Olympic" and various Olympic symbols. In late December 1981, the executivedirector of the USOC wrote to the SFAA, informing it of the existence of the Amateur Sports Act, and requesting that the SFAA immediately terminate use of the word "Olympic" in its description of the planned Games. The SFAA at first agreed to substitute the word "Athletic" for the word "Olympic," but, one month later, resumed use of the term. The USOC became aware that the SFAA was still advertising its Games as "Olympic" through a newspaper article in May 1982. In August, the USOC brought suit to enjoin the SFAA's use of the word "Olympic." The district court granted the USOC summary judgment and a permanent injunction. The Ninth Circuit affirmed. It found that the Act granted the USOC exclusive use of the word "Olympic" without requiring the USOC to prove that the unauthorized use was confusing and without regard to the defenses available to an entity sued for a trademark violation under the Lanham Trademark Act. It did not reach the SFAA's contention that the USOC enforced its rights in a discriminatory manner, because the court found that the USOC is not a state actor bound by the constraints of the Constitution. The court also found that the USOC's property right in the word "Olympic" and its symbols and slogans can be protected without violating the First Amendment. We affirm.
The SFAA contends that the Ninth Circuit erred in interpreting the Act as granting the USOC anything more than a normal trademark in the word "Olympic." Section 110 of the Act, 36 U.S.C. § 380(a), provides:
Without the consent of the [USOC], any person who uses for the purpose of trade, to induce the sale of any goods or services, or to promote any theatrical exhibition, athletic performance, or competition--...(4) the words "Olympic," "Olympiad," or any combination or simulation thereof tending to cause confusion, to cause mistake, to deceive, or to falsely suggest a connection with the [USOC] or any Olympic activity shall be subject to suit in a civil action by the [USOC] for the remedies provided in the [Lanham] Act.
The SFAA argues that the clause "tending to cause confusion" is properly read to apply to the word "Olympic." But because there is no comma after "thereof," the more natural reading of the section is that "tending to cause confusion" modifies only "any combination or simulation thereof." Nevertheless, we do not regard this language as conclusive. We therefore examine the legislative history of this section. ...This legislative history demonstrates that Congress intended to provide the USOC with exclusive control of the use of the word "Olympic" without regard to whether an unauthorized use of the word tends to cause confusion.
The SFAA further argues that the reference in § 110 to Lanham Act remedies should be read as incorporating the traditional trademark defenses as well. This argument ignoresthe clear language of the section. The language and legislative history of § 110 indicate clearly that Congress intended to grant the USOC exclusive use of the word "Olympic" without regard to whether use of the word tends to cause confusion, and that § 110 does not incorporate defenses available under the Lanham Act.
The protection granted to the USOC's use of the Olympic words and symbols differs from the normal trademark protection in two respects: the USOC need not prove that a contested use is likely to cause confusion, and an unauthorized user of the word does not have available the normal statutory defenses. The SFAA argues, in effect, that the differences between the Lanham Act and § 110 are of constitutional dimension. First, the SFAA contends that the word "Olympic" is a generic word that could not gain trademark protection under the Lanham Act. The SFAA argues that this prohibition is constitutionally required and thus that the First Amendment prohibits Congress from granting a trademark in the word "Olympic." Second, the SFAA argues that the First Amendment prohibits Congress from granting exclusive use of a word absent a requirement that the authorized user prove that an unauthorized use is likely to cause confusion. We address these contentions in turn.
This Court has recognized that words are not always fungible, and that the suppression of particular words runs a substantial risk of suppressing ideas in the process. The SFAA argues that this principle prohibits Congress from granting the USOC exclusive control of uses of the word "Olympic," a word that the SFAA views as generic. Yet this recognition always has been balanced against the principle that when a word acquires value "as the result of organization and the expenditure of labor, skill, and money" by an entity, that entity constitutionally may obtain a limited property right in the word. International News Service v. Associated Press, 248 U.S. 215, 239 (1918).
There is no need in this case to decide whether Congress ever could grant a private entity exclusive use of a generic word. Congress reasonably could conclude that the and promotional value of the word "Olympic" was the product of the USOC's own talents and energy, the end result of much time, effort, and expense. The USOC, together with respondent International Olympic Committee (IOC), have used the word "Olympic" at least since 1896, when the modern Olympic Games began. The history of the origins and associations of the word "Olympic" demonstrates the meritlessness of the SFAA's contention that Congress simply plucked a generic word out of the English vocabulary and granted its exclusive use to the USOC. Congress reasonably could find that since 1896, the word "Olympic" has acquired what in trademark law is known as a secondary meaning--it has become distinctive of the USOC's goods in commerce. The right to adopt and use such a word to distinguish the goods or property of the person whose mark it is, to the exclusion of use by all other persons, has been long recognized. Because Congress reasonably could conclude that the USOC has distinguished the word "Olympic" through its own efforts, Congress' decision to grant the USOC a limited property right in the word "Olympic" falls within the scope of trademark law protections, and thus certainly within constitutional bounds.
Congress also acted reasonably when it concluded that the USOC should not be required to prove that an unauthorized use of the word "Olympic" is likely to confuse the public. To the extent that § 110 applies to uses for the purpose of trade or to induce the sale of any goods or services, its application is to commercial speech. However, the SFAA claims that its use of the word "Olympic" was intended to convey a political statement about the status of homosexuals in society. Thus, the SFAA claims that in this case § 110 suppresses political speech.
By prohibiting the use of one word for particular purposes, neither Congress nor the USOC has prohibited the SFAA from conveying its message. The SFAA held its athletic event in its planned format under the names "Gay Games I" and "Gay Games II" in 1982 and 1986, respectively. Nor is it clear that § 110 restricts purely expressive uses of the word "Olympic." Section 110 restricts only the manner in which the SFAA may convey its message. The restrictions on expressive speech properly are characterized as incidental to the primary congressional purpose of encouraging and rewarding the USOC's activities. The inquiry is thus whether the incidental restrictions on First Amendment freedoms are greater than necessary to further a substantial governmental interest.
One reason for Congress to grant the USOC exclusive control of the word "Olympic," as with other trademarks, is to ensure that the USOC receives the benefit of its own efforts so that the USOC will have an incentive to continue to produce a "quality product," that, in turn, benefits the public. But in the special circumstance of the USOC, Congress has a broader public interest in promoting, through the activities of the USOC, the participation of amateur athletes from the United States in the great four-yearly sport festival, the Olympic Games. The USOC's goal under the Olympic Charter is to further the Olympic movement, that has as its aims:
to promote the development of those physical and moral qualities which are the basis of sport; to educate young people through sport in a spirit of better understanding between each other and of friendship, thereby helping to build a better and more peaceful world; and to spread the Olympic principles throughout the world, thereby creating international goodwill.
Congress' interests in promoting the USOC's activities include these purposes as well as those specifically enumerated inthe USOC's charter. Section 110 directly advances these governmental interests by supplying the USOC with the means to raise money to support the Olympics and encourages the USOC's activities by ensuring that it will receive the benefits of its efforts.
The restrictions of § 110 are not broader than Congress reasonably could have determined to be necessary to further these interests. Section 110 primarily applies to all uses of the word "Olympic" to induce the sale of goods or services. Congress reasonably could conclude that most commercial uses of the Olympic words and symbols are likely to be confusing. It also could determine that unauthorized uses, even if not confusing, nevertheless may harm the USOC by lessening the distinctiveness and thus the commercial value of the marks.
In this case, the SFAA sought to sell T- shirts, buttons, bumper stickers, and other items, all emblazoned with the title "Gay Olympic Games." The possibility for confusion as to sponsorship is obvious. Moreover, it is clear that the SFAA sought to exploit the commercial magnetism of the word given value by the USOC. There is no question that this unauthorized use could undercut the USOC's efforts to use, and sell the right to use, the word in the future, since much of the word's value comes from its limited use. Such an adverse effect on the USOC's activities is directly contrary to Congress' interest. Even though this protection may exceed the traditional rights of a trademark owner in certain circumstances, the application of the Act to this commercial speech is not broader than necessary to protect the legitimate congressional interest and therefore does not violate the First Amendment.
Section 110 also extends to promotional uses of the word "Olympic," even if the promotion is not to induce the sale of goods. Under § 110, the USOC may prohibit purely promotional uses of the word only when the promotion relates to an athletic or theatrical event. The USOC created the value of the word by using it in connection with an athletic event. Congress reasonably could find that use of the word by other entities to promote an athletic event would directly impinge on the USOC's legitimate right of exclusive use.
The SFAA's proposed use of the word is an excellent example. The "Gay Olympic Games" were to take place over a 9-day period and were to be held in different locations around the world. They were to include a torch relay, a parade with uniformed athletes of both sexes divided by city, an "Olympic anthem" and "Olympic Committee," and the award of gold, silver, and bronze medals, and were advertised under a logo of three overlapping rings. All of these features directly parallel the modern-day Olympics, not the Olympic Games that occurred in ancient Greece. (FN18) The image the SFAA sought to invoke was exactly the image carefully cultivated by the USOC. The SFAA's expressive use of the word cannot be divorced from the value the USOC's efforts have given to it. The mere fact that the SFAA claims an expressive, as opposed to a purely commercial, purpose does not give it a First Amendment right to "appropriat[e] to itself the harvest of those who have sown." International News Service v. Associated Press. The USOC's right to prohibit use of the word "Olympic" in the promotion of athletic events is at the core of its legitimate property right.
The SFAA argues that even if the exclusive use granted by § 110 does not violate the First Amendment, the USOC's enforcement of that right is discriminatory in violation of the Fifth Amendment. The fundamental inquiry is whether the USOC is a governmental actor to whom the prohibitions of the Constitution apply. The USOC is a private corporation established under Federal law. In the Act, Congress granted the USOC a corporate charter, imposed certain requirements on the USOC, and provided for some USOC funding through exclusive use of the Olympic words and symbols, and through direct grants.
The fact that Congress granted it a corporate charter does not render the USOC a Government agent. All corporations act under charters granted by a government, usually by a State. They do not thereby lose their essentially private character. Even extensive regulation by the government does not transform the actions of the regulated entity into those of the government. Nor is the fact that Congress has granted the USOC exclusive use of the word "Olympic" dispositive. All enforceable rights in trademarks are created by some governmental act, usually pursuant to a statute or the common law. The actions of the trademark owners nevertheless remain private. Moreover, the intent on the part of Congress to help the USOC obtain funding does not change the analysis. The Government may subsidize private entities without assuming constitutional responsibility for their actions. The Act merely authorized the USOC to coordinate activities that always have been performed by private entities. Neither the conduct nor the coordination of amateur sports has been a traditional governmental function.
The USOC's choice of how to enforce its exclusive right to use the word "Olympic" simply is not a governmental decision. There is no evidence that the Federal Government coerced or encouraged the USOC in the exercise of its right. At most, the Federal Government, by failing to supervise the USOC's use of its rights, can be said to exercise mere approval of or acquiescence in the initiatives of the USOC. This is not enough to make the USOC's actions those of the Government. Because the USOC is not a governmental actor, the SFAA's claim that the USOC has enforced its rights in a discriminatory manner must fail.
Accordingly, we affirm the judgment of the Ninth Circuit.
Justice O'Connor, with whom Justice Blackmun joins, concurring in part and dissenting in part.
I agree with the Court's construction of § 110, and with its holding that the statute is "within constitutional bounds." But I believe the USOC and the United States are joint participants in the challenged activity and as such are subject to the equal protection provisions of the Fifth Amendment. Accordingly, I would reverse the Ninth Circuit's finding of no Government action and remand the case for determination of petitioners' claim of discriminatory enforcement.
Justice Brennan, with whom Justice Marshall joins, dissenting.
The Court wholly fails to appreciate both the congressionally created interdependence between the USOC and the United States, and the significant extent to which § 110 of the Act infringes on noncommercial speech. I would find that the action of the USOC challenged here is Government action, and that § 110 is both substantially overbroad and discriminates on the basis of content. I therefore dissent.
For two independent reasons, the action challenged here constitutes Government action. First, the USOC performs important governmental functions and should therefore be considered a governmental actor. Second, there exists a sufficiently close nexus between the Government and the challenged action of the USOC that the action of the latter may be fairly treated as that of the Government itself.
Section 110 prohibits any person from using the word "Olympic" without the consent of the USOC for the purpose of trade, to induce the sale of any goods or services, or to promote any theatrical exhibition, athletic performance, or competition. The statute is overbroad on its face because it is susceptible of application to a substantial amount of noncommercial speech, and vests the USOC with unguided discretion to approve and disapprove others' noncommercial use of "Olympic." Moreover, by eliminating even noncommercial uses of a particular word, it unconstitutionally infringes on the SFAA's right to freedom of expression. The Act also restricts speech in a way that is not content neutral. The Court's justifications of these infringements on First Amendment rights are flimsy. The statute cannot be characterized as a mere regulation of the "manner" of speech, and does not serve any Government purpose that would not effectively be protected by giving the USOC a standard commercial trademark. Therefore, as construed by the Court, § 110(a)(4) cannot withstand the First Amendment challenge presented by petitioners.
The Act gives a single entity exclusive control over a wide range of uses of a word with a deep history in the English language and Western culture. Here, the SFAA intended, by use of the word "Olympic," to promote a realistic image of homosexual men and women that would help them move into the mainstream of their communities. As Judge Kozinski observed in dissent in the court of appeals, just as a jacket reading "I Strongly Resent the Draft" would not have conveyed Cohen's message, in Cohen v. California, 403 U.S. 15 (1971), so a title such as "The Best and Most Accomplished Amateur Gay Athletes Competition" would not serve as an adequate translation of petitioners' message. By prohibiting use of the word "Olympic," the USOC substantially infringes upon the SFAA's right to communicate ideas.
The Act also violates the First Amendment because it restricts speech in a way that is not content neutral. A wide variety of groups apparently wish to express particular sociopolitical messages through the use of the word "Olympic," but the Act singles out certain of the groups for favorable treatment. As the Court observes, Congress encouraged the USOC to allow the use of "Olympic" in athletic competitions held for youth ("Junior Olympics") and handicapped persons ("Special Olympics"), while leaving to the USOC's unfettered discretion the question whether other groups may use it.
Language, even in a commercial context, properly belongs to the public, unless the Government's asserted interest is substantial, and unless the limitation imposed is no more extensive than necessary to serve that interest. The Lanham Act is carefully crafted to prevent commercial monopolization of language that otherwise belongs in the public domain. The USOC demonstrates no need for additional protection. In my view, the SFAA therefore is entitled to use the word "Olympic" in a nonconfusing and nonmisleading manner in the noncommercial promotion of a theatrical or athletic event, absent proof of resultant harm to the USOC.
Does the First Amendment place limits on Congress' power under Art. 1, § 8, cl. 8 to grant to private persons, as a means of regulating commerce, exclusive rights to ideas useful in commerce and industry?
Suppose that Congress decided to grant to Nanosoft Corp., to encourage it to develop advanced operating system software and to help it fund the vast research and development efforts that this activity will require, an exclusive right comparable to that given the USOC. Say, to use the idea of replacing the mouse with waving one's hands about in an EMF field to cause software to accept cues based on hand motions. Or to exploit a particular business model in electronic commerce (e-commerce) applications. Any problems?
Do any other amendments or clauses in the Constitution create difficulties for this laudable legislation? What of the Ninth and Tenth Amendments? Any part of the Fifth, or the Fourteenth insofar as the Fifth incorporates it?
Excerpt from Graham v. John Deere Co.
Quoting Jefferson's letter to Isaac MacPherson
United States Supreme Court
383 U.S. 1 (1966)
Mr. Justice Clark.
The Court again focuses its attention on the patentability of inventions under the standard of Art. I, § 8, cl. 8, of the Constitution and under the conditions prescribed by the laws of the United States.
At the outset it must be remembered that the federal patent power stems from a specific constitutional provision which authorizes the Congress "To promote the Progress...of useful Arts, by securing for limited Times to...Inventors the exclusive Right to their... Discoveries." The clause is both a grant of power and a limitation. This qualified authority, unlike the power often exercised in the Sixteenth and Seventeenth Centuries by the English Crown, is limited to the promotion of advances in the "useful arts." It was written against the backdrop of the practices -- eventually curtailed by the Statute of Monopolies -- of the Crown in granting monopolies to court favorites in goods or businesses which had long before been enjoyed by the public.
The Congress in the exercise of the patent power may not overreach the restraints imposed by the stated constitutional purpose. Nor may it enlarge the patent monopoly without regard to the innovation, advancement or social benefit gained thereby. Congress may not authorize the issuance of patents whose effects are to remove existent knowledge from the public domain, or to restrict free access to materials already available.
Innovation, advancement, and things which add to the sum of useful knowledge are inherent requisites in a patent system which by constitutional command must "promote the Progress of...useful Arts." This is the standard expressed in the Constitution and it may not be ignored.
Within the limits of the constitutional grant, the Congress may, of course, implement the stated purpose of the Framers by selecting the policy which in its judgment best effectuates the constitutional aim. This is but a corollary to the grant to Congress of any Article I power. Gibbons v. Ogden, 9 Wheat. 1.
[Discussion here of role of Thomas Jefferson as first administrator of U.S. patent system and draftsman of 1793 Patent Act.]
Jefferson's philosophy on the nature and purpose of the patent monopoly is expressed in a letter to Isaac McPherson, a portion of which we set out in the margin.2 He rejected a natural rights theory of intellectual property rights and clearly recognized the social and economic rationale of the patent system. The patent monopoly was not designed to secure to the inventor his natural right in his discoveries. Rather, it was a reward, an inducement, to bring forth new knowledge. The grant of an exclusive right to an invention was the creation of society--at odds with the inherent free nature of disclosed ideas--and was not to be freely given. Only inventions and discoveries which furthered human knowledge, and were new and useful, justified the special inducement of a limited private monopoly.
2 "Stable ownership is the gift of social law, and is given late in the progress of society. It would be curious, then, if an idea, the fugitive fermentation of an individual brain, could, of natural right, be claimed in exclusive and stable property.
If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of every one, and the receiver cannot dispossess himself of it. Its peculiar character, too, is that no one possesses the less, because every other possesses the whole of it. He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me.
That ideas should freely spread from one to another over the globe, for the moral and mutual instruction of man, and improvement of his condition, seems to have been peculiarly and benevolently designed by nature, when she made them, like fire, expansible over all space, without lessening their density in any point, and like the air in which we breathe, move, and have our physical being, incapable of confinement or exclusive appropriation.
Inventions then cannot, in nature, be a subject of property. Society may give an exclusive right to the profits arising from them, as an encouragement to men to pursue ideas which may produce utility, but this may or may not be done, according to the will and convenience of the society, without claim or complaint from anybody."
VI Writings of Thomas Jefferson 180-181 (Washington ed.).
1. The Court's opinion is directed to the patent portion of Art. I, § 8, cl. 8. It does not directly address Congress' power to promote the progress of "science" (knowledge) by securing for limited times to authors the exclusive right to their writings. (The missing, copyright-directed words of Art. I, § 8, cl. 8, where the Court's Graham opinion thrice uses "..." are "Science," "Authors," and "Writings.")
Do the Court's statements about the limitation of Congress' power apply to copyrights?
2. Does any software force itself into the possession of everyone who receives it, so that the receivers cannot dispossess themselves of it? A flowchart? An icon? A metaphor? What about a very hairy signal-processing algorithm? A long sample of object code?
Is this point essential to Jefferson's argument?
3. Consider Jefferson's "taper." Economists characterize goods like intellectual property as "public goods." These are goods for which it is very difficult to exclude nonpaying consumers. Moreover, additional increments of consumption of such goods do not perceptibly deplete the supply that remains available to others. Fresh air (pollution considerations aside) and public gardens are typical examples of such goods. See, e.g., Paul Samuelson, The Pure Theory of Public Expenditures, 36 Rev. Econ. & Statis. 387 (1954). Given these characteristics, it is argued, free markets will tend to undersupply such goods, because the producers are unable to recover the full marginal value of their investment. Does this theory furnish a basis for the protection against infringement that intellectual property law provides?
4. If I receive a commercially useful idea from you, receiving instruction, do I always receive light from your taper without darkening it? What if I go into competition with you? Does that darken your taper? Is whether I darken your taper an appropriate factor on which to base the existence or nonexistence of a right to compensation?
5. Jefferson perceived a need to adapt laws to change. The following words of his are inscribed on the Jefferson Memorial:
[L]aws and institutions must go hand in hand with the progress of the human mind. ...[A]s new discoveries are made...institutions must advance also to keep pace....We might as well require a man to wear still the coat which fitted him when a boy.
In reading the cases that follow, consider the application of Jefferson's words to software. Consider whether these intellectual property coats might need a little letting out at the waist or taking in elsewhere to fit the needs of software, and if so how you would specify the alterations. Consider, also, as some commentators have suggested, whether the copyright or patent coat would be so altered that it wouldn't be copyright or patent law anymore. Are the needed alterations so extensive that a new coat is needed? Or can the old coat be made to last well into the 21st century?
Consider also the recurrent question whether the market system can itself provide adequate lead time and other alternative incentives. Is intellectual property therefore mere lagniappe or just surplusage? Can software progress fast enough if you just let programmers alone in a free and open market? See Stephen Breyer, The Uneasy Case for Copyright: A Study of Copyright in Books, Photocopies, and Computer Programs, 84 Harv. L. Rev. 281 (1970).
Whether patent protection contributes materially to the rate of development of new technology has been debated by economists since the start of industrialization. One commentator has summarized this debate as follows:
One view--advanced by Bentham...and shared by...Mill...(and others) -- holds that patent rights are absolutely necessary to encourage inventions. A second view, advanced by Taussig...and shared by Pigou..., maintains that a system of patent rights is largely superfluous. ...Plant..., with modern followers, argued that the patent system is actually detrimental. Finally, Arrow...argued that although property rights in ideas are clearly useful, they are nonetheless inferior to direct government investment in inventive activities.
Steven Cheung, Property Rights And Invention, in 8 Research in Law and Economics 5-6 (John Palmer & Richard Zerbe ed. 1986).
Does the development of the Internet under the joint auspices of the Department of Defense and a private university, support the view of Arrow? Does this long-running debate among economists still have any current relevance? The coexistence of rapid economic growth during the last decade with the virtual absence of inflation has been attributed by some economists, including Federal Reserve Chairman Greenspan, to improved worker productivity derived from the use of computer-assisted technology. If this technology is of material significance to the economy, as were the railroads and the telegraph to an earlier era, the long-running debate over the function of intellectual property protection remains important.
Suppose the thesis is advanced that each of these economists has a valid point, but that the best position is not the "all or none" view of intellectual property law that each one seems to advocate. In studying the decisions that follow, consider implications for further innovation. Consider whether and how the "monopoly" of intellectual property protection might be balanced with competition in order to pursue a policy of enhancing innovation and the growth of technology.
Commentator Rochelle C. Dreyfuss, in A Wiseguy's Approach To Information Products: Muscling Copyright and Patent Into A Unitary Theory of Intellectual Property, The Sup. Ct. Rev. 195, 210 (1992), argues that a conceptual mismatch exists between the criteria of copyright and patent law and the nature of information products, particularly fact databases. Dreyfuss concludes that without some new form of protection, information products of utility to society would lack sufficient incentives for their creation. She urges a new, unified theory of protection for information products and, presumably, for the software that produces them.
More discouraging or discouraged is a comment on some courts' application of copyright law to so-called nonliteral aspects of computer programs, such as command structures and programming languages. See Richard H. Stern, IEEE Micro, Dec. 1990, at 39-40 (idea/expression doctrine as applied is "unpredictable in scope...without any coherent rationalizing principle, and totally destructive of business certainty").
On the other hand, copyright law is not without Panglossian optimists. Thus, a former member of CONTU, the commission that recommended to Congress in 1979 that computer programs be placed within the existing copyright regime, argues:
Despite expressions of grave apprehensions and shrill pronouncements intimating that the sky is falling, no evidence has been produced that demonstrates that either CONTU or Congress was wrong in bringing computer programs, databases, and computer-assisted works into the copyright family. The technology is thriving, both in terms of creativity and overall economics, and most judicial decision to date seem correct both conceptually and on their facts.
Arthur R. Miller, Copyright Protection For Computer Programs, Databases, and Computer-Generated Works: Is Anything New Since CONTU?, 106 Harv. L. Rev. 978, 1072 (1993).
Does this comment take sufficient (or any) account of the social and economic costs of litigation in developing case law rules for protection of computer software?
6. Does recognition of hyperbole in some of Jefferson's remarks suggest the conclusion that intellectual property rights are not just the product of positive law? Is there a natural right to the creations of one's mind, against others who seek to light their tapers without authorization or payment of compensation? Thus, does Judge Newman have it right and has Jefferson got it wrong? How do you resolve a question like that?
7. If there is a natural right to property in one's own ideas, the laborious fermentations of an individual's brain, and of the sweat of the brow, what follows? Art. I, § 8, cl. 8 authorizes Congress to protect authors' and inventors' writings and discoveries. Must Congress do so? Also, can Congress in effect divest authors and inventors of this property when they fail to opt promptly for protection under congressional legislation? Consider 35 U.S.C. § 102(b). Consider 17 U.S.C. § 908(a). What about the prohibition against taking private property without due process and just compensation?
Does Congress' failure to protect Einstein in regard to the creation of the General Theory of Relativity divest him of his property in the Theory? If Congress decided not to protect Karmarkar in regard to the creation of his perhaps revolutionary new algorithm for linear programming, would that divest him of his property in the algorithm?
8. One commentator suggests that a "substantive entitlement to self-expression" limits (or should limit) the extent of intellectual property protection:
In a civilized nation much of reality is artifact. Too broad a set of intellectual property rights can give one set of persons control over how the reality is viewed, perceived, interpreted -- control over what the world means. Such control casts a pall over those acts of understanding that are at the core of what it means to be human.
Gordon, Reality As Artifact: From Feist to Fair Use, 55 Law & Contemp. Probs. 93, 101 (1992).
Do you agree that there is, in effect, a natural right to use intellectual property created, in the first instance, by others? If so, how far does the right go, and to what kinds of intellectual property? Assume, arguendo, that we agree that whether 2 Live Crew is allowed to make fun of Pretty Woman by writing and performing Big Hairy Woman fits within the principle stated above. Where does that take us for computer programs or for framing someone else's Web page content with banner advertising?
Suppose that the patent or copyright laws gave Lotus a legal monopoly over the keystroke patterns used in the "1-2-3" spreadsheet program, so that Lotus could control whether users or competitors could use slash-F-R to call up a file or slash to switch from data-entry mode to command-entry mode. Would that distort your perception of reality? Cast a pall over your understanding? Corrode the core of your humanity -- dehumanize you? Direct the same questions to control of algorithms.
Now direct the same questions to the natural right to copy the lines of code from 1-2-3 or some other program, because it's neat code that makes your application more elegant? Does copyright law's hands-off policy cast a pall, corrode your core, etc.? Sure, you could write your own code, but the combination of 1-2-3's code with the other great code that you are writing for your application would really improve how you and users of your application viewed, perceived, interpreted -- controlled -- reality.
Is self-expression the appropriate talisman in the context of computer-related works? Is programming important as self-expression? Is programming on a social-philosophical par with making parodies? Why is programming important to society? How does technological advancement in programming change society and individuals? How does self-expression change society and individuals?
What, if anything, does this kind of inquiry imply about whether the social or public policies at stake in regard to software controversies are more akin to those at stake in patent matters than those at stake in traditional copyright controversies? (Or do all three have divergent interests at stake?)
In patent matters, everyone generally has accepted it as a given that the issues at stake are economic in the main, perhaps supplemented to some extent by notions that technology makes life better for its beneficiaries. (Luddites of various kinds dissent.)
Wheaton v. Peters
United States Supreme Court
34 U.S. (8 Pet.) 591 (1834)
[Henry Wheaton was the court reporter for the Supreme Court from 1816 to 1827. The Court then appointed Peters as the court reporter. When Peters published the pre-1827 Supreme Court decisions, along with the post-1827 decisions for which he was the official reporter, Wheaton and his associates sued Peters for copyright infringement. Wheaton had not complied with all of the statutory formalities for federal registration of copyrights. Wheaton therefore sought to rely on his alleged common law rights in the pre-1827 reports and failed.]
Mr. Justice M'Lean.
In behalf of the common law right, an argument has been drawn from the word secure, which is used in relation to this right, both in the Constitution and in the Acts of Congress. This word, when used as a verb active, signifies to protect, insure, save, ascertain, etc. Counsel for the plaintiffs insist that the term, as used, clearly indicates an intention, not to originate a right, but to protect one already in existence.
The word secure, as used in the Constitution, could not mean the protection of an acknowledged legal right. It refers to inventors, as well as authors, and it has never been pretended, by any one, either in this country or in England, that an inventor has a perpetual right, at common law, to sell the thing invented.
Congress, then, by this Act, instead of sanctioning an existing right, created it. This seems to be the clear import of the law, connected with the circumstances under which it was enacted.
From these considerations it would seem that if the right of the plaintiffs can be sustained, it must be sustained under the Acts of Congress. The claim, then, of the plaintiffs must be examined in reference to the [copyright] statutes under which it is asserted.
This right, as has been shown, does not exist at common law -- it originated, if at all, under the Acts of Congress. No one can deny that when the legislature are about to vest an exclusive right in an author or an inventor, they have the power to prescribe the conditions on which such right shall be enjoyed; and that no one can avail himself of such right who does not substantially comply with the requisitions of the law.
1. For a thorough discussion of the history and significance of Wheaton v. Peters, see Craig Joyce, The Rise of the Supreme Court Reporter: An Institutional Perspective on Marshall Court Ascendancy, 83 Mich. L. Rev. 1291 (1985).
2. In Wheaton v. Peters, and in the following decision, White-Smith Music Pub. Co. v. Apollo Co., the Supreme Court said that the case before it turned upon the construction of a statute, because the protection given to copyrights is wholly statutory. By that, the Court meant that there are no common-law rights in published works, supplementing the rights that the federal statute provides for such works.
State common law was still considered applicable to unpublished works, however, until enactment of the present statute and its provisions expressly preempting state copyright law (17 U.S.C. § 301). Since the 1976 Act became effective, no vestiges appear to be left of common-law rights in the subject matter of copyright. Copyright protection is now wholly federal. But when is protection copyright?
Can a state legislature's statute protecting labor (sweat of brow) in a data base survive a preemption argument under § 301?
3. What difference in conceptual approach do you perceive between Jefferson in his letter to McPherson and the Supreme Court in Wheaton v. Peters in reaching the same conclusion that intellectual property rights are purely creations of the legislature?
White-Smith Music Pub. Co. v. Apollo Co.
United States Supreme Court
209 U.S. 1 (1908)
Concurring Opinion of Justice Holmes
[The question under argument was whether player piano rolls were "copies" of copyrighted songs. The majority opinion is at the beginning of chapter 2, part B, below.]
I do not feel justified in dissenting from the judgment of the Court, but the result is to give the copyright less scope than its rational significance and the ground on which it is granted seem to be to demand. Therefore I desire to add a few words to what he has said.
The notion of property starts, I suppose, from confirmed possession of a tangible object, and consists in the right to exclude others from interference with the more or less free doing with it as one wills. But in copyright property has reached a more abstract expression. The right to exclude is not directed to an object in possession or owned, but is in vacuo, so to speak. It restrains the spontaneity of men where, but for it, there would be nothing of any kind to hinder their doing as they saw fit. It is a prohibition of conduct remote from the persons or tangibles of the party having the right. It may be infringed a thousand miles from the owner and without his ever becoming aware of the wrong. It is a right which could not be recognized or endured for more than a limited time and therefore, I may remark, in passing, it is one which hardly can be conceived except as a product of statute, as the authorities now agree.
The ground of this extraordinary right is that the person to whom it is given has in- vented [sic] some new collocation of visible or audible points--of lines, colors, sounds, or words. The restraint is directed against reproducing this collocation, although, but for the invention [sic] and the statute, anyone would be free to combine the contents of the dictionary, the elements of the spectrum, or the notes of the gamut in any way that he had the wit to devise. The restriction is confined to the specific form, to the collocation devised, of course; but one would expect that, if it was to be protected at all, that collocation would be protected according to what was its essence.
One would expect the protection to be coextensive not only with the invention [sic], which, though free to all, only one had the ability to achieve, but with the possibility of reproducing the result which gives to the invention [sic] its meaning and worth. A musical composition is a rational collocation of sounds apart from concepts, reduced to a tangible expression from which the collocation can be reproduced either with or without continuous human intervention. On principle anything that mechanically reproduces that collocation of sounds ought to be held a copy, or, if the statute is too narrow, ought to be made so by a further act, except so far as some extraneous consideration of policy may oppose.
1. Congress overturned the holding in White-Smith by amending the statute to give protection to expressions in any tangible, machine-readable media.
2. Compare Holmes' opinion with Jefferson's letter to McPherson. Is it fair to characterize Holmes' concurring opinion as having a natural law theory as its unarticulated premise?
3. Holmes states: "On principle anything that mechanically reproduces that collocation of sounds ought to be held a copy, or, if the statute is too narrow, ought to be made so by a further act, except so far as some extraneous consideration of policy may oppose." Does Holmes find support for this statement in legislative history? Elsewhere? Whence the support?
4. Is it proper to conclude that if copyright law protects a drawing of a physical object, such as a sketch for a sculpture, a fanciful comic-strip drawing of a fat orange cat, or a tail pipe for a car, then on principle anything that mechanically reproduces that collocation of lines or shapes ought to be held a copy? Is there any extraneous consideration of policy that is relevant?
5. Holmes calls for protection of any copyrighted work "according to what [is] its essence," rather than in terms of its merely accidental incidents and its superficial, transitory aspects. How do you recognize the one and distinguish it from the other? How does this concept apply to software?
Is not the true essence of a computer program its ideas, as distinguished from the mere accidents of particular lines of code used to embody or express the ideas? Therefore, does it not follow that a proper application of copyright law to software would protect its idea essence?
6. Holmes also calls for copyright protection that is "coextensive with the invention [and] ...with the possibility of reproducing the result which gives to the invention its meaning and worth." What gives software its meaning and worth? Is it not the set of tasks, functions, and results that the computer program accomplishes?
Should not one expect, therefore, that reproducing the result of a computer program which gives to the program its meaning and worth will be held to be copyright infringement? And that one who reproduces the result should be liable in damages to the original creator? Is that what Holmes would be saying if translated forward in time to now? Are we not compelled by the force of his logic to agree with him?
International News Service v. Associated Press
United States Supreme Court
248 U.S. 215 (1918)
Mr. Justice Pitney delivered the opinion of the Court.
The parties are competitors in the gathering and distribution of news and its publication for profit in newspapers throughout the United States. The plaintiff Associated Press is a co-operative organization, its members being individuals who are either proprietors or representatives of about 950 daily newspapers published in all parts of the United States. AP gathers in all parts of the world, by means of various instrumentalities of its own, by exchange with its members, and by other appropriate means, news and intelligence of current and recent events of interest to newspaper readers and distributes it daily to its members for publication in their newspapers. The cost of the service, amounting approximately to $3.5 million per annum, is assessed upon the members and becomes a part of their costs of operation, to be recouped, presumably with profit, through the publication of their several newspapers.
Under AP's by-laws each member agrees upon assuming membership that news received through AP's service is received exclusively for publication in a particular newspaper, language, and place specified in the certificate of membership, that no other use of it shall be permitted, and that no member shall furnish or permit any one in his employ or connected with his newspaper to furnish any of AP's news in advance of publication to any person not a member. And each member is required to gather the local news of his district and supply it to the AP Press and to no one else.
Defendant International News Service is a corporation whose business is the gathering and selling of news to its customers and clients, consisting of newspapers published throughout the United States, under contracts by which they pay certain amounts at stated times for defendant's service. It has widespread news-gathering agencies; the cost of its operations amounts, it is said, to more than $2 million per annum; and it serves about 400 newspapers located in the various cities of the United States and abroad, a few of which are represented, also, in the membership of the AP.
The parties are in the keenest competition between themselves in the distribution of news throughout the United States; and so, as a rule, are the newspapers that they serve, in their several districts.
AP in its bill, INS in its answer, have set forth in almost identical terms the rather obvious circumstances and conditions under which their business is conducted. The value of the service, and of the news furnished, depends upon the promptness of transmission, as well as upon the accuracy and impartiality of the news; it being essential that the news be transmitted to members or subscribers as early or earlier than similar information can be furnished to competing newspapers by other news services, and that the news furnished by each agency shall not be furnished to newspapers which do not contribute to the expense of gathering it.
The bill was filed to restrain the pirating of AP's news by INS by copying news from bulletin boards and from early editions of AP's newspapers and selling this, either bodily or after rewriting it, to INS' customers.
The district court, upon consideration of the bill and answer, with voluminous affidavits on both sides, refused at that stage to restrain the systematic practice admittedly pursued by INS, of taking news bodily from the bulletin boards and early editions of AP's newspapers and selling it as its own. The court expressed itself as satisfied that this practice amounted to unfair trade, but as the legal question was one of first impression it considered that the allowance of an injunction should await the outcome of an appeal. Both parties having appealed, the circuit court of appeals remanded the cause, with directions to issue an injunction also against any bodily taking of the words or substance of AP's news until its commercial value as news had passed away. The present writ of certiorari was then allowed.
The only matter that has been argued before us is whether INS may lawfully be restrained from appropriating news taken from bulletins issued by AP or any of its members, or from newspapers published by them, for the purpose of selling it to INS' clients. AP asserts that INS' admitted course of conduct in this regard both violates AP's property right in the news and constitutes unfair competition in business. And notwithstanding the case has proceeded only to the stage of a preliminary injunction, we have deemed it proper to consider the underlying questions, since they go to the very merits of the action and are presented upon facts that are not in dispute.
As presented in argument, these questions are:
(1) Whether there is any property in news;
(2) Whether, if there be property in news collected for the purpose of being published, it survives the instant of its publication in the first newspaper to which it is communicated by the news-gatherer; and
(3) Whether INS' admitted course of conduct in appropriating for commercial use matter taken from bulletins or early editions of AP publications constitutes unfair competition in trade.
Federal jurisdiction was invoked because of diversity of citizenship, not upon the ground that the suit arose under the copyright or other laws of the United States. AP's news matter is not copyrighted. According to AP's contention, news is not within the operation of the copyright act. INS, while apparently conceding this, nevertheless invokes the analogies of the law of literary property and copyright, insisting as its principal contention that, assuming AP has a right of property in its news, it can be maintained (unless the Copyright Act being complied with) only by being kept secret and confidential, and that upon the publication with AP's consent of uncopyrighted news of any of AP's members in a newspaper or upon a bulletin board, the right of property is lost, and the subsequent use of the news by the public or by INS for any purpose whatever becomes lawful.
In considering the general question of property in news matter, it is necessary to recognize its dual character, distinguishing between the substance of the information and the particular form or collocation of words in which the writer has communicated it.
No doubt news articles often possess a literary quality, and are the subject of literary property at the common law; nor do we question that such an article, as a literary production, is the subject of copyright by the terms of the Act as it now stands. The present  Act provides that the works for which copyright may be secured shall include "all the writings of an author," and specifically mentions "periodicals, including newspapers." Evidently this admits to copyright a contribution to a newspaper, notwithstanding it also may convey news; and such is the practice of the copyright office, as the newspapers of the day bear witness.
But the news element--the information respecting current events contained in the literary production--is not the creation of the writer, but is a report of matters that ordinarily are publici juris; it is the history of the day. It is not to be supposed that the framers of the Constitution, when they empowered Congress "to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries," intended to confer upon one who might happen to be the first to report a historic event the exclusive right for any period to spread the knowledge of it.
We need spend no time, however, upon the general question of property in news matter at common law, or the application of the copyright act, since it seems to us the case must turn upon the question of unfair competition in business. And, in our opinion, this does not depend upon any general right of property analogous to the common-law right of the proprietor of an unpublished work to prevent its publication without his consent; nor is it foreclosed by showing that the benefits of the copyright act have been waived. The news of current events may be regarded as common property.
What we are concerned with is the business of making it known to the world, in which both parties to the present suit are engaged. That business consists in maintaining a prompt, sure, steady, and reliable service designed to place the daily events of the world at the breakfast table of the millions at a price that, while of trifling moment to each reader, is sufficient in the aggregate to afford compensation for the cost of gathering and distributing it, with the added profit so necessary as an incentive to effective action in the commercial world. The service thus performed for newspaper readers is not only innocent but extremely useful in itself, and indubitably constitutes a legitimate business. The parties are competitors in this field; and, on fundamental principles, applicable here as elsewhere, when the rights or privileges of the one are liable to conflict with those of the other, each party is under a duty so to conduct its own business as not unnecessarily or unfairly to injure that of the other.
Obviously, the question of what is unfair competition in business must be determined with particular reference to the character and circumstances of the business. The question here is not so much the rights of either party as against the public but their rights as between themselves. And, although we may and o assume that neither party has any remaining property interest as against the public in uncopyrighted news matter after the moment of its first publication, it by no means follows that there is no remaining property interest in it as between themselves.
For, to both of them alike, news matter, however little susceptible of ownership or dominion in the absolute sense, is stock in trade, to be gathered at the cost of enterprise, organization, skill, labor, and money, and to be distributed and sold to those who will pay money for it, as for any other merchandise. Regarding the news, therefore, as but the material out of which both parties are seeking to make profits at the same time and in the same field, we hardly can fail to recognize that for this purpose, and as between them, it must be regarded as quasi property, irrespective of the rights of either as against the public.
In order to sustain the jurisdiction of equity over the controversy, we need not affirm any general andabsolute property in the news as such. The rule that a court of equity concerns itself only in the protection of property rights treats any civil right of a pecuniary nature as a property right; and the right to acquire property by honest labor or the conduct of a lawful business is as much entitled to protection as the right to guard property already acquired. It is this right that furnishes the basis of the jurisdiction in the ordinary case of unfair competition. INS insists that when, with the sanction and approval of AP, and as the result of the use of its news for the very purpose for which it is distributed, a portion of AP's members communicate it to the general public by posting it upon bulletin boards so that all may read, or by issuing it to newspapers and distributing it indiscriminately, AP no longer has the right to control the use to be made of it; that when it thus reaches the light of day it becomes the common possession of all to whom it is accessible; and that any purchaser of a newspaper has the right to communicate the intelligence which it contains to anybody and for any purpose, even for the purpose of selling it for profit to newspapers published for profit in competition with AP's members.
The fault in the reasoning lies in applying as a test the right of the AP as against the public, instead of considering the rights of AP and INS, competitors in business, as between themselves. The right of the purchaser of a single newspaper to spread knowledge of its contents gratuitously, for any legitimate purpose not unreasonably interfering with AP's right to make merchandise of it, may be admitted; but to transmit that news for commercial use, in competition with AP--which is what INS has done and seeks to justify--is a very different matter.
In doing this INS, by its very act, admits that it is taking material that has been acquired by AP as the result of organization and the expenditure of labor, skill, and money, and which is salable by AP for money, and that INS in appropriating it and selling it as its own is endeavoring to reap where it has not sown, and by disposing of it to newspapers that are competitors of AP's members is appropriating to itself the harvest of those who have sown.
Stripped of all disguises, the process amounts to an unauthorized interference with the normal operation of AP's legitimate business precisely at the point where the profit is to be reaped, in order to divert a material portion of the profit from those who have earned it to those who have not; with special advantage to INS in the competition because of the fact that it is not burdened with any part of the expense of gathering the news. The transaction speaks for itself and a court of equity ought not to hesitate long in characterizing it as unfair competition in business.
The underlying principle is much the same as that which lies at the base of the equitable theory of consideration in the law of trusts -- that he who has fairly paid the price should have the beneficial use of the property. It is no answer to say that AP spends its money for that which is too fugitive or evanescent to be the subject of property. That might, and for the purposes of the discussion we are assuming that it would furnish an answer in a common-law controversy. But in a court of equity, where the question is one of unfair competition, if that which AP has acquired fairly at substantial cost may be sold fairly at substantial profit, a competitor who is misappropriating it for the purpose of disposing of it to his own profit and to the disadvantage of AP cannot be heard to say that it is too fugitive or evanescent to be regarded as property. It has all the attributes of property necessary for determining that a misappropriation of it by a competitor is unfair competition because contrary to good conscience.
It is said that the elements of unfair competition are lacking because there is no attempt by INS to palm off its goods as those of the AP, characteristic of the most familiar, if not the most typical, cases of unfair competition. But we cannot concede that the right to equitable relief is confined to that class of cases. In the present case the fraud upon AP's rights is more direct and obvious. Regarding news matter as the mere material from which these two competing parties are endeavoring to make money, and treating it, therefore, as quasi property for the purposes of their business because they are both selling it as such, INS' conduct differs from the ordinary case of unfair competition in trade principally in this that, instead of selling its own goods as those of AP, it substitutes misappropriation in the place of misrepresentation, and sells AP's goods as its own.
Mr. Justice Holmes, dissenting.
When an uncopyrighted combination of words is published there is no general right to forbid other people repeating them--in other words there is no property in the combination or in the thoughts or facts that the words express.
Property, a creation of law, does not arise from value, although exchangeable--a matter of fact. Many exchangeable values may be destroyed intentionally without compensation. Property depends upon exclusion by law from interference, and a person is not excluded from using any combination of words merely because some one has used it before, even if it took labor and genius to make it. If a given person is to be prohibited from making the use of words that his neighbors are free to make some other ground must be found.
One such ground is vaguely expressed in the phrase unfair trade. This means that the words are repeated by a competitor in business in such a way as to convey a misrepresentation that materially injures the person who first used them, by appropriating credit of some kind which the first user has earned.
The ordinary case is a representation by device, appearance, or other indirection that INS' goods come from the plaintiff. But the only reason why it is actionable to make such a representation is that it tends to give INS an advantage in his competition with the plaintiff and that it is thought undesirable that an advantage should be gained in that way. Apart from that INS may use such unpatented devices and uncopyrighted combinations of words as he likes.
The ordinary case, I say, is palming off INS' product as the plaintiff's but the same evil may follow from the opposite falsehood-- from saying whether in words or by implication that the plaintiff's product is INS', and that, it seems to me, is what has happened here. Fresh news is got only by enterprise and expense. To produce such news as it is produced by INS represents by implication that it has been acquired by INS' enterprise and at its expense. When it comes from one of the great news collecting agencies like the AP, the source generally is indicated, plainly importing that credit; and that such a representation is implied may be inferred with some confidence from the unwillingness of INS to give the credit and tell the truth. If the plaintiff produces the news at the same time that INS does, INS' presentation impliedly denies to the plaintiff the credit of collecting the facts and assumes that credit to INS. If the plaintiff is later in Western cities it naturally will be supposed to have obtained its information from INS.
The falsehood is a little more subtle, the injury, a little more indirect, than in ordinary cases of unfair trade, but I think that the principle that condemns the one condemns the other. It is a question of how strong an infusion of fraud is necessary to turn a flavor into a poison. The dose seems to me strong enough here to need a remedy from the law.
But as, in my view, the only ground of complaint that can be recognized without legislation is the implied misstatement, it can be corrected by stating the truth; and a suitable acknowledgment of the source is all that the plaintiff can require. I think that within the limits recognized by the decision of the Court INS should be enjoined from publishing news obtained from the AP for ___ hours after publication by the plaintiff unless it gives express credit to the AP; the number of hours and the form of acknowledgment to be settled by the district court.
Mr. Justice Brandeis, dissenting.
There are published in the United States about 2,500 daily papers. More than 800 of them are supplied with domestic and foreign news of general interest by the AP--a corporation which does not sell news or earn or seek to earn profits, but serves merely as an instrumentality by means of which these papers supply themselves at joint expense with such news. Papers not members of the AP depend for their news of general interest largely upon agencies organized for profit. Among these agencies is the International News Service which supplies news to about 400 subscribing papers. It has, like the AP bureaus and correspondents in this and foreign countries; and its annual expenditures in gathering and distributing news is about $2 million.
No question of statutory copyright is involved. The sole question for our consideration is this: Was the International News Service properly enjoined from using, or causing to be used gainfully, news of which it acquired knowledge by lawful means (namely, by reading publicly posted bulletins or papers purchased by it in the open market) merely because the news had been originally gathered by the AP and continued to be of value to some of its members, or because it did not reveal the source from which it was acquired?
News is a report of recent occurrences. The business of the news agency is to gather systematically knowledge of such occurrences of interest and to distribute reports thereof. The AP contended that knowledge so acquired is property, because it costs money and labor to produce and because it has value for which those who have it not are ready to pay; that it remains property and is entitled to protection as long as it has commercial value as news; and that to protect it effectively, INS must be enjoined from making, or causing to be made, any gainful use of it while it retains such value.
An essential element of individual property is the legal right to exclude others from enjoying it. If the property is private, the right of exclusion may be absolute; if the property is affected with a public interest, the right of exclusion is qualified. But the fact that a product of the mind has cost its producer money and labor, and has a value for which others are willing to pay, is not sufficient to ensure to it this legal attribute of property.
The general rule of law is, that the noblest of human productions--knowledge, truths ascertained, conceptions, and ideas-- become, after voluntary communication to others, free as the air to common use. Upon these incorporeal productions the attribute of property is continued after such communication only in certain classes of cases where public policy has seemed to demand it. These exceptions are confined to productions which, in some degree, involve creation, invention, or discovery.
But by no means all such are endowed with this attribute of property. The creations which are recognized as property by the common law are literary, dramatic, musical, and other artistic creations; and these have also protection under the copyright statutes. The inventions and discoveries upon which this attribute of property is conferred only by statute, are the few comprised within the patent law.
There are also many other cases in which courts interfere to prevent curtailment of plaintiff's enjoyment of incorporeal productions; and in which the right to relief is often called a property right, but is such only in a special sense. In those cases, the plaintiff has no absolute right to the protection of his production; he has merely the qualified right to be protected as against INS' acts, because of the special relation in which the latter stands or the wrongful method or means employed in acquiring the knowledge or the manner in which it is used. Protection of this character is afforded where the suit is based upon breach of contract or of trust or upon unfair competition.
The knowledge for which protection is sought in the case at bar is not of a kind upon which the law has heretofore conferred the attributes of property; nor is the manner of its acquisition or use nor the purpose to which it is applied, such as has heretofore been recognized as entitling a plaintiff to relief.
Plaintiff further contended that INS' practice constitutes unfair competition, because there is "appropriation without cost to itself of values created by" the plaintiff; and it is upon this ground that the decision of this court appears to be based. To appropriate and use for profit, knowledge and ideas produced by other men, without making compensation or even acknowledgment, may be inconsistent with a finer sense of propriety; but, with the exceptions indicated above, the law has heretofore sanctioned the practice. Thus it was held that one may ordinarily make and sell anything in any form, may copy with exactness that which another has produced, or may otherwise use his ideas without his consent and without the payment of compensation, and yet not inflict a legal injury; and that ordinarily one is at perfect liberty to find out, if he can by lawful means, trade secrets of another, however valuable, and then use the knowledge so acquired gainfully, although it cost the original owner much in effort and in money to collect or produce.
Such taking and gainful use of a product of another which, for reasons of public policy, the law has refused to endow with the attributes of property, does not become unlawful because the product happens to have been taken from a rival and is used in competition with him. The unfairness in competition which hitherto has been recognized by the law as a basis for relief, lay in the manner or means of conducting the business; and the manner or means held legally unfair, involves either fraud or force or the doing of acts otherwise prohibited by law. In the "passing off" cases (the typical and most common case of unfair competition), the wrong consists in fraudulently representing by word or act that INS' goods are those of plaintiff. In the other cases, the diversion of trade was effected through physical or moral coercion, or by inducing breaches of contract or of trust or by enticing away employees. In some others, called cases of simulated competition, relief was granted because INS' purpose was unlawful;namely, not competition but deliberate and wanton destruction of plaintiff's business.
That competition is not unfair in a legal sense, merely because the profits gained are unearned, even if made at the expense of a rival, is shown by many cases besides those referred to above. He who follows the pioneer into a new market, or who engages in the manufacture of an article newly introduced by another, seeks profits due largely to the labor and expense of the first adventurer; but the law sanctions, indeed encourages, the pursuit.
The means by which the INS obtains news gathered by the AP is also clearly unobjectionable. It is taken from papers bought in the open market or from bulletins publicly posted. Neither the International News Service nor its subscribers is gaining or seeking to gain in its business a benefit from the reputation of the AP. They are merely using its product without making compensation. That they have a legal right to do, because the product is not property, and they do not stand in any relation to the AP, either of contract or of trust, which otherwise precludes such use. The argument is not advanced by characterizing such taking and use a misappropriation.
It is further said that, while that for which the AP spends its money is too fugitive to be recognized as property in the common-law courts, INS cannot be heard to say so in a court of equity, where the question is one of unfair competition. The case presents no elements of equitable title or of breach of trust. The only possible reason for resort to a court of equity in a case like this is that the remedy which the law gives is inadequate. If the plaintiff has no legal cause of action, the suit necessarily fails. There is nothing in the situation of the parties which can estop INS from saying so.
The great development of agencies now furnishing country-wide distribution of news, the vastness of our territory, and improvements in the means of transmitting intelligence, have made it possible for a news agency or newspapers to obtain, without paying compensation, the fruit of another's efforts and to use news so obtained gainfully in competition with the original collector. The injustice of such action is obvious. But to give relief against it would involve more than the application of existing rules of law to new facts. It would require the making of a new rule in analogy to existing ones.
The unwritten law possesses capacity for growth; and has often satisfied new demands for justice by invoking analogies or by expanding a rule or principle. This process has been in the main wisely applied and should not be discontinued. Where the problem is relatively simple, as it is apt to be when private interests only are involved, it generally proves adequate. But with the increasing complexity of society, the public interest tends to become omnipresent; and the problems presented by new demands for justice cease to be simple.
Then the creation or recognition by courts of a new private right may work serious injury to the general public, unless the boundaries of the right are definitely established and wisely guarded. In order to reconcile the new private right with the public interest, it may be necessary to prescribe limitations and rules for its enjoyment; and also to provide administrative machinery for enforcing the rules. It is largely for this reason that, in the effort to meet the many new demands for justice incident to a rapidly changing civilization, resort to legislation has latterly been had with increasing frequency.
The rule for which AP contends would effect an important extension of property rights and a corresponding curtailment of the free use of knowledge and of ideas; and the facts of this case admonish us of the danger involved in recognizing such a property right in news, without imposing upon news-gatherers corresponding obligations. A large majority of the newspapers and perhaps half the newspaper readers of the United States are dependent for their news of general interest upon agencies other than the AP. The channel through which about 400 of these papers received, as the plaintiff alleges, `a large amount of news relating to the European war of the greatest importance and of intense interest to the newspaper reading public' was suddenly closed.
The closing to the INS of these channels for foreign news (if they were closed) was due not to unwillingness on its part to pay the cost of collecting the news, but to the prohibitions imposed by foreign governments upon its securing news from their respective countries and from using cable or telegraph lines running therefrom. For aught that appears, this prohibition may have been wholly undeserved; and at all events the 400 papers and their readers may be assumed to have been innocent. For aught that appears, the INS may have sought then to secure temporarily by arrangement with the AP the latter's foreign news service. For aught that appears, all of the 400 subscribers of the INS would gladly have then become members of the AP, if they could have secured election thereto.
It is possible, also, that a large part of the readers of these papers were so situated that they could not secure prompt access to papers served by the AP. The prohibition of the foreign governments might as well have been extended to the channels through which news was supplied to the more than a thousand other daily papers in the United States not served by the AP; and a large part of their readers may also be so located that they cannot procure prompt access to papers served by the AP.
A Legislature, urged to enact a law by which one news agency or newspaper may prevent appropriation of the fruits of its labors by another, would consider such facts and possibilities and others which appropriate inquiry might disclose. Legislators might conclude that it was impossible to put an end to the obvious injustice involved in such appropriation of news, without opening the door to other evils, greater than that sought to be remedied.
Courts are ill-equipped to make the investigations which should precede a determination of the limitations which should be set upon any property right in news or of the circumstances under which news gathered by a private agency should be deemed affected with a public interest. Courts would be powerless to prescribe the detailed regulations essential to full enjoyment of the rights conferred or to introduce the machinery required for enforcement of such regulations.
Considerations such as these should lead us to decline to establish a new rule of law in the effort to redress a newly disclosed wrong, although the propriety of some remedy appears to be clear.
1. Why doesn't the Supreme Court cite any statute under whose authority it is adjudicating this controversy?
Each of the three opinions states that AP has no copyright, and one mentions that AP concedes the correctness of the insistence by INS that there is no copyright in the facts contained in news reports.
How did the Supreme Court come to legislate a general commercial law defining unfair commercial practices and devising remedies against them? Whence the equitable powers invoked here? See generally Erie Railway Co. v. Tompkins, 304 U.S. 64 (1937). Could the Supreme Court adjudicate a new INS v. AP tomorrow? What of § 43(a) of the Lanham Trademark Act (15 U.S.C. § 1151(a))?
2. Consider this statement of the Court:
Although we may and do assume that neither party has any remaining property interest as against the public in uncopyrighted news matter after the moment of its first publication, it by no means follows that there is no remaining property interest in it as between themselves.
What kind of property interest could you have against A ("as between themselves"), but not against others in general? Can there be a relational property interest?
3. Consider this statement by the Court:
The rule that a court of equity concerns itself only in the protection of property rights treats any civil right of a pecuniary nature as a property right; and the right to acquire property by honest labor or the conduct of a lawful business is as much entitled to protection as the right to guard property already acquired.
What does that mean?
I want to advertise in your elitist, ultra-fastidious newspaper, to obtain the trade of your wealthy readers. You refuse to sell me advertising, and I enjoy less business than I would have--but for your obstinacy and attitude. Have I a legal right against you to further my efforts to acquire property by honest labor or the conduct of a lawful business?
Suppose that you operate a sausage factory and I operate a grocery store. I want you to sell me sausages and you won't do it.
Have I a legal right against you to further my efforts to acquire property by honest labor or the conduct of a lawful business? Do my lawsuits survive a motion to dismiss for failure to state a claim? Does 35 U.S.C. § 271(d)(4) shed any light on this as to patented goods and services? What of copyright?
4. Does the rule stated that a court of equity treats any civil right of a pecuniary nature as a property right mean that an action to recover pecuniary damages caused by a breach of contract is an equity action, and one concerning a property right? What about torts, such as slip and fall, if pecuniary relief is sought? Are they equity actions concerning property rights? Is the Court's rule one about what constitutes property in the general sense of that term? If not, what?
5. What is quasi property? How does it differ from property? Are there quasi torts? Do you get quasi damages if you win one of these cases, or just a quasi injunction? Is quasi property what you have if a court decides that it is a quasi legislature? What does Brandeis say?
6. The misappropriation doctrine, related state law claims of unfair competition, conversion, deceit, and other torts are sometimes pleaded as added counts in patent and copyright infringement suits. The district court may entertain them under its supplementary or pendant jurisdiction. It has been suggested that the misappropriation doctrine be expanded to provide protection for data bases and other material that is ineligible for, or given "thin," copyright protection. See Dennis Karjala, Misappropriation As A Third In-tellectual Property Paradigm, 94 Colum. L. Rev. 2594 (1994). For a more critical view of the viability of misappropriation analysis, see Leo J. Raskind, The Misappropriation Doctrine As A Competitive Norm of Intellectual Property Law, 75 Minn. L. Rev. 875 (1991); see also Richard H. Stern & Joel E. Hoffman, Public Injury and the Public Interest: Secondary Meaning in the Law of Unfair Competition, 110 U. Pa. L. Rev. 935, 966-971 (1962)(arguing that misappropriation doctrine is anticompetitive and too vague to serve any predictive function).
Assuming that copyright law will protect neither, are data bases and ideas on a par for this purpose?
7. Misappropriation and comparable state law claims may now assume a primary role in challenging state governments and their subdivisions for patent and copyright infringement. Under the Supreme Court's decision in Florida Prepaid Postsecondary Education Expense Bd. v. College Savings Bank, 527 U.S. 627 (1999), the Eleventh Amendment prevents such suits in federal court, notwithstanding express congressional attempts in 35 U.S.C. §§ 271(h) and 296, to abrogate such state sovereign immunity. (The subject matter of CSB's patent was a financial-analysis computer program.) It then became a foregone conclusion that 17 U.S.C. § 501(a), in which Congress sought to abrogate state sovereign immunity from suit for copyright infringement, would also be held unconstitutional on the same basis. See Chavez v. Arte Publico Press, 204 F.3d 601 (5th Cir. 2000); Rodriguez v. Texas Comm'n, 199 F.3d 279 (5th Cir. 2000). Federal courts now have exclusive jurisdiction of patent and copyright infringement actions. 28 U.S.C. § 1338(a).
IEEE Micro, Feb. 1987, at 73
Richard H. Stern
Legal reasoning does not typically involve the piece-by-piece construction of a conventional physical sciences model. You do not have a series of premises, axioms, or fundamental equations from which are derived theorems, subsidiary propositions, or the like. Instead, legal reasoning proceeds by a struggle between competing analogies — a very different kind of model building. A new problem arises--let us say the development during the lndustrial Revolution of factories spewing forth noxious gases and other waste products. Neighboring land owners are offended by the stenches and effluvia. Therefore, they bring the matter before the legal magistrates of the time, despite the fact that then current legal institutions have never dealt with factories belching forth noxious materials.
What to do?
One possibility, which would be championed by factory owners, is simply to say that factory owners may do whatever they choose on their own private property, because in a free society a man's home (here, his factory -- note the elision from home to factory) is his castle. Another possibility is to say that noxious fumes from factories are like wild beasts that escape from a game park; that the law is well settled that a person who maintains lions, tigers, and other dangerous wild beasts on his premises is liable to all of those harmed if a wild beast escapes and proceeds to savage passersby; and therefore, the factory owner is liable for any harm done by his fumes (for by now we have progressed from saying that the factory fumes are like wild beasts to the mythic stage where they are wild beasts, for legal purposes).
Which myth carries the day: The myth that a factory is the factory owner's home or the myth that a factory is a game park in which wild beasts are kept? Answering that question may take us from the realm of legal mythology to that of legal sociology. And that is not my point. The point is merely to illustrate how legal reasoning operates, which is in terms of analogy and myth. The model-making process is mythic, rather than inductive.
To proceed by analogy (why not, in this context?), suppose a tribe of early men are sitting around the cave devising cosmological models for agricultural prediction purposes. One says, "The sun is a fiery dragon flying across the sky and seeking food to devour." Another says, "No, the sun is a big lamp on a wagon pulled across the sky by our dead great-grandfather." Which myth prevails? Hard to say.
Legal mythic models present similar difficulties of choice among themselves. A Yale law professor, who then went on to become the assistant attorney general in charge of the Antitrust Division of the Justice Department, wrote a whole book on legal mythology, including that of the antitrust laws which he then considered a charade intended merely to placate the public. (He called his book The Folklore of Capitalism.)
One of my favorite legal myths is the one that a computer program is a kind of book--such as a novel or a play. Therefore, it is said, we should treat computer programs like books. No one should copy them for 75 years, and if some miserable wretch does copy a program, the whole legal arsenal of copyright law should be fired at him: injunctions, damages for diverted sales, payment of all profits attributable to the infringement, seizure and destruction of offending copies, and imprisonment for a willful offense.
And what does it mean to copy a program? Why, whatever it means to copy a play! Thus, since we protect Romeo and Juliet against more than literal word-for-word copying, we must likewise protect computer programs against more than bit-for-bit copies of the code. We protect the plot of Romeo and Juliet, paraphrases of its dialogue, translations, adaptation into motion-picture or musical form, and perhaps a large penumbra around all of that--we may even protect the "look and feel" of Romeo and Juliet. By the same token, therefore, we must protect software proprietors against paraphrases of the "plot" of a computer program, paraphrases of its code, adaptations of the program for different microcomputers, appropriation of its user interface, menus, and in general its "look and feel."
The Americans are not alone in this type of myth-making. The English even go us one better. Under their mythology, an automobile tail pipe can be a book, for copyright law purposes. ln the United States and most other countries, a copyright in a drawing of an object (other than an architectural drawing of a structure) does not give the copyright owner any particular rights with regard to the depicted object. I may have a copyright in my drawing of a bridge, a dress, or a pair of socks (to mention a few actual US cases), but the copyright gives me no monopoly over the manufacture or sale of the depicted bridges, dresses, or socks.
That is not how it operates in the United Kingdom, however, or in former dominions still following its law. Under their copyright rules, the owner of copyright in a blueprint or other technical drawing has the exclusive right to make and sell the depicted object. Thus, under this theory British Leyland Motors was entitled to prevent spare-parts makers from competing with Leyland in the sale of replacement tail pipes for Leyland cars. Although the tail-pipes judgment was reversed in the House of Lords on an obscure property-law ground, other decisions (including one in the House of Lords) have upheld the right of manufacturers to invoke copyrights in the drawings of their products to prevent competitors from selling similar products.
(I had a case like that myself, once, in which we prevented a US competitor from selling our client's box-making machines in the UK. We relied on the copyright in our blueprints. Of course, we could not get that kind of relief against the same competitor in the US. And our US patent was not any good either, so we sued him in the US for misappropriation of trade secrets.)
Thus, in the UK and Australia, a semiconductor chip appears to be a book for copyright-law purposes. That is, a chip is protected against second-sourcing by the copyright that the UK and Australia recognize in the technical drawings for the chip. That theory was tried in the US also, but it never succeeded. Accordingly, the US semiconductor industry got Congress to pass a special law protecting chip layouts -- the Semiconductor Chip Protection Act. Interestingly, the report in the House of Representatives on the chip law expressly states that the layout of a chip "is not a book," and goes on to reject the idea that copyright law should be directly applied to chips. That is one of the few documented refusals of our legal institutions to operate on the accepted principles of legal mythology.
Legal mythmaking can at times entrap the mythmakers into odd dead ends or cul-de-sacs of law. Sometimes mythologists get so entangled in the dialectic of their myth that they cannot extricate themselves from it. It is like birdlime. In fact, the myth may operate to prevent any sensible resolution of problems that develop as the subject matter addressed by the myth evolves. For example, central to the metaphysics and ideology of US and UK copyright law alike is the (imagined) distinction between idea and expression. The fundamental differences between copyrights and patents are thought to derive from this distinction.
Copyright is said to protect the expressions of ideas but not the underlying ideas themselves. Hence it is also said, no harm results to the public from a long-term exclusive right in the subject matter of copyright. Since ideas have many possible expressions, persons other than the copyright owner are free to express the same ideas in many other ways. By the same token, no harm results from the grant of a copyright, or its automatic coming into existence upon creation of a work, without any examination by experts for its technical merit or degree of advance over the work of others in the field, as would be required for the grant of a patent or other industrial property right. Idea and expression are thus central and fundamental to copyright metaphysics, ideology, and mythology.
Actually, it must be conceded that the idea/expression distinction has served us fairly well in a multitude of cases involving books, plays, and other traditional subject matter of copyright. But it does not help us determine whether it is a good or bad notion to protect computer program user-interfaces, icons, metaphors, menus, screens, instruction sets, languages, algorithms, flowcharts, dataflow patterns, and other noncode computer-program paraphernalia in some way and to some extent from unlimited competitive appropriation. The distinction is also unhelpful when trying to decide whether similarly to protect "blown" programmable logic devices.
In the first place, it may be possible to distinguish idea and expression in the case of poems, novels, and plays, and perhaps even to understand what we mean by those terms in a literary or artistic context. But it is by no means practical to distinguish idea and expression in computer programs, and it is probably extremely optimistic even to think that we know what the terms mean when applied to computer software-related subject matter (what I have termed computer-program paraphernalia).
The myth that a program is a book ends up by helping software publishers suppress pirates of mass-marketed software (such as word processor programs and games), and perhaps by helping mainframe manufacturers keep emulator manufacturers from using the operating system under which the installed base of applications software runs, thereby preventing customers from being diverted to the emulators.
Doubtless both of these are worthwhile and socially beneficial projects. But the same myth keeps us from rewarding the creators of new instruction sets, languages, algorithms, and the other valuable ideas that fuel software progress. It even stands in the way of giving file-deletion icon creators their just rewards.
What is a property right? How do you recognize one when it confronts you (or vice-versa)? Where do property rights come from? Or how do they arise? Is property suitably analyzed as a unitary concept? Is intellectual property of a piece with other property? Are rights in computer software just like any other intellectual property rights? Has "property" mythic potential?
Link to section C of chapter 1
Return to Table of Contents