Articles

Sovereign Immunity: Supreme Court Rulings Affect Copyrights

By Robert Clarida

Sep. 17, 1999

This past June, a 5-4 majority of the U.S. Supreme Court decided two non-copyright cases which will almost certainly have significant consequences for copyright owners. These cases, Nos. 98-531 (Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank) and 98-149 (College Savings Bank v. Florida Prepaid Postsecondary Education Expense Board) (collectively "College Savings Bank v. Florida" or "CSB") raise the constitutional issue of state sovereign immunity under the Eleventh Amendment, i.e., whether and how a state can be sued for a violation of federal law, such as the Copyright Act. Although College Savings Bank analyzed the question under federal patent and trademark statutes, the Court's sweeping decisions in favor of state immunity appear to mean that any state instrumentality, such as a state university, hospital or tourism bureau, can now freely infringe copyrighted works as well. This column will place the Supreme Court decisions in a copyright context, describe the Court's majority reasoning, and offer some conclusions about what the decisions could mean in practical terms for copyright owners.

Prior History: § 511(a) and Chavez v. Arte Publico

The Eleventh Amendment to the U.S. Consitution provides: "The Judicial Power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State." For over a century, the Supreme Court has interpreted that language as barring any federal action against a state without its consent, regardless of the plaintiff's citizenship.

In 1990, Congress recognized that copyright infringement by a state institution, such as UCLA, should not be treated any differently than infringement by a private institution, such as USC, particularly when institutions of both types were reaping the benefits of the copyright laws through revenue-generating enterprises such as publishing houses and television production.

Accordingly, Congress passed the 1990 Copyright Remedy Clarification Act, which provided in part that states "shall not be immune, under the Eleventh Amendment of the Constitution of the United States or under any other doctrine of sovereign immunity, from suit in Federal Court . . . for a violation of any of the exclusive rights of a copyright owner." In 1992, similar provisions were written into the Lanham Act (106 Stat. 3567) and the Patent Act (35 U.S.C. §§ 271(h), 296(a)). Since 1990, however, the clear statutory language of § 511(a) has effectively been nullified by a series of appellate and Supreme Court decisions which set the stage for the high Court's recent rulings in College Savings Bank.

In 1995, the Fifth Circuit in Chavez v. Arte Publico Press, 59 F.3d 539 (5th Cir. 1995) upheld § 511(a) and concluded that, notwithstanding the Eleventh Amendment, a district court had properly heard a copyright infringement action against the University of Houston. Congress could require states to waive their Eleventh Amendment immunity, held the Chavez court, pursuant to a legitimate exercise of Article I power, as under the Copyright Act. (Both the Copyright Act and the Patent Act derive from Article I, Section 8, of the Constitution; the Lanham Act is based on the Commerce Clause of Article I. All three statutes are therefore grounded in Article I powers).

Relying on Parden v. Terminal R. Co. of Ala. Docks Dep't, 377 U.S. 184 (1964), the Fifth Circuit held that because the University ran a publishing business, claiming the protections of the Copyright Act, it had waived its sovereign immunity by implication. The Supreme Court granted certiorari in the case and, in light of its decision in Seminole Tribe of Florida v. Florida, 116 S. Ct. 1114 (1996), remanded to the Fifth Circuit for further proceedings. Briefly, Seminole Tribe held that the Indian Commerce Clause, another Article I power, did not authorize Congress to override a state's Eleventh Amendment immunity. Only the Fourteenth Amendment, which prohibits the deprivation of "property" without due process of law, could serve as a valid basis for abrogating sovereign immunity. When the Fifth Circuit revisited Chavez in April of last year, 139 F.3d 504, it therefore read Seminole Tribe as foreclosing the "implied waiver" theory of Parden and also refused to recognize copyrights as a form of "property" which could be protected under the Fourteenth Amendment. That decision effectively nullfied § 511(a) of the Copyright Act.

Almost six months later, in October 1998, a dissent was filed in the Chavez case, which led to a rehearing en banc scheduled for January 1999. Before the argument on rehearing could be held, however, the Supreme Court granted certiorari in the two College Savings Bank cases, causing the Fifth Circuit to hold its Chavez argument in abeyance until further guidance from the Supreme Court was forthcoming. On June 23, the Supreme Court provided that guidance, handing down the two College Savings Bank decisions.

College Savings Bank

In one College Savings Bank case, No. 98-531, the Court decided the fate of a Federal Circuit decision subjecting states to liability for patent violations, with the bank arguing that patents are "property" eligible for Fourteenth Amendment protection. In the other College Savings Bank case, No. 98-149, the bank sought to reverse a Third Circuit decision which exempted states from Lanham Act liability for misleading advertising under § 43(a). In both cases, federal "remedy clarification" statutes authorizing suits against state governments, similar to § 511(a) of the Copyright Act, were held to be unconstitutional.

Chief Justice Rehnquist, writing for a conservative majority which also included Justices Scalia, Thomas, Kennedy and O'Connor, began the Patent Act decision by noting that the State of Florida had not expressly consented to suit. Further, as explained more fully in the second of the Court's CSB decisions, discussed below, the "implied waiver" theory of Parden was no longer good law in the wake of the Seminole Tribe. Thus, determining the constitutionality of abrogration under the Patent Remedy Clarification Act required the court to examine only two fundamental issues: (1) whether, in passing the legislation, Congress unequivocally expressed its intent to abrogate state immunity, and (2) whether it acted pursuant to a valid exercise of power under Seminole Tribe.

The first of these issues was easily resolved, because Congress clearly stated an intent to abrogate; indeed it "could not have been any clearer" on the issue. The Chief Justice went on to note that regardless of its intent, "[w]hether Congress had the power to compel states to surrender their sovereign immunity for these purposes, however, is another matter" (emphasis added).

Because it is grounded in Article I of the Constitution, the Patent Act clearly provides no basis for abrogation under Seminole Tribe. But even as it eliminated Article I, Seminole Tribe also reaffirmed the Fourteenth Amendment's enforcement clause as a possible basis on which Congress may validly abrogate the states' Eleventh Amendment rights. The question for the Court in CSB thus ultimately reduced to whether the Patent Remedy Clarification Act could properly be read as an exercise of Congressional power to "enforce, by appropriate legislation" the due process guarantees of the Fourteenth Amendment, including the right to be protected against deprivations of "property" by the states.

The Senate report on the legislation specifically noted that courts had upheld patents as a form of property, and that the statute was "justified as an acceptable method of enforcing the provisions of the Fourteenth Amendment." Even this explicit statement of intent was not sufficient for the CSB majority, however. The Court reasoned that because the Fourteenth Amendment is remedial in nature, Congress cannot simply declare the Amendment to be the basis for its authority to legislate. It must also affirmatively identify a pattern of state conduct which deprives persons of their property, and must tailor its legislation to prevent or remediate such conduct.

The Act in question was neither remedial nor preventive under this standard, held the Court, because Congress had not identified "a history of widespread and persistent deprivation of Constitutional rights" which it sought to address in passing the legislation. Further, the Court noted that patent infringement by the states violates the Constitution only where the states themselves provide no adequate remedy, and Congress "barely considered the availability of state remedies" when adopting the measure. Instead, the primary motives for the legislation appeared to be national uniformity and convenience, found the Court, which are valid rationales under Article I but which are insufficient to bring the legislation within the purely remedial ambit of the Fourteenth Amendment.

Accordingly, the Court concluded that the abrogation provisions under the Patent Remedy Clarification Act "are so out of proportion to a supposed remedial or preventive object that they cannot be understood as responsive to, or designed to prevent, unconstitutional behavior."

Writing for the same narrow majority, Justice Scalia was even less charitable regarding the Congressional abrogation of states' Eleventh Amendment rights under the Trademark Remedy Clarification Act. Again stressing the remedial nature of the Fourteenth Amendment, the Court held that the asserted property interests here, i.e. the right to be free from false advertising under §43(a) and the right to conduct one's business without state interference, are simply not "property" in any Constitutional sense because they do not involve a right to exclude. Although Justice Scalia observed that other Lanham Act rights, such as the right to enforce exclusive ownership of a trademark, may rise to the status of a Constitutional "property" interest, it appears that a claim resting on false advertising alone cannot be a valid ground on which to base any Congressional abrogation of state immunity, even under the Fourteenth Amendment.

Thus, the only possible way to sustain the petitioner's claim in CSB would be for the Court to hold that the state had constructively waived its immunity by engaging in federally regulated commercial activity, under the Parden doctrine.

The Court's answer to this argument was equally blunt: "Parden stands as an anomaly in the jurisprudence of sovereign immunity and indeed in the jurisprudence of Constitutional law. Today, we drop the other shoe: Whatever may remain of our decision in Parden is expressly overruled." The details of the Court's reasoning on this point, and the fascinating rejoinders offered by the dissent, are beyond the scope of this column, but the ultimate outcome is clear: until a new Court majority arises, the Trademark Remedy Clarification Act, like the Patent Remedy Clarification Act, is a dead letter.

Copyright Implications

What are the copyright implications of all these developments? Until the Fifth Circuit speaks again on Chavez and Congress has a chance to respond, the question is admittedly a matter of speculation, but the following consequences appear more likely than not:

First, like patents and trademarks (but apparently unlike false-advertising injuries) copyrights are probably a form of "property" which Congress could, in theory, protect under the Fourteenth Amendment. Second, notwithstanding the possibility of protecting copyrights under the Fourteenth Amendment, §511(a) of the present Copyright Act will almost certainly suffer the same fate as the statutes in the CSB cases. Justice Stevens' dissent in the patent decision observes at footnote 9 that there may be "hope" for § 511(a) based on its more comprehensive legislative history regarding infringement by the states, but even this faint glimmer of hope is premised on the unlikely hypothesis "that a majority of this Court finds this factor dispositive."

Third, properly "remedial" legislation by Congress must be preceded by a strong Congressional record establishing that state infringement rises to the level of a significant national problem. Fourth, the glacial pace of expected Congressional activity between now and the next election cycle probably means that even under conditions of rampant state infringement, copyright owners will be without an effective remedy until at least January 2001.

Fifth, even if the states were inclined to provide their own remedies for state-conducted infringement, as the Chief Justice suggests, they may not have the power to do so because all state-created rights equivalent to copyright protection are expressly preempted under § 301. Sixth, the federal courts have exclusive jurisdiction to hear copyright claims, so action in a state forum, even under some (hypothetically valid) state law, would probably be precluded as well.

Seventh, the states could always expressly waive their Eleventh Amendment rights with respect to copyright claims, but are unlikely to do so, at least to the extent that they stand to benefit from their new status as invulnerable infringers. Walter Dellinger, currently of Duke Law School, recognized this fact shortly after the CSB decisions were handed down, joking in a radio interview that he planned to run for governor of North Carolina on a platform of abolishing taxes and making up for the revenue shortfall by selling knock-off merchandise. Few states if any will be so flagrant in exploiting the change in the law, but even fewer will deprive themselves of the potential windfall which the Supreme Court has just handed them.

CONCLUSION

The practical consequences of these recent decisions by the Court could be significant. For example, the people who brought us the "I Love New York" ad campaign may be able to get away with using copyrighted songs, movie excerpts, cartoon characters, etc. gratis in their next effort; or a state research hospital might blithely photocopy entire issues of copyrighted scientific journals without taking a license; or a state tax department might simply copy accounting software rather than buying legitimate copies. These nightmare scenarios may never come to pass on the broad scale which some fear, but the mere fact that the Supreme Court has made it possible to foresee them has many copyright owners calling their lobbyists.

Copyright© 1999 Cowan, Liebowitz & Latman, P.C.
This article was previously published in the New York Law Journal.

Robert J. Bernstein is a member of the New York law firm of Cowan, Liebowitz & Latman, P.C. and a frequent author and lecturer on copyright law and litigation. He is currently Vice President of the Copyright Society of the U.S.A., and formerly served as Chairman of the Copyright Law Committee of the American Intellectual Property Law Association and as a member of its Board of directors.

Robert W. Clarida is an associate at the New York law firm of Cowan, Liebowitz & Latman, P.C. , and speaks and writes frequently on copyright law. He is the co-author, with David Goldberg, of "Recent Developments in Copyright," a review of copyright decisions delivered each year at the annual meeting of the Copyright Society of the U.S.A.

David Goldberg, the regular co-author of this column, is on vacation.

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