University of Houston Law Center Faculty Blog

Drilling Down Into Gov. Palin's Energy 'Experience'

Vflatt@central.uh.edu (Victor Flatt) — Wed, 10 Sep 2008 09:17:35 -0600

Say what you will about the selection of Alaska Governor Sarah Palin for the Republican Vice Presidential slot, but one inarguable fact remains: she is the only candidate on either ticket with direct energy policy experience. Palin spent one year as chairwoman of the Alaska Oil and Gas Conservation Commission, and as governor of Alaska she has received positive reviews for her work on energy issues ranging from natural gas pipeline construction to patchy statewide shortages of energy. But if she winds up as our Vice President, her Alaskan energy experience might help send our nation’s energy policy in exactly the wrong direction.

In terms of energy, Alaska is not like Texas or any other state; in fact, its closest parallel may be Saudi Arabia. Alaska’s very survival depends on oil and gas, with exploitation of fossil fuels currently accounting for more than 80% of the state’s revenues. Energy underwrites the annual payments that every Alaskan receives, and it is the primary source of jobs and property taxes in isolated native villages, particularly in the Arctic.

When Alaska was first considered for statehood, many feared “Seward’s Folly” would become a net drain on U.S. resources because it would never produce enough revenue to properly serve its residents. All of that changed, of course, with the discovery of large oil and gas reserves within the state’s borders. While there have been periodic attempts to diversify the state’s economy away from energy, the truth is that Alaska today is more dependent than ever on the money generated by the energy industry.

The parallel to Saudi Arabia is striking. Alaska has reinvented itself from a poor and isolated subsistence economy into a petro-giant with shiny new buildings and revenue streams generated from natural resource extraction and exploitation (even though much of these revenue windfalls are collected elsewhere and do not benefit the state.) And just like Saudi Arabia, Alaska has failed to fully develop its human capital, depending instead on the “easy money” generated by fossil-fuel deposits and other exploitable resources. Hollywood and Jack London may like to paint Alaska as the last frontier for self-sufficiency, but the sobering truth about modern Alaska is that the state relies on buried resources rather than its human ingenuity.

Alaska’s other great resource – a unique and pristine natural environment unlike any in the world – is facing new pressures from the effects of climate change. As glaciers wither and permafrost warms, Alaskans have boxed themselves into a corner. At a time when hard choices must be made in the name of environmental preservation, the state knows it must put the interests of energy exploration and exploitation above all others. Without the energy industry, Alaska would falter or fail – and every Alaskan politician understands and subscribes to this point of view.

It is probably unfair to fault modern Alaska for past decisions that have fostered the state’s addiction to the “easy” money generated by the energy industry. At the same time, it is equally unfair for the rest of these United States to continue to feed the cravings of our northernmost citizens. At stake, quite literally, are the environment, national security and economy of these United States. Rather than expanding our nation’s dependence on a resource that will become increasingly scarce, we must focus on increased conservation and cost-effective alternative sources of energy. Fossil fuels will necessarily remain part of our mix for years to come, but an energy perspective that hinges only on continued drilling cannot promote sustainable long-term policy. The bottom line is clear: we must start now if we are to change our energy direction away from the planet’s steadily decreasing supply of fossil fuels.

Governor Palin may have energy experience, but it is simply the wrong kind of experience for a leader charged with securing a prosperous future for our nation as a whole. As hard as it may be for Alaskans (and, by extension, their governor) to swallow, we must find a way to end our dependence on fossil fuels and pursue policies to promote the energy independence that will ensure the continued prosperity of all 50 states.

Copyright content providers lose control of DVR market

RNimmer@uh.edu (Ray Nimmer) — Mon, 08 Sep 2008 09:58:07 -0600

Who should derive revenue from remote DVR systems? According to a panel of the Second Circuit Court of Appeals, the revenue should not go to the content providers. This decision, grounded in three very narrow interpretations of the Copyright Act, works a shift of potentially significant revenue away from content providers. Hopefully, it will be challenged and reversed on rehearing.

The case seemed simple for the content providers, but with judicial panel sympathetic to the other side it became what is a potential nightmare for copyright owners in digital environments.

A recurring issue today in court is who control or has an advantage in the newly emerging digital and elated markets. Are technologists like Google in control with a right to use any content any time without permission, or do we still value the content creators? This is not a philosophical issue and the combatants are not professors or mavericks. They are large companies with billions of dollars at stake. This is the era of the information wars.

In the Cartoons case, Cablevision implemented a remote DVR system, allowing customers to select, store, and later play cable broadcasts. In the system, when cable programs are received by Cablevision, they are routed through a buffer (buffer 1) and copied briefly while software checks if any customer had requested copying of the program for later replay. If there was a request, the program would be copied into a server (buffer 2) and held for later viewing by the customer. When the customer later desired to watch the program, the DVR system delivered a performance to the customer’s home video. Variations of this system are widespread in the cable market and are a robust competitor to home recording systems.

Cablevision did not ask for licenses from the content (program) providers for copying their programs or publicly performing them at times other than the original transmission. It simply implemented the system and charged customers who desired to use it.

The Second Circuit concluded that this was fine – a major corporation (a cable company) could reuse another company’s copyrighted product without permission or payment. This was a complicated decision, but fundamentally, a choice by the panel to turn potentially billions of dollars away from the creative parts of the industry to those who copy and retransmit. It was a wrong decision.

First, the panel held that copying was not copying if the copied image lasted for only a second or two. So, the entire line of cases started in the Ninth Circuit’s MAI decision remains intact, but now seems to become a question of ….. I do not know what.

Second, the full content was copied into buffer 2 by Cablevision’s system. But, no, cablevision who charged for this service, did not make the copies – the customers did – at least if you believe the panel of he court!

Strike 2.

Strike 3 is when the court held that, when the customer who caused the copy to be made, eventually asked for it to be performed in the customer’s home – this was not a “public” performance.

This may be among the worst appellate court decisions in copyright law history.

Taking Environmental Laws Seriously: North Carolina v. EPA

Vflatt@central.uh.edu (Victor Flatt) — Wed, 06 Aug 2008 10:33:08 -0600

Many environmental organizations were stunned recently when the D.C. Circuit vacated the EPA’s implementation of the Clean Air Interstate Rule (“CAIR”) in North Carolina v. EPA. According to the Court, the CAIR failed to follow Clean Air Act (“CAA”) statutory mandates.

This rule, which for the first time seemed to put teeth into the CAA’s requirement that states not contribute to other states’ unhealthful levels of pollutants, was judged inconsistent with specific requirements of that section of the statute, 42 U.S.C. Sec. 7410(a)(2)(D)(i)(1).

Since the CAIR seemed poised to produce actual reductions in harmful pollutants, which could save 17,000 lives annually, the dismay is understandable. After all, prior EPA enforcement of section 7410(a)(2)(D)(i)(1) was woefully inadequate, leaving many states in situations where it was almost technically impossible for them to meet the CAA’s requirements within their state. And this was the only Bush EPA action that had received broad support from environmental and public health organizations. Nevertheless, as the D.C. Circuit reminds us, “all the policy reasons in the world cannot justify reading a substantive portion out of a statute.”

The DC Circuit correctly noted that under Sec. 7410(a)(2)(D)(i)(1), the EPA could only approve states’ State Implementation Plans, or SIPs, if the plans insured that pollutant sources within that state did not cause significant pollution loads in other states. This reflects one of the prime reasons for a federal air pollution control law in the first place – the abatement and control of interstate pollution. Unfortunately, for a variety of reasons, both technical and political, this requirement lay dormant for most of the history of the Act. The evolving understanding of this problem finally led individual states to petition the EPA to make findings of “out of state contributions” as early as 1997, leading to the first real attempt of the EPA to address this important issue.

Over the evolving attempts to do so under both the Clinton and Bush administrations, the DC Circuit has been consistent in its requirement that the EPA hew to specific statutory language in the Act, while also exhibiting a high degree of deference to specific agency scientific and technical findings of contribution. Thus, in Michigan v. EPA and in Appalachian Power Company v. EPA, the DC Circuit broadly upheld the EPA’s findings that specific sources were causing downwind non-compliance, and even upheld a somewhat novel use of cost reduction analysis to allow the EPA to make this determination on a wider and broader scale.

These prior decisions and current vogue of pollutant trading systems led many to believe that the DC Circuit would approve a broad trading system as a solution to the interstate problem. A broad trading system, like CAIR, however, fails to meet the requirements of the section at issue because it doesn’t pinpoint which sources cause downwind state non-compliance, nor does it require those sources to make the reductions necessary to return downwind state compliance. Though CAIR clearly would make improvements in overall air quality in the Eastern United States, thus meeting several of the overall goals of the CAA, it fails to do so in the way that takes account of all values at issue in the CAA. As North Carolina correctly noted, the CAA not only requires overall air quality to be improved, but mandates improvements in specific areas that are being harmed by out of state sources. It is not enough to improve the air quality in the Washington D.C. metro area, if Charlotte, North Carolina is still being inundated with pollutants from upwind states. Moreover, the competitive economic advantages and disadvantages of states struggling to meet their CAA requirements while protecting the health of their citizens (in other words, the federalism and sovereignty issues) are mostly ignored by a rule like CAIR.

Not having a shortcut like CAIR makes for a harder administration of this CAA provision to be sure, since it requires the EPA to focus on and reduce sources on an individual basis. But the DC Circuit in Michigan and Appalachian Power has shown a great degree of deference as to how this can be accomplished, and what evidence can be used to make this finding. While this means that some reductions will surely take longer without CAIR, it needn’t delay real health improvements if the agency acts quickly to make requested findings on upwind sources and is willing to impose a Federal Implementation Plan (or “FIP”) on non-compliant states.

While environmentalists were understandably thankful that CAIR seemed to represent some significant pollution reductions, the method of avoiding legislative specificities in this case are simply part and parcel of the Bush Administration’s attempts to accomplish its policy goals without following the legalities of the CAA. Just because the result would have been “better” in this case than in the Administration’s Mercury rule or New Source Review Routine Maintenance and Repair Rule, doesn’t make its use less dangerous. This case reminds us again that the statutory mandates of our environmental laws are important, and that an individual administration cannot simply change or alter them on its whim. The complexities of pollution reduction and accompanying issues of health and economic development require that policy choices be made in the appropriate arena, the legislature. If our policy provisions in the current CAA are unworkable, let us explore changing them there.

This case should also remind us, as we focus on the big issue of climate change, that we still have work to do on more traditional pollution control. Perhaps this will lead to a truly integrated and thoughtful debate on these intertwined issues in the next administration.

(Note: this opinion editorial first appeared in JURIST. -VF)

Why have a Bar Exam? One Inductee's Appraisal

DBush@central.uh.edu (Darren Bush) — Wed, 06 Aug 2008 10:03:30 -0600

Legions of aspiring lawyers recently sat for licensing exams administered by their respective state bars. Was it worth the effort? Here's my take.

My very first client after law school posed an interesting question. She was a creditor who was unsure as to whether she was a secured creditor. She wanted me to find out where she stood in a priority dispute against other creditors, who may or may not have been secured, and a trustee in bankruptcy. She gave me some facts (about a half page’s worth) and refused to answer any questions. Moreover, she wanted me to give her the answer to her problem within a half-hour (she was apparently worried about over-billing), and forbade me from consulting the statute, reading any security agreements, or doing anything else a competent UCC lawyer might do. I nonetheless responded, telling her some of the issues, without reading the UCC, without reading the security agreements, and without having much idea about UCC law.

But before you report me to the ethics committee for violations of various duties, keep in mind that my conduct was fully sanctioned by the Bar. After all, my client was a mythical one and I was a potential lawyer existing only on the pages of the bar exam.

I have been haunted since the bar exam by a nagging question: What was the point of the exam? I had spent roughly $1400 in application fees and bar review courses and who knows how many hours in preparation for the exam. In addition, since I was teaching a class at the time, I no doubt traumatized my students as well. While I knew the chances of failing the exam were slim, given the 93% pass rate, I did not want to be in the minority that did not pass. So, I spent a great deal of my few remaining days of freedom studying for an exam whose purpose was elusive to me.

After answering the first essay exam question (the UCC one posed above), I had concluded that the bar exam’s purpose was to teach young lawyers to violate ethical standards, skimp on research, and give bright-line answers to questions that may have no bright line rules. Clearly, this was not the intended goal of the bar exam. But, then, what is the goal?

I submit that the Bar Exam, as currently formulated, has no clear goal. Alternatively, if there is a clear goal that I am missing, then the goal is probably redundant to goals supposedly achieved in law school. Insofar as the exam adds nothing new to the formula, it should either be waived for law students who have demonstrated their competence in law school or it should be changed so that it fulfills a more useful, non-redundant purpose. As an added bonus, law students would save money by not having to invest in bar preparatory courses that instruct them on how to take an exam that evaluates useless or redundant standards.

Possible Goals of the Bar Exam

I preliminary question must be: What are the goals of the bar exam? I submit four alternatives: (1) to test the student’s ability to spot issues, thus getting the student to think like a lawyer; (2) to test the student’s knowledge of basic law, including areas in which the student will never practice; (3) to increase the Bar’s coffers through bar application fees, and; (4) to restrict the number of lawyers and thus raise the wage level of attorneys in Utah.

The fourth possible goal is the easiest to eliminate in the case of states like Texas and Utah. Utah consistently has a pass rate above 80%, with Texas fairly close behind at 76%. Obviously, not many people are being eliminated from the market of attorneys able to practice in those states. Although I have no support for this, I suspect that those that do not pass may have not passed because they were having more pressing life issues at the time— not because they are incompetent. Nonetheless, a 20% fail rate is low. Thus, if the goal is anticompetitive, the Utah and Texas Bars are amazingly incompetent monopolists. In contrast, California and Puerto Rico are more successful at erecting barriers to entry, each having pass rates of less than 50%.

Similarly, the bar application fee does not appear to be a valid reason for the bar exam. After all, administering an exam is a costly process, forcing admissions personnel to take time out of their lives to: (1) escort test takers to the bathroom so the test takers don’t collude and (2) walk up and down the examination room to increase the anxiety of already nervous test takers. Paying attorneys to read the examinations is also a costly proposition. Clearly, a better alternative would be to require “initial” members to pay a $400 fee, and the fee would decrease after the first year. The fees would be more valuable because the costs of the fees (the bar exam) would be eliminated. Thus, fee acquisition does not appear to be a legitimate goal of the bar exam.

Perhaps a more compelling argument is that the Bar Exam tests whether students are capable of thinking like lawyers, spotting issues and providing legal analysis of those issues based on the facts, the law, and the policies and implications of the combination. This would be a compelling argument were it not for the fact that most bar applicants just spent three years practicing these same skills. What law student has not been asked: “What is the issue?,” either in a class or on an exam? If students cannot spot issues and write essay exam answers by the time they take the bar exam, how on earth did they pass their classes?

One possible answer is grade inflation. Because grade distributions are posted by professor, professors have an incentive not to fail people. If a professor failed students, the following class of students would be less likely to take that professor’s courses. The implication would be that the professors who fail students would eventually end up with class rosters of zero students, thus eliminating classes that the professor wished to teach. Moreover, no law student is going to tolerate a failing grade (because all law students are clearly above average and thus deserve grades no lower than an A-), and will thus challenge the professor. No professor needs the abuse, and a safer route would be to give the student a stern warning of the student’s lack of performance: Namely, a B+. The alternative, failing students, would cause many a law professor to be without congregations of students to whom they could preach, and tensions on law school faculties would rise as colleagues burst into each other’s offices and shouted, “what is the issue?”

An alternative answer is one I think the Bar would support: Namely, that certain Texas schools are of such good quality that most students from those schools can issue spot and write effective essay exam answers. If true, this would, by implication, mean that the people who do not pass are not from these Texas schools. But this does not support the need for a bar exam: It supports the argument that there should be no bar exam (at least for students hailing from Texas law schools). In other words, because Texas law students are quality “outputs”, they should be exempted from taking the Texas Bar, much like Wisconsin students are quality “outputs” and are thus exempted from taking the Wisconsin Bar. Non Texas applicants could take a bar exam to insure that they are able to spot issues and write essays.

However, the Wisconsin model presents some questions. First, what about reciprosity between states? If Texas does not have a Bar exam, then how are Texas students going to waive in to DC? I suspect that this is not an issue for the majority of Texas students. I would suspect that most Texas graduates remain in Texas. Those that do not could always take the bar exam along with the non- Texas applicants. But, if we believe that the bar exam serves some purpose, then we should not do away with it all together. Thus, we must look for another answer.

A final possible reason to have a bar exam is to test the applicants’ knowledge of basic law. Students in Texas get tested on approximately twenty-three different subject categories. Why stop there? Texas could have easily added Antitrust Law, Intellectual Property, Immigration Law, Labor Law, and so on. It seems arbitrary to add some topics and not others. You could argue of course, that certain classes have universal practicality: Evidence, for example. But this clearly is not true for family law, unless perhaps Texas lawyers have higher divorce rates than lawyers in other states and need to be prepared. While there may be many useful concepts learned in a course in family law, it does seem arbitrary to place that subject on the bar exam while excluding others.

The topics listed on the bar exam caused many students to only take courses which are covered on the exam. As a law student, I would many times ask my fellow students why they did not take course X, in which they were very interested. The answer was inevitably “the Bar,” and the need to have a background in one of the covered topics. Alternatively, many rebels only took course which seemed interesting, or took courses from professors who had actual teaching skills, or some combination of the two. These students sometimes paid dearly in the summer, as they would be forced to watch a paid BarBri lecturer from a law school which they did not attend outline the basics of the courses they did not take in law school. A more efficient method of accomplishing the same goal would be to require students to take law school classes in whatever the Bar wanted the students to study without forcing them to take an expensive review course in preparation for a needless examination. Eighteen weeks of class would provide a more in-depth examination of the topic than one day in Bar-Bri. And it would cost less. The drawback would be that students would be unable to take the courses in which they are interested, which would make the second and third years of law school much like the first. It would also dramatically impinge upon the academic freedom of the professor conducting the course, and foreclose opportunities for students who choose not to practice in areas tested on the bar exam.

Thus far I have only addressed the essay exam. But what about the multiple choice portion of the exam? Clearly, one has to spot the relevant issues and know the relevant law in order to distinguish between answer “D” and answer “C”. But how often are issues so clearly articulated in reality? Moreover, how often in reality would a new attorney be required to give a “yes” or “no” or some other finite, discrete set of possibilities off the top of her head? In addition, given the pervasiveness of bar review courses which guide students as to the pitfalls of various examiners’ trickery, the multiple choice portion fails to test anything other than how well BarBri prepared the student.

I may have overlooked some other, more noble goal. Perhaps the Bar Exam is a character building exercise to determine how students react under pressure. I can answer that quite simply: Whenever I was faced with time pressure on the muti-state portion of the exam, I chose “B.” I figured I would get 20% of the guesses correct, assuming a random distribution of answers. I have been unable to transfer this skill into my work at the Justice Department because I was never asked a multiple choice question. I suspect that the Bar Exam is equally poor at determining how other applicants react to time pressure.

A More Useful Exam

Given the current exam’s inability to test the applicant’s skills as a budding attorney, the logical question is how to create a more useful examination. Alternatively, perhaps we should rid ourselves of the exam altogether.

Again, eliminating the exam is not necessarily a bad idea: Most Texas bar applicants are Texas law school graduates wishing to stay within the state. Given the outstanding quality of Texas law schools, it may be wasteful to administer an exam. Thus, a model such as Wisconsin’s seems efficient in the case of Texas.

Another alternative is a one day “performance” based test. Many states have implemented performance tests as an addendum to the essay and the multistate exam. The performance exam as currently rendered consists of one or two 90 minute “skills” questions. Each applicant receives a case file and a library, and is assigned a task and must apply the research provided to them to perform the task. But the performance test is given after two days of “essay” writing and multiple choice. Since these two elements appear to be pointless, a more efficient exam could be administered.

I propose a one day, six hour performance examination. The applicants could be given two “cases”, complete with legal research (some of which would be useless while other portions applicable), a set of relevant facts, and a laptop in order to answer the question in legible font. The applicants could be given three hours per case. This would allow for more reasoned and thorough answers to determine the applicant’s ability to analyze facts and the law. This should be sufficient to determine whether the student is a good candidate for admission and should be permitted to take the vows in the priesthood, clergy or ministry of the legal profession. At the end of the examination, each student would receive a reprimand from his or her imaginary firm, stating that the student is not generating sufficient billables. I can think of no exam that could be more realistic.

But even this drastic proposal has one flaw: It fails to take the BarBri factor out of the equation. For those you who have not taken a bar exam in a while, BarBri is the leading bar preparation course. In every state, BarBri has former law students taking bar exams, memorizing questions, and then submitting the information to BarBri for compilation. BarBri knows what each state likes to test on, and structures its lectures accordingly. Most students sign up for BarBri, and each pays $2495 for the honor of sitting and listening to several law professors lecture on topics on which they have been paid to lecture. It is not unlike law school, except that the BarBri professors are often videotape. Many may no longer be with us in this life. Moreover, BarBri provides schedules to follow, tests to take, and other forms of preparation. BarBri is thus ever-present for most first-time examination takers. As the student representative will tell you your first year of law school, you are “so screwed” without BarBri. That’ll be $2495, please.

However, it would be hard for one to imagine how BarBri might prepare students for the performance test, especially if the substantive law changes consistently and randomly from year to year. Topics could be on any facet of law, since the only guiding force for the students would be the cases provided in their case files: Anything from Antitrust to Maritime law to Intellectual property could be asked. This would prevent BarBri from preparing the student in any way, except possibly that BarBri might teach the student how to write a memo. If the student did not learn that skill in law school, then she deserves to pay BarBri $2495 for the learning experience. Still, the performance test does not eliminate many of the administrative costs of the exam. Moreover, many students, out of fear, would continue to pay BarBri just to relearn how to write a memo the “BarBri” way.

A final alternative could be a return to the articling process. In the days of yesteryear, depending upon how far back one goes, budding lawyers studied for a year or more under the supervision of a more experienced attorney either just after leaving the farm, high school, college, or after graduating from a law school. These more experienced attorneys would work closely with the new lawyer, and would determine the new lawyer’s competency to practice law after a year. This articling method could work in Texas as well. New attorneys could apprentice either as a clerk for a judge, an associate in a law firm, or even in a government position. Their immediate supervisor(s) would write a letter to the Bar at the end of the year, commenting on the applicant’s ability to practice law.

There are two problems with this method, however. First, the articling system could be abused by senior attorneys, who could use it to force the candidate to be a slave with the explicit sanction of the bar (rather than do so implicitly by the present practice of imposing slavery by the device of calling the candidate an “associate”). Moreover, the training is likely to range from outstanding to wholly inadequate, or the useless by using the candidate as a runner for the supervising attorney or as office help in operating the copying machines, keeping the office clean and making sure the coffee is hot. There is even the risk that the candidate might be called an “intern,” and we all know what can happen to and by persons called interns. While a complaint process might be established to curb abuse and maintain some minimal level of competence of those who would train the young, the hassle of the bar doing so may be more than it is worth.

A second concern is that articling could result in a law firm not adequately training the candidate or simply passing along the incompetent to prey upon the public. It may be too much trouble to provide adequate training or to insure the less than competent do not become members of the legal profession. While the firm will likely not employ the unworthy candidate after the period of articling, some poor member of the public may well employ the candidate to their regret. On the other hand, the truly creative and independent candidate might find themselves at odds with the firm where they spend their year of servitude. Such a circumstance might deprive the public of a lawyer who will make a difference because the establishment does not often appreciate those who do make a difference.

Towards a more sane approach

The bar exam, in its current formulation, does little to determine whether the bar applicant is competent as an attorney. Instead, the bar exam fills the coffers of bar review course and unnecessarily inflicts emotional and financial distress on the applicants.

It is no answer to say that we have always done it this way (we haven’t) or that since we had to go through it, why shouldn’t the new applicants? Applicants shouldn’t be forced to endure the same pointless process as those endured by graduate students, pledges to fraternities, and new members of athletic teams.

Instead, the bar examination should fulfill some important purpose. Namely, it should determine which applicants are competent in the practice of law, and which are not. Given the unrealistic nature of the current examination, it cannot possibly fulfill that purpose. A performance exam without the useless essay and multiple choice portions of the bar exam would be a better, more efficient screening device. Failing that, an articling process might serve the same purpose, determining whether an applicant, after working in the “real world” for a while, is competent in the practice of law. If none of these approaches are appealing, then perhaps the bar exam should be banished from Texas for applicants hailing from Texas schools. We could presume that Texas applicants are competent and save the students thousands of dollars each in bar review courses. This would allow BarBri employees to find more useful work other than the taking of bar examinations and reduce the excessive levels of anxiety and monetary costs to applicants forced to watched videotaped lectures from professors both living and dead.

(fyi: a footnoted version of this opinion editorial, which I authored in 1998, will be supplied upon request. -DB)

Guns and Campuses: A Dangerous Combination

DBush@central.uh.edu (Darren Bush) — Mon, 28 Jul 2008 17:05:41 -0600

It is time once again for the discussion about whether students should be permitted to pack heat on a college campus. See http://www.chron.com/disp/story.mpl/ap/tx/5885729.html.

My thoughts on this issue have not changed. As was stated in the op-ed I wrote (see below), allowing students to carry guns on a Texas college’s campus is a dangerous threat to higher education in Texas...

If Texas Gov. Perry has his way, I may need to change the way I greet new students on the first day of class. In addition to welcoming them and passing out the syllabus, I might need to remind them to click the safeties on their handguns.

Gov. Perry recently proclaimed that guns should be allowed everywhere, including college campuses, to ensure that holders of concealed weapons can “protect themselves from deranged individuals.” The argument is not a new one. My alma mater, the University of Utah, was recently forced by the Utah legislature to allow guns on its campus. The logic sounds simple enough: the more concealed weapons we have, the less likely it is that “deranged individuals” can wreak havoc.

Our Governor and the Utah Legislature are wrong. Dead wrong. No proof exists that concealed weapons deter crime in any setting. But in a university environment, the proliferation of weapons would risk facilitating crime, and would definitely have a chilling effect on academic freedom.

Proponents of gun proliferation like to point to “More Guns, Less Crime,” the controversial book by John R. Lott, Jr. of the American Enterprise Institute exploring the effect of gun possession on crime rates. Lott’s basic premise holds that allowing citizens to carry concealed weapons deters violent crimes without increasing accidental deaths.

Before one goes off half-cocked and adopts Lott’s position, one would need to deal with the persistent empirical assaults on Lott’s hypothesis, as well as the other issues problematic to his analysis. Lott himself concedes that his studies may be affected by “unknown factors,” and I will leave it to others to discredit his broad conclusions. But even if Lott is correct that more guns deter crime generally, there is no reason to assume his “theory” applies to college campuses. According to data from the University of Houston’s police department, well over two-thirds of campus crimes reported between 2003 and 2005 fell into two broad categories: either property crimes, where the likelihood of victim contact is low; or “victimless” crimes involving violations of liquor and drug laws. More guns on campus would do little to reduce violent crime for a simple reason: these crimes are rare.

All college campuses involve some degree of excess – and it’s not surprising that breaches of liquor and drug laws account for a hefty portion of campus crimes. In these contexts, it’s easy to conclude that more guns would have a facilitating effect on crime. Introducing guns into an arena where rabid students are debating the merits of various sports teams makes about as much sense as handing car keys to a drunk. Surveys of criminals indicate that roughly 40% of them committed their most recent offenses while intoxicated – sobering news to consider before changing our public policy to allow more guns.

As far as the UH campus is concerned, I believe allowing guns on campus would have a profound influence on academic freedom. These freedoms extend beyond students and their professor and literally embrace the future of our nation. As the Supreme Court noted in 1967, this future “depends upon leaders trained through wide exposure to that robust exchange of ideas which discovers truth ‘out of a multitude of tongues [rather] than through any kind of authoritative selection.” In my grade book, revolvers and automatics on campus represent authoritative selection of the worst kind.

The consideration of whether to allow guns on campus needs to be balanced with the needs of the university and its clients, the students. Will Texas universities be able to recruit top talent when our students are known more for guns than intellectual curiosity? Will discourse in the classroom, the stuff of real learning, be as free flowing if students think their peers are packing heat? Will professors be more inclined to wrongly change a grade because the student is carrying a gun? Will calmer heads prevail in a contentious campus parking dispute if students are packing heat? The answers to these questions aren’t clear, and education is too valuable a commodity for Texas to seek to be a test case.

And just who are these armed citizens that Gov. Perry wants to deputize in the name of campus security? For the most part, they will be people without police training, meeting the minimal safety requirements of ammunition discharge, plus a written test. Most of these people will be law abiding and peaceful, but the reality is that Texas, with its heritage of the Old West, has fairly lax concealed weapons laws that do not provide much in the way of the serious training necessary to end heated disputes.

Placing guns on college campuses runs the risk of eroding the benefits of academic freedom for no reason whatsoever, apart from the romantic notion that a relatively inexperienced and untrained holder of a concealed weapon would be able to play hero and save lives. But instead of Shane or Gary Cooper, we’re more likely to witness the heated use of handguns in a drunken brawl, a parking dispute, or a grade challenge. In those instances, it is our children and their education that suffer.

Abolish the Act of State doctrine?

dcrump@central.uh.edu (David Crump) — Wed, 09 Jul 2008 10:16:55 -0600

Imagine what would happen if an American President were to persuade Congress to abolish the Act of State doctrine. Presumably, the President would follow this step by “tough negotiations” conducted with the Saudis, which would be convened either “with or without preconditions.” .

And then, when the Saudis politely declined to end their membership in OPEC, the President would say to the Royal Family, “Aw, gee, fellows, do you mean you’re not going to go along? And you’re going to pass your own laws that are different from ours? Fooey on you.”

Such a President might then turn to other projects with about the same likelihood of meaning, such as making water flow uphill, bringing out the sun so we can see at midnight, and maybe, repealing the law of gravity.

This comment is not intended to disagree with the statement that Congress has the theoretical power to repeal the Act of State doctrine—I think it could, but it won’t, because that would be too transparently futile, even for those who want a so-called windfall profits tax. And I certainly don’t disagree with the statement that cartels are harmful, or at least they are almost always harmful. Unless we want to invade all the OPEC countries militarily, though, the United States can’t eradicate this evil in a practical way—it can’t use the methods that have been used with mixed success in cases involving expropriation, for example—and lawsuits about the subject are quixotic

Original jurisdiction of the Supreme Court etc.

JPaust@central.UH.edu (Jordan Paust) — Wed, 09 Jul 2008 10:13:03 -0600

Congress cannot obviate original jurisdiction of the Supreme Court, but it can sometimes limit the jurisdiction of lower federal courts – but can it do so in such a manner as to unconstitutionally thwart “judicial power” based in the U.S. Constitution., Art. III?

And then, can Congress mandate an expansion of lower fedederal court jurisdiction by obviating judicial use of the judicially created act of state doctrine?

The Hickenlooper Amendment limited application of the act of state doctrine re: certain expropriated property. Paust, Van Dyke, Malone, International Law and Litigation in the U.S. 800-801 (2 ed. 2005) (American Casebook Series, Thomson – West).

Note: Banco Nacional de Cuba v. Sabbatino

szamora@uh.edu (Stephen Zamora) — Tue, 08 Jul 2008 16:49:32 -0600

According to Gary Born, International Civil Litigation in U.S. Courts (3d ed, 1996), at 688, Sabbatino relied in significant part on domestic separation of powers considerations.

Justice Harlan, writing for the majority in Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 423, 425 (1964), noted that the “constitutional underpinnings” of the Act of State Doctrine reflect “a basic choice regarding the competence and function of the Judiciary and the National Executive in ordering our relationships with other members of the international community.”

If Congress tried to eliminate the Act of State Doctrine, I would expect the law to be challenged on domestic constitutional grounds the first chance anyone had to raise the issue

NOPEC Clarified

DBush@central.uh.edu (Darren Bush) — Mon, 07 Jul 2008 12:08:37 -0600

The NOPEC Bill, which passed the House, would have repealed the Act of State Doctrine with respect to the petroleum industry. The bill was defeated in the Senate. President Bush (unrelated) threatened a veto.

I fail to see the separation of powers argument. Can you elaborate? Are we talking about encroachment on the Executive Branch? Certainly we are not concerned about judicial interpretation of the antitrust laws (well, I’m concerned, but only because the Supreme Court seems to think the only interpretation is in the killing of the antitrust laws).

I don’t like cartels because they pervert the marketplace not only in terms of price signals and irrational investment, but also because they tend to kill innovation. Someone asked me why antitrust laws are harsher against cartels than monopolies. Monopolies may have other reasons for their existence (superior business acumen, innovation, etc.), but cartels do not possess any purpose but to raise price and restrict output. Note that Saudi Arabia is concerned about oil prices NOT because it is worried about our economic health, but because the price is clearly over the monopoly price and THAT is causing serious substitution away to other alternatives (of which environmentalists would approve). In other words, the Saudis are worried that overcharging will lead to long term substitution away from petroleum, which is not in its interests.

While I’d be fine with naturally high oil prices (such that innovation would invest in environmentally friendly technologies), any investment now is under a huge cloud of uncertainty. Will OPEC increase production? What will happen with speculation (which by all accounts has been causing serious manipulation of oil prices)? In other words, we are not talking about a real market, mostly due to the existence of a cartel and what is taking place in the commodities markets.

Questions for Prof. Bush

szamora@uh.edu (Stephen Zamora) — Mon, 07 Jul 2008 12:04:14 -0600

I wasn’t aware of the SD Texas case – was it brought by an affected party, or by the government? Does it raise the FSIA issue the of commercial activities exception to sovereign immunity?

It could be an important precedent in this regard, since the 1979 opinion on this issue was issued by a District Court.

Repeal of the Act of State Doctrine has been suggested by a number of writers, but I am not aware that Congress has ever seriously considered passing a law to do away with the doctrine. Such a law would be challenged as unconstitutional, since many experts believe that the Act of State doctrine has constitutional underpinnings in separation of powers.

The oil and gas industries are very strange, volatile industries, and for governments that are overly dependent on oil production as a major source of their foreign exchange, controlling production appears a logical economic policy. As far as the U.S. suing OPEC, I would rather see a multilateral solution, rather than a U.S. unilateral one – maybe replace OPEC with an “OPEIC” (Organization of Petroleum Exporting and Importation Countries), to try to bring some balance to supply and demand. Oops, there I go – forgetting that the market is supposed to do that. But the oil market is so volatile.

I do sympathize with the developing country members of OPEC.

Cartels are evil. (Response to Prof. Zamora)

DBush@central.uh.edu (Darren Bush) — Thu, 03 Jul 2008 13:38:46 -0600

As you know, the MOST recent lawsuit against OPEC is In Re Petroleum Products Antitrust Litigation, MDL No. 1886, currently in the Southern District of Texas. Of course, there are serious obstacles in terms of an antitrust suit against OPEC

or more precisely, its members. On the antitrust doctrine side, it would require the repeal of the Act of State Doctrine. Moreover, I suspect that because much of the oil is controlled by private entities, something would have to be done about the Foreign Sovereign compulsion doctrine as well.

As a practical matter, there are obvious hurdles. Clearly there would be extreme reluctance on the part of any Assistant Attorney General to take such a bold step. The White House would not look appreciatively at such a suit, as it would require some serious collaborate efforts by other countries to support such a suit, at least politically.

In addition, there are the issues involved in whether or not OPEC member countries would withdraw capital from the U.S. or any EU states deciding to bring an antitrust action against OPEC members. At the very least, it could spark threats of economic retaliation and other repercussions.

And, of course, the oil prices are not only OPEC’s doing. We have serious problems with oil speculation, and Congress is considering legislation to boost margin requirements. Refining capacity is perking up, based in part on projections that there is a 100% probability of oil prices greater than $60 barrel for just about forever. Oh, and then there’s our action in Iraq, which has caused serious volatility in the market.

As far as I’m concerned, however, cartels are evil. No exceptions. And it does not bother me that the cartel is run by foreign countries. I would love to see what kind of interesting discovery would occur if U.S. antitrust enforcement officials investigated OPEC and after the raiding of state oil company offices by European officials.

While we are at it, we could investigate whether U.S. oil companies are sharing in the monopoly rents. While Exxon and other companies are making record profits, I suspect that a lot of their revenues are likely concealed through exorbitant salaries and inefficient capital investment. Or at least that is how it works in seriously concentrated industries.

International cartels do untold damage because they are not deterred. They are not deterred because they are subject to a variety of immunities, such as the Act of State Doctrine. And, until recently, no country in the world subjects cartels to treble damages. And until recently, only the U.S. has offered hard prison time for cartel members. Thus, the rewards always exceed the risks by orders of magnitude. See John M. Connor and Darren Bush, How to Block Cartel Formation and Price Fixing: Using Extraterritorial Application of the Antitrust Laws as a Deterrence Mechanism, 112 Penn St. L. Rev. 813 (2008).

Of course, none of these thoughts would have fit into the op-ed.

Response to Darren Bush op-ed

szamora@uh.edu (Stephen Zamora) — Thu, 03 Jul 2008 13:24:59 -0600

The last time OPEC was sued over price fixing (IAM v. OPEC, in the 1970s), the U.S. District Court ruled that OPEC lacked legal personality to be sued as an entity.

The lawsuit proceeded against the individual OPEC governments, but was dismissed on the grounds that the Foreign Sovereign Immunities Act (FSIA) made the governments immune from suit. The court in that case ruled that the commercial activities exception contained in FSIA did not apply, the court interpreting the governmental activity to be protection of natural resources, not price fixing. See IAM v. OPEC, 477 F. Supp. 1097 (C.D. Calif. 1979), affd on other grounds, 649 F. 2d 1354, cert. denied, 454 U.S. 1163 (1982)

Link to the LA Times op-ed via http://www.latimes.com/news/opinion/la-oe-first19-2008jun19,0,7991948.story

Sue OPEC?

DBush@central.uh.edu (Darren Bush) — Thu, 03 Jul 2008 13:06:49 -0600

In an op-ed published in the LA TIMES, Darren Bush and co-authors Harry First and John J. Flynn advance the notion that the brazen actions of the OPEC cartel run afoul of U.S. antitrust laws.

As the national average price of gasoline raced toward $4 a gallon and airlines laid off workers by the thousands because of rising jet fuel costs, the House of Representatives took action: It overwhelmingly passed the Gas Price Relief for Consumers Act of 2008. The bill would have made it illegal for foreign states "to act collectively" to limit the production or distribution of oil. Put simply, the bill permitted the U.S. Justice Department to charge the Organization of the Petroleum Exporting Countries with violating American antitrust laws.

Even before the 324-84 House vote last month, President Bush pledged a veto, saying OPEC might retaliate against U.S. interests overseas or cut oil production further. But he didn't have to make good on that promise. Senate Republicans held the line for him, last week threatening a filibuster that Democrats couldn't break. That effectively killed the bill and, for now, any hope that the United States would finally start treating oil the same way it does computer chips, vitamins, rubber and all other products.

OPEC may call itself an "organization," but everyone knows that it is, pure and simple, a cartel that manipulates markets, restricts output and fixes prices. The United States and the European Union have vigorously prosecuted other multinational cartels for doing the same thing in the vitamin, lysine, computer chip and elevator/escalator markets. Swiss healthcare company F. Hoffmann-La Roche, for instance, paid a $500-million fine to the U.S. in 1999 for its part in a years-long scheme to raise prices on vitamin products. Just last year, British Airways and Korean Air each paid a $300-million fine to the U.S. for fixing international cargo rates.

But when it comes to oil, the U.S. gets squeamish. For nearly 50 years, the members of OPEC have openly operated as a cartel. OPEC's statutory provisions even state that its mission is "the coordination and unification of the petroleum policies of member countries and the determination of the best means for safeguarding their interests, individually and collectively."

The cartel's economic effect on the U.S. has been devastating, dating from the oil embargo in the 1970s, which led to the first U.S. fuel shortage since World War II, to today's unstoppable escalation of pump prices. Just in the last three years, crude prices rose from $54 to nearly $140 a barrel -- which means U.S. spending on imported oil has gone from about $185 billion a year to an expected $440 billion this year. Much of that excess is winding up in the pockets of OPEC members, increasing their global economic and political power.

High gas prices have now gone from consumer irritation to a serious threat to our national economic health. Our antitrust laws are tailor-made to help out in such a crisis.

OPEC is clearly a "combination or conspiracy" that restrains trade in violation of the Sherman Act. Unfortunately, over the years, courts have made it nearly impossible to use the act against OPEC, whose members claim they are sovereign nations and thus immune from such prosecution. But OPEC's behavior is commercial, not governmental or diplomatic. It is perfectly appropriate for Congress to remove these legal obstacles. Foreign businesses and individuals have long been subject to U.S. antitrust laws -- even for conduct overseas, if it has substantial effect on commerce here. So should OPEC.

Imagine suing OPEC members for the amount they overcharged for petroleum products the U.S. government purchased. Then triple that amount -- for that is what can be awarded to consumers injured by cartel activity. Imagine the seizure of OPEC assets to pay this award, such as Venezuelan government-owned Citgo headquarters in Houston or Saudi Arabia's Aramco assets in New York.

Imagine criminal charges filed against key cartel individuals when they come to the U.S. And imagine Justice Department officials compelling OPEC and its co-conspirators to disclose documents that might bring to light exactly how this cartel has functioned. Might this information show a relationship between OPEC and U.S. oil companies?

If we are afraid of OPEC, remember that our decades of putting up with this cartel have done nothing to reduce oil prices.

The bill Congress proposed was actually somewhat cautious. It didn't allow private suits for damages but gave enforcement jurisdiction exclusively to the Justice Department. Under the Bush administration, the attorney general seems unlikely to have used this authority anyway, but all that could change come January, when a new president and new Congress get to work. Job One for them should be to look past the fear-mongering rhetoric and enact this important piece of legislation.

At the very least, passage of this bill would send this loud and clear message to OPEC: Competition -- the basis of free enterprise and economic organization throughout most of the world -- ought to be the norm for producing oil just as it is for producing anything else.

A Climate Change Policy With No Teeth

Vflatt@central.uh.edu (Victor Flatt) — Thu, 17 Apr 2008 10:54:36 -0600

The academy, politicians, and environmental law nerds have been abuzz the last few days about the possibility of President Bush putting forward a climate change policy showing significant movement from his prior positions. I guess we can all harbor hope. If one was expecting any major policy pronouncement, however, one would have been sorely disappointed with yesterday’s Rose Garden ceremony.

Rather than pressing ahead with important initiatives to control greenhouse gases, President Bush instead announced his support for policies that had previously been rejected by the U.S. Congress and countries across the globe.

The limited CO2 caps announced yesterday would apply only to one sector of the economy – electricity generation – and would leaving the rest of the U.S. economy free to continue releasing untold quantities of greenhouse gases into the atmosphere. The target reductions outlined by President Bush fall well below what is necessary to meet the U.S. share of worldwide cutbacks that even the most conservative scientists deem necessary to avoid catastrophic climate change in the long term.

In other parts of the world, this “new” U.S. policy that doesn’t come close to meeting the U.S. need for reductions and only ensures that developing countries, such as India and China, will resist binding reductions in CO2 emissions. And while President Bush emphasized the role that new technologies can play in reducing emissions, he fails to promote the strong economic incentives that could spur the development and acceptance of these low-carbon technologies.

The program outlined in the Rose Garden would have represented a welcome “start” if it were announced in 2001; today, however, it constitutes a step backward. Over the last 18 months, academics, scientists and business interests have cooperated with Congress in a meaningful and focused debate aimed at controlling climate change. Many of these discussions centered on the critical need to hold developing countries accountable for their emissions, and on the equally critical need to mitigate the economic impact that CO2 controls might have on U.S. businesses and the people they employ.

The good news is that these efforts have generated real progress, and each of the three candidates to become the next U.S. president has indicated his or her support for a comprehensive bill that would be in line with international expectations.

In one way, however, President Bush does not disappoint. His hubris in assuming that the world will listen to him "no matter what," and his belief that he is always right, were very evident in his pronouncement. However, just as in other issues in this administration, he is in for a rude surprise. For years, President Bush has declined to be a part of any collaborative process on addressing climate change. When it became clear in the last year that businesses (even Republican-leaning businesses) needed "certainty" and were prepared to accept a cap-and-trade bill, this president still wouldn’t play. Because of that, the bill we ultimately get may be harder on particular industries than would have otherwise occurred. It is a sure bet that if President Bush had indicated the possibility of signing a mandatory cap-and-trade bill two years ago, the allocations would almost assuredly have been given way (as they were with SO2) instead of auctioned, the position favored by environmentalists and a position to which most bills are now moving.

Either the President has so isolated himself from public and business opinion on this issue that he doesn’t realize this proposal will go nowhere, or he is intentionally trying to “gum up the works” by slowing down the march towards a thoughtful bill. Whatever the motivation, the only conclusion to draw from his statements in the Rose Garden is that it is time for him to step aside. If he wishes to be remembered for his support of a thoughtful and fair bill on climate change, he can simply sign one of the existing proposals currently before the Congress. His choices were to lead, follow, or get out of the way – and he clearly failed to make the proper choice.

Does the future of patent law portend compulsory licensing by judicial fiat?

RNimmer@uh.edu (Ray Nimmer) — Wed, 02 Jan 2008 09:44:20 -0600

I hope not, but that is one risk created by the Supreme Court’s decision in the Ebay case and by the actions of some courts who have denied permanent injunctions in successful infringement cases. But the fact that a permanent injunction does not issue after a judgment of infringement does not mean that the infringer (by losing the case) obtains a right to use the patent owner’s property in the future. It simply means that the court declined to add the coercive force of an injunction to the statutory right to exclude as to future infringing conduct.

Although most patent cases that result in a finding of infringement yield a permanent injunction, in some circumstances, injunctive relief will be more difficult to obtain. This is especially true if the defendant is not in competition with the patent owner or is a patent holding company (sometimes referred to as a patent troll) that engages in no business other than licensing patents it acquired from third persons.

But what is the appropriate remedy if the court holds that a permanent injunction is not warranted, but that infringement has occurred and may occur in the future?

One response is simply to assess damages as to past infringement, leaving any future use of the patent for a voluntary agreement of the parties (a license) or a subsequent infringement suit for the subsequent infringements. That is clearly the preferable option, although it does raise limited issues of judicial economy.

A second alternative is to permit subsequent use by the defendant subject to the payment of a reasonable royalty imposed by the court. This is a form of compulsory licensing that rewards the wrongdoer, unless the remedy has been requested by the patent owner. Nevertheless, a panel of the Federal Circuit indicated that such a remedy may be appropriate. One wonders why.

In Paice LLC v. Toyota Motor Corp., 2007 WL 3024994 (Fed. Cir. 2007), after a finding of infringement and damages of $25 per use of infringing drive trains for hybrid motors, the District Court denied the patent holder’s request for a permanent injunction, and instead sua sponte issued an order permitting Toyota to continue to produce the infringing items subject to payment of a $25 per motor royalty. The refusal to grant an injunction was not appealed, but the Federal Circuit noted that the court’s decision was based on at least the following factors:

In context, the absence of an injunction would not adversely affect the patent holder’s ability to license the patent to others.
The patent holder did not actually manufacture any goods, and there was no threat that it would lose name recognition or market share without an injunction.
Monetary damages were adequate as suggested by the fact that the patent owner had offered to license Toyota during the post-trial period.
The balance of hardships favored Toyota since issuing an injunction would disrupt not only its business, but that of suppliers, dealers and others.

This gives you some idea of the type of issues likely to adversely influence a patent owner’s ability to obtain injunctive relief. They depict a plaintiff company whose only interest in control of the patent is to obtain licenses or judgments of infringement, rather than to build or protect an existing or potential market.

Should a denial of permanent injunctive relief automatically require judicially forced licensing? The answer is no.

The Federal Circuit suggested that courts have long had the ability to order ongoing royalties as a remedy in appropriate cases, but carefully said that the District Court may do so, not that this result is ever required. Even then, the cases it cited – an antitrust remedies case and an infringement case in which the ongoing royalty was not contested – do not support the conclusion that broad judicial power exists to make an award that effectively takes away the winning party’s property without being requested by the prevailing party. Indeed, the Patent Act talks about granting injunctions to prevent violation of the property rights, while this remedy permits use of the invention.

But even if a court has power to make such an award, what is an appropriate case? The one “appropriate” case the Federal Circuit mentioned was where, after the judgment of infringement, the parties attempt but fail to agree on a license for future use. The court commented that that this may be a case for granting ongoing royalties as a remedy, not that this was required. The court commented:

But, awarding an ongoing royalty where “necessary” to effectuate a remedy … does not justify … such relief … whenever a permanent injunction is not imposed. In most cases, where … a permanent injunction is not warranted, the district court may wish to allow the parties to negotiate a license amongst themselves … before imposing an ongoing royalty. Should the parties fail to come to an agreement, the district court could step in to assess a reasonable royalty in light of the ongoing infringement.

But why is a failed bargain as to future conduct grounds for the court to step in and impose a bargain of its own forcing the injured party to allow continued use of its property, even though the owner did not request that remedy? The court did not explain this strange reversal or comment on whether a rights owner who does not want the court to control its future income would be better off not negotiating an attempted license at all.

In Paice, the court remanded because the lower court’s order contained nothing to show why the selected royalty was appropriate. But there is a more fundamental issue. Judge Radar, writing a concurrence, directly approached that issue. To him, giving the parties an opportunity to negotiate a license should be a precondition to the court having any power to impose an ongoing royalty. He commented:

[This] court should require the district court to remand this issue to the parties, or to obtain the permission of both parties before setting the ongoing royalty rate itself. District courts have considerable discretion in crafting equitable remedies, and in a limited number of cases, as here, imposition of an ongoing royalty may be appropriate. Nonetheless, calling a compulsory license an “ongoing royalty” does not make it any less a compulsory license.

The preconditions should be both an opportunity to negotiate a license and, failing a bargain, a request by both parties for the court to impose a royalty as part of the remedy for infringement. A patent creates a right to exclude and, where the patent owner prefers to exercise that right, it should not be forced into a licensing arrangement resulting from a case in which it prevailed on the infringement claim. There may be some cases in which vital public policy interests justify this result, but those cannot be grounded simply in the fact that the court denied a permanent injunction or the parties have not agreed to license terms. A remedy should not penalize the person to whom the remedy is awarded.

Watchdog Blog Bites Arbitration for Business Bent

http://www.law.uh.edu/faculty/main.asp?PID=1 (Richard Alderman) — Tue, 02 Oct 2007 09:38:29 -0600

Public Citizen's Watchdog Blog discusses a new report that concludes that arbitrators rule for business between 94 and 97 percent of the time.

In a nutshell, [binding mandatory arbitration] is a private, corporate-dominated secret "court" that overwhelmingly rules against consumers. In this world, merely by signing your name on the dotted line, you have forfeited your right to a trial by jury. If someone steals your identity and runs out to buy a $4,000 plasma TV – and the credit card company wants YOU to pay for it – the dispute will automatically bypass the public civil justice system. Instead, it goes straight to an arbitrator who may have heard thousands of cases for that same credit card company.

I am among the many critics who have assailed consumer arbitration. This report documents how consumer arbitration is designed not to offer an alternative forum, but rather to deny consumers their legal rights.

Standards Setting Organizations: deference to the market

RNimmer@uh.edu (Ray Nimmer) — Thu, 27 Sep 2007 16:21:07 -0600

Many industries function under technological standards that shape the technology, the products, and the focus of competition. But standards-setting groups have become competition focuses themselves, such as in the debate about “open document” versus “open xml” as a standard.

The standards groups should follow a simple premise: standards-setting organizations should not dictate among competing technologies vying for market dominance.

While much has been written about standards-setting organizations (SSO), most of the law literature concentrates on antitrust law, or on the relationship between SSO rules and intellectual property rights. The issues there, however, are merely symptomatic of a broader issue. SSO standards are market-shaping forces. Because of this, competing firms must inevitably engage in the SSO process seeking a result that benefits them or, at least, a result that does not harm their competitive position. When this occurs, the broader question is what role an SSO should play in a market that has not yet selected a winner.

The appropriate role should be facilitative of competition, rather than to resolve technological competition before the market chooses. Where two (or more) technologies or products have viable market presence, the proper place to resolve that competition lies in the marketplace, not on the technologist’s computer screen or the bureaucrat’s regulations.

This calls for deference to the market with respect to standards not associated with safety, health or other over-riding public policy issues. Standards imposed by an SSO in a competitive market should occur only based on true consensus, including among all competing firms, or one’s framed in a manner that does not alter the competitive balance. This can be accomplished in numerous ways, including by recognizing that competing approaches exist and adopting only standards for individual competitors or by adopting standards that reflect both (all) competing systems, leaving the separate standards compete in the same fashion as the basic products and technologies compete.

The closer a standard moves toward resolving an existing, competitive issue in a mandatory or quasi-mandatory way, the more predictable it is that the standards-setting will in fact be driven by competition issues. Resolving such issues is not an appropriate role for standards setting organizations.

The intrusive impact of standards into competitive contexts is directly related to the type of standard involved. As the standard moves more toward a permissive framework, its competitive impact lessens and the likelihood of competitive influences diminishes.

The SSO process potentially displaces the market in choosing preferred technology. In many circumstances, however, rather than being neutral, adopting a standard may advantage one competitor over another without allowing the market to judge the competing approaches. Standards-setting has become (perhaps always has been) a competition environment that impacts commercial markets, but that functions outside their influence.

Why is it wrong, one might ask, to have technocrats deciding for a market based on technical criteria, rather than the market deciding. The answer in part lies in faith in the market and in innovation that is not prematurely channeled into a particular path by a “standard.” The simple fact is that the market is the best guide to consumer value. A standards-based choice risks choosing the wrong one and foreclosing alternatives. Once implemented, the switching costs to an alternative are high and perhaps insurmountable.

But the question is not simply why it is wrong to have technocrats decide. A pure technological decision in ongoing market competition is impossible to achieve. Any standards-setting will draw competition-based reactions. And so it should. SSO procedures should attempt to exclude competitive themes in a “neutral” SSO process, but that is likely to be impossible to enforce when significant competitive issues are involved.

The true question is – how should SSOs deal with the fact that for important standards there will competitive advocacy based on obtaining market advantage? The SSO setting is not a market, but a company whose competitive position may be affected by a standard will act to protect that position or enhance it.

SSOs should take the following steps:

· First, SSOs must recognize the inevitability of competition issues whenever a proposed standard would resolve current competition in the market place.

· Second, consensus standards-setting should in fact reflect a true consensus and, particularly, agreement among all major competing firms in the affected market before a mandatory or quasi-mandatory standard is promulgated. This gives veto power to all competitors and runs counter to the goal of those who seek expansive scope for standards drafted on the basis of pure technology, but it recognizes the inevitable competition impact that such mandatory standards may have.

· Third, where standards are proposed in environments where two or more approaches are in active competition, any standard adopted should be permissive by focusing on only characteristics shared among the competitors, are unlikely to adversely affect one or another of the competitors, or are formulated solely for one of the approaches and not mandated for the others.

Justice Denied

ddow@central.uh.edu (David Dow) — Thu, 19 Jul 2007 16:18:00 -0600

George W. Bush became governor of Texas in 1994, when he upset the popular incumbent, Ann Richards. The following September, my client, Carl Johnson, was scheduled for execution.

Johnson had killed a security guard during a holdup of a convenience store. The guard had opened fire on Johnson first, but Johnson did not use that as an excuse. He accepted responsibility for what he had done, and he was remorseful. He had been robbing the convenience store in the first place because he had an expensive heroin habit to support, a habit he picked up in Vietnam, after being drafted.

Johnson had been represented at his trial by one of the most notoriously inept death penalty lawyers in history. The lawyer fell asleep in numerous trials, including Johnson's. He was eventually no longer permitted to represent capital murder defendants. Johnson's co-defendant pleaded guilty, and had long since been released from prison by the time Johnson's execution date rolled around.

Johnson grew up in prison. He became religious and repentant. He did not falsely proclaim his innocence or blame anyone other than himself for his mistakes, which he acknowledged to be serious and perhaps unforgivable. At the same time, in his years in prison, he had no significant disciplinary violations. He worked in prison. He crafted religiously-inspired art. He got his high school equivalency diploma.

I thought of Johnson on the day that President Bush commuted the prison sentence of I. Lewis Libby, Vice President Dick Cheney's former chief of staff, a man who was convicted of lying to a grand jury — that is, a man who was convicted of perjury. President Bush went to the White House saying he was going to bring integrity back to the Oval Office, a reference to President Clinton, who had been impeached for lying to a grand jury, the same as Libby's crime. President Bush got elected despite charges that he had used his father's connections to avoid service in Vietnam, the place where my client, Carl Johnson, found heroin.

In Texas, the governor cannot commute a death row inmate's sentence without approval of the Board of Pardons and Parole. The governor still wields great power, however, because the governor appoints the members of the board, and they take their cues from him. When Gov. Bush wanted to commute the death sentence of Henry Lee Lucas, a man believed by some law enforcement officers to have been a serial killer but who probably did not murder the woman he was sent to death row for killing, he let it be known, and the board accommodated his wishes, recommending a commutation, which Governor Bush signed in 1998.

I asked then-Gov. Bush to grant my client a 30-day reprieve, with the idea that he could thereby signal to the board his belief that Johnson's death sentence should be commuted to life. He denied my request, as he denied the other 56 requests that were made of him by lawyers representing death row inmates. Some of these inmates were mentally retarded. Some were juveniles when they committed their crimes. Gov. Bush always gave the same explanation: that the inmates had had full access to the legal system. He gave that same reason when he turned down a reprieve request made by the lawyers representing Karla Faye Tucker, whose reformation on death row was legendary, and when he rejected the reprieve request made by lawyers representing Gary Graham, who was probably innocent.

My client, Carl Johnson, committed the worst crime that can be committed against another human being: He killed someone. And Lewis Libby committed the crime that is most injurious to our criminal justice system: He lied. Unlike my client, Libby, who was convicted by a jury of his peers despite being represented by the best lawyers that money can buy, has never shown any public sign of remorse. Nevertheless, despite all that, President Bush did not exceed his authority in commuting Lewis Libby's prison sentence. The Constitution gives him the power to do what he did. But it is possible for actions to be lawful and simultaneously in conflict with other constitutional principles. Last week's pardon deeply offends the constitutional value of equality, the idea that all citizens stand equal before the law.

Lewis Libby had something in common with the other people George Bush has pardoned, and with people President Clinton pardoned as well: He is rich and powerful, and he has rich and powerful connections. People do not get pardons because they are mentally retarded, or because they were young when they committed their crime, or because they had terrible lawyers, or because they have reformed, or even because they are innocent. They get them because they have friends in high places. That might not be illegal, but it's still wrong, and a president who issues pardons and commutations on that basis has not done very much at all to bring integrity to the Oval Office.

E-Commerce should not be over-regulated

RNimmer@uh.edu (Ray Nimmer) — Thu, 19 Jul 2007 10:42:55 -0600

We wake up one morning and discover that a question we have been asking for the last decade or two may now be the wrong one. The question was: how can we use law to enable businesses to use e-commerce? The question now seems to be: how can we shape law to support e-commerce without over-regulating it?

Here’s how things have changed over the years about the idea of “electronic commercial law.” Courts and commercial parties have recognized that electronic commercial transactions and licensing are now a central part of commerce, but legislatures and agencies seem to want a "regulatory world” for this form commerce. We need to fight that tendency.

Electronic commerce refers to the use of digital systems to create or perform transactions and enforce rights in digital information. The term covers a wide variety of commercial practices that were once new in ordinary commerce; today, the have become staple elements of it.

What does that mean for law?

For contract law, the meaning should be clear. Contract law is a practical discipline that supports the marketplace and should respond supportively to changes in commercial methods and subject matter. We have a different transactional framework (licensing), a new subject matter (digital information), and a new way of doing business (electronic interactions). Contract law needs to continue to adjust to support this new environment.

The relationships have changed, not just the mechanics. Ethan Katsh once commented: “[A] new system of communication … leads to the creation of new relationships and, most importantly, changes our attitudes, expectations, and ways of thinking about law.” M. Ethan Katsh, The Electronic Media and the Transformation of Law 22 (1989). He was right. New relationships. New attitudes. New expectations. These are the grist for the mill of contract law and practice. The new technologies have fundamentally changed the character of relationships. These new relationships need to be governed by new supportive contract law themes, not by themes developed from an old, now gone era.

Where does all that leave contract law?

Contract law creates (or denies) legal obligations associated with voluntary interactions. When the interactions and their subject matter change, contract law serves the same function but its tools and outcomes must differ from the past.

In our world, significant change seldom flows smoothly. While many embrace change, others resist it. Some of the resistance is due to what Lewellyn explained years ago: “You wake up then to the fact that the throne your subject matter once occupied is overshadowed” – and that is a fearful situation for many. The costs imposed on commerce by reaction to that fear are extravagant and harmful.

In my view, rather than protecting the status quo, the role of law generally should be to establish a responsive body of rules that support change and that limit regulation to cases where actual clear abuse otherwise exists. This has been the tradition of U.S. commercial law – but it has not consistently been the way in which law related to electronic commercial transactions has evolved. Instead, we have seen an explosion of new law, often regulatory in nature, dealing with data security breaches, “spyware”, privacy policies, “spam”, etc. Too often, political arguments and interest-group politics weigh in toward the view that the proper role of law is to regulate commerce, rather than to support it. Much of this lies simply in a grab for position enforced through law, rather than in the marketplace. Also, this stems in part from the regulators’ view that preexisting regulations were already inadequate to safeguard consumer interests, and that the transition to a new commerce provides an opportunity to impose more extensive regulation. In addition, some believe that there are enhanced risks of abuse in e-commerce that require proactive regulation even before abuse actually occurs,

But when a regulatory approach is taken in a period of rapid social change, the result is an enormous expansion of new law … and we pay a huge price for this. Its short-term effect lies in the creation of an often-bewildering array of new rules and regulations with which commercial entities must deal, and which seldom reflect sound or considered legal or social policy.

Digital media have enabled a wide range of new ways of doing business and new commercial subject matter. There are numerous instances in which the balance between technological capability to engage in new transactions, and legal infrastructure that permits or impedes implementing aspects of the new technologies is being drawn. We need to exercise care in such contexts.

The messages are simple ones.

· Electronic commercial transactions have engaged a fundamental change in commercial and consumer relationships, expectations and subject matter. The relationship between a licensor and licensee, an access provider and its clients, and other modern information-based transactional relationships does not flow from models of relationships between the buyer and seller of a toaster or television set, or from a desire to regulate and impede change.

· Electronic commerce might once have been reasonably treated as a small sub-part of contract law and commercial practice. That is no longer true. This is, indeed, modern commercial law and needs to be respected on its own terms with its own unique demands.

· The business of law in our market economy is not to comprehensively regulate and control, but to support technological and commercial evolution, limiting regulation to cases of proven and palpable abuse.