Message to Google: Don't Be Inconsistent

Famously, Google’s motto is “Don’t Be Evil.”

But there are times I wish Google would change its mantra to “Don’t Be Inconsistent.” And then follow the injunction.

Here’s a good example.

Google is now arguing that the International Trade Commission does not possess authority to prevent entry into the United States of digital content that infringes upon intellectual property rights protected by law. Google took this position in a case before the ITC in which the six-member Commission, with only one dissenting vote, disagreed with its assertion that the agency’s authority to prevent infringing imports should be limited to physical goods.

Section 337(a)(1)(B) of the Tariff Act of 1930 grants the ITC the authority to prevent the importation for sale into the U.S. of “articles” that infringe valid copyrights and patents. Contrary to Google’s position, the Commission held that digital files constitute “articles” within the meaning of the statute. The case is now on appeal before the Court of Appeals for the Federal Circuit with oral argument scheduled for August 4, 2015 – and with Google still maintaining that the “articles” over which the ITC has jurisdiction do not include digital data.

The ITC case involves the importation of digital scans of dental appliances claimed to infringe patents. Suffice it to say that it is unnecessary here to bite off any more of the facts of the case than you or I can comfortably chew. Indeed, my purpose is not to sink my teeth into the arguments about the validity of the particular dental patents but rather to make a larger, more fundamental point concerning the ITC’s jurisdiction – and what Google previously has said about it.

Back in 2011-2012, when the Stop Online Piracy Act (SOPA) was being debated, Google and its allies opposing the bill intended to combat online piracy, suggested online infringement should be treated as an international trade issue. In a FAQ sheet opposing SOPA and supporting the alternative OPEN Act, here is what Google and its allies had to say then:

“For well over 80 years, the independent International Trade Commission (ITC) has been the venue by which U.S. rightsholders have obtained relief from unfair imports, such as those that violate intellectual property rights. Under Section 337 of the Tariff Act of 1930 – which governs how the ITC investigates rightsholders’ request for relief – the agency already employs a transparent process that gives parties to the investigation, and third party interests, a chance to be heard. The ITC’s process and work is highly regarded as independent and free from political influence and the department already has a well-recognized expertise in intellectual property and trade law that could be expanded to the import of digital goods.

The Commission already employs important safeguards to ensure that rightsholders do not abuse their right to request a Commission investigation and the Commission may self-initiate investigations. Keeping them in charge of determining whether unfair imports – like those that violate intellectual property rights – would ensure consistent enforcement of Intellectual Property rights and trade law.”

Mind you, this followed a heading asking: “Why is the International Trade Commission the best agency to handle cases of copyright and trademark infringement?”

And this too came from Google and its allies in supporting the OPEN Act: “This approach targets foreign rogue sites without inflicting collateral damage on legitimate, law-abiding U.S. Internet companies by bringing well-established international trade remedies to bear on this problem.”

In light of these statements touting the efficacy of international trade remedies, and the fact that SOPA and the OPEN Act obviously were all about protecting digital data, not physical goods, it’s hard to believe that Google is now arguing that the imported “articles” over which the ITC possesses authority do not include digital content.

Perhaps it should be enough to suggest that consistency is a virtue and leave it at that.

But it also should be emphasized that unless the ITC’s interpretation of the meaning of “articles” in the Tariff Act is clearly wrong, it makes sense for the statute to be construed to grant the agency authority to prevent importation of infringing digital data as well as infringing physical goods. After all, digital content comprises an increasingly large portion of international trade. Indeed, the Progressive Policy Institute has just released a new report titled “Uncovering the Hidden Value of Digital Trade: Towards a 21^st Century Agenda of Transatlantic Prosperity.” Not surprisingly, the report’s summary concludes: “More and more, global trade has come to rely on a vital commodity: data.” In the digital age, reading the protection of digital data out of the ambit of the ITC’s authority would significantly shrink its ability to prevent the importation of pirated copyrighted works and patents.

I’m not accusing Google of being evil, of course. Just of being inconsistent.

I’d rather not have to suggest that Google change its motto to “Don’t Be Inconsistent.”

Multilateral Trade Agreements Facilitate Global IP Protections

On July 9, 2015, the United Nations Foundation and the U.S. Chamber of Commerce hosted a briefing on Capitol Hill entitled “Global Impacts of American Intellectual Property.” The most significant takeaway came from Patrick Kilbride, Executive Director of International IP at the U.S. Chamber of Commerce’s Global IP Center (GIPC). He discussed the important role the United States should play in influencing developing countries to adopt stronger protections of IP rights. He pointed to GIPC’s February 2015 International Index, which scores and ranks countries based on different IP protections (patents, copyright, trademarks, trade secrets, international treaties) and enforcement mechanisms. (See my February blog for more on the index.)

Mr. Kilbride said that the best way for the U.S. to promote strong IP policies around the globe is through multilateral trade agreements. He mentioned that the most recent IP-related multilateral agreement, the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), is over twenty years old. TRIPS established only minimum standards for IP and many of the leading countries within GIPC’s International Index have now surpassed these standards. Because of this, Mr. Kilbride said that it is time for a new multilateral trade agreement with stronger IP standards. He added that the current one under negotiation, the Trans-Pacific Partnership (TPP), is an important place to start.

TPP would export American IP protections to developing countries in the Pacific realm, thus incentivizing more investment and innovation within those economies. However, additional economic activity would not be the only benefit of a stronger IP framework; mutual gains from trade are much higher with transactions that contain strong protections of IP rights rather than weak protections of IP rights.

Developing countries also would vastly benefit from TPP because an expansion of trading partners increases the number of buyers and sellers in a marketplace leading to more transparency, accountability, consumer welfare, and, ultimately, economic growth. This is why Mr. Kilbride declared that the global economy would be much better off if a trade agreement with a strong IP framework could be reached with heavily populated countries such as China, India, and Indonesia.

It is important to remember that gains from trade are mutually beneficial but not necessarily equal. If the TPP agreement is reached, the United States would benefit from the positive externality of robust IP protections in other countries and from lower trade barriers with countries in the Pacific realm. However, the positive impacts for developing countries would be much greater if they adopt American IP protections, incentivizing more economic activity and expanding trade throughout the global economy. Developing countries grow significantly faster than developed countries when there is an expansion in global trade.

That being said, TPP and all multilateral trade agreements with strong IP frameworks are very beneficial for all parties involved, including, most especially, consumers who benefit from increased competition and lower prices. 

Maryland Needs to Improve Its Regulatory Climate

Last week, my blog titled “Maryland Needs to Improve Its Fiscal Health” highlighted a new study from George Mason University’s Mercatus Center that determined Maryland ranks 37^th among the 50 states with respect to its fiscal health. As I explained, the study examined five different measures of fiscal solvency in arriving at the overall ranking.

In the blog, I said last November’s election indicated that Marylanders recognized a change of direction was needed to improve Maryland’s fiscal health. And I stated that Governor Larry Hogan already has taken some positive steps to improve the state’s budgetary situation.

At the end of the week came the announcement that Governor Hogan has created a new Regulatory Reform Commission to examine regulations to determine which ones are making it unnecessarily burdensome to do business in Maryland. As Hogan said in announcing the new panel: “For years, over-burdensome and out-of-control regulations were making it impossible for businesses to stay in Maryland.”

It is not clear from the initial reports whether the commission will have any role beyond identifying regulations that it concludes are unduly burdensome or no longer necessary. But the establishment of the commission is a welcome step in any event for the focus it brings to the need for regulatory reform.

Not all regulations are bad, of course. Many serve important purposes, most especially those directly related to protecting public health and safety in carefully targeted ways. But all regulations impose costs upon those they affect, be they ordinary citizens or business. And, this is the important point: these regulatory costs – although “off-budget” – have the same economic effect as taxes.

So, just as reducing unnecessary spending is important to improving Maryland’s fiscal health, so too is eliminating unnecessary or unduly burdensome regulations. The positive economic effect that results from leaving more productive resources in the realm of the private sector is the same in both instances.

Governor Hogan’s new commission, primarily composed of representatives of business interests, might have benefitted – or still might – from inclusion of some academics and public policy advocates well versed in regulatory reform issues. Nevertheless, the Regulatory Reform Commission’s establishment represents another positive step in changing Maryland’s direction and countering its reputation as a state with an increasingly unfriendly business climate.

Finally, whether under the charge or the new commission or some other entity, the state should consider whether – beyond the identification of existing regulations targeted for elimination – more fundamental long-term structural regulatory reforms should be pursued. For example, should there be a “sunset” date for all new regulations requiring that they expire on that sunset date if they are not affirmatively readopted? Should there be a central entity within the executive branch to review regulations before they are promulgated to determine that the projected benefits outweigh the costs and they are not inconsistent with other regulations? Should there be some formalized retrospective review (“look back”) process to assess whether regulations are actually achieving their objectives in the most efficient manner?

Commendably, Governor Hogan has initiated a process to examine Maryland’s existing regulations so that those that are no longer unnecessary or which are unduly burdensome can be targeted for elimination, or at least modification. But in light of the costs imposed by unnecessary regulations – costs ultimately paid by all Maryland consumers – achieving fundamental structural regulatory reform should be the governor’s objective.    

Maryland Needs to Improve Its Fiscal Health

The election last November of Maryland Governor Larry Hogan was a welcome sign that Marylanders recognized that the state’s fiscal health was poor – the result of too much unrestrained spending leading to too much debt. The election confirmed that Maryland’s citizens wanted a change of direction.

Since he took office, Governor Hogan already has taken some positive steps to improve Maryland’s budgetary situation – and he needs the help of the legislature to do more.

If a further spur were needed, now comes the newly-released study from George Mason University’s Mercatus Center titled, “Ranking the States by Fiscal Condition.” The study is authored by Eileen Norcross, the respected analyst who directs the Mercatus Centers State and Local Policy Project.

The new study ranks each U.S. state’s financial health based on short and long-term debt and other key fiscal obligations, including unfunded pensions and health care benefits. It builds on previous Mercatus research concerning each state’s fiscal condition. And it provides information from the states’ audited financial reports in an easily accessible format, presenting an accurate snapshot of each state’s fiscal health.

Sadly, Maryland ranks 37^th among the 50 states for its fiscal health, based on its fiscal solvency in five separate categories. I urge you to look at the Maryland results set forth in more depth in the report. But here are the summary results for the five categories used to rank all the states:

• Maryland ranks 39^th in terms of cash solvency
• Maryland ranks 44^th in terms of budget solvency
• Maryland ranks 43^rd in terms of long-run solvency
• Maryland ranks 11^th in terms of service-level solvency
• Maryland ranks 17^th in terms of trust fund solvency

Again, all told, Maryland’s overall ranking is 37^th among the 50 states. (Perhaps not surprisingly, Illinois brings up the rear!)

Make no mistake whatever: Maryland is not Greece! But the new study does indicate that there is work to be done to improve Maryland’s fiscal health. Governor Hogan, rightfully in my view, has vowed to hold the line against imposing new taxes, since Maryland already suffers from a reputation as a state with excessively high taxes. So it will be important, going forward, to restrain the rapid growth experienced in the last many years in the level of expenditures.

For the sake of future Marylanders, as a measure of its fiscal health, the state needs to do better than rank 37^th!

Independence Day 2015

The celebration of the 800^th anniversary of Magna Carta, sealed in June 1215, is a fitting backdrop to thinking about Independence Day 2015. While Magna Carta’s impact on Anglo-American jurisprudence is sometimes exaggerated, there is no doubt that, in fact, the Great Charter has played an influential role in the development of our nation’s understanding of rule of law principles.

So, this Independence Day I propose to discuss the rule of law – without which there would not exist the “unalienable Rights” of “Life, Liberty, and the Pursuit of Happiness” proclaimed in the Declaration of Independence and secured by the Revolution of 1776. 

And while there is an embarrassment of riches from which to choose, I propose to use the Federal Communications Commission’s recent adoption of new Internet regulations – “net neutrality” mandates – to illustrate how overly broad, vague government regulations serve to undermine rule of law norms.

First, back to Magna Carta and its most frequently cited provision, Chapter 39, which provides: “No free man is to be arrested, or imprisoned, or disseised [i.e., dispossessed]…or in any other way ruined…except by the lawful judgments of his peers or by the law of the land.” It is from this “law of the land” guarantee that the concept of “due process of law” largely developed. This owes much to Sir Edward Coke, who in his famous Institutes, equated the phrase “due process of law,” first found in an English statute of 1354, with Magna Carta’s “law of the land.”

The American Constitution’s framers, intimately familiar with both Magna Carta and Coke’s Institutes, incorporated the “due process of law” guarantee into the United States Constitution through the Bill of Rights. The Fifth Amendment provides: “No person shall…be deprived of life, liberty, or property, without due process of law.”

A rule of law regime that conforms to our jurisprudential understanding of “due process of law” generally must include the following elements: (1) fidelity to rules; (2) of principled predictability; and (3) embodied in valid authority external to individual government decision-makers. As Ronald Cass puts it in his book, The Rule of Law in America, the rule of law “pulls society in the direction of knowable, predictable, rule-based decision-making, toward limitations on the alignment of power with legitimacy.”

Now to the FCC’s new Internet regulations – found in its artfully styled Open Internet order – as an example of government action substantially at odds with traditional rule of law norms. FCC Chairman Tom Wheeler has made somewhat of a fetish of declaring that the Commission’s role is to act as a “referee on the field who can throw the flag” or a “referee with a yardstick” to enforce the “basic ground rules” – or some variation thereof. Perhaps in a sports-crazed nation the invocation of a flag-throwing referee is seductive. The fundamental problem, of course, is that unlike football, or any other sport, the Open Internet order does not contain, in significant part, rules of “principled predictability” against which flags can be thrown.

Without belaboring here other aspects of the rules’ built-in vagueness, I will simply point to one key part of the agency’s Internet regulation order that, prima facie, shows that the legal requirements are not knowable in advance. In what the FCC itself calls a “general conduct standard,” the regulations provide that Internet providers “shall not unreasonably interfere with or unreasonably disadvantage” users’ Internet services or competitors. In the technologically dynamic, rapidly evolving Internet environment, where new business models emerge and are modified in response to changing consumer demands, this “no unreasonable interference/disadvantage” standard leaves too much unbridled discretion in the hands of the government enforcers. In other words, the referee can throw the flag – and levy huge multi-million dollar fines – without reference to any “basic ground rules” of “principled predictability” knowable in advance.

Contrary to rule of law norms that align power with legitimacy, regulations such as the FCC’s open-ended general conduct proscription serve to undermine the legitimacy of government action.

Federalist No. 62 (probably authored by James Madison) addresses the “calamitous” effects of mutable policy resulting from laws “so incoherent that they cannot be understood.” The author declares: “Law is defined to be a rule of action; but how can that be a rule, which is little known and less fixed?” According to the Federalist, this little known/less fixed conception of law “poisons the blessings of liberty itself.”

As I said, the FCC’s action in the Open Internet proceeding is just one example of a government action in tension with rule of law norms, albeit an important one. Many others could be cited.

As we celebrate this Independence Day – and the 800^th anniversary of Magna Carta too – we should be cognizant of protecting the freedom we enjoy. And we should expect our government officials to uphold the rule of law, so as not to “poison the blessings of liberty itself.”

Best wishes for a Happy Independence Day 2015!

PS – My previous Independence Day messages are here: 2007, 2008, 2009, 2010, 2011, 2012, 2013, and 2014.