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Supreme Court Rules States Cannot Be Involuntarily Liable for Copyright Infringement

Author: Shaleen J. Patel

May 2020
Supreme Court Rules States Cannot Be Involuntarily Liable for Copyright Infringement

This article was published in May 2020 issue of IP Strategist. Copyright © 2020 ALM Media Properties, LLC. It is republished here with permission.

The U.S. Supreme Court has ruled that individual states are free to commit copyright infringement. The Court held that Congress attempted to abrogate states’ sovereign immunity in an unconstitutional manner when enacting the Copyright Remedy Clarification Act of 1990 (CRCA) (codified in 17 U.S.C. §511). See, Allen v. Cooper, No. 18-877, slip op. at 4 (Mar. 23, 2020). Sovereign immunity through the Eleventh Amendment has yet again proven to be a powerful tool for states to avoid intellectual property infringement liability, where private actors would not be so fortunate. Although Congress said that “[a]ny State … shall not be immune, under the Eleventh Amendment … or any other doctrine of sovereign immunity” from copyright infringement and that remedies available for such infringement would be “available … to the same extent as such remedies are available for such a violation … against any public or private entity,” the Court ruled that this language impermissibly abrogated states’ rights. 35 U.S.C. §511.

Speaking for the court, Justice Kagan found no juridical difference between Congress’s similar abrogation of state sovereign immunity with respect to patent infringement, which the Court struck down two decades earlier in Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank, 527 U.S. 627 (1999). Neither Congress’s Article I powers under what the Court has dubbed the “Intellectual Property Clause” (U.S. Const. Art. I, §8, cl. 8), nor Section 5 of the Fourteenth Amendment, properly grant Congress the power to abrogate sovereign immunity from copyright or patent infringement.

While rights holders may be discouraged that states are permitted to infringe patents and copyrights, the Court did not necessarily open the door to rampant misappropriation or all causes of action against states. In addition, the Court explicitly found copyright to be a property right and not a form of government-issued monopoly. See, Allen, slip op. at 11.

Background

In 1717, Edward Teach, more infamously known as Blackbeard, captured a French ship capable of supporting a crew of about 300 men and armed with more than 30 cannons and renamed her Queen Anne’s Revenge. A year later the Revenge sank off the coast of North Carolina. Most of the ship’s passengers survived, but Queen Anne’s Revenge remained submerged for almost 300 years. According to federal and North Carolina state law, the Revenge was property of North Carolina. See, 43 U.S.C. §2105(c) (“The title of the United States to any abandoned shipwreck … is transferred to the State in or on whose submerged lands the shipwreck is located); N.C. Gen. Stat. Ann. §121-22 (2019) (declaring unclaimed shipwrecks property of the state of North Carolina). In 1996, Intersal Inc., a marine salvage company, discovered the wreck and was contracted to salvage it. Intersal retained Frederick Allen, the petitioner and a local videographer to photograph and take videos of the salvaging efforts. Allen registered copyrights in all his work, but in 2013 argued the state of North Carolina was infringing his copyrights when it uploaded some of his works to a state website without permission. After an early settlement, the state again uploaded more of his works to a state website and published a photo in a newsletter. Allen then filed suit.

In the district court, North Carolina moved for summary judgment on sovereign immunity grounds. Allen, slip op. at 2. The court denied the motion, stating that Congress properly abrogated sovereign immunity by unequivocally stating its intent to do so and properly invoking Section 5 of the Fourteenth Amendment to curb the states’ “pattern of current and anticipated abuse of the copyright held by their citizens.” Allen v. Cooper, 244 F. Supp. 3d 525, 535 (E.D.N.C. 2017) (Allen I). See, U.S. Const. amend. XIV §5 (“The Congress shall have power to enforce, by appropriate legislation, the provisions of [the Fourteenth Amendment].”). The district court reasoned that because copyright, as a form of property, was subject to due process protections, an examination of Section 5 of the Fourteenth Amendment validly supported Congress’s abrogation of sovereign immunity. See, Allen I, 244 F. Supp. at 533-534.

The Supreme Court’s Analysis

First, the Supreme Court examined its own cases in the context of the Eleventh Amendment, which has generally been read beyond its text to exclude from the jurisdiction of federal courts matters subjecting a state to suit, unless that particular state consents. See, Seminole Tribe of Florida v. Florida, 517 U.S. 44, 54 (1996). The Court then noted that, notwithstanding the Eleventh Amendment, Congress may nonetheless abrogate state sovereign immunity so long as two conditions are met. “First, Congress must have enacted unequivocal statutory language abrogating the States’ immunity from the suit.” Allen, slip op. at 5 (internal quotation omitted). Second, “some constitutional provision must allow Congress to thus have encroached on the States’ sovereignty.” Id. In Allen, the Court ruled that the CRCA unequivocally stated Congress’s attempt to abrogate state sovereign immunity, just as its sister statute did in Florida Prepaid. However, the Court was not willing to find that Congress had constitutional authority to make such an abrogation.

Article I Authority

The petitioner argued authority was vested either by the “Intellectual Property Clause” of Article I (U.S. Const. Art. I, §8, cl. 8) or Section 5 of the Fourteenth Amendment (U.S. Const. amend. XIV §5). To deny such authority under the Intellectual Property Clause, the Court turned to its 5-4 decision in Seminole Tribe, where the majority determined “‘Article I cannot be used to circumvent’ the limits sovereign immunity ‘place[s] upon federal jurisdiction.’” Allen, slip op. at 6-7 (citing Seminole Tribe, 517 U.S. at 73) (alteration in original). The petitioner argued that Florida Prepaid, which itself was a 5-4 decision that relied on Seminole Tribe, was not conclusive of the matter because the Court had agreed on a similar use of Article I powers to abrogate sovereign immunity after Florida Prepaid had been decided.

The Court then noted that the petitioner’s argument erroneously viewed its earlier decision. Specifically, the Court noted that in rem actions, which abrogate immunity, are manifestly different than in personam actions because in rem actions, such as bankruptcy, focus not on the creditors, but the debtors. In that way, abrogation of sovereign immunity for in rem actions does not impinge upon states’ rights as strongly as in personam actions. See, Allen, slip op. at 7-8 (citing Central Va. Community College v. Katz, 546 U.S. 356, 359 (2006)). The Court then stated the Bankruptcy Clause itself was evidence the states already consented to in rem jurisdiction. See U.S. Const. Art. I § 8 cl. 4 (vesting in Congress the power “[t]o establish … uniform Laws on the subject of Bankruptcies throughout the United States”). In this way, the Court reasoned, the Bankruptcy Clause and the Intellectual Property Clause were materially different. Regardless, the Court inserted a catch-all that stare decisis would prevail unless there was a “special justification, over and above the belief that [Florida Prepaid] was wrongly decided.” Allen, slip op. at 9 (internal quotations omitted).

Fourteenth Amendment Authority

Next, the Court turned to the petitioner’s argument that Section 5 of the Fourteenth Amendment vested Congress with the power to subject the state to copyright infringement liability. Under Section 5, Congress has the power to enact laws to “enforce, by appropriate legislation,” the requirements of due process. U.S. Const. amend. XIV §5. The petitioner argued that because copyright is a form of property, a point which the Court agreed with, Congress was allowed to enact laws to ensure due process.

For Congress to exercise property authority under Section 5, the law must pass a “means-end test. … [T]here must be a congruence and proportionality between the injury to be prevented or remedied and the means adopted to that end.” City of Boerne v. Flores, 521 U.S. 507, 520 (1997) (superseded by statute on other grounds). “[C]ourts are to consider the constitutional problem Congress faced” on the one hand and “examine the scope of the response Congress chose to address that injury” on the other. Allen, slip op. at 11.

Under the means-end test, the Court ruled that a state’s negligent infringement of copyright does not deprive someone of property under due process. Instead, “an infringement must be intentional, or at least reckless, to come within the reach of the Due Process Clause.” Id. at 11. Additionally, the Court noted that “[a] State cannot violate [due process] unless it fails to offer an adequate remedy for an infringement, because such a remedy itself satisfies the demand of ‘due process.’” Id at 11-12. Because the states did not have a “pattern” of copyright infringement, the Court ruled that Congress was not remedying an unconstitutional deprivation of rights that would require invoking Section 5. Id. at 12. Examining the legislative record behind the CRCA, the Court found that, in fact, states on the whole were attempting to be respectful of copyright law and to take steps to avoid infringement. Id. at 13-15.

While the Court did not forbid Congress from “trying again,” since both the CRCA and its patent sister were enacted before Seminole Tribe, it is difficult to imagine a scenario where Congress can subject states to suit without running afoul of the means-end test.

Practitioner Notes

Allen demonstrates the importance of exploring all relevant claims aside from copyright. While the decision closes the door to copyright infringement damages, the decision does not stop copyright holders from suing for declaratory judgment or state-law-based remedies. Additionally, states may waive immunity contractually to subject themselves to suit in federal court. Lastly, while states may have broad immunity from copyright infringement claims, state contractors are not immune. For instance, a state may contract with a publicity firm or marketing agency, and, if such a contractor were to violate copyright, the contractor would still be subject to suit without immunity.

There are other avenues to seek remedies for copyright and patent infringement, such as breach-of-contract or injunctive relief against state actors responsible for ongoing infringement (see, e.g., 28 U.S.C. §2201; Ex Parte Young, 209 U.S. 123 (1908) (allowing for injunctions against state actors where the state would otherwise be protected by sovereign immunity)). North Carolina has waived its sovereign immunity to breach-of-contract claims, and the Court’s decision should remind practitioners and clients alike to research as many alternative theories of recovery as possible to ensure as full of a recovery as possible. In light of the Court’s decision, practitioners should be especially vigilant in contractually navigating waters that may otherwise impinge on sovereign immunity without a waiver.

At least one district court judge has already taken notice of the Allen decision. In eScholar LLC v. Nebraska Department of Education, Judge Gerrard has ordered the plaintiff to show cause as to why Allen does not preclude the suit in light of the plaintiff’s lack of Ex Parte Young claims in its pleadings. No. 8:20-CV-135 (D. Neb. Apr. 13, 2020).

Until Congress crafts a more narrowly tailored statute or is able to identify a substantial record of infringement by states, practitioners should employ a state-by-state approach to copyright infringement committed by the state to see what, if any, remedies are available.

The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship.

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