Home > ILN IP Insider > “What’s Mine Is Not Yours To Give Me”—Nor To Take Without Just Compensation: A New Jersey Reaction To Sovereign Immunity, Intellectual Property, & Takings

“What’s Mine Is Not Yours To Give Me”—Nor To Take Without Just Compensation: A New Jersey Reaction To Sovereign Immunity, Intellectual Property, & Takings

I have to give it to creative, resilient lawyers (and in fact, I have lauded them in the past here and there).  When the United States Supreme Court issued its decision in Allen v. Cooper, 140 S.Ct. 994 (2020), a decision holding that the sovereign immunity of individual states prevented a copyright holder from recovering damages for infringement, I was a bit disheartened.  Seeing no immediate litigation alternative, I called for “common sense Congressional legislation to make States directly liable for damages for copyright infringement,” because I felt it unfair that, after Allen, copyright owners “would find themselves defenseless from state-sponsored copyright piracy.”  Flynn, Queen Anne’s Revenge, Indeed!: Copyright Conundrums, Sovereign States, and IP Piracy (2020).  Then some creative, resilient lawyers said, “Not so fast,” arguing that the 11th Amendment’s bar on infringement damages actions does nothing to lessen a copyright holder’s claim for just compensation for the taking of property under the 5th and 14th Amendments, and that unlicensed use of another’s intellectual property is a form a taking from the owner a defining strand of the bundle of rights that define copyrights as “property.”

That is the central premise of the Petition For Writ Of Certiorari filed November 15, 2021, in Jim Olive Photography, d/b/a Photolive, Inc., v. University Of Houston System,  No. 21-735 (2021).  In this case, the Supreme Court of Texas held that a government entity may reproduce, display, and utilize a copyrighted work for its own benefit without paying any compensation to the copyright owner.  Because the federal copyright law fully occupies the field and pre-empts state law claims sounding in copyright, a copyright owner faced with such state action would have to bring any damages action in federal court.  But the 11th Amendment provides the state actor with sovereign immunity.  So, believing that the state’s usurpation of his right to control use of the copyrighted work essentially took from the photographer a valuable property right, the photographer made a takings claim, seeking just compensation for the state’s alleged taking, essentially an assertion of eminent domain over the intellectual property.

But the Texas courts found no taking, reasoning that nothing was taken from the photographer as he still had the right to use, and license others to use, his photographs. See Jim Olive Photography, d/b/a Photolive, Inc., v. University Of Houston System,  624 SW 3d 764, 769 (Texas 2021)(“the University’s single act of copyright infringement was not a taking because it did not take away Olive’s right to use, license, or dispose of the underlying creative work.”), affirming 580 SW3d 360, 376, fn. 26 (Tx. Ct. App. 2019). Indeed, the intermediate Texas appellate court, at Jim Olive Photography, 580 SW3d at 376, fn. 26, rejected the claim that taking away, or ignoring, the ability-to-control indicia of ownership amounts to a taking:

Similarly, property rights, including copyright, have been described as ownership of a bundle of rights or interests. See Harper & Row, Publishers, Inc. v. Nation Enters., 471 U.S. 539, 546, 105 S.Ct. 2218, 85 L.Ed.2d 588 (1985) (“Section 106 of the Copyright Act confers a bundle of exclusive rights to the owner of the copyright.”); see  also Ruckelshaus, 467 U.S. at 1011, 104 S.Ct. 2862; Note, [Copyright Reform and the Takings Clause,] 128 Harv. L. Rev. [973,] 980 [(2015)]; [Pascal] Chapdelaine, [The Property Attributes of Copyright,] 10 Buff. Intell. Prop. L.J. [34,] 51-61[(2014)]. “But the denial of one traditional property right does not always amount to a taking. At least where an owner possesses a full `bundle’ of property rights, the destruction of one `strand’ of the bundle is not a taking, because the aggregate must be viewed in its entirety.” Andrus v. Allard, 444 U.S. 51, 65-66, 100 S.Ct. 318, 62 L.Ed.2d 210 (1979).

The Texas court held that the infringement there was “not a `taking,’ as it does not `virtually destroy’ the property’s value,” and is, like trespass to real property, “a merely transitory invasion” that “may not amount to a taking at all.” Id. at 376.

The aptness of that analysis lost some vigor, however, when the United Supreme Court decided just five days later Cedar Point Nursery v. Hassid, 141 S. Ct. 2063 (June 23, 2021)Cedar Point held that a government commits a per se violation of the Takings Clause when it appropriates an owner’s “right to exclude” others from utilizing his property (even for a mere transitory period and without dispossessing the nursey owner) and appropriates for the government or its designees “a right to invade” that property for a few days every month. Id. at 2072.  Petitioner’s counsel in Jim Olive Photography looked at Cedar Point and saw what I did not, at least immediately—the Supreme Court had just called into question the Texas courts’ conclusion that destruction of one strand of the bundle of rights can constitute a taking. (And, in point of fact, the plaintiff in Allen itself resurrected takings claims as well).  Whether talking about real property or intellectual property, it could be said, and indeed has been said, that ownership “confers [the] owner an exclusive title which involves the right to use, the right to exclude all others both from use and possession, and the right to transfer use and possession to others.”

But there is a lot swirling round as one considers the implications of applying Cedar Point to intellectual, rather than real, property.  Readers of this blog post get to consider these issues in parallel with the Supreme Court as that “cert. petition” is listed for consideration at this Friday’s (January 7, 2022’s) conference of the Justices.  So play along, and consider whether this case makes A Cert. Worthy Argument (as defined in The Cockle Bur Blog)

To be heard, you must convince the Court that your case is “certworthy.”  A cert. worthy petition is generally thought to contain legal issues that have: (1) national importance; (2) divided federal courts of appeals; (3) divided federal and state courts; and (4) not been decided by the Supreme Court.   See Sup. Ct. R. 10.

Thus, let us turn to some important considerations.

Takings analysis starts with the 5th Amendment (sometimes through the 14th Amendment and sometimes through state counterparts to the 5th Amendment). See Murr v. Wisconsin, 137 S. Ct. 1933, 1942 (2017) (citing Chicago Burlington & Q.R.C. v. Chicago, 166 U.S. 226 (1897). And, it goes like this–the relevant concept in the United States is that a person shall “no[t] be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.”  Elsewhere and under other regimes, the lingo may differ but, as Antonio Azuela notes,  it is the same idea: “Compulsory purchase, expropriation, eminent domain, or simply ‘taking,’ are different names for one and the same legal institution: That which allows states to acquire property against the will of its owner in order to fulfill some purpose of general interest.”

So, the question arises as to whether such “intellectual property” is “private property.”  I don’t think that should be much of a question, but let’s indulge the debate.

We will start with patents and copyrights because they have constitutional grounding in Article 1, Section 8:

[The Congress shall have power t]o promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.

Perhaps picking up on the sentiment implied in the constitutional language the “securing for…inventors the exclusive right to their …discoveries,” Section 261 of Title 35 states that “patents shall have the attributes of personal property.”  As Thomas Creel points out in Are Patents Property That is Protected By The US Constitution?, 14 Landslide 30 (No. 2, December/January 2022), there are many cases, at the Supreme Court and Circuit Court level,  that have reached the same conclusion. See Consol. Fruit Jar Co. v. Wright, 94 U.S. 92, 96 (1876)(“A patent for an invention is as much property as a patent for land. The right rests on the same foundation, and is surrounded and protected by the same sanctions.”); James v. Campbell, 104 U.S. 356, 357-58 (1882)(expressing “no doubt” that when the government “grants letters-patent for a new invention or discovery in the arts, confers upon the patentee an exclusive property in the patented invention which cannot be appropriated or used by the government itself, without just compensation, any more than it can appropriate or use without compensation land which has been patented to a private purchaser”); Patlex  Corp. v. Mossinghoff, 758 F.2d 594, 599-600 (Fed. Cir.) (patents provide property ownership that “embodie[s] a bundle of rights in implementation of this exclusivity, including the foundational right to exclude others from practice of the patented invention.”), modified on other grounds 771 F.2d 480 (Fed. Cir. 1985).  In fact, as Creel has noted, “[a]gainst this background, the Federal Circuit ruled in 1985 that ‘[i]t is beyond reasonable debate that patents are property [that is protected by the Constitution.’”  Creel, supra, at 31(citing Patlex).   Copyrights have also been viewed as personal property in much the same way, as have trade secrets. See CCC Info. Servs., Inc. v. Maclean Hunter Market Reports, Inc., 44 F.3d 61, 74 (2d Cir. 1994) (“[A] rule that the adoption of such a reference by a state legislature or administrative body deprived the copyright owner of its property would raise very substantial problems under the Takings Clause of the Constitution.”); Lane v. First Nat’l Bank of Boston, 871 F.2d 166, 174 (1st Cir. 1989) (suggesting if state remedies do not afford just compensation for copyright infringement, “the Takings Clause of the federal Constitution might at that point enable [owner] to pursue a damage remedy in federal court”); and see Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1003 (1984) (compensation required for taking of trade secrets).

But there is also a counter-trend.  Taking what seems a different approach as to what is the constitutional language emphasizes, a growing number of courts are seemingly swayed by the notion that it is “Congress” that has the “power” to “secur[e] for” applicants certain rights for “limited times.” Article 1, Section 8.  Though the Supreme Court said expressly in Oil States Energy Services v. Greene’s Energy Corp. LLC, 138 S.Ct. 1365, 1379 (2018), that its “decision should not be misconstrued as suggesting that patents are not property for purposes of the Due Process or the Takings Clause,” the Supreme Court’s discussion of the difference between public and private rights has resulted in at least two lower court decisions concluding that the analysis more than suggests that patents are outside takings protections.  First, in Christy Inc. v. United States, the Court of Claims said that the decision to grant a patent is “a matter involving public rights…and …is a ‘creature of statute law.’” 141 Fed. Cl. 641, 659 (2019), aff’d on other grounds 971 F.3d 1332 (Fed. Cir. 2020).  For the Court of Claims, this means, as noted in Christy, 141 Fed. Cl. at 659-60, that no compensable taking occurs when the Government usurps, infringes, or vacates a private party’s patent:

The Supreme Court observed that its longstanding precedent teaches that “the decision to grant a patent is a matter involving public rights—specifically, the grant of a public franchise.” … [T]he [Patent and Trademark Office] has ‘the authority to reexamine—and perhaps cancel—a patent claim’ in an inter partes review” and that “franchises can be qualified in this manner.” … Importantly, the Supreme Court remarked that the handful of prior decisions characterizing patents as “private property” did not contradict its conclusion in Oil States that patents are public franchises.

***

In other words, modern invention patents are distinguishable from land patents because the Patent and Trademark Office exercises continuing authority over invention patents, whereas the government generally cedes “all authority or control” over the land in question when it issues a land patent.

In short, patents are public franchises, not private property. Because “[a] taking compensable under the Fifth Amendment inherently requires the existence of ‘private property,’” Skip Kirchdofer[, Inc. v. United States,] 6 F.3d [1573,] 1580 [(Fed. Cir. 1993)], patent rights are not cognizable property interests for Takings Clause purposes.

Second, Golden v. United States, 955 F.3d 981, 987 (Fed. Cir. 2020), held that, though Fifth Amendment requires just compensation for takings of private property, a “cause of action under the Fifth Amendment is unavailable to patent owners alleging infringement by the government.” See also Creel, supra, at 32-33.

Thus, as the Supreme Court considers Jim Olive’s cert. petition, there is not only the uncertainty of whether Cedar Nursery applies to intellectual property takings but, as Creel notes (at 33), whether the 5th Amendment itself even applies to alleged takings of intellectual property:

So this is the current state of the law: Two lower court opinions (Christy and Golden) have found that patents are not property that is protected by the Fifth Amendment, which were both affirmed on appeal without addressing this issue; two earlier Federal Circuit opinions (Patlex and Joy [Techs., Inc. v. Manbeck, 959 F.2d 226 (Fed. Cir.), cert. denied, 506 U.S. 829 (1992)]) have found that patents re protected property under the Fifth Amendment; and the Supreme Court (Oil States) has held that patents are a particular type of property, but it has not decided whether or not that type of property is protected under the Fifth Amendment takings prohibition.

As explained below, the “public franchise” (mis)understanding in Christy and Golden is one in dire need of correction. While the Supreme Court must decide whether the Jim Olive Photography case is the best vehicle for such correction, these are clearly issues of national importance, with inconsistent decisions by various federal appellate courts (and now state courts) present. Further, the Supreme Court’s Oil States decision has somehow been read to require outcomes that the Court specifically said it was not deciding concerning intellectual property rights and 5th Amendment takings protections. Indeed, even Justices Gorsuch and Sotomoyer, in dissent in Thryv, Inc. v. Click-To-Call Technologies, LP, 140, S.Ct. 1367, 1387 (2020), have already called Oil States a “wrong turn,” which it clearly seems to be, away from the settled notion that “patents were, for centuries, regarded as a form of personal property.”

When a governmental entity infringes, it is using the inventor’s, or the author’s, creation without license or payment.  The government is not using the patent, but the patented technology.  Likewise, the government is not using the copyright registration, but the copyrighted text.  Thus, the government is not taking back some governmentally-assigned franchise, blessing, or recognition like a letters-patent or a copyright registration, but is taking from such “authors and inventors … their respective writings and discoveries,” in the language of Article I, Section 8.  That is just very different from ending a public franchise.  Thus, the notion that, through a patent or copyright registration, the government has given the author or inventor that which defines either their rights, their creations, or the value of either just does not ring true.  Indeed, on such logic, the government need not provide just compensation for land taken because the landholder’s interest is memorialized in a deed recorded at the county clerk’s office or for an automobile seized because its ownership is reflected in a DMV registration document.  The law rejected such distinctions between intellectual and real property long ago. Hovey v. Henry, 12 F.Cas. 603, 604 (No. 6,742) (C.C. Mass. 1846) (an invention patent holder “holds a property in his invention by as good a title as the farmer holds his farm and flock.”).

And authors and inventors, and their counsel, should not shrink from fighting that fight. That is the view from New Jersey anyway.  As I have provided such perspective before, see Out Of Character: Jersey Boys, Detective Stories, & The Case Of Space-Traveling Tardigrades; WORLD FAMOUS (By, Say, New Jersey Standards): Expanding The Right Of Publicity Nationally And Internationally; Still Standing?: The Sometimes Rocky World Of Public Art), let me channel The Sopranos, which some have said reflects the unconscious, primitive id of the New Jersey personality, fittingly here part of the psyche “used for everything from survival instincts to appreciation of art.”  Though some of these (fictional) New Jerseyans think no one’s going to the mattresses in this day in age on such questions, a lot of friends of ours are complaining because they feel differently about the intellectual property and earning rights surviving for artists and creators.  Creators, and creative counsel, need to make clear to governmental actors that bestowing patents and copyright registration certificates is not the same thing as inventing or creating the protected work, the former done to “promote the progress of science and useful arts” and the latter being the embodiment and exemplar of that progress itself.  Every creator should emphasize, with the conviction of a mythical New Jersey resident like Richie Aprile, that “what’s mine is not yours to give me,” and such creators feel, justifiably, “100% entitled” to enjoy the full measure of the fruits of their labors, regardless who is seeking to limit that return. While one may be tempted to conclude that dealing with governmental entities demands a level of flexibility, one can also take solace in the “intuitive approach” Cedar Point recognized (at 141 S.Ct. at 2076), namely that rights of control over access and exclusion were implicit and “fundamental” concomitants of ownership. Id. at 2076-78. Creators should not be powerless to protect or at least should be able to require that they be paid for the use of, their creations.  This is true even though the government “did not vest it[self] with a property interesting recognized by state law” or amount to a “formal condemnation.” Id. I much prefer a result where, as to the intellectual property one created, the government’s approach is toasted rather than questioned.  These entities shouldn’t be ducking their obligation to provide just compensation by claiming property isn’t really property; earners should be recognized.  When such entities make unlicensed use of intellectual property, creators should be able to figure out how much they are owed as a consequence of allowed infringement damages or as just compensation for a taking and should be able to take what is owed.

Simply stated, “[g]overnments might be interested in acquiring intellectual property for any number of reasons and are free to acquire intellectual property, just as private entities are, by paying its owners for permission to use it,” as Adkisson notes at 7 (emphasis added), a sentiment not unlike what the Supreme Court said in Cedar Point: “The government must pay for what it takes.” 141 S.Ct. at 2071. A government failing to recognize these rights is especially problematic because, “[u]nless the rights are enforced by the government, protected creations or innovations would suffer from non-excludability. Free riders would simply use the innovations without granting compensation to the innovators.” Adkisson, at 13. As Adkisson noted (at 16), getting nothing or little as compensation could impact detrimentally on innovation:

Takings, compensated at what property owners perceive to be less than fair value, can be viewed as a rolling back of property rights that were once justified as spurs to innovation. By not allowing innovators to glean their (perceived) just reward, innovation could be slowed.

Though the law discussed in this post to this point has only included United States legal citations, these takings issues have international implications as “U.S. innovators may be tempted to register their patents and other intellectual property outside the U.S.” if they would be subject here to uncompensated takings.  Adkisson, at 16-17. So one could say, looking at the pending cert. petition, that it raises important questions.

The issues highlighted here also illustrate the incomplete analytical construct stated in Cedar Point.  There the majority stated that the “essential question is not… whether the government action at issue comes garbed as a regulation (or statute, or ordinance, or miscellaneous decree). It is whether the government has physically taken property for itself or someone else— by whatever means—or has instead restricted a property owner’s ability to use his own property.” Cedar Point, 141 S.Ct. at 2072. Here, when dealing with intellectual, and hence intangible, property, the government’s action may not have restricted the owner’s ability to use it, though that entity has taken that property for itself.  That it did not, and indeed given its nature could not take it physically should not eliminate the government’s action from being deemed a taking.  See Eisenberg, Intangible Takings, 60 Vanderbilt Law Review 667, 676 (2007) (“Regrettably, Supreme Court Takings jurisprudence has failed to acknowledge a definitive test or rule to determine when emerging, intangible rights amount to ‘property’ under the Takings Clause. As a result, courts and legislatures, afraid to depart from established legal doctrine, struggle to keep pace with innovations in technology.”), but see Bobbs-Merrill Co. v. Straus, 210 U.S. 339, 347 (1908) (recognizing that copyright “is an exclusive right to the multiplication of the copies, for the benefit of the author or his assigns, disconnected from the plate, or any other physical existence. It is an incorporeal right to print and publish the map, or, as said by Lord Mansfield in Miller v. Taylor, 4 Burr, [2303,] 2396 [(1769)], ‘a property in notion, and has no corporeal, tangible substance.'”).

For property of this sort, i.e. intellectual property, the government’s acts in Jim Olive Photography were the equivalent of the “appropriation of an easement” noted in Cedar Point. 141 S.Ct. at 2073.  That easement had, in effect according to Eisenberg ( supra, at 699), overrode the photographer’s fundamental rights as an owner to exclude others and determine use:

The initial element required for an interest to be constitutionally cognizable property is that it must be exclusionary. The holder must maintain a right to exclude, which includes the right to sole possession and control, and the right to determine how the property will be used.  In College Savings Bank v. Florida Prepaid Postsecondary Expense Board, [527 U.S. 666, 673 (1999),] the Supreme Court held that “[t]he hallmark of a protected property interest is the right to exclude others.”

The notion of a copyright easement is not some recently conceived mash-up by this blogger, but rather a duly considered concept that has been the subject of academic analysis. See, e.g., Mazzone, Jason, Copyright Easements, 50 Akron Law Review 725 (2015); Karl Kowallis, Treating Fair Use as an Easement on Intellectual Property, 2018 BYU L. Rev. 1073 (2019).  A government entity’s appropriation of a copying and use right deprives the photographer of his sole right to control copying and use his photograph much more than a governmental entity’s traversing that photographer’s real property will interfere with his own right to also amble around that property.

But, since the law imposes on the governmental entity an “implied duty and obligation to make adequate compensation to the landowner” for taking even such a real property easement, Nigro v. Planning Board, 122 N.J. 270, 278 (1991) (another New Jersey perspective, in an opinion by Justice Garibaldi during the term I clerked for her), it should also compensate him for the intellectual property one because the very “concept of intellectual property relates to the fact that certain products of human intellect should be afforded the same protective rights that apply to physical property.”  This “is consonant with a notion of ‘property’ that extends beyond land and tangible goods and includes the products of an individual’s ‘labour and invention.’ 2 W. Blackstone, Commentaries 405; see generally J. Locke, The Second Treatise of Civil Government, ch. 5 (J. Gough ed. 1947)…. That intangible property rights protected by state law are deserving of the protection of the Taking Clause has long been implicit in the thinking of this Court.” Ruckelshaus, 467 U.S. at 1003.  So with the Justices convening this Friday for an unusual and important Friday argument concerning vaccine mandates, some court watchers may be inclined to underappreciate the cases being conferenced that day as if it’s nothing so forget about it.  But let’s hope that the Supreme Court itself does not forget the notion that intangible intellectual property rights are deserving of constitutional protection against their taking.  Perhaps Justice Alito, who appropriately “speaks with great pride about just how deep his New Jersey roots run,” will bring New Jersey common sense to Friday’s conference, and ask, as he did during the oral argument in Allen (at 44:15-16), “So why wasn’t it a taking?”  That question is sort of rhetorical here, as it is a taking to me, and there should be just compensation when the government uses someone’s intellectual property.

Why?  Because “right is right,” as is instinctively and viscerally said around here when a result feels obvious.  (In fact, it is said here even in judicial opinions, about patents no less.  See Eagleview Tech, Inc. v. Xactware Solutions, Inc., 485 F. Supp. 3d 505, 510 (D.N.J. 2020) (upholding $125 million patent infringement jury verdict, and noting that this New Jersey jury, despite a “farrago of shifting defenses…[,] made sense of it all,” “saw through the confusion and illusion, and held right is right.”)(emphasis added).  I hope the dissenters in Thryv will agree; and despite voting with the majority in Allen and Thyrv, perhaps Justice Alito’s New Jersey common sense will kick in like it did in Koontz v. St. John’s River Water Mgmt. District, 133 S.Ct. 2586, 2594 (2013), where he noted in a majority opinion the importance of preventing governmental trespasses and making sure public rights of way did not trample on important individually-owned property rights.  They will still need one more vote to hear this case, and move toward ending such takings, trespasses, and infringements of intellectual property.   That’s what we’d like to see here in New Jersey, and around the United States.