SCOTUS copyright case and Oregon’s Oracle example

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Wall Street Journal Editorial, 11/4/19

The Supreme Court has bolstered both state and property rights in recent decades, but on Tuesday it will mediate an ostensible conflict between the two. States argue they can’t be sued for copyright infringement, but sovereign immunity isn’t a constitutional license to steal intellectual property.

At issue in Allenv. Cooper is whether Congress validly abrogated state sovereign immunity in the 1990 Copyright Remedy Clarification Act. North Carolina published copyrighted video of the shipwrecked Blackbeard’s Queen Anne’s Revenge after it was discovered off the state’s coast. The state then passed a law appropriating the creator’s works into the public domain.

After the creator sued, North Carolina invoked the Supreme Court’s Seminole Tribe (1996) ruling that held Congress’s Article I powers generally don’t trump state sovereign immunity. In Florida Prepaid (1999) the Court also said Congress could not use its Article I powers to abrogate state immunity against patent infringement.

But the Court has made exceptions. For instance, Congress may override state sovereign immunity under Section 5 of the Fourteenth Amendment, which gives it power to enforce due-process rights. A law must be tailored to prevent or remedy a substantive and well-documented injury.

Prior to passing the 1990 law, Congress documented a pattern of willful state copyright infringement. One state-operated nursing home copied and sold a publisher’s educational materials. The Chamber of Commerce says more than 150 copyright cases have been filed against states since 2000. That’s probably low since many small businesses lack resources to detect infringement. The Software & Information Industry Association found 77 infringements by states over six years.

Consider Oracle, which designed the software for Oregon’s health-insurance exchange. Oregon agreed to waive its sovereign immunity in the Oracle contract. But then the state withheld payment, disavowed the waiver and continued to use Oracle’s proprietary software. Georgia has claimed ownership of a small business’s software after its five-year contract ended.

Public schools are some of the worst offenders. Georgia State University created an online system that encouraged professors to make unlicensed chapters of books available for download. Professors regularly copy and distribute texts to classes, though public universities in a brief claim there are few cases of willful infringement.

Dow Jones, which publishes the Wall Street Journal, has submitted an amicus brief in the case detailing how the California Public Employees Retirement System (Calpers) reproduced 53,000 articles from 4,500 publishers in eight years. It also distributed the articles in a daily newsletter to recipients in and outside of the pension fund. If it were a private pension fund, Calpers could be sued for hundreds of millions of dollars in damages for copyright infringement. But Calpers claimed sovereign immunity as an arm of the state and ultimately agreed to settle with Dow Jones for a mere $3.4 million and two other large publishers for $600,000.

Copyright infringement deprives intellectual-property owners of due process and just compensation. The Court last term in Knick v. Township of Scott held that individuals whose land is taken may seek redress under the Fifth Amendment in federal court. Copyright owners should get the same protections.