Statement of Marybeth Peters
The Register of Copyrights
before the
Committee on the Judiciary

United States Senate
107th Congress, 1st Session

February 27, 2002

Intellectual Property Protection Restoration Act (S. 1611)

Mr. Chairman, Senator Hatch, Members of the Committee, good morning. It is always a pleasure to appear before this Committee and I thank you for inviting the Copyright Office to present its views today on this very important issue.

I would like to begin by thanking you, Mr. Chairman, for your leadership in this area. You began working on legislation to rectify the imbalance created by the Supreme Court's June, 1999 rulings almost immediately after the decisions were announced. You consulted extensively with my office, other agencies, the intellectual property community, legal scholars, and other interested parties. In that process, you kept an open mind to all views and went to great lengths to accommodate all concerns that were raised. The product of your efforts, S. 1611, the Intellectual Property Protection Restoration Act, is a carefully balanced bill. It provides copyright owners with effective tools to restore their ability to obtain appropriate remedies for infringement by States while remaining, I believe, within Congress' constitutional authority. The Copyright Office supports enactment of S. 1611.

I. Background

The broadened interpretation of state sovereign immunity and its resulting application to remedies available under the Copyright Act is a relatively recent phenomenon. The United States enacted the first Copyright Act in 1790. There is no judicial decision in the ensuing 172 years that failed to subject States to the full range of remedies available under the Copyright Act on the grounds of sovereign immunity.

Then, in 1962, the United States Court of Appeals for the Eighth Circuit dismissed a copyright infringement suit against a state agency on sovereign immunity grounds.⁽¹⁾ However, that case did not usher in a new era for state sovereign immunity. Just two years later, the Supreme Court issued its ruling in Parden v. Terminal Railway of Alabama (Parden) in which it held that "when a State leaves the sphere that is exclusively its own and enters into activities subject to congressional regulation, it subjects itself to that regulation as fully as if it were a private person or corporation."⁽²⁾

Over time, the decision in Parden was gradually eroded. More than twenty years after Parden, in Atascadero State Hospital v. Scanlon (Atascadero),⁽³⁾ the Court reversed itself on the legislative requirements necessary to find congressional intent to abrogate state sovereign immunity. The Court held that in the instant case, the Eleventh Amendment barred recovery from the States because a "general authorization for suit in federal court is not the kind of unequivocal language sufficient to abrogate the Eleventh Amendment."⁽⁴⁾ Rather, what is required for congressional abrogation of state sovereign immunity is that the federal statute be "unmistakably clear" that States are included in the defendant class.⁽⁵⁾

The decision in Atascadero created great uncertainty as to which federal laws were unmistakably clear in their intent to subject States to liability and which were not. Applying this standard to the Copyright Act, some courts held in favor of the States' immunity,⁽⁶⁾ to the great distress of copyright owners.

In 1987, Congress requested that the Copyright Office produce a report on the current state of the law in the area of the enforcement of copyright against state governments. On June 27, 1988, the Copyright Office submitted its report, Copyright Liability of States and the Eleventh Amendment. That report noted that copyright owners "caution that injunctive relief is inadequate - damages are needed. And if states are not responsible for remunerating copyright owners, as are all other users subject to limited statutory exceptions, proprietors warn that: marketing to states will be restricted or even terminated; prices to other users will increase; and the economic incentives, even ability, to create works will be diminished." Given these concerns and the analysis of the case law as it stood at that time, the report concluded that "copyright proprietors clearly demonstrate the potential for immediate harm to them."

In 1990, Congress responded to the situation created by the ruling in Atascadero by enacting the descriptively-named Copyright Remedy Clarification Act (CRCA).⁽⁷⁾ That law added provisions to Title 17 which clearly provide that States "shall not be immune, under the Eleventh Amendment of the Constitution . . . or any other doctrine of sovereign immunity, from suit in Federal Court . . . for a violation of the exclusive rights of a copyright owner . . . ."⁽⁸⁾ This clear statement left little doubt that Congress intended to make States liable for infringement and to abrogate their sovereign immunity. Thus, once again, the apparent uncertainty about the immunity of States from suits for damages for copyright infringement was removed. A similar law for patents and one for trademarks were enacted two years later.

That brings us to the Supreme Court's triad of opinions on June 23, 1999.⁽⁹⁾ It is worth noting that all three of these cases were decided by the same 5-4 vote and all three engendered strong dissenting views.

The decision in Alden undergirded the other two decisions. In that case, John Alden and other employees of the State of Maine filed suit in state court in Maine against that state for violation of the overtime provisions of the Fair Labor Standards Act, a federal law. The U.S. Supreme Court affirmed the decision of the Maine Supreme Judicial Court that the State's sovereign immunity barred the suit, holding that:

the States' immunity from suit [in the State's own courts and in federal courts] is a fundamental aspect of the sovereignty which the States enjoyed before the ratification of the Constitution, and which they retain today . . . except as altered by the plan of the Convention or certain constitutional Amendments.⁽¹⁰⁾

In the second of the June 23 cases, College Savings, the Court considered whether Congress had the authority to abrogate state sovereign immunity from lawsuits under section 43(a) of the Lanham Act. Under the Court's earlier holding in Seminole Tribe of Florida v. Florida,⁽¹¹⁾ there is only one source of constitutional authority from which Congress may abrogate state immunity: the enforcement power in Section 5 of the Fourteenth Amendment.⁽¹²⁾

The Fourteenth Amendment instructs in relevant part that "No State shall . . . deprive any person of . . . property, without due process of law."⁽¹³⁾ Because the Court held that College Savings did not allege deprivation of a property right within the meaning of the Fourteenth Amendment, the avenue of congressional abrogation of state immunity was closed.⁽¹⁴⁾

Next, the Court turned to the question of implied state waiver of immunity. Invoking the precedent of Parden, Petitioner College Savings sought to show that Florida had impliedly waived its immunity by participating in a scheme that is enforceable in federal court.⁽¹⁵⁾ Not only did the Court reject this argument, but it overruled Parden and renounced the doctrine of implied waiver of state immunity.⁽¹⁶⁾

The Court's holding requires that a state's waiver be explicit and voluntary in order to be effective. However, Congress may provide incentives to the State by conditioning use of its discretionary authority such as that found in the Spending Clause and the Compact Clause on state waiver.⁽¹⁷⁾

In the third of the three opinions issued on June 23, Florida Prepaid, the Court considered whether Congress had the authority to abrogate state sovereign immunity from lawsuits under the Patent Act. The Court acknowledged that patents are property within the meaning of the Fourteenth Amendment.⁽¹⁸⁾ However, the Court held that the legislative enactment at issue in this case did not fall within Congress' Fourteenth Amendment power for three reasons.

First, Congress "must identify conduct transgressing the Fourteenth Amendment's substantive provisions, and must tailor its legislative scheme to remedying or preventing such conduct."⁽¹⁹⁾ The Court found that Congress failed to meet this burden because it did not identify a pattern of patent infringement by states.⁽²⁰⁾

Second, the Court recognized that patent infringement by a state is not a violation of the Fourteenth Amendment if the state provides a remedy, that is, due process.⁽²¹⁾ Because the statute was drafted to apply to all States, without regard to state-provided remedies, the Court held that it went beyond the power conveyed by the Fourteenth Amendment.⁽²²⁾

Third, the Court noted that "a state actor's negligent act that causes unintended injury to a person's property does not 'deprive' that person of property within the meaning of the Due Process Clause."⁽²³⁾ Because a claim for patent infringement requires no showing of intent in order for the plaintiff to prevail, the Court held that the legislative enactment at issue in this case was again overbroad.

Although the Supreme Court has not ruled directly on the constitutionality of the CRCA, the Fifth Circuit applied the Supreme Court's recent rulings in Chavez v. Arte Publico Press (Chavez).⁽²⁴⁾ That case involved a suit by an author claiming copyright infringement of her book by the University of Houston, a state university.

The court followed the analysis in Florida Prepaid, first inquiring whether Congress identified a pattern of infringement by States. While noting that the legislative history in support of the CRCA, which included the 1988 report of the Copyright Office, was somewhat more substantial than that of the PRCA, the court found that the record was still inadequate to support the legislative enactment. Second, the court noted that in adopting the CRCA, Congress "barely considered the availability of state remedies for infringement."⁽²⁵⁾ That the legislative history did not meet requirements the Court articulated a decade after the law was enacted is not surprising. Thus, the Fifth Circuit refused to enforce the CRCA.

The same result was reached in another Fifth Circuit case, Rodriguez v. Texas Comm'n on the Arts,⁽²⁶⁾ in a brief opinion that presumably is based upon the same rationale as that circuit's decision in Chavez. Given the current Supreme Court precedent, it is difficult to find fault with the ruling in Chavez, and we believe that the CRCA would most likely be held unconstitutional by the current Supreme Court.

Thus, like the recent, brief periods in the early 1960's and the late 1980's, we are again faced with the issue of state sovereign immunity being interpreted and applied in a manner which inhibits the proper functioning of the Copyright Act.

The most recent development has been a report issued by the General Accounting Office, at the request of Senator Hatch, which surveyed the recent legal landscape for the number of infringement actions against states and the availability of remedies for infringements by States.⁽²⁷⁾ That report reached the conclusions that there are relatively few infringements of intellectual property rights by States and that there are few if any remedies available to rightholders whose rights are infringed.

That report also contains the text of a letter that the Copyright Office sent to the GAO regarding the study and report. In that letter we expressed no surprise at the relatively low number of infringements found. We were not surprised because we recognized the difficulties in obtaining accurate and complete records of claims against states and the relatively recent phenomenon of state sovereign immunity trumping copyright liability. We believe, however, that even a few acts of infringement by States, if unremedied, should be sufficient to justify congressional abrogation of state sovereign immunity. Moreover, the Congress is entirely within its authority to condition the exercise of its discretionary authority to provide a State what amounts to a federal gratuity on a waiver of sovereign immunity by that State regardless of the extent of a record of known infringements.

II. The Current Imbalance

At the outset, we acknowledge that the problems addressed by S. 1611 apply to all forms of intellectual property. However, as Register of Copyrights, my remarks will be confined to intellectual property covered by Title 17 of the U.S. Code. The effect of the Court's 1999 decisions is that copyright owners are unable to obtain monetary relief⁽²⁸⁾ under the Copyright Act against a State, state entity, or state employee unless the State waives its immunity. The availability of monetary awards through lawsuits filed in state courts is highly doubtful.⁽²⁹⁾ Actions such as takings claims and tort are not designed to apply to intellectual property and courts may not be willing to expand those areas of law. Further, the States have immunity in their own courts as well as in Federal court,⁽³⁰⁾ so the State would have to waive its immunity in any event.

The ability of copyright owners to protect their property and to obtain complete relief when their rights are violated is central to the balance of interests in the Copyright Act. By denying that opportunity to copyright owners in cases where the infringers are under the umbrella of a State's sovereign immunity, the Supreme Court's decisions dilute the incentive for authors, performers, and producers to create. If the diminution of incentives to create results in a diminution of creative output, as may reasonably be assumed, the American economy and culture will be poorer for it.

We would like to think that States and State employees will respect the copyright laws despite the unavailability of any monetary remedy when they infringe, but we are concerned that in light of the Supreme Court's 1999 rulings the available legal remedies will be insufficient to ensure that result.

We do not mean to suggest by this that States and their employees are any less willing to abide by the law than the American public as a whole. However, recent experiences in the internet environment suggest that some segments of the public do not view copyright as sacrosanct. Further, logic dictates that if a segment of people will not be held fully accountable for certain actions, they may be less likely to restrict themselves in those actions. As it was stated in Federalist No. 51, albeit in a different context, "[i]t may be a reflection on human nature, that such devices should be necessary to control the abuses of government....If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary."

In sum, we do not accept the proposition that copyright owners must or should endure future infringements without an adequate and just remedy. If the Supreme Court's decisions have effectively blocked Congress from directly abrogating the State's immunity, then it is appropriate for Congress to consider other legislative responses, such as those in this bill - providing incentives to States to waive their immunity voluntarily by conditioning the receipt of a gratuity from the Federal Government on such waiver. Only in this way can the proper balance, and basic fairness, be restored.

III. Elements of S. 1611

The Copyright Office is gratified that you have undertaken to remedy this situation, Mr. Chairman. S. 1611, is a layered approach, designed to provide copyright owners with the best chance of getting their day in court. It is also a balanced approach, respectful of States and carefully crafted to comply with the most recent Court rulings.

S. 1611 contains three main components: a system designed to encourage States to waive their immunity from federal court suits seeking monetary relief for infringement of intellectual property by granting the benefit of fully enforceable intellectual property only to those States that do so, a carefully circumscribed abrogation of State sovereign immunity in the intellectual property field to provide a remedy against States that choose not to waive their immunity, and a codification of the judicially-made rule that notwithstanding a State's sovereign immunity, the employees of a State may be enjoined by a Federal court from engaging in illegal action.

A. Incentive to Waive

The bill provides significant incentives for a State to waive its immunity, but does so in a way that is inherently proportional and fair to the States and copyright owners. The bill is designed so that a State which chooses not to waive its immunity from monetary damages in intellectual property infringement cases is unable to obtain damage awards when it seeks to enforce its own intellectual property rights. If a State does waive its immunity, then it obtains the benefit of being able to seek monetary relief. This approach is reasonable, proportionate, and appropriate.

We are optimistic that this incentive will be successful in encouraging States to level the playing field by waiving their immunity. States derive significant revenue from the commercial exploitation of their intellectual property. The price of being unable to obtain monetary relief for the infringement of future intellectual property should give States good cause to consider accepting the bargain that Congress offers with this legislation. Of course, States would have even greater incentive to waive their immunity if their ability to obtain injunctive relief was also conditioned on such waiver. But out of concern for not crossing the line between encouragement to the States and coercion of the States, Mr. Chairman, you elected to follow a symmetrical approach - to deny a State exactly what is denied to other right holders if the State refuses to waive its immunity. We respect that choice, and I believe that the bill can effectively accomplish its goals as written.

We feel confident that the bill is within Congress' constitutional authority. The Supreme Court has made clear that the sovereign immunity of a State is "a personal privilege which it may waive at its pleasure."⁽³¹⁾ Further, the Court wrote that Congress may properly seek to induce States to waive their immunity by conditioning "the denial of a gift or gratuity...",⁽³²⁾ such as approval of an interstate compact⁽³³⁾ or its grant of funds to a State,⁽³⁴⁾ on such waiver. That is precisely what this bill does.

The Constitution grants to Congress the authority "To 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...."⁽³⁵⁾ Of course, we recognize this as the authority by which Congress may provide copyright protection for qualifying works. This authority is entirely permissive. Congress may choose not to extend copyright protection at all, it may extend that protection subject to certain conditions, or it may extend that protection only to certain classes of authors. A particularly relevant example is the choice that Congress has made to withhold copyright protection from "any work of the United States Government...."⁽³⁶⁾ Similarly, Congress may withhold copyright protection from any work of any state government. That it has chosen not to do so to date represents a gift from the Congress to the States. And, as the Supreme Court has opined, Congress may condition the grant of such a gratuity upon a State's waiver of its sovereign immunity in the directly related field of suits for monetary relief under the Federal intellectual property laws.⁽³⁷⁾

The fact that Congress has allowed States to enjoy copyright protection for their works for so long in no way alters the fact that such protection remains a gift from the Federal Government or diminishes its constitutionally granted discretion to change that policy. S. 1611 would effectuate a change in that policy, offering States an opportunity to receive full copyright protection for their works in the future in exchange for waiver of sovereign immunity to infringement claims.

This system is closely analogous to the changes made by the Telecommunications Act of 1996. That Act altered the long-standing regime of federal acquiescence to state regulation of local telephone service. The Act provided that a State could continue to play a role in such regulation, but conditioned that gratuity on a waiver by the State of its immunity to suits arising under the procedures set forth in the Act. This condition has been challenged in federal court and upheld by four of the five appeals courts to hear such cases.⁽³⁸⁾

B. Abrogation

While we are optimistic that most States will waive their immunity under the system this bill provides, there is a distinct possibility that some States, perhaps more than a few, will not. In that case, it is necessary to provide copyright owners with at least a chance to have their day in court. You were therefore wise, Mr. Chairman, to have included the second element of the bill; a provision for the abrogation of state sovereign immunity, pursuant to Congress' authority under the Fourteenth Amendment.

The Supreme Court's decision in Florida Prepaid leaves Congress almost no leeway to accomplish an abrogation of State sovereign immunity that will place copyright owners on the same footing they were prior to the Court's ruling. Not only must Congress have an extensive record of infringements, but the record must also include proof that adequate remedies in state court are not available, and possibly also that the infringements were willful.⁽³⁹⁾ This standard appears nearly impossible to reach. We are baffled at the Court's apparent decision that the Fourteenth Amendment requires the denial of copyright owners' constitutional rights at epidemic proportions before it allows Congress to fully restore those rights.

Nonetheless, Mr. Chairman, you made full use of the few tools left to you in this area. The result is an abrogation provision that traces the outlines of the Fourteenth Amendment precisely. The Court has held that such narrowly-tailored abrogations do not require the support of the factual record that broader abrogations would.⁽⁴⁰⁾ Unfortunately, the burden of establishing a constitutional violation merely shifts to the individual right holder/plaintiff. Thus, the abrogation provision in this bill is helpful only to those who can meet these additional burdens of proof beyond what is normally necessary to establish a prima facia case of infringement. In the final analysis, given the restrictions the Court has placed on Congress' exercise of its Fourteenth Amendment authority, we believe that this is the best abrogation provision that courts will sustain under the precedent of Florida Prepaid.

C. Codification of Injunctive Relief

The third and final element of the bill is a codification of the< judicially-made rule that notwithstanding the State's immunity, state employees may be enjoined by Federal courts from engaging in illegal activity, such as infringement of copyrights. This doctrine was first articulated by the Supreme Court in Ex Parte Young.⁽⁴¹⁾ The reasoning the Court followed was that state employees are covered by the umbrella of the State's sovereign immunity only to the extent they are acting within the scope of their official duties. Because a state employee may not violate Federal law in carrying out his duties, if he does so, he is by definition operating outside the scope of his official duties. And because he is acting outside the scope of his official duties, he is no longer protected by the State's sovereign immunity and the court may enjoin him from that activity.⁽⁴²⁾

Despite the long-standing recognition of this doctrine, some fear that the recent judicial supercharging of state sovereign immunity may be extended to nullify this venerable rule. Thus, we believe that it is wise to codify this doctrine in federal law.

IV. Conclusion

It is only logical to expect that without an alteration of the status quo, infringements by States are likely to increase. Only Congress has the power to remedy the existing imbalance. The Supreme Court's rulings and the rights of States must surely be respected, but the current state of affairs is unjust and unacceptable. It is appropriate for Congress to use its authority to prevent state sovereign immunity from becoming a tool of injustice. S. 1611 achieves the necessary goals within the constitutional limits and I look forward to its enactment.

1. Wihtol v. Crow, 309 F.2d 777 (8^th Cir. 1962).

2. 377 U.S. 184, 196 (1964).

3. 473 U.S. 234 (1985).

4. Id. at 246.

5. Id. at 242.

6. See Woelffer v. Happy States of America, Inc., 626 F. Supp. 499 (N.D. Ill. 1985); BV Engineering v. UCLA, 657 F. Supp. 1246 (C.D. Cal. 1987), aff'd, 858 F.2d 1394 (9^th Cir. 1988), cert. den., 109 S. Ct. 1557 (1989).

7. Pub. L. No. 101-553.

8. 17 U.S.C. � 511.

9. College Savings Bank v. Florida Prepaid Postsecondary Educ. Expense Bd., 527 U.S. 666 (1999)(College Savings); Florida Prepaid Postsecondary Educ. Expense Bd. v. College Savings Bank, 527 U.S. 627 (1999)(Florida Prepaid); Alden v. Maine, 527 U.S. 706 (1999)(Alden).

10. Id. at 713.

11. 517 U.S. 44 (1996).

12. College Savings at 670.

13. U.S. Const., amend. XIV.

14. College Savings at 673.

15. Id. at 676.

16. Id. at 680.

17. Id. at 686-87.

18. Florida Prepaid at 637.

19. Id. at 639.

20. Id.

21. Id. at 642-43.

22. Id. at 646-47.

23. Id. at 645 (citing Daniels v. Williams, 474 U.S. 327, 328 (1986)).

24. 204 F.3d 601 (5^th Cir. 2000).

25. Id. at 606.

26. 199 F.3d 279 (5^th Cir. 2000).

27. Intellectual Property: State Immunity in Infringement Actions, GAO-01-811 (Sept. 2001).

28. Monetary relief for copyright infringement may consist of some combination of actual damages, defendant's profits, statutory damages, litigation costs, and attorney's fees. 17 U.S.C. ��504, 505.

29. Id. at 13-24.

30. Id. at 23-24; Alden at 712.

31. College Savings, at 675 (quoting Clark v. Barnard, 108 U.S. 436, 447 (1883)).

32. College Savings at 687.

33. Petty v. Tennessee-Missouri Bridge Comm'n, 359 U.S. 275 (1959).

34. South Dakota v. Dole, 483 U.S. 203 (1987).

35. U.S. Const. Art. I, sec. 8.

36. 17 U.S.C. � 105.

37. See supra, note 17.

38. See MCI Telecomms. Corp. v. Illinois Bell Tel. Co., 222 F.3d 323 (7^th Cir. 2000); Southwestern Bell Tel. Co. v. Brooks Fiber Communications of Okla., Inc., 235 F.3d 493 (10^th Cir. 2000); Southwestern Bell Tel. Co. v. Connect Communications Corp., 225 F.3d 942 (8^th Cir. 2000); Southwestern Bell Tel. Co. v. Public Util. Comm'n, 208 F.3d 475 (5^th Cir. 2000); but see Bell Atlantic MD, Inc. v. MCI Worldcom, Inc., 240 F.3d 279 (4^th Cir. 2001), cert. granted, 121 S. Ct. 2448 (2001).

39. See supra, notes 19-23.

40. Kimel v. Florida Board of Regents, 528 U.S. 62, 81 (2000).

41. 209 U.S. 123 (1908).

42. Id. at 159-60.