Author: David Newhoff

David is an author, communications professional, and copyright advocate. After more than 20 years providing creative services and consulting in corporate communications, he shifted his attention to law and policy, beginning with advocacy of copyright and the value of creative professionals to America’s economy, core principles, and culture.

Allen v. Cooper Revisited: Part II – That Damned Eleventh Amendment

(NOTE: This post relies on information presented in Part I.)

In my first post in this series, I tried to summarize (albeit in nearly 3,000 words) the reasons why the states, and arms of the states, may freely infringe intellectual property without fear of being sued for monetary damages. I referred to the Eleventh Amendment as a pain in the neck, but also mentioned that the man usually credited for its existence, Justice James Iredell, is an interesting figure. This is because I like stories about the conceptual dichotomies tugging at one another during the founding period of the United States, especially when those tensions are manifest in a single individual.

As a Justice of the Supreme Court, Iredell wrote the singular, dissenting opinion that resulted in the most acute expression of states’ rights in the Constitution. But he was also a passionate advocate of the federal plan at a time and place when the audacity of those men in Philadelphia, initially tasked with fixing the Articles of Confederation, was a source of considerable irritation among many Americans.

In July of 1788, when some 300 county delegates of the State of North Carolina met in Hillsborough to decide whether to join the ten states that had already ratified the Constitution, Iredell was among the minority of those who favored the plan of the Convention. In fact, most of North Carolina’s representatives were already so sure of their intent to reject the Union, that they moved to vote immediately on the matter and return home. And it was Iredell who rose to make an impassioned plea for a section-by-section debate on the text of the document. Acknowledging his inclination toward adoption, he declared …

“My constituents did me the honor to elect me unanimously, without the least solicitation on my part. They probably chose me because my sentiments were the same with their own. But highly as I value this honor, and much as I confess my ambition prompted me to aspire to it, had I been told that I should not be elected unless I promised to obey their directions, I should have disdained to serve on such dishonorable terms. Sir, I shall vote perfectly independent, and shall certainly avow a change of my present opinion, if I can be convinced it is a wrong one.”

So, after nearly three days of debate as to whether there should be a debate, Mr. David Caldwell rose near the start of Day Four to ask whence the Convention delegates derived the authority (i.e. the arrogance) to begin their preamble with We the people…. Iredell must have been among those who thought to himself, “This is going to be a long bloody meeting,” while patiently listening to Archibald Maclaine (who would later help draft the Bill of Rights) explain that if the Constitution were adopted, it would become North Carolina’s law as well, and thus, the citizens of the state would be represented by the words We the people. I mention this not only because it’s funny, but to emphasize the atmosphere of distrust that existed with regard to the allegedly insidious Constitution.

Throughout the substantive debate on the various articles and clauses, Iredell was, of course, not the only advocate of the federal plan. William Davie, who served as a delegate at Philadelphia, naturally argued the cause of ratification. But it is notable that Iredell, who, in February of 1790, will be nominated by Washington as one of the nation’s first Supreme Court Justices, consistently plays the role of interpreter at Hillsborough. He intermittently defends the principles of a contested paragraph or section, principally by explaining how the delegates who express concern have misread the meaning of the text. In short, Iredell emerges as the jurist in the room.

North Carolina ratified the Constitution on November 21, 1789, making it the twelfth state to join the Union, and, like the straggler Rhode Island, its delegates had principally delayed on the grounds that they wanted a bill of rights added to the general legislature. As many of us were taught in school, there were founders who argued that an affirmative statement of rights was dangerous because it meant that all rights not named were impliedly not protected. Iredell, a member of this latter camp; inveighed against a bill of rights, declaring …

“…when it is evident that the exercise of any power not given up would be a usurpation, it would be not only useless, but dangerous, to enumerate a number of rights which are not intended to be given up; because it would be implying, in the strongest manner, that every right not included in the exception might be impaired by the government without usurpation; and it would be impossible to enumerate every one.”

This was during the fairly heated debate on Article III, establishing the federal judiciary, which stoked the anxieties of many delegates, fearing that certain rights, like trial by jury, were not expressly guaranteed in the federal plan. Although the subject of state immunity from suit was not raised at Hillsborough, the issue of “diversity” was discussed. Article III, Section 2 contains what are known as the Diversity Clauses, which were meant to alleviate fears of “home-court advantage,” where state courts may be prejudiced against suits brought by residents of foreign states. Hence, the need for uniform (i.e. federal) remedies, which Iredell explained thus:

“A man in North Carolina, for instance, if he owed £100 here, and was compellable to pay it in good money, ought to have the means of recovering the same sum, if due to him in Rhode Island, and not merely the nominal sum, at about an eighth or tenth part of its intrinsic value. To obviate such a grievance as this, the Constitution has provided a tribunal to administer equal justice to all.”

If Iredell’s sentiments, which I have barely skimmed here, do not quite sound like a those of a man who would have asserted that Congress, under its Article I powers, could never have the authority to abrogate state immunity, this is because most evidence points to the conclusion that he believed no such thing. In fact, according to Justices Souter and Stevens, in their dissents in Seminole Tribe, Iredell does not even articulate this view in his dissent in Chisolm v. Georgia, which provided the blueprint for the Eleventh Amendment. Stevens writes …

“Justice Iredell relied on the text of the Judiciary Act of 1789, not the State’s assertion that Article III did not extend the judicial power to suits against unconsenting States. For Justice Iredell, then, it was enough to assume that Article III permitted Congress to impose sovereign immunity as a jurisdictional limitation; he did not proceed to resolve the further question whether the Constitution went so far as to prevent Congress from withdrawing a State’s immunity.”

What I find compelling about the Stevens and Souter dissents in Seminole (especially Souter’s) is the scope and depth of historical evidence presented to support the conclusion that the majority erred in Seminole, when it held that the Eleventh Amendment bars Congress from abrogating state immunity under its Article I powers. First, Souter maintains, that the majority rested its opinion on a flawed reading of a case from 1890 (Hans v. Louisiana), about which he writes …

“The Court [in Hans] elected, to recognize a broader immunity doctrine, despite the want of any textual manifestation….Because no federal legislation purporting to pierce state immunity was at issue, it cannot fairly be said that Hans held state sovereign immunity to have attained some constitutional status immunizing it from abrogation….the Court today simply compounds the already serious error in taking Hans the further step of investing its rule with constitutional inviolability against the considered judgment of Congress to abrogate it.

Souter presents a compelling, in-depth narrative to argue that interpreting the Eleventh Amendment as blanket immunity for states is untethered from its intent in 1795 and more broadly asserts “that American political thought [at the founding period] had so revolutionized the concept of sovereignty itself that calling for the immunity of a State as against the jurisdiction of the national courts would have been sheer illogic.”

More specifically, Souter cites Justice Marshall in Cohens v. Virginia (1821), stating, “The point of the Eleventh Amendment, according to Cohens, was to bar jurisdiction in suits at common law by Revolutionary War debt creditors, not ‘to strip the government of the means of protecting, by the instrumentality of its Courts, the constitution and laws from active violation.’”

Like many of you, I finally saw Hamilton over the Independence Day weekend on Disney+, and I was very amused by the portrayal of Jefferson as a rock-star dilettante, especially when he debates, in rap-battle-style, Hamilton’s plan to assume state debts and establish a national bank. War debts were a profoundly sensitive matter at the time, especially when the debtor was a state that owed money to a citizen of another state, as was the case in Chisolm (and again in Hans after the Civil War). Hence, there is ample historic evidence to recommend Souter’s interpretation of the intent of the Eleventh Amendment.

Souter and Stevens maintain that the Eleventh Amendment was narrowly written to “constrict the scope” of the Diversity Clauses of Article III. In a nutshell, if a plaintiff’s ONLY plea to trial in federal court, when suing a state, is fear of bias, the amendment prohibits the lawsuit. As Souter writes, “The best explanation for our practice belongs to Chief Justice Marshall:  the Eleventh Amendment bars only those suits in which the sole basis for federal jurisdiction is diversity of citizenship.” [Emphasis added]

And perhaps most pointedly, Souter invokes Iredell in Chisolm, stating “[t]he United States are sovereign as to all the powers of government actually surrendered: each State in the Union is sovereign, as to all the powers reserved.” So unless some scholar wants to unravel the body of evidence Souter brings to the table, one must accept his argument that nowhere in the record is there any evidence that the intent of the framers was to “affirmatively guarantee state sovereign immunity against any congressional action to the contrary.”

Despite the fact that the Souter dissent provides a far more scholarly case for its interpretation of the Eleventh Amendment than the reasoning presented by the majority in Seminole, the former is not the holding that prevails. Anyone who may have grounds to bring civil federal claims against a state, or state actor, is barred from doing so in nearly all instances. Not just copyright and other intellectual property complaints.

As described in this post, there are some quirky coincidences associated with the Allen v. Cooper case, and among these is the fact that this epic tale of state sovereign immunity begins and ends (for now) in North Carolina. After all, documentary filmmaker Rick Allen is a citizen of North Carolina, who sued his home state for infringement of his audio-visual works. So, a plain reading of the Eleventh Amendment might lead one to think that this automatically qualifies him to sue, given the textual certainty of the words, “…against one of the United States by citizens of another state.” Yet, it was the Hans decision—130 years ago—that magically erased the citizens of another state condition and, according to Souter’s dissent in Seminole, erased all historic context to go with it.

Class Action © Suit Against YouTube is a BIG Friggin’ Deal

When Viacom et al, in 2014, settled their copyright infringement suit against YouTube, that outcome had significant consequences for millions of independent creators. For one thing, the settlement left YouTube and other major platforms to over-emphasize the district court’s summary judgment that the DMCA had fully shielded the video platform against any liability in that case—this despite the appellate court having found that holding to be premature because there remained triable issues of both law and fact. Thanks to the settlement, however, those questions were never adjudicated. (See post here noting Viacom is unfinished business.) But now, some of those same questions of law, and very similar questions of fact, have been reprised in a class action suit, filed against YouTube on July 2nd, by Grammy winning composer Maria Schneider. And this case is going to be a doozy.

For one thing, the class of creators represented by Schneider has little motive to settle before the courts thoroughly weigh every aspect of the complaint. Further, the plaintiffs have about a decade’s worth of evidence, and experience with the DMCA, that Viacom et al did not have when they filed against YouTube in 2009. Further, the Schneider complaint reminds us that YouTube was built on mass copyright infringement that it still thrives on mass copyright infringement.

In this case, as in Viacom, plaintiffs cite evidence that YouTube’s founders clearly recognized that their platform was as existentially dependent on hosting infringing material as any pirate site on the web. “[A YouTube] founder argued against the company removing obviously infringing videos, claiming that site traffic would drop by 80% if it did so,” the Schneider complaint avers. At that time, the Google Video platform, which did monitor and remove infringing material, could not compete with what Google then called the “rogue” YouTube.

So, naturally, when Google purchased the “rogue” YouTube in 2006 for $1.65 billion, “[They] chose to continue YouTube’s aggressive policy of allowing obviously infringing videos to be uploaded with zero ‘friction’ and no screening, thus allowing infringing and illegally posted videos to be played and monetized by YouTube unless and until a takedown notice was received from the copyright owner,” the complaint continues.

Then, under pressure from the major, corporate rights holders, YouTube created Content ID, the platform’s automated system, which identifies protected material, alerts rights holders when their works are uploaded, and gives them options as to what to do with those uploaded files. But this system is not available to the vast number of independent creators like Maria Schneider. The complaint states, “Only approximately five percent or less of all applicants who attempt to sign up for Content ID are approved for its use.”

Keep in mind that when I say “independent” creators, I am not referring to some singer/songwriter you haven’t heard of and has a hundred views on the platform. “Independent” comprises, for instance, thousands of musical artists with substantial fan bases and multiple albums (songs you hear on the radio), but whose rights are not managed by some large label or publisher YouTube wants to try to placate. This is not to suggest that the larger rights holders are satisfied by the state of enforcement. To the contrary, they’ve made it quite clear that the volume of infringement, even with Content ID, is unacceptable. I merely mean to emphasize that the class referred to here as “independent” is very valuable when monetized.

Left out of the Content ID program, countless independent rights holders have been trying for years to fend for themselves—manually sending one notice per infringement via the DMCA notice-and-takedown provision. And what enables YouTube to exploit this class of creators is the presumption of immunity under the “safe harbor” provisions of the DMCA. See post here for more detail, but the basic premise was that, as long as a platform meets certain conditions, taking certain actions to remove infringing material, it cannot be held liable for infringing uploads by its users.  

But now, the Schneider complaint makes a compelling argument that YouTube had voided its safe harbor immunity vis-à-vis the plaintiff class in this litigation. Among other interesting aspects of this case, it is the first time, in a long time, that anyone will ask the court to articulate the law on some critical DMCA matters that have otherwise been left to the anecdotal and editorial buzz of the blogosphere.

As just one example (and a bit of unfinished business in Viacom), anyone who follows these issues will be eager, or perhaps anxious, to know whether the court ultimately agrees with Schneider that YouTube has both “actual” and “constructive” knowledge that it hosts infringing material. What constitutes “knowing” when material is infringing is a hotly contested topic, and one that will be of particular interest to the Senate Judiciary Committee in its ongoing review of the DMCA’s efficacy since its passage in 1998.

There will be plenty more to write about this case, perhaps digging into some of the legal nitty-gritty. YouTube’s response will almost certainly be a motion to dismiss, arguing that the platform is unequivocally shielded by the DMCA safe harbor. Consequently, the district court will have to weigh the full scope of Schneider’s multiple arguments that the platform has vitiated that liability shield, and whether any of those allegations implicate triable issues of law and fact. And, as mentioned above, that’s exactly what the Second Circuit Court of Appeals decided in 2014. So, this should be quite a show.

Coronavirus Exposes Big Tech’s Big Bad Ideas for Artists

Emergencies have a way of shining a bright light on flawed thinking and dumb ideas. The COVID-19 pandemic has exposed latent and embarrassing American weaknesses, from the highest levels of government right down to the grocery stores, where Karen and Ken refuse to follow basic public safety rules. All in, it’s been a rather stunning demonstration of national incompetence laid bare for the world to watch, shake its collective head, and put up border signs saying: NO AMERICANS PLEASE. Happy 4th of July.

In the creative world, the pandemic has illuminated one of the first lies Big Tech started pitching more than twenty years ago—namely that wiping out the market for music sales was an opportunity that musical artists were failing to understand.  Tell that to one of the industry’s latest casualties—singer/songwriter Nadine Shah, creator of four albums to date, who, according to an article published on June 25, was forced to move back in with her parents after all her scheduled gigs were canceled due to coronavirus.  Nick Levine writes …

“Shah admits she feels ‘humiliated’ by what has happened and initially ‘didn’t want my peers to know I’m skint’. But then she had a change of heart. “’It’s so important for musicians like me to talk about this, because my bread and butter comes from playing live. Once that’s gone, I’ve really got nothing,’ she says. ‘That’s
why we have to encourage people to buy records and make the streaming system fairer. What artists are paid by streaming services for their music, it’s disgusting.’”

By now, it has been widely reported (or easily assumed) that everyone who works in the venue-based creative arts is suffering financially due to the pandemic. With theaters of every size shuttered, musicians cannot perform, plays and musicals are on indefinite hiatus, and all the associated economic activity—from backstage crew to nearby restaurants and bars—has come to a deafening halt. On June 29, it was announced that Cirque du Soleil will be filing for bankruptcy.

For the most part (notwithstanding America’s general mismanagement), there is no one to blame for these effects of COVID-19. At the same time, many of us who have, so far, mostly been inconvenienced by the pandemic, rather than unemployed by it, are spending more time than ever streaming music, movies, TV, etc. And not surprisingly, that increase includes outright piracy. In a letter to the Senate Judiciary Committee commenting on DMCA review, CreativeFuture cites analytics firm MUSO finds an increase of 31 percent in U.S. visits to pirate sties between February and March, as stay-at-home orders went into effect.

But one class of creators, who should at least be sustained by legal streaming, instead watch their “spin” numbers rise on platforms like Spotify, while pennies trickle into their bank accounts. Songwriters and recording artists were, of course, the first casualties in Big Tech’s assault on copyrights. In the late 1990s, when P2P file sharing (i.e. Napster) nurtured a whole generation’s worth of opposition to the idea of paying for recorded music, individual creators not only watched helplessly as their works were pirated in the tens of millions, but they were also forced to endure a litany of absurd rationales and explanations that amounted to victim blaming. “Quit whining about music sales,” the imperative resounded. “Sales will never return. Adapt! Develop new business models. Sell merchandise. And, above all, get off your lazy butts and tour.” 

These and other helpful tips naturally came from people who neither participated in, nor knew anything about, being a professional songwriter or musical performer. As countless members of the music community tried repeatedly to explain, those other revenue streams are all fine, but they are not even close to a substitute for sales of sound recordings.

As for touring, anyone speaking so blithely about it, fails to understand how costly, labor-intensive, and unglamorous that job really is for any artist(s) smaller than mega-stars. And, of course, music creators who are exclusively songwriters and composers do not tour at all. Nevertheless, the rhetoric became so shrill over the years, that some consumers seemed to convince themselves that paying for recorded music was tantamount to subsidizing artists who were too lazy to work for a living. Not that I want to give that cynical and ignorant opinion any deference, but what happens now?

Now that piracy and the predation of “legal” platforms have devastated music sales—and there is no foreseeable date when live performance will return—to what new model should the music creators “adapt” next? Sadly, Nadine Shah has answered that one for herself—the move-back-in-with-her-parents-and-still-try-to-make-music model. And, let’s not regurgitate the “nobody promised you a career” meme. No artist is that naïve. If the market does not want a creator’s work, that’s fair. It’s a risk every artist takes. But if the market wants the work (and it appears that a sizeable market wants Shah’s music), but multi-billion-dollar corporations have managed to redirect the creator’s earned income into their pockets, that’s not creative destruction, it’s theft.

Old (dumb) Ideas Still Wreaking Havoc

In 2009, Mike Masnick appeared in a video in which he techsplained the “The Economics of Abundance,” an idea so facially preposterous, it makes trickle-down look like a sensible theory. Without a hint of irony or self-consciousness, Masnick parroted the concept that the natural price for recorded music is zero (because digital distribution obliterates scarcity). But this is good news because, as he said at the time, “…additional scarcities are created. For example, the more abundant music is, the more demand there may be for live shows or merchandise….”

Anyone with far less education than Masnick can easily figure out that just because the market has access to unlicensed (free) recorded music, this does not create a new demand for live shows or merchandise. There is no question that the destruction of sales aggressively forced musicians to rely more on those other revenue streams, but calling that an opportunity is as economically bogus as it is personally offensive. Just ask the 50+ year-old singer/songwriter with the family and a few incipient health issues how eager she is to get back on the road, while her fans are happily listening to her sound recordings, but only making money for Spotify et al.

Further, to demonstrate the big “idea,” in that video, Masnick casually circled two icons on a white board, each representing live shows and merch, as if it were just that easy. As if those revenue generators do not have their own costs and barriers, which were in no way lowered by the “abundance” of zero-price sound recordings. And let’s not forget that the internet also opened up new opportunities for swindlers to sell counterfeit merchandise, thus providing indie musicians with the opportunity to chase infringements of their musical works and their tee shirts at the same time. Because that’s how more music gets made. 

Why bother highlighting the gibberish in an 11-year-old video? Because it so neatly sums up the thinking that has persisted from the late 1990s into the age of Spotify and beyond, and which still results in an artist unable to pay her bills, despite the popularity of her music. No, it is not Big Tech’s fault that a global health crisis canceled Nadine Shah’s gigs and countless live events for so many creators. But in light of the fact that most of us enjoy music most of the time as sound recordings, there is no valid economic theory to explain why songwriters and musical artists should be providing all that abundance for the artificially manufactured price of zero.