My first post discussed one primary impediment to deregulating all the lawyers – which is the current system of legal regulation of lawyers.   Even if one agrees that deregulating all the lawyers may be the ultimate goal, this still leaves the question of how best to achieve this result.  Deregulating all the lawyers may not be the first thing we do.  One plausible candidate is fixing intellectual property protection for law.

This view is based upon the assumption that the best way to achieve the goal of deregulating all the lawyers is to create incentives for entrepreneurs to produce new and innovative legal information products.  As noted in my earlier post, innovation and entry by entrepreneurs into the legal information market can be a powerful force that weakens of the economic and political power of those whose interests are aligned with maintaining the current regulatory regime.  One result of this process is that deregulation becomes more likely.   This dynamic is why I love Virginia wine, even though I never drink it.

Creating incentives for entrepreneurs to innovate and enter requires a mechanism that allows them to appropriate a return to their investments.  Intellectual property rights can be an essential mechanism through which this occurs. Indeed, intellectual property rights can effectively protect many innovative legal information products.  However, in several important cases, legal information is subject to what can be described as a form of legal exceptionalism that results in weakened intellectual property rights.  In general, the availability and scope of intellectual property rights are limited so that the costs of restricting the use of already produced information do not exceed the benefits associated with the marginal incentives to create the information.   Intellectual property rights for law and related works seem to be further limited because of heightened concerns regarding use costs that are specific to legal information.

Perhaps the best example of legal exceptionalism is the legal treatment of the privately produced model building codes in Veeck v. SBCCI, 293 F.3d 791 (5th Cir. 2002, en banc).  In this case, Veeck posted SBCCI’s copyrighted model building codes on a website in violation of a license agreement that prohibited copying or distributing the work. The court held that the copyrighted code text entered the public domain when adopted as law by several local jurisdictions.  Through SBCCI retained copyrights to its model codes, they could not enforce them against Veeck, who identified the posted SBCCI model codes as the building codes of two municipalities.

Current copyright law precludes copyright protection for any work “prepared by an officer or employee of the United States Government as part of that person’s official duties”.  Under this definition, court opinions written by federal judges, congressional bills and statutes, and federal regulations are ineligible for copyright protection.  Courts have applied similar rules to state legal materials, including state judicial opinions, statutes, and regulations.   These rules assume that the use costs of intellectual property protection outweigh gains from improved private incentives to produce model laws.   Copyright law does not explicitly preclude copyright for model codes and other privately produced laws.  However, the court’s holding, by elevating due process concerns with public access to the law over providing economic incentives to produce model codes, effectively extends this prohibition to privately produced model codes and laws that have been adopted as law.

Protecting due process concerns does not require precluding copyright protection for privately produced works adopted as law.  Broad fair use privileges for those bound by the laws or codes could address these concerns while simultaneously protecting model codes from appropriation by competing commercial interests and other jurisdictions.   Restrictive licenses can also serve to appropriately balance the use-creation tradeoff by clarifying parties’ expectations regarding permitted uses and pricing of the copyrighted model law.   As part of these licenses, jurisdictions that adopt privately produced and copyrighted model codes could alleviate due process concerns by authorizing use by citizens bound by the law while preventing reproduction for other purposes.  Courts could require similar licenses to be granted by those wishing to file briefs and other potentially copyrightable documents.

The court’s holding in Veeck unnecessarily limits the ability to use these mechanisms by effectively eliminating copyright protection rather than retaining the protection and using the mechanisms discussed above that would permit limited public use and mitigate any due process concerns.  In doing so, the courts holding, along with other similar forms of legal exceptionalism unnecessarily weakens incentives for legal innovation and can result in less pressure to deregulate all the lawyers.

In Part I of this post, I identified a jurisprudential thread of cases that suggest corporations have a First Amendment right to own and invest in law practices for the delivery legal services.  These decisions include NAACP v. Button, the union trilogy, and Bates v. State Bar of Arizona.  Two recent cases shed light on how the Supreme Court might view my collective reading of NAACP v. Button and its progeny: Citizens United v. Federal Election Commission and Sorrell v. IMS Health.

Citizens United accomplished at least two tasks related to understanding the free speech interests bound up in access to the law and the delivery of legal services via a corporation:  (1) the majority made clear that for-profit and nonprofit corporations alike enjoy the same protections as individuals under the First Amendment and (2) the holding broadened prior decisions related to the need for speech to further economic competition.  Writing for the majority, Justice Kennedy observed: “The identity of the speaker is not decisive in determining whether speech is protected.  Corporations and other associations, like individuals, contribute to the discussion, debate, and the dissemination of information and ideas that the First Amendment seeks to foster.”   If the majority’s opinion means what it says, Rule 5.4’s blanket ban against outside investment and ownership of law practices unconstitutionally interferes with the corporation’s ability to disseminate legal services.

In Sorrell, the Court struck down a Vermont statute restricting the sale and use of pharmacy records to so-called data miners.  Writing the 6-3 majority opinion, Justice Kennedy quoted from the Bates case, observing that the “consumer’s concern for the free flow of commercial speech often may be far keener than his concern for urgent political dialogue.”  The Sorrell decision recognizes that dissemination of information is essential to the First Amendment. The corporation is uniquely situated to engage in wide-scale distribution of legal services in a way that currently does not occur largely due to cost restraints associated with economies of scale.  It simply isn’t economically feasible for a traditional law firm to market and deliver en masse representation to the general public for routine wills, child custody, divorce, mortgage foreclosure, standard contracts, small business needs, immigration, bankruptcy, housing disputes, and other basic matters.

Let me return for a moment to the NYT editorial on America’s justice gap that I mentioned in Part I of this post.  The remedies proposed in that piece have not succeeded to date and are unlikely to come to fruition.  Funding for the Legal Services Corporation is on the decline, as it has been since established in 1974.  It is unclear how required pro bono reporting would make any meaningful difference in offering legal services to the untapped market of consumers that could be reached by corporations like Wal-Mart or Google.  As law schools struggle to control tuition and manage their budgets, expanding loan forgiveness programs seems unrealistic.  At best, permitting nonlawyers to engage in limited categories of simple legal representation might offer some relief but that, alone, is not enough.  Missing from this list of solutions, as I noted in my previous post, is the reform most likely to result in the dissemination of legal representation for those in need and to create jobs for unemployed lawyers:  corporate ownership of law practices.

We need a novel resource to facilitate competition, fuel innovation, and increase access to quality legal services.  Corporations have the potential to provide this resource.  Not only do economic realties and global competition demand this, but it is a matter of First Amendment concern as well.

First, thanks to TOTM for organizing this symposium on a most timely and important topic.  As computers and technology have revolutionized every aspect of human endeavor it is a particularly critical time to ask ourselves why 21^st century law schools closely resemble the law schools of the late-19^th century and why in court litigation would seem relatively familiar to Clarence Darrow.  One significant answer is the regulation of the legal profession, and one possible solution is significant deregulation.

My particular interest in the topic is the role that the American judiciary has played in generating the remarkably lawyer-friendly regulations that govern the practice of law.  (Self promotion alert!).  Cambridge University Press recently published my book entitled The Lawyer-Judge Bias in the American Courts.

The book starts with the relatively unremarkable observation that virtually all American judges are former lawyers. The book goes on to argue that these lawyer-judges instinctively favor the legal profession in their decisions and that this bias has far-reaching and deleterious effects on American law.  The book notes many reasons for this bias, some obvious and some subtle. Fundamentally, it occurs because – regardless of political affiliation, race, or gender – every American judge shares a single characteristic: a career as a lawyer. This shared background results in the lawyer-judge bias.

The regulation of lawyers is a prime example (in fact it’s chapters Five and Six in the book).  American lawyers have a unique regulatory structure.  Every other profession – from cosmetology to medicine – is regulated in the first instance by state or federal legislatures.  State legislatures generally set up regulatory agencies for each licensed profession and the efficacy of these agencies are a subject of some debate.  That said, at least every other American profession must push their policies and regulation through a legislature made up of members who generally practice another profession (ironically enough many state legislators are lawyers).  As such, state legislatures generally serve as some check on other professions.

The legal profession, by contrast, is governed in all fifty states by state supreme courts.  These Courts frequently delegate the actual nuts and bolts of governing lawyers to bar associations or other administrative bodies.  Predictably, this regulatory structure favors the interests of the legal profession over those of the public.

Interestingly, it was not always thus.  During most of the nineteenth century, lawyers were largely unregulated and what regulation existed came from legislatures not courts.  There was almost no formal regulation of lawyer behavior and barriers to entry like a bar exam or the law school requirement were unheard of.  Bar associations were weak or non-existent.  Admittedly this period was pre-industrialization, but note that it is not unthinkable or impossible to have a deregulated market for lawyers; to the contrary, we’ve done it before.

In the late-nineteenth century bar associations began to reform.  Priority number one was lobbying courts to step up the regulation of the profession.  Over time state supreme courts have taken control of lawyer regulation and have created the complex web of regulations that now govern the legal profession.

Priority one for the new bar associations was to encourage state supreme courts to take over lawyer regulation and then to raise barriers to entry.  For example, from its inception the ABA pilloried what it considered to be the undesirable element in the bar and proposed a tightening of bar admission standards because low admissions standards had contributed to “extraordinary numbers” of the “ignorant” and “unprincipled” becoming lawyers.  See 2 A.B.A. Rep. 212 (1878).  In 1891, the ABA Committee on Legal Education produced a 60-page report on entry to the profession that proved incredibly prophetic.  The report recommended virtually every major innovation to come: including state supreme court control over entry, written bar exams, a three year requirement for law schools, and specific law library and facility requirements.  The report’s very first resolution was to “strongly recommend that the power of admitting members to the Bar, and the supervision of their professional conduct, be in each state lodged in the highest courts of the State.”

State supreme courts obliged by claiming an “inherent authority” to regulate the legal profession as an outgrowth of the constitutional separation of powers between the legislative and judicial branches.  State supreme courts used this “inherent authority” to seize entry regulation from the legislature, conduct sua sponte investigations of the unauthorized practice of law, and even to make many bar associations unified or mandatory.  In states with unified bars, a lawyer must be a member of and pay dues to the state bar association to practice law in that state.  Obviously, a mandatory bar association has significant benefits for the legal profession in those states.  In many of these states, the Supreme Courts ceded control over the profession to the unified bars, making lawyers in those states the most self-regulated professionals in the world.   Further, like a closed union shop, the mandatory collection of dues and the associated political clout of having all lawyers be members of the bar association are significant advantages to the profession.

I raise this history and the close interplay between the interests of judges and lawyers to note how difficult any deregulation effort will prove.  State supreme courts govern lawyer regulation in all fifty states.  There have been federal incursions by the SEC and others, but judges control the nuts and bolts of both entry and conduct.  Any large-scale changes to regulation will likely have to go through state supreme courts and if history is any guide those courts will naturally (and frequently unconsciously) care more about the needs and desires of bar associations and the legal profession than the public at large.