Archives For First amendment

Monday July 22, ICLE filed a regulatory comment arguing the leased access requirements enforced by the FCC are unconstitutional compelled speech that violate the First Amendment. 

When the DC Circuit Court of Appeals last reviewed the constitutionality of leased access rules in Time Warner v. FCC, cable had so-called “bottleneck power” over the marketplace for video programming and, just a few years prior, the Supreme Court had subjected other programming regulations to intermediate scrutiny in Turner v. FCC

Intermediate scrutiny is a lower standard than the strict scrutiny usually required for First Amendment claims. Strict scrutiny requires a regulation of speech to be narrowly tailored to a compelling state interest. Intermediate scrutiny only requires a regulation to further an important or substantial governmental interest unrelated to the suppression of free expression, and the incidental restriction speech must be no greater than is essential to the furtherance of that interest.

But, since the decisions in Time Warner and Turner, there have been dramatic changes in the video marketplace (including the rise of the Internet!) and cable no longer has anything like “bottleneck power.” Independent programmers have many distribution options to get content to consumers. Since the justification for intermediate scrutiny is no longer an accurate depiction of the competitive marketplace, the leased rules should be subject to strict scrutiny.

And, if subject to strict scrutiny, the leased access rules would not survive judicial review. Even accepting that there is a compelling governmental interest, the rules are not narrowly tailored to that end. Not only are they essentially obsolete in the highly competitive video distribution marketplace, but antitrust law would be better suited to handle any anticompetitive abuses of market power by cable operators. There is no basis for compelling the cable operators to lease some of their channels to unaffiliated programmers.

Our full comments are here

[Note: A group of 50 academics and 27 organizations, including both myself and ICLE, recently released a statement of principles for lawmakers to consider in discussions of Section 230.]

In a remarkable ruling issued earlier this month, the Third Circuit Court of Appeals held in Oberdorf v. Amazon that, under Pennsylvania products liability law, Amazon could be found liable for a third party vendor’s sale of a defective product via Amazon Marketplace. This ruling comes in the context of Section 230 of the Communications Decency Act, which is broadly understood as immunizing platforms against liability for harmful conduct posted to their platforms by third parties (Section 230 purists may object to myu use of “platform” as approximation for the statute’s term of “interactive computer services”; I address this concern by acknowledging it with this parenthetical). This immunity has long been a bedrock principle of Internet law; it has also long been controversial; and those controversies are very much at the fore of discussion today. 

The response to the opinion has been mixed, to say the least. Eric Goldman, for instance, has asked “are we at the end of online marketplaces?,” suggesting that they “might in the future look like a quaint artifact of the early 21st century.” Kate Klonick, on the other hand, calls the opinion “a brilliant way of both holding tech responsible for harms they perpetuate & making sure we preserve free speech online.”

My own inclination is that both Eric and Kate overstate their respective positions – though neither without reason. The facts of Oberdorf cabin the effects of the holding both to Pennsylvania law and to situations where the platform cannot identify the seller. This suggests that the effects will be relatively limited. 

But, and what I explore in this post, the opinion does elucidate a particular and problematic feature of section 230: that it can be used as a liability shield for harmful conduct. The judges in Oberdorf seem ill-inclined to extend Section 230’s protections to a platform that can easily be used by bad actors as a liability shield. Riffing on this concern, I argue below that Section 230 immunity be proportional to platforms’ ability to reasonably identify speakers using their platforms to engage in harmful speech or conduct.

This idea is developed in more detail in the last section of this post – including responding to the obvious (and overwrought) objections to it. But first it offers some background on Section 230, the Oberdorf and related cases, the Third Circuit’s analysis in Oberdorf, and the recent debates about Section 230. 

Section 230

“Section 230” refers to a portion of the Communications Decency Act that was added to the Communications Act by the 1996 Telecommunications Act, codified at 47 U.S.C. 230. (NB: that’s a sentence that only a communications lawyer could love!) It is widely recognized as – and discussed even by those who disagree with this view as – having been critical to the growth of the modern Internet. As Jeff Kosseff labels it in his recent book, the key provision of section 230 comprises the “26 words that created the Internet.” That section, 230(c)(1), states that “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” (For those not familiar with it, Kosseff’s book is worth a read – or for the Cliff’s Notes version see here, here, here, here, here, or here.)

Section 230 was enacted to do two things. First, section (c)(1) makes clear that platforms are not liable for user-generated content. In other words, if a user of Facebook, Amazon, the comments section of a Washington Post article, a restaurant review site, a blog that focuses on the knitting of cat-themed sweaters, or any other “interactive computer service,” posts something for which that user may face legal liability, the platform hosting that user’s speech does not face liability for that speech. 

And second, section (c)(2) makes clear that platforms are free to moderate content uploaded by their users, and that they face no liability for doing so. This section was added precisely to repudiate a case that had held that once a platform (in that case, Prodigy) decided to moderate user-generated content, it undertook an obligation to do so. That case meant that platforms faced a Hobson’s choice: either don’t moderate content and don’t risk liability, or moderate all content and face liability for failure to do so well. There was no middle ground: a platform couldn’t say, for instance, “this one post is particularly problematic, so we are going to take it down – but this doesn’t mean that we are going to pervasively moderate content.”

Together, these two provisions stand generally for the proposition that online platforms are not liable for content created by their users, but they are free to moderate that content without facing liability for doing so. It recognized, on the one hand, that it was impractical (i.e., the Internet economy could not function) to require that platforms moderate all user-generated content, so section (c)(1) says that they don’t need to; but, on the other hand, it recognizes that it is desirable for platforms to moderate problematic content to the best of their ability, so section (c)(2) says that they won’t be punished (i.e., lose the immunity granted by section (c)(1) if they voluntarily elect to moderate content). 

Section 230 is written in broad – and has been interpreted by the courts in even broader – terms. Section (c)(1) says that platforms cannot be held liable for the content generated by their users, full stop. The only exceptions are for copyrighted content and content that violates federal criminal law. There is no “unless it is really bad” exception, or a “the platform may be liable if the user-generated content causes significant tangible harm” exception, or an “unless the platform knows about it” exception, or even an “unless the platform makes money off of and actively facilitates harmful content” exception. So long as the content is generated by the user (not by the platform itself), Section 230 shields the platform from liability. 

Oberdorf v. Amazon

This background leads us to the Third Circuit’s opinion in Oberdorf v. Amazon. The opinion is remarkable because it is one of only a few cases in which a court has, despite Section 230, found a platform liable for the conduct of a third party facilitated through the use of that platform. 

Prior to the Third Circuit’s recent opinion, the best known previous case is the 9th Circuit’s Model Mayhem opinion. In that case, the court found that Model Mayhem, a website that helps match models with modeling jobs, had a duty to warn models about individuals who were known to be using the website to find women to sexually assault. 

It is worth spending another moment on the Model Mayhem opinion before returning to the Third Circuit’s Oberdorf opinion. The crux of the 9th Circuit’s opinion in the Model Mayhem case was that the state of Florida (where the assaults occurred) has a duty-to-warn law, which creates a duty between the platform and the user. This duty to warn was triggered by the case-specific fact that the platform had actual knowledge that two of its users were predatorily using the site to find women to assault. Once triggered, this duty to warn exists between the platform and the user. Because the platform faces liability directly for its failure to warn, it is not shielded by section 230 (which only shields the platform from liability for the conduct of the third parties using the platform to engage in harmful conduct). 

In its opinion, the Third Circuit offered a similar analysis – but in a much broader context. 

The Oberdorf case involves a defective dog leash sold to Ms. Oberdorf by a seller doing business as The Furry Gang on Amazon Marketplace. The leash malfunctioned, hitting Ms. Oberdorf in the face and causing permanent blindness in one eye. When she attempted to sue The Furry Gang, she discovered that they were no longer doing business on Amazon Marketplace – and that Amazon did not have sufficient information about their identity for Ms. Oberdorf to bring suit against them.

Undeterred, Ms. Oberdorf sued Amazon under Pennsylvania product liability law, arguing that Amazon was the seller of the defective leash, so was liable for her injuries. Part of Amazon’s defense was that the actual seller, The Furry Gang, was a user of their Marketplace platform – the sale resulted from the storefront generated by The Furry Gang and merely hosted by Amazon Marketplace. Under this theory, Section 230 would bar Amazon from liability for the sale that resulted from the seller’s user-generated storefront. 

The Third Circuit judges had none of that argument. All three judges agreed that under Pennsylvania law, the products liability relationship existed between Ms. Oberdorf and Amazon, so Section 230 did not apply. The two-judge majority found Amazon liable to Ms. Oberford under this law – the dissenting judge would have found Amazon’s conduct insufficient as a basis for liability.

This opinion, in other words, follows in the footsteps of the Ninth Circuit’s Model Mayhem opinion in holding that state law creates a duty directly between the harmed user and the platform, and that that duty isn’t affected by Section 230. But Oberdorf is potentially much broader in impact than Model Mayhem. States are more likely to have broader product liability laws than duty to warn laws. Even more impactful, product liability laws are generally strict liability laws, whereas duty to warn laws are generally triggered by an actual knowledge requirement.

The Third Circuit’s Focus on Agency and Liability Shields

The understanding of Oberdorf described above is that it is the latest in a developing line of cases holding that claims based on state law duties that require platforms to protect users from third party harms can survive Section 230 defenses. 

But there is another, critical, issue in the background of the case that appears to have affected the court’s thinking – and that, I argue, should be a path forward for Section 230. The judges writing for the Third Circuit majority draw attention to

the extensive record evidence that Amazon fails to vet third-party vendors for amenability to legal process. The first factor [of analysis for application of the state’s products liability law] weighs in favor of strict liability not because The Furry Gang cannot be located and/or may be insolvent, but rather because Amazon enables third-party vendors such as The Furry Gang to structure and/or conceal themselves from liability altogether.

This is important for analysis under the Pennsylvania product liability law, which has a marketing chain provision that allows injured consumers to seek redress up the marketing chain if the direct seller of a defective product is insolvent or otherwise unavailable for suit. But the court’s language focuses on Amazon’s design of Marketplace and the ease with which Marketplace can be used by merchants as a liability shield. 

This focus is unsurprising: the law generally does not allow one party to shield another from liability without assuming liability for the shielded party’s conduct. Indeed, this is pretty basic vicarious liability, agency, first-year law school kind of stuff. It is unsurprising that judges would balk at an argument that Amazon could design its platform in a way that makes it impossible for harmed parties to sue a tortfeasor without Amazon in turn assuming liability for any potentially tortious conduct. 

Section 230 is having a bad day

As most who have read this far are almost certainly aware, Section 230 is a big, controversial, political mess right now. Politicians from Josh Hawley to Nancy Pelosi have suggested curtailing Section 230. President Trump just held his “Social Media Summit.” And countries around the world are imposing near-impossible obligations on platforms to remove or otherwise moderate potentially problematic content – obligations that are anathema to Section 230 as they increasingly reflect and influence discussions in the United States. 

To be clear, almost all of the ideas floating around about how to change Section 230 are bad. That is an understatement: they are potentially devastating to the Internet – both to the economic ecosystem and the social ecosystem that have developed and thrived largely because of Section 230.

To be clear, there is also a lot of really, disgustingly, problematic content online – and social media platforms, in particular, have facilitated a great deal of legitimately problematic conduct. But deputizing them to police that conduct and to make real-time decisions about speech that is impossible to evaluate in real time is not a solution to these problems. And to the extent that some platforms may be able to do these things, the novel capabilities of a few platforms to obligations for all would only serve to create entry barriers for smaller platforms and to stifle innovation. 

This is why a group of 50 academics and 27 organizations released a statement of principles last week to inform lawmakers about key considerations to take into account when discussing how Section 230 may be changed. The purpose of these principles is to acknowledge that some change to Section 230 may be appropriate – may even be needed at this juncture – but that such changes should be careful and modest, carefully considered so as to not disrupt the vast benefits for society that Section 230 has made possible and is needed to keep vital.

The Third Circuit offers a Third Way on 230 

The Third Circuit’s opinion offers a modest way that Section 230 could be changed – and, I would say, improved – to address some of the real harms that it enables without undermining the important purposes that it serves. To wit, Section 230’s immunity could be attenuated by an obligation to facilitate the identification of users on that platform, subject to legal process, in proportion to the size and resources available to the platform, the technological feasibility of such identification, the foreseeability of the platform being used to facilitate harmful speech or conduct, and the expected importance (as defined from a First Amendment perspective) of speech on that platform.

In other words, if there are readily available ways to establish some form of identify for users – for instance, by email addresses on widely-used platforms, social media accounts, logs of IP addresses – and there is reason to expect that users of the platform could be subject to suit – for instance, because they’re engaged in commercial activities or the purpose of the platform is to provide a forum for speech that is likely to legally actionable – then the platform needs to be reasonably able to provide reasonable information about speakers subject to legal action in order to avail itself of any Section 230 defense. Stated otherwise, platforms need to be able to reasonably comply with so-called unmasking subpoenas issued in the civil context to the extent such compliance is feasible for the platform’s size, sophistication, resources, &c.

An obligation such as this would have been at best meaningless and at worst devastating at the time Section 230 was adopted. But 25 years later, the Internet is a very different place. Most users have online accounts – email addresses, social media profiles, &c – that can serve as some form of online identification.

More important, we now have evidence of a growing range of harmful conduct and speech that can occur online, and of platforms that use Section 230 as a shield to protect those engaging in such speech or conduct from litigation. Such speakers are clear bad actors who are clearly abusing Section 230 facilitate bad conduct. They should not be able to do so.

Many of the traditional proponents of Section 230 will argue that this idea is a non-starter. Two of the obvious objections are that it would place a disastrous burden on platforms especially start-ups and smaller platforms, and that it would stifle socially valuable anonymous speech. Both are valid concerns, but also accommodated by this proposal.

The concern that modest user-identification requirements would be disastrous to platforms made a great deal of sense in the early years of the Internet, both the law and technology around user identification were less developed. Today, there is a wide-range of low-cost, off-the-shelf, techniques to establish a user’s identity to some level of precision – from logging of IP addresses, to requiring a valid email address to an established provider, registration with an established social media identity, or even SMS-authentication. None of these is perfect; they present a range of cost and sophistication to implement and a range of offer a range of ease of identification.

The proposal offered here is not that platforms be able to identify their speaker – it’s better described as that they not deliberately act as a liability shield. It’s requirement is that platforms implement reasonable identity technology in proportion to their size, sophistication, and the likelihood of harmful speech on their platforms. A small platform for exchanging bread recipes would be fine to maintain a log of usernames and IP addresses. A large, well-resourced, platform hosting commercial activity (such as Amazon Marketplace) may be expected to establish a verified identity for the merchants it hosts. A forum known for hosting hate speech would be expected to have better identification records – it is entirely foreseeable that its users would be subject to legal action. A forum of support groups for marginalized and disadvantaged communities would face a lower obligation than a forum of similar size and sophistication known for hosting legally-actionable speech.

This proportionality approach also addresses the anonymous speech concern. Anonymous speech is often of great social and political value. But anonymity can also be used for, and as made amply clear in contemporary online discussion can bring out the worst of, speech that is socially and politically destructive. Tying Section 230’s immunity to the nature of speech on a platform gives platforms an incentive to moderate speech – to make sure that anonymous speech is used for its good purposes while working to prevent its use for its lesser purposes. This is in line with one of the defining goals of Section 230. 

The challenge, of course, has been how to do this without exposing platforms to potentially crippling liability if they fail to effectively moderate speech. This is why Section 230 took the approach that it did, allowing but not requiring moderation. This proposal’s user-identification requirement shifts that balance from “allowing but not requiring” to “encouraging but not requiring.” Platforms are under no legal obligation to moderate speech, but if they elect not to, they need to make reasonable efforts to ensure that their users engaging in problematic speech can be identified by parties harmed by their speech or conduct. In an era in which sites like 8chan expressly don’t maintain user logs in order to shield themselves from known harmful speech, and Amazon Marketplace allows sellers into the market who cannot be sued by injured consumers, this is a common-sense change to the law.

It would also likely have substantially the same effect as other proposals for Section 230 reform, but without the significant challenges those suggestions face. For instance, Danielle Citron & Ben Wittes have proposed that courts should give substantive meaning to Section 230’s “Good Samaritan” language in section (c)(2)’s subheading, or, in the alternative, that section (c)(1)’s immunity require that platforms “take[] reasonable steps to prevent unlawful uses of its services.” This approach is problematic on both First Amendment and process grounds, because it requires courts to evaluate the substantive content and speech decisions that platforms engage in. It effectively tasks platforms with undertaking the task of the courts in developing a (potentially platform-specific) law of content moderations – and threatens them with a loss of Section 230 immunity is they fail effectively to do so.

By contrast, this proposal would allow, and even encourage, platforms to engage in such moderation, but offers them a gentler, more binary, and procedurally-focused safety valve to maintain their Section 230 immunity. If a user engages in harmful speech or conduct and the platform can assist plaintiffs and courts in bringing legal action against the user in the courts, then the “moderation” process occurs in the courts through ordinary civil litigation. 

To be sure, there are still some uncomfortable and difficult substantive questions – has a platform implemented reasonable identification technologies, is the speech on the platform of the sort that would be viewed as requiring (or otherwise justifying protection of the speaker’s) anonymity, and the like. But these are questions of a type that courts are accustomed to, if somewhat uncomfortable with, addressing. They are, for instance, the sort of issues that courts address in the context of civil unmasking subpoenas.

This distinction is demonstrated in the comparison between Sections 230 and 512. Section 512 is an exception to 230 for copyrighted materials that was put into place by the 1998 Digital Millennium Copyright Act. It takes copyrighted materials outside of the scope of Section 230 and requires platforms to put in place a “notice and takedown” regime in order to be immunized for hosting copyrighted content uploaded by users. This regime has proved controversial, among other reasons, because it effectively requires platforms to act as courts in deciding whether a given piece of content is subject to a valid copyright claim. The Citron/Wittes proposal effectively subjects platforms to a similar requirement in order to maintain Section 230 immunity; the identity-technology proposal, on the other hand, offers an intermediate requirement.

Indeed, the principal effect of this intermediate requirement is to maintain the pre-platform status quo. IRL, if one person says or does something harmful to another person, their recourse is in court. This is true in public and in private; it’s true if the harmful speech occurs on the street, in a store, in a public building, or a private home. If Donny defames Peggy in Hank’s house, Peggy sues Donny in court; she doesn’t sue Hank, and she doesn’t sue Donny in the court of Hank. To the extent that we think of platforms as the fora where people interact online – as the “place” of the Internet – this proposal is intended to ensure that those engaging in harmful speech or conduct online can be hauled into court by the aggrieved parties, and to facilitate the continued development of platforms without disrupting the functioning of this system of adjudication.

Conclusion

Section 230 is, and has long been, the most important and one of the most controversial laws of the Internet. It is increasingly under attack today from a disparate range of voices across the political and geographic spectrum — voices that would overwhelming reject Section 230’s pro-innovation treatment of platforms and in its place attempt to co-opt those platforms as government-compelled (and, therefore, controlled) content moderators. 

In light of these demands, academics and organizations that understand the importance of Section 230, but also recognize the increasing pressures to amend it, have recently released a statement of principles for legislators to consider as they think about changes to Section 230.

Into this fray, the Third Circuit’s opinion in Oberdorf offers a potential change: making Section 230’s immunity for platforms proportional to their ability to reasonably identify speakers that use the platform to engage in harmful speech or conduct. This would restore the status quo ante, under which intermediaries and agents cannot be used as litigation shields without themselves assuming responsibility for any harmful conduct. This shielding effect was not an intended goal of Section 230, and it has been the cause of Section 230’s worst abuses. It was allowed at the time Section 230 was adopted because the used-identity requirements such as proposed here would not have been technologically reasonable at the time Section 230 was adopted. But technology has changed and, today, these requirements would impose only a moderate  burden on platforms today

The US Senate Subcommittee on Antitrust, Competition Policy, and Consumer Rights recently held hearings to see what, if anything, the U.S. might learn from the approaches of other countries regarding antitrust and consumer protection. US lawmakers would do well to be wary of examples from other jurisdictions, however, that are rooted in different legal and cultural traditions. Shortly before the hearing, for example, Australia’s Competition and Consumer Protection Commission (ACCC) announced that it was exploring broad new regulations, predicated on theoretical harms, that would threaten both consumer welfare and individuals’ rights to free expression that are completely at odds with American norms.

The ACCC seeks vast discretion to shape the way that online platforms operate — a regulatory venture that threatens to undermine the value which companies provide to consumers. Even more troubling are its plans to regulate free expression on the Internet, which if implemented in the US, would contravene Americans’ First Amendment guarantees to free speech.

The ACCC’s errors are fundamental, starting with the contradictory assertion that:

Australian law does not prohibit a business from possessing significant market power or using its efficiencies or skills to “out compete” its rivals. But when their dominant position is at risk of creating competitive or consumer harm, governments should stay ahead of the game and act to protect consumers and businesses through regulation.

Thus, the ACCC recognizes that businesses may work to beat out their rivals and thus gain in market share. However, this is immediately followed by the caveat that the state may prevent such activity, when such market gains are merely “at risk” of coming at the expense of consumers or business rivals. Thus, the ACCC does not need to show that harm has been done, merely that it might take place — even if the products and services being provided otherwise benefit the public.

The ACCC report then uses this fundamental error as the basis for recommending content regulation of digital platforms like Facebook and Google (who have apparently been identified by Australia’s clairvoyant PreCrime Antitrust unit as being guilty of future violations). It argues that the lack of transparency and oversight in the algorithms these companies employ could result in a range of possible social and economic damages, despite the fact that consumers continue to rely on these products. These potential issues include prioritization of the content and products of the host company, under-serving of ads within their products, and creation of “filter bubbles” that conceal content from particular users thereby limiting their full range of choice.

The focus of these concerns is the kind and quality of  information that users are receiving as a result of the “media market” that results from the “ranking and display of news and journalistic content.” As a remedy for its hypothesised concerns, the ACCC has proposed a new regulatory authority tasked with overseeing the operation of the platforms’ algorithms. The ACCC claims this would ensure that search and newsfeed results are balanced and of high quality. This policy would undermine consumer welfare  in pursuit of remedying speculative harms.

Rather than the search results or news feeds being determined by the interaction between the algorithm and the user, the results would instead be altered to comply with criteria established by the ACCC. Yet, this would substantially undermine the value of these services.  The competitive differentiation between, say, Google and Bing lies in their unique, proprietary search algorithms. The ACCC’s intervention would necessarily remove some of this differentiation between online providers, notionally to improve the “quality” of results. But such second-guessing by regulators would quickly undermine the actual quality–and utility — of these services to users.

A second, but more troubling prospect is the threat of censorship that emerges from this kind of regime. Any agency granted a mandate to undertake such algorithmic oversight, and override or reconfigure the product of online services, thereby controls the content consumers may access. Such regulatory power thus affects not only what users can read, but what media outlets might be able to say in order to successfully offer curated content. This sort of control is deeply problematic since users are no longer merely faced with a potential “filter bubble” based on their own preferences interacting with a single provider, but with a pervasive set of speech controls promulgated by the government. The history of such state censorship is one which has demonstrated strong harms to both social welfare and rule of law, and should not be emulated.

Undoubtedly antitrust and consumer protection laws should be continually reviewed and revised. However, if we wish to uphold the principles upon which the US was founded and continue to protect consumer welfare, the US should avoid following the path Australia proposes to take.

It is a bedrock principle underlying the First Amendment that the government may not penalize private speech merely because it disapproves of the message it conveys.

The Federal Circuit handed down a victory for free expression today — in the commercial context no less. At issue was the Lanham Act’s § 2(a) prohibition of trademark registrations that

[c]onsist[] of or comprise[] immoral, deceptive, or scandalous matter; or matter which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute.

The court, sitting en banc, held that the “disparaging” provision is an unconstitutional violation of free expression, and that trademarks will indeed be protected by the First Amendment. Although it declined to decide whether the other prohibitions actually violated the First Amendment, the opinion contained a very strong suggestion to future panels that this opinion likely applies in that context as well.

In many respects the opinion was not all that surprising (particularly if you’ve read my thoughts on the subject here and here ). However given that it was a predecessor Court of Customs and Patent Appeals decision, In Re McGinley, that once held that First Amendment concerns were not implicated at all by § 2(a) because “it is clear that the … refusal to register appellant’s mark does not affect his right to use it” — totally ignoring of course the chilling effects on speech — it was by no means certain that this decision would come out correctly decided.

Today’s holding vacated a decision from a three-judge panel that, earlier this year, upheld the ill-fated “disparaging” prohibition. From just a cursory reading of § 2(a), it should be a no-brainer that it clearly implicates the content of speech — if not a particular view point — and should get at least some First Amendment scrutiny. However, the earlier three-judge opinion  gave all of three paragraphs to this consideration — one of which was just a quotation from McGinley. There, the three-judge panel rather tersely concluded that the First Amendment argument was “foreclosed by our precedent.”

Thus it was with pleasure that I read the Federal Circuit as it today acknowledged that “[m]ore than thirty years have passed since the decision in McGinley, and in that time both the McGinley decision and our reliance on it have been widely criticized[.]” The core of the First Amendment analysis is fairly straightforward: barring “disparaging” marks from registration is neither content neutral nor viewpoint neutral, and is therefore subject to strict scrutiny (which it fails). The court notes that McGinley’s First Amendment analysis was “cursory” (to put it mildly), and was decided before a fully developed body of commercial speech doctrine had emerged. Overall, the opinion is a good example of subtle, probing First Amendment analysis, wherein the court really grasps that merely labeling speech as “commercial” does not somehow magically strip away any protected expressive content.

In fact, perhaps the most important and interesting material has to do with this commercial speech analysis. The court acknowledges that the government’s policy against “disparaging” marks is targeting the expressive aspects of trademarks and not the more easily regulable “transactional” aspects (such as product information, pricing, etc.)— to look at § 2(a) otherwise would not make sense as the government is rather explicitly trying to stop certain messages because of their noncommercial aspects. And the court importantly acknowledges the Supreme Court’s admonition that “[a] consumer’s concern for the free flow of commercial speech often may be far keener than his concern for urgent political dialogue” ( although I might go so far as to hazard a guess that commercial speech is more important that political speech, most of the time, to most people, but perhaps I am just cynical).

The upshot of the Federal Circuit’s new view of trademarks and “commercial speech” reinforces the notion that regulations and laws that are directed toward “commercial speech” need to be very narrowly focused on the actual “commercial” message — pricing, source, etc. — and cannot veer into controlling the “expressive” aspects without justification under strict scrutiny. Although there is nothing terrible new or shocking here, the opinion ties together a variety of the commercial speech doctrines, gives much needed clarity to trademark registration, and reaffirms a sensible view of commercial speech law.

And, although I may be reading too deeply based on my preferences, I think the opinion is quietly staking out a useful position for commercial speech cases going forward—at least to a speech maximalist like myself. In particular, it explicitly relies upon the “unconstitutional conditions” doctrine for the proposition that the benefits of government programs cannot be granted upon a condition that a party only engage in “good” or “approved” commercial speech.  As the world becomes increasingly interested in hate speech regulation,  and our college campuses more interested in preparing a generation of”safe spacers” than of critically thinking adults, this will undoubtedly become an important arrow in a speech defender’s quiver.

Last July, the Eastern District of Virginia upheld the cancellation of various trademarks of the Washington Redskins on the grounds that the marks were disparaging to Native Americans. I am neither a fan of football, nor of offensive names for sports teams–what I am is a fan of free speech. Although the Redskins may be well advised to change their team name, interfering with both the team’s right to free speech as well as its property right in the registered mark is the wrong way–both legally and in principle–to achieve socially desirable ends.

Various theories have been advanced, but the really interesting part of the dispute–a topic upon which I published a paper this year–is the likelihood that the Lanham Act’s prohibition of immoral, scandalous, or disparaging marks runs afoul of the First Amendment. I was cheered to see this week that the First Amendment Lawyers Association filed an amicus brief largely along the lines of my paper. However, there were a couple of points that I still feel deserve more attention when thinking about the § 2(a) (the Lanham Act’s so-called “morality clauses”).

Trademarks Are Not License Plates

The district court tried to sidestep the First Amendment issue by declaring that the trademarks themselves are not at issue, but merely the right to register the trademarks. To reach its result, the court relied on the recent Walker case wherein the Supreme Court declared that Texas was at liberty to prevent Confederate flags from appearing on its license plates, since license plates could be considered the speech of the government.

However, there is an important distinction between license plates and trademarks. License plates are a good totally of government manufacture. One cannot drive a car on a public road without applying to the government for permission and affixing a government registration tag on the vehicle. The plate is not a blank slate upon which one may express one’s self, but is a state-issued information placard used for law enforcement purposes.

Trademarks, arising as they do from actual use, preexist federal recognition. The Lanham Act merely provides a mechanism for registering trademarks that happen to be used in interstate commerce. The federal government then chooses to recognize that trademark when contested or offered for registration.

This is a major distinction: the social field of trademarks already exists – the federal government has chosen to regulate and provide an enforcement mechanism for these property rights and speech acts when used in interstate commerce. Thus it is the market for trademarks that constitutes the forum, and not the physically recorded government register. Given that the government has interfered in a preexisting market in a way in which it protects some state-created trademark property rights, but not others, is it proper to regulate speech by virtue of its content? I think not.

Further, license plates are obviously government property to anyone who looks at them. Plates bear the very name of the state directly on their face. The system of trademark registration is a largely invisible process that only becomes relevant during legal proceedings. When the public looks at a given trademark I would argue that the state’s imprimatur is certainly one of the last things of which they would think.

Thus, a restriction on “immoral” or “disparaging” trademarks constitutes viewpoint discrimination. Eugene Volokh echoed this sentiment when he wrote on the refusal to register “Stop the Islamisation of America”:

Trademark registration … is a government benefit program open to a wide array of speakers with little quality judgment. Like other such programs … it should be seen as a form of “limited public forum,” in which the government may impose content-based limits but not viewpoint-based ones. An exclusion of marks that disparage groups while allowing marks that praise those groups strikes me as viewpoint discrimination.

The Lanham Act endows registrants with government-guaranteed legal rights in connection with the words and symbols by which they are recognized in society. Particularly in a globalized, interconnected society, the brand of an entity is a significant component of how it speaks to society. Discriminating against marks as “immoral” or “disparaging” can be nothing short of viewpoint discrimination.

Commercial Speech Is Protected Speech

As everyone is well aware, the First Amendment provides broad protection for a wide spectrum of speech. The definition of speech itself is likewise broad, including not only words, but also non-verbal gestures and symbols. Any governmental curtailing of such speech will be “presumptively invalid,” with the burden of rebutting that presumption on the government.

When speech is undertaken as part of commerce it does not magically lose any political, social or religious dimension it had when in a noncommercial context. Cartoons issued bearing the image of the Prophet as part of a commercial magazine are surely a political statement deserving of protection. The situation is the same if an organization adopts a logo that is derisive to a particular political or religious ideology – that publication is making a protected, expressive statement through its branding.

At first glance, one might think that defenders of § 2(a) would attempt to qualify scandalous and immoral trademarks as “obscene” and thereby render them subject to censorship. But, in McGinley the Federal Circuit explicitly refused to apply the obscenity standards from the Supreme Court to §2(a) on the grounds that the Lanham Act does not itself use the word “obscenity.” Instead, the Federal Circuit, following the TTAB, was of the opinion that “[w]hat is denied are the benefits provided by the Lanham Act which enhance the value of a mark” and that the appellant still had legal recourse under state common law. Therefore, so the court in McGinley reasoned, since the right to use the mark is not actually abridged, no expression is abridged. And this is the primary basis upon which the district court in Pro-Football built its argument that no First Amendment concerns were implicated in canceling the Redskins trademark.

This of course willfully ignores once again the notion that in intervening in the field of trademarks, and in favoring certain speakers over others, courts effectively allows the Lanham Act to amplify preferred speech and burden disfavored speech. This is true whether or not we classify the trademark right as a bundle of procedural rights (which in turn make speech competitively possible) or as pure speech directly.

That said, it’s much more in keeping with the tradition of the First Amendment to understand trademarks as a protected category of commercial speech. The Supreme Court has noted that otherwise commercial information may at times be more urgent than even political dialog, and that information relating to a financial incentive was not necessarily commercial for First Amendment purposes. “[S]ignificant societal interests are served by such speech.” This is so because even entirely commercial speech “may often carry information of import to significant issues of the day.”

Even were commercial speech not fully protected–as I believe it to be–the Supreme Court has also recognized that commercial speech may be so intertwined with noncommercial speech so as to make them inseparable for First Amendment purposes. In particular, commercial messages do more than merely provide information about the characteristics of goods and services:

[S]olicitation is characteristically intertwined with informative and perhaps persuasive speech seeking support for particular causes or for particular views on economic, political, or social issues, and for the reality that without solicitation the flow of such information and advocacy would likely cease.

The analogy to trademarks is rather clear in this context. Although trademarks may refer to a particular product or service, that product or service is not of necessity a purely commercial object. Further, even if the product or service is a commercial object, the trademark itself can be, or can become, a symbolic referent and not a mere sales pitch. Consider, for instance, Mickey Mouse. The iconic mouse ears certainly represent a vast commercial empire generally, and specifically operate as a functional trademark for Mickey Mouse cartoons and merchandise. However, is there not much more of cultural significance to the mark than mere commercial value? The mouse ears represent something culturally – about childhood, about America, and about art – that is much more than merely a piece of pricing or quality information.

The Unconstitutional Conditions Doctrine Prevents Trading Rights for Privileges

The district court (and Federal Circuit, for that matter) have missed a very important dimension in summarily dismissing First Amendment concerns of trademark holders. These courts dismiss owners of “immoral” or “disparaging” trademarks on the belief that no actual harm is done – the mark holders still own the mark, and, as far as the court is concerned, no speech has been suppressed. However, trademark registration, in addition to providing a forum in which to speak, also provides real procedural benefits for the mark holder. For instance, businesses and individuals enjoy a nationwide recognition of their presence and can vindicate their interests in federal courts. Without the federal registration that is presumptively supplied to marks that are not “immoral” or “scandalous,” an individual can find himself attempting to protect his interests in a mark in the courts of every state in which he does business.

However, under the unconstitutional conditions doctrine even though the benefits of trademark registration are not constitutionally guaranteed rights, those benefits cannot be offered in exchange for a trademark owner’s loss of actually guaranteed rights. Thus, the tight link between trademark registration and First Amendment protections that the courts just keep ignoring.

Its also worth noting that this doctrine did not emerge in constitutional jurisprudence until after the period in which the Lanham Act was drafted. Instead, the Lanham Act era was characterized by the rights-privileges distinction–made famous by then Chief Justice of the Massachusetts Supreme Judicial Court Oliver Wendell Holmes. In McAuliffe, a police officer sued for reinstatement after he was dismissed for his participation in a political organization. In dismissing the case, Chief Justice Holmes held that “[t]he petitioner may have a constitutional right to talk politics, but he has no constitutional right to be a policeman.” This quote from Holmes captures precisely the sense in which the Federal Circuit dismisses the First Amendment concerns of mark holders. 

In contrast to this rather antiquated view, the Supreme Court has recently reaffirmed the proposition that “the government may not deny a benefit to a person because he exercises a constitutional right.” Although this principle contains exceptions, it has been applied to a wide variety of situations including refusal to renew teaching contracts over First Amendment-protected speech acts, and infringement of the right to travel by refusing to adequately extend healthcare benefits to sick persons who had not been residents of a county for at least a year.

Basically, the best defense one can offer for § 2(a) is rooted in an outmoded view of the First Amendment that is, to put it mildly, unconstitutional. We don’t shut down speakers who offend us (at least for the time being), and we should stop attacking trademarks that we find to be immoral.

By a 3-2 vote, the Federal Communications Commission (FCC) decided on February 26 to preempt state laws in North Carolina and Tennessee that bar municipally-owned broadband providers from providing services beyond their geographic boundaries.  This decision raises substantial legal issues and threatens economic harm to state taxpayers and consumers.

The narrow FCC majority rested its decision on its authority to remove broadband investment barriers, citing Section 706 of the Telecommunications Act of 1996.  Section 706 requires the FCC to encourage the deployment of broadband to all Americans by using “measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment.”  As dissenting Commissioner Ajit Pai pointed out, however, Section 706 contains no specific language empowering it to preempt state laws, and the FCC’s action trenches upon the sovereign power of the states to control their subordinate governmental entities.  Moreover, it is far from clear that authorizing government-owned broadband companies to expand into new territories promotes competition or eliminates broadband investment barriers.  Indeed, the opposite is more likely to be the case.

Simply put, government-owned networks artificially displace market forces and are an affront to a reliance on free competition to provide the goods and services consumers demand – including broadband communications.  Government-owned networks use local taxpayer monies and federal grants (also taxpayer funded, of course) to compete unfairly with existing private sector providers.  Those taxpayer subsidies put privately funded networks at a competitive disadvantage, creating barriers to new private sector entry or expansion, as private businesses decide they cannot fairly compete against government-backed enterprises.  In turn, reduced private sector investment tends to diminish quality and effective consumer choice.

These conclusions are based on hard facts, not mere theory.  There is no evidence that municipal broadband is needed because “market failure” has deterred private sector provision of broadband – indeed, firms such as Verizon, AT&T, and Comcast spend many billions of dollars annually to maintain, upgrade, and expand their broadband networks.  Indeed, far more serious is the risk of “government failure.”  Municipal corporations, free from market discipline and accountability due to their public funding, may be expected to be bureaucratic, inefficient, and slow to react to changing market conditions.  Consistent with this observation, an economic study of government-operated municipal broadband networks reveals failures to achieve universal service in areas that they serve; lack of cost-benefit analysis that has caused costs to outweigh benefits; the inefficient use of scarce resources; the inability to cover costs; anticompetitive behavior fueled by unfair competitive advantages; the inefficient allocation of limited tax revenues that are denied to more essential public services; and the stifling of private firm innovation.  In a time of tight budget constraints, the waste of taxpayer funds and competitive harm stemming from municipal broadband activities is particularly unfortunate.  In short, real world evidence demonstrates that “[i]n a dynamic market such as broadband services, government ownership has proven to be an abject failure.”  What is required is not more government involvement, but, rather, fewer governmental constraints on private sector broadband activities.

Finally, what’s worse, the FCC’s decision has harmful constitutional overtones.  The Chattanooga, Tennessee and Wilson, North Carolina municipal broadband networks that requested FCC preemption impose troublesome speech limitations as conditions of service.  The utility that operates the Chattanooga network may “reject or remove any material residing on or transmitted to or through” the network that violates its “Accepted Use Policy.”  That Policy, among other things, prohibits using the network to send materials that are “threatening, abusive or hateful” or that offend “the privacy, publicity, or other personal rights of others.”  It also bars the posting of messages that are “intended to annoy or harass others.”  In a similar vein, the Wilson network bars transmission of materials that are “harassing, abusive, libelous or obscene” and “activities or actions intended to withhold or cloak any user’s identity or contact information.”  Content-based prohibitions of this type broadly restrict carriage of constitutionally protected speech and, thus, raise serious First Amendment questions.  Other municipal broadband systems may, of course, elect to adopt similarly questionable censorship-based policies.

In short, the FCC’s broadband preemption decision is likely to harm economic welfare and is highly problematic on legal grounds to boot.  The FCC should rescind that decision.  If it fails to do so, and if the courts do not strike the decision down, Congress should consider legislation to bar the FCC from meddling in state oversight of municipal broadband.

On December 11 I published a Heritage Foundation Legal Memorandum on this topic. I concluded that the federal courts have done a fairly good job in harmonizing antitrust with constitutionally-based federalism and First Amendment interests (petitioning, free speech, and religious freedom). Nevertheless, it must be admitted that these “constitutional constraints” somewhat limit the ability of antitrust to promote a procompetitive, pro-efficiency, pro-innovation, pro-consumer welfare agenda. Anticompetitive government action – the most pernicious and long-lasting affront to competition, because it is backed by the coercive power of the state – presents a particularly serious and widespread problem. How can antitrust and other legal principles be applied to further promote economic freedom and combat anticompetitive government action, in a manner consistent with the Constitution?

First, it may be possible to further tweak antitrust to apply a bit more broadly to governmental conduct, without upsetting the constitutional balance.

For instance, in 2013, in Phoebe Putney, the United States Supreme Court commendably held that general grants of corporate powers (such as the power to enter into contracts) to sub-state governmental entities are not in themselves “clear articulations” of a state policy to displace competition. Thus, in that case, a special purpose hospital authority granted general corporate powers by the State of Georgia could not evade federal antitrust scrutiny when it orchestrated a potentially anticompetitive hospital merger. In short, by requiring states to be specific when they authorize regulators to displace competition, Phoebe Putney makes it a bit more difficult to achieve anticompetitive results through routine state governmental processes.

But what about when a subsidiary state entity has been empowered to displace competition? Imposing a greater requirement on states to actively supervise decisions by self-interested state regulatory boards could enhance competition without severely undermining state prerogatives. Specifically, where members of a profession dominate a state-created board that oversees the profession, the risk of self-dealing and consumer harm is particularly high, and therefore the board’s actions should be subject to exacting scrutiny. In its imminent ruling on the Federal Trade Commission’s (FTC) challenge to anticompetitive rules by the dentist-dominated North Carolina Dental Board of Dental Examiners (rules which forestall competition by storefront teeth whitening services), the Supreme Court will have the opportunity to require that states actively supervise the decisions of self-interested regulators as a prerequisite to federal antitrust immunity. At the very least, such a requirement would make states be more cautious before giving a blank check to potentially anticompetitive industry self-regulation. It could also raise the costs of obtaining special government favor, and shed needed light on rent-seekers’ efforts to achieve regulatory capture.

Unfortunately, though, a great deal of anticompetitive governmental activity, both state and federal, is and will remain beyond the bounds of federal antitrust prosecution. What can be done to curb such excesses, given the practical political difficulties in achieving far-reaching pro-competitive legislative and regulatory reforms? My December 11 Heritage Memo highlights a few possibilities rooted in constitutional economic liberties (see also the recent Heritage Foundation special report on economic liberty and the Constitution). One involves putting greater teeth into constitutional equal protection and due process analysis – say, by holding that pure protectionism standing alone does not pass muster as a “rational basis” justification for a facially anticompetitive law. Another approach is to deploy takings law (highlighted in a current challenge to the U.S. Agriculture Department’s raisin cartel) and the negative commerce clause in appropriate circumstances. The utility of these approaches, however, is substantially limited by case law.

Finally, competition advocacy – featuring public statements by competition agencies that describe the anticompetitive effects and welfare harm stemming from specific government regulations or proposed laws – remains a potentially fruitful means for highlighting the costs of anticompetitive government action and building a case for reform. As I have previously explained, the FTC has an established track record of competition advocacy filings, and the International Competition Network is encouraging the utilization of competition advocacy around the world. By shedding light on the specific baleful effects of government actions that undermine normal competitive processes, competition advocacy may over time help build a political case for reform that transcends the inherent limitations of antitrust and constitutional litigation.

With Berin Szoka

We’ll be delving into today’s oral arguments at our live-streamed TechFreedom/ICLE event at 12:30 EDT — and tweeting on the #NetNeutrality hashtag.

But here are a few thoughts to help guide the frantic tea-leaf reading everyone will doubtless be engaged in after (and probably even during) the arguments:

While most commentators have focused on ancillary jurisdiction questions, the FCC first and foremost asserts that Section 706 of the Telecommunications Act gives it direct authority to regulate the Internet.

  • The FCC purports to find this authority primarily in the language of the Section 706, which directs the Commission to “encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans… by utilizing… measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment.”

  • The DC Circuit in Comcast suggested that this language might constitute a direct grant of authority, but in that case it’s clear the court was talking about a grant of authority sufficient to constitute the basis for ancillary jurisdiction. Here, the FCC explicitly claims that the language confers direct authority (although the Commission still claims other sections as the basis for ancillary authority).

  • In any case, the court in Comcast didn’t address the substance of the Commission’s claim, and despite some commentators’ claims to the contrary, nothing in the court’s analysis of Section 706 in Comcast directly forecloses the arguments the FCC makes in this case (although some of its language suggests the court may be uncomfortable with the FCC’s claim of authority).

  • Rather, because the FCC had not yet offered the revised interpretation of Section 706 contained within the Open Internet Order, the court in Comcast simply accepted the FCC’s then-current interpretation that Section 706 conferred no direct authority on the Commission to regulate broadband information services.

  • Since then, however, the FCC has changed course, and it now asserts such authority in the OIO. It is worth noting, as Commissioner McDowell discussed in his dissent from the OIO, that the process by which the FCC majority repudiated its previous interpretation and set up the basis for its authority under Section 706 was remarkably disingenuous and underhanded. The court may or may not take notice of this, but it should serve as a caution.

Thus the case is likely to hinge primarily on whether the court accepts the FCC’s claim that Section 706 grants direct authority, and, if so, whether the Open Internet Order adduces sufficient evidence to justify the FCC’s claim that Section 706 constitutes a valid basis for the specific regulations encompassed in the OIO.

  • The FCC’s arguments that it has ancillary jurisdiction under other provisions of the Telecommunications Act aren’t likely to get any more traction than last time.

  • The analysis of Section 706 as a basis for direct or ancillary jurisdiction is similar — and the court may well agree with Verizon that the FCC is really still claiming ancillary jurisdiction with a different label. So why does the distinction matter?

In order to establish Section 706 as the jurisdictional basis for the OIO under ancillary jurisdiction, the FCC would have to demonstrate that the OIO is necessary to implementation of Section 706’s (Section 4(i) of the Act says the FCC “may perform any and all acts, make such rules and regulations, and issue such orders … as may be necessary in the execution of its functions”). But if Section 706 confers authority for the OIO directly, the FCC need only show that its interpretation of the provision authorizing the Order is reasonable and not arbitrary and capricious. In other words, the FCC is trying to significantly lower its factual burden for using Section 706 (even as it claims that section confers authority narrower in scope than would ancillary authority). If the court accepts this argument, it could accept the FCC’s argument (however poorly supported and contrary to Congress’s clear intent) that the regulation of ISPs in order to encourage broadband deployment is a legitimate action under Section 706.

But the analysis doesn’t end there. Authority may exist in the abstract, but that doesn’t mean that this particular implementation of Section 706 is appropriate (or consistent with the Communications Act or the Constitution).

  • Rather, the plain language of Section 706 demands regulation that encourages deployment by means of removing barriers to infrastructure deployment. It is thus a sort of effects-based standard, and the FCC’s implementation of it is permitted only to the extent that its regulation actually has the effect of encouraging deployment.

  • This means that the FCC must adduce evidence sufficient to support the claim that, on net, its regulation will encourage deployment. To us, the FCC hasn’t met its burden.

  • The problem for the FCC is that, while the OIO contains a raft of assertions that prohibiting discrimination against, and forbidding the blocking of, edge content will encourage demand for, and thus deployment of, broadband infrastructure, the Order gives short shrift to the obvious reality that, at the same time, constraining broadband providers will reduce their incentive to invest in infrastructure.

  • It is an empirical question which effect is stronger, and, in theory, the Commission may be correct that the OIO meets the obligations imposed on it by Section 706.

  • But it is not enough simply to argue, as the FCC has done, that the OIO will encourage deployment along one dimension, while dismissing the other.

  • Unfortunately for the FCC, the OIO does just that (and badly, it must be added. Not only does the record clearly demonstrate only the most minimal instances of non-neutrality, but most of these were resolved without FCC intervention. Moreover, despite its bold claims, the economic evidence connecting neutrality and infrastructure deployment is vanishingly thin, to say the least).

It seems clear that the FCC is reading Section 706 with the wrong emphasis. The provision is not meant to be a broad grant of power (and to its credit the FCC asserts that it understands there are some limits to the provision and whatever powers it might confer). But in contorting the provision to find a basis for the OIO, the FCC doesn’t go far enough in accepting the limits of Section 706.

  • Properly understood, Section 706 is meant rather to be a broad limitation on the FCC’s power, requiring it to act, but only insofar as doing so encourages, on net, deployment, increases competition and removes barriers. This obligation is the most likely reason why the FCC had previously minimized the importance of Section 706.

  • The NTIA, for example, seems to understand this. As it wrote in a letter to the FCC in 1998, “the legislative history of section 706 suggests that it would operate only in the event that competition failed to produce reasonable and timely broadband deployment.” In asserting this the NTIA cites to, among other things, a statement from then Sen. Burns that “If competition is stalled, the [bill] gives the FCC authority to quicken the pace of competition and deregulation to accelerate the deployment of advanced telecommunications infrastructure.”

  • Quite clearly, the provision is not meant to authorize regulation except where regulating will improve the status quo — will “quicken the pace of competition.”

The evidence required to defend a regulation promulgated under this provision thus must include evidence not only that the regulation is intended to increase competition relative to the status quo, but that it actually does so. The OIO contains no such evidence. Instead, the FCC

  • identifies vanishingly few instances of discrimination by ISPs and fails to note that most of these wouldn’t be affected by the OIO or were resolved without the FCC’s intervention;

  • asserts that ISPs have an ill-defined “incentive” to foreclose content providers and offers no baseline from which to assess whether foreclosure, if it exists, would actually cause consumer harm;

  • merely asserts that the benefits of the OIO outweigh its costs;

  • draws only a tenuous connection between neutrality and broadband deployment;

  • does not address how excluding vertically integrated broadband providers from profiting from the “virtuous circle of innovation” will affect net outcomes;

  • neglects to establish the requisite baseline showing that that competition and deployment have stalled in the status quo and that they will improve under its rules.

  • fails to confront the possibility that its expansive reading of its authority will further deter investment and innovation; and

  • fails to analyze the rules within the well-established framework of consumer welfare economics.

The Commission may be correct that “[e]ach round of innovation increases the value of the Internet for broadband providers, edge providers, online businesses, and consumers.” But the OIO explicitly forbids broadband providers from capturing these rents in any but the most blunt fashion, ensuring that whatever positive effects edge content innovation will confer, they will not substantially be enjoyed by the companies actually making infrastructure investment decisions.

  • Moreover, directly flouting Section 706’s mandate, the Order contains a number of explicit exceptions (for, e.g., CDNs, VPNs, peering arrangements, game consoles and app stores) that collectively have the effect of enshrining the competitive conditions of the status quo rather than encouraging innovation. These exceptions are well-taken and clearly benefit consumers. But by acknowledging that many aspects of today’s Internet are appropriately non-neutral and by establishing exceptions for these existing technologies, but not for the non-neutral technologies of tomorrow that will also benefit competition and consumers, the OIO impedes rather than quickens the pace of competition.

Even if the FCC gets this far, it still has to establish that it hasn’t violated the Communications Act by imposing common carrier status on broadband providers, which the FCC has classified as a Title I non-common-carrier service. To win here, the court would have to find that the Net Neutrality rules leave room for “commercially reasonable negotiation” — as it did in upholding the FCC’s mandate that wireless carriers offer data roaming to the subscribers of other carriers. The Order insists that the FCC hasn’t regulated negotiations with consumers, which the agency claims is all that matters. But that’s clearly inconsistent with Judge Tatel’s analysis in the data roaming order, which focused on whether the data roaming rule left room for such negotiations on the other side of the market— between carriers. So look for Judge Tatel to ask tough questions about this point today.

FInally, Verizon’s Constitutional arguments remain, and while they present an uphill battle, the court may press the FCC on whether its regulations are consistent with the the First and Fifth Amendments — the core of TechFreedom’s amicus brief.

There will be much more to say following the oral argument, but we wanted to offer these preliminary thoughts to guide court watchers. In sum, as a technical legal matter, we believe that the court will not focus on the ancillary jurisdiction question and will likely defer substantially to the FCC’s interpretation of its direct jurisdiction to regulate broadband information providers under the Telecommunications Act. But the real action will be in the court’s evaluation of the FCC’s claimed support for its specific implementation of its authority. And if the Court seems open to the FCC’s arguments, it will have to delve into the common carriage and constitutional questions.

We add one note in conclusion: The type of analysis and resulting regulation called for under even the FCC’s interpretation of Section 706 should look an awful lot like a rule of reason foreclosure analysis under antitrust law. The rule is effects-based and calls for a case by case evidentiary determination that complained of conduct results in anticompetitive foreclosure relative to the but-for world without the conduct. We can certainly imagine Judge Tatel striking down the rule, upholding the assertion of jurisdiction, and offering guidance to the FCC that it might cure its error by implementing a rule that effectively embodies the well-established law and economics of an antitrust rule of reason analysis. Or perhaps we could cut out the middleman and just let the FTC apply antitrust laws directly.

William Buckley once described a conservative as “someone who stands athwart history, yelling Stop.” Ironically, this definition applies to Professor Tim Wu’s stance against the Supreme Court applying the Constitution’s protections to the information age.

Wu admits he is going against the grain by fighting what he describes as leading liberals from the civil rights era, conservatives and economic libertarians bent on deregulation, and corporations practicing “First Amendment opportunism.” Wu wants to reorient our thinking on the First Amendment, limiting its domain to what he believes are its rightful boundaries.

But in his relatively recent piece in The New Republic and journal article in U Penn Law Review, Wu bites off more than he can chew. First, Wu does not recognize that the First Amendment is used “opportunistically” only because the New Deal revolution and subsequent jurisprudence has foreclosed all other Constitutional avenues to challenge economic regulations. Second, his positive formulation for differentiating protected speech from non-speech will lead to results counter to his stated preferences. Third, contra both conservatives like Bork and liberals like Wu, the Constitution’s protections can and should be adapted to new technologies, consistent with the original meaning.

Wu’s Irrational Lochner-Baiting

Wu makes the case that the First Amendment has been interpreted to protect things that aren’t really within the First Amendment’s purview. He starts his New Republic essay with Sorrell v. IMS (cf. TechFreedom’s Amicus Brief), describing the data mining process as something undeserving of any judicial protection. He deems the application of the First Amendment to economic regulation a revival of Lochner, evincing a misunderstanding of the case that appeals to undefended academic prejudice and popular ignorance. This is important because the economic liberty which was long protected by the Constitution, either as matter of federalism or substantive rights, no longer has any protection from government power aside from the First Amendment jurisprudence Wu decries.

Lochner v. New York is a 1905 Supreme Court case that has received more scorn, left and right, than just about any case that isn’t dealing with slavery or segregation. This has led to the phenomenon (my former Constitutional Law) Professor David Bernstein calls “Lochner-baiting,” where a commentator describes any Supreme Court decision with which he or she disagrees as Lochnerism. Wu does this throughout his New Republic piece, somehow seeing parallels between application of the First Amendment to the Internet and a Liberty of Contract case under substantive Due Process.

The idea that economic regulation should receive little judicial scrutiny is not new. In fact, it has been the operating law since at least the famous Carolene Products footnote four. However, the idea that only insular and discrete minorities should receive First Amendment protection is a novel application of law. Wu implicitly argues exactly this when he says “corporations are not the Jehovah’s Witnesses, unpopular outsiders needing a safeguard that legislators and law enforcement could not be moved to provide.” On the contrary, the application of First Amendment protections to Jehovah’s Witnesses and student protesters is part and parcel of the application of the First Amendment to advertising and data that drives the Internet. Just because Wu does not believe businesspersons need the Constitution’s protections does not mean they do not apply.

Finally, while Wu may be correct that the First Amendment should not apply to everything for which it is being asserted today, he does not seem to recognize why there is “First Amendment opportunism.” In theory, those trying to limit the power of government over economic regulation could use any number of provisions in the text of the Constitution: enumerated powers of Congress and the Tenth Amendment, the Ninth Amendment, the Contracts Clause, the Privileges or Immunities Clause of the Fourteenth Amendment, the Due Process Clause of the Fifth and Fourteenth Amendments, the Equal Protection Clause, etc. For much of the Constitution’s history, the combination of these clauses generally restricted the growth of government over economic affairs. Lochner was just one example of courts generally putting the burden on governments to show the restrictions placed upon economic liberty are outweighed by public interest considerations.

The Lochner court actually protected a small bakery run by immigrants from special interest legislation aimed at putting them out of business on behalf of bigger, established competitors. Shifting this burden away from government and towards the individual is not clearly the good thing Wu assumes. Applying the same Liberty of Contract doctrine, the Supreme Court struck down legislation enforcing housing segregation in Buchanan v. Warley and legislation outlawing the teaching of the German language in Meyer v. Nebraska. After the New Deal revolution, courts chose to apply only rational basis review to economic regulation, and would need to find a new way to protect fundamental rights that were once classified as economic in nature. The burden shifted to individuals to prove an economic regulation is not loosely related to any conceivable legitimate governmental purpose.

Now, the only Constitutional avenue left for a winnable challenge of economic regulation is the First Amendment. Under the rational basis test, the Tenth Circuit in Powers v. Harris actually found that protecting businesses from competition is a legitimate state interest. This is why the cat owner Wu references in his essay and describes in more detail in his law review article brought a First Amendment claim against a regime requiring licensing of his talking cat show: there is basically no other Constitutional protection against burdensome economic regulation.

The More You Edit, the More Your <sic> Protected?

In his law review piece, Machine Speech, Wu explains that the First Amendment has a functionality requirement. He points out that the First Amendment has never been interpreted to mean, and should not mean, that all communication is protected. Wu believes the dividing lines between protected and unprotected speech should be whether the communicator is a person attempting to communicate a specific message in a non-mechanical way to another, and whether the communication at issue is more speech than conduct. The first test excludes carriers and conduits that handle or process information but have an ultimately functional relationship with it–like Federal Express or a telephone company. The second excludes tools, those works that are purely functional like navigational charts, court filings, or contracts.

Of course, Wu admits the actual application of his test online can be difficult. In his law review article he deals with some easy cases, like the obvious application of the First Amendment to blog posts, tweets, and video games, and non-application to Google Maps. Of course, harder cases are the main target of his article: search engines, automated concierges, and other algorithm-based services. At the very end of his law review article, Wu finally states how to differentiate between protected speech and non-speech in such cases:

The rule of thumb is this: the more the concierge merely tells the user about himself, the more like a tool and less like protected speech the program is. The more the programmer puts in place his opinion, and tries to influence the user, the more likely there will be First Amendment coverage. These are the kinds of considerations that ultimately should drive every algorithmic output case that courts could encounter.

Unfortunately for Wu, this test would lead to results counterproductive to his goals.

Applying this rationale to Google, for instance, would lead to the perverse conclusion that the more the allegations against the company about tinkering with its algorithm to disadvantage competitors are true, the more likely Google would receive First Amendment protection. And if Net Neutrality advocates are right that ISPs are restricting consumer access to content, then the analogy to the newspaper in Tornillo becomes a good one–ISPs have a right to exercise editorial discretion and mandating speech would be unconstitutional. The application of Wu’s test to search engines and ISPs effectively puts them in a “use it or lose it” position with their First Amendment rights that courts have rejected. The idea that antitrust and FCC regulations can apply without First Amendment scrutiny only if search engines and ISPs are not doing anything requiring antitrust or FCC scrutiny is counterproductive to sound public policy–and presumably, the regulatory goals Wu holds.

First Amendment Dynamism

The application of the First Amendment to the Internet Age does not involve large leaps of logic from current jurisprudence. As Stuart Minor Benjamin shows in his article in the same issue of the U Penn Law Review, the bigger leap would be to follow Wu’s recommendations. We do not need a 21st Century First Amendment that some on the left have called for—the original one will do just fine.

This is because the Constitution’s protections can be dynamically applied, consistent with original meaning. Wu’s complaint is that he does not like how the First Amendment has evolved. Even his points that have merit, though, seem to indicate a stasis mentality. In her book, The Future and Its Enemies, Virginia Postrel described this mentality as a preference for a “controlled, uniform society that changes only with permission from some central authority.” But the First Amendment’s text is not a grant of power to the central authority to control or permit anything. It actually restricts government from intervening into the open-ended society where creativity and enterprise, operating under predictable rules, generate progress in unpredictable ways.

The application of current First Amendment jurisprudence to search engines, ISPs, and data mining will not necessarily create a world where machines have rights. Wu is right that the line must be drawn somewhere, but his technocratic attempt to empower government officials to control innovation is short-sighted. Ultimately, the First Amendment is as much about protecting the individuals who innovate and create online as those in the offline world. Such protection embraces the future instead of fearing it.

According to Senators Barbara Boxer, Jeanne Shaheen, and Patty Murray, the Catholic Church is the real bully in the fight over whether religious employers must include coverage for contraception in the insurance policies they offer their employees.  In yesterday’s Wall Street Journal, the three responded to, in their words, the “aggressive and misleading campaign” against this new Obamacare mandate.  They wrote:

Those now attacking the new health-coverage requirement claim that it is an assault on religious liberty, but the opposite is true.  Religious freedom means that Catholic women who want to follow their church’s doctrine can do so, avoiding the use of contraception in any form.  But the millions of American women who choose to use contraception should not be forced to follow religious doctrine, whether Catholic or non-Catholic.

The three Senators seem to believe that as long as the government doesn’t force Catholic women to use birth control and the morning after pill, religious liberty is protected.  They also believe that in praying to the Almighty One (not that Almighty One) for permission not to pay for a medical intervention that offends their deeply and sincerely held religious beliefs, Catholic officials are trying to force women to follow their religious doctrine.

That’s ridiculous, and it shows how desperate the defenders of President Obama’s intrusion on individual conscience have become.  In a world in which religious employers were exempt from paying for a measure that violates their sacred beliefs, any woman who didn’t share those beliefs would be perfectly free to obtain birth control.  The Catholic Church, after all, doesn’t have the power to overrule Griswold v. Connecticut.

By contrast, in the world of Mr. Obama’s contraception mandate, Catholic officials who choose to follow their consciences by refusing to subsidize interventions that violate their religious beliefs may ultimately be thrown in jail.  That, Honorable Senators, is a full-frontal assault on religious liberty.

[More on the deeply misguided contraception mandate here.]

Since the day it was handed down, Citizens United has been a kind of political flypaper for bad laws.  The first dead bugs sought to exploit the decision’s caveats by targeting disclosure and shareholder approval (the Shareholder Protection Act, critized here) and prohibiting political expenditures by government contractors (the Disclose Act).

More recently, CU-haters are trying a more frontal assault. Some senators have proposed a constitutional amendment that would authorize Congress and the states to regulate contributions and expenditures in connection with political candidates.  See the Law Blog.

And now ballot initiatives in such corporate powerhouses as Boulder, Madison and Missoula are striking out against “corporate personhood.” See MoveToAmend.org.

Bainbridge notes that this move is “kind of clever” because it would distinguish corporations from unions, which are unincorporated voluntary associations and the left’s key source of campaign funds.

But even David St. Hubbins and Nigel Tufnel know there’s but a fine line between clever and stupid (side comment:  this coming Friday is Nigel Tufnel day).  Bainbridge notes that personhood is an important corporate characteristic in protecting corporate and shareholder assets.  He asks how “the brilliant legal minds behind this movement propose to preserve this feature of corporate personhood if they succeed” and observes that “lots of pillars of the liberal political movement are limited liability entities with the status of legal persons.”

Actually, I’m skeptical that abolishing artificial personhood would have a lot of non-constitutional implications.  To be sure, it would introduce massive confusion and provided needed work for lawyers.  But in the final analysis, personhood is more a description than a creator of legal consequences (see Bromberg & Ribstein, §1.03). If state law says corporations have limited liability and owners’ creditors have limited recourse to business assets, these consequences should and probably would still hold even in Madison, Wisconsin.

The real problems arise on the constitutional front.  To begin with, the loss of personhood would not have the slightest effect under Citizens United.  The Court held that the First Amendment “protects speech and speaker, and the ideas that flow from each” (130 S.Ct. at 899).  As I have discussed, “the First Amendment does not guard corporations’ expressive rights, but rather the public’s interest in hearing what corporations have to say.” The “entity” nature of corporations doesn’t seem to have anything to do with this reasoning.

On the other hand, if personhood matters at all under Citizens United and subsequent decisions, the loss of personhood actually could be a constitutional boon to corporations.  As I noted some time ago (The Constitutional Conception of the Corporation, 4 Supreme Court Economic Review 95, 129 (1995)):

Under the corporate person theory, speech is attributed to the corporate entity rather than to individuals. Although Bellotti held that speech is protected even if uttered by artificial persons, the post-Bellotti cases on corporate political speech showed that it is easier to deny First Amendment rights if the speech is attributed to an artificial person.

CU avoided this problem by reasoning that the identity of the speaker should be irrelevant.  In the article just cited I argued that corporations would derive more robust constitutional protection, including under the First Amendment, if courts squarely applied the contract theory.  Explicitly overruling artificial personhood would force courts to look through the artificial entity to actual people whose speech is clearly protected.  In other words, the courts would finally have to recognize that corporate speech is people speech.

What’s the answer to those looking for a constitutional fix for CU?  The Supreme Court decided that the for-profit corporation is one of those ideas the First Amendment forbids government from censoring. So there would seem to be only two ways around CU: change the Supreme Court or repeal the First Amendment.

I recently discussed the policy issues regarding litigation against LegalZoom for unauthorized practice of law (as well as noting my potential interest in this litigation).  A recent paper analyzes the legal issues:  Catherine Lanctot, Does LegalZoom Have First Amendment Rights? Some Thoughts About Freedom of Speech and the Unauthorized Practice of Law.  Here’s some of the abstract:

The article first sketches some potential problems with the reflexive assumption that LegalZoom and its fellow travelers are engaged in the unauthorized practice of law. Even assuming that the practice of preparing routine legal documents for consumers runs afoul of many unauthorized practice statutes, however, there remains an open question of whether these statutes may themselves interfere with First Amendment guarantees. In particular, to the extent that these statutes broadly sweep vast amounts of law-related speech within their scope, they may infringe on free speech rights. The article sets forth some of the possible First Amendment arguments available to document preparers, without extensive elaboration, to call attention to the possibility that they may be raised in defense to an unauthorized practice prosecution. It concludes with a caution about aggressive pursuit of these online document preparers without careful consideration of the possible risks involved. A successful First Amendment challenge to an unauthorized practice statute could have repercussions far beyond the world of LegalZoom.

With respect to the “caution about aggressive pursuit of these online document preparers,” Professor Lanctot concludes:

The legal profession has deliberately left itself free to define a host of activities as “unauthorized practice” on an as-needed basis. This flexibility may have served the bar’s regulatory needs in the past, but it could prove fatal to enforcing unauthorized practice laws in the face of a serious First Amendment challenge. The broad and standardless definition of “practice of law” could then collide with the requirement of specificity and narrow tailoring that underlies many aspects of relevant First Amendment doctrine. Whether or not these First Amendment arguments may succeed ultimately in the courts is less important than the fact that they have a sufficient basis to complicate any action for unauthorized practice.

In other words, by arguing that any individualized advice about the law by a non-lawyer is illegal, the bar has exposed all of this regulation to the risk of invalidation.

Of course the bar might think this strategy is worth the risk because the alternative is the horrors of free competition.  But in the end, the bar may have little choice.  Law’s information revolution, and the general forces of competition and deregulation (particularly including the UK’s Legal Services Act) are pressing on all fronts whatever the bar does.

Waking the First Amendment bear in LegalZoom litigation could have implications not only for unauthorized practice laws but for all kinds of other regulation of commercial speech, particularly including the securities laws.  See my and Butler’s Corporate Governance Speech and the First Amendment, 43 U. Kans. L. Rev. 163 (1994) and The Corporation and the Constitution.

I would add that the majority’s broad reasoning in Citizens United has makes this a particularly good time to raise these arguments. See my recently published article, The First Amendment and Corporate Governance.

The political and market pressure to deregulate and thereby lower the costs of legal services may make this regulation a particularly inviting target for First Amendment claims.  In contrast with Citizens United, a case on the constitutionality of unauthorized practice could be portrayed not as big corporations against the little guy, but as the little guy against a powerful entrenched interest group of greedy lawyers.  This could make the claim a useful lever to bring down large chunks of regulation of truthful commercial speech.