Statement before the

Subcommittee on Courts and Intellectual Property,

Committee on the Judiciary

United States House of Representatives

July 27, 2000

Daniel J. Meltzer⁽¹⁾

Mr. Chairman, and members of the Committee: I appreciate the opportunity to appear before you today at this oversight hearing.

I have a prepared statement and would request that it be inserted in the record.

The Supreme Court's enthusiastic embrace of the doctrine of state sovereign immunity crossed paths with the law of intellectual property in 1999 in Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank.⁽²⁾ In that case, the Court held unconstitutional a congressional enactment that had purported to make states, like other actors, liable for damages when they are sued by private parties for an infringement of patent rights. Congressional efforts to subject the states to private damage actions for copyright or trademark infringement⁽³⁾ must, under the reasoning of Florida Prepaid, be deemed to be equally invalid.⁽⁴⁾

Where do these rulings leave the system for enforcing intellectual property rights against the states? What remedial gaps exist, and what opportunities are open to Congress should it wish to close those gaps?

I. The Remedies that Remain

Imagine that, today, various faculty members and administrators in different departments of a state university are engaged in widespread illegal duplication of copyrighted materials. What remedies are available to the copyright holders?

First, the Supreme Court's cases leave intact injunctive remedies against state action that infringes intellectual property (IP) rights. A certain form must be observed--the suit for an injunction must be filed against a state official, rather than against the state or an agency of the state. But so long as that form is observed, and injunctive relief is otherwise appropriate (as, for example, in the case of ongoing violations), a prospective injunction may be obtained. Thus, if and when the copyright holders discover that their rights are being violated, bring suit, and obtain an injunctive order, the illegal practice will presumably halt.⁽⁵⁾

The constitutional difficulties arise when the holder of an intellectual property right seeks to recover damages for infringement that has already taken place. Suppose that the infringement had been going on for many years before any injunctive order was obtained. What the Florida Prepaid case held was that, at least under existing statutes, the plaintiff may not sue the state for damages--no matter how flagrant the violation, and no matter how clearly and insistently Congress has sought to authorize such relief.

This holding would not mean that, in our example, no avenue exists by which the copyright holders may obtain compensation for the harm suffered. But the only recourse available under existing law is to sue the responsible state officials for damages to be paid out of their personal resources.⁽⁶⁾ Such awards are not barred by the principle of sovereign immunity, since, unlike damage awards against the state treasury, they are thought not to affect the state directly. Needless to say, however, limiting damage actions to suits against officials raises a whole set of problems: plaintiffs may have difficulty identifying and suing all of the responsible individuals; adjudicating multiple claims against multiple individuals and proving their individual responsibility for the acts in question may be burdensome; the officials may possess a qualified immunity from damages, permitting compensation only when their conduct violated clearly established law;⁽⁷⁾ juries may be reluctant to award damages against state officials who, at least in some cases, may be viewed as trying to perform important duties under difficult conditions; collecting on multiple judgments may be burdensome or, as a practical matter, impossible, particularly when individuals are impecunious if not judgment proof. It is true that many states indemnify such individuals, but it is also true that indemnification is neither universal, unlimited in scope, nor free from possible friction in operation.⁽⁸⁾ In the end, recovering damages against officials is a far less satisfactory option than recovering against the state itself.

Thus, imagine that it is well-known at our hypothetical state university that many professors and administrators are illegally reproducing materials. If the university did face damages liability for the acts of its staff, it might itself implement policies to bring such violations to a halt and to prevent new ones. But the incentive to take such action, given the state of current law, is considerably weaker: unless and until an injunction is issued, the university as an entity faces no risk of liability.

In pointing to existing remedial gaps, I do not mean to suggest that states and their officials will necessarily take advantage of them. State officials do not generally act like Justice Holmes' bad men, motivated only by the fear of legal sanctions. "[R]outine rule-following, respect for the law, and desire to avoid the burdens of litigation often will induce compliance with federal duties."⁽⁹⁾ In some instances, however, these factors may operate only weakly; Professor Menell notes that university research laboratories, for example, may exhibit a competitiveness that makes them likely to press at if not beyond the legal margins;⁽¹⁰⁾ in such cases, the threat of entity liability could be an important enforcement tool in the public as in the private sector. Among the situations where entity liability may be of particular importance are those in which the scope of federal duties is uncertain or the cost of compliance is very high; in such cases, the prospect of liability for non-compliance may induce greater care in considering whether federal law truly permits the conduct in question.⁽¹¹⁾ But it is precisely that technique--imposition of entity liability on state governments--that the Florida Prepaid case held to be unconstitutional.

II. Possible Congressional Approaches

If Congress wished to strengthen the remedies against infringement of intellectual property (IP) rights by state governments, how might it do so?

A. Enact a Narrow Cause of Action under Section 5 of the 14th Amendment

One route that Congress might take is one that would partially, but only partially, fill the remedial gap that I have just identified. To explain this approach, some greater attention must be paid to the reasoning of the Supreme Court's 1999 decision in the Florida Prepaid case.

The statute that the Court there invalidated--the "Patent and Plant Variety Protection Remedy Clarification Act," or, for short, the Patent Remedy Act--was enacted in 1992.⁽¹²⁾ That Act had purported to abrogate the states' sovereign immunity from suit for patent infringement, and thus to authorize federal court jurisdiction over private damage actions against the states for patent infringement. But four years later, in 1996, the Supreme Court, in the Seminole Tribe decision,⁽¹³⁾ had made clear its view that Congress lacks power to overcome state sovereign immunity when legislating under its Article I powers--its power, for example, to create a system of patent or copyright protection or to regulate commerce. However, the Court in Seminole Tribe did not disturb a line of authority holding that Congress, when it legislates under section 5 of the Fourteenth Amendment, does have power to overcome state sovereign immunity.⁽¹⁴⁾ Thus, when in 1999 the Court confronted, in the Florida Prepaid case, the question whether the Patent Remedy Act was constitutional, the answer to that question turned on whether that Act could be viewed as a measure that provided a remedy for deprivations of property without due process, and thus constituted a valid exercise of legislative authority under section 5.

To answer that question under the approach it had followed in City of Boerne v. Flores,⁽¹⁵⁾ the Court in Florida Prepaid began by considering the scope of the constitutional violations that the Patent Remedy Act could be understood to redress, and then asked whether the Act could be viewed as a congruent and proportional remedy for those violations. The majority answered that question in the negative, advancing two reasons why a state that infringes a private patent may not have deprived the patent holder of property without due process, and why the Patent Remedy Act therefore went beyond the scope of congressional power to pass legislation to enforce the Fourteenth Amendment.

First, the Court doubted that all patent infringements constitute deprivations within the meaning of the due process clause. Writing for the Court, the Chief Justice contrasted the Supreme Court's ruling in Daniels v. Williams⁽¹⁶⁾--which held that merely negligent action of state officials does not give rise to a deprivation within the meaning of the Due Process Clause--with the Patent Remedy Act, which authorizes infringement actions against the states even where the infringement was entirely inadvertent.⁽¹⁷⁾ The first defect, then, was that the Patent Remedy Act lacks a scienter requirement that the Due Process Clause has been held to contain.

The Court's second reason for finding the Patent Remedy Act to be overbroad--to create sanctions for state action that does not necessarily violate the Due Process Clause--is more technical and complicated. Relying on the doctrine of Parratt v. Taylor⁽¹⁸⁾ and Zinermon v. Burch,⁽¹⁹⁾ the Court held that a state's patent infringement, even if a deprivation, would not necessarily constitute a deprivation without due process. The Parratt and Zinermon decisions ruled that, at least in some circumstances, if a deprivation of liberty or property is random and unauthorized, the only process due is a meaningful post-deprivation remedy (for example, a tort action against the state). Thus, even if a state official has deprived a patent holder of property (by intentionally infringing the patent), there is no procedural due process violation unless the state fails to provide such a post-deprivation remedy. In view of this doctrine, the Court ruled in Florida Prepaid that the Patent Remedy Act, by authorizing a federal patent infringement remedy without regard to the existence of an adequate state post-deprivation remedy, extends to circumstances in which the state's infringement of a patent does not constitute a violation of the Fourteenth Amendment.

Much could be said about both of these aspects of the Court's reasoning.⁽²⁰⁾ For present purposes, the critical point is that the decision would seem to permit Congress to legislate under section 5 of the Fourteenth Amendment by enacting a more narrowly-drawn statute. Congress could provide a cause of action against states that intentionally deprive individuals of patents or other intellectual property rights in situations in which the state does not provide an adequate post-deprivation remedy. Under such a statute, when a state, through its agents, has intentionally infringed intellectual property rights, the injured party could either (a) sue the state or state officials⁽²¹⁾ in state court under the state's "adequate" post-deprivation remedy, or (b) where no such remedy exists, establish a constitutional violation and thus bring a federal court action against the state itself under the narrow statute I suggest.⁽²²⁾

Such an approach raises two obvious questions. First, how much would be lost to intellectual property holders under such a regime? This first question has two sub-parts. Sub-part one involves the restriction of federal remedies for damages against the state to cases of intentional violation. I do not know the terrain of intellectual property rights and governmental infringement thereof well enough to hazard a guess about what proportion of all infringements are "intentional,"⁽²³⁾ or whether such a restriction would lead to an increase in unintentional infringements. Moreover, the meaning of "intentional" may not be clear: if state officials know that they are photocopying copyrighted work but believe, erroneously, that the photocopying constitutes fair use, is that action intentional (because they surely intend the conduct and know that they have no permission from the copyright holder) or unintentional (because they do not know that the conduct is illegal)? I find the former, broader view of intentional far more persuasive. Indeed, in the Daniels case itself, the court seemed to be requiring only that the defendant, a prison official, have intended to cause harm by having left a pillow on a staircase; the Court did not appear to suggest that the Due Process Clause would also require a showing that the official knew that intentionally causing harm was a deprivation of liberty within the meaning of the Fourteenth Amendment.⁽²⁴⁾ But the Supreme Court's decisions do not clearly answer the question of just what "intentional" means in this context.⁽²⁵⁾

Sub-part two of the question focuses on the likelihood that the owner of an IP right would, under the proposed statute, end up in state court, and on how adequate state court remedies would be in practice. It would require careful inquiry to determine the extent to which the states today--despite a regime of federal law that has been understood both to preempt state protection for intellectual property rights⁽²⁶⁾ and to preclude the exercise of state court jurisdiction for suits arising under the patent and copyright laws⁽²⁷⁾--have causes of action that would provide damages for the deprivation of intellectual property rights.⁽²⁸⁾

(Of course, were Congress to enact a statute along the lines suggested, some states might create a new remedy so as to move themselves outside the reach of the suggested cause of action.) Moreover, it is far from clear just how robust a remedy must be for it to count as "adequate" or "meaningful" within the meaning of the Parratt/Zinermon line of cases. We do know that adequacy is a constitutional standard, and the Constitution does not require redress that is as generous as that provided by the existing federal intellectual property regimes.⁽²⁹⁾ Courts have tended to treat state remedies as adequate if they provide the opportunity for a hearing by a tribunal with authority to provide redress.⁽³⁰⁾ More specifically, remedies can be adequate even if, unlike the federal intellectual property laws, they provide no punitive damages⁽³¹⁾ or attorney's fees.⁽³²⁾ Moreover, a state remedy is evidently not inadequate merely because it confers some immunities on the defendants, at least if the immunities are no broader than the immunities recognized in constitutional tort actions under 42 U.S.C. § 1983.⁽³³⁾ The harder question, to which there is not a clear answer, is whether state remedies are inadequate if they recognize immunities that are significantly broader than those available in § 1983 actions. Some courts have upheld state remedies as adequate even when immunity doctrines seem to bar any prospect of monetary recovery from either the government or its officials;⁽³⁴⁾ other courts disagree.⁽³⁵⁾ Were the Supreme Court to take the former view, one can imagine that states might react to the federal statutes I have outlined by enacting limited post-deprivation remedies so as to confine litigation to their courts under a more restrictive remedial regime.

The second question raised by the suggested approach relates to the appropriate allocation of authority between the federal and state courts: what would be the likely results of this approach for the system of federal intellectual property litigation? Copyright and patent (but not trademark) regulation are among the relatively few areas in which federal subject matter jurisdiction is exclusive,⁽³⁶⁾ suggesting a strong interest in federal expertise and uniformity. And jurisdiction in patent cases in particular is virtually unique in consolidating all appeals of cases arising under the patent laws in a single court of appeals--the United States Court of Appeals for the Federal Circuit.⁽³⁷⁾ By contrast, were states to enact post-deprivation remedies that passed constitutional muster, presumably issues of patent and copyright law--for example, whether an intellectual property right was valid, and whether the allegedly infringing use was illegal--would have to be decided in the state courts, with only the tiniest likelihood of federal review by the United States Supreme Court.⁽³⁸⁾ To be sure, state courts do now occasionally decide issues of patent of copyright law; when those issues arise as defenses, or as counterclaims, they fall outside the grant of exclusive federal court jurisdiction. But these situations run counter to the general aspiration for federal uniformity and expertise; one would not welcome an expansion of the circumstances in which state courts must decide issues of federal intellectual property law.

One additional uncertainty must be addressed. The analysis so far has assumed the constitutionality of a statute that did nothing more than provide remedies for state conduct that is in fact unconstitutional. Whether that assumption is correct depends upon one's reading of Florida Prepaid and other recent Supreme Court decisions ruling that various federal statutes cannot be upheld as exercises of legislative power under section 5 of the Fourteenth Amendment.⁽³⁹⁾ In the course of so ruling, those decisions have pointed to the absence of evidence of widespread constitutional violations by the states as one reason for the statutes' invalidity.

I do not believe that these decisions should be read as holding that congressional action under section 5 that regulates unconstitutional conduct itself is valid only if there is a showing that such conduct is prevalent. For in each of the cases striking down a federal statute regulating the states, the enactment extended well beyond conduct that itself violated the Fourteenth Amendment. Where that is so, these recent decisions clearly require a strong showing of legislative need to reach beyond the regulation of core constitutional violations. Thus, while recognizing that in some instances section 5 does permit Congress to regulate conduct that is not itself unconstitutional, as a means of preventing or remedying constitutional violations, the Court has insisted that "`[t]here must be a congruence and proportionality between the [constitutional] injury to be prevented or remedied and the means adopted to that end. Lacking such a connection, legislation may become substantive in operation and effect.'"⁽⁴⁰⁾ And in the course of determining whether that test of congruence and proportionality has been satisfied, the Court has inquired whether there was a pattern of constitutional violations by the state that would be redressed by the statute in question.⁽⁴¹⁾

By contrast, the approach just discussed would tailor the statute so that it, unlike the statutes recently invalidated by the Court, extended only to instances of constitutional violations. Such a measure is more easily viewed as "remedial," and in my view the validity of a statute limited to regulating unconstitutional conduct itself should not require an additional showing of widespread violations by the states. Rather, I believe that examination of the record of state violations is significant only when a statute reaches well beyond the scope of constitutional violations.

This reading of the Supreme Court's jurisprudence under section 5 appears consistent with the reasoning of the Court's most recent decision in this line. In Kimel v. Florida Board of Regents,⁽⁴²⁾ the Court held unconstitutional Congress' effort to subject the states to liability under the Age Discrimination in Employment Act. In Kimel, after first opining that age discrimination rarely if ever is itself a violation of the Fourteenth Amendment, the Court added:

That the ADEA prohibits very little conduct likely to be held unconstitutional, while significant, does not alone provide the answer to our § 5 inquiry. Difficult and intractable problems often require powerful remedies, and we have never held that § 5 precludes Congress from enacting reasonably prophylactic legislation. Our task is to determine whether the ADEA is in fact just such an appropriate remedy or, instead, merely an attempt to substantively redefine the States' legal obligations with respect to age discrimination. One means by which we have made such a determination in the past is by examining the legislative record containing the reasons for Congress' action. . . .

Our examination of the ADEA's legislative record confirms that Congress' 1974 extension of the Act to the States was an unwarranted response to a perhaps inconsequential problem. Congress never identified any pattern of age discrimination by the States, much less any discrimination whatsoever that rose to the level of constitutional violation.⁽⁴³⁾

While I think the reading of the Court's section 5 jurisprudence is sound, there is no doubt that the opinions are capable of other readings. It surely would be advisable in any event for Congress to assemble the fullest record it can of instances in which state governments have violated federal IP laws and, beyond that, of instances in which those violations appear also to constitute violations of the Due Process Clause.

B. Rely on A Cause of Action Against State Officials

A second possibility--one that would require at most a minor amendment to existing intellectual property laws--would be to relegate intellectual property holders seeking past damages to suits against state officials. Without more, the resulting regime would be inadequate for plaintiffs, intolerable for state governments, and unfair to state officials.⁽⁴⁴⁾ But such a regime would pressure states to provide counsel for officials who are sued and to indemnify officials against whom judgments are rendered. Were indemnification universal and comprehensive, the resulting system would approximate direct governmental liability.⁽⁴⁵⁾ Indeed, some have viewed the existing regime for civil rights litigation under 42 U.S.C. § 1983 as following this approach in practice, for § 1983 does not authorize damage actions against the state as such⁽⁴⁶⁾ but does permit suits against state officials in their personal capacities, and many states provide officials with defense counsel and indemnification.

Yet it is too easy, in my view, to equate officer liability accompanied by indemnification with direct governmental liability.⁽⁴⁷⁾ To begin with, as noted earlier, there is some authority (at least under the copyright laws) that individual officials enjoy a qualified immunity from damages.⁽⁴⁸⁾ Even were Congress to amend the laws to make clear that qualified immunity was not to be conferred on state officials,⁽⁴⁹⁾ the resulting regime, as noted earlier, would require sometimes difficult and burdensome determinations of which official(s) should be held personally liable for illegal action. For that and a range of other reasons, juries may hesitate to award adequate damages against individual officers serving the public under often difficult conditions.⁽⁵⁰⁾

Moreover, indemnification, though generally thought to be widespread, is not universal: for example, some employees or agencies may (advertently or otherwise) be excluded; indemnification may be permissive rather than mandatory (though admittedly a routine practice of permissive indemnification may blunt any distinction); some states impose monetary limits on indemnification; and many indemnification provisions exclude conduct that is criminal, egregious, willful, or the like.⁽⁵¹⁾ Given these kinds of gaps, to shift damages liability from state governments to state officials would at a minimum have significant transition costs. And even with complete indemnification, officials nonetheless might well fear the entry of significant judgments against them personally.⁽⁵²⁾

Finally, even universal indemnification may not be equivalent to governmental liability. In cases that involve very large damages, the judgment may exceed the individual officer's net worth. It is unclear that every state with an indemnification policy would simply write a a check for the judgment amount directly to the plaintiff. Though some state indemnification laws would appear to authorize that result, other states seem to provide that a government's obligation to indemnify does not mature at the time that a judgment is entered against the officer but only when the officer-indemnitee has sustained a loss by actual payment of the judgment.⁽⁵³⁾

To be sure, if federal law were amended to rely exclusively on official liability and clearly to deny officials any qualified immunity, states would be under considerable pressure to expand the scope of their indemnification provisions. That kind of federal pressure, however, even if it were to provide an adequate substitute for governmental liability, hardly constitutes a blow for harmonious federalism.⁽⁵⁴⁾

C. Suit by the United States

There is a third possible mechanism by which Congress might seek to close the remedial gap: Congress could authorize suit by the United States on behalf of the victims of state violations of federal IP laws, with the proceeds of such actions to be paid over to the victims. It is well established that states have no immunity from suit by the United States.⁽⁵⁵⁾ It appears equally well established that Congress may authorize the United States to bring suit to enforce federal law, whether or not the United States claims a proprietary interest in the outcome.⁽⁵⁶⁾ It thus appears that Congress may authorize not only suit by the United States but also the payment of any fine or other money judgment collected to the injured parties--in this case, to intellectual property holders. This approach has been followed under the Fair Labor Standards Act;⁽⁵⁷⁾ there, the Department of Labor is authorized to sue employers for damages and in turn to pay the recoveries over to the employees whose rights were violated.⁽⁵⁸⁾

To be sure, there has never been a square holding from the Supreme Court upholding this last technique, as against constitutional challenge, in a suit against a state, and one cannot be sure just where the current Court's assertiveness in protecting its vision of constitutional federalism might next lead. Still, although in this fast-moving area one's judgments must be somewhat tentative, I believe that Congress could, if it wished, authorize a federal agency--whether the patent and trademark office, the Department of Justice, or some new institution--to sue a state for infringement of intellectual property rights, with any monetary judgment to be paid over to the intellectual property holder.

This would, of course, be a significant shift in enforcement technique. And one might well doubt (absent the idiosyncracies of Eleventh Amendment doctrine) that the fact that a violator of federal law is a state agency necessarily provides a reason for public enforcement. If a university has infringed a patent, it is hard to see why the appropriate enforcement strategy should differ if the violator is the University of Massachusetts (a state school) rather than Boston University (a private one). Indeed, Congress may reasonably doubt that federal governmental resources are wisely used to pursue litigation against state agencies when a private rightholder's interest is great but the public interest may be small. Moreover, such a technique, to be effective, would require that the new agency be adequately funded and that the funding continue year after year. Despite these disadvantages, when the Supreme Court has precluded private damage actions against the state by intellectual property holders themselves, this approach remains a second-best solution that appears to be constitutionally permissible.

D. Waiver Schemes

A final possible set of approaches involves federal legislation conditioning the dispensation of a federal benefit on a state's waiver of immunity. The Supreme Court has recognized broad power under the spending clause for Congress to impose conditions upon its award of one kind of federal benefit--federal funds. In South Dakota v. Dole,⁽⁵⁹⁾ the Court held that Congress could condition the availability of a portion of federal highway funds on a state's raising the drinking age to 21.⁽⁶⁰⁾ That was a striking holding for a number of reasons. First, viewing the 21st Amendment as at least potentially a guarantee of state autonomy, the Court assumed that Congress could not directly and unconditionally legislate to raise the drinking age. Yet the Court held that Congress, through its use of the conditional spending power, could do indirectly that which, arguendo, it could not constitutionally do directly. Second, the condition that it imposed on federal spending was one that required the states to enact legislation in order to qualify for the federal funds. In view of the Court's subsequent decision that Congress may not unconditionally command states to enact legislation,⁽⁶¹⁾ and because the enactment of legislation is often considered the core of governmental authority, even conditional pressure to enact legislation might have been viewed as problematic. In these respects, Dole is a broad decision.

The Dole opinion, though upholding the program in question, suggested in its discussion that the spending power is limited.⁽⁶²⁾ The Court indicated that for a conditional spending measure to be constitutional, (i) the spending must be in pursuit of the general welfare,⁽⁶³⁾ (ii) the condition imposed on the acceptance of the funds must be expressed unambiguously,⁽⁶⁴⁾ and (iii) the condition must not be independently unconstitutional--that is, Congress may not induce the states to engage in activities (for example, racial discrimination) that would be unconstitutional if undertaken by the states entirely on their own.⁽⁶⁵⁾ Ordinarily, a well-drafted statute will not run afoul of these limitations.

Dole suggests two other limits that may pose greater difficulties. First, Dole notes prior decisions recognizing that inducement may be so coercive as to pass the point at which pressure turns into compulsion.⁽⁶⁶⁾ The Court stressed that on the facts before it, the state would lose only a small percentage of its highway funds--5%--if it did not raise the drinking age, and thus the decision whether to do so remained a state prerogative in fact as well as in theory.⁽⁶⁷⁾ Second, Dole suggests a relatedness requirement--that there must be a sufficiently tight relationship between the condition and the purpose of the spending.⁽⁶⁸⁾

The Supreme Court's 1999 College Savings Bank decision⁽⁶⁹⁾ had some discussion that bears on these last two limitations. There, the Court ruled that Congress lacked power to subject the state of Florida to suit under the Lanham Act for false and misleading advertising. In so holding, the Court rejected the argument that the state had waived its immunity by engaging in activity with the knowledge that federal legislation purported to regulate a state voluntarily engaging in that activity. In rejecting that waiver argument, the Court distinguished two decisions suggesting that Congress may exact a waiver from the states--one of which was Dole.⁽⁷⁰⁾ The basis for distinction was that in spending cases like Dole, Congress was dispensing a gratuity, and in distributing gratuities to a state, Congress may condition them on the state's waiver of immunity. In College Savings Bank, by contrast, what Congress threatened if the state refused to agree to the federal condition was not a gratuity but a sanction--exclusion of the state from otherwise permissible activity. When that is so, the point of impermissible coercion is automatically passed.

With that background, Congress might consider either of two techniques to induce states to waive their immunity from private suit under the IP laws.

1. Conditional Spending

It would appear that Congress could provide that any state agency that receives federal funding--whether for highway construction, education, job training or university research--must agree, as a condition of receiving that funding, to waive immunity from suit under federal intellectual property laws. Congress could say, that is, that it does not want federal funds being used to infringe intellectual property rights and that to promote that objective, it conditions its grant of funding on the agency's waiver of immunity. Indeed, the connection on these facts between the use of the funds and the condition seems to me a tighter one than the connection that was upheld in Dole.

Still, one cannot be sure that such a scheme is constitutionally home free. For one must confront the question whether the price of non-compliance with the condition--loss of federal funds--is so burdensome as to constitute prohibited "coercion." The Court has yet to strike down a program of conditional spending on that basis. And as Justice Cardozo noted in Steward Machine v. Davis⁽⁷¹⁾ some 63 years ago and as commentators have elaborated in more detail,⁽⁷²⁾ efforts to distinguish coercion from temptation are likely doomed to failure. The difficulties of giving content to this concept in the abstract are matched by the lack of guidance from the case law. I know of no standing federal decision since Dole that has invalidated a law on this ground.⁽⁷³⁾ But as noted in the margin, there is some ferment in some courts of appeals. And the Supreme Court, were it to seek to limit the Dole decision, could rely on the fact that there the state faced a loss of only 5% of the highway funds in question (despite any convincing reason why the loss of 5% of a $100 million grant should be viewed as less coercive than the loss of 100% of a $5 million grant).⁽⁷⁴⁾ As the law now stands, I do not think the coercion limitation poses an obstacle to this approach, but the law in this area may well not be standing still.

Assuming that the coercion limitation does not pose an obstacle, the effectiveness of such an approach depends upon the interaction of two factors. The first factor is the scope of a waiver that can be attached to any particular federal spending program--an aspect of the "relatedness" requirement. A state might argue that Congress may not condition funding for a particular program on a state agency's waiver of immunity from suit as to "unrelated" programs that are operated by that same agency but that receive no federal funding. On this question of relatedness, Dole said only that "our cases have suggested (without significant elaboration) that conditions on federal grants might be illegitimate if they are unrelated 'to the federal interest in particular national projects or programs.'"⁽⁷⁵⁾ However, in practice the Court's application in Dole of any relatedness criterion was quite relaxed;⁽⁷⁶⁾ moreover, many doubt the normative significance of the criterion in any event;⁽⁷⁷⁾ and there is little case law from the lower courts indicating when a relatedness requirement might have bite.⁽⁷⁸⁾ I find persuasive the following argument that Congress may condition funds on a waiver by the entire state agency receiving the funding: Congress does not want federal funds contributing to the infringement of IP rights, and since federal funding for one program frees up money for other programs that the agency operates, Congress has a legitimate interest in conditioning its funding on a waiver by the agency as to all of its operations. And Congress has already in effect acted on the basis of this argument in attaching other conditions to the expenditure of federal funds, providing that conditions prohibiting various forms of discrimination govern not just the particular program receiving federal funding but the entire agency within which that program is located.⁽⁷⁹⁾

The second factor affecting the effectiveness of such an approach raises a factual rather than a legal question: how many state programs or agencies in fact receive federal funding? I assume that most agencies in most states do receive federal funds and could therefore, under this approach, be put to the choice of waiving immunity or forgoing federal funding. That question, however, requires more detailed study.

Quite apart from legal objectives, there may be practical questions concerning this approach along a different dimension. Different agencies of the states receive funds under a very large number of authorization provisions. Though no expert in internal congressional procedure, I can think of two ways that imposition of the condition might be accomplished, either one of which might require navigating some difficult jurisdictional shoals in Congress. Congress could write the condition into every piece of legislation now on the books that authorizes federal funding of state programs (and every future such measure). That would, of course, be a major effort that, under current arrangements, would require the participation of a very large number of separate committees of the House and Senate. Alternatively, if the rival claims to jurisdiction of various committees could be resolved, Congress could pass a single statute requiring that states waive their immunity from suit with respect to any program or activity that obtains federal funding. Global conditions on all federal spending are not unprecedented; two important civil rights statutes make non-discrimination a condition applicable to receipt by states (and others) of any federal funding.⁽⁸⁰⁾

If the jurisdictional problems within the Congress can be surmounted, this second, global approach to waiver strikes me as the better one for Congress to follow. Dole, to be sure, could be limited by subsequent Supreme Court decisions, but based on the law as it now stands, this approach seems to me constitutionally sound and likely to lead to reasonably plenary remediation against the states.

2. Conditional Extension of Intellectual Property Rights

a. The Basic Approach

A different approach would condition not federal funding, but rather the conferral on the states of new intellectual property rights, on a state's waiver of immunity from suit under IP regimes. The argument supporting this technique would go as follows: (a) Congress need not create intellectual property rights; (b) thus, from the states' standpoint, the property rights they enjoy under federal IP schemes are gratuities; (c) in dispensing those gratuities, Congress may condition them on a state's waiving immunity; (d) and, therefore, Congress may provide that a state cannot obtain new IP rights unless it agrees to waive immunity from suit under federal IP schemes.

It is, candidly, difficult to assess the constitutionality of such an approach. While I have considerable sympathy for it, it also raises a set of difficult questions:

(i) Are intellectual property rights really a gratuity? As is typically the case, the answer to that question depends on the baseline against which one measures. Looking only at the Constitution, which by itself does not confer intellectual property rights, one could say that whatever Congress has chosen to confer since 1789 must be a gratuity. But two centuries after the Founding, there are regimes of federal IP rights for which states have long been eligible to apply, and against that baseline of state eligibility, new legislation that threatens to make those rights unavailable to states in the future could be viewed not as a gratuity but as a prohibited sanction. I do not favor the second view, but cannot rule it out.⁽⁸¹⁾

(ii) Even if IP rights are a gratuity, one might object that legislation like that just sketched would unconstitutionally condition eligibility for that gratuity on waiver of a state's constitutional immunity from suit. That argument, of course, was made and rejected in Dole. And as a general matter, just when the doctrine of unconstitutional conditions will be applied is hardly crystal clear.⁽⁸²⁾ But it would have been entirely logical for the Court to have held in Dole--as Justice Brennan argued in his dissent--that states have a constitutional right (so the Court assumed) under the Twenty-First amendment to regulate the drinking age free of congressional interference, and that Congress may not condition federal funding on a state's yielding that constitutional right. The Court might have so ruled, but it did not.

Nonetheless, the Court's growing commitment to state sovereign immunity creates uncertainty whether Dole, though it was a 7-2 decision, may be regarded as a fixed landmark. Moreover, even without overruling Dole, the Court might decide that the spending power differs in nature from, for example, Congress' legislative authority under the Inventions Clause. Spending, the Court could say, by its nature cannot be effectively exercised without the imposition of conditions on what federal funds are spent for; moreover, Congress equally has an interest in what funds are not spent for--that is, in prohibiting their use for purposes deemed by Congress to be contrary to the general welfare. Those points might be thought to distinguish conditional grants from conditional conferral of IP rights.⁽⁸³⁾

(iii) States could raise the objection that the condition imposed on the grant was not related to the gratuity being awarded. For reasons similar to those discussed with regard to conditional spending, I do not find this objection persuasive, at least as to a statute that limits its reach to waivers of immunity by the particular state agency that applies for IP rights. Suppose, however, that Congress provided that in order to obtain any new patents, the entire state must waive immunity from patent infringement lawsuits--so that in order, for example, for the biology department of a state university to obtain a new patent, the state would first have to provide a general waiver of immunity from suit under the patent laws--which would then permit suit against the state highway department for infringement of a patent relating to the use of concrete. Is requiring a waiver that extends to the entire state government sufficiently related to the national objective of the patent program--the equitable and efficient enforcement of the patent laws?

One purpose of such legislation would be to create a level playing field, and to require states to accept the burdens as well as the benefits of the patent system. Support for the proposition that a waiver based on that purpose is valid may be found in federal decisions. In Gardner v. New Jersey,⁽⁸⁴⁾ the Supreme Court held that a state that "invokes the aid of the bankruptcy court by offering a proof of claim and demanding its allowance must abide the consequences of that procedure"⁽⁸⁵⁾--in that case, to be deemed to have waived any immunity from adjudication by the federal bankruptcy court of objections to the state's claims. And the Court specifically noted that it was the affirmative act of filing a claim that waived immunity, adding that it would be unfair to subject claims by states to lesser scrutiny than claims by other creditors.⁽⁸⁶⁾

For similar reasons, when a state government files suit in federal court, it is generally deemed to have consented to suit on counterclaims; as the Court of Appeals for the Fourth Circuit recently stated, "it would violate the fundamental fairness of judicial process to allow a state to proceed in federal court and at the same time strip the defendant of valid defenses because they might be construed to be affirmative claims against the state."⁽⁸⁷⁾ At the same time, most lower courts have not extended this waiver doctrine to counterclaims against a state that are not transactionally related, or that seek not merely setoff or recoupment but rather an affirmative recovery.⁽⁸⁸⁾ The Supreme Court has not yet squarely ruled on the scope of any waiver effected by a state's availing itself of federal jurisdiction. But if the limits recognized by the lower court decisions prevail, then perhaps a state's availing itself of federal intellectual property rights relating to biological discoveries is not a valid basis for exacting a general waiver of immunity from suit on unrelated matters.

One should also note that the College Savings Bank decision, which held that Congress may not overcome state immunity from suit by a private party under the false advertising provisions of the Lanham Act, contains some language that could be viewed as casting doubt on the force of the level playing field justification. In College Savings Bank, in rejecting the argument that a state, when it acts in a proprietary capacity, can be subjected to federal regulation of the market on the same basis as other market participants, the Supreme Court declared: "In the sovereign immunity context, . . . '[e]venhandedness between individuals and States is not to be expected.'"⁽⁸⁹⁾ To be sure, that statement was made in the course of rejecting the argument that Congress could unconditionally impose evenhandedness, whereas the waiver scheme would aspire to evenhandedness only if a state first sought future patents; indeed, the College Savings Bank decision expressly re-affirmed the Gardner decision.⁽⁹⁰⁾

Nonetheless, College Savings Bank raises a question about how receptive the Supreme Court would be to a very broad conception of leveling the playing field as a justification for future legislation.

If, however, Congress could validly enact the scheme just described, could Congress go one step further, requiring that in order to obtain a patent, a state agency must waive immunity from suit under not only the patent but also the copyright and trademark laws? I can understand why this kind of linkage may be important practically, for in many cases states may care most about obtaining one set of IP rights (for example, patents for research applications) while the likelihood of infringement by the states may be the greatest as to a different set of rights (for example, copyrights). Still, even without clear markers for application of the relatedness criterion, the broader waiver seems to me to run a serious risk of invalidation. (Indeed, if Congress can go that that far, why could not it go further, conditioning the award of federal dollars, or federal patents, on waiver by the state of immunity from suit under all federal statutes?)

(iv) A distinct but related question about the waiver scheme is whether the condition imposed on the award of new IP rights is so burdensome as to constitute prohibited coercion. I noted earlier the absence of legal markers outlining the scope of any such limitation. However, it seems doubtful to me that a threat to withhold new patent rights unless a state agency waives its immunity from patent infringement actions is more coercive than is withholding large amounts of federal funds.⁽⁹¹⁾ The only basis for viewing the withholding of IP rights as more coercive would be that the federal government has a monopoly on creating IP rights but not on generating funds for state spending. The argument is not persuasive, though, if, as I suspect, the economic value to the states of federal spending dwarfs that of any IP rights the states may acquire; in that case, it would be far more coercive to threaten to withdraw the former than the latter.

(v) A waiver scheme could run into an objection that it is constitutionally unsound because it is directed only at the states, rather than being a general regulation equally applicable to state and private actors. Some recent Supreme Court decisions could be read to support the proposition that a law enacted under Article I that regulates only the states and not private actors may, without more, be unconstitutional.⁽⁹²⁾ No Supreme Court decision so holds, however. Moreover, one can ask whether a law requiring waiver of immunity does regulate only the states, or instead is part of an overall scheme of IP regulation that demands something of all actors--that they take whatever action is necessary to ensure that they are fully subject to suit for damages. Finally, even if a requirement of general applicability exists, it would be hard to apply it in this context; a statute requiring that private actors, like states, waive sovereign immunity, when the private actors possess no such immunity, would simply make no sense.

(vi) A last point, more general in nature, must be raised. Commentators have suggested that the Supreme Court's federalism and sovereign immunity decisions exhibit both a disregard if not contempt for Congress and a willingness to strike down legislative approaches that the Court perceives to be an end run around sovereign immunity.⁽⁹³⁾ Insofar as those impulses animate the Court's recent decisions, one must be more pessimistic about the prospects that a statute along the lines noted above would survive the scrutiny of the Court's current majority. In this connection, it may be worth noting that the federal government has been unwilling to subject itself to the full range of liability for patent infringement faced by private actors. The government is not liable for treble damages for willful infringement, and the availability of statutory damages is more limited than it is against other defendants.⁽⁹⁴⁾ That fact, though not necessarily of constitutional significance, might contribute to skepticism among members of the Court about efforts to use federal power to subject states to the full range of remedies for violations of IP laws.

b. Alternative Waiver Techniques

Were Congress to require a state to waive its immunity in order to qualify for new IP rights, it might follow two different approaches. What I will call the "state legislation approach" would require a state to enact a statute waiving its immunity in federal IP cases as a condition of obtaining any new federal IP rights; absent such an enactment, no new rights would be awarded.⁽⁹⁵⁾ An alternative, which I will call "the affirmative declaration approach," would instead require every application for a federal IP right affirmatively to indicate whether it is being sought on behalf of a state entity and, if it is, to include a certification (perhaps by the Attorney General or his designee) that the state will not assert immunity if sued for infringement under that statutory scheme.

The affirmative declaration approach has some obvious attractions--perhaps most importantly, it may be far easier in practice for Attorneys General or their designees to check a box on a form than it is to get legislation enacted. However, there is a serious legal question about whether the affirmative declaration approach would be effective. Longstanding authority declares that a waiver of immunity by a state official is valid only if that official is authorized under state law to waive immunity on behalf on the state. Thus, in Ford Motor Co. v. Department of Treasury of Indiana,⁽⁹⁶⁾ Ford had sued the state in federal court for a tax refund. The Supreme Court noted in its opinion that the state conceded that "if it is within the power of the administrative and executive officers of Indiana to waive the state's immunity, they have done so in this proceeding."⁽⁹⁷⁾ But the Court added that the question of who has power to sue is governed by state law, and looking to Indiana law, the Court determined that though the Attorney General was authorized to litigate, he was not authorized to waive Indiana's immunity from suit.⁽⁹⁸⁾ The underlying presumption seems to be that ordinarily waiver must be effected either by the legislature or by a person whom the legislature has authorized to waive.

The history of the Ford Motor approach, however, is uneven, for some cases have recognized the validity of a waiver by a state official without inquiring whether that official was authorized by state law to waive the state's immunity. For example, a number of lower federal courts have routinely found that states have waived their sovereign immunity by accepting federal funds whose award is unambiguously conditioned on waiver--without bothering to inquire whether the particular state official responsible for obtaining the funds was authorized under state law to waive immunity.⁽⁹⁹⁾ On the other hand, a long line of cases in a different context does look to state law: in determining whether a state Attorney General's decision to remove a state court action to federal court constitutes a waiver of 11th Amendment immunity from federal court suit, these decisions have inquired whether state law authorized the Attorney General to waive immunity.⁽¹⁰⁰⁾