November 2020

Google It: Justice Department Files Antitrust Case Against Google

November 21, 2020
Antitrust, Internet, Litigation

Amanda Erickson, MJLST Staffer

Technology giants, such as Google, have the ability to influence the data and information that flows through our day to day lives by tailoring what each user sees on its platform. Big Tech companies have been under scrutiny for years, but they continue to become more powerful and have access to more user data even as the global economy tanks. As Google’s influence broadens, the concern over monopolization of the market grows. This concern peaked on October 20, 2020 when the Justice Department filed an antitrust lawsuit against Google for abusing its dominance in general search services, search advertising, and general search text advertising markets through anticompetitive and exclusionary practices.

The Department of Justice, along with eleven state attorney generals, raised three claims in their lawsuit, all of which are under Section 2 of the Sherman Antitrust Act. The Department of Justice claims that, because of Google’s contracts with companies like Apple and Samsung, and its multiple products and services, such as search, video, photo, map, and email, competitors in search will not stand a chance. The complaint is rather broad, but it details the cause of action well, even including several graphs and figures for additional support. For instance, the complaint states Google has a market value of $1 trillion and annual revenue that exceeds $160 billion. This allows Google to pay “billions of dollars each year to distributors . . . to secure default status for its general search engine.” Actions like these have the potential to curb competitive action and harm consumers according to the government.

The complaint states that “between its exclusionary contracts and owned-and-operated properties, Google effectively owns or controls search distribution channels accounting for roughly 80 percent of the general search queries in the United States.” It further mentions that “Google” is not only a noun meaning the company, but a verb that is now used when talking about general searches on the internet. It has become a common practice for people to say, “Google it,” even if they complete an internet search with a different search engine. If Google is considered to be a monopoly, who is harmed by Google’s market power? The complaint addresses the harm to both advertisers and consumers. Advertisers have very little choice but to pay the fee to Google’s search advertising and general search text monopolies and consumers are forced to accept all of Google’s policies, including privacy, security and use of personal data policies. This is also a barrier to entry for new companies emerging into the market that are struggling to gain market share.

Google claims that it is not dominant in the industry, but rather just the preferred platform by users. Google argues that its competitors are simply a click away and Google users are free to switch to other search engines if they prefer. Google points out that its deals with companies such as Apple and Microsoft are completely legal deals and these deals only violate antitrust law if they exclude competition. Since switching to another search engine is only a few clicks away, Google claims it is not excluding competition. As for Google’s next steps, it is “confident that a court will conclude that this suit doesn’t square with either the facts or the law” and it will “remain focused on delivering the free services that help Americans every day.”

Antitrust laws are in place to protect the free market economy and to allow competitive practices. Attorney General William Barr stated “[t]oday, millions of Americans rely on the Internet and online platforms for their daily lives. Competition in this industry is vitally important, which is why today’s challenge against Google—the gatekeeper of the Internet—for violating antitrust laws is a monumental case.” This is just the beginning of a potentially historic case as it aims to protect competition and innovation in the technology markets. Consumers should consider the impacts of their daily searches and the implications a monopoly could have on the future structure of internet searching.

The Future of Software Industry Is at Stake—An Interview With Professor Thomas F. Cotter of University of Minnesota Law on the Supreme Court Case Google v. Oracle

November 21, 2020
Copyrights, Intellectual Property

Mengmeng Du, MJLST Staffer

Background

In the United States, intellectual property rights in computer software receive protection from copyright law. In 1980, Congress amended 17 U.S.C. § 101 to add software to the subject matters of copyright. Section 101 defines “computer program” as “a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result.” At the same time, Congress added in § 117 exemption of infringement liability under certain circumstances such as when a user installs and runs the software or makes backup copies of the software.

With these seemingly clear definitions, the debate over the extent of the copyrightability of computer software, however, has not abated in the following decades. In Apple Computer, Inc. v. Franklin Computer Corp., 714 F.2d 1240 (3d Cir. 1983), the Third Circuit was asked to determine whether literal copying of computer program object codes constitutes copyright infringement. The Third Circuit ruled that object codes are copyrightable and thus literal copying of such infringes the copyright. In Whelan Ass’n, Inc. v. Jaslow Dental Lab., Inc., 797 F.2d 1222 (3d Cir. 1986) and Computer Ass’n Int’l v. Altai, Inc., 982 F.2d 693 (2d Cir. 1992), the Third and Second Circuit faced the problem of where to draw the line for finding infringement when the copying of software at issue is non-literal. While the Third Circuit would find almost anything below the “purpose of the program” copyrightable, the Second Circuit later developed its more rigorous but more popular “abstraction-filtration-comparison” test, which would yield less copyright protection for non-literal components of computer software.

In 1996, the Supreme Court had a chance to further define the boundary for finding copyright protection in software but missed it. In Lotus Dev. Corp. v. Borland Int’l, Inc., 516 U.S. 233 (1996), the copyrightability of the Lotus menu command hierarchy was questioned. The First Circuit ruled found it an uncopyrightable method of operation by comparing the Lotus menu command hierarchy to the arrangement of buttons on a VCR [see Lotus Dev. Corp. v. Borland Int’l, Inc., 49 F.3d 807 (1st Cir. 1995)]. Lotus petitioned to the U.S. Supreme Court. Due to an even split court with Justice Stevens recusing, the Supreme Court affirmed the First Circuit’s judgment in a per curiam opinion without discussion on the reasoning.

Google v. Oracle

Finally, there is, again, hope to resolve the extent of computer software copyrightability. The Supreme Court granted certiorari to review the decision in Oracle America, Inc., v. Google LLC, 886 F.3d 1179 (Fed. Cir. 2018) on November 15, 2019. In this case, Oracle sued Google for copyright infringement for copying its Java Application Programing Interfaces (APIs) when developing Google’s Android platform. The two parties vehemently debated the copyrightability of the Java APIs and whether the fair use doctrine applies to exempt Google’s use of the declaring code and “structure, sequence, and organization” (SSO) of 37 Java APIs. The Federal Circuit eventually sided with Oracle, finding first in 2014 that the declaring code and SSO of Java APIs are copyrightable (Oracle America, Inc., v. Google LLC, 750 F.3d 1179 (Fed. Cir. 2014)) and then in 2018 that Google’s use is not a fair use (Oracle America, Inc., v. Google LLC, 886 F.3d 1179 (Fed. Cir. 2018)). Google successfully petitioned to the U.S. Supreme Court on its second try. The Supreme Court heard oral arguments from Google, Oracle, and Deputy Solicitor General Malcom Stewart on October 7, 2020.

Professor Thomas F. Cotter

Professor Cotter joined the University of Minnesota Law School faculty in 2006 and is Taft Stettinius & Hollister Professor of Law. With a background in economics and law, Professor Cotter’s principal research interests are in the field of intellectual property law, antitrust, and law and economics. He teaches a variety of intellectual property law courses, including patents, copyright, antitrust, international intellectual property, and patent remedies. For further information, please see his law school profile.

This semester, I attended Professor Cotter’s copyright course, where we studied the Federal Circuit’s decisions in Oracle v. Google. Professor Cotter encouraged the class to listen to the Supreme Court hearing for the now Google v. Oracle case on October 7.

To better understand the law and logic behind Google v. Oracle, I invited Professor Cotter to conduct this blog interview.

The Interview

Q: It is notable that after Federal Circuit’s decision in 2014, Google petitioned to the Supreme Court for the first time but was denied. What do you think is the main reason that the Supreme Court decided to grant cert at this time? Does it have something to do with the “ripeness” in this case, i.e., receiving a final judgement?

A: Like you have suggested, the Supreme Court might have wanted to see what would happen on the fair use issue. Other than that, it is hard to know why the Supreme Court denied cert. It seems like there are a lot of important issues, but often the Supreme Court wants to let them continue to percolate through the lower courts before chiming in, so it can be hard to guess sometimes.

Q: The Supreme Court justices raised a lot of questions during the oral argument. Which one is your favorite question, and why?

A: I’m not sure if I have a favorite question as such, but there were some questions I thought were more getting into the heart of the issue than others.

For example, at pages 80-81 of the transcript, Justice Kavanaugh’s questions to the Deputy Solicitor General Malcom Stewart. These were the two of the more perceptive questions in the entire oral argument. Question number one is on the merger doctrine. Justice Kavanaugh said: “First, Google says in its reply brief that the dispositive undisputed fact in this case is that the declarations could not be written in any other way and still properly respond to the calls used by Java programmers. Are they wrong in saying that?” I think that is a very important question. Justice Kavanaugh then followed that up with a second question on page 81: “And the method of operation, Google says that the declarations are a method of operation because they are for the developers to use, while the implementing code instructs the computer. Your response to that?” I think those are the fundamental questions of the case.

Generally speaking, I would say that I think the better questions were those searching for some kind of analogy, whether it is the QWERTY keyboard or whatever else. But analogies only go so far. Computer software is a thing unto itself. Maybe there is no precise analogy. But you do the best to try to draw inferences from something that is more familiar.

Q: Justice Sotomayor and Oracle disagreed as to whether the precedents have held that there is a distinction between declaring and implementing codes for copyright purpose, whether the precedents have held APIs are not copyrightable, and accordingly, what assumptions the software industry has built on for years. How would you read the precedents?

A: Yes. Particularly precedents from the Ninth Circuit on the question of whether APIs are copyrightable.

I tend to agree with Justice Sotomayor that in these two Ninth Circuit cases in particular— Sega v. Accolade [see Sega Enterprises Ltd. v. Accolade, Inc., 977 F.2d 1510 (9th Cir. 1992)] and Sony v. Connectix [see Sony Computer Entertainment, Inc. v. Connectix Corp., 203 F.3d 596 (9th Cir. 2000)]—those were both cases in which the defendants copied software for the purpose of extracting interface specifications that would enable the defendants to create a compatible program, and Ninth Circuit in both cases held that was a fair use.

The response by Oracle’s counsel was to say among other things that those are fair-use cases and are not going to the fundamental issue of whether the interfaces themselves are copyrightable. But I would say many people have read those cases as premised on the belief that interfaces themselves are not copyrightable and that’s why you can copy the software in its entirety for the purpose of extracting interfaces so as to use them to make compatible programs. So many people would read those cases as standing for the proposition that interfaces are not copyrightable to the extent that they are necessary to enable others to make compatible systems and programs.

So, I’m inclined to think that Justice Sotomayor had the better argument that in construing those cases. But again, they are Ninth Circuit cases and not binding on the decision of the Supreme Court.

Q: So . . . interfaces are not copyrightable is what the industry has understood for years?

A: I think that’s largely true. But I am not an industry insider. There are different opinions depending on who you talk to about whether there is an expectation that someone would pay a license fee to use interfaces, APIs, and the declaring code in particular. There are some instances where companies have paid for that. But my understanding, based on what I have read from the amicus briefs filed in this case, commentaries on it and so on, is that more people are of the view that declaring code was not copyrightable, or at least it was industry custom that you can go ahead and copy it to make a compatible program. Again, not everybody will agree on that, and I am not an insider in the industry. So please take whatever I said with a grain of salt. But based on what I saw, I think that is the dominant view.

Q: I talked to friends in the industry. According to some of them, Google could have developed its own declaring codes or APIs, or paid a “moderate” license fee to Oracle to use the Java SE. But Google chose not to.

A: That’s Oracle’s view, and the view of some commentators and people in the industry.

Here is how I would think of it: there are two viewpoints, and ultimately it comes down to which of the viewpoints the Supreme Court finds more persuasive.

On one hand, Oracle is saying: “You can’t copy our declaring code to make a rival platform. If you want to do that, you would have to ask us and pay us if we can reach an agreement. But you can’t just copy our declaring code to make a rival platform.” This sounds intuitively correct.

But on the other hand, Google comes back and says: “You Oracle cannot use your copyright to inhibit us from creating a rival platform. That would be analogous to Baker v. Selden [see Baker v. Selden, 101 U.S. 99 (1879)], where the attempt was made to leverage copyright to control over an uncopyrightable thing.” So basically, Google is saying that you can’t use your copyright to inhibit others from creating a competing product, as that would be undermining the purpose of copyright and extending copyright to some other endeavors or fields.

In response to that, Oracle says: “But if we can’t assert copyright in our declaring code, the incentive to innovate diminishes. The whole purpose of copyright is to provide that incentive.” I also have long been of the view that many people at least intuitively, rightly or wrongly, feel that if they invest their labor and personality in something, they have some moral entitlement to it, even though you could debate the philosophical issues and how persuasive this really is.

In response to the argument that copyright in declaring code is necessary to validate the incentive to create, Google argues that if the declaring code is copyrightable, then the incentive for people like us to innovate is diminished, because negotiating and paying for the declaring code would give Oracle some control over our creation of the rival platform. This is analogous to the case in Sony v. Universal City Studios [see Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417 (1984)], where if Sony had lost on the contributory infringement theory, the movie industry would have gained some control over how VCRs and other copying technologies would evolve. Google is also making a point here that were they to develop different declaring codes, it would put their rival platform at a disadvantage since people who are already familiar with the Java declarations would be less likely to use it if they need to learn all these new ones.

That’s where the analogy was made with the QWERTY keyboard. It’s also related to what economists call “network effects”—the value of certain things increases in proportion to the number of other people who are using them. My use of a telephone is negligible if I am the only person in the world who has one. But once more people come onto the network, the value to me of the telephone increases. Similar with the QWERTY keyboard, the network effect provides that if there is one single design in the world, the value of it is much greater and it becomes very difficult for any rival keyboard to ever maintain a position in the marketplace—no one wants to adopt it, even if in theory it is better.

Google would make similar arguments here as well—once people are familiar with the Java declarations, they will be less motivated to learn a new set of declarations to implement the new platform. Therefore, either Google pays for the existing declaration code or makes their own, it diminishes the incentive on Google to develop the rival platform, which enables interoperability for a wide variety of phones and apps.

Thinking beyond this case, if the copyright owners generally have the ability to exert control on declaring codes, maybe that will have the long-term effect of inhibiting innovation and interoperability from which the consumers benefit.

In summary, ultimately, it comes down to which side the Court thinks has the most persuasive arguments.

Q: There is one interesting fact that some people noticed—if you look at how Java originated, Sun actually created Java to break the monopoly of Microsoft. Had Google developed its own declaring codes, it could have ended up with achieving some technology breakthroughs just like Java. Could that be a potential argument to rebut Google’s position regarding inhibition of incentives?

A: Maybe. Network effects are not always insurmountable. Sometimes you might come up with a better product that ultimately does replace the earlier one. Then again, maybe not. People who support Google’s position are concerned that copyright owners having the ability to control the use of declaring code or APIs more generally would ultimately lead to what is called “walled gardens,” which refers to proprietary systems as opposed to open-source systems that enable greater interoperability.

Q: I recall that it was mentioned several times in our copyright law and patents class that it is hard to prove the effects on incentive by evidence. Is it correct to say that is also the case here?

A: Yes, it is. There are a few empirical studies on patent law, and even fewer on copyright law, on this issue.

For example, there may be some empirical evidence showing that the motion pictures industry benefits from having copyright protection. Motion pictures generally take huge amount of money to create. If there is no copyright in motion pictures, it would greatly reduce the incentive to produce, given the high fixed cost and the low marginal cost.

For other works, there is not much empirical evidence one way or the other, either to substantiate that the copyright incentive is necessary or to refute that. Some people would argue that the Oracles of the world would still have very substantial incentive to invest in coming up with new software products. Even if their ability to control the use of some aspects of their software is diminished, there are still substantial benefits to be gained from being the first in the marketplace, e.g., from having good products or from network effects. Maybe the copyright incentive is not altogether necessary. Maybe copyright has more of an inhibiting effect on innovation if it is used too aggressively.

The odd thing about software is that it covers something very functional and the justices were talking about it during the oral argument. It was Congress’s decision, and whether it is a good decision or a bad one, software is copyrightable. Back in the 1970s, there was a debate about whether copyright is a good fit, or maybe it would make sense to have some new and different system in intellectual property law that provides an intellectual property right that lasts for shorter period of time. But the decision was made. Code is copyrightable.

It appears to be some of the justices’ view that the declaring code cannot be viewed as a method of operation because § 101 says code is copyrightable and doesn’t distinguish between declaring code and implementing code. But then you get into a legal doctrine and not the policy. I am not sure whether that argument is necessarily persuasive because it seems you could have a literary work that prima facie looks copyrightable but counts as a method of operation. We will see how the Court resolves this issue.

Q: Justice Gorsuch said it was wise for Google not to linger on the main argument in their brief, i.e., not to make too much Baker v. Selden / § 102(b) arguments. Google did concede that their main argument is the merger doctrine and not the § 102(b) arguments. Do you think it is wise?

A: I am not sure. Some of the justices seem to be skeptical about the Baker v. Selden argument. Though at the end of the day, it seems to me that the idea-expression dichotomy, the merger doctrine, and the Baker v. Selden argument all kind of go to the same issue—all of them refer to § 102(b) which says that you can’t copyright ideas, facts, concepts, systems and methods of operation. From a policy perspective, the idea is that there are certain things are off limits to copyright, and you shouldn’t be able to use your copyright to exert control over those things. So if the majority of justices see this case as implicating that principle, then whether they invoke the merger doctrine, the method of operation principle, or the Baker v. Selden principle, it comes down to the same outcome. But if the majority of justices don’t see this case as so (since Google could have either paid or made its own declaring code), then that analogy is not going to hold.

Q: Several justices have mentioned that other rivals such as Apple and Microsoft didn’t copy to create their competing platform and that Google could have spent the million dollars to develop its own. What do you think about that?

A: That is certainly one way to look at it. The ultimate question is should Google be required to develop its own system that does not require copying the Java declaring code. Maybe that would not be very productive. Allowing programmers to use Java SE may be better for innovation since it is a tool that so many programmers have already known how to use. If Google is to pay for the declaring code or to create its own new ones, there will be a lot of startup costs, which may be socially wasteful. Again, that’s the debate.

Q: Last question. There are many amicus briefs filed in support of Google, but not so many in support of Oracle. Do you think it reflects where the experts stand, and should it substantially impact the Court’s decision (as the Court frequently said that it does not possess the technical expertise to resolve many complex issues)?

A: Amicus briefs may or may not be representative of opinions as a whole. But I think the fact that many more amicus briefs in the case were filed on behalf of Google should at least give some pause. Maybe the amici have a point that code that enables you to make these calls is somehow different from the implementing code. They are all functional in some sense, but declaring code is probably more functional in a general sense and more analogous to a method of operation. This is the way the industry has grown for years. It is the underlying assumption of many people in the industry that it is perfectly lawful to do this. Maybe the Supreme Court should at least give serious consideration whether it should run up against the custom, since many people in the field of computer science and as well law are of the view that Google’s argument is more sensible. But again, there are people who disagree with that, and the Supreme Court has to evaluate all of the opinions.

(the end of the interview)

Closing

As Professor Cotter has pointed out, the debate behind Google v. Oracle comes down to the core issue of why we should provide copyright protection for computer software. Each side has important interests at stake—Oracle’s interest in guarding its investment of labor and personality in Java and Google’s interest in being free from inhibition of innovation. Society at large also has an interest in having a balanced intellectual property system that provides most incentive for people to create.

The 83 computer scientists mentioned in the amicus briefs are of the point that the sky will fall if the Supreme Court rule against Google in this case. Whether it is true or not, this time, the future of the software industry is really at stake. All we can do is wait and see what the Supreme Court will say about these important issues in months.

Inconceivable! How the Fourth Amendment Failed the Dread Pirate Roberts in United States v. Ulbricht

November 21, 2020
Constitutional Law, Cyber Security, Fourth Amendment, Law Enforecement

Emily Moss, MJLST Staffer

It is not an overstatement to claim that electronic devices, such as laptop and smart phones, have “altered the way we live.” As Chief Justice Roberts stated, “modern cell phones . . . are now such a pervasive and insistent part of daily life that the proverbial visitor from Mars might conclude they were an important feature of human anatomy.” Riley v. California, 573 U.S. 373, 385 (2014). These devices create new digital records of our everyday lives. United States v. Ulbricht, 858 F.3d 71 (2d Cir. 2017) is one of many cases that grapple with when the government should gain access to these records.

In February 2015, a jury found Ross William Ulbricht (aka “Dread Pirate Roberts” or “DPR”) guilty on seven counts related to his creation and operation of Silk Road. United States v. Ulbricht, 858 F.3d 71, 82 (2d Cir. 2017). Silk Road was an online criminal marketplace where, using the anonymous currency Bitcoin, “users principally bought and sold drugs, false identification documents, and computer hacking software.” Id. Government trial evidence showed that, hoping to protect Silk Road anonymity, DPR commissioned the murders of five people. Id. at 88. However, there is no evidence that the murders actually transpired. Id.

On appeal, the Second Circuit upheld both the conviction and Ulbricht’s two-life sentence. Ulbricht, 858 F.3d at 82. Ulbricht argued, inter alia, that “the warrant[] authorizing the government to search his laptop . . . violated the Fourth Amendment’s particularity requirement.” Id. at 95. The warrant authorized “opening or ‘cursorily reading the first few’ pages of files to ‘determine their precise contents,’ searching for deliberately hidden files, using ‘key word searches through all electronic storage areas,’ and reviewing file ‘directories’ to determine what was relevant.” Id. at 101–02. Ulbricht claimed that the warrant violated the Fourth Amendment’s particularity requirement because it “failed to specify the search terms and protocols” that the government was required to employ while searching Ulbricht’s laptop. Id. at 102.

The court acknowledged that particularity is especially important when the warrant authorizes the search of electronic data, as the search of a computer can expose “a vast trove of personal information” including “sensitive records.” Id. at 99. It noted that “a general search of electronic data is an especially potent threat to privacy because hard drives and e-mail accounts may be ‘akin to a residence in terms of the scope and quantity of private information [they] may contain’ . . . Because of the nature of digital storage, it is not always feasible to ‘extract and segregate responsive data from non-responsive data,’. . . creating a ‘serious risk that every warrant for electronic information will become, in effect, a general warrant.’” Id. (internal citations omitted).

Nonetheless, the court rejected Ulbricht’s claim that the laptop warrant failed to meet the Fourth Amendment’s particularity requirement. It reasoned that it would be impossible to identify how relevant files would be named before the laptop search began, which the government reasonably anticipated when requesting the laptop warrant. Id. at 102 (emphasizing examples where relevant files and folders had misleading names such as “aliaces” or “mbsobzvkhwx4hmjt”). Further, the court held that broad search protocols were appropriate given that the alleged crime involved sophisticated technology and masking identity. Id. Ultimately, the court emphasized that the “fundamental flaw” in Ulbricht’s argument was that it equated a broad warrant with a violation of the particularity requirement. Id. Using the analogy of searching an entire home where there is probable cause to believe that there is relevant evidence somewhere in the home, the court illustrated that a warrant can be both broad and still satisfy the particularity requirement. Id. (citing U.S. Postal Serv. v. C.E.C. Servs., 869 F.2d 184, 187 (2d Cir. 1989)). The court therefore upheld the constitutionality of the warrant. The Supreme Court denied Ulbrich’s writ of certiorari.

Orin Kerr’s equilibrium adjudgment theory of the Fourth Amendment argues that as new tools create imbalanced power on either the side of privacy or the side of law enforcement, the Fourth Amendment must adjust to restore its original balance. The introduction of computers and the internet created an immense change in the tools that both criminals and law enforcement use. Without minimizing the significance of Ulbricht’s crimes, United States v. Ulbricht illustrates this dramatic change. While computers and the internet did create new avenues for crime, computer and internet searches—such as the ones employed by the government—do far more to disrupt the Fourth Amendment’s balance.

Contrary to the court’s argument in Ulbricht, searching a computer is entirely unlike searching a home. First, it is easy to remove items from your home, but the same is not true of computers. Even deleted files often linger on computers where the government can access them. Similarly, when law enforcement finds a file in someone’s home, it still does not know how that file was used, how often it has been viewed, or who has viewed it. But computers do store such information. These, and many other differences demonstrate why particularity, in the context of computer searches, is even more important than the court in UIlbricht acknowledged. Given the immense amount of information available on an individual’s electronic devices, Ulbricht glosses over the implications for personal privacy posed by broad search warrants directed at computers. And with the rapidly changing nature of computer technology, the Fourth Amendment balance will likely continue to stray further from equilibrium at a speed with which the courts will struggle to keep up.

Thus, adjusting the Fourth Amendment power balance related to electronic data will continue to be an important and complicated issue. See, e.g., Proposal 2 Mich. 2020) (amending the state’s constitution “to require a search warrant to access a person’s electronic data or electronic communications,” passing with unanimous Michigan Senate and House of Representative approval, then with 88.8% of voters voting yes on the proposal); People v. Coke, 461 P.3d 508, 516 (Colo. 2020) (“‘Given modern cell phones’ immense storage capacities and ability to collect and store many distinct types of data in one place, this court has recognized that cell phones ‘hold for many Americans the privacies of life’ and are, therefore, entitled to special protections from searches.”) (internal citations omitted). The Supreme Court has ruled on a number of Fourth Amendment and electronic data cases. See, e.g., Carpenter v. United States, 138 S.Ct. 2206 (2018) (warrantless attainment of cell-site records violates the Fourth Amendment); Riley v. California, 134 S.Ct. 2473 (2014) (warrantless search and seizure of digital contents of a cell phone during an arrest violates the Fourth Amendment). However, new issues seem to appear faster than they can be resolved. See, e.g., Nathan Freed Wessler, Jennifer Stisa Granick, & Daniela del Rosario Wertheimer, Our Cars Are Now Roving Computers. Is the Fourth Amendment Ready?, ACLU (May 21, 2019, 3:00 PM), https://www.aclu.org/blog/privacy-technology/surveillance-technologies/our-cars-are-now-roving-computers-fourth-amendment. The Fourth Amendment therefore finds itself in eel infested waters. Is rescue inconceivable?

Special thanks to Professor Rozenshtein for introducing me to Ulbricht and inspiring this blog post in his course Cybersecurity Law and Policy!

When Divides Collide: How COVID-19 Has Further Exposed the Link Between the Digital Divide and the Education Gap

November 15, 2020
COVID-19, Economy, Education, Social Welfare

Schuyler Troy, MJLST Staffer

As we enter what public health experts warn will be the worst phase yet of the coronavirus pandemic, many Americans have been forced to reckon with the world of remote work—as of June 2020, 42 percent of the U.S. work force was working from home full time. Zoom, the now-ubiquitous video teleconferencing platform, saw an increase in meeting participation from approximately 10 million daily participants in December 2019 to at least 200 million by the end of March 2020. Zoom snafus have taken their place in the cultural zeitgeist, ranging from relatively harmless and even humorous technical snafus to more serious issues like “Zoombombing” and privacy concerns.

Among the more serious problems coming into sharper focus is the effect that remote learning has had on school-aged children, their parents, and their teachers. Without a national strategy regarding how to reopen schools for in-person instruction, states and localities were left to devise what ultimately became a patchwork of solutions. As of September 2, 2020, 73 percent of the largest school districts in the United States had chosen to offer only remote instruction at least to start the year, affecting more than 8 million students.

Early data from this massive shift to remote instruction has revealed some worrying signs. A majority of teachers across the United States report that fewer than half of their students are attending remote classes; 34 percent of teachers report that only 1 in 4 students are attending remote classes. Perhaps more distressing is the data showing stagnation in academic progress. Researchers at Brown University and Harvard University analyzed data gathered for over 800,000 students across the United States and found that through late April 2020, “student progress in math had decreased by about half in classrooms located in low-income ZIP codes, [and] by a third in classrooms in middle-income ZIP codes” as compared to a typical school year. An analysis by McKinsey & Company indicates that the effects on Black and Hispanic students could be even more pronounced.

While racial and socioeconomic education achievement gaps are not new, the shift to remote instruction nationwide appears to have exacerbated them. Pew Research data provides some clues as to one factor that may be driving this phenomenon: lack of access to reliable, high-speed Internet that is necessary for videoconferencing and online coursework. As of 2019, 61 percent of Hispanic Americans and 66 percent of Black Americans used broadband to access the Internet, as compared to 79 percent of white Americans. Only 56 percent of Americans making under $30,000 per year had access to broadband Internet at home, as compared to 92 percent of Americans making over $75,000. Rural communities, which tend to have higher poverty rates than urban and suburban communities, are also less likely to have access to broadband Internet; only 63 percent of rural communities had access to broadband Internet, as compared to 75 percent of urban communities and 79 percent of suburban communities.

Taken together, the data paints a clear and rather sobering picture: remote instruction is leaving some of America’s most vulnerable students even further behind than before.

Congress has taken action in recent years to address the broadband access disparity with the Digital Equity Act, introduced in the Senate in 2019 but not yet passed, which would require the National Telecommunications and Information Administration to establish grant programs promoting digital equity and inclusion, and building capacity for state governments to increase adoption of broadband by their residents. President-elect Joe Biden also pledged throughout the 2020 presidential campaign to expand access to broadband Internet through infrastructure plans and subsidies to low-income Americans who cannot afford broadband. With seeming bipartisan agreement, a rarity in today’s polarized Congress, the United States may be on track to begin closing the digital divide. How that affects the education gap is yet to be seen, but there is good reason to believe closing the digital divide will help narrow the education gap as well.

Pandemics are fairly rare, but they are near impossible to predict, either in frequency or severity. The world was caught off-guard by COVID-19, but the lessons learned, including the lessons on remote instruction, can and should endure. Further, remote instruction is now another metaphorical “tool in the belt” for school districts; many districts are now considering eliminating snow days and replacing them with remote instruction. The sooner there is action on bridging the digital divide, the better the chances that students have to maintain their learning goals.

Reviewing Interchange Fees: How Fifteen Years of Litigation Partially Explains the Grimace on Your Local Business Owner’s Face When You Pay for a $2.00 Product With a Credit Card

November 14, 2020
Antitrust, Class Action, Financial Law

Jesse Smith, MJLST Staffer

Credit and debit cards have become a fundamental part of commerce. It’s hard to beat the perceived simplicity, convenience, and security of using a small piece of plastic or your phone to purchase goods and services. But many forget that when you swipe your card at any business that accepts cards, the merchant does not receive the full amount of the price it charges for the good or service purchased. “Interchange fees” are costs levied against a merchant by the bank that issued the card being used for payment. Until 2010, interchange fees comprised between 1%-3% of the cost of the purchase. Their described purpose is to “cover handling costs, fraud and bad debt costs, and the risk involved in approving the payment.” In recent decades, card issuers have also used interchange fees to fund popular “rewards programs” offered in the form of cashback and points to cardholders.

Interchange fees have been the subject of intense legislative and litigation controversies for the last two decades. They highlight numerous salient issues at the intersection of law, economics, and technology. In 2004, a group of merchants filed a lawsuit against Visa, Mastercard, and their card issuing banks (In Re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation 827 F.3d 223 (2d Cir. 2016)), alleging anticompetitive practices in how they set interchange fees and the contractual rules required of merchants who accepted their credit cards. The issues addressed in the case span multiple areas of law including corporate structure, antitrust, freedom of speech, and legislative process.

Over a decade later, the lawsuit culminated in one of the largest antitrust class action settlements in the history of the United States. To understand the history and progression of this lawsuit is to understand interchange fees more generally. I spoke to K . Craig Wildfang, a partner at Robins Kaplan LLP, and co-lead counsel for the merchants in the case. Mr. Wildfang’s explanation of the litigation and payment card industry overall provided unparalleled insight into this important aspect of how we conduct transactions in an increasingly tech driven society.

In 2004, Plaintiffs filed claims against Visa and Mastercard (who previously set interchange fee schedules), and the banks that collectively owned these card networks at the time. The lawsuit challenged the “collective setting of interchange fees” by the defendants as antitrust violations, more specifically, as price fixing conspiracies under Sections 1 and 2 of the Sherman Antitrust Act. It also challenged anti-steering rules written into the card networks’ contracts with merchants, which prevented businesses from using discounts, surcharges, or signage to “steer” customers towards use of cheaper methods of payment, including cash or checks.

Soon after the commencement of the lawsuit, Visa and Mastercard restructured their businesses by divesting the banks from their ownership interests and offering IPOs in their companies’ stock. Doing so would cause interchange fee rate setting to resemble the actions of single entities, rather than joint conduct propagated by the banks as owners of the credit card companies. Such restructuring posed a challenge to the merchants suing, as courts historically look at single conduct less skeptically than joint conduct in an antitrust context. Undeterred, Wildfang and the merchants’ counsel leveraged this action into an additional antitrust claim under § 7 of the Clayton Act (which utilizes a lower standard of proof for anti-competitive behavior). Thus, they were able to obtain discovery that, in Wildfang’s estimation, made it “100% clear that the only reason they [restructured] was to try to minimize their antitrust liability.”

After years of litigation, mediation, and even a DOJ investigation into the defendants, in 2012, the parties finally reached a historic multibillion-dollar settlement that also saw Visa and Mastercard lift their contractual bans on steering policies. The 2nd Circuit struck down the settlement on appeal based on a conflict from the same class counsel representing the plaintiffs for both monetary and injunctive relief. Consequently, Wildfang and Robins Kaplan were appointed as counsel for 23(b)(3) plaintiffs seeking monetary relief. Undeterred by this setback, after further amended complaints, discovery, and mediation, Wildfang and class counsel achieved another victory in 2019, securing a $6.25 billion settlement for over 10 million merchants, before reductions for opt outs. Additionally, Visa and Mastercard did not reinstate any anti-steering provisions into their contracts.

While litigation was a necessary element of relief, the merchants’ counsel understood this was only part of the solution. Wildfang noted that “when we started the litigation, we knew there would be these ancillary battles, and we decided as the leadership of the litigation, that it was in the interest of our clients . . . to play a productive role in these other . . . fora.”

In 2010, as part of the Dodd-Frank Wall Street Reform Act, Senator Richard Durbin, assisted by Plaintiffs’ counsel and other merchant trade groups, introduced an amendment granting the Federal Reserve the power to regulate debit card interchange fees. The Fed subsequently capped them at approximately 22 to 24 cents per transaction for banks with assets of $10 billion or more. In Wildfang’s assessment, limiting regulation to debit card fees was a logical starting point for legislative reform:

[I]t was much easier for the merchants to argue . . . that a debit card transaction was just an electronic check . . . it made it more appealing to the congressional people we were talking to, to think . . . “well we’re just going to recognize that these are like electronic checks, and checks don’t have interchange fees. So, let’s get rid of these, or at least cap them.” That’s something more reasonable. If you get into trying to cap or regulate credit card interchange fees, that gets a lot more complicated, because the economics of a credit card transaction are a lot more complicated. Some of the interchange revenue ends up going as rewards to cardholders, which of course, the banks always claim is a wonderful good for the consumer, but in fact, those reward dollars are coming out of pockets of other consumers who may not have a credit card.

Senator Durbin espoused this reasoning in discussing the Durbin Amendment in the Senate Congressional Record. Debit card fees are fundamentally like electronic checks, in that they deduct payment for a transaction from a customer’s checking account. The nature of these transactions largely eliminates the need for high interchange fees, as banks need not entice consumers to spend their own money with rewards programs, nor does it require the same costs incurred to mitigate the risk of a consumer refusing to pay what they owe at the end of a month, as with a credit card.

Capping debit card fees was a monumental victory for merchants. Wildfang noted:

It had been true . . . by the early two thousand teens, that debit card transactions were increasing at a much faster rate than credit card transactions, and that was true whether you were talking about numbers of transactions or transaction volume. And there were a lot of reasons for that . . . [which] made capping debit fees particularly appealing, because we knew that that was a growing piece of the pie, and it was going to continue to grow, and it has continued to grow.

The number of non-prepaid debit card transactions has increased every year from 8.3 billion in 2000, to 72.7 billion in 2018, now constituting over half of all card based transactions, as compared to a little over a quarter in 2000. With the average value of debit card sales hovering consistently in the $38-$39 range, merchants were undoubtedly spared the cost of billions of dollars in interchange fees, having to pay a max of 24 cents, rather than 1%-3% of every transaction conducted. Additionally, the effects of the Durbin Amendment went far beyond relief of the financial burden from debit card fees, igniting tangential legislative and judicial fights throughout the U.S.

Armed with an affordable card payment alternative, it became paramount for merchants to make debit card, check, and cash payment options more appealing by offering discounts for use of these payments, or imposing surcharges on more expensive types of payments. Multiple states, often lobbied by Visa and Mastercard, had either passed or were considering passing laws banning these steering practices. Repealing or preventing these laws was key, as removal of anti-steering provisions from card issuer contracts would be useless if steering were illegal in the first place. Wildfang and merchants’ counsel worked behind the scenes with counsel for plaintiffs in Expressions Hair Design v. Schneiderman, 137 S. Ct. 1144 (2017), where the Supreme Court ruled a New York state law banning merchants from imposing surcharges regulated speech, not conduct. While the holding did not rule on the law’s constitutionality, some believe the case may percolate back to the Court soon to reexamine a key rational basis review standard in free speech cases.

When the litigation first began, consumers paid primarily by cash, check, and magnetic stripe credit or debit cards. Since then, the menu for consumers has increased exponentially, with EMV chip cards, various digital wallets, and cryptocurrencies now permeating payment methods both online and at a physical point of sale. The increasing diversity of payment methods further served to complicate the factual and narrative landscape of the litigation, primarily by challenging the standing Plaintiffs had in the antitrust realm. Wildfang explained:

Let’s take, for example, a transaction like Apple Pay. The economics of that are facially somewhat similar to a credit card, but there are more players in the payment chain, and the impact on the merchant of those transactions is not as clear as in a simple credit . . . or debit card transaction. And you had these intermediate players, one more layer between the banks and the merchant, and as you probably know, under federal antitrust law, only the direct purchaser has standing to bring an action for damages, and the defendants had always argued from the very beginning, that merchants were indirect purchasers, because, as sort of a technical matter, the way the electronics work, the acquiring bank—the merchant’s bank, is in some sense “first in line” as the money goes through them back to the merchant.

This potential dilution of a merchant’s ability to sue as a direct purchaser underscored the need to reach a monetary settlement rather than risk losing at trial. Wildfang believes these developments will play a key role in future electronic payment litigation:

[I]t’s going to be complicated, and the release that we gave to the defendants in the second settlement is almost certain to prompt litigation. There are going to be cases brought in the future where the defendants are going to argue the release applies and protects them against those claims and so there[] [is]going to be a lot of litigation along the edges of the original case, and whether or not a particular future claim has been released or not. And I think that the technological changes are going to be probably right in among all of those cases and kind of test the boundaries of the release.

Digital wallet platforms function and release payment information differently. Google utilizes an actual account for its wallet users to “store” money in, while Apple “facilitat[es] the ordering of fund transfers,” by creating and providing secure payment tokens to the merchant, rather than actual user account information. Apple also levies a 0.15% fee on card issuers who accept Apple Pay for integration with their cards. It remains to be seen how legislatures and courts will classify these roles of differing platforms in the payment chain between consumer and merchant.

But as both merchants and card issuers deal with another party and the costs it brings to the table, numerous issues will emerge once. Will the use of a certain payment method/platform render merchants as indirect purchasers? Will card issuers use additional or new fees to offset the costs of digital wallet providers’ fees? If so, are these fees precluded from litigation by this settlement? These are just a few of countless questions that may arise “around the edges of the original case.” Regardless of if or how these specific battles arise, the dynamic nature of the payment card industry is the one constant in a sea of changing technological variables. As Wildfang summed it up, “for the first forty years or so of the payment card industry, not much changed. But in the last ten years, a lot has changed, and I think that the next five or ten years is going to bring even more change.”

Regulatory Agencies Spring Into Action After Supreme Court Decides Dusky Gopher Frog Case

November 7, 2020
Climate Change, Environment, Environmental Justice, Environmental Law, EPA

Emily Newman, MJLST Staffer

While “critical habitat” is defined within the Endangered Species Act (ESA), a definition for “habitat” has never been adopted within the statute itself or any regulations issued by the two agencies responsible for implementing the ESA, the U.S. Fish and Wildlife Service (USFWS) and the National Marine Fisheries Service (collectively, the “Services”). In 2018, however, the U.S. Supreme Court called this gap into question. Weyerhaeuser Co. v. United States Fish and Wildlife Serv., 139 S. Ct. 361 (2018). In Weyerhaeuser Co. v. United States Fish and Wildlife Service, the Court reviewed a case by which the USFWS designated a particular area of land as critical habitat for the dusky gopher frog, including private property and land that was currently unoccupied by the frog. Id. at 366. Weyerhaeuser Company, a timber company, and a group of family landowners challenged the designation because the land was not currently occupied by this species and would need to be improved before occupation could actually occur. Id. at 367. The Court vacated and remanded the case to the Fifth Circuit, determining that the land first must be designated as “habitat” before being designated as “critical habitat.” Id. at 369. More specifically, they remanded to the Fifth Circuit for it to interpret the meaning of “habitat” under the ESA; however, they did not specifically direct the Services to adopt a definition. Id. The Fifth Circuit ended up dismissing the case upon remand.

The Services’ proposed new rule aims to address this gap. The proposed rule was published on August 5, 2020, and within it, the Services propose two alternative definitions for the meaning of “habitat” which would be added to § 424.02 of the ESA. The first definition is as follows: “The physical places that individuals of a species depend upon to carry out one or more life processes. Habitat includes areas with existing attributes that have the capacity to support individuals of the species.” The alternative definition of “habitat” is listed as: “The physical places that individuals of a species use to carry out one or more life processes. Habitat includes areas where individuals of the species do not presently exist but have the capacity to support such individuals, only where the necessary attributes to support the species presently exist.”

The first definition emphasizes “dependence” while the second emphasizes “use”, but both allow for unoccupied areas to be included in the definition. Additionally, both definitions imply that the land has to be suitable for a particular species in its current condition with no improvements made. The Services clarified that the proposed rule would only be prospective and would not revise any designations of critical habitat already made.

The Services issued the proposed rule largely in order to respond to the Supreme Court’s ruling in Weyerhaeuser, but the Services do mention additional purposes such as the desire to “provide transparency, clarity, and consistency for stakeholders.” The proposed rule is also meant to build upon regulatory reforms issued by the Services in 2019. Additionally, the Services place the proposed rule in a larger context as part of the efforts of the Trump administration to “bring the ESA into the 21st century.”

The proposed rule has received both support and criticism. Those in support of the rule mainly highlight how defining “habitat” would lead to more certainty as to when a particular area would or could be protected under the ESA. They say that this could positively impact species by “aiding the public’s understanding of those areas that constitute habitat” and also by helping companies plan out projects in such a way as to minimize any impact on habitat.

Those against the two definitions contained in the proposed rule have multiple reasons for their criticism. For one, they believe that the primary definition in particular runs the risk of conflating “habitat” and “critical habitat” even though “habitat” presumably should cover a wider area. Second, they argue that defining “habitat” through a regulation is unnecessary and has not been necessary in the 45 plus years that the ESA has been around. This is because defining “habitat” could undermine any critical habitat designations under the ESA, and it would also negatively impact or cause confusion in other parts of the ESA where the word “habitat” is used and other federal statutes that are often “implicated by actions related to listed species.” Third, while the proposed rule is prospective and would not require reevaluations of past critical habitat designations, that does not mean the Services by their own accord won’t reevaluate those designations using the new definition of “habitat.”

The last, and arguably most important, critique of the proposed rule is that either definition has the potential to exclude essential areas of habitat such as fragmented, degraded, or destroyed habitat that would need to be restored, and also habitat that is needed for species whose range will likely fluctuate due to the impacts of climate change. Critics, such as the Southern Environmental Law Center (SELC) and the American Fisheries Society (AFS), argue that this would only maintain the status quo and simply “wouldn’t make sense from a management perspective for species recovery or the legislative perspective intended by Congress in enacting the ESA.” The AFS makes a useful analogy to what would happen if a similar definition applied to polluted waters under the Clean Water Act: “Indeed, if a similar definition was used for polluted waters in the U.S. under the Clean Water Act, we would never have improved water quality by installing treatment systems to remove pollutants, as the definition leaves the only condition as status quo.”

Several opponents of the proposed rule provide their own alternative definitions of habitat or what that definition should include. The Defenders of Wildlife suggest a definition that is consistent with definitions of habitat in academia and with the intent of the ESA, as well as being complementary to but distinct from the definition of “critical habitat” in the ESA: “ ‘Habitat’ is the area or type of site where a species naturally occurs or depends on directly or indirectly to carry out its life processes, or where a species formerly occurred or has the potential to occur and carry out its life processes in the foreseeable future.” Additionally, the AFS advises that any definition of habitat account for areas that may not even “house” the species in question but that are nevertheless important for energy and resource flow; this broader suggestion reflects the move towards “holistic watershed approaches” in fisheries management.

The public comment period for the proposed rule closed on September 4, 2020, but the Services has not yet issued a final rule. Looking ahead, though, the strong opinions both for and against the proposed rule indicate that the Services will most likely face litigation irrespective of what they decide upon in the final rule. Moreover, a change in the Administration following the 2020 election will likely affect the outcome of this regulatory action.

“IceBreaker” Freshwater Offshore Wind Project Cracks Through Regulatory Jam

November 7, 2020
Energy Law, Environmental Law

Ben Cooper, MJLST Staffer

An offshore wind project in Lake Erie, churned by regulatory crosscurrents, has begun flowing towards construction once again. But followers of the IceBreaker Wind project can be forgiven for harboring reservations about what lies ahead, due to the long-running back-and-forth. Back-and-forth notwithstanding, critics and proponents alike look at IceBreaker Wind as an, ahem, icebreaker to clear the path for more offshore wind in the Great Lakes.

IceBreaker Wind Project

For more than a decade, the Lake Erie Energy Development Corporation (LEEDCo) has been working to advance a windfarm eight miles off the coast of Cleveland in Lake Erie. The project would have six turbines with a combined production to power 7,000 homes. Outside advocates are split on the project: some environmental groups (like the Sierra Club and the Ohio Environmental Council) support IceBreaker Wind, while other environmental groups (like the Black Swamp Bird Observatory and the American Bird Conservancy) are leading the legal challenges to it. Additionally, a group of lakefront property owners and a coal company have become involved in the opposition to the project.

As this project has moved through the regulatory framework, stakeholders have continually pointed out that it will likely chart the course for future offshore wind projects in the Great Lakes. Up until this point, the future of freshwater offshore wind has been aspirational. The CEO of LEEDCo says this approach makes sense when launching a new industry: “[U]ntil you climb that first hill and see what’s out there, you better focus on that first hill.” Now that IceBreaker Wind has cleared some of its most significant hurdles, others in the industry are beginning to peak over the top of that first hill.

Diamond Offshore Wind Moves in on the Great Lakes

Way back when IceBreaker Wind was just a concept, optimism bubbled throughout the Great Lakes region about the promise of offshore wind. Major cities like Chicago, Buffalo, New York, and Cleveland sit just a few miles away from strong, consistent winds. The appeal of offshore wind in the Great Lakes is obvious: abundant energy close to the population centers that need it. Yet, the challenges are evident in IceBreaker’s decade-long saga.

With all the uncertainty that crept into the IceBreaker Wind project, proposals and planning for other offshore wind projects in the Great Lakes quieted down. Still, industry has kept its eyes on IceBreaker—looking for a proof of concept project to lay out the “pathway to responsible development.” Based on recent movement, it seems like players in the freshwater offshore wind space have seen the pathway they need.

One move has been in response to New York State’s 70% renewable energy target by 2030. Diamond Offshore Wind, a subsidiary of Mitsubishi Corporation, thinks the answer lies at least in part in a wind farm in Lake Erie off the coast of Buffalo. This project is in its earliest stages and is still waiting for the results of a feasibility study New York State is conducting.

Even with all the uncertainty of offshore wind development in the Great Lakes, there is a regulatory benefit to these freshwater projects over their ocean counterparts: while offshore projects in the ocean require approval from the Bureau of Ocean Energy Management (BOEM), projects in the Great Lakes do not require BOEM’s involvement. This is notable because BOEM has been frustratingly absent from offshore wind development over the past few years.

Conclusion

Even with the benefits of advancing these offshore wind projects in the Great Lakes rather than the ocean, these projects are costly and time intensive. It makes sense that developers are cautious to jump into the unknown. Since IceBreaker Wind cleared some of its last major hurdles, however, we should expect to see more companies embarking on projects to harness the country’s greatest untapped natural resource.

FDA Approval of a SARS-CoV-2 Vaccine and Surrogate Endpoints

November 1, 2020
COVID-19, Food and Drug Law, Health, Healthcare, Public Health

Daniel Walsh, Ph.D, MJLST Staffer

The emergence of the SARS-CoV-2 virus has thrown the world into chaos, taking the lives of more than a million worldwide to date. Infection with SARS-CoV-2 causes the disease COVID-19, which can have severe health consequences even for those that do not succumb. An unprecedented number of vaccines are under development to address this challenge. The goal for any vaccine is sterilizing immunity, which means viral infection is outright prevented. However, a vaccine that provides only partially protective immunity will still be a useful tool in fighting the virus. Either outcome would reduce the ability of the virus to spread, and hopefully reduce the incidence of severe disease in those who catch the virus. An effective vaccine is our best shot at ending the pandemic quickly.

For any vaccine to become widely available in the United States, it must first gain approval from the Food and Drug Administration (FDA). Under normal circumstances a sponsor (drug manufacturer) seeking regulatory approval would submit an Investigational New Drug (IND) application, perform clinical trials to gather data on safety and efficacy, and finally file a Biologics License Application (BLA) if the trials were successful. The FDA will review the clinical trial data and make a determination as to whether the benefits of the therapy outweigh the risks, and if appropriate, approve the BLA. Of course, degree of morbidity and mortality being caused by COVID-19 places regulators in a challenging position. If certain prerequisites are met, the FDA as the authority to approve a vaccine using an Emergency Use Authorization (EUA). As pertaining to safety and efficacy, the statutory requirements for issuing an EUA are lower than normal approval. It should also be noted that an initial approval via EUA does not preclude eventual normal approval. Full approval of the antiviral drug remdisivir is an example of this occurrence.

In any specific instance, the FDA must conclude that a reason for using the EUA process (in this case SARS-CoV-2):

can cause a serious or life-threatening disease or condition . . . based on the totality of scientific evidence available . . . including data from adequate and well-controlled clinical trials, if available, it is reasonable to believe that . . . the product may be effective in diagnosing, treating, or preventing [SARS-CoV-2] . . . the known and potential benefits of the product, when used to diagnose, prevent, or treat [SARS-CoV-2], outweigh the known and potential risks of the product . . . .

21 USC 360bbb-3(c). On its face, this statute does not require the FDA to adhere to the full phased clinical trial protocol in grating an EUA approval. Of course, the FDA is free to ask for more than the bare minimum, and it has wisely done so by issuing a set of guidance documents in June and October. The FDA indicated that, at the minimum, a sponsor would need to supply an “interim analysis of a clinical endpoint from a phase 3 efficacy study;” that the vaccine should demonstrate an efficacy of at least 50% in a placebo controlled trial; that phase 1 and 2 safety data should be provided; and that the phase 3 data “should include a median follow-up duration of at least two months after completion of the full vaccination regimen” (among other requirements) in the October guidance.

It is clear from these requirements that the FDA is still requiring sponsors to undertake phase 1, 2, and 3 trials before FDA will consider issuing an EUA, but that the FDA is not going to wait for the trials to reach long term safety and efficacy endpoints, in an effort to get the public access to a vaccine in a reasonable time frame. The Moderna vaccine trial protocol, for example, has a study period of over two years. The FDA also has a statutory obligation to “efficiently review[] clinical research and take[] appropriate action . . . in a timely manner.” 21 USC § 393(b)(1).

One method of speeding up the FDA’s assessment of efficacy is a surrogate endpoint. Surrogate endpoints allow the FDA to look at an earlier, predictive metric of efficacy in a clinical trial when it would be impractical or unethical to follow the trial to its actual clinical endpoint. For example, we often use blood pressure as a surrogate endpoint when evaluating drugs intended to treat stroke. The FDA draws a distinction between candidate, reasonably likely, and validated surrogate endpoints. The latter two can be used to expedite approval. However, in its June guidance, the FDA noted “[t]here are currently no accepted surrogate endpoints that are reasonably likely to predict clinical benefit of a COVID-19 vaccine . . . . [and sponsors should therefore] pursue traditional approval via direct evidence of vaccine safety and efficacy . . . .” This makes it unlikely surrogate endpoints will play any role in the initial EUAs or BLAs for any SARS-CoV-2 vaccine.

However, as the science around the virus develops the FDA might adopt a surrogate endpoint as it has for many other infectious diseases. Looking through this list of surrogate endpoints, a trend is clear. For vaccines, the FDA has always used antibodies as a surrogate endpoint. However, the durability of the antibody response to SARS-CoV-2 has been an object of much concern. While this concern is likely somewhat overstated (it is normal for antibody levels to fall after an infection is cleared), there is evidence that T-cells are long lasting after infection with SARS-CoV-1, and likely play an important role in immunity to SARS-CoV-2. It is important to note that T-Cells (which coordinate the immune response and some of which can kill virally infected cells) and B-Cells (which produce antibody proteins) are both fundamental, and interdependent pieces of the immune system. With this in mind, when developing surrogate endpoints for SARS-CoV-2 the FDA should consider whether it is open to a more diverse set of surrogate endpoints in the future, and if so, the FDA should communicate this to sponsors so they can begin to build the infrastructure necessary to collect the data to ensure vaccines can be approved quickly.

Ad Astra Per Aspera – “To the Stars Through Difficulties”

November 1, 2020
Economy, Space Law

Carlton Hemphill, MJLST Staffer

With upcoming elections and the ongoing pandemic on the minds of many, it’s easy to get lost in the negatives of 2020. However, one shining star of a historic event took place on May 30, 2020, NASA astronauts once again launched from U.S. soil, and for the first time on commercially produced and maintained spacecraft. The mission to the International Space Station (ISS) went as well as anyone could have hoped for: uneventful. It sounds ironic to describe such a monumental moment as being “uneventful,” but in the context of strapping humans to the tip of a rocket and blasting them into space, “uneventful” is good. It is also a testament to how far the privatization of space exploration has come. SpaceX, the company responsible for the successful launch of NASA astronauts to the ISS, did not start out with success. Many of their early launch attempts of the Falcon 1 ended in disaster, nearly putting the company out of business. However, with the help of government contracts SpaceX was able to continue researching and developing their rockets to the point of being an industry leader.

What about the economy? Good news for the U.S. economy and taxpayers alike.

Besides allowing for this milestone of American science and engineering to occur, government contracts for commercial space exploration prove to be economically beneficial. Prior to the May 30^th mission, NASA was paying a premium to launch astronauts on Russian spacecraft, and virtually all commercial satellite launches had been outsourced to Russia and China. It appeared as if the United States was out of the space game. With the then existing technology, domestic aerospace companies were unable to match the prices offered by foreign competitors. The economic incentives provided by government contracts to domestic companies such as SpaceX, have reversed this trend. They have allowed companies to invest in research that has led to tremendous cost savings, such as a reusable first stage rocket engine, and increased reliability and safety. Domestic companies are now able to offer safe and reliable space travel cheaper than foreign competitors. This has once again shifted power back to the United States, with SpaceX controlling the market for commercial satellites, as well as the future launches of NASA astronaut missions. NASA plans to continue using commercial spacecraft for its next mission to the ISS. The mission, named SpaceX Crew–1, is slotted for November 14, 2020, and will bring three NASA astronauts and one Japanese mission specialist to the ISS. So, stay tuned, and stay excited!

Is there more to commercial space exploration than satellites and astronauts? Sure there is.

The idea of sending paying customers into space is nothing new and has been talked about since space travel first became a reality. The recent success of commercializing space has reignited talk about profiting from those curious to venture out of this world (especially with the way 2020 has gone). NASA has even gotten on board with economizing space and is planning on allowing “private astronauts” to spend up to 30 days on the ISS for the low cost of $35,000 per night, plus shipping and handling (i.e. launch costs for commercial spacecraft). It seems that the end goal of both the government and private companies is to stimulate a space economy. While this concept might initially seem hard to imagine, one need only look to the evolution of the aviation industry for a reality check.

Of course, when a space economy becomes reality, there will be a pressing need for increased laws and regulations. While space travel has been around for over half a century, and a good body of laws pertaining to space already exist, the concept of commercialized space travel is still relatively new and uncharted territory. Lawmakers will most likely turn to the aviation industry for guidance on how to regulate this growing field. As technology advances and propels people further into previously uncharted territory, the law must follow hand in hand and evolve to the changing circumstances.

November 2020

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