Articles by mjlst

The Rise and Fall of a Scholarly Crowdfunding Article

March 10, 2017
Economics, Financial Law, Regulatory

Tim Joyce, Editor-in-Chief, MJLST Vol. 18

Print publication of science and tech articles is a weird thing. On the one hand, a savvy articles selection team will prioritize articles on the most pressing and innovative advancements in the field. On the other, though—and precisely because these articles are so current—a draft piece can be partially outdated even before the publisher’s pressing start rolling. So it is that a little piece on investment crowdfunding, conceived in September 2015, meticulously researched throughout the 2015–16 academic year, and selected in April 2016, for publication in January 2017, can transform from forward-looking thinkpiece to historically-dated comparison piece.

My recent article with MJLST, 1000 Days Late & $1 Million Short: The Rise and Rise of Intrastate Equity Crowdfunding, compares the newly-activated federal Regulation Crowdfunding to Minnesota’s intrastate investment crowdfunding model MNvest. When the piece was originally conceived both of these laws were not yet active; in fact, it was not yet clear that the SEC would ever release final rules for what would become Regulation Crowdfunding. When the issue was ultimately sent to the printers, each of the laws had been active for at least 6 months. Like I said, weird.

This post is intended to update the curious reader on current happenings with investment crowdfunding on both a federal and a state level.

On the federal level, Regulation Crowdfunding rules have been final since October 2015 and active since May 2016. Nearly 200 offerings later, analysts and scholars are already starting to crunch the numbers. [Full disclosure: I am one of those academics. Our paper (co-author Zach Robins of Winthrop & Weinstine) will be presented at the Mitchell-Hamline Law Review Symposium next month, if you’re interested.] Similar to rewards-based crowdfunding models like Indiegogo and Kickstarter, there appear to be some things a crowdfunding issuer can do to increase the likelihood of success of their offering. Here are some examples.

First, a clear business plan is essential to attracting investors. After all, the “crowd” is made of lots of folks without sophisticated investing experience; so you have to find a creative way to hook them without violating securities disclosure restrictions. This isn’t always as easy said than done, and some portal operators have already gotten in serious trouble for violating their obligations to ensure offering accuracy.

Second, and perhaps a bit counterintuitive, the most successful Regulation Crowdfunding issuers actually have slightly higher minimum investments than you would expect. There is no dollar floor to the investment under the rules of Reg CF, but a small minimum opens the door to a potentially unwieldy cap table. In addition, a high minimum investment decreases the number of available spots for investors in the targeted offering amount; there is a very real “exclusivity” effect. To illustrate: it takes 10,000 investors at $10/per to get to $100,000 offering, but you could raise the same $100,000 with only 100 investors at $1,000/per. Issuers get to choose which investors they take on in oversubscription situations, and it can’t hurt to create a little buzz as investors “compete” for limited spots in the offering.

Finally, communicating the business plan using a strong video is a must—industry analysts report that campaigns using any video at raised significantly more money that those without (on the order of 11:1 times more money!). If that video is of good enough quality, according to those same analysts, your offering does even better. Of course, video quality only matters if your network is sufficiently large to reach enough potential investors. For issuers hoping to raise $50,000, that generally means connecting with more than 3,000 people.

There are plenty more nuggets of wisdom to glean from the first 8 months of federal investment crowdfunding offerings, and this post only scratches the surface. For more, see our forthcoming paper in Mitchell-Hamline Law Review’s symposium issue later this year.

As for MNvest, unfortunately, while the law has been technically available for Minnesota crowdfunders since June 2016, it took until the end of the year for the Department of Commerce to approve any portals. So only a handful of issuers and portals are currently active in the space. True to form, for federal crowdfunding offerings at least, craft breweries are making a strong showing (read: in Minnesota, 4 of the first 4 MNvest issuers are breweries!). Hopefully we’ll see more of them as the vehicle becomes more well-known.

One thing that should further aid MNvest issuers is that the SEC recently released final rules that will make it easier and safer for intrastate issuers to use the internet to advertise. Before the rules update, issuers were bound by advertising and solicitation restrictions drafted in the 1970s (that is, before the interwebs). As crowdfunding, almost by definition, requires the use of the internet to reach a crowd, these updates should streamline and loosen up the fundraising process. The new final rules create a new exemption (Rule 147A); state legislatures that based their intrastate laws on old Rule 147 will need to update their laws accordingly first.

Investment crowdfunding laws of the intrastate and federal varieties hold promise for many issuers. And, while there is not yet a perfect model or a one-size-fits-all strategy for fundraising, it is clear that investors and issuers alike are excited by the promise this investment vehicle holds.

Who knows—perhaps in another 18 months the way we crowdfund will have experienced as much change again, to make this piece as quickly “historical” as my earlier article!

Broadening the Ethical Concerns of Unauthorized Copyright and Rights of Publicity Usage: Do We Need More Acronyms?

March 9, 2017
Copyrights, Privacy, Torts Law

Travis Waller, MJLST Managing Editor

In 2013, Prof. Micheal Murray of Valparaiso University School of Law published an article with MJLST entitled “DIOS MIO—The KISS Principle of the Ethical Approach to Copyright and Right of Publicity Law”. (For those of you unfamiliar with the acronyms, as I was previous to reviewing this article, DIOS MIO stands for “Don’t Include Other’s Stuff or Modify It Obviously”, just as KISS stands for “Keep it Simple, Stupid”). This article explored an ethical approach to using copyrighted material or celebrity likeness that has developed over the last decade due to several court cases merging certain qualities of the two regimes together.

The general principle embodied here is that current case law tends to allow for transformative uses of either a celebrity’s likeness or a copyrighted work – that is, a use of the image or work in a way that essentially provides a new or “transformative” take on the original. At the other extreme, the law generally allows individuals to use a celebrity’s likeness if the usage is not similar enough to the actual celebrity to be identifiable, or a copyrighted work if the element used is scenes a faire or a de minimis usage. Ergo, prudent advice to a would-be user of said material may, theoretically, be summed up as “seek first to create and not to copy or exploit, and create new expression by obvious modification of the old expression and content”, or DIOS MIO/KISS for the acronym savvy.

The reason I revisit this issue is not to advocate for this framework, but rather to illustrate just how unusual of bedfellows the regimes of copyright and “rights of publicity” are. As a matter of policy, in the United States, copyright is a federal regime dedicated to the utilitarian goals of “[p]romot[ing] the progress of science,” while rights of publicity laws are state level protections with roots going back to the Victorian era Warren & Brandies publication “The Right to Privacy” (and perhaps even further back). That is to say, the “right to publicity” is not typically thought of as a strictly utilitarian regime at all, and rather more as one dedicated to either the protection of an individual’s economic interests in their likeness (a labor argument), or a protection of that individual’s privacy (a privacy tort argument).

My point is, if, in theory, copyright is meant to “promote science”, while the right to publicity is intended to either protect an individual’s right to privacy, or their right to profit from their own image, is it appropriate to consider each regime under the age-old lens of “thou shalt not appropriate?” I tend to disagree.

Perhaps a more nuanced resolution to the ethical quandary would be for a would-be user of the image or work to consider the purpose of each regime, and to ask oneself if the usage of that work or image would offend the policy goals enshrined therein. That is, to endeavor on the enlightened path of determining whether, for copyright, if their usage of a work will add to the collective library of human understanding and progress, or whether the usage of that celebrity’s likeness will infringe upon that individual’s right to privacy, or unjustly deprive the individual of their ability to profit from their own well cultivated image.

Or maybe just ask permission.

Is There a Reasonable Pot of Gold at the End of the Rainbow?: Legal Ethics, Brain Stimulation and Neuroprosthetics

March 3, 2017
Biotechnology, Ethics, Neuroscience

Angela Fralish, MJLST Invited Blogger

As expert bioethicist Dr. Walter Glannon remarks, “Interventions in the brain raise general ethical questions about weighing the potential benefit of altering neural circuits against the potential harm from neurophysiological and psychological sequelae.” Laws governing human subject research for these interventions mandate that “risks to subjects are reasonable in relation to anticipated benefits.” Modern brain technologies in neuroprosthetics make the harm/benefit analysis challenging because there are many unanswered questions surrounding neuroprosthetic implementation.

So what is a neuroprosthetic? Neuroprosthetic devices use electrode muscle and nerve stimulation to produce muscle contraction and restore motor function. Basically, since the brain controls the body, a device is put on the brain telling it to make the body work. Through neuroprosthetics devices, a person may restore movement by bypassing nervous system damage which allows greater independence in daily living. To someone whose dependence is caused by non-working body parts such as blindness, Parkinson’s or spinal cord paralysis, this technology holds great potential for a higher quality of life.

However, the use of a neuroprosthetic may involve negative side effects. Some are more behavioral such as gambling and addiction while others are biological like pain from overstimulation. For instance, Steffen K. Rosahl discusses how “relatives and friends sometimes complain of personality changes in the patient, ranging from transient confusion and bradyphrenia to euphoria or depression.” Further, implanting the device is not an exact science and if done incorrectly, a completely different result may occur such as loss of speech or other unknown changes. Research also indicates that an autonomy-capable neuroprosthetic can influence the brain if its actions go unchecked, making it a threat to the user and his or her surroundings. There are serious risks and concerns associated with the use of neurprosthetic technology.

The juncture of law, science and research is especially prevalent in modern neurological research. The cochlear implant is one such example. While the implant has allowed many children all over the world to hear for the first time, it has also led to shock and convulsions. In Sadler v. Advanced Bionics, Inc., the plaintiffs won a $7.25 million verdict in a negligence action when the manufacturer failed to adequately test or obtain approval for a new material in one of their implant designs. The unanswered legal questions in this case evolved around product recalls for implants, overcoming federal preemption, regulatory laws governing research submissions and product liability. Exactly how does a business recall an implant in someone’s brain!?

Clearly, legal-science partnerships are in high demand in advancing neurological research. Scientists need to understand the law and lawyers need to understand science. This principle is critically important when research institutions weigh the risks and benefits to subjects before that device ever hits the market. As Stephen Breyer, associate justice of the U.S. Supreme Court, stated, “In this age of science, we must build legal foundations that are sound in science as well as in law. Scientists have offered their help. We in the legal community should accept that offer.”

Your Honor, That Guy “Subconsciously” Copied My Music!

February 28, 2017
Copyrights, Intellectual Property

Meibo Chen, MJLST Staffer

Under the Copyright Act, 17 USC § 106, a copyright owner of a copyrighted work has exclusive rights to reproduce, create derivative works, distribute, perform, or display that work. The Copyright Act specifically carves out provisions that make it applicable to the music industry. Thus, it is no surprise that the music industry frequently utilized the courts to protect its respective works. While seemingly superfluous and redundant, such legal actions are justified as copyright infringement and piracy cost the US economy nearly $12.5 billion and more than 71,000 jobs yearly.

Copyright infringement, to the traditional public audience, simply would translate to: “that person downloaded my copyrighted music without my permission,” or “that person copied by song without my permission.” Here is the kicker that the average consumer or musician most likely would not know. There is such a thing called “subconscious copying” and “subconscious copyright infringement.” The illustrative case is George Harrison vs Bright Tunes Music Corp. Long story short, the second musician wrote a song that very similar to that of the first musician’s, give or take a few notes and chords. Even though the judge did not believe the second musician purposefully plagiarized, the second musician was nonetheless liable for a whopping $587,000.00 for subconscious plagiarism.

Flash forward to 2000, the 9th Circuit decided a similar case in Three Boys Music Corp. v. Michael Bolton, and put Learned Hand’s “subconscious copying” concept on the mantle. More specifically, the 9th Circuit articulated the concept as requiring (1) a chain of events established between plaintiff’s work and defendant’s access to that work or (2) plaintiff’s work has been widely disseminated.

That boils down to an almost ridiculously broken cause of action for copyright infringement. It is as if more famous musical works get more deference in an infringement case, just because more people heard it. It also takes the objective standard and throws it out the window, as this “subconscious copying” forces a judge or jury to dive inside the mind of the alleged infringer. To make it even more ridiculously broken, the fact-finder has to determine the SUBconscious.

Extending the Earth’s Life to Make It Off-World: Will Intellectual Property Law Allow Climate Change to Go Unchecked?

February 28, 2017
Climate Change, Intellectual Property, New Technology, Space Law

Daniel Green, MJLST Staffer

The National Aeronautics and Space Administration (NASA) recently discovered seven Earth-like planets. Three of these planets are even located the specific distance from the star, Trappist-1, in order to be considered in the proposed “Goldilocks zone” necessary to sustain life, thereby bringing about the conversation of whether a great migration for humanity is in order such as seen in movies of the last ten years such as Passengers, The Martian, Interstellar, even Wall-E. Even Elon Musk and Stephen Hawking have made statements that the human race needs to leave earth before the next extinction level event occurs. The possibility that these planets may be inhabitable presents some hope for a future to inhabit other planets.

Sadly, these planets are forty light years away (or 235 trillion miles). Although relatively near to Earth in astronomical terms, this fact means that there exists no possibility of reaching such a planet in a reasonable time with present technology despite the fact that NASA is increasing funding and creating institutes for such off worldly possibilities. As such, humankind needs to look inward to extend the life of our own planet in order to survive long enough to even consider such an exodus.

Admittedly, humanity faces many obstacles in its quest to survive long enough to reach other planets. One of the largest and direst is that of climate change. Specifically, the rise in the temperature of the Earth needs to be kept in check to keep it within bounds of the two-degree Celsius goal before 2100 C.E. Fortunately, technologies are well on the way of development to combat this threat. One of the most promising of these new technologies is that of solar climate engineering.

Solar climate engineering, also known as solar radiation management, is, essentially, a way to make the planet more reflective in order to block sunlight and thereby deter the increase in temperature caused by greenhouse gases. Though promising, Reynolds, Contreras, & Sarnoff predict that this new technology may be greatly hindered by intellectual property law in Solar Climate Engineering and Intellectual Property: Toward a Research Commons.

Since solar climate engineering is a relatively new scientific advancement, it can be greatly improved by the sharing of ideas. However, the intellectual property laws run directly contrary to this, begging the question as to why would anyone want to hinder technology so vital to the Earth’s survival. Well the answer lies in numerous reasons including the following three:

Patent “thickets” and the development of an “anti-commons”: This problem occurs when too many items in the same technological field are patented. This makes patents and innovations extremely difficult to patent around. As such, it causes scientific advancement to halt since patented technologies cannot be built upon or improved.
Relationship to trade secrets: Private entities that have financial interests in funding research may refuse to share advancements in order to protect the edge it gives them in the market.
Technological lock in: Broad patents at the beginning of research may force others to rely on technologies within the scope of the patent when working on future research and development. Such actions may ingrain a certain technology into society even though a better alternative may be available but not adopted.

There is no need to despair yet though since several steps can be taken to combat barriers to the advancement of solar climate engineering and promote communal technological advancement such as:

State interventions: Government can step in so as to ensure that intellectual property law does not hinder needed advancements for the good of humanity. They can do this in numerous action such as legislative and administrative actions, march-in rights, compulsory licensing, and asserting a control over funding.
Patent pools and pledges: Patent pools allow others to use one’s patents in development with the creation of an agreement to split the proceeds. Similarly, patent pledges, similarly, limit the enforcement of a patent holder by a promise in the form of a legally binding commitment. Though patent pools have more limitations legally, both of these incentivize the concept of sharing technology and furthering advancement.
Data commons: Government procurement and research funding can promote systematic data sharing in order to develop a broadly accessibly repository as a commons. Such methods ideally promote rapid scientific advancement by broadening the use and accessibility of each advancement through the discouragement of patents.

Providing that intellectual property laws do not stand in the way, humanity may very well have taken its first steps in extending its time to develop further technologies to, someday, live under the alien rays of Trappist-1.

Ensuring Quality and Avoiding Bad Eggs: Food Executives, Food Safety and Criminal Sanctions

February 22, 2017
Criminal Law, FDA, Food and Agriculture

MJLST Guest Blogger, Tommy Tobin

[Editor’s Note: This post is last and #4 in a series on current FDA issues. You can find the previous post here, here and here.]

Food can—and all too often does—make people sick. Anyone who has suffered from food-borne illness would be unlikely to want to repeat the experience. The safety of our food relies in large part on compliance with food safety protocols. From Upton Sinclair’s The Jungle to today, the processing and manufacturing of food is rife with stories of poor practices leading to public health problems.

Maintaining the safety of the nation’s food supply is an ongoing challenge for regulators and businesses. The FDA requires that food be processed or produced using good manufacturing practices, or else risk food being labeled “adulterated” as it was produced under “unfit” conditions. Producing food in such a way as to avoid being “contaminated with filth” seems like a worthwhile goal.

Ensuring food safety sometimes means throwing away product, but it can be a matter of life and death. For example, Listeria concerns prompted Blue Bell Ice Cream to remove all of its product from store shelves in 2015. Three deaths were reported from the ice cream. In the midst of its food safety issues, Chipotle closed all locations across the US on February 8, 2016 to focus improving food safety protocols.

What happens when individuals upend the delicate balance of food safety? In the wake of several high-profile trials, food executives charged with food safety violations may be walking on eggshells. As Food Safety News put it, “Not so long ago, errant food industry managers and executives did not have to worry about going to jail. But they do now.”

What changed? In part, peanut butter, cantaloupe, and eggs. These products might seem like an unlikely combination, but these foods—or rather some of the companies behind them—demonstrate the “New Normal” in food safety enforcement.

Taking peanut butter first, a nationwide Salmonella outbreak sickened hundreds of Americans and killed nine. Stewart Parnell, the executive behind the Peanut Corporation of America, approved shipments of peanut butter that his company had tested positive for Salmonella and those that were known to be “partially covered in dust and rat crap.” Instead of jettisoning product for public safety, he instead demanded, over email, that “[expletive deleted], just ship it. I can’t afford to loose [sic] another customer.” According to the Washington Post, prosecutors sought a life sentence, but he was ultimately sentenced for 28 years. One man, quoted by the Post, whose mother had died due to the peanut butter said, “As far as I’m concerned, he’s a murderer.”

As for cantaloupe, Eric and Ryan Jensen—two Colorado brothers—pled guilty to six counts arising from their role in a 2011 Listeria outbreak. According to the FDA, the Jensen brothers knew they were putting the public at risk by not sufficiently washing their produce and maintaining the fruit in “unsanitary conditions.” As a result, the deadly cantaloupes were linked to 147 hospitalizations and 33 deaths. You read that right; 33 lives were ended due to contaminated cantaloupe.

With regard to eggs, the DeCosters of Quality Egg, LLC may have presented the courts with the most significant responsible corporate officer liability ruling in over forty years, according to the venerable FDA Law Blog. Jack DeCoster and his son Peter, the owner and COO of the company, respectively, were sentenced to three month’s imprisonment for their part in food safety outbreaks that caused an estimated 56,000 Americans to fall ill.

As noted in the Eighth Circuit opinion upholding the prison sentence, the company pled guilty to bribing a food safety inspector and introducing misbranded and adulterated eggs into interstate commerce. The opinion details the conditions at Quality Egg’s Iowa operations in August 2010:

The FDA inspected the Quality Egg operations in Iowa from August 12–30, 2010. Investigators discovered live and dead rodents and frogs in the laying areas, feed areas, conveyer belts, and outside the buildings. They also found holes in the walls and baseboards of the feed and laying buildings. The investigators discovered that some rodent traps were broken, and others had dead rodents in them. In one building near the laying hens, manure was found piled to the rafters; it had pushed a screen out of the door which allowed rodents into the building. Investigators also observed employees not wearing or changing protective clothing and not cleaning or sanitizing equipment.

The FDA concluded that Quality Egg had failed to comply with its written plans for biosecurity and salmonella prevention. One government expert reported that “there were minimal to no records from the poultry [ ] barns to indicate that company personnel [had] implemented the written plans [to eliminate salmonella].” The agency also discovered that the company’s eggs tested positive for salmonella at a rate of contamination approximately 39 times higher than the current national rate, and that the contamination had spread throughout all of the Quality Egg facilities. In October 2010 the FDA instructed Quality Egg to euthanize every hen, remove the manure, repair its facilities, and disinfect its barns to prevent the risk of another outbreak.

As responsible corporate officers, the DeCosters pled guilty to misdemeanor violations of the Food, Drug, and Cosmetic Act (FDCA). In their plea agreements, they stipulated that they “had not known that the eggs were contaminated at the time of shipment, but stipulated that they were in positions of sufficient authority to detect, prevent, and correct the sale of contaminated eggs had they known about the contamination.”

An important question before the Eighth Circuit panel was the requisite knowledge required for imposing criminal penalties, particularly imprisonment, on responsible corporate officials. In the cantaloupe and peanut butter cases reviewed above, each executive knew of food safety violations, but the record in this case did not reveal that the DeCosters had actual knowledge. The three judge DeCoster panel issued a three-opinion ruling, with the majority advancing a concept of responsible corporate officer liability arising from the FDCA and the Supreme Court’s ruling in United States v. Park, 421 U.S. 658 (1975). Under Park, responsible corporate officials were prosecuted under a lower standard than normally used for criminal cases, whether under theories of negligence or strict liability.

The DeCoster majority noted that the FDCA and Park enabled criminal sanctions for responsible corporate officials for their own failure to prevent or remedy the conditions giving rise to the food safety claim. The judges in the majority agreed that vicarious liability was not applicable here, instead it was the executives’ own duty to be aware of, to prevent, and to address potential violations of the FDCA that gave rise to criminal penalties. Writing in concurrence, Judge Gruender reasoned that the DeCosters “are responsible for their own failures to exercise reasonable care to prevent the introduction of adulterated food.” In the absence of actual knowledge, the DeCoster majority ascribed constructive knowledge to the DeCosters in running their operation. They “knew or should have known” of the unsanitary conditions and failed to address or prevent them.

Writing in dissent, Judge Beam reasoned that the DeCoster’s sentence was inappropriate. Judge Beam would reject negligence as an appropriate standard for corporate officer liability under the FDCA, substituting a mens rea requirement similar to that found elsewhere in criminal law. The dissent noted, “there is no precedent that supports imprisonment without establishing some measure of a guilty mind on the part of these two individuals, and none is established in this case” and that “no person associated with Quality Egg had knowledge of salmonella contamination at any relevant time.”

Given the three-opinion decision, the DeCoster case was appealed for an en banc rehearing within the Eighth Circuit, which was denied in September 2016. Petition for certiorari was filed in January 2017, and the case may make it to the Supreme Court.

Public health requires vigilance, especially on the part of those involved with producing and processing the nation’s food supply. The FDA and other food safety regulators work with businesses to maintain public health and safety. Unfortunately, all too often there are bad eggs whose decisions, or lack of awareness, may put the public at risk. Time will tell whether the Supreme Court weighs in on the proper standard for criminal liability for food safety violations in the wake of several recent high-profile cases.

Something to Chew On: the FDA, Food, and a Healthy Dose of Definitions

February 21, 2017
Drug Policy, FDA, Health, Regulatory

MJLST Guest Blogger, Tommy Tobin

[Editor’s Note: This post is #3 in a series on current FDA issues. You can find the previous post here and here.]

Is food medicine? The answer to this simple question is surprisingly complicated.

The name of the Food and Drug Administration (FDA) seems to distinguish between foods and drugs. So too does the Federal Food, Drug, and Cosmetics Act, which helpfully defines “food” as “(1) articles used for food or drink for man or other animals, (2) chewing gum, and (3) articles used for components of any such article.”

While it is not difficult to swallow the concept of chewing gum being food, the broad legal definition of “food” is somewhat circular and does not provide much guidance by itself. Indeed, the definition of “drug” under the same law notes that drugs are, in relevant part, “articles (other than food) intended to affect the structure or any function of the body of man or other animals.”

Setting the table for further discussion, it should be noted that foods and drugs face different regulatory burdens. For example, drugs face pre-market approval. As for foods, the FDA does not have sole regulatory oversight over food products, which it shares with approximately 14 other federal agencies. The Government Accountability Office labeled the patchwork of federal food safety oversight as a “high risk issue” noting that it had caused “inconsistent oversight, ineffective coordination, and inefficient use of resources.”

Knowing whether an item is a drug or a food dictates whether it is regulated appropriately and even which laws apply to the item. From the definitions, it would seem that foods are categorically not drugs. Yet, sometimes foods do function as medicine. For example, the Harvard Food Law & Policy Clinic argues that “for critically and chronically ill people, food is medicine.” Part of the Clinic’s work has advocated for expanded medically-tailored food and nutrition interventions to improve health outcomes and reduce overall health care costs for high-risk, high-need populations. Even outside of high-risk populations, it is likely many of us provide self-care through food, such as sipping chicken soup for colds or the flu.

Adding more food for thought, there are several terms that blur the lines between the categories of “food” and “drug.” The FDA notes that “terms like ‘functional foods’ or ‘nutraceuticals’ are widely used in the marketplace” but are not explicitly defined in the Food, Drug, and Cosmetic Act. While one could devote a book to the regulation of nutraceuticals and functional foods (and some have done so), it is sufficient here to note that nutraceuticals and functional foods have their own definitions in the relevant, non-regulatory literature. According to an article in the aptly-titled scholarly journal Nutrients, a nutraceutical is “food (or part of a food) that provides medical or health benefits, including the prevention and/or treatment of a disease” and functional foods are “food products that have an added positive health benefit” (internal citations omitted). Notably, each definition expressly notes that these items are foods, not drugs. Put another way, an apple a day may keep doctors away, but apples enriched with antioxidants may be a functional food that merits a price premium from consumers.

The terms have largely arisen out of marketing practice, and a combination of the words “nutrition” and “pharmaceutical.” Entire publications have devoted themselves to the news and scholarly analysis of these products, including Nutraceuticals World and the Journal of Functional Foods. One recent article examined whether Jelly Belly, the jelly bean purveyor, could support its claims that its Sports Beans were “clinically-proven” to maximize sports performance.

Further blurring the line between foods and drugs, a “medical food” is defined under a statute that has “drug” in the name, but the product is not actually a “drug.” A “medical food” is defined under the Orphan Drug Act, as “a food which is formulated to be consumed or administered enterally under the supervision of a physician and which is intended for the specific dietary management of a disease or condition for which distinctive nutritional requirements, based on recognized scientific principles, are established by medical evaluation.” Pursuant to the above definition, the FDA has declared that medical foods must be taken only under the supervision of a physician. According to a recent FDA Guidance Document, medical foods are explicitly not drugs and are not subject to the requirements that apply to drugs. As an example, one medical food, Deplin, is an orange pill that advertises itself as a “prescription medical food” specifically designed to meet the “clinical dietary management of depression and schizophrenia.”

In the supermarket, consumers may stroll from the pharmacy aisles to the food aisles, seeing pharmaceuticals one moment and nutraceuticals the next. With consumers willing to pay a price premium for healthy foods, including functional foods, foods that make claims to reduce disease and promote good health are likely here to stay.

Bet on Science: Transplantation Without Human Donation

February 17, 2017
Biotechnology, Healthcare

Rhett Schwichtenberg, MJLST Staffer

There is no question that the American organ donor process is flawed. An individual makes the selfless decision to become an organ donor, but upon death their organs remain in their body. Although the law states that the donor is the only person that can revoke an anatomical gift, hospital practice will almost never harvest an organ without the family’s consent. A recent article published in the Minnesota Journal of Law, Science & Technology has proposed a solution to the 120,000 Americans waiting for organs: paying the donor $5,000 per organ. This solution could have many positive impacts, but many negative ones as well.

First, this solution will have a strong influence on the socio-economically poor, as an individual could make up to $40,000 for their family by donating the eight organs currently eligible for donation (not including hands and face, added in 2014). This amount of money would put low-income families in a horrible position where they might choose to forego medical treatment in order to provide for their family. This reward manages to take the decision away from the socio-economically poor by incentivizing death. Though middle-class individuals might also elect to choose money over treatment, the decision is based more on want than on need.

Second, with advancing technologies, organs harvested from fatalities will become less frequent. Take, for instance, the new technology of self-driving cars. In the near future, self-driving cars will dominate the automotive industry. Given that in 2016, 13.6 percent of organ donors died in a road accident, the number of available organs will only decrease in years to come. In a very recent article, Elon Musk stated that nearly all new cars will be self-driving within ten years.

Although self-driving cars might be farther down the road than Musk declared, scientists have made a major breakthrough in the biological field. Researchers have successfully used an enzyme to integrate human stem cells into developing pig embryos. This technology makes it possible to edit a pig’s DNA sequence coding for a certain organ, and insert code that would “theoretically grow a human organ for patient transplantation.” Artificially creating human organs would single-handedly eliminate the need for organ donation.

In addition to biological advancements, the tech industry has been a major player in organ creation. The use of 3D printing in the medical industry was instantly commercialized for its ability to create prosthetics and fake organs to practice surgical procedures. Today, Wake Forest Institute for Regenerative Medicine has developed a 3D printer capable of “print[ing] tissues and organs by utilizing cells as the main filament or component of the 3D printer.” Using an individual’s own cells to 3D print new organs for them would also eliminate the need for organ donation.

With such large advancements in science and technology, I do not believe there is a need to incentivize organ donation. This would result in a disparity between rich and poor and create situations where an individual has to choose between life or death for all the wrong reasons. Until science reaches the point where human organs can be created, individuals who wish to donate their organs upon death need to take steps to ensure their wish is fulfilled. Such steps include preparing an advance directive or a living will, signing a donor card, obtaining a health care power of attorney, and informing family members of their decision. Paying someone for their organs is simply not the solution.

Exploring the Final Frontier—The Relevance of Brain Imaging in Litigation

February 15, 2017
Biotechnology, Litigation, Neuroscience

Mary Riverso, MJLST Staffer

Human curiosity and technological advancements have led to the exploration of the ends of the earth, the deep seas, even outer space. We have learned so much about the animals we live amongst, the nooks and crannies of planet Earth, and our role in the universe. But as we continue to explore farther and farther outward, we often overlook how little we actually know about ourselves.

The human brain remains predominantly mysterious and unknown. Neuroscientists continue to attempt to map the brain, to assign different functions and behaviors to the different regions of the brain supposedly responsible for them. However, a thorough understanding remains nearly impossible given the intricate circuitry of brain functioning. While certain areas of the brain are sometimes responsible for discrete tasks, complex functions are not exclusively localized. It is more accurate to think of the brain as composed of neuron circuits – the different regions constantly connecting with one another via neuron circuits to work together to process information and complete tasks. Technological advancements now allow for many groundbreaking and non-invasive means of observing the functioning brain. For example, devices administering scans for functional magnetic resonance imaging, or fMRI, monitor blood flow to detect areas of activity. Whereas an electroencephalogram, or EEG, is a test that measures and records the electrical activity of your brain. Finally, magnetoencephalography, or MEG, captures the magnetic fields generated by neural activity. As the capacity and means to monitor brain functioning expand, the potential for successful brain mapping increases. As a result, using brain images resulting from these scans as evidence in litigation becomes more tempting.

The potential for brain imaging to be used as expert evidence in litigation is already being explored. Criminal defendants, such as Herbert Weinstein, want to use the results from brain scans and tests to show that they are not responsible for their criminal actions due to a physical mental disease or defect. Other defense teams see the potential of brain imaging to aid in assessments of truth-telling. Physicians who administer the tests must be willing to testify as expert witnesses to the results and their medical conclusions. Often times, the physicians probe brain function and analyze energy utilization of the brain and then administer tests of human behavior and mental representations to provide a basis for their medical conclusions. However, a major hurdle for potential neuroscientific evidence is its relevance under Federal Rule of Evidence 401 (“FRE 401”). FRE 401 demands that before such evidence be admitted, it must have a tendency to make a fact of consequence more of less probable. But because the brain remains so misunderstand, it is difficult, or arguably impossible, to draw any exact conclusions that a physical disease or defect in fact caused a behavioral or mental defect. As a result, courts have come out on either side of the threshold issue in FRE 401 – some have found that the neuroscientific evidence is appropriate for consideration by a jury who can decide what inferences to draw from it, while others find that this kind of evidence is too prejudicial while being only minimally probative and exclude the evidence under FRE 403, and still others allow the evidence but only for limited purposes, such as the sentencing phase of proceedings instead of the guilt phase. As technology continues to advance and neuroscientists continue to learn more about brain functioning, this kind of evidence may become commonplace in litigation. But for now, the admissibility decision seems to be fact-and-circumstance dependent, based on the case, the expert, the evidence, and the judge.

Genetically Modified Foods and the Consumer Quest for Disclosure

February 14, 2017
Biotechnology, Food and Agriculture, Regulatory

Nicholas Ratkowski, MJLST Staffer

In 2000, the Minnesota Journal of Law, Science, and Technology (MJLST) proudly published its first issue, spanning a variety of issues between Patent Protection of Computer Programs to an analysis of the First Amendment through the lens of Jesse Ventura. One Note addressed how genetically modified foods (GMOs) should be labeled, if at all. In the seventeen years since MJLST’s inception, much has changed – how has the landscape of GMO labeling progressed?

In 2000, the principal argument was whether or not GMOs should be specially labeled as such; the author references unexpected concomitant protein allergies and environmental effects as prime concerns. As of 2000, scientists had not identified any negative effects from consuming GMOs. The Note notes different approaches between Europe and the United States, with the former relying on strict disclosure requirements, and the latter ignoring the issue (for the most part). At the time of authorship, “[m]ore than 4,500 GM plants ha[d] been tested, and at least 40 ha[d] passed government reviews” and “as much as 70% of processed foods contain[ed] GM components. The Note “propose[d] that the most appropriate method of resolving the labeling issue involves developing a new, international, voluntary labeling standard for products that have not been developed through genetic engineering techniques or do not contain genetically engineered ingredients.”

Now to the fun part – has anything changed? The short answer is not really. In 2013, Connecticut became the first state to “successfully enact a law requiring food containing genetically modified ingredients to be labeled as such, though it comes with the unusual requirement that four other states must pass similar legislation.” As of 2017, more than 70 bills across 30 states have been proposed in an effort to require labeling of GMOs. Only two states (Vermont and Maine) have joined Connecticut’s lead in forcing disclosure of genetically modified foods. Maine’s disclosure law requires disclosure, but is subject to a litany of exceptions. Vermont’s seems a bit more stringent, but is also easily circumvented. See §3043(d) and §3044 (for example, “Any processed food that would be subject to subsection 3043(a) of this title solely because it includes one or more materials that have been produced with genetic engineering, provided that the genetically engineered materials in the aggregate do not account for more than 0.9 percent of the total weight of the processed food”).

It is perhaps surprising then that GMOs remain mostly invisible to the average consumer in the United States, considering “[m]ore than 70 percent of Americans say they don’t want genetically modified organisms in their food” and “92 percent of Americans want genetically modified foods to be labeled,” according to a 2014 Consumer Reports survey. I’m not smart enough to tell you whether or not eating GMOs has any effect on health, much less whether that effect would be positive or negative. I can, however, posit a theory to explain this paradox, albeit not a novel one – the Pro-GMO lobby is simply too powerful for states to butt heads with in the courts on the taxpayers’ dime. With Monsanto leading the charge, the pro-GMO lobby has spent tens of millions of dollars to fight state-level labeling initiatives. In 2013, lobbyists spent $9,300,000 to prevent GMO disclosure requirements. In just the first quarter of 2014, lobbyist spent another $9,000,000. How can states compete?

If the U.S. ever makes the policy decision to implement widespread labeling requirements for GMOs, doing so will require federal legislation; states have been shown to lack the resources necessary to fight the purveyors of incomplete information that are GMO lobbyists. On the other hand, would labeling have any discernable effect on consumers? Maybe not, but I believe consumers should have the choice to pick what they eat, and how their food is sourced.

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