Articles by mjlst

Behind the “Package Insert”: Loophole in FDA’s Regulation of Off-Label Prescriptions

November 12, 2022
Agencies, Drug Policy, FDA, Healthcare, Industry, Pharmaceuticals, Public Health, Regulatory

Yolanda Li, MJLST Staffer

FDA Regulation of Drug Prescription Labeling and the “Package Insert”

Over the recent years, constant efforts have been made towards regulating medical prescriptions in an attempt to reduce risks accompanied with drug prescriptions. Among those efforts is the FDA’s revision of the format of prescription drug information, commonly known as the “package insert”.[1]

The package insert regulation, effective since 2006, applies to all prescription drugs. The package insert is to provide up-to-date information on the drug in an easy-to-read format. One significant feature is a section named “highlights”, which provides the most important information regarding the benefits and risks of a prescribed medication. The highlights section is typically half a page in length providing a concise summary of information including “boxed warning”, “indications and usage”, and “dosage and administration”.[2] The highlights section also refers physicians to appropriate sections of the full prescribing information. In this way, the package insert aims to draw both the physicians’ and the patients’ attention to the prescription of a drug, consequently accomplishing the ultimate purpose of managing medication use and reducing medical errors. Mike Leavitt, the Health and Human Services Secretary of the FDA commented that the package insert “help[s] ensure safe and optimal use of drugs, which translates into better health outcomes for patients and more efficient delivery of healthcare.”[3]

FDA Regulation of Off-Label Prescription and the Emergence of a Loophole

The FDA’s regulations relating to the labeling of prescription drugs, although systematic in its form, are cut short to a certain extent due to its lack of regulation on off-label prescriptions. Off-label prescriptions do not refer to a physician prescribing non-FDA approved drugs, a common misunderstanding by the public. Rather, off-label prescriptions are those that do not conform to the FDA-approved use set out in the FDA-approved label.[4] More specifically, off-label prescription generally refers to: “(1) the practice of a physician prescribing a legally manufactured drug for purposes other than those indicated on that drug’s FDA mandated labeling; (2) using a different method of applying the treatment and prescribing a drug, device, or biologic to patient groups other than those approved by FDA; and (3) prescriptions for drug dosages that are different from the approved label-recommended dosage or for time periods exceeding the label-recommended usage.”[5] For example if Drug A’s use, as mandated by the FDA, is to treat chronic headaches, and a physician prescribes it to treat a patient’s sprained ankle, that is an off-label prescription. However, such practice is common as estimated by the American Medical Association (AMA).[6]

The commonly approach is that the FDA and courts do not to interfere with physicians’ off-label uses.[7] Thus, when the FDA regulates the labeling of approved uses but does not regulate prescriptions for off-label uses, a loophole is formed. Andrew von Eschenbach, M.D., claims that because the FDA’s package insert regulation makes it easier for physicians to get access to important information about drugs, including drug safety and benefits, this regulation helps physicians to have more meaningful discussions with patients.[8] However, physicians’ discretion in prescribing off-label prescriptions would offset the proposed benefit of the FDA regulation because the regulation remains as guidance without force of law once physicians choose to go off from FDA’s approved uses of drugs. The easy-to-understand feature of the package insert and its benefit for a patient’s understanding of the drug becomes futile when physicians exercise discretion and prescribe drugs for uses not written on the inserts. In sum, when a patient receives an off-label prescription, the insert provides them little benefit as it addresses benefits and risks related to a different use of the drug.

It is undisputed that drug manufacturers have less discretion regarding drug labeling than physicians. If a manufacturer included an off-label use on a drug’s label, and promoted the off-label use of the drug, the drug would be considered misbranded. The manufacturer would then be subject to liability[9] as manufacturing a misbranded product in interstate commerce is prohibited.[10] However, the effect of regulations on manufacturers still fail to eliminate the loophole in off-label prescription: in response to the regulations, the manufacturer usually receives FDA approval for only a few drug uses and then relies on physicians prescribing off-label uses to ensure their profitability.[11] In this way, the manufacturer avoids liability under regulation and furthers the loophole in off-label prescription by encouraging physicians to prescribe more off-label uses in order to expand the manufacturer’s market.[12]

Why are Off-Label Prescriptions Difficult to Regulate?

One of the main reasons behind the lack of regulation of off-label prescriptions is the FDA’s objective in ensuring effective delivery of health care. Physicians are encouraged to use discretion and judgment in order to tailor prescription to patients’ individual conditions.[13] Another reason is to increase efficiency in treatments by avoiding the lengthy FDA approval process.[14] Aspirin was widely prescribed to reduce the risk of heart attack long before it was FDA-approved for this purpose; off-label prescriptions have also been proven effective in treatment of cancer, and off-label therapies have prolonged the lives of AIDS patients.[15] Another concern is drug prices in the United States, and promoting off-label uses has been found to help reduce drug prices as increased sales volume enables drug companies to lower their prices.[16] Indeed, off-label prescription has become a mainstream of medicine: “the FDA has long tolerated off-label drug use and has disclaimed any interest in regulating physicians’ prescribing practices.”[17] Today it is unclear whether the agency even has jurisdiction to regulate off-label prescription of drugs.[18]

In sum, there is clear guidance on the labeling of prescription drugs as a result of FDA regulation. However, because of difficulties in enforcement, the custom and widely accepted practice of off-label prescriptions and the inherent benefit of off-label prescription, the effects of the regulation are not as effective as what was firstly planned and proposed.

Notes

[1] The FDA Announces New Prescription Drug Information Format, U.S. Food & Drug Adm’ (Dec. 04 2015) https://www.fda.gov/drugs/laws-acts-and-rules/fda-announces-new-prescription-drug-information-format.

[2] Id.

[3] Id.

[4] Margaret Z. Johns, Informed Consent: Requiring Doctors to Disclose Off-Label Prescriptions and Conflicts of Interest, 58 Hastings L.J. 967, 968 https://plus.lexis.com/document?crid=35364c11-2939-4e58-bceb-dab7ae8f0154&pddocfullpath=%2Fshared%2Fdocument%2Fanalytical-materials%2Furn%3AcontentItem%3A4P0W-GY20-00CW-906B-00000-00&pdsourcegroupingtype=&pdcontentcomponentid=7341&pdmfid=1530671&pdisurlapi=true.

[5] Lisa E. Smilan, The off-label loophole in the psychopharmacologic setting: prescription of antipsychotic drugs in the nonpsychotic patient population, 30 Health Matrix 233, 240 (2020), https://plus.lexis.com/document/?pdmfid=1530671&crid=367cf8ad-295e-4f14-97fa-737618718d61&pddocfullpath=%2Fshared%2Fdocument%2Fanalytical-materials%2Furn%3AcontentItem%3A64BT-RR31-JWBS-61KV-00000-00&pdworkfolderid=5506aeec-9540-4837-89f0-5a1acfd81d8b&pdopendocfromfolder=true&prid=1d42abd0-b66e-43af-a61a-0d1fb94180f5&ecomp=gdgg&earg=5506aeec-9540-4837-89f0-5a1acfd81d8b#.

[6] Supra note 4.

[7] Sigma-Tau Pharms. v. Schwetz, 288 F.3d 141, 148, https://plus.lexis.com/document?crid=7d2a2b00-13ad-4953-968e-82a28724aa00&pddocfullpath=%2Fshared%2Fdocument%2Fcases%2Furn%3AcontentItem%3A45RF-5H50-0038-X1PB-00000-00&pdsourcegroupingtype=&pdcontentcomponentid=6388&pdmfid=1530671&pdisurlapi=true.

[8] Supra note 1.

[9] 21 CFR 201.5, https://plus.lexis.com/document/?pdmfid=1530671&crid=e02a99fb-be65-4525-b83c-a167f3e21b93&pddocfullpath=%2Fshared%2Fdocument%2Fadministrative-codes%2Furn%3AcontentItem%3A603K-BXD1-DYB7-W30Y-00000-00&pdcontentcomponentid=5154&pdworkfolderlocatorid=NOT_SAVED_IN_WORKFOLDER&prid=ff2b7e20-9dab-49b0-8385-627c16ee0ba2&ecomp=vfbtk&earg=sr2.

[10] 21 CFR 801.4, https://plus.lexis.com/document/?pdmfid=1530671&crid=721a586d-52a4-4228-b0c3-c464a77d6e6a&pddocfullpath=%2Fshared%2Fdocument%2Fadministrative-codes%2Furn%3AcontentItem%3A638R-X4S3-GXJ9-32FV-00000-00&pdcontentcomponentid=5154&pdworkfolderlocatorid=NOT_SAVED_IN_WORKFOLDER&prid=ff2b7e20-9dab-49b0-8385-627c16ee0ba2&ecomp=vfbtk&earg=sr6.

[11]  Supra note 4.

[12] Id.

[13]   Supra note 7.

[14]   Supra note 4.

[15]  Id.

[16] Supra note 4, at 981.

[17] ​​Kaspar J. Stoffelmayr, Products Liability And “Off-label” Uses Of Prescription Drugs, 63 U. Chi. L. Rev. 275, 279, https://plus.lexis.com/document?crid=a2181ffc-7f3e-4bce-b82e-08ba9111194f&pddocfullpath=%2Fshared%2Fdocument%2Fanalytical-materials%2Furn%3AcontentItem%3A3S3V-4CF0-00CV-K03W-00000-00&pdsourcegroupingtype=&pdcontentcomponentid=7358&pdmfid=1530671&pdisurlapi=true.

[18]  Id.

Target Number One, the Consequences of Being the Best

November 12, 2022
Internet, Litigation, Torts Law

Ben Lauter, MJLST Staffer

The World of Chess

Since 2013, Norwegian Magnus Carlsen has been the reigning World Champion in chess. This achievement was not shocking to many; Magnus has been an elite chess prodigy and Grandmaster since the age of thirteen (nine years before his eventual champion title). Many regard Magnus as the best chess player ever, surpassing the legend of Fischer and Kasparov[1], two former great world champions. During Kasparov’s reign, he drew, or tied, Magnus in a classical game[2] of chess when Magnus was just thirteen. With this being said, it seems impossible to quantify the talent and genius that Magnus possesses and continues to refine in chess. However, that is exactly what the ELO rating system intends to do.

An ELO rating is a calculation of a chess player’s current skill level. Magnus boasts the highest classical ELO rating ever to be retained: 2882. Along the way to receiving this all-time high was a period of time spanning nearly two and a half years where Magnus did not lose a single classical game, winning 125 straight. All of this is to say, Magnus Carlsen is an unstoppable force in chess. However, on September 4th, 2022, Magnus played a game that would snap his then current 53 game winning streak. On that date he lost to a 19-year-old American at the St. Louis based Sinquefield Cup Tournament, Hans Niemann, a San Francisco born prodigy currently ranked as the 49th best player in the world with an ELO rating of 2688.

The Match

This match had anything but a quiet result, despite the silence in the interviews afterwards. All that was said from the reigning World Champion was a tweet stating that Magnus would be withdrawing from the tournament, a measure that is near unprecedented from a World Champion at such a major world tournament. With that tweet, a clip was attached of the famous soccer (football) manager, Jose Mourinho, saying “If I speak, I will be in big trouble.” The chess world speculated that this was Magnus’s informal way of accusing the teenage Hans of cheating in an “over the board” chess match. A conjecture of which the chess world has not yet made peace, with article after article, interview after interview, and Grandmaster after Grandmaster giving their two cents.

There were many aftershocks to Magnus’s tweet, but it seems that the legal ones, namely a defamation case for slander or libel, may be the worst for Magnus. For the past several weeks Hans Niemann has been put under the magnifying glass. He has faced harassment, attacks on his character, and irreparable reputational damage. Yet, Magnus has still failed to present any evidence as to why he withdrew or sent that tweet out to the world and has not yet clarified or disclaimed any of the rumors that shadow Hans.
For a while, it looked like Hans would simply have actions and innuendos as his evidence in a slander or libel case. Then, after an online chess tournament that both Magnus and Hans were participants in, Magnus put out his official position on the matter. Magnus declared that on top of cheating in his match in St. Louis, Hans was a serial chess cheater and should be punished proportionately to the crime he committed. In Magnus’s declaration, he said that he believed his accusation whole-heartedly and would never participate in an invitational event in which Hans plays again. Throughout the rest of the statement Magnus provided zero evidence of the alleged cheating and stated he could not release his evidence without the approval of the player that he accused.

Consequences

There are two massive consequences likely to result from Magnus’s statement. The first is that Han’s professional career will likely be in ruins. Invitationals are a priority for top ranked chess professionals, allowing them to play in official matches and record status for their rating in addition to receiving prize money. If an invitational is going to have to choose between a candidate for the best player of all time, Magnus, and a rising teenager, Hans, there might not be a long discussion. The second consequence is that because no evidence has been released to validate the statements that Magnus made based on his gut feeling, Hans may have a case for slander or libel.

There are four elements to prove in a slander case. The plaintiff must show that there was a false statement made purporting to be fact, a publication of that statement to a third person, fault amounting to at least negligence, and damages incurred. Two of these elements are quite clear and likely provable; there was publication of a statement and there were damages to Han’s reputation. The other two elements require further analysis. The third element related to fault asks one to look to Magnus’s state of mind when he made his statements and find evidence that he did so to tarnish Han’s name, or was at the very least negligent in making the statements, to fulfill a prima facie case for slander. This standard is notoriously hard to prove and will undoubtedly act as a roadblock to a slander case. However, it will likely be even harder for Hans to prove the first element, that the statement was false purporting to be fact. This element causes an issue because of the difficulty in proving that something that didn’t happen, didn’t happen. Specifically, Hans would have to show that he did not cheat in order to prove that Magnus’s cheating accusation was false.

Further complicating the issue is surfacing evidence from other sources making Magnus’s claim of cheating more believable. Statistical analysis of Han’s performances show that he has been playing games with computer moves 90% of the time or more, compared to the likes of Fischer, Kasparov, or Magnus who are only around 70% during their all-time peaks, and to traditional 2700 ELO rated Grandmasters who average between 50%-60%. Reports indicate that based on Han’s last 18 months of performance the chance that he played games at the rate he had without computer assistance is one in over 60,000. Without being able to prove that Magnus’s statements are at the least unlikely true, Hans will likely fail to prove slander and his career will likely be derailed after the events of September.

Notes

[1]  Kasparov is the longest reigning World Champion to date.

[2] A “Classical Game” is a time format of chess that allows for 120 minutes of play per person for the first forty moves; it allows for the deepest level of consideration on every move. As a result, classical games of chess are an incredibly accurate and sound measure of a player’s talent. They are used to determine the World Champion every two years.

Electric Vehicles: The Path of the Future or a Jetson-Like Fantasy?

November 6, 2022
Administrative Law, Climate Change, Energy Law, Industry, Infrastructure, Social Welfare, Supply Chain, Transportation

James Challou, MJLST Staffer

Last week President Biden contributed to the already growing hype behind electric vehicles when he heralded them as the future of transportation. Biden touted that $7.5 billion from last year’s infrastructure law, Public Law 117-58, would be put toward installing electric vehicle charging stations across the United States. This mass rollout of electric vehicle chargers, broadly aimed to help the US meet its goal of being carbon neutral by 2050, constitutes an immediate effort by the Biden administration to tackle pollution in the sector responsible for the largest share of the nation’s greenhouse gas emissions: transportation. The administration’s short-term goal is to install half a million chargers by 2030. However, not all are as confident as President Biden that this movement will be efficacious.

The “Buy America” Obstacle

Despite President Biden’s enthusiasm for this commitment to funding widespread electric vehicle charging stations, many experts remain skeptical that supply can keep up with demand. Crucially, Public Law 117-58 contains a key constraint, dubbed the “Buy America” rule, that mandates federal infrastructure projects obtain at least 55% of construction materials, including iron and steel, from domestic sources and requires all manufacturing to be done in the U.S.

Although labor groups and steel manufacturers continue to push for these domestic sourcing rules to be enforced, other groups like automakers and state officials argue that a combination of inflation increasing the cost of domestic materials and limited domestic production may hamstring the push towards electric vehicle charging accessibility altogether. One state official stated, “A rushed transition to the new requirements will exacerbate delays and increase costs if EV charging equipment providers are forced to abruptly shift component sourcing to domestic suppliers, who in turn may struggle with availability due to limited quantities and high demand.”

Proponents of a slower implementation offer a slew of different solutions ranging from a temporary waiver of the Buy America rules until domestic production can sustain the current demand, to a waiver of the requirements for EV chargers altogether. The Federal Highway Administration, charged with oversight of the EV charger program, proposed an indeterminate transitional period waiver of the Buy America rules until the charger industry and states are prepared to comply with requirements.

Domestic Manufacturer Complications

Domestic manufacturers are similarly conflicted about the waiver of the Buy America rules, with some thinking they may not be able to meet growing demand. While many companies predict they can meet Buy America production requirements in the future, the Federal Highway Administration specified in its waiver proposal that a mere three manufacturers, all based in California, presently believe they have existing fast charger systems that comply with Buy America requirements.

Predictably, the waiver proposal is divisive amongst domestic manufacturers. Some companies are onboard with the waiver and requested even more flexibility. This includes automakers like Ford and General Motors, who say that a process of moving all supply chains to the US demands more time, particularly at the scale necessary to match the surge in federal funding. This is largely seen as the most stakeholder friendly move as it offers companies the opportunity to use the duration of the waiver to see if a clear competitive market materializes which in turn benefits stakeholders.

Contrarily, others have asked for the waiver period to be shortened to allow them to quickly recoup their investments into Buy America compliant manufacturing upgrades. Some companies are even more aggressive; they oppose the waiver altogether and argue that the waiver would disadvantage manufacturers that intentionally put money into meeting the Buy America requirements. These companies posit that domestic manufacturing provides immediate benefits like augmenting supply chain security and electric-vehicle cybersecurity and warn against dependency on foreign governments for electrical steel needs. They further add that the Buy America rule will fuel growth in the US market and create manufacturing jobs. Labor groups and some lawmakers have adopted this stance as one lawmaker from Ohio commented, “[f]ederal agencies should implement the new Buy America provisions as quickly as possible to give American companies the certainty they need to move forward with investments.”

Other Implementation Difficulties

 The inclusion of the Buy America rule in this legislation is not the only aspect of the EV charging project that has generated considerable debate. Regional challenges pose more of an issue than originally anticipated. Although many states reported common potential hurdles like vandalism, range anxiety, supply chain, and electricity challenges, unique geographic problems have also arisen. For example, Nebraska reported in its plan that a shift to electric vehicles could decrease revenue collection from gas tax. Iowa aired out concerns about stations being hit by and damaged by snow plows. Michigan cited rodent damage as a potential concern. Finally, Oklahoma flagged political opposition to the chargers as a problem that could be both pervasive and fatal to the overall electric charging process.

Moreover, the law caught a substantial amount of flak for a curious decision to skip interstate rest stops when installing the EV charging stations. Although at first glance this would appear to be a pivotal oversight, it stems from a 1956 law that restricts commercial activity, in this case including electric car charging, at rest stops. The Federal Highway Administration, to alleviate these concerns, issued guidance that says electric vehicle chargers should be “as close to Interstate Highway Systems and highway corridors as possible” and generally no more than one mile from the exit. Furthermore, some of the older rest stops are excluded from the 1956 guidance. However, this is not enough to sate critics as many continue to fight for the 1956 law to be changed. They claim that the existence of the restriction drastically inconveniences drivers, planners, and vehicles while potentially creating a wealth disparity by forcing low-income families, who traditionally rely more on public rest areas, to avoid purchasing electric vehicles.

Conclusion

President Biden deserves to be lauded for his ambitious plan for electric vehicles which attempts to square combating the effects of climate change with preserving American manufacturing while simultaneously improving infrastructure. It is worth questioning whether the law would be more effective if it simply focused its efforts on one of these areas. As a commentator at the Cato Institute noted, “The goal of infrastructure spending should be better infrastructure — and if you’re trying to pursue policies to mitigate climate change, well that should be the overall goal … Anything that hinders that should be avoided.”  Only time will reveal the answer to this question.

Beef (and Residual Hormones?). It’s What’s for Dinner.

November 6, 2022
Agencies, Agriculture, Animal Law, Environment, FDA, Food and Agriculture, Health, Industry, Public Safety

Kira Le, MJLST Staffer

The beef industry in the United States has been using hormones, both natural and synthetic, to increase the size of cattle prior to slaughter for more than a century.[1] Capsules are implanted under the skin behind a cow’s ear and release specific doses of hormones over a period of time with the goal of increasing the animal’s size more quickly. Because the use of these hormones in the beef industry involves both drug regulation and food safety regulations, both the U.S. Food and Drug Administration (FDA) and the United States Department of Agriculture (USDA) are responsible for ensuring the safety of the practice and regulating its use.[2] According to the FDA, “scientific data” is used to establish “acceptable” safe limits for hormones in meat by the time it is consumed.[3] Agricultural science experts support the fact that the naturally-occurring hormones used in beef production, such as estrogen, are used in amounts much smaller than those that can be found in other common foods, such as eggs and tofu.[4] However, the debate within the scientific community, and between jurisdictions that allow the sale of hormone-treated beef (such as the United States) and those that have banned its importation (such as the European Union), is still raging on in 2022 and has led to significant distrust in the beef industry by consumers.[5] With the release of research earlier this year presenting opposing conclusions regarding the safety of the use of synthetic hormones in the beef industry, the FDA has a responsibility to acknowledge evidence suggesting that such practices may be harmful to human health.

Some defend the use of hormones in the beef industry as perfectly safe and, at this point, necessary to sustainably feed a planet on which the demand for meat continues to increase with a growing population. Others, such as the European Union and China, both of which have restricted the importation of beef from cattle implanted with growth-promoting hormones, argue that the practice threatens human health.[6] For example, a report out of Food Research Collaboration found that a routinely-used hormone in United States beef production posed a significant risk of cancer.[7] Such a finding is reminiscent of when, in the not-too-distant past, known carcinogen diethylstilbestrol (DES) was used in U.S. cattle production and led to dangerous meat being stocked on grocery store shelves.[8]

This year, research published in the Journal of Applied Animal Research discussed the effects that residual hormones left in beef and the environment have on human health in the United States.[9] Approximately 63% of beef cattle in the United States are implanted with hormones, most of which are synthetic.[10] Despite organizations and agencies such as the FDA assuring consumers that the use of these synthetic hormones in cattle production is safe, the residues that can be left behind may be carcinogenic and/or lead to reproductive or developmental issues in humans.[11] Furthermore, the National Residue Program (NRP), housed in the USDA, is not only the “only federal effort that routinely examines food animal products for drug residues,” but also only examines tissues not commonly consumed, such as the liver and kidney.[12] Researchers Quaid and Abdoun offer the example of Zeranol, a genotoxic synthetic hormone used in beef production in the United States that activates estrogen receptors, causing dependent cell proliferation in the mammary glands that may result in breast cancer.[13] They also noted the problem of residual hormones found in the environment surrounding cattle production locations, which have been found to reduce human male reproductive health and increase the risk of some endocrine cancers.[14]

Also this year, researchers published an article in the Journal of Animal Science claiming that despite the “growing concern” of the effects of residual hormones on human health, including the earlier onset of puberty in girls and an increase in estrogen-related diseases attributed to the excessive consumption of beef, research shows that cattle treated with hormones, “when given at proper administration levels, do not lead to toxic or harmful levels of hormonal residues in their tissues.”[15] The researchers concluded that the hormones have no effect on human health and are not the cause of disease.[16]

Perhaps it is time for the FDA to acknowledge and address the scientific disagreements on the safety of the use of hormones – synthetic hormones, especially – in beef production, as well as reassure consumers that players in the agriculture industry are abiding by safety regulations. Better yet, considering the currentness of the research, the inconsistency of the conclusions, and the seriousness of the issue, formal hearings – held by either the FDA or Congress – may be necessary to rebuild the trust of consumers in the U.S. beef industry.

Notes

[1] Synthetic Hormone Use in Beef and the U.S. Regulatory Dilemma, DES Daughter (Nov. 20, 2016), https://diethylstilbestrol.co.uk/synthetic-hormone-use-in-beef-and-the-us-regulatory-dilemma/.

[2] Id.

[3] Steroid Hormone Implants Used for Growth in Food-Producing Animals, U.S. Food and Drug Admin (Apr. 13, 2022), https://www.fda.gov/animal-veterinary/product-safety-information/steroid-hormone-implants-used-growth-food-producing-animals.

[4] Amanda Blair, Hormones in Beef: Myths vs. Facts, S.D. State Univ. Extension (July 13, 2022), https://extension.sdstate.edu/hormones-beef-myths-vs-facts.

[5] See Julia Calderone, Here’s Why Farmers Inject Hormones Into Beef But Never Into Poultry, Insider (Mar. 31, 2016), https://www.businessinsider.com/no-hormones-chicken-poultry-usda-fda-2016-3 (discussing the debate within the scientific community over whether the use of hormones in animals raised for human consumption is a risk to human health).

[6] New Generation of Livestock Drugs Linked to Cancer, Rafter W. Ranch (June 8, 2022), https://rafterwranch.net/livestock-drugs-linked-to-cancer/.

[7] Id.

[8] Synthetic Hormone Use in Beef and the U.S. Regulatory Dilemma, DES Daughter (Nov. 20, 2016), https://diethylstilbestrol.co.uk/synthetic-hormone-use-in-beef-and-the-us-regulatory-dilemma/.

[9] Mohammed M. Quaid & Khalid A. Abdoun, Safety and Concerns of Hormonal Application in Farm Animal Production: A Review, 50 J. of Applied Animal Rsch. 426 (2022).

[10] Id. at 428.

[11] Id. at 429–30.

[12] Id. at 430.

[13] Id. at 432–33.

[14] Id. at 435.

[15] Holly C. Evans et al., Harnessing the Value of Reproductive Hormones in Cattle Production with Considerations to Animal Welfare and Human Health, 100 J. of Animal Sci. 1, 9 (2022).

[16] Id.

New Congressional Bill to Fuel the Crypto Winter?

November 6, 2022
Agencies, Cryptocurrency, Economics, Industry, Regulatory, Securities Law, Tax

Shawn Zhang, MJLST Staffer

Cryptocurrency has experienced rapid growth over the past few years. Retail investors rushed into this market in hopes of amassing wealth. However, the current price of Bitcoin is sitting at roughly 30% of the all-time high. Investors dub this current state of the market as the “Crypto Winter”, where the entire crypto market is underperforming. This term signifies the current negative sentiment held by a large portion of the market towards cryptocurrency.

Cryptocurrency is a relatively new class of assets, bearing similarities to both currency and securities. Regulators are not quite sure of how to regulate this volatile market, and with the lack of regulations investors are more prone to risk. Nevertheless, legislators are still seeking to protect retail investors and the general public from risky investments, as they did with the 1933 Securities Act and 1934 Securities Exchange Act. The question is how? Well, the answer may be The Lummis-Gillibrand Responsible Financial Innovation Act which has recently been introduced into Congress. This bill seeks to “provide for responsible financial innovation and to bring digital assets within the regulatory perimeter.” If passed, this bill would address those concerns investors currently have with investing in the volatile crypto market.

Summary of the Bill

This legislation would set up the regulatory landscape by granting the Commodity Futures Trading Commission (CFTC) exclusive jurisdiction over digital assets, subject to several exclusions. One of the exclusions being that when the asset is deemed a security, the Securities and Exchange Commission (SEC) will gain jurisdiction and providers of digital asset services will then be required to provide disclosures. The bill would also require the Internal Revenue Service to issue regulations clarifying issues of digital assets and eliminate capital gains taxes through a de minimis exclusion for cryptocurrencies used to buy up to $200 of goods and services per transaction. Moreover, it would also allow crypto miners to defer income taxes on digital assets earned while mining or staking until they dispose of the assets.

Commodity vs Security

So, what’s the difference between CFTC and SEC? The CFTC governs commodities and derivatives market transactions, while the SEC governs securities. The key difference that these classifications make are the laws under which they operate. The CFTC was created under the 1936 Commodities Exchange Act, while the SEC was created under the 1933 Securities Act and 1934 Securities Exchange Act. Hence, giving the CFTC primary jurisdiction means that cryptocurrency will primarily be governed under the 1936 Commodity Exchange Act. The biggest advantage (or what one may think of as a disadvantage) of this Act is that commodities are generally more lightly regulated than securities. Under the 33’ act and 34’ act, securities are thoroughly regulated via disclosures and reports to protect the public. Issuers of securities must comply with a large set of regulations (which is why IPOs are expensive). This could be a win for crypto, as crypto was intended to be “decentralized” rather than heavily regulated. Though having some regulations may help invoke public trust in this class of assets and potentially increase the total number of investors, which may be a bigger win.

The question ends up being what level of regulation and protection is appropriate? On the one hand, applying heavy handed regulations may not be effective, and in fact might encourage black market activity. This may lead to tech savvy investors detaching their real life identity from the world of crypto and using their money elsewhere through the blockchain networks. On the other hand, investors hate uncertainty. Markets react badly when there is “fear, uncertainty, and doubt.” By solidifying the jurisdiction of CFTC on cryptocurrency, both investors and issuers may feel more at ease rather than wonder what regulations they must follow. As a comparison, oil, gold, and futures are also regulated by the CFTC rather than the SEC, and they seem to be doing fine on the exchanges.

Tax Clarifications & Incentives

Clarifications are always welcome in the complex world of federal taxes. Uncertainty can result in investors avoiding a class of assets purely due to the complexity of its tax consequences. Moreover, investors may be unexpectedly hit with a tax bill that was different from what they expected due to ambiguity or lack of clarity in the statutes. Thus, clarifications under the proposed Act would likely make lives easier for investors in this space.

Tax often incentivizes certain investor actions. For example, capital gains tax incentivizes investors to hold their investments for longer than a year in order to reduce their taxes. Tax incentives also often have policy rationales behind them, like the capital gain tax incentive aims to promote long term investment rather than short term speculation. This indirectly protects investors from short term fluctuations in the market, and also keeps more money in the economy for longer.

The proposed Act would eliminate capital gains tax for crypto used to purchase goods and services up to $200. That’s $200 of untaxed money that could be spent without increasing an investor’s tax liability. This would likely encourage people to conduct at least some transactions in crypto, and thus further legitimize the asset class. People often doubt the real world use of cryptocurrencies, but if this Act can encourage people to utilize and accept cryptocurrencies in everyday transactions, it may increase confidence in the asset class.

Conclusion

The Lummis-Gillibrand Responsible Financial Innovation Act could be a big step towards further adoption and legitimization of crypto. Congress giving primary jurisdiction to the CFTC is likely the better choice, as it strikes a balance between protecting consumers while not having too much regulation. Regardless of whether this will have a positive impact on the current market or not, Congress is at least finally signaling that they do see Crypto as a legitimate class of asset.

Only Humans Are Allowed: Federal Circuit Says No to “AI Inventors”

October 26, 2022
Artificial Intelligence, Intellectual Property, Inventions, New Technology, Patents

Vivian Lin, MJLST Staffer

On August 5, 2022, the U.S. Court of Appeals for the Federal Circuit affirmed the U.S. District for the Eastern Division of Virginia’s decision that artificial intelligence (AI) cannot be an “inventor” on a patent application,[1] joining many other jurisdictions in confirming that only a natural person can be an “inventor”.[2] Currently, South Africa remains the only jurisdiction that has granted Dr. Stephan Thaler’s patent naming DABUS, an AI, as the sole inventor of two patentable inventions.[3] With the release of the Federal Circuit’s opinion refusing to recognize AI as an inventor, Dr. Thaler’s fight to credit AI for inventions reaches a plateau. 

DABUS, formally known as Device for the Autonomous Bootstrapping of Unified Sentience, is an AI-based creativity machine created by Dr. Stephan Thaler, the founder of the software company Imagination Engine Inc. Dr. Thaler claimed that DABUS independently invented two patentable inventions: The Factual Container and the Neural Flame. For the past few years, Dr. Thaler has been in battle with patent offices around the world trying to receive patents for these two inventions. Until this date, every patent office, except one,[4] has refused to grant the patents on the grounds that the applications do not name a natural person as the inventor. 

The inventor of a patent being a natural person is a legal requirement in many jurisdictions. The recent Federal Circuit opinion ruled mainly based on statutory interpretation, arguing that the text is clear in requiring a natural person to be the inventor.[5] Though there are many jurisdictions that have left the term “inventor” undefined, it seems to be a general agreement that an inventor should be a natural person.[6]

Is DABUS the True Inventor?

There are many issues centered around AI inventorship. The first is whether AI can be the true inventor, and subsequently take credit for an invention, even though a human created the AI itself. Here it becomes necessary to inquire into whether there was human intervention during the discovery process, and if so, what type of intervention was involved. It might be the case that a natural human was the actual inventor of a product while AI only assisted in carrying out that idea. For example, when a developer designed the AI with a particular question in mind and carefully selected the training data, the AI is only assisting the invention while the developer is seen as the true inventor.[7] In analyzing the DABUS case, Dr. Rita Matulionyte, a senior lecturer at Macquarie Law School in Australia and an expert in intellectual property and information technology law, has argued that DABUS is not the true inventor because Dr. Thaler’s role in the inventions was unquestionable, assuming he formulated the problem, developed the algorithm, created the training date, etc.[8] 

However, it is a closer question when both AI and human effort are important for the invention. For example, AI might identify the compound for a new drug, but to conclude the discovery, a scientist still has to test the compound.[9] The U.S. patent law requires that the “inventor must contribute to the conception of the invention.”[10] Further defined, conception is “the formation in the mind of the inventor, of a definite and permanent idea of the complete and operative invention, as it is hereafter to be applied in practice.”[11] In the drug discovery scenario, it is difficult to determine who invented the new drug. Neither the AI developers nor the scientists fit the definition of “inventor”: The AI developers and trainers only built and trained the algorithm without any knowledge of the potential discovery while the scientists only confirmed the final discovery without contributing to the development of the algorithm or the discovery of the drug.[12] In this scenario, it is likely the AI did the majority of the work and made the important discovery itself, and should thus be the inventor of the new compound.[13]

The debate on who is the true inventor is important because mislabeling the inventor can cause serious consequences. Legally, improper inventorship attribution may cause a patent application to be denied, or it may lead to the later invalidation of a granted patent. Practically speaking, human inventors are able to take credit for their invention and that honor comes with recognition which may incentive future creative inventions. Thus, a misattribution may harm human inventiveness as true inventors could be discouraged by not being recognized for their contributions. 

Should AI-Generated Inventions be Patentable?

While concluding that AI is the sole inventor of an invention may be difficult as outlined in the previous section, what happens when AI is found to be the true, sole inventor? Society’s discussion on whether AI inventions should be patented focuses mostly on policy arguments. Dr. Thaler and Ryan Abbott, a law professor and the lead of Thaler’s legal team, have argued that allowing patent protection for AI-generated inventions will encourage developers to invest time in building more creative machines that will eventually lead to more inventions in the future.[14] They also argued that crediting AI for inventorship will protect the rights of human inventors.[15] For example, it cuts out the possibility of one person taking credit for another’s invention, which often happens when students participate in university research but are overlooked on patent applications.[16] Without patent applicability, the patent system’s required disclosure of inventions, it is very likely that owners of AI will keep inventions secret and privately benefit from the monopoly for however long it takes the rest of society to figure it out independently.[17] 

Some critics argue against Thaler and Abbott’s view. For one, they believe that AI at its current stage is not autonomous enough to be an inventor and human effort should be properly credited.[18] Even if AI can independently invent, its inventions should not be patentable because once it is, there will be too many patented inventions by AI in the same field owned by the same group of people who have access to these machines.[19] That will prevent smaller companies from entering into this field, having a negative effect on human inventiveness.[20]  Finally, there has been a concern that not granting patents to AI-invented creations will let AI owners keep the inventions as trade secrets, leading to a potential long-term monopoly. However, that might not be a big concern as inventions like the two created by DABUS are likely to be easily reverse engineered once they reach the market.[21]

Currently, Dr. Thaler plans to file appeals in each jurisdiction that has rejected his application and aims to seek copyright protection as an alternative in the U.S. It is questionable that Dr. Thaler will succeed on those appeals, but if he ever does, it will likely result in major changes to patent systems around the world. Even if most jurisdictions today forbid AI from being classified as an inventor, with the advancement of technology the need to address this issue will become more and more pressing as time goes on. 

Notes

[1] Thaler v. Vidal, 43 F.4th 1207 (Fed. Cir. 2022).

[2] Ryan Abbott, July 2022 AIP Update Around the World, The Artificial Inventor Project (July 10, 2022), https://artificialinventor.com/867-2/.

[3] Id.

[4] South Africa’s patent law does not have a requirement on inventors being a natural person. Jordana Goodman, Homography of Inventorship: DABUS And Valuing Inventors, 20 Duke L. & Tech. Rev. 1, 17 (2022).

[5] Thaler, 43 F.4th at 1209, 1213.

[6] Goodman, supra note 4, at 10.

[7] Ryan Abbott, The Artificial Inventor Project, WIPO Magazine (Dec. 2019), https://www.wipo.int/wipo_magazine/en/2019/06/article_0002.html.

[8] Rita Matulionyte, AI as an Inventor: Has the Federal Court of Australia Erred in DABUS? 12 (2021), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3974219.

[9] Susan Krumplitsch et al. Can An AI System Be Named the Inventor? In Wake Of EDVA Decision, Questions Remain, DLA Piper (Sept. 13, 2019), https://www.dlapiper.com/en/us/insights/publications/2021/09/can-an-ai-system-be-named-the-inventor/#11

[10] 2109 Inventorship, USPTO, https://www.uspto.gov/web/offices/pac/mpep/s2109.html (last visited Oct. 8, 2022).

[11] Hybritech, Inc. v. Monoclonal Antibodies, Inc., 802 F.2d 1367, 1376 (Fed. Cir. 1986).

[12] Krumplitsch et al., supra note 9.

[13] Yosuke Watanabe, I, Inventor: Patent Inventorship for Artificial Intelligence Systems, 57 Idaho L. Rev. 473, 290.

[14] Abbott, supra note 2.

[15] Id.

[16] Goodman, supra note 4, at 21.

[17] Abbott, supra note 2.

[18] Matulionyte, supra note 8, at 10–14.

[19] Id. at 19.

[20] Id.

[21] Id. at 18.



Whisky Is for Drinking, Water Is for Fighting

October 25, 2022
Administrative Law, Climate Change, Environment, Environmental Justice, Environmental Law, EPA, Public Health

Poojan Thakrar, MJLST Staffer

The American Southwest often lives in our imagination as an arid environment with tumbleweeds strewn about. This hasn’t been truer in centuries, as the Colorado River is facing its worst drought in 1200 years, in large part because of climate change.[1] The Colorado River is the region’s most important river, providing drinking water to about 40 million people.[2] In June, the federal government gave the seven states[3] that rely on the water two months to draft a water conservation agreement or risk federal intervention. The states blew past that deadline and the DOI’s Bureau of Reclamation imposed cuts to water usage as high as 21%.[4]

The History of the Modern Colorado River Allocation System

In 1922, the Colorado River Compact allocated an annual amount of 15 million acre-feet (maf) evenly between the Upper and Lower Basin states.[5] One acre-foot represents the volume of water that covers one acre in one foot of water and is about the amount of water that a family of four uses annually.[6] However, relying on 15 maf was already problematic; data from the past three centuries showed that the Colorado River has average flows of 13.5 maf, with some years as low as 4.4 maf.[7] 

Moreover, Arizona refused to sign this compact, arguing that water should be allocated amongst individual states instead of between river basins.[8] Tensions flared in 1935 as Arizona moved National Guard troops to the California border in protest of a new dam.[9] Arizona finally ratified the compact in 1944, but the disagreements were far from over.[10] 

Arizona also brought a case to the Supreme Court for a related dispute, asking the Supreme Court to allocate how each basin splits water according to the Boulder Canyon Project Act of 1928.[11] Originally filed in 1952, Arizona v. California was not resolved until a Supreme Court opinion in 1963.[12] In the end, the Supreme Court accepted the recommendations of a court-appointed Special Master, whose findings California disagreed with. Of the 7.5 maf allocated to the Lower River Basin, 4.4 maf was allocated to California, 2.8 maf to Arizona and 0.3 to Nevada.[13] The court affirmed each state’s use of their own tributary waters, which Arizona argued for.[14] The case also affirmed the Secretary of the Interior’s authority under the Boulder Canyon Project Act to allocate water amongst the states irrespective of their agreement to a compact.[15] Ultimately, this was a victory for Arizona. 

Colorado River water use has been less contentious since Arizona v. California. The Upper Basin states of Colorado, Utah, Wyoming, and New Mexico signed a contract to divide their 7.5 maf amongst themselves without the need for federal intervention.[16] However, because of comparatively less development in these Upper Basin states, they collectively only use 4.4 maf of their allocated 7.5 maf.[17] California has historically enjoyed the excess and has often historically surpassed its own allocation.[18]

Modern Water Allocation

Until this year, the seven Colorado River states have relied on voluntary agreements and cutbacks to manage water allocation. For example, in 2007, the states agreed to rules which decreased the amount of water that can be drawn from reservoirs when levels are low.[19] In 2019, they agreed to Drought Contingency Plans (DCPs) in the face of waning reservoir levels.[20] It was under this new DCP that the Bureau of Reclamation first announced a drought in August of 2021.[21] Later that December, the Lower Basin states were able to come to an agreement regarding the drought declaration to keep more water in Lake Mead, a reservoir on the Colorado.[22]

However, the December 2021 cutbacks were presumably not enough. In June of 2022, Bureau of Reclamation Commissioner Camille Calimlim Touton testified in front of the Senate Energy Committee about the dire situation on the Colorado.[23] She testified that Lake Powell and Lake Mead, both reservoirs on the Colorado, cannot sustain the current level of water deliveries.[24] Commissioner Tounton gave the seven states 60 days to agree how to conserve 2 to 4 maf.[25] 

Underlying this recent situation is the megadrought that the western United States has suffered since 2000.[26] The last 20 years have been the driest two decades in the past 1200 years.[27] The Colorado River states have become remarkably adept at conserving water in that time. For example, the Las Vegas basin’s population has grown by 750,000 in the past 20 years, but its water usage is down 26%.[28] Earlier this year, Los Angeles banned lawn watering to only one day a week, much to the chagrin of Southern California’s most famous residents.[29] 

Commissioner Tounton’s 60 day deadline came and went without an agreement.[30] During a speech on August 15th of this year, Commissioner Tounton mandated that the seven states have to cut their water usage by 1 maf, roughly the amount of water usage of four million people.[31] However, the cuts were not proportioned equally. Arizona was mandated to cut its water by 21% because of the old water agreements, while California was not required to make any.[32]

More recently on October 5th, several California water districts volunteered cuts of almost one-tenth of their total allocation.[33] California conditioned these cuts upon other states agreeing to similar reductions, as well as on incentives from the federal government.[34] California’s cuts are significant, representing roughly 0.4 maf of the 1 maf that Commissioner Tounton asked states to conserve in her August 15th statement.[35] This represents a bold, good-faith move considering California was not mandated to make any. However, there is no doubt that these ad hoc negotiations are unsustainable. As the drought continues, Colorado River water policy will have implications on how food is grown and where people live. The 40 million people that live in the American Southwest may see their day-to-day lives affected if a solution is not crafted. Ultimately, this situation is far from over as states are forced to come to grips with a new water and climate reality.

Notes

[1] The Journal, The Fight Over Water In The West, Wall Street Journal, at 00:50 (Aug. 23, 2022) (downloaded using Spotify).

[2] Luke Runyon, 7 states and federal government lack direction on cutbacks from the Colorado River, NPR (Aug. 27, 2022, 5:00 AM) https://www.npr.org/2022/08/27/1119550028/7-states-and-federal-government-lack-direction-on-cutbacks-from-the-colorado-riv.

[3] Wyoming, Colorado, Utah, and New Mexico are considered Upper Basin states and California, Arizona and Nevada are the Lower Basin states.

[4] The Journal, supra note 1, at 12:30.

[5] Joe Gelt, Sharing Colorado River Water: History, Public Policy and the Colorado River Compact, The University of Arizona (Aug. 1997), https://wrrc.arizona.edu/publications/arroyo-newsletter/sharing-colorado-river-water-history-public-policy-and-colorado-river.

[6] The Journal, supra note 1, at 8:08.

[7] Gelt, supra note 5.

[8] Id.

[9] Nancy Vogel, Legislation fixes borders wandering river created; Governors of Arizona, California sign bills to get back land the Colorado shifted to the wrong state, Contra Costa Times, Sept. 13, 2002.

[10] Gelt, supra note 5.

[11]  Arizona v. California, 373 U.S. 546 (1963).

[12] Supreme Court Clears the Way for the Central Arizona Project, Bureau of Reclamation https://www.usbr.gov/lc/phoenix/AZ100/1960/supreme_court_AZ_vs_CA.html.

[13] Arizona v. California, 373 U.S. 546, 565, 83 S. Ct. 1468, 1480 (1963).

[14] Id.

[15] Id.

[16] Gelt, supra note 5.

[17] Heather Sackett, Water managers set to talk about how to divide Colorado River, Colorado Times (Dec. 13, 2021) https://www.steamboatpilot.com/news/water-managers-set-to-talk-about-how-to-divide-colorado-river.

[18] Gelt, supra note 5.

[19] Lower Colorado River States Reach Agreement to Reduce Water Use, Renewable Natural Resources Foundation (Feb. 4, 2022) https://rnrf.org/2022/02/lower-colorado-river-states-reach-agreement-to-reduce-water-use/.

[20] Id.

[21] Id.

[22] Id.

[23] Marianne Goodland, Reclamation official tells Colorado River states to conserve up to 4 million acre-feet of water, Colorado Politics(June 15, 2020) https://www.coloradopolitics.com/energy-and-environment/reclamation-official-tells-colorado-river-states-to-conserve-up-to-4-million-acre-feet-of/article_376a907a-ece6-11ec-b0ba-6b2e72447497.html.

[24] Id.

[25] Id.

[26] Ben Adler, ‘Moment of reckoning:’ Federal official warns of Colorado River water supply cuts, Yahoo News (June 15, 2020) https://news.yahoo.com/moment-of-reckoning-federal-official-warns-of-colorado-river-water-supply-cuts-171955277.html.

[27] Id.

[28] The Journal, supra note 1, at 5:50.

[29] Id. at 6:10.

[30] Id. at 8:55.

[31] Id. at 10:05.

[32] Id.

[33] Marketplace, Why women have been left behind in the job recovery, American Public Media, at 11:35 (Oct. 6, 2022) (downloaded using Spotify).

[34] Id.

[35] Ian James, More water restrictions likely as California pledges to cut use of Colorado River supply, L.A. Times, (Oct. 6, 2022) https://www.latimes.com/california/story/2022-10-06/southern-california-faces-new-water-restrictions-next-year.

It’s Social Media – A Big Lump of Unregulated Child Influencers!

October 25, 2022
Administrative Law, Agencies, Entertainment, Industry, Internet, Regulatory, Social Media

Tessa Wright, MJLST Staffer

If you’ve been on TikTok lately, you’re probably familiar with the Corn Kid. Seven-year-old Tariq went viral on TikTok in August after appearing in an 85-second video clip professing his love of corn.[1] Due to his accidental viral popularity, Tariq has become a social media celebrity. He has been featured in content collaborations with notable influencers, starred in a social media ad for Chipotle, and even created an account on Cameo.[2] At seven-years-old, he has become a child influencer, a minor celebrity, and a major financial contributor for his family. Corn Kid is not alone. There are a growing number of children rising to fame via social media. In fact, today child influencers have created an eight-billion-dollar social media advertising industry, with some children generating as much as $26 million a year through advertising and sponsored content.[3] Yet, despite this rapidly growing industry, there are still very few regulations protecting the financial earnings of children entertainers in the social media industry.[4]

What Protects Children’s Financial Earnings in the Entertainment Industry?

Normally, children in the entertainment industry have their financial earnings protected under the California Child Actor’s Bill (also known as the Coogan Law).[5] The Coogan Law was passed in 1939 by the state of California in response to the plight of Jackie Coogan.[6] Coogan was a child star who earned millions of dollars as a child actor only to discover upon reaching adulthood that his parents had spent almost all of his money.[7] Over the years the law has evolved, and today it upholds that earnings by minors in the entertainment industry are the property of the minor.[8] Specifically, the California law creates a fiduciary relationship between the parent and child and requires that 15% of all earnings must be set aside in a blocked trust.[9]

What Protections do Child Social Media Stars Have? 

Social media stars are not legally considered to be actors, so the Coogan Law does not apply to their earnings.[10] So, are there other laws protecting these social media stars? The short answer is, no. 

Technically, there are laws that prevent children under the age of 12 from using social media apps which in theory should protect the youngest of social media stars.[11] However, even though these social media platforms claim that they require users to be at least thirteen years old to create accounts on their platforms, there are still ways children end up working in content creation jobs.[12] The most common scenario is that parents of these children make content in which they feature their children.[13] These “family vloggers” are a popular genre of YouTube videos where parents frequently feature their children and share major life events; sometimes they even feature the birth of their children. Often these parents also make separate social media accounts for their children which are technically run by the parents and are therefore allowed despite the age restrictions.[14] There are no restrictions or regulations preventing parents from making social media accounts for their children, and therefore no restriction on the parents’ collection of the income generated from such accounts.[15]

New Attempts at Legislation 

So far, there has been very little intervention by lawmakers. The state of Washington has attempted to turn the tide by proposing a new state bill that attempts to protect children working in social media.[16] The bill was introduced in January of 2022 and, if passed, would offer protection to children living within the state of Washington who are on social media.[17] Specifically, the bill introduction reads, “Those children are generating interest in and revenue for the content, but receive no financial compensation for their participation. Unlike in child acting, these children are not playing a part, and lack legal protections.”[18] The bill would hopefully help protect the finances of these child influencers. 

Additionally, California passed a similar bill in 2018.[19] Unfortunately, it only applies to videos that are longer than one hour and have direct payment to the child.[20] What this means is that a child who, for example, is a Twitch streamer that posts a three-hour livestream and receives direct donations during the stream, would be covered by the bill; however, a child featured in a 10-minute YouTube video or a 15-second TikTok would not be financially protected under the bill.

The Difficulties in Regulating Social Media Earnings for Children

Currently, France is the only country in the world with regulations for children working in the social media industry.[21] There, children working in the entertainment industry (whether as child actors, models, or social media influencers) have to register for a license and their earnings must be put into a dedicated bank account for them to access when they’re sixteen.[22] However, the legislation is still new and it is too soon to see how well these regulations will work. 

The problem with creating legislation in this area is attributable to the ad hoc nature of making social media content.[23] It is not realistic to simply extend existing legislation applicable to child entertainers to child influencers[24] as their work differs greatly. Moreover, it becomes extremely difficult to attempt to regulate an industry when influencers can post content from any location at any time, and when parents may be the ones filming and posting the videos of their children in order to boost their household income. For example, it would be hard to draw a clear line between when a child is being filmed casually for a home video and when it is being done for work, and when an entire family is featured in a video it would be difficult to determine how much money is attributable to each family member. 

Is There a Solution?

While there is no easy solution, changing the current regulations or creating new regulations is the clearest route. Traditionally, tech platforms have taken the view that governments should make rules and then they will then enforce them.[25] All major social media sites have their own safety rules, but the extent to which they are responsible for the oversight of child influencers is not clearly defined.[26] However, if any new regulation is going to be effective, big tech companies will need to get involved. As it stands today, parents have found loopholes that allow them to feature their child stars on social media without violating age restrictions. To avoid these sorts of loopholes to new regulations, it will be essential that big tech companies work in collaboration with legislators in order to create technical features that prevent them.

The hope is that one day, children like Corn Kid will have total control of their financial earnings, and will not reach adulthood only to discover their money has already been spent by their parents or guardians. The future of entertainment is changing every day, and the laws need to keep up. 

Notes

[1] Madison Malone Kircher, New York Times (Online), New York: New York Times Company (September 21, 2022) https://www.nytimes.com/2022/09/21/style/corn-kid-tariq-tiktok.html.

[2] Id.

[3] Marina Masterson, When Play Becomes Work: Child Labor Laws in the Era of ‘Kidfluencers’, 169 U. Pa. L. Rev. 577, 577 (2021).

[4] Coogan Accounts: Protecting Your Child Star’s Earnings, Morgan Stanley (Jan. 10, 2022), https://www.morganstanley.com/articles/trust-account-for-child-performer.

[5] Coogan Law, https://www.sagaftra.org/membership-benefits/young-performers/coogan-law (last visited Oct. 16, 2022).

[6] Id.

[7] Id.

[8] Cal. Fam. Code § 6752.

[9] Id.

[10] Morgan Stanley, supra note 4.

[11] Sapna Maheshwari, Online and Making Thousands, at Age 4: Meet the Kidfluencers, N.Y. Times, (March 1, 2019) https://www.nytimes.com/2019/03/01/business/media/social-media-influencers-kids.html.

[12] Id.

[13] Id.

[14] Id.

[15] Id.

[16] Katie Collins, TikTok Kids Are Being Exploited Online, but Change is Coming, CNET (Aug. 8, 2022 9:00 AM), https://www.cnet.com/news/politics/tiktok-kids-are-being-exploited-online-but-change-is-coming/.

[17] Id.

[18] Id.

[19] E.W. Park, Child Influencers Have No Child Labor Regulations. They Should, Lavoz News (May 16, 2022) https://lavozdeanza.com/opinions/2022/05/16/child-influencers-have-no-child-labor-regulations-they-should/.

[20] Id.

[21] Collins, supra note 19.

[22] Id.

[23] Id.

[24] Id.

[25] Id.

[26] Katie Collins, TikTok Kids Are Being Exploited Online, but Change is Coming, CNET (Aug. 8, 2022 9:00 AM), https://www.cnet.com/news/politics/tiktok-kids-are-being-exploited-online-but-change-is-coming/.

Making Moves on Marijuana: President Biden and Minnesota Update Marijuana Laws in 2022

October 23, 2022
Agencies, Drug Policy, Employment Law, FDA, Food and Drug Law, Health, Public Health, Regulatory

Emma Ehrlich, MJLST Staffer

Federal Pardoning 

Earlier this month, President Biden announced that he would be pardoning anyone with a federal conviction due to simple marijuana possession charges. This will affect approximately 6,500 people on the federal level, plus thousands of others who were convicted in the District of Columbia. However, this pardon does not cover anyone involved in the actual sale of marijuana or anyone convicted under state possession laws, meaning it affects only a subsection of those who have been convicted of marijuana related charges. The administration’s goal was to give a clean slate to those who were struggling to find housing or employment due to a possession charge, and to encourage state legislatures to do the same. 

The second half of President Biden’s announcement was to task the Attorney General with reviewing the federal government’s categorization of marijuana as a Schedule 1 drug, which President Biden pointed out is currently the same categorization as heroin. Drugs are supposed to be assigned to schedules based on their medical uses and addictive qualities. The Drug Enforcement Agency (“DEA”) currently categorizes marijuana as a “drug[] with no currently accepted medical use and a high potential for abuse.” The U. S. Food and Drug Administration (“FDA”) explains on their website, almost in a regretful tone, that only four cannabis drugs have been approved by the FDA, one containing CBD and the other three containing synthetically derived THC. This categorization issue is not new, but because legislation regarding marijuana is changing rapidly federal agencies have had to play catch up with the law.  

Minnesota and Beyond 

Meanwhile, the state of Minnesota is still chugging along in terms of marijuana legalization. In July of this year, the state of Minnesota legalized the production and sale of edibles containing 5-mg of THC, which can now be purchased by adults in bags containing no more than 50-mg of THC. This sounds like good news, but many state residents are baffled at the lack of a tax provision in the new state law. The University of Maryland actually did a study on Minnesota’s potential for taxing cannabis, and determined that if the newly legalized edibles were taxed at the same rate as Michigan taxes, the state could have collected over $40 million. Given this high estimate, it is not out of the question that a tax on marijuana will be implemented in the future. 

Minnesotan employers were similarly not thrilled when the law passed as they felt ill equipped to update their drug policies. Employers “can bar workers from using, possessing, and being under the influence of THC during work hours or in the workplace,” as well as conduct “random drug testing for safety-sensitive positions” and “employees suspected of being intoxicated.” The gray area exists in the employer’s ability to hire and fire based on an applicant or employee’s use of marijuana outside of work. It is currently illegal to make hiring and firing decisions based on tobacco usage or alcohol consumption, and it is unclear if marijuana will be treated in the same manner. The added layer to marijuana testing is that a positive drug test for marijuana does not mean an employee consumed THC right before work since THC lingers in the body for so long. Thus, an employee could test positive for mairjuana at work even if they had used the drugs days ago and were no longer feeling its effects. Though the employee would have ingested the drug legally, they may not be considered for a job position or could be fired from a job they already hold. This is the type of issue that has led a number of municipalities in Minnesota to put a pause on the sale of the state legalized edibles. In contrast, California passed a law just last month protecting employees, apart from some exceptions, from being discriminated against based on their marijuana usage when not at work. What might be a little concerning is that California made recreational marijuana legal in 2016, and this law won’t go into effect until 2024, meaning there was an eight year gap in the legislation. Regardless, this may serve as the beginning of a pattern, pointing to what Minnesota may do down the line. 

In 2020 New Jersey passed a law legalizing recreational marijuana use which went into effect in April of this year. Similarly to California, part of the law protects workers from being discriminated against because of their marijuana use outside of work. However, Walmart and Sam’s Club have continued to administer drug tests to job applicants to search for traces of marijuana, a practice that has gotten them into legal trouble in New Jersey. Walmart is arguing that only the state Cannabis Regulatory Commission can enforce the new employment law, and that this case should be dismissed because it was brought by individuals. Courts in other states in which similar laws have been passed have issued decisions that oppose Walmart’s position, ruling that individual workers can sue under the law. It seems that Minnesota is not the only state that has enacted fuzzy recreational drug use laws that directly affect employers and employees. 

On the bright side of this employment confusion, many appreciate the baby step the Minnesota legislature has taken to legalize marijuana use. The state has been in dire need of updated marijuana legislation, and the hope is that continuing this legalization process will lessen the disparities between black and white arrests for marijuana possession. This change is necessary, because as of 2020 Minnesota was found to rank 8th in the United States for largest racial disparities in marijuana possession arrests. In 2021, the Minnesota Bureau of Criminal Apprehension released data showing that out of the over 6,000 marijuana related arrests made in the state, 90% were for simple possession charges, and a black person was almost five times more likely to be arrested for these types of charges than a white person. This statistic is down from almost eight times more likely back in 2010, but is still extremely present. 

In Conclusion

President Biden’s pardon is just a beginning step towards moving the US forward on marijuana legislation. Though states such as Minnesota are moving in the right direction by gradually legalizing recreational marijuana use, the laws are often unclear and lead to a multitude of logistical issues like those seen in the employment sector. Regardless, making continued progress is important to the U.S. for many reasons and is crucial for helping to lessen racial arrest disparities. Hopefully this pardon will have the effect the administration aimed for and will encourage more state legislatures to update their policies on marijuana usage.

 

 

Meta Faces Class Action Lawsuits Over Pixel Tool Data Controversy

October 22, 2022
Class Action, Cyber Security, Data, Data Privacy, Internet, Pharmaceuticals, Privacy, Social Media

Ray Mestad, MJLST Staffer

With a market capitalization of $341 billion, Meta Platforms is one of the most valuable companies in the world.[1] Information is a prized asset for Meta, but how that information is acquired continues to be a source of conflict. Their Meta “Pixel” tool is a piece of code that allows websites to track visitor activity.[2] However, what Meta does with the data after it is acquired may be in violation of a variety of privacy laws. Because of that, Meta is now facing almost fifty class action lawsuits due to Pixel’s use of data from video players and healthcare patient portals.[3]

What is Pixel?

Pixel is an analytical tool that tracks visitor actions on a website.[4] In theory, the actions that are tracked include purchases, registrations, cart additions, searches and more. This information can then be used by the website owners to better understand user behavior. Website owners can more efficiently use ad spend by tailoring ads to relevant users and finding more receptive users based on Pixel’s analysis.[5]

In the world of search engine optimization and web analysis tools like Pixel are common, and there are other sites, like Google Analytics, that provide similar functions. However, there are two key differences between these other tools and Pixel. First, Pixel has in some cases accidentally scraped private, identifiable information from websites. Second, Pixel can connect that information to the social profiles on their flagship website, Facebook. Whether intentionally or accidentally, Pixel has been found to have grabbed personal information beyond the simple user web actions it was supposed to be limited to and connected them to Facebook profiles.[6]

Pixel and Patient Healthcare Information

It’s estimated that, until recently, one third of the top 100 hospitals in the country used Pixel on their websites.[7] However, that number may decrease after Meta’s recent data privacy issues. Meta faced both criticism and legal action in the summer of 2022 for its treatment of user data on healthcare websites. Pixel incorrectly retrieved private patient information, including names, conditions, email addresses and more. Meta then targeted hospital website users with ads on Facebook, using the information Pixel collected from hospital websites and patient portals by matching user information with their Facebook accounts.[8] Novant Health, a healthcare provider, ran advertisements promoting vaccinations in 2020. They then added Pixel code to their website to evaluate the effectiveness of the campaign. Pixel proceeded to send private and identifiable user information to Meta.[9] Another hospital (and Meta’s co-defendant in the lawsuit), the University of California San Francisco and Dignity Health (“UCSF”), was accused of illegally gathering patient information via Pixel code on their patient portal. Private medical information was then distributed to Meta. At some point, it is claimed that pharmaceutical companies then gained access to this medical information and sent out targeted ads based thereon.[10] That is just one example – all in all, more than 1 million patients have been affected by this Pixel breach.[11] 

Pixel and Video Tracking

The problems did not stop there. Following its patient portal controversy, Meta again faced criticism for obtaining protected user data with Pixel, this time in the context of video consumption. There are currently 47 proposed class actions against Meta for violations of the Video Privacy Protection Act (the “VPPA”). The VPPA was created in the 1980’s to cover videotape and audio-visual materials. No longer confined to the rental store, the VPPA has now taken on a much broader meaning after the growth of the internet. 

These class actions accuse Meta of using the Pixel tool to take video user data from a variety of company websites, including the NFL, NPR, the Boston Globe, Bloomberg Law and many more. The classes allege that by collecting video viewing activity in a personally identifiable manner without consent (matching Facebook user IDs to the activity rather than anonymously), so Pixel users could target their ads at the viewers, Pixel violated the VPPA. Under the VPPA Meta is not the defendant in these lawsuits, but rather the companies that shared user information with Meta.[12]

Causes of Action

The relatively new area of data privacy is scarcely litigated by the federal government due to the lack of statutes protecting consumer privacy on the federal level. Because of that, the number of data protection civil litigants can be expected to continue to grow. [13] HIPAA is the Health Insurance Portability and Accountability Act, an act created in 1996 to protect patient information from disclosure without patient consent. In the patient portal cases, HIPAA actions would have to be initiated by the US government. Claimants are therefore suing Meta under consumer protection and other privacy laws like the California Confidentiality of Medical Information Act, the Federal Wiretap Act, and the Comprehensive Computer Data Access and Fraud Act instead.[14] These state Acts allow individuals to sue, when under Federal Acts like HIPPA, the Government may move slowly, or not at all. And in the cases of video tracking, the litigants may only sue the video provider, not Meta itself.[15] Despite that wrinkle of benefit to Meta, their involvement in more privacy disputes is not ideal for the tech giant as it may hurt the trustworthiness of Meta Platforms in the eyes of the public.

Possible Outcomes

If found liable, the VPPA violations could result in damages of $2,500 per class member.[16] Punitive damages for the healthcare data breaches could run in the millions as well and would vary state to state due to the variety of acts the claims are brought in violation of.[17] Specifically, in the UCSF data case class members are seeking punitive damages of $5 million.[18] One possible hang-up that may become an issue for claimants are arbitration agreements. If the terms and conditions of either hospital patient portals or video provider websites contain arbitration clauses, litigants may have difficulty overcoming them. On the one hand, these terms and conditions may be binding and force the parties to attend mandatory arbitration meetings. On the other hand, consumer rights attorneys may argue that consent needs to come from forms separate from online user agreements.[19] If more lawsuits emerge due to the actions of Pixel, it is quite possible that companies will move away from the web analytics tools to avoid potential liability. It remains to be seen whether the convenience and utility of Meta Pixel stops being worth the risk the web analytics tools present to websites.

Notes

[1] Meta Nasdaq, https://www.google.com/finance/quote/META:NASDAQ (last visited Oct. 21, 2022).

[2] Meta Pixel, Meta for Developers, https://developers.facebook.com/docs/meta-pixel/.

[3] Sky Witley, Meta Pixel’s Video Tracking Spurs Wave of Data Privacy Suits, (Oct. 13, 2022, 3:55 AM), Bloomberg Law, https://news.bloomberglaw.com/privacy-and-data-security/meta-pixels-video-tracking-spurs-wave-of-consumer-privacy-suits.

[4] Meta Pixel, https://adwisely.com/glossary/meta-pixel/ (last visited Oct. 21, 2022).

[5] Ted Vrountas, What Is the Meta Pixel & What Does It Do?, https://instapage.com/blog/meta-pixel.

[6] Steve Adler, Meta Facing Further Class Action Lawsuit Over Use of Meta Pixel Code on Hospital Websites, HIPPA Journal (Aug. 1, 2022), https://www.hipaajournal.com/meta-facing-further-class-action-lawsuit-over-use-of-meta-pixel-code-on-hospital-websites/.

[7] Id.

[8] Id.

[9] Bill Toulas, Misconfigured Meta Pixel exposed healthcare data of 1.3M patients, Bleeping Computer (Aug. 22, 2022, 2:16 PM), https://www.bleepingcomputer.com/news/security/misconfigured-meta-pixel-exposed-healthcare-data-of-13m-patients/.

[10] Adler, supra note 6.

[11] Toulas, supra note 9.

[12] Witley, supra note 3. 

[13] Id.

[14] Adler, supra note 6.

[15] Witley, supra note 3.

[16] Id. 

[17] Dave Muoio, Northwestern Memorial the latest hit with a class action over Meta’s alleged patient data mining, Fierce Healthcare (Aug. 12, 2022 10:30AM), https://www.fiercehealthcare.com/health-tech/report-third-top-hospitals-websites-collecting-patient-data-facebook.

[18] Id.

[19] Witley, supra note 3.



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