Extending Trademark Protections to the Metaverse

Alex O’Connor, MJLST Staffer

After a 2020 bankruptcy and steadily decreasing revenue that the company attributes to the Coronavirus pandemic, Chuck E. Cheese is making the transition to a pandemic-proof virtual world. Restaurant and arcade center Chuck E. Cheese is hoping to revitalize its business model by entering the metaverse. In February, Chuck E. Cheese filed two intent to use trademark filings with the USPTO. The trademarks were filed under the names “CHUCK E. VERSE” and “CHUCK E. CHEESE METAVERSE”. 

Under Section 1 of the Lanham Act, the two most common types of applications for registration of a mark on the Principal Register are (1) a use based application for which the applicant must have used the mark in commerce and (2) an “intent to use” (ITU) based application for which the applicant must possess a bona fide intent to use the mark in trade in the near future. Chuck E. Cheese has filed an ITU application for its two marks.

The metaverse is a still-developing virtual and immersive world that will be inhabited by digital representations of people, places, and things. Its appeal lies in the possibility of living a parallel, virtual life. The pandemic has provoked a wave of investment into virtual technologies, and brands are hurrying to extend protection to virtual renditions of their marks by registering specifically for the metaverse. A series of lawsuits related to alleged infringing use of registered marks via still developing technology has spooked mark holders into taking preemptive action. In the face of this uncertainty, the USPTO could provide mark holders with a measure of predictability by extending analogue protections of marks used in commerce to substantially similar virtual renditions. 

Most notably, Hermes International S.A. sued the artist Mason Rothschild for both infringement and dilution for the use of the term “METABIRKINS” in his collection of Non-Fungible Tokens (NFTs). Hermes alleges that the NFTs are confusing customers about the source of the digital artwork and diluting the distinctive quality of Hermes’ popular line of handbags. The argument continues that the term “META” is merely a generic term that simply means “BIRKINS in the metaverse,” and Rothschild’s use of the mark constitutes trading on Hermes’ reputation as a brand.  

Many companies and individuals are rushing to the USPTO to register trademarks for their brands to use in virtual reality. Household names such as McDonalds (“MCCAFE” for a virtual restaurant featuring actual and virtual goods), Panera Bread (“PANERAVERSE” for virtual food and beverage items), and others have recently filed applications for registration with the USPTO for virtual marks. The rush of filings signals a recognition among companies that the digital marketplace presents countless opportunities for them to expand their brand awareness, or, if they’re not careful, for trademark copycats to trade on their hard-earned good will among consumers.

Luckily for Chuck E. Cheese and other companies that seek to extend their brands into the metaverse, trademark protection in the metaverse is governed by the same set of rules governing regular analogue trademark protection. That is, the mark the company is seeking to protect must be distinctive, it must be used in commerce, and it must not be covered by a statutory bar to protection. For example, if a mark’s exclusive use by one firm would leave other firms at a significant non-reputation related disadvantage, the mark is said to be functional, and it can’t be protected. The metaverse does not present any additional obstacles to trademark protection, and so as long as Chuck E. Cheese eventually uses its two marks,it will enjoy their exclusive use among consumers in the metaverse. 

However, the relationship between new virtual marks and analogue marks is a subject of some uncertainty. Most notably, should a mark find broad success and achieve fame in the metaverse, would that virtual fame confer fame in the real world? What will trademark expansion into the metaverse mean for licensing agreements? Clarification from the USPTO could help put mark holders at ease as they venture into the virtual market. 

Additionally, trademarks in the metaverse present another venue in which trademark trolls can attempt to register an already well known mark with no actual intent to use it-—although the requirement under U.S. law that mark holders either use or possess a bona fide intent to use the mark can help mitigate this problem. Finally, observers contend that the expansion of commerce into the virtual marketplace will present opportunities for copycats to exploit marks. Already, third parties are seeking to register marks for virtual renditions of existing brands. In response, trademark lawyers are encouraging their clients to register their virtual marks as quickly as possible to head off any potential copycat users. The USPTO could ensure brands’ security by providing more robust protections to virtual trademarks based on a substantially similar, already registered analogue trademark.


“I Don’t Know What To Tell You. It’s the Metaverse—I’ll Do What I Want.” How Rape Culture Pervades Virtual Reality

Zanna Tennant, MJLST Staffer

When someone is robbed or injured by another, he or she can report to the police and hold the criminal accountable. When someone is wronged, they can seek retribution in court. Although there are certainly roadblocks in the justice system, such as inability to afford an attorney or the lack of understanding how to use the system, most people have a general understanding that they can hold wrongdoers accountable and the basic steps in the process. In real life, there are laws explicitly written that everyone must abide by. However, what happens to laws and the justice system as technology changes how we live? When the internet came into widespread public use, Congress enacted new laws new laws to control how people are allowed to use the internet. Now, a new form of the internet, known as the Metaverse, has both excited big companies about what it could mean for the future, as well as sparked controversy about how to adapt the law to this new technology. It can be hard for lawyers and those involved in the legal profession to imagine how to apply the law to a technology that is not yet fully developed. However, Congress and other law-making bodies will need to consider how they can control how people use the Metaverse and ensure that it will not be abused.

The Metaverse is a term that has recently gained a lot of attention, although by no means is the concept new. Essentially, the Metaverse is a “simulated digital environment that uses augmented reality (AR), virtual reality (VR), and blockchain, along with concepts from social media, to create spaces for rich user interaction mimicking the real world.” Many people are aware that virtual reality is a completely simulated environment which takes a person out of the real world. On the other hand, augmented reality uses the real-world and adds or changes things, often using a camera. Both virtual and augmented reality are used today, often in the form of video games. For virtual reality, think about the headsets that allow you to immerse yourself in a game. I, myself, have tried virtual reality video games, such as job simulator. Unfortunately, I burned down the kitchen in the restaurant I was working at. An example of augmented reality is PokemonGo, which many people have played. Blockchain technology, the third aspect, is a decentralized, distributed ledger that records the provenance of a digital asset. The Metaverse is a combination of these three aspects, along with other possibilities. As Matthew Ball, a venture capitalist has described it, “the metaverse is a 3D version of the internet and computing at large.” Many consider it to be the next big technology that will revolutionize the way we live. Mark Zuckerberg has even changed the name of his company, Facebook, to “Meta” and is focusing his attention on creating a Metaverse.

The Metaverse will allow people to do activities that they do in the real world, such as spending time with friends, attending concerts, and engaging in commerce, but in a virtual world. People will have their own avatars that represent them in the Metaverse and allow them to interact with others. Although the Metaverse does not currently exist, as there is no single virtual reality world that all can access, there are some examples that come close to what experts imagine the Metaverse to look like. The game, Second Life, is a simulation that allows users access to a virtual reality where they can eat, shop, work, and do any other real-world activity. Decentraland is another example which allows people to buy and sell land using digital tokens. Other companies, such as Sony and Lego, have invested billions of dollars in the development of the Metaverse. The idea of the Metaverse is not entirely thought out and is still in the stages of development. However, there are many popular culture references to the concepts involved in the Metaverse, such as Ready Player One and Snow Crash, a novel written by Neal Stephenson. Many people are excited about the possibilities that the Metaverse will bring in the future, such as creating new ways of learning through real-world simulations. However, with such great change on the horizon, there are still many concerns that need to be addressed.

Because the Metaverse is such a novel concept, it is unclear how exactly the legal community will respond to it. How do lawmakers create laws that regulate the use of something not fully understood and how does it make sure that people do not abuse it? Already, there have been numerous instances of sexual harassments, threats of rape and violence and even sexual assault. Recently, a woman was gang raped in the VR platform Horizon Worlds, which was created by Meta. Unfortunately and perhaps unsurprisingly, little action was taken in response, other than an apology from Meta and statements that they would make improvements. This was a horrifying experience that showcased the issues surrounding the Metaverse. As explained by Nina Patel, the co-founder and VP of Metaverse Research, “virtual reality has essentially been designed so the mind and body can’t differentiate virtual/digital experiences from real.” In other words, the Metaverse is so life-like that a person being assaulted in a virtual world would feel like they actually experienced the assault in real life. This should be raising red flags. However, the problem arises when trying to regulate activities in the Metaverse. Sexually assaulting someone in a virtual reality is different than assaulting someone in the real world, even if it feels the same to the victim. Because people are aware that they are in a virtual world, they think they can do whatever they want with no consequences.

At the present, there are no laws regarding conduct in the Metaverse. Certainly, this is something that will need to be addressed, as there needs to be laws that prevent this kind of behavior from happening. But how does one regulate conduct in a virtual world? Does a person’s avatar have personhood and rights under the law? This has yet to be decided. It is also difficult to track someone in the Metaverse due to the ability to mask their identity and remain anonymous. Therefore, it could be difficult to figure out who committed certain prohibited acts. At the moment, some of the virtual realities have terms of service which attempt to regulate conduct by restricting certain behaviors and providing remedies for violations, such as banning. It is worth noting that Meta does not have any terms of service or any rules regarding conduct in the Horizon Worlds. However, the problem here remains how to enforce these terms of service. Banning someone for a week or so is not enough. Actual laws need to be put in place in order to protect people from sexual assault and other violent acts. The fact that the Metaverse is outside the real world should not mean that people can do whatever they want, whenever they want.


Who Has To Pay? Major Contractual Elements That Affect Which Party Bears the Cost of Supply Chain Delays and Price Increases in Construction Projects

Kristin Thompson, MJLST Staffer

As a result of the COVID-19 pandemic there have been supply chain issues occurring around the world, causing constant price increases and delivery delays for construction materials.[1] While there are numerous factors that will affect exactly where the expenses of those delays fall, this article briefly outlines the major contractual elements that will come into play when determining whether the contractor, subcontractor or owner bears the risk. The first question that should be asked when investigating COVID-19 related supply chain issues is, “what does the contract say?” However, my first area of analysis begins when the answer to that question is “we don’t have one yet.”

 

The contract is not yet executed

This is the first major element to be addressed: what point of the contractual process the parties are in. To be clear, once the contract and subcontracts are executed the parties must rely on contract remedies and their pricing structures for relief. However, if the contracts have not yet been executed the contractor and subcontractors still have the potential to push the risk onto the owner or devise an equitable way to share those risks. They can build the supply chain-related price increases and project delay costs into their estimates, putting the owner in the position to either accept the increased cost and timeline or forego the project. During this pre-execution process the contractors will largely either be bidding a cost plus guaranteed maximum price model (“GMP”) or a lump sum model.[2] Here the GMP is ideal as the contractor can build the increased costs into the contingency. The lump sum model will call for an upward adjustment to their estimated total costs to account for the increases, chancing that those estimates will be enough. After adjusting their price model, the contractor and subcontractors can then add contractual language specifically saying that they are allowed time extensions for any and all supply chain delays, define their force majeure clause as inclusive of a pandemic or epidemic, and include change in law provisions that cover mandates issued as a result of the COVID-19 pandemic.

 

The Contract is Executed

In this case, the parties will need to dive into their contract to see who bears the responsibility for extra costs and find out if they are able to extend their timelines without consequence. Issues relating to extra costs will be almost exclusively determined by whether or not a GMP or lump sum price model was used. Absent provisions stating otherwise, a GMP will allocate the extra costs to the owner up to the guaranteed maximum price as those costs come out of the contingency fee, while a lump sum contract will allocate them to the contractor as the costs will come out of the total bid price.[3] In the latter scenario, the contractor can then hold subcontractors to the price of their contract and make them bear their own price increases which would relieve the contractor from some of the extra cost burden. However, the contractor must keep in mind the reality in which a subcontractor would not be able to bear the extra costs and then either go out of business or refuse to perform. Legal action taken will either be futile if the subcontractor is insolvent, or expensive and time-consuming if they refuse to perform.

The parties then must determine whether or not schedule extensions resulting from supply chain issues are proper. This determination will largely be based on the force majeure clause and change in law provision located in the general conditions.

 

Force Majeure Clause

If the COVID-19 pandemic is found to be included as a force majeure event, the contractor will be allowed a time extension for the extra work relating thereto. Some contracts pre-dating the pandemic already used language relating to a pandemic or epidemic. The most regularly used form contracts, 200AIA.201-017[4] and ConsensusDocs 200[5],include broad force majeure provisions that have been read to include the pandemic.[6] The AIA provides for “other causes beyond contractors control,[7]” and the ConsensusDocs200 for “any cause beyond the control of constructor” and “epidemics.[8]” The specific delays must still be attributed to the pandemic, and proving causation will depend on the amount of proof the suppliers can provide to support that claim. The more challenging situations are those in which the contracts have narrow force majeure clauses or contain catch-all phrases.[9] Interpretation in these cases tend to be dependent on state law and vary widely.[10] If found to not include the pandemic, the contractor will not be guaranteed a time extension for delays and will be held to their original timeline absent other contractual provisions affording them an extension.

 

Changes in Law Provision

The final factor is whether the contract has a change of law provision. If so, executive orders or other changes of law related to the pandemic may allow for time extensions.[11] For instance, a delay in production because a factory producing specified windows had to cut their work force in half to stay in line with federal social distancing mandates would constitute a change in law allowing the contractor an extension while they wait for the windows. ConsensusDOCS 200 currently provides that “the contract price or contract time shall be equitably adjusted by change order for additional costs resulting from any changes in laws…[12]” thus laying out an avenue for relief for those party to a ConsensusDOCS 200 contract. Conversely, the AIA.201-2017 currently does not provide a change in law provision, taking away this option for the large number of contractors that use this form.

In sum, when viewing supply chain delays and expenses in an attempt to ascertain who bears the risk one should look to where the parties are at in their contractual process, the price model being used, the general conditions involved and the breadth of the force majeure and change in law provisions.

 

Notes

[1] Continued Increases In Construction Materials Prices Starting To Drive Up Price Of Construction Projects, As Supply-chain & Labor Woes Continue, The Associated General Contractors of America (November 9, 2021).

[2] Richard S. Reizen, Philip P. Piecuch, & Daniel E. Crowley, Practice Note, Construction Pricing Models – Choosing an Appropriate Pricing Arrangement, Gould + Ratner (2018).

[3] Joseph Clancy, How Do Guaranteed Maximum Price (GMP) Contracts Work?, Oracle (May 20, 2021).

[4] AIA Document 201-2017.

[5] ConsensusDOCS 200.

[6] Force Majeure Provisions: COVID-19, Sheet Metal and Air Conditioning Contractors’ National Association (June 3, 2021).

[7] AIA Document 201-2017 § 8.3.1.

[8] ConsensusDOCS 200 § 6.3.1.

[9] Douglas V. Bartman, Force Majeure in Construction and Real Estate Claims, American Bar Association (July 17, 2020).

[10] Id.

[11] Peter Hahn, Enough About Force Majeure! What Other Options Does a Construction Contractor Have for COVID-19 Pandemic Losses?, JDSupra (April 3, 2020).

[12] ConsensusDOCS 200 § 3.21.1


Breaking the Tech Chain To Slow the Growth of Single-Family Rentals

Sarah Bauer, MJLST Staffer

For many of us looking to buy our first homes during the pandemic, the process has ranged from downright comical to disheartening. Here in Minnesota, the Twin Cities have the worst housing shortage in the nation, a problem that has both Republican and Democratic lawmakers searching for solutions to help both renters and buyers access affordable housing. People of color are particularly impacted by this shortage because the Twin Cities are also home to the largest racial homeownership gap in the nation

Although these issues have complex roots, tech companies and investors aren’t helping. The number of single-family rentals (SFR) units — single-family homes purchased by investors and rented out for profit — have risen since the great Recession and exploded over the course of the pandemic. In the Twin Cities, black neighborhoods have been particularly targeted by investors for this purpose. In 2021, 8% of the homes sold in the Twin Cities metro were purchased by investors, but investors purchased homes in BIPOC-majority zip codes at nearly double the rate of white-majority neighborhoods. Because property ownership is a vehicle for wealth-building, removing housing stock from the available pool essentially transfers the opportunity to build wealth from individual homeowners to investors who can both profit from rents as well as the increased value of the property at sale. 

It’s not illegal for tech companies and investors to purchase and rent out single-family homes. In certain circumstances, it may actually be desirable for them to be involved in the market. If you are a seller that needs to sell your home before buying a new one, house-flipping tech companies can get you out of your home faster by purchasing the home without a showing, an inspection, or contingencies. And investors purchasing single-family homes can provide a floor to the market during slowdowns like the Great Recession, a service which benefits homeowners as well as the investors themselves. But right now we have the opposite problem: not enough homes available for first-time owner-occupants. Assuming investor-ownership is becoming increasingly undesirable, what can we do about it? To address the problem, we need to understand how technology and investors are working in tandem to increase the number of single-family rentals.

 

The Role of House-Flipping Technology and iBuyers

The increase in SFRs is fueled by investors of all kinds: corporations, local companies, and wealthy individuals. For smaller players, recent developments in tech have made it easier for them to flip their properties. For example, a recent CityLab article discussed FlipOS, “a platform that helps investors prioritize repairs, access low-interest loans, and speed the selling process.” Real estate is a decentralized industry, and such platforms make the process of buying single-family homes and renting them out faster. Investors see this as a benefit to the community because rental units come onto the market faster than they otherwise would. But this technology also gives such investors a competitive advantage over would-be owner-occupiers.

The explosion of iBuying during the pandemic also hasn’t helped. iBuyers — short for “instant buyers” — use AI to generate automated valuation models to give the seller an all-cash, no contingency offer. This enables the seller to offload their property quickly, while the iBuyer repairs, markets, and re-sells the home. iBuyers are not the long-term investors that own SFRs, but the house-flippers that facilitate the transfer of property between long-term owners.

iBuyers like Redfin, Offerpad, Opendoor (and formerly Zillow) have increasingly purchased properties in this way over the course of the pandemic. This is true particularly in Sunbelt states, which have a lot of new construction of single-family homes that are easier to accurately price. As was apparent from the demise of Zillow’s iBuying program, these companies have struggled with profitability because home values can be difficult to predict. The aspects of real estate transactions that slow down traditional homebuyers (title check, inspections, etc…) also slow down iBuyers. So they can buy houses fast by offering all-cash offers with no inspection, but they can’t really offload them faster than another seller.

To the degree that iBuyers in the market are a problem, that problem is two-fold. First, they make it harder for first-time homeowners to purchase homes by offering cash and waiving inspections, something few first-time homebuyers can afford to offer. The second problem is a bigger one: iBuyers are buying and selling a lot of starter homes to large, non-local investors rather than back to owner-occupants or local landlords.

 

Transfer from Flippers to Corporate Investors

iBuyers as a group sell a lot of homes to corporate landlords, but it varies by company. After Zillow discontinued its iBuying program, Bloomberg reported that the company planned to offload 7,000 homes to real estate investment trusts (REITs). Offerpad sells 10-20% of its properties to institutional investors. Opendoor claims that it sells “the vast majority” of its properties to owner-occupiers. RedfinNow doesn’t sell to REITs at all. Despite the variation between companies, iBuyers on the whole sold one-fifth of their flips to institutional investors in 2021, with those sales more highly concentrated in neighborhoods of color. 

REITs allow firms to pool funds, buy bundles of properties, and convert them to SFRs. In addition to shrinking the pool of homes available for would-be owner-occupiers, REITs hire or own corporate entities to manage the properties. Management companies for REITs have increasingly come under fire for poor management, aggressively raising rent, and evictions. This is as true in the Twin Cities as elsewhere. Local and state governments do not always appear to be on the same page regarding enforcement of consumer and tenant protection laws. For example, while the Minnesota AG’s office filed a lawsuit against HavenBrook Homes, the city of Columbia Heights renewed rental occupancy licenses for the company. 

 

Discouraging iBuyers and REITs

If we agree as a policy matter that single-family homes should be owner-occupied, what are some ways to slowdown the transfer of properties and give traditional owner-occupants a fighting chance? The most obvious place to start is by considering a ban on iBuyers and investment firms from acquiring homes. The Los Angeles city council voted late last year to explore such a ban. Canada has voted to ban most foreigners from buying homes for two years to temper its hot real estate market, a move which will affect iBuyers and investors.

  Another option is to make flipping single-family homes less attractive for iBuyers. A state lawmaker from San Diego recently proposed Assembly Bill 1771, which would impose an additional 25% tax on the gain from a sale occurring within three years of a previous sale. This is a spin on the housing affordability wing of Bernie Sanders’s 2020 presidential campaign, which would have placed a 25% house-flipping tax on sellers of non-owner-occupied property, and a 2% empty homes tax on property of vacant, owned homes. But If iBuyers arguably provide a valuable service to sellers, then it may not make sense to attack iBuyers across the board. Instead, it may make more sense to limit or heavily tax sales from iBuyers to investment firms, or the opposite, reward iBuyers with a tax break for reselling homes to owner-occupants rather than to investment firms.

It is also possible to make investment in single-family homes less attractive to REITs. In addition to banning sales to foreign investors, the Liberal Party of Canada pitched an “excessive rent surplus” tax on post-renovation rent surges imposed by landlords. In addition to taxes, heavier regulation might be in order. Management companies for REITs can be regulated more heavily by local governments if the government can show a compelling interest reasonably related to accomplishing its housing goals. Whether REIT management companies are worse landlords than mom-and-pop operations is debatable, but the scale at which REITs operate should on its own make local governments think twice about whether it is a good idea to allow so much property to transfer to investors. 

Governments, neighborhood associations, and advocacy groups can also engage in homeowner education regarding the downsides of selling to an iBuyer or investor. Many sellers are hamstrung by needing to sell quickly or to the highest bidder, but others may have more options. Sellers know who they are selling their homes to, but they have no control over to whom that buyer ultimately resells. If they know that an iBuyer is likely to resell to an investor, or that an investor is going to turn their home into a rental property, they may elect not to sell their home to the iBuyer or investor. Education could go a long way for these homeowners. 

Lastly, governments themselves could do more. If they have the resources, they could create a variation on Edina’s Housing Preservation program, where homeowners sell their house to the City to preserve it as an affordable starter home. In a tech-oriented spin of that program, the local government could purchase the house to make sure it ends up in the hands of another owner-occupant, rather than an investor. Governments could decline to sell to iBuyers or investors single-family homes seized through tax forfeitures. Governments can also encourage more home-building by loosening zoning restrictions. More homes means a less competitive housing market, which REIT defenders say will make the single-family market less of an attractive investment vehicle. Given the competitive advantage of such entities, it seems unlikely that first-time homebuyers could be on equal footing with investors absent such disincentives.


A Solution Enabled by the Conflict in Ukraine, Cryptocurrency Regulation, and the Energy Crisis Could Address All Three Issues

Chase Webber, MJLST Staffer

This post focuses on two political questions reinvigorated by Vladimir Putin’s invasion of Ukraine: the energy crisis and the increasing popularity and potential for blockchain technology such as cryptocurrency (“crypto”).  The two biggest debates regarding blockchain may be its extraordinarily high use of energy and the need for regulation.  The emergency of the Ukraine invasion presents a unique opportunity for political, crypto, and energy issues to synergize – each with solutions and positive influence for the others.

This post will compare shortcomings in pursuits for environmentalism and decentralization.  Next, explain how a recent executive order is an important turning point towards developing sufficient peer-to-peer technology for effective decentralization.  Finally, suggest that a theoretical decentralized society may be more well-equipped to address the critical issues of global politics, economy, and energy use, and potentially others.

 

Relationship # 1: The Invasion and The Energy Crisis

Responding to the invasion, the U.S. and other countries have sanctioned Russia in ways that are devastating Russia’s economy, including by restricting the international sale of Russian oil.  This has dramatic implications for the interconnected global economy.  Russia is the second-largest oil exporter; cutting Russia out of the picture sends painful ripples across our global dependency on fossil fuel.

Without “beating a dead dinosaur” … the energy crisis, in a nutshell, is that (a) excessive fossil fuel consumption causes irreparable harm to the environment, and (b) our thirst for fossil fuel is unsustainable, our demand exceeds the supply and the supply’s ability to replenish, so we will eventually run out.  Both issues suggest finding ways to lower energy consumption and implement alternative, sustainable sources of energy.

Experts suggest innovation for these ends is easier than deployment of solutions.  In other words, we may be capable of fixing these problems, but, as a planet, we just don’t want it badly enough yet, notwithstanding some regulatory attempts to limit consumption or incentivize sustainability.  If the irreparable harm reaches a sufficiently catastrophic level, or if the well finally runs dry, it will require – not merely suggest – a global reorganization via energy use and consumption.

The energy void created by removing Russian supply from the global economy may sufficiently mimic the well running dry.  The well may not really be dry, but it would feel like it.  This could provide sufficient incentive to implement that global energy reset, viz., planet-wide lifestyle changes for existing without fossil fuel reliance, for which conservationists have been begging for decades.

The invasion moves the clock forward on the (hopefully) inevitable deployment of green innovation that would naturally occur as soon as we can’t use fossil fuels even if we still want to.

 

Relationship # 2: The Invasion and Crypto   

Crypto was surprisingly not useful for avoiding economic sanctions, although it was designed to resist government regulation and control (for better or for worse).  Blockchain-based crypto transactions are supposedly “peer-to-peer,” requiring no government or private intermediaries.  Other blockchain features include a permanent record of transactions and the possibility of pseudonymity.  Once assets are in crypto form, they are safer than traditional currency – users can generally transfer them to each other, even internationally, without possibility of seizure, theft, taxation, or regulation.

(The New York Times’ Latecomer’s Guide to Crypto and the “Learn” tab on Coinbase.com are great resources for quickly building a basic understanding of this increasingly pervasive technology.)

However, crypto is weak where the blockchain realm meets the physical realm.  While the blockchain itself is safe and secure from theft, a user’s “key” may be lost or stolen from her possession.  Peer-to-peer transactions themselves lack intermediaries, but hosts are required for users to access and use blockchain technology.  Crypto itself is not taxed or regulated, but exchanging digital assets – e.g., buying bitcoin with US dollars – are taxed as a property acquisition and regulated by the Security Exchange Commission (SEC).  Smart contract agreements flounder where real-world verification, adjudication, or common-sense is needed.

This is bad news for sanctioned Russian oligarchs because they cannot get assets “into” or “out of” crypto without consequence.  It is better news for Ukraine, where the borderless-ness and “trust” of crypto transaction eases international transmittal of relief assets and ensures legitimate receipt.

The prospect of crypto being used to circumvent U.S. sanctions brought crypto into the federal spotlight as a matter of national security.  President Biden’s Executive Order (EO) 14067 of March 9, 2022 offers an important turning point for blockchain: when the US government began to direct innovation and government control.  Previously, discussions of whether recognition and control of crypto would threaten innovation, or a failure to do so would weaken government influence, had become a stalemate in regulatory discussion. The EO seems to have taken advantage of the Ukraine invasion to side-step the stagnant congressional debates.

Many had recognized crypto’s potential, but most seemed to wait out the unregulated and mystical prospect of decentralized finance until it became less risky.  Crypto is the modern equivalent of private-issued currencies, which were common during the Free Banking Era, before national banks were established at the end of the Civil War.  They were notoriously unreliable.  Only the SEC had been giving crypto plenty of attention, until (and especially) more recently, when the general public noticed how profitable bitcoin became despite its volatility.

EO 14067’s policy reasoning includes crypto user protection, stability of the financial system, national security (e.g., Russia’s potential for skirting sanctions), preventing crime enablement (viz., modern equivalents to The Silk Road dark web), global competition, and, generally, federal recognition and support for blockchain innovation.  The president asked for research of blockchain technology from departments of Treasury, Defense, Commerce, Labor, Energy, Homeland Security, the Consumer Financial Protection Bureau (CFPB), Federal Trade Commission (FTC), SEC, Commodity Futures Trading Commission (CFTC), Environmental Protection Agency (EPA), and a handful of other federal agencies.

While promoting security and a general understanding of blockchain’s potential uses and feasibility, the order also proposes Central Bank Digital Currencies (CBDC).  CBDCs are FedCoins – a stablecoin issued by the government instead of by private entities.  Stablecoins (e.g., Tether) are a type of crypto whose value is backed by the US Dollar, whereas privately issued crypto (e.g., Bitcoin, Ether) are more volatile because their value is backed by practically nothing.  So, unlike Tether, a privately issued stablecoin, CBDCs would be crypto issued and controlled by the U.S. Treasury.

Imagine CBDCs as a dollar bill made of blockchain technology instead of paper.  A future “cash transaction” could feel more like using Venmo, but without the intermediary host, Venmo.

 

Relationship # 3: Crypto and Energy

Without getting into too many more details, blockchain technology, on which crypto is based, requires an enormous amount of energy-consuming computing power.

Blockchain is a decentralized “distributed ledger technology.” The permanent recordings of transactions are stored and verifiable at every “node” – the computer in front of you could be a node – instead of in a centralized database.  In contrast, the post you are now reading is not decentralized; it is “located” in a UMN database somewhere, not in your computer’s hard drive.  Even a shared Google Doc is in a Google database, not in each of the contributor’s computers.  In a distributed system, if one node changes its version of the distributed ledger, some of the other nodes verify the change.  If the change represents a valid transaction, the change is applied to all versions at each node, if not, the change is rejected, and the ledger remains intact.

These repeated verifications give blockchain its core features, but also require a significant amount of energy.

For most of the history of computers, computing innovation has focused primarily on function, especially increased speed.  Computer processing power eventually became sufficiently fast that, in the last twenty-ish years, computing innovation began to focus on achieving the same speed using less energy and/or with more affordability.  Automotive innovation experienced a similar shift on a different timeline.

Blockchain will likely undergo the same evolution.  First, innovators will focus on function and standardization.  Despite the popularity, this technology still lacks in these areas.  Crypto assets have sometimes disappeared into thin air due to faulty coding or have been siphoned off by anonymous users who found loopholes in the software.  Others, who became interested in crypto during November 2021, after hearing that Ether had increased in value by 989% that year and the crypto market was then worth over $3 trillion, may have been surprised when the value nearly halved by February.

Second, and it if it is a profitable investment – or incentivized by future regulations resulting from EO14067 – innovators will focus on reducing the processing power required for maintaining a distributed ledger.

 

Decentralization, and Other Fanciful Policies

Decentralization and green tech share the same fundamental problem.  The ideas are compelling and revolutionary.  However, their underlying philosophy does not yet match our underlying policy.  In some ways, they are still too revolutionary because, in this author’s opinion, they will require either a complete change in infrastructure or significantly more creativity to be effective.  Neither of these requirements are possible without sufficient policy incentive.  Without the incentive, the ideas are innovative, but not yet truly disruptive.

Using Coinbase on an iPhone to execute a crypto transaction is to “decentralization” what driving a Tesla running on coal-sourced electricity is to “environmentalism.”  They are merely trendy and well-intentioned.  Tesla solves one problem – automotive transportation without gasoline – while creating another – a corresponding demand for electricity – because it relies on existing infrastructure.  Similarly, crypto cannot survive without centralization.  Nor should it, according to the SEC, who has been fighting to regulate privately issued crypto for years.

At first glance, EO 14067 seems to be the nail in the coffin for decentralization.  Proponents designed crypto after the 2008 housing market crash specifically hoping to avoid federal involvement in transactions.  Purists, especially during The Digital Revolution in the 90s, hoped peer-to-peer technology like blockchain (although it did not exist at that time) would eventually replace government institutions entirely – summarized in the term, “code is law.”  This has marked the tension between crypto innovators and regulators, each finding the other uncooperative with its goals.

However, some, such as Kevin Werbach, a prominent blockchain scholar, suggest that peer-to-peer technology and traditional legal institutions need not be mutually exclusive.  Each offers unique elements of “trust,” and each has its weaknesses.  Naturally, the cooperation of novel technologies and existing legal and financial structures can mean mutual benefit.  The SEC seems to share a similarly cooperative perspective, but distinguished, importantly, by the expectation that crypto will succumb to the existing financial infrastructure.  Werbach praises EO 14067, Biden’s request that the “alphabet soup” of federal agencies investigate, regulate, and implement blockchain, as the awaited opportunity for government and innovation to join forces.

The EPA is one of the agencies engaged by the EO.  Pushing for more energy efficient methods of implementing blockchain technology will be as essential as the other stated policies of national security, global competition, and user friendliness.  If the well runs dry, as discussed above, blockchain use will stall, as long as blockchain requires huge amounts of energy.  Alternatively, if energy efficiency can be attained preemptively, the result of ongoing blockchain innovation could play a unique role in addressing climate change and other political issues, viz., decentralization.

In her book, Smart Citizens, Smarter State: The Technologies of Expertise and the Future of Governing, Beth Simone Noveck suggests an innovative philosophy for future democracies could use peer-to-peer technology to gather wide-spread public expertise for addressing complex issues.  We have outgrown the use of “government bureaucracies that are supposed to solve critical problems on their own”; by analogy, we are only using part of our available brainpower.  More recently, Decentralization: Technology’s Impact on Organizational and Societal Structure, by local scholars Wulf Kaal and Craig Calcaterra, further suggests ways of deploying decentralization concepts.

Decentralized autonomous organizations (“DAOs”) are created with use of smart contracts, a blockchain-based technology, to implement more effectively democratic means of consensus and information sharing.  However, DAOs are still precarious.  Many of these have failed because of exploitation, hacks, fraud, sporadic participation, and, most importantly, lack of central leadership.  Remember, central leadership is exactly what DAOs and other decentralized proposals seek to avoid.  Ironically, in existing DAOs, without regulatory leadership, small, centralized groups of insiders tend to hold all the cards.

Some claim that federal regulation of DAOs could provide transparency and disclosure standards, authentication and background checks, and other means of structural support.  The SEC blocked American CryptoFed, the first “legally sanctioned” DAO, in the state of Wyoming.  Following the recent EO, the SEC’s position may shift.

 

Mutual Opportunity

To summarize:  The invasion of Ukraine may provide the necessary incentive for actuating decentralized or environmentalist ideologies.  EO 14067 initiates federal regulatory structure for crypto and researching blockchain implementation in the U.S.  The result could facilitate eventual decentralized and energy-conscious systems which, in turn, could facilitate resolutions to grave impending climate change troubles.  Furthermore, a new tool for gathering public consensus and expertise could shed new light on other political issues, foreign and domestic.

This sounds suspiciously like, “idea/product X will end climate change, all political disagreements, (solve world hunger?) and create global utopia,” and we all know better than to trust such assertions.

It does sound like it, but Noveck and Kaal & Calcaterra both say no, decentralization will not solve all our problems, nor does it seek to.  Instead, decentralization offers to make us, as a coordinated society, significantly more efficient problem solvers.  A decentralized organizational structure hopes to allow humans to react and adapt to situations more naturally, the way other living organisms adapt to changing environments.  We will always have problems.  Centralization, proponents argue, is no longer the best means of obtaining solutions.

In other words, one hopes that addressing critical issues in the future – like potential military conflict, economic concerns, and global warming – will not be exasperated or limited by the very structures with which we seek to devise and implement a resolution.


Save the Children . . . From Algorithms?

Sarah Nelson, MJLST Staffer

Last week, a bill advanced out of the Minnesota House Commerce Finance and Policy Committee that would ban social media platforms from utilizing algorithms to suggest content to those under the age of 18. Under the bill, known as HF 3724, social media platforms with more than one million account holders that operate in Minnesota, like Instagram, Facebook, and TikTok, would no longer be able to use their algorithms to recommend user-generated content to minors.

The sponsor of the bill, Representative Kristin Robbins, a Republican from Maple Grove, said that she was motivated to sponsor HF 3724 after reading two articles from the Wall Street Journal. In the first, the Wall Street Journal created dozens of automated accounts on the app TikTok, which it registered as being between the ages of 13 and 15. The outlet then detailed how the TikTok algorithm, used to create a user’s For You feed, would inundate teenage users with sex- and drug-related content if they engaged with that content. Similarly, in the second article, the Wall Street Journal found that TikTok would repeatedly present teenagers with extreme weight loss and pro-eating disorder videos if they continued to interact with that content.

In response to the second article, TikTok said it would alter its For You algorithm “to avoid showing users too much of the same content.” It is also important to note that per TikTok’s terms of service, to use the platform, users must be over 13 and must have parental consent if they are under 18. TikTok also already prohibits “sexually explicit material” and works to remove pro-eating disorder content from the app while providing a link to the National Eating Disorders Association helpline.

As to enforcement, HF 3724 says social media platforms are liable to account holders if the account holder “received user-created content through a social media algorithm while the individual account holder was under the age of 18” and the social media platform “knew or had reason to know that the individual account holder was under the age of 18.” Social media platforms would then be “liable for damages and a civil penalty of $1,000 for each violation.” However, the bill provides an exception for content “that is created by a federal, state, or local government or by a public or private school, college, or university.”

According to an article written on the bill by the legislature, Robbins is hopeful that HF 3724 “could be a model for the rest of the country.”

 

Opposition from Tech

As TechDirt points out, algorithms are useful; they help separate relevant content from irrelevant content, which optimizes use of the platform and stops users from being overwhelmed. The bill would essentially stop young users from reaping the benefits of smarter technology.

A similar argument was raised by NetChoice, which expressed concerns that HF 3724 “removes the access to beneficial technologies from young people.” According to NetChoice, the definition of “social media” used in the bill is unacceptably broad and would rope in sites that teenagers use “for research and education.” For example, NetChoice cites to teenagers no longer being able to get book recommendations from the algorithm on Goodreads or additional article recommendations on a research topic from an online newspaper.

NetChoice also argues that HF 3724 needlessly involves the state in a matter that should be left to the discretion of parents. NetChoice explains that parents, likely knowing their child best, can decide on an individual basis whether they want their children on a particular social media platform.

Opponents of the bill also emphasize that complying with HF 3724 would prove difficult for social media companies, who would essentially have to have separate platforms with no algorithmic functions for those under 18. Additionally, in order to comply with the bill, social media platforms would have to collect more personal data from users, including age and location. Finally, opponents have also noted that some platforms actually use algorithms to present appropriatecontent to minors. Similarly, TikTok has begun utilizing its algorithms to remove videos that violate platform rules.

 

What About the First Amendment?

In its letter to the Minnesota House Commerce Committee, NetChoice said that HF 3724 would be found to violate the First Amendment. NetChoice argued that “multiple court cases have held that the distribution of speech, including by algorithms such as those used by search engines, are protected by the First Amendment” and that HF 3724 would be struck down if passed because it “result[s] in the government restraining the distribution of speech by platforms and Minnesotans access to information.”

NetChoice also cited to Ashcroft v. ACLU, a case in which “the Supreme Court struck down a federal law that attempted to prevent the posting of content harmful to teenagers on the web due to [the fact it was so broad it limited adult access] as well as the harm and chilling effect that the associated fines could have on legal protected speech.”

As Ars Technica notes, federal courts blocked laws pertaining to social media in both Texas and Florida last year. Both laws were challenged for violating the First Amendment.

 

Moving Forward

HF 3724 advanced unanimously out of the House Judiciary Finance and Civil Law Committee on March 22. The committee made some changes to the bill, specifying that the legislation would not impact algorithms associated with email and internet search providers. Additionally, the committee addressed a criticism by the bill’s opponents and exempted algorithms used to filter out age-inappropriate content. There is also a companion bill to HF 3724, SF3922, being considered in the Senate.

It will be interesting to see if legislators are dissuaded from voting for HF 3724 given its uncertain constitutionality and potential impact on those under the age of 18, who will no longer be able to use the optimized and personalized versions of social media platforms. However, so far, to legislators, technology companies have not put their best foot forward, as they have sent lobbyists in their stead to advocate against the bill.


Predicted Effects of Price Transparency on Healthcare Economics

David Edholm, MJLST Staffer

In 2019, the Centers for Medicare and Medicaid Services (CMS) promulgated the Price Transparency Rule in order to allow patients to access healthcare pricing information. The stated purpose of the Price Transparency Rule is as follows:

By disclosing hospital standard charges [including payer-specific negotiated charges and discounted-cash prices], we believe the public (including patients, employers, clinicians, and other third parties) will have the information necessary to make more informed decisions about their care. We believe the impact of these final policies will help to increase market competition, and ultimately drive down the cost of healthcare services, making them more affordable for all patients.

There is significant debate whether compliance with the Price Transparency Rule will actuate its intended purpose.

On the proponent side, economic theory to support this purpose statement comes from a market advocacy perspective. In order to drive down the cost of healthcare through competition, consumers must know the prices in advance in order to bargain between providers. By giving consumers the ability to shop around and barter, the thinking goes, providers will undercut competitors by lowering their own prices, even slightly below a competitor’s rate.

Another theory that supports price transparency is that shining light onto healthcare pricing will lead to more public outcry, guilting providers to lower overinflated or unconscionable gross charges or hospital fees. Public outcry may also compel states to create global healthcare budget caps, which have been shown to have positive price-lowering effects. A recent study from Rice University found that Maryland’s all-payer global budget policy reduces costs while increasing quality of care.

Skeptics of the rule, however, including the American Hospital Association (AHA), argue that price transparency will induce institutions that currently charge less than competitors to increase their prices to match their competitors, ultimately raising costs. In litigation, the DC Circuit responded to that argument, holding that, based on available research, this result is unlikely. Secretary Azar was not required to rely on definitive rather than predictive data in writing the requirements because of the novelty of the price disclosure scheme and the unique complexity of healthcare pricing. The DC Circuit held that relying on studies of similar price disclosure schemes in other industries was sufficient to inform a stable policy judgment.

However, the healthcare service market is of a unique nature in that quality of care may be a consumer’s primary consideration before seeking treatment, trumping price considerations. Alternatively, a consumer may assume that paying more means receiving higher-quality care. Quality of care is incredibly hard to measure and report, and unless a consumer has access to quality-of-care information alongside pricing information, they are more likely to make fallacious assumptions about this correlation. Another unique factor about healthcare shopping is that many consumers have a strong relationship with their physician, thus would base their decision primarily on receiving advice from one they trust, rather than the out-of-pocket cost of care, especially if the difference is negligible.

Last is the complexity of healthcare viewpoint. Opponents of the price transparency rule emphasize the nature of healthcare as an unpredictable trade. For example, if a patient consumer undergoes surgery to fix one problem, a surgeon may discover another problem amidst the procedure. The standard of care likely prompts the surgeon to correct both problems, thus the patient consumer will be charged an amount higher than they could have reasonably predicted. The AHA brought this argument to court to support its assertion that the price transparency rule violated the Administrative Procedure Act (APA) by overstating the rule’s benefits. The DC Circuit court responded that the rule did not require hospitals to publish every potential permutation of finalized charges, rather that the baseline charges are publicized. Thus, in the surgery scenario, a patient consumer should have access to the payer-negotiated rate to fix the initial problem.

The jury is out, so to speak, on the effects that Price Transparency Rule compliance will have on healthcare economics. But from a consumer perspective, rapidly increasing healthcare costs are at the forefront of relevant political issues.


I Think, Therefore I Am: The Battle for Intellectual Property Rights with Artificial Intelligence

Sara Pistilli, MJLST Staffer

Artificial intelligence (AI) is a computer or robot that is able to perform tasks that are usually done by humans because they require human judgement and intellect. Some AI can be self-learning, allowing them to learn and progress beyond their initial programming. This creates an issue of inventorship when AI creates patentable subject matter without any contribution from the original inventor of the AI system. This technological advancement has posed the larger question of whether AI qualifies as an “individual” under the United States Patent Act and whether people who create AI machines are able to claim the patent rights when the AI has created the patentable subject matter.

Artificial Intelligence “Inventors”

Patent law is continuously changing as technology expands and advances. While the law has advanced to accommodate innovative technology in the past, the introduction of AI has not been fully articulated. The United States Patent and Trademark Office (USPTO) opened up for comment on patenting AI inventions in 2019, however, it does not appear they asked for any further purpose other than to gather information from the public. The USPTO again asked for comment about patent eligibility jurisprudence as it related to specific technological areas, including AI in 2021. They gathered this information as a “study” and did not pursue any official action. The first official push to recognize AI as an inventor was by Dr. Stephen Thaler. Thaler built an AI machine called “DABUS,” and sought patent rights for the machine’s inventions. Thaler did not argue for DABUS to be the patent right holder, but rather the machine to be named the inventor with Thaler as the patent owner. Thaler’s insistence to name DABUS as the inventor complies with USPTO’s rulesregarding an inventor’s oath or declaration that accompanies a patent application.

United States’ Rulings

Thaler applied for patent rights over a food container and devices and methods for attracting enhanced attention. Both of these products were invented by his AI machine, DABUS. After applying for a U.S. patent, the USPTO rejected his application stating that U.S. law does not allow for artificial intelligence to be listed as an inventor on a patent application or patent. USPTO cited the Patent Act, stating an inventor must be a person, not a machine. USPTO stated that to allow “inventor” to include machines was too broad. Thaler requested reconsideration from the USPTO which was later denied. In 2021, Thaler appealed his rejection in the Eastern District of Virginia. Thaler failed to obtain patent rights with Judge Brinkema ruling only a human can be an inventor. Judge Brinkema relied heavily on statutory interpretation of the word “individual” which was performed by the Supreme Court in a 2012 case on the Torture Victim Protection Act. The Supreme Court had concluded that an “individual” referred to a “natural person.” Judge Brinkema further stated, that it will be up to Congress’ discretion on how they would like to alter patent law to accommodate for AI in the future. Thaler now has a pending appeal to the Court of Appeals.

International Rulings

While countries’ patent systems are independent of one another, they can be influenced based on technological and regulatory advancement happening in another country. Thaler has sought patent rights for DABUS’ two inventions discussed above in several countries including, but not limited to, the United Kingdom, Australia, and South Africa. Thaler obtained patent rights in South Africa, constituting a first in intellectual property history. Of note, however, is that South Africa’s patent system does not have a substantive patent examination system like other countries, nor do their patent laws define “inventor.” Thaler received a more persuasive ruling in Australia that may be able to effectuate change in other countries.  In 2021, Thaler’s patent application was denied in Australia. The Australian Patent Office (APO) stated that the language of the Patents Act was inconsistent with AI being treated as an inventor. Thaler appealed this decision to the Federal Court of Australia. Justice Beach ordered that this case must be remitted based on his ruling that AI can be a recognized inventor under the Australian Patents Act. Judge Beach further stated that AI cannot, however, be an applicant for a patent or an owner of a patent. It is with these reasons that Judge Beach requested reconsideration and remitted this case back to the Deputy Commissioner of the APO. The APO is now appealing this decision. Similar to the APO, the United Kingdom Intellectual Property Office (UKIPO) also pushed back against Thaler’s application for patent rights. In 2019, the UKIPO rejected Thaler’s application stating that the listing of DABUS as an inventor did not meet the requirements of the United Kingdom’s Patent Act. They stated a person must be identified as the inventor. Thaler appealed this rejection and was again denied by the UKIPO, who stated that a machine as an inventor does not allow for the innovation desired by patent rights. Thaler appealed again, to the England and Wales Patents Court, and was again denied patent rights. The judge stated that Thaler was using the Patent Act text out of context for his argument, ruling that the Patent Act cannot be construed to allow non-human inventors. In 2021, Thaler appealed this decision in the England and Wales Court of Appeals. He was again denied patent rights with all three judges agreeing that a patent is a right that can only be granted to a person and, that an inventor must be a person.

Future Prospects

Thaler currently has pending applications in several countries including Brazil, Canada, China, and Japan. The outcome of the appeal against the Federal Court of Australia’s decision on whether AI can be an inventor may prove crucial in helping to amend U.S. patent laws. Similarly, if more countries, in addition to South Africa, outright grant Thaler his patent rights, the U.S. may be forced to re-think their policies on AI-invented patentable subject matter.


The Heavy Cost of Costless Lies

Shuang Liu, MJLST Staffer

Does repetition of a lie make it truer? “What a ridiculous question,” you might think. But according to psychological experiments, the answer is yes.

In a series of psychological experiments, scientists provided true and false statements to participants, repeating only some of the statements, and asked the participants to evaluate whether the statements were true or false. The results showed that people typically evaluated repeated statements truer than those that appeared just once. The effect of repetition was summarized by Christian Unkelbach et al. in 2019:

The effect appears with information ranging from trivia (“The thigh bone is the longest bone in the human body”) to consumer opinions (“Billabong shampoo leaves hair shiny with no residue”) to false news items (“Donald Trump sends his own plane to transport 200 stranded marines”). It is present with repetition intervals from minutes to weeks to months.

In addition to the frequency of statements, temporal order also affects people’s trust in statements. For example, if people read the statement “Falstaff was the last opera of Verdi” first and the statement “Othello was the last opera of Verdi” later, they are more likely to believe the latter statement is false. To make things worse, the phenomenon of confirmation bias reveals that when a person has drawn a conclusion on a given matter, either consciously or subconsciously, the person is inclined to disregard information that contradicts the conclusion.

The implication of these experiments can be huge. Consider a scenario where a famous person says “COVID is not real” with literally no explanation. People will then hear it countless times from various sources including the press, and potentially family, friends, and collogues. As a result, some of these people will tend to believe this lie more than later statements that contradict it but are true. When the lie is closely related to public interest, just as the one in this example, its negative effects are serious.

Nevertheless, the law does not defend people against such serious lies at all. The First Amendment protects free speech including false statements, as long as no defamation issue is involved. Generally, there are two reasons for not outlawing lies. Firstly, the First Amendment “presupposes that right conclusions are more likely to be gathered out of a multitude of tongues, than through any kind of authoritative selection.” Secondly, the “First Amendment freedoms need breathing space to survive.” Penalties for lies will also deter statements that are believed to be true when made, but could be disproven later. However, as will be discussed below, these two reasons are not adequate for allowing lies to be legally costless.

To begin with, the presupposition that truth can be gathered from various contradictory sources does not reflect the reality. Most information people obtain today is secondhand. People can hardly confirm the truthiness of most information directly. Therefore, people have no better option than choosing to believe some of the accessible sources. This choice, as illustrated above, is far from rational. You may think that simple repetition and temporal primacy cannot mislead you. But statistical results show a considerable portion of people can and will be fooled in such ways. Moreover, confirmation bias suggests once a person believes a lie, the person will strengthen the lie in his or her mind by selectively absorbing future information. Accordingly, the presumption that truth can be found from various sources may hold in the scenario of a discovery proceeding in litigation, for example, but never for most people in their daily life.

Moreover, the concern that punishing lies may also deter true statements can be dispelled by a systematic solution. Firstly, whether a speaker is liable for his or her false statement should not turn on whether the statement is false objectively. Rather, the test should be whether the speaker, as a reasonable person, has had sufficient factual bases for the statement before making it. After all, even respectable scientists have made false statements about the nature of the universe, but hardly can anyone say they were lying. Additionally, in order not to disrupt people’s normal life, the requirements of not lying should be imposed only on public officials when they are speaking in their positions. This role-based requirement is consistent with the well-established policy that government officials “are to be treated as men of fortitude, able to thrive in a hardy climate.” It is also aligned with the fact that statements of public officials are more likely to be viewed, heard, reported, and spread, and hence are deserved to be more strictly regulated. Lastly, to be held liable for lying, the false statement should bear some relation to the public interest. Trivial lies that do not hurt the public interest are not worth the legal cost for preventing them.

As can be expected, to outlaw false statements, even only those made by public officials, entails a radical change in the Constitutional law. But the efforts will pay off because people will be less harmed by lies, and the government will receive more credence from people as a result.


Xenotransplantation: Ethics and Public Policy Need To Catch up to the Science

Claire Colby, MJLST Staffer

In early January, surgeons at the University of Maryland Medical Center made history by successfully transplanting a genetically altered pig heart to a human recipient, David Bennett.  The achievement represents a major milestone in transplantation. The demand for transplantable organs far outpaces the supply, and xenotransplantation–the implantation of non-human tissue into human recipients–could help bridge this gap. In the U.S. alone, more than 106,000 people are on the waiting list for transplants. Legal and ethical questions remain open about the appropriateness of implementing xenotransplants on a large scale. 

The FDA approved the January transplant through an emergency authorization compassionate use pathway because Bennett likely would have died without this intervention. Larger clinical trials will be needed to generate enough data to show that xenotransplants are safe and effective. The FDA will require these trials to show xenotransplantations are non-inferior to human organ transplants. IRB requirements bar interventions where risk outweighs benefits for patients, but accurately predicting and measuring risk is difficult. 

If xenotransplantation becomes standard clinical practice, animal rights proponents may balk at the idea of raising pigs for organs. Far before that point, pre-clinical trials will make heavy use of animal models. Institutional Animal Care and Use Committees (IACUCs) which oversee animal research in universities and medical entities apply a “much lower ethical standard” for animals than human research subjects. Bioethicists apply a “3R” framework for animal subjects research that stresses replacing animal models, reducing animal testing, and refining their use. Because of the inherent nature of xenotransplantation, applying this framework may be near impossible. Ongoing discussions are needed with relevant stakeholders.  

If both human and animal organs are approved for widespread transplant, but human organs prove superior, new allocation policies are needed to determine who gets what. Organ allocation policy is currently dictated by the Organ Procurement and Transplantation Network (OPTN). As it stands, organ transplantation shows inequality across racial groups and financial status. New allocation policies for organs must not reinforce or worsen these disparities. 

Like all medical interventions, patients must be able to provide informed consent for xenotransplantation. The recipient of the altered pig heart had previously been deemed ineligible for a human heart transplant because his heart failure was poorly managed. Reserving experimental interventions, like xenotransplantations, for the sickest patients raises serious ethical concerns. Are these desperate patients truly able to give meaningful consent? If xenotransplantation becomes a common practice, the traditional model of institutional review boards may need updating. Currently, individual institutions maintain their own IRBs. Xenotransplantation of altered animal organs may involve several sites: procurement of the organ, genetic editing, and transplantation may all take place in different locations. A central IRB for xenotransplantation could standardize and streamline this process. 

In all, xenotransplantation represents an exciting new frontier in transplant medicine. Responsibly implementing this innovation will require foresight and parallel innovation in ethics and public policy.