The Apathetic Divide: Surrogacy and the Anglo-American Courtroom

February 20, 2023
Ethics, EU Law, Health, Healthcare, Reproductive Health

Kelso Horne, MJLST Staffer

The State of New York defines Gestational Surrogacy as “a process where one person, who did not provide the egg used in conception, carries a fetus through pregnancy and gives birth to a baby for another person or couple.” The process of surrogacy can be fraught with legal, technical, and moral issues, particularly when the surrogacy is paid for via contract with the surrogate, also called Compensated Gestational Surrogacy (CGS). Until 2020, this kind of contractual paid surrogacy was illegal in the state of New York. That year, it was legalized, and the regulatory regime normalized by the Child-Parent Security Act.  In contrast, the state of Louisiana has one of the harshest gestational surrogacy regimes in the world, outright banning CGS, and requiring both sets of gametes to come from a couple married residing in the state of Louisiana. But these competing regulatory regimes are not replicated across the nation. To the contrary, most states have not passed any laws legalizing or banning CGS or other fertility practices, like the sale of gametes. With sparse case law and frequent legal limbo, the question of “is CGS legal for me?” can be a difficult question for many Americans.

Across the Atlantic, the question used to be an easy one to answer. In 1985 the UK Parliament Enacted the Surrogacy Arrangements Act, which made it an offense to “initiate or take part in any negotiations with the view of making a surrogacy arrangement”, along with some related activities, like compiling information to assist in the creation of surrogacy arrangements. Critically, however, the Act did not criminalize the act of looking to hire a surrogate, or looking to become one, only being a middleman, or publishing advertisements on behalf of those looking to obtain the services of a surrogate. The Human Fertilisation and Embryology Act 1990 defined the mother of a child under UK law as “[t]he woman who is carrying or has carried a child… and no other woman”. In 2001, the Lords Appeal in Ordinary, which acted as the UK’s highest court until 2009, heard the appeal in Briody v. St Helens and Knowsley Area Health Authority. The question before the Lords was one of damages. A woman, rendered infertile as a result of medical negligence, sought £78,267 in order to obtain the services of a surrogate in California, which had legalized CGS in 1993 in the landmark case Johnson v. Calvert. The Lady Justice Hale, speaking for the court, foreclosed the use of CGS in California or elsewhere, as the proposal was “contrary to the public policy of the country”. While she did not entirely dismiss the idea of providing damages to pay for surrogacy procedures, she said it would be permitted only in the case of a voluntary, unpaid surrogate.

Few appellate court judges get to issue an opinion on the same facts twice in their career. In 2020, in one of her final cases prior to retiring, the Lady Justice Hale, now sitting on the UK Supreme Court, which by then had replaced the Lords Appeal in Ordinary, did just that.  In Whittington Hospital NHS Trust (Appellant) v XX, the court determined that a woman who had been rendered infertile as a result of medical negligence could claim damages, including the costs to pay a United States based surrogate to carry her children. CGS, while still entirely illegal in the UK, could now nevertheless provide the basis for damages in a UK court. The Court did note some factual differences between Whittington Hospital and Briody, notably, that the likelihood that a surrogacy arrangement would result in a child was higher in the former. However, the court’s main argument for its opposite ruling was a change in cultural attitude to surrogacy and its role in society, stating “[t]he use of assisted reproduction techniques is now widespread and socially acceptable.”

While admitting that surrogacy was now widely accepted in UK society, the dissent, authored by The Lord Justice Carnwath, nevertheless disagreed with the Court. It argued that the criminal law of the UK remained clearly averse to commercial surrogacy, and that by awarding damages for CGS in California the court misaligned the UK’s civil and criminal law. Thus, the CGS regimes of the UK and the U.S. are now bound together. UK citizens may seek surrogacy arrangements and have them compensated by the UK government through the UK’s National Health Service, but they must use an American “womb”. A financial arrangement which the UK itself deems too unethical to allow inside its own borders is nevertheless legalized and compensated when occurring in other countries. The deeply strange situation is mirrored in the opaque CGS law in the United States itself.

A quick glance at any 50-state review of laws, compiled either by supporters or opponents to commercial surrogacy, paint a similar picture. They show strange ad hoc mixes of case law which often cover ancillary issues or are at least 30 years old. Some scholars have started to publicly discuss the possible ethical pitfalls of “procreative tourism”, but without clear legal rules governing what arrangements are and are not allowed, it becomes difficult to discuss possible solutions. The dangers of this shadow regime were thrown into stark relief by the war in Ukraine, which prior to the Russian invasion was a major source of surrogate mothers. Mothers were paid on average $15,000 per child, which is considerable in a country where, prior to the invasion, the GDP per capita was less than $5,000. The United States needs to determine if it wishes to become a “destination” country for procreative tourism, as the result in Whittington would seem to suggest it is, and whether it wishes to allow its own citizens the opportunity to travel abroad to engage in CGS.

This blog has touched on only a small fraction of the issues which are faced when determining the ideal regulatory regime for surrogacy. However, a lack of discussion, and a failure to acknowledge possible risks leaves us ignorant of what the problems may be, let alone the route to potential solutions. States have largely failed to address the issue since the first CGS baby was born in their borders, usually in the late 1980’s and early 1990’s. It’s time for a serious examination of CGS regulation as it exists, as well as a meaningful discussion about safeguarding the health and wellbeing of those involved in such a transaction. The UK has now done the same, passing the buck without a serious response to the issues surrounding CGS. Regardless of one’s opinion on the results of the Louisiana and New York regulations, potential participants in a surrogacy arraignment in those two states know the boundaries. That should be the case nationwide.

Are Social Media Empires Liable for “Terror” Organizations?

February 16, 2023
Constitutional Law, First Amendment, Internet, Social Media, Social Welfare

Ray Mestad, MJLST Staffer

The practicality, ease of use, and sheer addictiveness of social media has led to its massive explansion around the world. Approximately 65% of the world uses the internet, and of that group, only 5% does not use social media.[1] So 60% of the world is on social media, around 4.76 billion people.[2] For most, social media is one of the simplest ways to stay connected and communicate with friends, family, and other people in their circle. But along with the growing use of social media, questions have been raised regarding the potential liability social media corporations may have for the content that is posted on their platforms. Recently, lawsuits have been filed against companies like Google, Twitter, and Facebook for allegedly allowing groups accused of terrorism to spread their message or plan on their platforms.[3] The question we are left with is to what extent are social media companies responsible for posts on their sites that lead to violence?

The family of Nohemi Gonzales, an American student killed in Paris during a 2015 Islamic State attack, is suing Google for platforming the Islamic State by allowing them to post videos on Youtube, and then recommending them to people with the Google algorithm.[4] And the family of Nawras Alassaf, a Jordanian citizen killed in a 2017 Istanbul Islamic State attack, is suing Twitter, Google, and Facebook, for not doing more to prevent the organization from using their platform as a communications and messaging tool.[5] Gonzales v. Google and Twitter v. Taamneh will both be presenting their oral arguments to the Supreme Court this month, February 2023.[6]

The legal issues in these cases are rooted in Section 230 of the Communications Decency Act, part of the Telecommunications Act of 1996.[7] 47 U.S.C. 230 intends to protect freedom of expression by protecting intermediaries that publish information posted by users.[8] Section 230(c)(1) states that “no provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”[9] This protects web platforms from liability for the content that users post.

Further, Section 230(c)(2) states that “No provider or user of an interactive computer service shall be held liable on account of…any action voluntarily taken in good faith to restrict access to or availability of material that the provider or user considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected…”[10] This is known as the “Good Samaritan” provision. Like 230(c)(1), Section 230(c)(2) gives internet providers liability protection, allowing them to moderate content in certain circumstances and then providing a safeguard from the free speech claims that would be made against them.[11]

The question is whether or not defendant social media platforms should be shielded from liability for platforming content that has allegedly led to or facilitated violent attacks. In Gonzales, the Justice department stated that although the company is protected against claims for hosting ISIS videos, a claim may be filed against Google for allowing Youtube to provide targeted recommendations of the videos.[12] And in Taamneh, the 9th Circuit agreed with the plaintiffs that there was room for the claim to go forward under the Anti-Terrorism Act because Twitter had generalized knowledge of the Islamic State’s use of their services.[13]

Section 230 has drawn an eclectic mix of critics and supporters. For example, although many conservatives and free speech advocates support the protections of Section 230, there have also been conservatives that oppose the code due to perceived restriction of conservative viewpoints on social media platforms. For example, prominent Republican Josh Hawley from Missouri has come out against the code, stating that the tech platforms ought to be treated as distributors and lose Section 230 protections.[14] In fact, Hawley introduced a piece of legislation opposing Section 230 called the Federal Big Tech Tort Act to impose liability on tech platforms.[15] And on the left, Section 230 is supported by those who believe the voices of the marginalized are protected by 230 and would otherwise be at the whim of tech companies, but opposed by people who fear that the code enables political violence and hate speech.[16]

The Supreme Court has now granted certiorari in both Gonzales and Taamneh. In Gonzales, the plaintiffs are arguing that Section 230 should not protect the actions of Google because the events occurred outside the US, it is preempted by the Justice Against Sponsors of Terrorism Act (JASTA), and the algorithmic recommendations transform Google / Youtube from an interactive computer service to an information content provider.[17] Google is arguing that they should be protected by 230, particularly 230(c)(1).[18] The 9th Circuit stated that although 230 did apply abroad, that JASTA shouldn’t supersede 230. Instead, 230 and JASTA should run parallel to each other. The 9th Circuit further stated that the claims based on revenue sharing (rather than ad targeting) should be dismissed. They did not think Google was contributing to terrorism, because they were motivated by financial enrichment rather than ideology, and affirmed the dismissal, partially because there was not clear enough information of how much support Google had provided to ISIS.[19] Future decisions regarding this case will implicate things like whether algorithmic recommendations should apply to 230.[20]

In Taamneh, the defendants argued that there was no proximate cause, as well as arguing about the inapplicability of Section 230.[21]  Unlike in Gonzales, Taamneh had adequately stated a claim for aiding and abetting because the social media companies had more explicit knowledge of how their platforms were being used by these groups. The Taamneh dismissal was reversed. The Supreme Court review of this case will have implications on what it means to support or have a relationship with a group via a social media platform. In both of these cases, fears regarding the scope of 230 were expressed, which could reflect poorly on its applicability going forward.[24]   

Gonzales and Taamneh will hit the Supreme Court soon. If 230 is restricted, it would enable greater free speech but risks exposing more people to harms like hate speech or violence.  However, if 230 is preserved as is, it could restrict the accessibility and openness that has made the internet what it is today. Whichever decision is made, there will be massive implications for what the internet looks like in the future.

Notes

[1] https://www.smartinsights.com/social-media-marketing/social-media-strategy/new-global-social-media-research/#:~:text=The%20number%20of%20social%20media,growth%20of%20%2B137%20million%20users.

[2] Id.

[3] https://apnews.com/article/islamic-state-group-us-supreme-court-technology-france-social-media-6bee9b5adf33dd15ee64b0d4d4e5ec78

[4] Id.

[5] Id.

[6] https://www.washingtonpost.com/politics/2023/01/03/2023-is-poised-be-landmark-year-tech-legal-bouts/

[7] https://www.justice.gov/archives/ag/department-justice-s-review-section-230-communications-decency-act-1996

[8] https://www.eff.org/issues/cda230

[9] https://casetext.com/statute/united-states-code/title-47-telecommunications/chapter-5-wire-or-radio-communication/subchapter-ii-common-carriers/part-i-common-carrier-regulation/section-230-protection-for-private-blocking-and-screening-of-offensive-material

[10] https://bipartisanpolicy.org/blog/gonzalez-v-google/

[11] https://bipartisanpolicy.org/blog/gonzalez-v-google/

[12] https://www.washingtonpost.com/politics/2022/12/09/tech-critics-urge-supreme-court-narrow-section-230/

[13] https://knightcolumbia.org/blog/twitter-v-taamneh-in-the-supreme-court-whats-at-stake

[14] Supa Washington Post

[15] https://www.hawley.senate.gov/hawley-files-gonzalez-v-google-amicus-brief-supreme-court-challenging-big-techs-section-230

[16] Supa Washington Post

[17] https://www.lawfareblog.com/supreme-court-grants-certiorari-gonzalez-v-google-and-twitter-v-taamneh-overview

[18] Id.

[19] Id.

[20]

[21] Id.

[22] Id.

[23] Id.

[24]Id.

Data Privacy Regulations in 2023: Is the New Standard Burdensome?

February 16, 2023
Cyber Security, Data, Data Privacy, Financial Law

Yolanda Li, MJLST Staffer

Beginning in 2023, businesses will see enhanced regulations on data privacy. There has been an increase in legal requirements for company-held data in protection of companies’ customers as a number of proposed data security laws and regulations came into effect in 2023. Specifically, the FTC Safeguards Rule and the NIS2 Directive.

The FTC Safeguards Rule

The FTC Safeguards Rule came into force in December 2022. The FTC requires non-banking financial institutions “to develop, implement, and maintain a comprehensive security program to keep their customers’ information safe.”[1] Non-banking financial institutions affected by this rule include mortgage brokers, motor vehicle dealers, and payday lenders. The Safeguards Rule is promulgated under the Gramm-Leach-Bliley Act of 1999, which requires financial institutions to “explain their information-sharing practices to their customers and to safeguard sensitive data.”[2] Financial institutions include companies that offer consumer financial products or services like loans, insurance, and financial or investment advice.[3] Specifically, the rule required that the covered financial institutions “designate a qualified individual to oversee their information security program, develop a written risk assessment, limit and monitor who can access sensitive customer information, encrypt all sensitive information, train security personnel, develop an incident response plan, periodically assess the security practices of service providers, and implement multi-factor authentication or another method with equivalent protection for any individual accessing customer information.”

One specific question that arises is whether the FTC Safeguards Rule will truly elevate data privacy standards. On its face the FTC Safeguards Rule does not run counter to the FTC’s mission of protecting consumers. However, the economic cost and effect behind the rule is debatable. One concern is that the rule may impose substantial costs, especially on small businesses, as the new burdens will render costs that may be unbearable for small businesses with less capital than large companies. According to Commissioner Christine S. Wilson, although financial institutions are already implementing many of the requirements under the rule, or have sophisticated programs that are easily adaptable to new obligations, there are still large burdens underestimated by the FTC Safeguards Rule.[4] Specifically, labor shortages have hampered efforts by financial institutions to implement information security systems. Supply chain issues caused delays in obtaining equipment for updating information systems. What is important to note is, according to Commissioner Wilson, most of these factors are outside the control of the financial institutions. Implementing a heightened standard would thus cause unfairness, especially to small financial institutions who have even more trouble obtaining the necessary equipment during times of supply chain and labor shortages.

Recognizing such difficulties, the FTC did offer a certain extent of leniency for implementation of the rule. Specifically, the FTC extended the deadline by six months, primarily due to supply chain issues that may result in delays and shortage of qualified personnel to implement information security programs. This extension is beneficial to the Rule because it offers the covered financial institutions time for adjustment and compliance.

Another concern that the FTC Safeguards Rule has raised is that the mandates will not result in a significant reduction in data security risks in protecting customers. The answer to this question is still uncertain as the FTC Safeguards Rule just came into effect, and the extension pushes out implementation even farther. One thing to note, however, is that during the rule-making process the FTC sought comments on the proposed Safeguards Rule and during that time extended the deadline for the public to submit comments to changes by 60 days in.[5] This fact may show that the FTC took careful consideration of how to most effectively reduce data security risks by giving the public ample time to weigh in.

NIS2 Directive

A corresponding law is the NIS2 Directive by the EU that came into force on January 16, 2023. This EU-wide legislation provides a variety of legal measures to boost cybersecurity. Specifically, it requires member states to be appropriately equipped with response and information systems, set up a Corporation Group to facilitate corporate exchange of information among member states, and ensure a culture of security that relies heavily on infrastructures, including financial market infrastructure.[6] The Directive also contains a variety of security and notification requirements for service providers to comply with. The NIS2 Directive echoes the FTC Safeguards Rule to a large extent regarding the elevated standard of cybersecurity measures.

However, the NIS2 Directive contains a different measure by implementing duties onto the European Union Agency for Cybersecurity (ENISA) itself. The Directive designates that ENISA assists Member States and the Corporation Groups set up under the Directive by “identifying good practices in the Member States regarding the implementation of the NIS directive, supporting the EU-wide reporting process for cybersecurity incidents, by developing thresholds, templates and tools, agreeing on common approaches and procedures, and helping Member States to address common cybersecurity issues.”[7] The Directive ordering the agency itself to facilitate the carrying out of the Directive may add to the likelihood of success. Although the outcome is uncertain, primarily because of the broad language of the Directive, at least burdens on financial institutions will be lessened to a certain extent. What distinguishes the NIS2 Directive from the FTC Safeguards Rule is that the Member States are given 21 months to transpose to their national legislative framework.[8] This time offers more flexibility as compared to the extension of the FTC Safeguards Rule. As the Directive passes through the legislative framework, more time will be allowed for financial institutions to prepare and respond to the proposed changes.

In summary, data privacy laws are tightening up globally, and the United States should look to and learn from the successes and failures of the EU’s Directive as both countries’ are attempting to do regulate a similar industry. That being said, regardless of the EU, financial institutions in the United States must begin paying attention to and complying with the FTC Safeguards Rule. Though the outcome of the Rule is uncertain, the 6-month extension will at least offer a certain degree of flexibility.

Notes

[1]https://www.ftc.gov/news-events/news/press-releases/2022/11/ftc-extends-deadline-six-months-compliance-some-changes-financial-data-security-rule; 16 CFR 314.

[2] https://www.ftc.gov/business-guidance/privacy-security/gramm-leach-bliley-act.

[3] Id.

[4] Concurring Statement of Commissioner Christine S. Wilson, Regarding Delaying the Effective Date of Certain Provisions of the Recently Amended Safeguards Rule (Nov 2022).

[5] https://www.ftc.gov/news-events/news/press-releases/2019/05/ftc-extends-comment-deadline-proposed-changes-safeguards-rule.

[6] https://digital-strategy.ec.europa.eu/en/policies/nis2-directive.

[7] https://www.enisa.europa.eu/topics/cybersecurity-policy/nis-directive-new#:~:text=On%2016%20January%202023%2C%20the,cyber%20crisis%20management%20structure%20(CyCLONe).

[8] Id.

 

Will Artificial Intelligence Surpass Human Intelligence Sooner Than Expected? Taking a Look at ChatGPT

February 6, 2023
Artificial Intelligence, Cyber Security, Data Privacy, Internet, New Technology

Alex Zeng, MJLST Staffer

The fear of robots taking over the world and making humans obsolete has permeated the fabric of human society in recent history. With advances in technology blurring the line between human art and artificial intelligence (“AI”) art and a study predicting that 800 million workers across the globe will be replaced by robots by 2030, it may be hard to remain optimistic about humanity’s role in an increasingly automated society. Indeed, films such as 2001: A Space Odyssey(1968) and I, Robot (2004) take what awaits humans in a society ruled by robots to its logical conclusion, and—spoiler alert—it is not great for humans. This blog post discusses ChatGPT, its achievements, and its potential consequences on human society. ChatGPT, a point for the robots, embodies people’s fear of the bleak future of a fully automated world.

What Is ChatGPT?

ChatGPT is a chatbot launched by OpenAI in November of 2022. It uses natural language processing to engage in realistic conversations with humans and it can generate articles, fictional stories, poems, and computer code by responding to prompts queried by users. It is built on top of OpenAI’s GPT-3 family of large language models and is fine-tuned using supervised and reinforcement learning techniques. This GPT model is also autoregressive, meaning that it predicts the next word given a body of text. The dialogue format makes it possible for ChatGPT to answer followup questions, admit its mistakes, challenge incorrect premises, and reject inappropriate requests. ChatGPT is not without its limitations, however. OpenAI says that ChatGPT’s limitations include: (1) writing plausible-sounding but incorrect or nonsensical answers, (2) being sensitive to tweaks to the input phrasing or attempting the same prompt multiple times, (3) being excessively verbose and overusing certain phrases, (4) being unable to ask clarifying questions when the user provides an ambiguous query, and (5) responding to harmful instructions or exhibiting biased behavior.

Uses For ChatGPT

The main distinction between ChatGPT and other chatbots and natural language processing systems is its ultra-realistic conversational skills. Professor Ethan Mollick in the Harvard Business Review claims that it is a tipping point for AI because of this difference in quality as it can even be used to write weight-loss plans, children’s books, and offer advice on how to remove a peanut butter sandwich from a VCR in the style of the King James Bible. I even attempted to use ChatGPT to write this blog post for me, although it wrote only 347 words—nowhere near the word minimum of 1,000 words that I had set for it. What is evident through these cases, however, is its level of quality reflecting something that sounds remarkably human.

ChatGPT’s uses are not limited to just answering absurd prompts, however. Professor Mollick had a student using ChatGPT complete a four-hour project in less than an hour by creating a computer code for a startup prototype using code libraries they had never seen before. Additionally, ChatGPT was able to pass graduate business and law exams, although it was by the skin of its silicon teeth. Indeed, it was even able to pass Constitutional Law, Employee Benefits, Taxation, and Torts exams administered by University of Minnesota Law School professors Jonathan Choi, Kristin Hickman, Amy Monahan, and Daniel Schwarcz. Of course, while ChatGPT would not be graduating in the top of its class and would actually be placed on academic probation, it would still notably graduate with a degree based on these results.

Implications of ChatGPT

ChatGPT’s application to tasks that require creativity and expression such as answering exam questions, producing computer code, and being this generation’s Dr. Seuss, reveals an important yet potentially perilous step forward in how AI is used. Rather than being used in areas where failure is expensive and intolerable—such as with autonomous driving—AI is now being used in tasks where some failure is acceptable. In these tasks, AI such as ChatGPT is already performing well enough that online customer service roles were taken over by AI and it threatens replacing humans in any task that requires simple execution, such as following a script or whipping up a legal document. In fact, an AI-powered robot lawyer was about to represent a defendant in court before the prosecutors threatened the person behind the chatbot with prison time.

When used as a tool rather than a standalone replacement for humans, however, the realm of possibilities regarding productivity expands exponentially. Businesses and individuals can save time and resources by having AI do more of these menial tasks such as drafting letters and writing emails. Writers with writer’s block, for example, can suddenly gain inspiration by having a conversation with ChatGPT. On the other hand, students can use ChatGPT to finish their assignments and write their exams for them. Additionally, while ChatGPT has filters that prevent it from saying offensive language, these filters can be bypassed so that it responds to queries that may facilitate crime. Additionally, ChatGPT raises big questions regarding, for example, copyright law and who owns the responses ChatGPT generates.

Some drawbacks to using AI and ChatGPT for these tasks is that while ChatGPT gives human-like answers, it does not necessarily give the right answer. ChatGPT also cannot explain what it does or how it does it, making it difficult to verify what results in the answers it gives. Finally, and perhaps critically, ChatGPT cannot explain why something is meaningful and thus cannot replicate human judgment. In other words, ChatGPT can explain data but cannot explain why it matters.

Conclusion

In a more positive light, some may herald the improvements in AI and ChatGPT as the dawn of a new human-machine hybrid Industrial Revolution, where humans are able to be vastly more efficient and effective at their jobs. ChatGPT is, in some ways, the culmination of current efforts in AI to produce human sentience. However, as advancements in AI continue to replace human functions in society, it may no longer be a question of if humans will be replaced entirely by robots, but when. Although it was previously believed that AI could never replicate art, for example, discussions about AI-generated art today reflect that AI may achieve what was believed to be impossible sooner rather than later. In this case, AI like ChatGPT can be viewed not as the harbinger of a human-machine society, but an omen of the obsoletion of human function in society. Relievingly, however, AI like ChatGPT has not yet reached the logical conclusion contemplated in dystopian films.

A “Living” AI: How ChatGPT Raises Novel Data Privacy Issues

February 6, 2023
Artificial Intelligence, Cyber Security, Data Privacy, Internet, New Technology

Alexa Johnson-Gomez, MJLST Staffer

At the end of 2022, ChatGPT arrived on the scene with tremendous buzz and discourse to follow. “Is the college essay dead?”[1]“Can AI write my law school exams for me?”[2] “Will AI like ChatGPT take my job?”[3] While the public has been grappling with the implications of this new technology, an area that has been a bit less buzzy is how this massive boom in AI technology inextricably involves data privacy.

ChatGPT is a machine learning model that constantly evolves through a process of collecting and training on new data.[4] In teaching AI to generate text with a natural language style, computer scientists engage in “pre-generative training” involving feeding AI huge swaths of unlabeled text followed by repeated rounds of “fine-tuning.”[5] Since its public launch, that process has only grown in scale; the chatbot continues to utilize its interactions with users to fine-tune itself. This author asked ChatGPT itself how its machine learning implements user data, and it described itself as a “living” AI—one that is constantly growing with new user input. While such a statement might evoke dystopian sci-fi themes, perhaps much more unsettling is the concept that this AI is indiscriminately sucking in user data like a black hole.

In an era where “I didn’t read the privacy policy” is the default attitude, understanding what an AI might be able to glean from user data seems far beyond the purview of the general public. Yet this collection of user data is more salient than ever. Sure, one might worry about Meta targeting its advertisements based on user data or Google recommending restaurants based on their GPS data. In comparison, the way that our data is being used by ChatGPT is in a league of its own. User data is being iterated upon, and most importantly, is dispositive in how ChatGPT learns about us and our current moment in human culture.[6] User data is creating ChatGPT; it is ChatGPT.

In other words, the general public may not have full awareness of what kind of privacy protections—or lack thereof—are in place in the United States. In brief, we tend to favor free expression over the protection of individual privacy. The privacy act that regulates information sent over the Internet is the Electronic Communications Privacy Act, 18 U.S.C. §§ 2510–2523. Enacted in 1986, the bulk of ECPA predates the modern internet. As a result, any amendments have been meager changes that do not keep up with technological advancement. A majority of ECPA touches things like interceptions of communication with, for example, wiretapping or government access to electronic communications via warrants. “Electronic Communications” may be a concept that includes the Internet, yet the Internet is far too amorphous to be regulated by this outdated Act, and AI tools existing on the Internet are several technological steps away from its scope.

In contrast, the European Union regulates online data with the General Data Protection Regulation (GDPR), which governs the collection, use, and storage of personal data of people in the EU. The GDPR applies to all companies whose services reach individuals within the EU, regardless of where the company is based, and non-compliance can result in significant fines and legal penalties. It is considered to be one of the most comprehensive privacy regulations in the world. Since ChatGPT is accessible by those in the EU, interesting questions are raised about how the use and collection of data is the base function of this AI. Does the GDPR even allow for the use of ChatGPT, considering how user data is being constantly used to evolve the technology?[7] The collection and use of European citizens’ data is a violation of the GDPR, but the definition of “use” as it pertains to ChatGPT is not clear. The use of data in ChatGPT’s fine-tuning process could arguably be a violation of the GDPR.

While a bit of a unique use-case, a particularly troubling example raised by a recent Forbes article is a lawyer using ChatGPT to generate a contract, and inputting confidential information in the chatbot in the process.[8] That information is stored by ChatGPT, and would potentially violate ABA rules. As ChatGPT brews even more public fervor, professionals are likely to try to use the tool to make their work more efficient or thorough. But individuals should think long and hard about what kind of information they are inputting into the tool, especially if confidential or personally-identifying information is at play.

The privacy policy of OpenAI, the company responsible for ChatGPT, governs ChatGPT’s data practices. OpenAI stipulates collecting information including contact info (name, email, etc), profiles, technical info (IP, browser, device), and interactions with ChatGPT. OpenAI “may” share data with third parties that perform services for the company (e.g., website hosting, conducting research, customer service), affiliates and subsidiaries of the company, the government & law enforcement, “or other third parties as required by law.” OpenAI explicitly claims to comply with the GDPR and other privacy laws like the California Consumer Privacy Act (CCPA), in that transparency is a priority, and users can access and delete data upon request. However, compliance with the GDPR and CCPA must be in name only, as these regulations did not even contemplate what it means for user data to form the foundation of a machine learning model.

In conclusion, the rapid growth of AI technology presents important data privacy issues that must be addressed by lawmakers, policy experts, and the public alike. The development and use of AI arguably should be guided by regulations that balance innovation with privacy concerns. Yet public education is perhaps the most vital element of all, as regulation of this sort of technology is likely to take a long time in the U.S., if ever. If users of ChatGPT can be cognizant of what they are inputting into the tool, and stay informed about what kind of obligation OpenAI has to its users’ privacy, then perhaps privacy can be somewhat protected.

Notes

[1] Stephen Marche, The College Essay is Dead, The Atlantic (Dec. 6, 2022), https://www.theatlantic.com/technology/archive/2022/12/chatgpt-ai-writing-college-student-essays/672371/.

[2] Jonathan H. Choi et al., ChatGPT Goes to Law School (2023).

[3] Megan Cerullo, AI ChatgPT Is Helping CEOs Think. Will It Also Take Your Job?, CBS News (Jan. 24, 2023), https://www.cbsnews.com/news/chatgpt-chatbot-artificial-intelligence-job-replacement/.

[4] Richie Koch, ChatGPT, AI, and the Future of Privacy, Proton (Jan. 27, 2023), https://proton.me/blog/privacy-and-chatgpt.

[5] Alec Radford & Karthik Narasimhan, Improving Language Understanding by Generative Pre-Training (2018).

[6] Lance Eliot, Some Insist That Generative AI ChatGPT Is a Mirror Into the Soul of Humanity, Vexing AI Ethics and AI Law, Forbes (Jan. 29, 2023), https://www.forbes.com/sites/lanceeliot/2023/01/29/some-insist-that-generative-ai-chatgpt-is-a-mirror-into-the-soul-of-humanity-vexing-ai-ethics-and-ai-law/?sh=1f2940bd12db.

[7] Kevin Poireault, #DataPrivacyWeek: Addressing ChatGPT’s Shortfalls in Data Protection Law Compliance, Info Security Magazine (Jan. 28, 2022), https://www.infosecurity-magazine.com/news-features/chatgpt-shortfalls-data-protection/.

[8] Lance Eliot, Generative AI ChatGPT Can Disturbingly Gobble Up Your Private and Confidential Data, Forewarns AI Ethics and AI Law, Forbes (Jan. 27, 2023),  https://www.forbes.com/sites/lanceeliot/2023/01/27/generative-ai-chatgpt-can-disturbingly-gobble-up-your-private-and-confidential-data-forewarns-ai-ethics-and-ai-law/?sh=9f856a47fdb1.

Saving the Planet With Admin Law: Another Blow to Tax Exceptionalism

December 13, 2022
Administrative Law, Agencies, Environment, Tax, Tax Law

Caroline Moriarty, MJLST Staffer

Earlier this month, the U.S. Tax Court struck down an administrative notice issued by the IRS regarding conservation easements in Green Valley Investors, LLC v. Commissioner. While the ruling itself may be minor, the court may be signaling a shift away from tax exceptionalism to administrative law under the Administrative Procedures Act (“APA”), which could have major implications for the way the IRS operates. In this post, I will explain what conservation easements are, what the ruling was, and what the ruling may mean for IRS administrative actions going forward. 

Conservation Easements

Conservation easements are used by wealthy taxpayers to get tax deductions. Under Section 170(h) of the Internal Revenue Code (“IRC”), taxpayers who purchase development rights for land, then donate those rights to a charitable organization that pledges not to develop or use the land, get a deduction proportional to the value of the land donated. The public gets the benefit of preserved land, which could be used as a park or nature reserve, and the donor gets a tax break.

However, this deduction led to the creation of “syndicated conservation easements.” In this tax scheme, intermediaries purchase vacant land worth little, hire an appraiser to declare its value to be much higher, then sell stakes in the donation of the land to investors, who get a tax deduction that is four to five times higher than what they paid. In exchange, the intermediaries are paid large fees. 

Conservation easements can be used to protect the environment, and proponents of the deduction argue that the easements are a critical tool in keeping land safe from development pressures. However, the IRS and other critics argue that these deductions are abused and cost the government between $1.3 billion and $2.4 billion in lost tax revenue. Some appraisers in these schemes have been indicted for “fraudulent” and “grossly inflated” land appraisals. Both Congress and the IRS have published research about the potential for abuse. In 2022, the IRS declared the schemes one of their “Dirty Dozen” for the year, writing that “these abusive arrangements do nothing more than game the tax system with grossly inflated tax deductions and generate high fees for promoters.”

Notice 2017-10 and the Tax Court’s Green Valley Ruling

To combat the abuse of conservation easements, the IRS released an administrative notice (the “Notice”) that required taxpayers to disclose any syndicated conservation easements on their tax returns as a “listed transaction.” The notice didn’t go through notice-and-comment procedures from the APA. Then, in 2019, the IRS disallowed over $22 million in charitable deductions on Green Valley and the other petitioners’ taxes for 2014 and 2015 and assessed a variety of penalties.  

While the substantive tax law is complex, Green Valley and the other petitioners challenged the penalties, arguing that the Notice justifying the penalties didn’t go through notice and comment procedures. In response, the IRS argued that Congress had exempted the agency from notice-and-comment procedures. Specifically, the IRS argued that they issued a Treasury Regulation that defined a “listed transaction” as one “identified by notice, regulation, or other form of published guidance,” which should have indicated to Congress that the IRS would be operating outside of APA requirements when issuing notices. 

The Tax Court disagreed, writing “We remain unconvinced that Congress expressly authorized the IRS to identify a syndicated conservation easement transaction as a listed transaction without the APA’s notice-and-comment procedures, as it did in Notice 2017-10.” Essentially, the statutes that Congress wrote allowing for IRS penalties did not determine the criteria for how taxpayers would incur the penalties, so the IRS decided with non-APA reviewed rules. If Congress would have expressly authorized the IRS to determine the requirements for penalties without APA procedures in the penalty statutes, then the Notice would have been valid. 

In invalidating the notice, the Tax Court decided that Notice 2017-10 was a legislative rule requiring notice-and-comment procedures because it imposed substantive reporting obligations on taxpayers with the threat of penalties. Since the decision, the IRS has issued proposed regulations on the same topic that will go through notice and comment procedures, while continuing to defend the validity of the Notice in other circuits (the Tax Court adopted reasoning from a Sixth Circuit decision).

The Future of Administrative Law and the IRS 

The decision follows other recent cases where courts have pushed the IRS to follow APA rules. However, following the APA is a departure from the past understanding of administrative law’s role in tax law. In the past, “tax exceptionalism” described the misperception that tax law is so complex and different from other regulatory regimes that the rules of administrative law don’t apply. This understanding has allowed the IRS to make multiple levels of regulatory guidance, some binding and some not, all without effective oversight from the courts. Further, judicial review is limited for IRS actions by statute, and even if there’s review, it may be ineffective if the judges are not tax experts. 

This movement towards administrative law has implications for both taxpayers and the IRS. For taxpayers, administrative law principles could provide additional avenues to challenge IRS actions and allow for more remedies. For the IRS, the APA may be an additional barrier to their job of collecting tax revenue. At the end of the day, syndicated conservation easements can be used to defraud the government, and the IRS should do something to curtail their potential for abuse. Following notice-and-comment procedures could delay effective tax administration. However, the IRS is an administrative agency, and it doesn’t make sense to think they can make their own rules or act like they’re not subject to the APA. Either way, administrative law will likely continue to prevail in both federal courts and Tax Court, and it will continue to influence tax law as we know it.

Charged Up! the Inflation Reduction Act of 2022 and Its Impacts on Energy Storage Capacity in the U.S.

December 5, 2022
Climate Change, Energy Law, Environment, Solar Energy

Quinn Milligan, MJLST Staffer

The Inflation Reduction Act of 2022 (the IRA) is one of the most significant steps the U.S. government has ever taken towards fighting climate change. Over a decade, the IRA dedicates nearly $400 billion to clean energy tax incentives with the aim of reducing carbon emissions and aiding the U.S. energy economy in speeding up its transition away from fossil fuel based energy generation.[1] One of the most interesting features of the IRA’s emphasis on clean energy is the energy storage industry. The IRA extends the coverage of the 30% Investment Tax Credit (ITC) to standalone energy storage projects, and creates a system by which standalone battery projects can earn up to 70% in tax credits, with additional incentives linked to involvement in low-income housing and other projects.[2]

Why is that such a big deal? At a high level, one of the main obstacles to reliance on renewable energy sources, other than nuclear power, is the variability of their supply generation. Variability is easy to understand at a cursory level: You can’t rely on solar power when it’s not sunny out or wind energy when there’s no wind. So, variability of energy production from renewable sources has long been an obstacle to the increased dispatch of renewable sources.[3] Increased transmission capacity and energy storage capacity provide a solution to the variability in generation of renewable energy sources.[4]

The manner in which the Federal Energy Regulatory Committee (FERC) regulates the Independent System Operators (ISOs) and Regional Transmission Organizations (RTOs) accentuates the impact of generation variability on the ability of renewable resources to be widely utilized. These ISOs and RTOs operate independently of the federal government to ensure that U.S. citizens have reliable access to affordable energy.[5] In essence, for huge swaths of the country, ISOs and RTOs oversee the markets wherein energy is purchased from generators and resold to retail suppliers, which provide energy to end consumers.[6] The ISOs and RTOs both forecast and plan for the energy needs of their areas of oversight, and then coordinate the purchase and sale of those contracts to fulfill the energy needs. These purchases happen at multiple different time scales, ranging from forward contracts, to day-ahead markets, and even minutes before requirement.[7] Because planning and forecasting make up such an important part of how energy is purchased, the variability of generation from renewables has historically made it very hard for ISOs and RTOs to rely on renewably sourced energy to fulfill any sort of energy need other than minutes-ahead contracts. However, that is the very problem many of the incentives in the IRA may help to solve.

The huge tax incentives given out to standalone energy storage projects are critical policy achievements that will go very far in aiding the U.S. to accomplish its lofty goal of reducing carbon emissions up to 40% below 2005 levels by 2035, as the Biden Administration claims will be accomplished with help of the IRA.[8] One huge change the IRA made to climate policies enacted under the Obama Administration was to remove the solar charging of battery storage in order to receive tax credits. Under the IRA, as opposed to prior legislation, investment in projects to create better storage will receive the IRA’s ITC regardless of what source of energy is used to fill that battery capacity.[9] This ITC for energy storage capacity pairs hand-in-hand with the tax credits extended under the IRA to renewables; for example, the IRA extends the current tax breaks for solar and wind generation for another 10 years.

The emphasis on energy storage capacity increases means ISOs, RTOs and other energy utilities will have less need to rely on fossil fuel energy sources to power their grids, as cleanly produced energy can be stored and dispatched on a longer-term basis to store power and make up for variability in generation. The other important aspect of increases in electricity storage capacity is that ISOs and RTOs can more comfortably rely on renewable energy sources to respond to fluctuations in peak demand periods than ever before.[10] Responding to changes in demand during peak demand hours has long been one of the main challenges for utilities, and one of the reasons our grid has continued to rely on fossil-fuel-based energy for so long. Its generation is reliable, cheap, established and abundant.[11] The increase in energy storage capacity resulting from the IRA’s incentive structure will help ISOs and RTOs transition more fully toward reliance on renewable energy in short-term markets, as well as the long-term capacity markets, by minimizing reliability concerns previously raised by generation variability.

The real genius of the IRA’s focus on the energy storage capacity from a policy standpoint is that all battery projects put into service after December 31, 2022, receive the ITC, even if they are powered by fossil fuels.[12] Unlike many climate change policies before it, this approach means the entire U.S. energy grid, and not just the renewables sector, will be incentivized to address a critical constraint on the deployment of renewably generated electricity and subsequently ease the transition of the grid away from fossil-fuel-generated electricity.

As time goes forward, the price of renewable energy continues to go down as compared to fossil-fuel-generated energy; in fact, renewable energy today is generally cheaper than fossil fuel energy.[13] That begs the question of why most of our electricity is sourced from fossil fuels when FERC directs the ISOs and RTOs to power the grid affordably. The reliability of renewable energy generation has long been one of the obstacles standing in the way of a transition to renewable energy generation, and the IRA’s electricity storage incentives go far in setting up the U.S. to successfully build the storage capacity needed to finally make a transition away from carbon reliance.

Notes

[1] https://www.mossadams.com/articles/2022/08/inflation-reduction-act-clean-energy-credits

[2] https://www.utilitydive.com/spons/ira-sets-the-stage-for-us-energy-storage-to-thrive/635665/#:~:text=The%20Inflation%20Reduction%20Act%20(IRA,70%20percent%20with%20additional%20incentives.

[3] https://www.rff.org/publications/explainers/renewables-101-integrating-renewables/

[4] https://climatechangeresources.org/storage/

[5] https://www.ferc.gov/power-sales-and-markets/rtos-and-isos

[6] https://bestpracticeenergy.com/2020/05/21/energy101-electricity-iso/#:~:text=What%20exactly%20do%20ISOs%20and,actions%20are%20unbiased%20and%20neutral.

[7] https://www.iso-ne.com/markets-operations/markets/da-rt-energy-markets/

[8]https://crsreports.congress.gov/product/pdf/R/R47262#:~:text=The%20same%20analyses%20estimated%20that,prices%2C%20among%20other%20uncertain%20factors

[9] https://www.ny-engineers.com/blog/energy-storage-tax-credit-before-and-after-the-inflation-reduction-act

[10] https://www.ncsl.org/research/energy/energy-storage-for-a-modern-electric-grid-technology-trends-and-state-policy-options.aspx

[11] https://www.solarreviews.com/blog/fossil-fuels-pros-and-cons#fossil-fuel-pros-and-cons

[12]https://www.mossadams.com/articles/2022/08/inflation-reduction-act-clean-energy-credits “Standalone battery storage. “If placed in service after December 31, 2022, standalone battery storage qualifies for the ITC, regardless of whether it’s charged by a renewable source.”

[13] https://www.weforum.org/agenda/2021/07/renewables-cheapest-energy-source/

DNA Testing and Death: How Decades-Long Procedural Battles Determine Who Has to Die

December 5, 2022
Criminal Law, DNA Evidence, Evidence, Forensic Evidence, Litigation

Alexa Johnson-Gomez, MJLST Staffer

When individuals convicted of murder claim actual innocence, crime-scene DNA testing has, many times over, been dispositive in proving such innocence. Intuitively, we assume that if someone has been wrongfully convicted, DNA will be the bringer of truth. But what happens when a defendant cannot get their requested DNA testing because the State argues their claim is procedurally defaulted or barred by the statute of limitations?

Reed v. Goertz is a case in the current U.S. Supreme Court term. Petitioner Rodney Reed argues that his due process rights were violated by a refusal to complete DNA testing after he filed post conviction petitions for relief. While the facts are fairly case-specific and relate to Texas criminal procedure, the Court’s holding in this case could have important implications for when the clock starts to run on petitions for crime-scene DNA testing, as well as for death-row claims of actual innocence more generally.

Back in 1998, a Texas court convicted Rodney Reed of the murder of Stacey Stites; the evidentiary basis for this conviction was solely the presence of his sperm.[1] Reed has maintained his innocence since trial, explaining that his sperm was present because he was having a secret, long-standing affair with Stites.[2] At trial, Reed theorized that the murderer might have been the man Stites was engaged to, who was perhaps retaliating against Stites, a white woman, for having an affair with Reed, a Black man.

In 2014, Reed sought post conviction DNA testing under Chapter 64 of the Texas Code of Criminal Procedure. This provision allows a convicted person to obtain post conviction DNA testing of biological material if the court finds that certain conditions are met.[3] The state trial court denied this motion in November 2014, on the grounds that Reed failed to prove by a preponderance of the evidence that he would not have been convicted but for exculpatory results. Reed appealed the denial, and the appellate court remanded for additional fact finding. Then in September 2016, after additional fact finding was done, the state trial court denied the post conviction DNA testing yet again. The appellate court affirmed the denial in April 2017 and denied rehearing in October 2017.

At this stage, Reed filed a 42 U.S.C. § 1983 complaint against the prosecuting attorney, challenging the constitutionality of Chapter 64 both on its face and as applied to his case.[4] The district court dismissed all of Reed’s claims for failure to state a claim; the Fifth Circuit affirmed in April 2021, stating that Reed’s claim was untimely and that Reed knew or should have known of his injury in November 2014. Generally, time bars in post conviction follow a common principle: if a defendant did know or should have known of a claim, that is the point at which the clock starts running. Defense counsel argues that the clock began to run in October 2017, after Reed exhausted his post conviction appeals fully.

At oral argument on October 11, 2022, the state argued that the clock started prior to the rehearing date in October 2017. Justice Kagan reasoned that it would be simpler to acknowledge we do not know what the authoritative construction of a court of appeals is until appeals are concluded. Justice Jackson agreed, noting that if the federal clock starts while the state appeals process is still ongoing, then the federal courts would have to pause consideration to allow state courts to weigh in first. This would be untenable and overly chaotic. Defense counsel reminded the court of the mounting evidence that points at Reed’s innocence, evidence which is still under review.

While not the hottest topic of this Supreme Court term, this case could still have important implications. While the use of DNA testing to prove actual innocence has been a practice in the world of litigation for the past few decades, cases that have yet to get their post conviction DNA testing done, like Reed’s, often stand in such perilous status because of procedural bars.

A haunting example—the recent execution of Murray Hooper in Arizona. 76 years old at the time of his death, Hooper maintained his innocence until his day of execution.[5] There was never any forensic testing in Hooper’s case that proved he conclusively committed the murders. Hooper’s lawyers filed appeals to get newly discovered evidence considered and forensic testing completed,[6] yet these petitions were all denied.

In theory, post conviction and habeas relief are meant to be reserved for the most deserving of defendants. The courts do not want to allow convicted murderers chance after chance at getting a conviction or sentence overturned, and there is, of course, the presumption that any conviction was right the first time. Yet the high procedural barrier to bringing such claims is not in line with the reality of wrongful convictions. Since 1973, 190 death-row inmates have been exonerated.[7]Post conviction DNA testing is not merely allowing defendants to draw out their appeals process and stave off execution, but is an important scientific tool that can check if the trial court got it right. Preventing petitioners from accessing DNA testing just because of procedural barriers is an injustice, and hopefully the Supreme Court rules as such in Reed v. Goertz.

Notes

[1] Innocence Staff, 10 Facts About Rodney Reed’s Case You Need to Know, Innocence Project (Oct. 11, 2019), https://innocenceproject.org/10-facts-you-need-to-know-about-rodney-reed-who-is-scheduled-for-execution-on-november-20/.

[2] Amy Howe, Justices Wrestle with Statute of Limitations in Rodney Reed’s Effort to Revive DNA Lawsuit, SCOTUSblog (Oct. 11, 2022), https://www.scotusblog.com/2022/10/justices-wrestle-with-statute-of-limitations-in-rodney-reeds-effort-to-revive-dna-lawsuit/.

[3] See Tex. Code Crim. Proc. Ann. § 64.03.

[4] Reed v. Goertz, 995 F.3d 425, 428 (5th Cir. 2021).

[5] Liliana Segura, Out of Time, The Intercept (Nov. 15, 2022), https://theintercept.com/2022/11/15/murray-hooper-arizona-execution/.

[6] Associated Press, Lawyers for Murray Hooper File New Appeal as Execution Date Nears, Fox 10 (Nov. 1, 2022),https://www.fox10phoenix.com/news/lawyers-for-murray-hooper-file-new-appeal-as-execution-date-nears.

[7] Innocence, Death Penalty Information Center, https://deathpenaltyinfo.org/policy-issues/innocence (last visited Nov. 27, 2022).

Who Qualifies for the Patent Bar? Proposed Changes May Mean More Applicants With Computer Science Degrees Soon Will

November 27, 2022
Intellectual Property, Legal Education, Patents

Nina Elder, MJLST Staffer

Last month, the United States Patent and Trademark Office (USPTO) put out a request for comments on a proposal to amend the admission requirements for the registration examination it administers. Passing this examination, colloquially referred to as the patent bar, is required before an aspiring practitioner can practice patent matters before the USPTO. To qualify for the test, applicants must demonstrate that they have the appropriate scientific and technical training. There are three ways to qualify, but most applicants are automatically admitted under “Category A” which simply requires a degree in an approved topic. The USPTO has historically adhered strictly to its list of approved degrees; for example, “biology” is included on the list, but in the past a degree in “biological sciences” did not qualify.

In 2021, the USPTO made its first major change to the admission requirements in years by expanding the degrees accepted under Category A to include advanced degrees and 14 new undergraduate majors. Though it did not officially announce it, the USPTO also edited its Frequently Asked Questions to reflect that it no longer requires that an applicant’s degree match a Category A degree title exactly, but instead evaluates any degree that is similar to an approved degree to determine if they are equivalent. However, even after these improvements there was still a clear lack of approved computer science-related degrees, and many attorneys felt the USPTO needed to do more. The USPTO’s new proposal at least partially addresses this issue and suggests several more changes, a key one being removing the certification requirement for computer science degrees.

Currently, computer science degrees only qualify under Category A if they are certified by either the Computing Accreditation Commission or the Accreditation Board for Engineering and Technology. This is the only degree accepted under Category A that requires extra certification. Qualifying under either of the alternative routes—Category B or C—may be nearly impossible for many students with computer science degrees. Category B requires an applicant establish they have the necessary training by showing they have a certain number of credits in particular scientific topics. However, the coursework needed for a computer science degree typically does not align with the subjects required for Category B such as physics, chemistry, and biology. Under Category C an applicant can prove they have practical training by taking the Fundamentals of Engineering test, but once again the information covered for a degree in computer science may not prepare a student for such a test. 

As of November 2022, there are only 368 schools in the US with a qualifying certified computer science program. Many highly respected schools, including Stanford, UC Berkeley, and Carnegie Mellon, do not have the required certification for their computer science programs. Considering there appear to be more than 700 four-year schools that offer computer science degrees, there are likely hundreds of computer science students graduating every year that do not qualify to take the patent bar under Category A and may have difficulty qualifying under Category B or C. Even if a school becomes accredited, any student that received a degree before that accreditation does not qualify.

The certification requirement may be excluding the “best and brightest” computer practitioners, and is contributing to the lack of practitioners with relevant experience in a heavily patented area. There is a huge disconnect between the number of patents related to software and the number of practitioners with a relevant background. As of 2010, less than 5% of patent practitioners trained in a computer science-related field. While decisions such as Alice Corp v CLS Bank International have limited what software can be patented, a growing number of patents at least include some element relating to computers and more than 60% of utility patents issued in 2019 related to software. There is clearly an increasing need for competent patent attorneys with experience in software and, if adopted, the USPTO’s current proposal would increase that pool.

It has also been suggested that altering patent bar requirements may improve diversity in patent law. Despite women making up more than 37% of attorneys in the US, only 17% of patent attorneys are women. Less than 15% of patent practitioners with a background in computer science are women. The picture is even more striking when we examine racial diversity—less than 7% of all patent attorneys and agents are minorities. Shockingly, there are more male patent practitioners named Michael than women of color. The USPTO’s broadening of the accepted degrees last year was spurred by a journal article written by a law student, Mary Hannon, suggesting that changes to patent bar admission may help address the low number of women in patent law. While she acknowledged that removing the computer science certification requirement would not close the gender gap since the majority of computer science graduates are men, she pointed out that by allowing more individuals with computer science degrees to take the patent bar the overall number of women admitted to the exam may increase. 

Many have been pushing for changes to the patent bar admission requirements for years, and while it is promising to see progress being made, there is still more that can be done. Organizations such as the American Intellectual Property Law Association have suggested Category A be broadened even further to include degrees such as data science and mathematics. The USPTO has not only shown willingness to continue updating these requirements, as evidenced by the fact it is proposing to regularly consider and add new Category A degrees, but also that it is responsive to comments. For example, environmental engineering was added to the list of accepted degrees at least partially in response to a comment. Kathi Vidal, USPTO’s current director, explained the goal is to ensure the USPTO remains dynamic by recognizing the new types of degrees being awarded as society and technology evolve. In its recent request for comments, the USPTO asked commenters to weigh in on its new proposals and to submit general suggestions on updating the scientific and technical requirements for admission to the patent bar. Comments close on January 17th, 2023—if you have thoughts about the degrees the USPTO should accept under Category A, go comment!


The Crypto Wild West Chaos Continues at FTX: Will the DCCPA Fix This?

November 27, 2022
Agencies, Cryptocurrency, Regulatory

Jack Atterberry, MJLST Staffer

The FTX Collapse and Its Implications

Over the last few weeks, the company FTX has imploded in what appears to be a massive scam of epic proportions. John Ray III, the former Enron restructuring leader who just took over FTX as CEO in their bankruptcy process, described FTX’s legal and bankruptcy situation as “worse than Enron” and a “complete failure of corporate control.”[1] FTX is a leading cryptocurrency exchange company that provided a platform on which customers could buy and sell crypto assets – similar to a traditional finance stock exchange. As of this past summer, FTX was worth $32 billion and served as a platform that global consumers trusted enough to deposit tens of billions of dollars in assets.[2]

Although FTX and its CEO Sam Bankman-Fried (“SBF”) engaged in numerous questionable and likely illegal business practices, perhaps the greatest fraudulent activity was intermingling customer deposits on the FTX exchange platform with assets from SBF’s asset management firm Alameda Research. Although facts are still being uncovered, preliminary investigations have highlighted that Alameda Research was using customer deposits in their trading and lending activities without customer consent – now customers face the unpleasant reality that their assets (in excess of $1 billion on aggregate) may never be returned.[3] While many lessons in corporate governance can be learned from the FTX situation, a key legal implication of the meltdown is that crypto has a regulatory problem that needs to be addressed by Congress and other US government agencies.

Current State of Government Regulation

Crypto assets are a relatively new asset class and have risen to prominence globally since the publishing of the Bitcoin white paper by the anonymous Satoshi Nakamoto in 2009.[4] Although crypto assets and the business activities associated with them are regulated in the United States, this regulation has been inconsistent and has created uncertainty for businesses and individuals in the ecosystem. Currently, the US Securities and Exchange Commission (“SEC”), state legislatures, the US Treasury, and a host of other government agencies have acted inconsistently. The SEC has inconsistently pursued enforcement actions, state governments have enacted differing digital assets laws, and the Treasury has banned crypto entities without clear rationale.[5] This has been a major problem for the industry and has led companies (including now infamously FTX) to move abroad to seek more regulatory certainty. Companies like FTX have chosen to domicile in jurisdictions like the Bahamas to avoid having to guess what approach various state governments and federal agencies will take with regard to its digital asset business activities.

Earlier in 2022, Congress introduced the Digital Commodities Consumer Protection Act (“DCCPA”) to attempt to fill gaps in the federal regulatory framework that oversees the crypto industry. The Digital Commodities Consumer Protection Act amends the Commodity Exchange Act to create a much-needed comprehensive and robust regulatory framework for spot markets of digital asset commodities. The DCCPA would enable the Commodity Futures Trading Commission (“CFTC”) to require digital asset commodity exchanges to actively prevent fraud and market manipulation, and would provide the CFTC regulatory authority to access quote and trade data allowing them to identify market manipulation more easily.[6] Taken as a whole, the DCCPA would implement consumer protections relating to digital asset commodities, ensure oversight of digital asset commodity platforms (such as FTX, Coinbase, etc.), and better prevent system risk to financial markets.[7] This regulation fills in a necessary gap in federal crypto regulation and industry observers are optimistic of its chances in getting passed as law.[8]

Digital Asset Regulation Has a Long Path Ahead

Despite the potential benefits and strong congressional regulatory action that the DCCPA represents, elements of the bill have been criticized by both the crypto industry and policy experts. According to the Blockchain Association, a leading crypto policy organization, the DCCPA could present negative implications for the decentralized finance (“DeFi”) ecosystem because of the onerous reporting and custody requirements that elements of the DCCPA would inflict on De-Fi protocols and applications[9]. “De-Fi” is a catch-all term for blockchain-based financial tools that allow users to trade, borrow, and loan crypto assets without third-party intermediaries.[10] The DCCPA attempts to regulate intermediary risks associated with digital asset trading whereas the whole point of De-Fi is to remove intermediaries through the use of blockchain software technology.[11] The Blockchain Association has also criticized the DCCPA as providing an overly broad definition for “digital commodity platform” and an overly narrow and ambiguous definition of “digital commodity” which could create future unnecessary turf wars between the SEC and CFTC.[12] When Congress revisits this bill next year, these complexities will likely be brought up in weighing the pros and cons of the bill. Besides the textual contents of the DCCPA, the legislators pushing forward the bill must also deal with the DCCPA’s negative association with Sam Bankman-Fried, the former FTX CEO. The former FTX CEO and suspected fraudster was perhaps the greatest supporter of the bill and lobbied for its provisions before Congress several times.[13] While Bankman-Fried’s support does not necessarily mean anything is wrong with the bill, some legislators and lobbyists may be hesitant to push forward a bill that was heavily influenced by a person who perpetrated a massive fraud scheme severely hurting thousands of consumers.

Though the goal of the DCCPA is to establish CFTC authority over crypto assets that qualify as commodities, the crypto ecosystem will still be left with several unanswered regulatory issues if it is passed. A key question is whether digital assets will be treated as commodities, securities or something else entirely. In addition, another key looming question is how Congress will regulate stablecoins—a type of digital asset where the price is designed to be pegged to another type of asset, typically a real-world asset such as US Treasury bills. For these unanswered questions Congress and the SEC will likely need to provide additional guidance and rules to build on the increased certainty that could be brought about with the DCCPA. By passing an amended version of the DCCPA with more careful attention paid to the De-Fi ecosystem as well as clarified definitions of digital commodities and digital commodity platforms, Congress would go a long way in the right direction to prevent future FTX-like fraud schemes, protect consumers, and ensure crypto innovation stays in the US.

Notes

[1] Ken Sweet & Michelle Chapman, FTX Is a Bigger Mess Than Enron, New CEO Says, Calling It “Unprecedented”, TIME (Nov. 17, 2022), https://time.com/6234801/ftx-fallout-worse-than-enron/

[2] FTX Company Profile, FORBES, https://www.forbes.com/companies/ftx/?sh=506342e23c59

[3] Osipovich et al., They Lived Together, Worked Together and Lost Billions Together: Inside Sam Bankman-Fried’s Doomed FTX Empire, WSJ (Nov. 19, 2022), https://www.wsj.com/articles/sam-bankman-fried-ftx-alameda-bankruptcy-collapse-11668824201

[4] Guardian Nigeria, The idea and a brief history of cryptocurrencies, The Guardian (Dec. 26, 2022), https://guardian.ng/technology/tech/the-idea-and-a-brief-history-of-cryptocurrencies/

[5] Kathryn White, Cryptocurrency regulation: where are we now, and where are we going?, World Economic Forum (Mar. 28, 2022), https://www.weforum.org/agenda/2022/03/where-is-cryptocurrency-regulation-heading/

[6] https://www.agriculture.senate.gov/imo/media/doc/Testimony_Phillips_09.15.2022.pdf

[7] US Senate Agriculture Committee, Crypto One-Pager: The Digital Commodities Consumer Protection Act Closes Regulatory Gaps, https://www.agriculture.senate.gov/imo/media/doc/crypto_one-pager1.pdf

[8] Courtney Degen, Washington wants to regulate cryptocurrency, Pensions & Investments (Oct. 3, 2022), https://www.pionline.com/cryptocurrency/washington-wants-regulate-crypto-path-unclear

[9] Jake Chervinsky, Blockchain Association Calls for Revisions to the Digital Commodities Consumer Protection Act (DCCPA), Blockchain Association (Sept. 15, 2022), https://theblockchainassociation.org/blockchain-association-calls-for-revisions-to-the-digital-commodities-consumer-protection-act-dccpa/

[10] Rakesh Sharma, What is Decentralized Finance (DeFi) and How Does It Work?, Investopedia (Sept. 21, 2022), https://www.investopedia.com/decentralized-finance-defi-5113835.

[11] Jennifer J. Schulpt & Jack Solowey, DeFi Must Be Defended, CATO Institute (Oct. 26, 2022), https://www.cato.org/commentary/defi-must-be-defended

[12] Jake Chervinsky, supra note 7.

[13] Fran Velasquez, Former SEC Official Doubts FTX Crash Will Prompt Congress to Act on Crypto Regulations, CoinDesk (Nov. 16, 2022), https://www.coindesk.com/business/2022/11/16/former-sec-official-doubts-ftx-crash-will-prompt-congress-to-act-on-crypto-regulations/

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