Topic: Regulatory Studies

The Patent & Trademark Office Has a Slanted View of the First Amendment

Yesterday’s Supreme Court ruling regarding Confederate-flag license plates isn’t the last word on First Amendment protection for “offensive” speech. Indeed, it doesn’t even resolve all the issues related to government-insinuated expression. One case working its way through the lower courts regarding a controversial trademark – but not this one! – illustrates some of the pitfalls inherent in allowing the government to act as censor, for whatever reason.

A musician named Simon Tam wanted to “take back” and “own” what had previously been used as an ethnic slur by calling his Asian-American rock band “The Slants.” The Patent and Trademark Office found that this trademark was disparaging to Asians, however, so refused to register it under § 2(a) of the Lanham Act. This provision says, among other things, that the PTO may refuse to register a trademark that “[c]onsists of … matter which may disparage … persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute.”

This refusal to register the trademark was affirmed by a three-judge panel of the U.S. Court of Appeals for the Federal Circuit. But then the entire Federal Circuit—without being asked!—decided to erase that decision and consider whether § 2(a), or at least its application here, violates the First Amendment.

California Labor Commission: Uber Driver Is Employee

According to the California Labor Commission, a San Francisco-based Uber driver who filed a claim against the rideshare company is an employee and not, as Uber argued, an independent contractor. The ruling orders Uber to pay the driver about $4,000 for expenses.

The ruling, which Uber considers non-binding, could potentially have devastating implications for the rideshare company in California. If similar rulings are issued regarding other rideshare companies like Lyft or sharing economy players such as Airbnb, Instacart, and TaskRabbit, we could see the growth of these popular and innovative companies stifled as they cope with the costs associated with having providers classified as employees.

The California Labor Commission ruling states that Uber is “involved in every aspect of the operation.” It is true that Uber provides a technology and that it carries out background checks on drivers. But Uber does not provide vehicles or set any hours or for its rideshare drivers. In fact, according to research on Uber wages conducted by Princeton economist Alan Krueger and Uber’s Jonathan Hall, only 38 percent of Uber drivers rely on Uber as their sole source of income.

Regulators and lawmakers ought to realize that Uber drivers, who are often driving for Uber part-time while using their own vehicles on their own schedule, shouldn’t be treated the same as traditional workers.

Uber might seem like something relatively new given that it relies on users hailing rides with smartphones, but fundamentally it is making a very familiar experience easier. People were offering car rides in exchange for money long before the rise of the Internet, let alone smartphones. What makes Uber and other rideshare companies like Lyft so popular is that if someone wants a ride, they no longer have to find a friend ready and willing to give a ride at a particular time or stand on a street corner waving their hands in the hope of hailing a taxi. Rather, they can simply open an app and find a driver who is ready and willing to give a ride in exchange for a fare in a matter of minutes.

Uber and the sharing economy more broadly fit awkwardly into existing regulatory frameworks, but this should be welcomed as an opportunity to revise outdated regulations and laws, not an opportunity to regulate popular new companies as if they are the older incumbents they are competing with.

As the commission itself noted, Uber would not exist without drivers like the one who filed the claim. Certainly, Uber as we know it will become a very different company if its drivers in California are classified as employees. It will begin to look more like its traditional competitors rather than an innovative technology company, which would be a great shame.

The FDA’s Trans Fat Ban: Their Laws, Your Body

The Obama administration’s Food and Drug Administration today announced a near-ban, in the making since 2013, on the use of partially hydrogenated vegetable fats (“trans fats”) in American food manufacturing. Specifically, the FDA is knocking trans fats off the Generally Recognized as Safe (GRAS) list. This is a big deal and here are some reasons why:

  • It’s frank paternalism. Like high-calorie foods or alcoholic beverages, trans fats have marked risks when consumed in quantity over long periods, smaller risks in moderate and occasional use, and tiny risks when used in tiny quantities. The FDA intends to forbid the taking of even tiny risks, no matter how well disclosed.
  • The public doesn’t agree. A 2013 Reason-RUPE poll found majorities of all political groups felt consumers should be left free to choose on trans fats.  Even in heavily governed places like New York City and California, where the political class bulldozed through restaurant bans some years back, there was plenty of resentment.
  • The public is also perfectly capable of recognizing and acting on nutritional advances on its own. Trans fats have gone out of style and consumption has dropped by 85 percent as consumers have shunned them. But while many products have been reformulated to omit trans fats, their versatile qualities still give them an edge in such specialty applications as frozen pizza crusts, microwave popcorn, and the sprinkles used atop cupcakes and ice cream. Food companies tried to negotiate to keep some of these uses available, especially in small quantities, but apparently mostly failed.

Court Finds Government Actions in AIG Bailout Were Illegal

Ask any first year law student “what did you learn in school today” and you’ll probably get some version of the answer: “duty-breach-causation-harm.”  While this applies specifically to tort claims, it seems axiomatic, even for non-lawyers, that you can’t sue someone who hasn’t hurt you.  Or can you?

Former AIG CEO Hank Greenberg caused a ripple of shock in late 2011 when he filed suit against the U.S. government, alleging that the government’s 2008 bailout and subsequent take-over of AIG was unlawful, and claiming $40 billion in damages.  Despite skepticism throughout the legal community, the case not only survived dismissal, but went on to a full trial, during which such heavyweights as Tim Geithner, Hank Paulson, and Ben Bernanke took the stand. 

Throughout the trial, Judge Thomas Wheeler seemed sympathetic to the claims that Greenberg brought on behalf of Starr International Company, an AIG shareholder.  Few believed that AIG had any alternative to the government’s money, except bankruptcy.  In bankruptcy, shareholders (like Starr) are paid last out of whatever remains after all the company’s debts are paid.  Which typically (and most likely in AIG’s case) means not paid at all.  Would the judge really grant Starr a $40 billion judgment – against the U.S. government – when the alternative was bankruptcy?

No.  But that doesn’t mean the government got off scot free either.  Judge Wheeler found that the federal government committed an illegal exaction.  That is, it took something it had no right to take.  (This, the judge carefully notes, is not the same as a “takings” under the Fifth Amendment.  When there is a takings, the government lawfully uses its authority to take private property for public use and then must pay the owner “just compensation” for that property.  An illegal exaction means the government took properly unlawfully.) 

Obama’s King v. Burwell Speech Displayed the Very Ideological Fervor that Led Him to Break the Law

In a case called King v. Burwell, the Supreme Court will soon decide whether it agrees with two lower courts that President Obama is breaking the law by subjecting 57 million employers and individuals to illegal taxes, and spending the illegal proceeds to hide the cost of HealthCare.gov coverage from 6.5 million enrollees. Today the president delivered a speech designed to cow the Supreme Court Justices into turning a blind eye to the law. Instead, he offered what for some is the missing piece of the King v. Burwell puzzle. He displayed the very ideological fervor that leads powerful people to break the rules.

“We have an obligation to put ourselves in our neighbor’s shoes, and to see the common humanity in each other,” the president said. Yet the president of the United States has an even more important obligation to “take Care that the Laws be faithfully executed.”  It’s right there in Article II, Section 3 of the U.S. Constitution, which President Obama swore to uphold. King v. Burwell is about his failure to meet that obligation.  

Everything Forbidden Is Also Compulsory

Conservatives are fond of saying, usually in regard to homosexuality, “Everything not forbidden is compulsory.” At National Review recently, Kevin Williamson reminded readers of the provenance of that particular formulation:

One of the finest books ever written about politics is The Once and Future King, in which young Arthur, not yet king, is transformed by Merlin into various kinds of animals in order to learn about different kinds of political arrangements: Hawks live under martial law, geese are freewheeling practitioners of spontaneous order, badgers are scholarly isolationists, and ants live under totalitarianism, with T. H. White famously rendering their one-sentence constitution: “Everything not forbidden is compulsory.”

The District of Columbia can go the ants one better: It makes things simultaneously forbidden and compulsory. D.C. banned discrimination on the basis of sexual orientation in 1973, but didn’t repeal its sodomy law until 1993. So for 20 years you couldn’t be fired for being gay, but you could be arrested.

EPA: Fracking Doesn’t Affect Groundwater

Last week the Environmental Protection Agency released a study that concluded that hydraulic fracturing, so-called “fracking” of oil and natural gas wells, does not contaminate drinking water, except in extremely unusual cases involving improper drilling techniques. The study should reduce the concerns of some of the technique’s vocal critics whose fears have led to restrictions on its use.

The EPA study reviewed the results from thousands of wells and found few faults with the drilling technique. When problems occurred, they stemmed from improperly sealed wells, which can affect any oil or gas well and not just those that utilize hydraulic fracturing.