Opinion analysis: Court uses cheerleader uniform case to validate broad copyright in industrial designs
It’s the kind of case my colleagues who teach copyright law might spend an entire class session analyzing, pondering the pros and cons of copyright protection for industrial designs. In a rare moment for the Roberts Court, the opinion in Star Athletica v Varsity Brands addressed that question broadly and categorically, passing up every opportunity to narrow or confine its ruling.
The case involves cheerleader uniforms designed by Varsity Brands, the market leader, and copied by Star Athletica. The legal problem is whether copyright protection, which extends naturally not only to works of music and literature, but also to “pictorial, graphic, or sculptural” works, protects the particular combination of chevrons, zigzags and stripes that characterizes Varsity’s uniforms. Star Athletica argues, with considerable support from lower courts and commentators, that this kind of “industrial” design, largely influenced by utilitarian considerations, does not warrant copyright protection, which is best reserved for wholly aesthetic creations. The majority opinion of Justice Clarence Thomas, though, has nothing to say about concerns of competition policy. Rather, as you might expect from a Thomas opinion, the text addresses the topic wholly as a matter of statutory interpretation. Working in that vein, it reads the statute as giving remarkably broad protection to industrial designs.
The key language of the statute emphasizes that it does not protect useful articles as such. Instead, it protects only “the design of a useful article,” and it protects that only if the “design incorporates pictorial, graphic, or sculptural features that can be identified separately from, and are capable of existing independently of, the utilitarian aspects of the article.” The key doctrinal question, then is the question of “separability,” or when the expressive aspects of the design are sufficiently “separable” from the utilitarian design.
Quoting the Oxford English Dictionary’s definition of “capable,” the court’s opinion states that for copyright protection to reach the design, “[t]he decisionmaker must determine that the separately identified feature has the capacity to exist apart from the utilitarian aspects of the article,” explaining that “[i]f the feature is not capable of existing as a pictorial, graphic, or sculptural work once separated from the useful article, then it was not a pictorial, graphic, or sculptural feature of that article, but rather one of its utilitarian aspects.”
Pointing to the explicit protection for copyrighted works applied to useful objects, the court explains that the Copyright Act as a whole “makes clear that copyright protection extends to pictorial, graphic, and sculptural works regardless of whether they were created as free-standing art or as features of useful articles.” Thus, the court concludes, the ultimate question is whether a particular design “would have been eligible for copyright protection … had it originally been fixed in some tangible medium other than a useful article before being applied to a useful article.”
What the court does not state expressly in that part of its opinion is that the standard for determining whether a graphic work (for example) is copyrightable is minimal. Unlike patents, which require a notable step of inventiveness, the level of expressive spark necessary for copyright protection is quite low. So once the court has said that any design can gain copyright protection if it would be protectable if placed first on a piece of paper, it really has ensured that all but the subtlest graphic designs will be able to gain copyright protection.
The proof of the breadth of the court’s analysis comes a few pages later, when the court applies its test to the facts at hand to find that the designs were protectable. The sum of the court’s analysis is as follows:
Applying this test to the surface decorations on the cheerleading uniforms is straightforward. First, one can identify the decorations as features having pictorial, graphic, or sculptural qualities. Second, if the arrangement of colors, stripes, and chevrons … were separated from the uniform and applied in another medium – for example, on a painter’s canvas—they would qualify as “two-dimensional … works of … art.” And imaginatively removing the surface decorations from the uniform and applying them in another medium would not replicate the uniform itself.
To put it more bluntly, once we determine that the designs “hav[e] … graphic … qualities … [and could be] applied … on a painter’s canvas,” the test for copyrightability is met.
The remainder of the court’s opinion consists of a half-hearted dismissal of a variety of Star Athletica’s contrary arguments. At bottom, Star Athletica’s central contention is that copyright protection requires that the useful article “would remain equally useful” without the design features in question. Here, for example, the cheerleader’s uniform would be considerably less useful as a cheerleader’s uniform without the chevrons, stripes, and zigzags; what team dresses its cheerleaders in plain white tunics? That contention is fundamentally misguided, the court explains, because it rests on the assumption that copyright protection is limited to features that are “solely artistic.” Rather, the court explains, “[t]he focus of the separability inquiry is on the extracted features and not on any aspects of the useful article that remain after the imaginary extraction.” In the court’s view, the explicit extension of copyright protection to “applied art” necessarily contemplates copyright protection for expression that is at least in part utilitarian.
I am sure that my colleagues who study intellectual property will write at length for years to come about the doctrinal nuances of the court’s discussion of the separability requirement, which seems to me a marked shift from most of the prior treatments. What is most interesting on the face of the opinion, though, is the marked lack of concern for the problem Justice Sonia Sotomayor noted at the argument – allowing copyright law to decimate the “knockoff” industry. The bulk of the briefing in and attention to this case emphasized the industrial policy questions affected by applying copyright law to industrial designs. For the justices, though, those concerns surface only in the dissenting opinion of Justice Stephen Breyer (joined by Justice Anthony Kennedy).
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“Federal government statistics provide critical information to the country and serve a key role in a democracy. For decades, sample surveys with instruments carefully designed for particular data needs have been one of the primary methods for collecting data for federal statistics. However, the costs of conducting such surveys have been increasing while response rates have been declining, and many surveys are not able to fulfill growing demands for more timely information and for more detailed information at state and local levels. Innovations in Federal Statistics examines the opportunities and risks of using government administrative and private sector data sources to foster a paradigm shift in federal statistical programs that would combine diverse data sources in a secure manner to enhance federal statistics. This first publication of a two-part series discusses the challenges faced by the federal statistical system and the foundational elements needed for a new paradigm.”
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House GOP amended health care bill, but CBO estimates of coverage losses are not likely to meaningfully improve
Follow up to previous postings included in CBO Health Score – 14 million more uninsured next year under GOP plan – via Brookings – “Late Monday night (March 20, 2017) Republican leaders unveiled a “manager’s amendment” that makes several changes to the American Health Care Act (AHCA). The House is currently scheduled to vote on an amended version of the AHCA sometime on Thursday. It remains unclear whether a Congressional Budget Office (CBO) score of the revised legislation will be available before the House vote, and a score is very unlikely to be available before the bill’s markup in the House Rules Committee. In this analysis, we use CBO’s score of the earlier version of the AHCA as well as other CBO analyses to assess how the changes made in the manager’s amendment are likely to change CBO’s estimates of the effect of the AHCA on health insurance coverage. We conclude that the changes made by the manager’s amendment will not meaningfully alter CBO’s earlier prediction that the AHCA would substantially reduce insurance coverage. While one provision of the manager’s amendment would slightly relax the “per capita cap” on state Medicaid spending created under the AHCA and thereby modestly increase CBO’s estimate of insurance coverage under the AHCA, the work requirement and block grant options created by the manager’s amendment have the potential to cause additional coverage losses that largely or more than offset this improvement, at least if states take up these options…”
Brookings: “This Brown Center Report (BCR) on American Education is the sixth and final edition in the third volume and the 16th issue overall. The series began in 2000. As in the past, the report comprises three studies. Also in keeping with tradition, the first section features recent results from state, national, or international assessments; the second section investigates a thematic topic in education, either by collecting new data or by analyzing existing empirical evidence in a novel way; and the third section looks at one or more education policies.
“The latest available data from the Justice Department show that during February 2017, the first complete month under the new Trump Administration, there were only 24 new official corruption prosecutions filed by federal prosecutors. During the last two fiscal years of the Obama Administration, federal prosecutors filed an average of 43 official corruption cases each month. Unless the pace of prosecutions turns around, FY 2017 will reach a record low of federal criminal prosecutions of corrupt government officials. These results are based upon case-by-case information analyzed by the Transactional Records Access Clearinghouse (TRAC) at Syracuse University. These detailed records were obtained by TRAC under the Freedom of Information Act from the Executive Office for United States Attorneys. Nearly half (46%) of official corruptions prosecutions during the first five months of FY 2017 involved corrupt acts at the federal level. Corruption prosecutions of local level officials accounted for more than one out of three (35%) of these cases, while state corruption accounted for just 5 percent. For more details, including a twenty-year timeline of prosecutions and lead investigative agencies in these cases, see the report at: http://trac.syr.edu/tracreports/crim/463/.”
Newswire – “By the time someone realizes they damaged a ligament, tendon or cartilage from too much exercise or other types of physical activity, it’s too late. The tissue is stretched and torn and the person is writhing in pain. But a team of researchers led by University of Utah bioengineering professors Jeffrey Weiss and Michael Yu has discovered that damage to collagen, the main building block of all human tissue, can occur much earlier at a molecular level from too much physical stress, alerting doctors and scientists that a patient is on the path to major tissue damage and pain. This could be especially helpful for some who want to know earlier if they are developing diseases such as arthritis or for athletes who want to know if repeated stress on their bodies is taking a toll…But a team of researchers led by University of Utah bioengineering professors Jeffrey Weiss and Michael Yu has discovered that damage to collagen, the main building block of all human tissue, can occur much earlier at a molecular level from too much physical stress, alerting doctors and scientists that a patient is on the path to major tissue damage and pain…The team’s research, funded by the National Institutes of Health, was published this week in the latest issue of Nature Communications…”
Read more of this story at Slashdot.
Hackers Claim Access To 300 Million iCloud Accounts, Demand $75,000 From Apple To Delete the Cache of Data
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We live-blogged the third day of the Senate Judiciary Committee’s hearing on the nomination of Judge Neil Gorsuch to the Supreme Court. The transcript is available at this link.
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Today the Senate Judiciary Committee is holding the third day of its hearing on the nomination of Judge Neil Gorsuch to the Supreme Court. Early coverage of today’s proceedings, which has so far featured round two of the senators’ questioning and will feature a third round this evening, comes from Adam Liptak, Charlie Savage, Matt Flegenheimer and Carl Hulse of The New York Times, Lawrence Hurley and Andrew Chung of Reuters, various contributors at NPR, Elise Viebeck, Robert Barnes and Ed O’Keefe of The Washington Post, Mark Sherman and Erica Werner of the Associated Press, Richard Wolf of USA Today, Seung Min Kim and Josh Gerstein of Politico, Debra Cassens Weiss of the ABA Journal, Matt Ford of The Atlantic and Ashley Killough of CNN.
Commentary on the hearings comes from Ilya Shapiro for Washington Examiner, Elizabeth Wydra for The Huffington Post, J. Douglas Smith for The Daily Beast, Lisa Keen of Keen News Service, Jonathan Bernstein at Bloomberg, the editorial board of USA Today and Ronald Cass at USA Today. Ian Millhiser of ThinkProgress discusses the court’s ruling this morning in Endrew F. v. Douglas County School District, which overturned a decision by the U.S. Court of Appeals for the 10th Circuit that employed a legal standard Gorsuch had applied in a previous 10th Circuit opinion.
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The argument next Wednesday in Honeycutt v. United States presents a seemingly simple statutory question. The federal forfeiture statute for narcotics conspiracies requires that a convicted defendant be ordered to forfeit the “proceeds the person obtained” from the crime. May a federal court using this statute order a defendant to forfeit proceeds that he did not “obtain,” under a theory of joint and several liability?
Terry Honeycutt argues that obtain means obtain, and that “with the text so clear, the Court need go no further.” But the government notes that nine federal courts of appeal have adopted the broader “joint and several liability” rule since the forfeiture statute was adopted in 1984 (although the U.S. Court of Appeals for the District of Columbia Circuit ruled the other way in 2016); and that substantively, the doctrine of Pinkerton v. United States has long held conspirators liable for foreseeable crimes committed by their co-conspirators on a familiar “partnership” theory.
Still, the court has recently been critical of perceived overreaching in federal prosecutions. Recall Yates v. United States in 2015 (holding that a fish is not a “tangible object” under the federal obstruction of justice statute) and Bond v. United States in 2014 (holding that the federal Chemical Weapons Act does not extend to a simple domestic assault even though the assault involved chemicals). Which lens the justices will use to examine Honeycutt’s case should become apparent at oral argument.
Two cases of brotherly conspiracy
Seventy years ago when the court considered a case involving brothers who criminally conspired together, the Pinkerton doctrine was born. Over the objection of two justices who decried “vicarious criminal liability,” the court adopted a “partnership” view of crime and held that Daniel Pinkerton (who had been in prison most of the time) could be convicted of crimes that his brother Walter had committed, so long as those crimes were foreseeable and in furtherance of the overall conspiracy. Although some states, and the Model Penal Code, reject Pinkerton liability, it is a well-settled federal doctrine. Next Wednesday, however, Terry Honeycutt will argue that when it comes to sentencing (as opposed to conviction liability), he should not be ordered to forfeit monies that only his brother Tony received.
The Honeycutt brothers operated a hardware store in Brainerd, Tennessee. Tony owned the store with their father; Terry was merely a “salaried employee” who worked sales behind the counter. In less than three years, the store sold over 15,000 bottles of “Polar Pure,” a water-purifying product whose iodine ingredient could also be used in manufacturing methamphetamine. The police told the Honeycutts about Polar Pure’s potential use in cooking meth, but they kept selling.
The government indicted the brothers on multiple counts including conspiracy to distribute methamphetamine precursors;. Tony (the store owner) pled guilty and when the government showed that sales of Polar Pure during the charged conspiracy had brought in over $270,000 in profits, Tony accepted a forfeiture judgment of $200,000.
Unlike his brother, Terry went to trial and the jury convicted him on 11 of 14 counts. When it came to sentencing, the government apparently did not offer any evidence of profits going to Terry, and the trial court found that Terry’s “motivations” were “just not clear.” Still, the government argued that Terry must be ordered to forfeit the remaining $70,000 in profits that the store (and the conspiracy) had received. But the district court declined to order forfeiture against Terry, noting that he was salaried, had no ownership interest in the store, and “did not stand to benefit personally from the illegal sales.”
On appeal, the U.S. Court of Appeals for the 6th Circuit reversed and remanded for consideration of forfeiture, finding itself bound by a prior precedent. Judge Karen Moore concurred that the court was bound, but suggested en banc review. She noted that the textual requirement for forfeiture of assets have been “obtained” by the defendant made forfeiture against Terry “problematic,” and that the government’s joint and several liability theory “would hold a defendant responsible for property he never had.” After en banc review was denied, the Supreme Court agreed to resolve the circuit split created by the D.C. Circuit’s recent conflicting ruling on the question.
Arguments of the parties
Although one can speculate endlessly about what benefits Terry Honeycutt might have received from helping his brother’s store sell Polar Pure, the government apparently introduced no evidence of this in the trial court. Thus this case proceeds on the assumption that Terry did not receive, directly or otherwise, any proceeds from the illegal sales. Yet the forfeiture statute (18 U.S.C. § 853(a)) provides that a convicted defendant can be ordered to forfeit only property that constitutes or is derived from “proceeds the person obtained, directly or indirectly, as a result” of the convicted conduct. This text, with its focus on proceeds that “the person obtained,” seems reasonably clear. As Judge Moore wrote below, if broader forfeiture is desirable, “it would seem to be Congress’s job to provide an expanded mechanism.”
Not so fast, argues the U.S. solicitor general. The law permitting joint and several liability for federal forfeiture under this provision has been settled without dissent for over 20 years, and Congress has amended the forfeiture statute a number of times without altering Section 853(a). The Pinkerton liability principle has been settled even longer, and the government argues that Pinkerton should make co-conspirators liable for each others’ ill-gotten gains at sentencing, as well as for their substantive criminal acts.
But significantly, perhaps, the government’s brief does not turn to the text of the statute until page 23, and that section of its argument is only four paragraphs long. Moreover, under its “text” heading, the government constructs a straw man, claiming (without citation) that Honeycutt is arguing that forfeiture is “limit[ed] … to proceeds the defendant obtained personally” (emphasis in original). But that is plainly not Honeycutt’s argument. In fact, Honeycutt concedes that even when a defendant obtains proceeds “indirectly,” or when proceeds go to “entities or people under the defendant’s control,” they are subject to forfeiture. (Similarly, the D.C. Circuit suggested that an employee who received “increased compensation” as a result of assisting a conspiracy might be ordered to forfeit those monies). When, however, there is no evidence that a defendant “benefit[ed] personally” at all – as was both apparently conceded (or at least not argued) by the government below and found by the district court in this case – Honeycutt argues simply that the statute’s text does not reach proceeds that other co-conspirators may have obtained.
In addition to the statute’s text, Honeycutt presents further arguments regarding statutory purpose and structure. He even extends his arguments to constitutional extremes under the Sixth and Eighth Amendments, noting that both the D.C. Circuit and U.S. Court of Appeals for the 9th Circuit have recognized, and the government agrees, that the Eighth Amendment can constrain expansive applications of the joint-and-several theory.
The solicitor general’s brief effectively rebuts some of Honeycutt’s further arguments. However, it returns repeatedly to “traditional principles of conspiracy liability” that it says supports joint and several liability for forfeiture absent some unconstitutional excessiveness. Still, whether or not that is so – and Honeycutt argues for a contrary view based on history and tradition – the point at issue here is one of statutory interpretation, not constitutional law or policy. Aside from text, the D.C. Circuit also found no legislative history to support an “expansive purpose” for Section 853(a). If sensible policy supports a broad view of forfeiture that the text does not, then, as Judge Moore wrote below, it falls to Congress to write statutory language that clearly endorses such a view.
Thirteen months after Justice Antonin Scalia’s death, this is yet another case in which his absence will pervade the courtroom. Scalia was generally a strict textualist. Particularly when the statutory meaning of a criminal statute was not clear, Scalia would turn to the “rule of lenity” to apply the construction favoring a defendant. In this case, Justice Samuel Alito may agree with the government’s view of well-settled law (although he did not in Yates). By contrast, Justice Clarence Thomas has long been a critic of over-extended asset-forfeiture laws, as was evidenced just two weeks ago when Thomas referred critically to “broad modern forfeiture practice” in a brief opinion regarding the denial of certiorari in a civil forfeiture case. I generally resist trying to predict the court’s inclinations before argument is even heard; trying to forecast the justices’ likely votes after argument is uncertain enough. Still, despite 20 years of unquestioning precedent, the textual argument for Honeycutt seems strong on this record. Tune in next week to hear what the life-tenured decision-makers think.
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In today’s edition, we decry weaponized disclosures, share new data about gun murders across the country, highlight Judge Gorsuch’s testimony on dark money, ask about Ivanka Trump’s new job in the White House, and more.SPEAKING UP
On Tuesday, Sunlight joined a coalition of organizations dedicated to government transparency and accountability, privacy, human rights, civil rights, and immigrant rights in a letter addressed to U.S. Attorney General Jeff Sessions and Secretary of Homeland Security John Kelly raising substantial concerns about recent executive actions on immigration and refugees. As we all noted in the letter, the White House’s memoranda include provisions inconsistent with federal privacy protections and information quality guidelines.
These actions treat data disclosure as a tool for division and public intimidation, not a means for achieving transparency and accountability. Weaponized disclosures must not erode public trust in government.States and Cities
- Michigan Senate resists new transparency requirements. “Despite the Michigan House of Representatives’ unanimous vote last week to expand the state’s public records laws under the Freedom of Information Act (FOIA), the outlook for improving transparency — in one of the least transparent states in the country — is questionable.” Sunlight’s Stephen Larrick weighed in: “It is absolutely necessary to have the executive branch and the chief of the executive branch be subject to FOIA…And I think the overwhelming majority of states that have those provisions are showing that democratic norm that transparency should be proportional to power” (StateScoop)
- A new way to track gun violence at the hyper-local level. The Guardian worked with data from the Gun Violence Archive to create a “new set of nationwide data for 2015 that maps gun murders at the micro level – down to the local census tract. You can use this data to do analysis of how gun murder clusters within neighborhoods in your city or state.” (The Guardian)
- State legislatures are likely to tackle five tech-centric issues in coming sessions. “State legislatures are fairly predictable creatures when it comes to the bills they propose each session. A thing — in this case technology — becomes a major focus in the public eye for one reason or another, and a flood of potential legislative solutions pour out of capital offices, each meant to address, improve or regulate some aspect of the larger issue.” This article details five tech-centric issues that look poised for attention across state legislatures. (Government Technology)
- Sen. Sheldon Whitehouse grilled Judge Neil Gorsuch on Citizens United and money in politics at confirmation hearing. The Senate Judiciary Committee has been considering Neil Gorsuch’s Supreme Court Nomination. Yesterday, Senator Whitehouse “rattled Gorsuch with a series of increasingly tough questions about corruption, corporate spending, and Citizens United.” He specifically focused on the millions of dollars in dark money being spent to support Gorsuch’s nomination. (Slate)
- Paul Manafort accused of laundering $750,000. “President Trump’s former campaign leader Paul Manafort is being accused of laundering money from the party of Ukraine’s Kremlin-backed former president, the Washington Post reported Tuesday, citing documents from a Ukraine lawmaker.” (The Hill)
- Philadelphia District Attorney facing federal corruption charges. “A grand jury on Tuesday indicted Philadelphia District Attorney R. Seth Williams on federal corruption charges, including allegations that he” exchanged official favors for tens of thousand of dollars in bribes, defrauded a nursing home, and more. (Wall Street Journal)
- Ivanka Trump’s increased role at the White House raises ethics concerns. Ivanka Trump, a close adviser to her father, is taking her role a step further with a White House office and security clearance. But her role as an unpaid, unconfirmed adviser with no official title “has historians and ethics experts questioning the appropriateness of having one of the president’s adult children serving directly in the administration, especially while continuing to own a business.” (NPR)
- Precedent may push the President to give Ivanka an official position. Ivanka is taking on increased responsibility, but she won’t be “sworn into a formal role, despite Justice Department legal opinions that urge the president to make sure that individuals engaged in government work hold some type of official federal post, in part to guarantee that they are clearly subject to nepotism and conflict-of-interest rules.” (POLITICO)
- Trump’s global business partners are looking to cash in. “A previously little-known batch of billionaires and tycoons from around the world suddenly find themselves in an unprecedented position: How do you cash in on a partnership with the president of the United States of America?”(Forbes)
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On Tuesday, Sunlight joined a coalition of organizations dedicated to government transparency and accountability, privacy, human rights, civil rights, and immigrant rights in a letter addressed to U.S. Attorney General Jeff Sessions and Secretary of Homeland Security John Kelly raising substantial concerns about recent executive actions on immigration and refugees.
“The undersigned organizations committed to government openness and accountability, privacy, human rights, civil rights, and immigrant rights, write to express concern about certain provisions in the recent Executive Orders related to immigration and refugees.1 The provisions call for the collection and dissemination of personal information that selectively targets certain populations and reverses decades old policy that provides certain Privacy Act protections to immigrants and foreigners.2 Based on agency implementation memos,3 it appears that these provisions are being implemented in a manner that is unlawful and inconsistent with federal information quality guidelines, raising serious privacy, transparency, and accountability concerns.
We ask that you modify the implementation memos to ensure that the collection and dissemination of information required by the Orders is complete, unbiased, and consistent with federal information quality guidelines. The data collected as a result of these provisions also must be disclosed to the public in a manner consistent with privacy safeguards, open data, and data quality requirements. It is also imperative that your agencies carry out the provisions in the Orders in a manner that is consistent with all applicable laws and regulations, including proper public notice and comment procedures. We oppose the Privacy Act exclusions included in the January 25th Order, and urge you to rescind these provisions. However, should you go forward, existing law limits how you may implement such changes, and, among other things, requires issuance of System of Records Notices (SORNs) and privacy impact assessments.”
Sunlight champions open data that strengthens public policy and public trust in government. We support proactive disclosures that help grow bonds between the public and the government that represents them.
These executive actions, however, in addition to violating federal information policy norms, treat data disclosure as a tool for division and public intimidation, rather than a means for achieving transparency and accountability.
The disclosures ordered by the Trump White House support a political and racial narrative advanced by an administration that has repeatedly dissembled about violence, fabricated narratives about vulnerable populations, and explicitly vowed to ban Muslims from entering the United States of America.
Modern history has repeatedly demonstrated that vilifying vulnerable populations, racial minorities or minority religions has led to the worst chapters of our shared history.
In the 21st century, information disclosures hold immense potential to harm individuals when government use public data irresponsibly. As billions of people know around the world, once data is published online by a government, restoring reputations and privacy after mistakes is nearly impossible.
It’s incumbent upon the Trump administration, Congress and the judiciary to ensure that abuse based on race, class, gender or religion is not tolerated. Public disclosure should be used with caution, never weaponizing transparency to divide nor threaten.
Bitcoin has found success as a decentralized digital currency, but it is only one step toward decentralized digital commerce. Indeed, creating decentralized marketplaces and mechanisms is a nascent and active area of research. In a new paper, we present escrow protocols for cryptocurrencies that bring us closer to decentralized commerce.
In any online sale of physical goods, there is a circular dependency: the buyer only wants to pay once he receives his goods, but the seller only wants to ship them once she’s received payment. This is a problem regardless of whether one pays with bitcoins or with dollars, and the usual solution is to utilize a trusted third party. Credit card companies play this role, as do platforms such as Amazon and eBay. Crucially, the third party must be able to mediate in case of a dispute and determine whether the seller gets paid or the buyer receives a refund.
A key requirement for successful decentralized marketplaces is to weaken the role of such intermediaries, both because they are natural points of centralization and because unregulated intermediaries have tended to prove untrustworthy. In the infamous Silk Road marketplace, buyers would send payment to Silk Road, which would hold it in escrow. Note that escrow is necessary because it is not possible to reverse cryptocurrency transactions, unlike credit card payments. If all went well, Silk Road would forward the money to the seller; otherwise, it would mediate the dispute. Time and time again, the operators of these marketplaces have absconded with the funds in escrow, underscoring that this isn’t a secure model.
Lately, there have been various services that offer a more secure version of escrow payment. Using 2-of-3 multisignature transactions, the buyer, seller, and a trusted third party each hold one key. The buyer pays into a multisignature address that requires that any two of these three keys sign in order for the money to be spent. If the buyer and seller are in agreement, they can jointly issue payment. If there’s a dispute, the third party mediates. The third party and the winner of the dispute will then use their respective keys to issue a payout transaction to the winner.
This escrow protocol has two nice features. First, if there’s no dispute, the buyer and seller can settle without involving the third party. Second, the third party cannot run away with the money as it only holds one key, while two are necessary spend the escrowed funds.
Until now, the escrow conversation has generally stopped here. But in our paper we ask several further important questions. To start, there are privacy concerns. Unless the escrow protocol is carefully designed, anyone observing the blockchain might be able to spot escrow transactions. They might even be able to tell which transactions were disputed, and connect those to specific buyers and sellers.
In a previous paper, we showed that using multisignatures to split control over a wallet leads to major privacy leaks, and we advocated using threshold signatures instead of multisignatures. It turns out that using multisignatures for escrow has similar negative privacy implications. While using 2-of-3 threshold signatures instead of multisignatures would solve the privacy problem, it would introduce other undesirable features in the context of escrow as we explain in the paper.
Moreover, the naive escrow protocol above has a gaping security flaw: even though the third party cannot steal the money, it can refuse to mediate any disputes and thus keep the money locked up.
In addition to these privacy and security requirements, we study group escrow. In such a system, the transacting parties may choose multiple third parties from among a set of escrow service providers and have them mediate disputes by majority vote. Again, we analyze both the privacy and the security of the resulting schemes, as well as the details of group formation and communication.
Our goal in this paper is not to provide a definitive set of requirements for escrow services. We spoke with many Bitcoin escrow companies in the course of our research — it’s a surprisingly active space — and realized that there is no single set of properties that works for every use-case. For example, we’ve looked at privacy as a desirable property so far, but buyers may instead want to be able to examine the blockchain and identify how often a given seller was involved in disputes. In our paper, we present a toolbox of escrow protocols as well as a framework for evaluating them, so that anyone can choose the protocol that best fits their needs and be fully aware of the security and privacy implications of that choice.
We’ll present the paper at the Financial Cryptography conference in two weeks.
Read more of this story at Slashdot.
This morning the court will hear oral argument in two cases. The first is County of Los Angeles v. Mendez, a Fourth Amendment case stemming from a police search that resulted in a shooting. Rory Little previewed the case for this blog. At Cornell University Law School’s Legal Information Institute, Laurel Hopkins and Eugene Temchenko also provide a preview.
The second case on the argument docket is Water Splash v. Menon, which involves service of process under the Hague Service Convention. Charlotte Garden had this blog’s preview. Cassandra Desjourdy and Weiru Fang preview the case for Cornell. At Letters Blogatory, Ted Folkman predicts a unanimous ruling for Water Splash, because its reading of the relevant provision “is at least a permissible reading,” and because “it is the reading of all the other parties to the Convention and of the Executive Branch.”
Yesterday the court heard argument in two cases. In Microsoft v. Baker, the justices considered the options available for plaintiffs when a district court determines that a case is not suited for adjudication as a class action. Ronald Mann analyzes the argument for this blog. At Mayer Brown’s Class Defense blog, Archis Parasharami discusses the case, arguing that “an approach to appellate jurisdiction that gives only one side (plaintiffs and their counsel) the ability to secure an immediate appeal at will would unfairly increase the already outsized leverage that plaintiffs have in class-action litigation.”
In Impression Products, Inc. v. Lexmark International, Inc., the court looked at the scope of the patent exhaustion doctrine. Ronald Mann has this blog’s argument analysis. In an op-ed at Bloomberg, Aaron Perzanowski and Jason Schultz argue that unlike “most patent cases, this one directly affects the daily lives of nearly every American,” asserting that “Lexmark is attempting to use patent law to construct something resembling customer loyalty” and that the “Supreme Court should reject that power grab.” In a Wall Street Journal op-ed, Daniel Hamel and Lisa Larrimore Ouellette maintain that the case is essentially “about price discrimination, the practice of charging higher prices to customers who likely can pay more and offering discounts to those who cannot,” and they urge the justices to “consider what their decision might mean for consumers beyond the U.S.—and especially in developing countries—who will feel the weight of the court’s judgment.”
Yesterday the court also issued three opinions. First, in Manuel v. City of Joliet, the court held 6-2 that an arrestee can challenge his pretrial detention under the Fourth Amendment when the criminal charges are based on false information. Rory Little has this blog’s opinion analysis. In SCA Hygiene Products v. First Quality Baby Products, the justices ruled 7-1 that the common law defense of laches does not apply to a patent infringement suit for damages brought within the statutory limitations period. Ronald Mann analyzes the opinion for this blog. Howard Newman discusses the ruling at his eponymous law firm’s blog. And in National Labor Relations Board v. SW General, Inc., the court held 7-2 that someone nominated for a Senate-confirmed position may not serve in that position in an acting capacity. Amy Howe analyzes the opinion for this blog. In The Washington Post, Ann Marimow covers the decision, noting that the court’s holding makes it “more difficult for the president to quickly fill vacant top government jobs.” Additional coverage comes from Sam Hananel at the Associated Press. At his eponymous blog, Ross Runkel notes that hundreds “of NLRB decisions could be at risk after the Supreme Court’s decision that for three years Lafe Solomon served improperly as the NLRB’s Acting General Counsel.”
Yesterday the Senate Judiciary Committee conducted the second day of its hearing on the nomination of Judge Neil Gorsuch to the Supreme Court. Molly Runkle rounds up early coverage of and commentary on the proceedings for this blog. Additional coverage comes from Adam Liptak in The New York Times, Carl Hulse in The New York Times, Glenn Thrush in The New York Times, Robert Barnes and Ed O’Keefe in The Washington Post, Peter Kane in The Washington Post, Ariane de Vogue at CNN, Richard Wolf at USA Today, here and here, Mark Walsh at Education Week’s School Law Blog, here and here, Ken Jost at Jost on Justice, and Tony Mauro in The National Law Journal (subscription or registration required), who focuses on Neil Katyal’s decision to introduce Gorsuch.
Commentary on and analysis of the hearings comes from Richard Eskow at OurFuture, William Yeomans at ACSBlog, Adam Winkler, also at ACS Blog, Advice and Consent (podcast), David Fontana at Prawfsblawg, Christopher Ingraham in The Washington Post, Jay Michaelson in The Daily Beast, Robert Schlesinger at US News and World Report, Paul Callan at CNN, and Sen. Tom Harkin and Eve Hill in the Des Moines Register, At Empirical SCOTUS, Adam Feldman analyzes “various linguistic aspects of some senior senators’ preliminary remarks from recent confirmation hearings” and suggests that the trends he identifies may become “even more pronounced in the Gorsuch hearings.”
On Monday, the justices heard oral argument in Murr v. Wisconsin, in which they will decide what constitutes the “parcel as a whole” for the purpose of regulatory takings analysis. Miriam Seifter analyzes the argument for this blog. At The Washington Post’s Volokh Conspiracy blog, Ilya Somin worries that if “the oral argument is any indication, the case might well result in a muddled ruling that fails to provide clear guidance for either government regulators or property owners.”
- In the American Bar Association’s Litigation magazine, Ashish Joshi interviews Justice Stephen Breyer about Breyer’s recent book, “The Court and the World,” exploring Breyer’s premise that judicial “isolationism in an interconnected world is not the way forward.”
- At The George Washington Law Review’s On the Docket, Cynthia Lee looks at the court’s decision in Peña-Rodriguez v. Colorado, in which the justices held that evidence that a juror relied on racial animus to convict a criminal defendant trumps a Colorado no-impeachment rule, remarking that as “a vehicle for minimizing racial bias,” “the case may be of limited value in light of the fact that most bias today is implicit, not explicit.”
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