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Judge fixes troubling court order in CloudFlare filtering case

July 16, 2015, 9:33 AM

I’ve written before to express skepticism about whether it makes sense for a federal court to order a content-delivery network like CloudFlare to filter its services proactively for domain names and other content that might infringe intellectual-property rights.

Happily, the judge in the case now has revised that order; if Arista Records or other plaintiffs want CloudFlare to deny services to particular infringing clients or websites, they have to give CloudFlare notice of the infringement.

The Electronic Frontier Foundation should be applauded for it key role in asserting that CloudFlare, like other Internet intermediary services, shouldn’t have to take on the task of monitoring all its traffic to determine (or guess) whether Arista’s trademarks or copyright interests are infringed. You can find EFF’s summary of the issues in the case here. EFF Attorney Mitch Stoltz makes a key point when he writes:

The original order against CloudFlare, if it had become the norm, would put service providers in the uncomfortable position of having to figure out who’s allowed to use terms like ‘grooveshark’ and who isn’t—or of having to block them all. Turning Internet companies into enforcers of who can say what on the Internet is exactly what laws like the DMCA were meant to avoid.

Also important is the judge’s decision to allow CloudFlare to give 48 hours’ notice to a client or website that’s about to be cut off. This gives the targets a reasonable chance to challenge an unfair or overly broad order in court, which is yet another victory for due process.

Stoltz referenced the Digital Millennium Copyright Act, which deals with intellectual property. But the scope of protection for Internet intermediaries is even broader under American law, thanks to Section 230 of the Communications Decency Act.

Taken together, Section 230 and the DMCA have provided a protective legal framework that has shaped the Web we love today. That’s why we have to be vigilant about litigation, new laws or other efforts that may put this framework at risk.

This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

Preserving energy access for distributed generation

July 16, 2015, 8:00 AM

ISSUE SNAPSHOT

  • Moving our energy generation paradigm increasingly toward distributed generation and market choice provides many potential benefits.
  • Regulations and state policy should ensure access to existing infrastructure at rates that are fair to distributed generators, while protecting non-participating ratepayers from indirectly subsidizing
    the practice.

BACKGROUND

Since at least the 1930s, the American power sector long has operated based on a paradigm of centralized generation.1 The advent of the alternating current grid enabled the bulk transmission of electricity over long distances. This allowed large-scale centralized generating facilities to produce power for many widely distributed customers.

For much of its existence, this centralized generation paradigm has created economies of scale, ensured reliability and addressed immediate environmental and health concerns by moving generation outside of highly populated areas. The model favored highly regulated monopoly utilities, who would be responsible for the generation, transmission and distribution of electricity.

But recent innovations have driven a significant shift in the way we produce and deliver electricity. Technologies designed to harness wind, solar, and geothermal power are equally effective on a customer’s roof or in his or her backyard as at a large, centralized installation. Broader adoption of these sources of renewable energy are having a variety of effects on the market, and lawmakers and regulators need to be prepared to respond to these changes.

Power produced through a network of many small installations is called distributed generation. Photovoltaic solar (PV) and small wind turbines allow individual residential and commercial customers to generate power on-site for themselves. This new technology also allows those who previously were energy consumers to become energy producers, selling power to their neighbors on the same electrical grid used by the large utility generators.

POLICY CONSIDERATIONS

Distributed generation has the ability to foster technological innovation, improve national energy security and provide new options for consumers. At the same time, emergent technologies remain reliant on existing transmission infrastructure and backup generation.

The challenge across the nation is to foster policies that maintain the stability and reliability of legacy generation, transmission and distribution systems while simultaneously opening opportunities for distributed generation and emerging energy technologies to compete in the market. This inevitably will challenge America’s longstanding energy-generation paradigm.

RECOMMENDATIONS

With these considerations in mind, regulators and legislators should focus on the following principles to develop an effective new energy generation model:

  • Consumers should be free to generate their own electricity and protected from punitive regulatory measures or rate assessments designed to protect the status quo.
  • Utilities should receive fair payment for their services, including grid access, maintenance, reliability and backup generation.
  • Consumers who do not self-generate power should not bear any increased cost imposed by the addition of distributed generation.
  • Access to existing energy distribution and transmission infrastructure should be afforded to all customers and all power sources.
  • Regulators and legislators should avoid discriminating between particular types of distributed generation.

Support for the Innovation Act grows

July 15, 2015, 4:10 PM

From House Judiciary Committee:

Below are excerpts from the letter sent by R Street Institute, Niskanen Center, Center for Individual Freedom, Taxpayers Protection Alliance, Institute for Liberty, Small Business & Entrepreneurship Council, Independent Women’s Forum, American Consumer Institute, Citizen Outreach, and Minnesota Center-Right Coalition.  The full letter can be found here and a list of all supporters of H.R. 9 can be found here.

Letter supporting S.B. 602, California seismic retrofit financing

July 15, 2015, 3:30 PM

The R Street Institute is a nonprofit think tank headquartered in Washington. Our mission is to engage in policy research and outreach to promote free markets and limited, effective government. What’s more, we maintain the largest insurance-focused project of any non-industry think tank. In California, our focus has been in the area of property insurance reform, with an eye toward the California Earthquake Authority, in particular.

In terms of a population’s exposure to high intensity and severity events, nowhere is the risk of a major earthquake greater than in California. In March 2015, the U.S. Geological Survey released its Third Uniform Earthquake Rupture Forecast. The study revised upward the odds of an 8.0 magnitude event occurring in California within the next 30 years from 4.7 percent to 7 percent. Less profound earthquakes are even more likely.

In our January 2015 study, “Insuring a Way Out: Modernizing the California Earthquake Authority,” we suggested the Legislature adopt an earthquake-retrofit equivalent of the “Property Assessed Clean Energy” financing program. We favor such an approach because it is a free-market and fiscally conservative approach to increasing the state’s seismic resilience:

The PACE model overcomes two of the biggest hurdles to widespread adoption of major property upgrades: the high upfront cost and property owners’ uncertainty about when they might sell their property. Investors also are protected, because their obligation becomes attached to the property itself.

S.B. 602 (Monning) is PACE for earthquakes made real – but, by another name. The “Property Secured

Mitigation Program” combines the scale and reach of government without warping the private price signals necessary to transmit a full understanding of risk.

Concerns about the impact of PACE-like programs have been expressed by federal lending authorities in the past. Their concerns, centered on the seniority of PACE liens, have proven to be illusory. PACE lending has successfully allowed Californians to outfit their homes with solar systems without encumbering the status or alienability of their mortgages or their properties.

In spite of objections from institutional lenders and the broker community, PACE-financing programs exist across the nation. To date, 31 states have enabled PACE programs and California’s approach has been a terrific success. Applying a similar principle to seismic retrofitting would be both a national first and a step toward addressing California’s urgent vulnerability to earthquakes.

For these reasons, the R Street Institute is an enthusiastic supporter of S.B. 602 (Monning) and urges a “Yes” vote. If you have any questions, please contact Ian Adams at (916)761-5269.

30 million U.S. adults have used e-cigarettes, unpublicized CDC data reveals

July 15, 2015, 12:30 PM

Analyzing fresh data from the 2014 National Health Interview Survey, which involved nearly 37,000 respondents, it can be estimated that 30 million American adults have used an e-cigarette at least once, and 8.9 million were current users last year. The data was released by the Centers for Disease Control and Prevention June 29.

This was the first time the NHIS, the main source for national smoking prevalence statistics, asked about e-cigarettes.  The survey asked participants if they had ever used e-cigs, even one time; if they had, a second question asked them if they currently used them every day, some days or not at all (“triers”). From this data, I have produced the first-ever national estimates of e-cigarette use.

About 71 percent of e-cigarette users are also current smokers (every day or some days), and 22 percent are former smokers. The rest (about 7 percent or 595,000) were never cigarette smokers, but nearly 70 percent of them said they smoke products other than cigarettes (cigars, pipes, water pipes or hookahs, very small cigars that look like cigarettes, bidis or cigarillos) every day, some days or rarely.

Of the 6.3 million smokers who used e-cigarettes, only 22 percent used them every day. In contrast, among the nearly 2 million former smokers who used e-cigarettes, about 63 percent – or 1.25 million – were daily users. Among those who never smoked cigarettes, but did vape, only 16 percent were daily users.

Among daily smokers, there was virtually no difference in cigarette consumption; regardless of whether they vaped or not, daily smokers consumed 14-15 cigarettes per day on average. Cigarette consumption was more variable among “some day” smokers: those who used e-cigarettes every day smoked only 3.5 cigarettes on the days they smoked, while those who used e-cigs on some days smoked 5.2 cigarettes. Some-day smokers who had tried e-cigarettes consumed 7.8 cigarettes per day, while those who had never used an e-cig smoked 5.6 cigarettes.

While it is encouraging that almost 2 million former smokers were currently using e-cigarettes in 2014, it is not possible to prove that they had used e-cigarettes to quit. However, 85 percent of these former smokers had quit five years or less before the survey, making it plausible that e-cigarettes played some role in their becoming or staying smoke-free.

The table below compares some characteristics of former smokers who currently used e-cigarettes with former smokers who never used them. (These comparisons are general observations that might change after additional analysis). Former smokers who used e-cigarettes were younger and more likely to live in the South; they looked more frequently for health information on the Internet during the previous 12 months.

Former smokers who use e-cigarettes  and those who never use them Characteristic Current users Never used Under age 45 59 percent 22 percent Live in the South 46 percent 36 percent Live in the Northeast 9 percent 19 percent Looked for health info/ Internet 62 percent 44 percent Quit smoking less than five years prior 85 percent 15 percent

 

Another statistic stands out: In 2014, the percentage of adults in the U.S. who smoked was 16.7 percent, down from 17.8% in 2013.

Cigarette smoking in the U.S. continues an inexorable decline. Rather than impeding progress, e-cigarettes may be accelerating a smoke-free revolution.

Progressives turn their backs on the sharing economy

July 15, 2015, 9:00 AM

Santa Monica, Calif., is now spending $410,000 a year investigating, ticketing and fining residents who sublet their houses and apartments on Airbnb.

In Key West, Fla., a new city ordinance outlaws ride-sharing without a vehicle-for-hire license. Police are arresting Uber and Lyft drivers if they catch them offering passengers a ride in exchange for compensation.

These recent news items represent the most extreme examples of local-government attempts to constrain the so-called “sharing” economy, an emerging economic ecosystem that combines the social networking, geolocation and transaction-processing capabilities of the Internet to connect buyers and sellers of various services.

Uber and Airbnb arguably are the two most high-profile players in this emerging business segment. Uber, along with Lyft and Sidecar, provides economical local transportation. Airbnb lets homeowners and apartment dwellers rent or sublease their residences to visitors looking for a place to stay. Others, like TaskRabbit, are more general, providing classified-type listings for a wide range of personal services, from lawn maintenance to furniture assembly.

Until recently, excitement about the sharing economy’s potential was rare common ground for free-market libertarians and socially conscious progressives. Both saw the trend as a way to provide economic empowerment to individuals with limited resources. In ridesharing, at least, there also was the bonus of undermining politically protected monopolies with poor records of pricing and performance.

Sadly, progressives more recently have turned hostile. They charge that jobs in the sharing economy pay less than minimum wage and allow corporations to get away with improperly classifying as workers as contractors in order to avoid social safety net obligations like health insurance coverage and payment of Social Security and Medicare taxes.

In a closely watched decision, the California Labor Commission earlier this month ruled that an Uber driver should be reimbursed for expenses as an employee. Though the ruling doesn’t affect other drivers – at least, not yet – it sets a dangerous precedent in an industry that has insisted drivers are independent contractors who own their vehicles, set their own hours and do not report to an Uber supervisor. The decision seems geared to create cost and red tape both for Uber and its drivers and, if applied more broadly, could even drive the company out of its home state.

This week, Hillary Clinton, the Democratic Party’s presidential front-runner, made the sharing economy a campaign issue by promising to “crack down” on companies that misclassify employees as contractors. All her rhetoric will do is provide local governments with more cover to shut down or criminalize sharing economy activities, as in Santa Monica and Key West.

The fight over the sharing economy is the first skirmish in what looks to become an outright battle over labor policy in the next few years. I regret the loss of my progressive friends on the issue, because I don’t think anyone’s interests are served when the government, at any level, goes out of its way to outlaw voluntary transactions between individuals because they don’t follow traditional models.

It’s worse still, because traditional models of gainful employment already have been upended. In “A World Without Work,” an article in this month’s Atlantic, Derek Thompson offers a startling picture of the revolution that the unstoppable forces of globalization, automation and inexpensive software have brought to American labor. For example, in 1964, the nation’s most valuable company, AT&T, was worth $267 billion in today’s dollars and employed 758,600 people. Today’s telecommunications giant, Google, is worth $370 billion but has only 55,000 employees. As Thompson writes, that shift is visible in the data that shows that one in six men between the ages of 25 and 54 are either unemployed or out of the workforce altogether:

This is what the economist Tyler Cowen calls “the key statistic” for understanding the spreading rot in the American workforce. Conventional wisdom has long held that under normal economic conditions, men in this age group—at the peak of their abilities and less likely than women to be primary caregivers for children—should almost all be working. Yet fewer and fewer are.

These trends run head-on into the current progressive policy that seeks to use business — particularly large, entrenched corporations that can employ thousands –as the avenue for welfare-state benefits. The California Labor Commission does not wish to deny citizens the opportunity to make a living. They are, however, tasked with sustaining California’s employee entitlement policies. Sharing economy platforms, which foster individual economic empowerment, threaten this mission.

What progressives should be asking is whether the entitlement partnership between big government and big business is sustainable, given the structural shift underway in the American labor market. They need to question whether they really want to deny millions of individuals the freedom to adjust to this shift by deliberately sabotaging the sharing economy.

Instead, the sharing economy should be understood as an organic response to the changing labor market. Entrepreneurs have fashioned opportunities out of new technologies and real market needs are being met. Uber averages 82,000 rides a day in New York City alone. Airbnb claims 1.2 million listings in 34,000 cities worldwide. These services are not harming people; and are measurably contributing to the local economy. They provide income for a growing generation of workers who see themselves as independent agents, empowered to negotiate on their own terms by balancing security, freedom and fulfillment.

This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

Proxy access proposals do not maximize shareholder wealth, R Street study finds

July 15, 2015, 8:01 AM

WASHINGTON (July 15, 2015) – Shareholder-sponsored proxy access proposals, which have passed at 39 of the 65 companies that have voted on them in 2015, do not maximize wealth and may have led to $14.6 billion in foregone value for the companies that passed them, according to a new paper from the R Street Institute.

Often touted as promoting “shareholder democracy,” proxy access is a process that allows independent shareholders with minority stakes to nominate director candidates and have those nominees included in the packets sent to shareholders ahead of a company’s annual meeting. But 2015 has seen a surge of politically motivated proposals for proxy access from major public employee pension funds.

Most notable in this year’s proxy season have been the 75 companies targeted by New York City Comptroller Scott Stringer, with roughly half of them concentrated in the utilities and energy sectors. According to R Street’s policy study, authored by Editor-in-Chief and Senior Fellow R.J. Lehmann, investor response to the recent proposals demonstrates the dangers of empowering activist shareholders more interested in extracting concessions from companies than in fulfilling the fiduciary duties of a board of directors.

“The results support the supposition that investors do not positively value news that a firm has passed proxy access, but they did positively value news that a proxy access initiative failed,” Lehmann wrote.

Lehmann noted however that the idea of proxy access is not inherently bad.

“When wielded by the appropriate parties, proxy access does hold at least some promise to act as a counter to the myopic tunnel vision or never-ending echo chamber that bedevils some underperforming boards,” he wrote.

Toward that end, Lehmann offered up policy recommendations to counter the misapplication of proxy access, ranging from SEC clarification on conflicting proposals to preservation of state laws of incorporation to the exemption of small and medium-sized filers from proxy access initiatives.

He also recommended states and municipalities reform public employee pensions by moving toward defined contribution programs. Doing so not only would help ensure their long-term solvency, but also reduce politicians’ incentive to use pension funds as a cudgel against public companies.

“Grandstanding of the sort engaged in by New York City’s comptroller would be impossible if the authority to determine investment allocations were transferred from the politicians to the workers themselves,” Lehmann wrote.

 

Proxy Access: Shareholder democracy or creeping mercantilism?

July 15, 2015, 8:00 AM

Following certain rule changes made by Congress and the U.S. Securities and Exchange Commission, the 2015 proxy season has seen a deluge of shareholder proposals at U.S. public companies calling for proxy access – the ability of minority shareholders to have their slate of directors included in the materials presented to shareholders ahead of a company’s annual meeting. Promoted as a means to enhance “shareholder democracy,” the legal and economic literature on proxy access does not support claims it maximizes shareholder wealth. Moreover, the process may allow unions and certain elected officials to use the corporate boardroom to effect politically motivated outcomes. This paper’s analysis of 65 proxy ballots completed through June 2015 suggests shareholders of firms that passed access initiatives lost $14.6 billion of wealth. The paper concludes with recommendations to grant more leeway to companies that omit or disqualify some kinds of proxy access proposals, as well as changes to rein in the power of elected officials who serve as administrators of public pension plans.

Texas Supreme Court strikes stupid licensing law

July 15, 2015, 7:00 AM

Last month, the Texas Supreme Court struck a blow for liberty. Progressives are predictably upset about it. In Patel v. Texas Department of Licensing and Regulation, the court invalided state regulations requiring an individual to complete 750 hours of training from an accredited cosmetology school before they can practice hair threading, an ancient technique for removing facial or body hair using a thin string.

I don’t know much about hair threading. On the other hand, neither do most schools of cosmetology. As the majority opinion notes, of the nearly 400 state-approved beauty schools in Texas, fewer than ten teach threading techniques at all. Only one devotes more than a few hours to the practice.

Instead, much of the required curriculum is on topics that have nothing to do with hair threading. These include at least 225 hours of instruction on facial treatments, cleansing, masking, and therapy; 15 hours on aromatherapy; ten hours on nutrition; and ten hours on color psychology.

Admittedly, some of the required curriculum covers items—such as general sanitation and hygiene—that could be relevant to hair threading. Exactly how much of the coursework was irrelevant was a matter of dispute between the parties in the case. Plaintiffs claimed that 710 of the 750 required hours were irrelevant. According to the state, this was an exaggeration; it was only 320 hours that were a complete waste of time.

In other words, requiring hair threaders to get a cosmetology license makes no sense. But is it really fair to expect the law to make sense? Mark Joseph Stern doesn’t think so. Writing in Slate, Stern claims:

[The court’s] startling decision revives a dangerous, widely discredited doctrine that gives judges authority to strike down economic regulations that interfere with the free market. By resuscitating it, the Texas Supreme Court has effectively declared that laissez-faire capitalism is the only true form of American liberty.

Are irrational laws unconstitutional?

To understand what Stern is getting at, one needs a quick review of the last 150 years of constitutional law. In 1868, the United States adopted the Fourteenth Amendment to the Constitution, which states (among other things) that citizens may not be denied “life, liberty, or property without due process of law.” A similar provision was adopted as part of the Texas Constitution in the 1870s.

How to interpret the Due Process Clause has been a matter of extended controversy. One school of thought says the requirements of the Due Process Clause are purely procedural. If the law says you can get life in prison for stepping on a sidewalk crack on a Tuesday, then as long as the state gives you a fair trial before sending you to the slammer, you’re out of luck.

Alternatively, some scholars argue the Due Process Clause also imposes some kind of substantive limitation on how irrational the law can be. If the requirements of a law bear no relationship to any legitimate purpose (at least in certain areas), then they are unconstitutional even if the state follows all the typical procedural requirements. So-called “substantive due process” has come in for a lot of mockery over the years (the great constitutional theorist John Hart Ely called it “a contradiction in terms, sort of like ‘green pastel redness.’”) But few people have been willing to live without it entirely.

During the early part of the last century, the Supreme Court occasionally applied substantive due process to economic regulations. The most famous example, Lochner v. New York, involved a maximum-hours regulation for bakers that, the court found, didn’t actually improve health or safety (for more details, see here). Lochner soon became a bête noire among progressives, and Justice Oliver Wendell Holmes, who wrote a stinging dissent accusing the court of substituting its own views for those of an elected legislature, was lionized as a progressive hero.

The dignity of earning a living

Holmes, at least, really meant it. He thought courts shouldn’t be in the business of second-guessing the wisdom of legislative measures. That applied not only to economic regulations, but also to laws mandating forced sterilization and making it difficult for southern blacks to change jobs.

Today’s progressives, by contrast, mostly don’t mean it. On the same day that the Texas Supreme Court decided the hair-threading case, the U.S. Supreme Court ruled in Obergefell v. Hodges that state bans on same-sex marriage were unconstitutional. Holmes’ Lochner dissent could be adapted with very few changes to a dissent in Obergefell.

Stern recognizes this problem, but his attempt to deal with it is lacking: “The court still enforces the ‘liberty’ guaranteed by the Due Process Clause—but now it protects only those fundamental rights relating to personal dignity and autonomy, which judges are much better at describing and defending.”

Leaving aside the question of whether earning a living is not itself a matter of personal dignity and autonomy, there’s nothing in the text or history of the Due Process Clause that says it wasn’t meant to apply to economic liberty.

Nor is it clear why judges would be better at describing and defending one type of liberty than another. Figuring out the consequences and rationale of economic rules is something that state court judges do routinely; the grand philosophizing is more of a hobby. As Justice Don Willett as aptly described in a concurring opinion, occupational licensing is “often less about protecting the public than about bestowing special privileges on political favorites.” The public-choice case for additional scrutiny of such laws is strong.

While Stern invokes the bogeyman of laissez faire capitalism, the only example he can come up with for his parade of horribles is that the continuing education requirement for dental hygienists could get reduced from 15 hours a year to six hours every three years. That hardly seems like the stuff of a “Mad Max” post-apocalyptic wasteland.

Reasonable people can disagree about the extent to which courts should defer to legislatures when they pass dumb laws. But two points are beyond dispute: 1) requiring that hair threaders go through hundreds of hours of meaningless training was really dumb, and 2) if courts are going to second-guess legislatures, it shouldn’t just be for Progressive pet projects. Economic liberty matters, too.

Free-market, taxpayer and consumer groups to Congress: Support the Innovation Act

July 15, 2015, 4:00 AM

Dear Representatives,

On behalf of the undersigned free-market, taxpayer and consumer organizations, we write to express strong support for ongoing efforts to enact patent-litigation reform in the U.S. House of Representatives. As advocates for a healthy innovation economy with a strong and effective patent system, we urge you to support the important litigation reforms in H.R. 9, also known as the Innovation Act, sponsored by House Judiciary Chairman Bob Goodlatte, R-Va.

Last Congress, a similar version of this legislation passed the House with broad bipartisan support and an overwhelming margin of 325-91. Republicans support was even more decisive, with a margin of more than seven to one.

We firmly believe these reforms are essential to buttress the structure of our patent system against predatory litigation. In so doing, it would create more clarity and better protections for legitimate intellectual property rights.

The Progress Clause in Article I, Section 8 of the U.S. Constitution establishes a patent system, first and foremost, with a mandate to “promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” Though many other provisions of the document drafted at the Constitutional Convention were divisive, this language was supported unanimously and without debate. This reflects the foundational importance our nation’s framers placed on a robust legal structure that could protect inventors’ rights in their existing creations and, at the same time, foster new inventions and innovations.

Sadly, it has become clear that the current litigation environment surrounding our patent system has become an immense burden on the very innovators and innovations that the Constitution sought to encourage and protect. Each year, abusive patent litigation drains tens of billions of dollars from the economy, creating tremendous deadweight losses, as well as a great deal of uncertainty. This, in turn, dramatically reduces spending on research and development, venture capital investment and other essential business activities.

These assertion entities, otherwise known as “patent trolls,” don’t just go after big tech companies. About half the defendants in these lawsuits are small businesses, which make easier targets since they are less well-positioned financially to defend themselves in court.

Most of these businesses choose to settle, because patent litigation is risky, time-intensive and can cost millions of dollars in legal fees. Even when a claim against them is spurious, small businesses know it’s seldom a sensible business decision to put their entire enterprise on hold and risk bankruptcy in an extended legal battle.

We agree, of course, that patent-asserting entities do play a valued role in creating healthy secondary markets. However, the current civil-litigation environment invites abuse and exploitation from a multitude of bad actors.

The Innovation Act would address these problems by implementing several important reforms. These include allowing judges more discretion in fee shifting; changing venue rules to limit unfair forum shopping; adopting pleading standards that appropriately identify alleged infringements; and reducing abuse of the discovery process. Together, these changes would lower the cost to defend against spurious patent claims. Companies thus would less likely to resolve such disputes by paying out what are, in effect, extorted settlements.

With these changes, H.R. 9 would help reduce the economic harm associated with expensive and frivolous patent troll suits, while improving the overall strength and quality of America’s patent system, in accordance with the founders’ intent. The bill would bolster a system that promotes the freedom to innovate, rather than lining trial lawyers’ pockets and offering windfall revenues to patent-holders who do not, themselves, add to innovation and economic growth.

We urge you to support patent litigation reform once again, to better align our patent system with its constitutional mandate and to send a message that bad actors can no longer hold the innovation economy hostage.

Sincerely,

R Street Institute
Niskanen Center
Center for Individual Freedom
Taxpayers Protection Alliance
Institute for Liberty
Small Business & Entrepreneurship Council
Independent Women’s Forum
American Consumer Institute
Citizen Outreach
Minnesota Center-Right Coalition

Coalition for Tax Competition urges Congress to represent taxpayer voices in the OECD

July 14, 2015, 3:02 PM

Dear Senators and Representatives:

The Organization for Economic Cooperation and Development (OECD) is rapidly working to rewrite global tax rules in the name of combating base erosion and profit shifting (BEPS). We the undersigned organizations are deeply concerned that this process lacks oversight and will result in onerous new reporting requirements and higher taxes on American businesses, and are urging Congress to speak up for U.S. interests by adding its voice to the process.

The OECD has a history of supporting higher tax burdens and larger government, and the BEPS project represents just the latest salvo in a long-running campaign by global bureaucrats to undermine tax competition and its restraining force on political greed.

Because the OECD is populated by tax collectors and finance ministers, new rules being drafted through the BEPS initiative are necessarily going to be skewed in their favor. Businesses are given only a token voice, while other interests are not considered at all. Consumers, employees, and everyone that benefits from global economic growth are not able to make their preferences known.

The inevitable prioritizing of tax collection over every other political or economic interest ensures that the result of the BEPS project will be economic pain. And based on the OECD’s own acknowledgement that corporate tax revenues have not declined in recent years, that pain will provide little to no real gain to national treasuries.

BEPS recommendations already released further show a troubling trend toward excessive and unnecessary demands on taxpayers to supply data not typically relevant to the collection of taxes. This includes proprietary information that is not the business of any government, and for which adequate privacy safeguards are not and likely cannot be provided.

The Treasury Department should not be the only voice representing U.S. interests during this critical process. We urge members of Congress to get involved before it is too late, and to protect American interests by ensuring that the voices of tax collectors are not allowed to speak for everyone.

Sincerely,
Andrew F. Quinlan, President
Center for Freedom & Prosperity

Grover Norquist, President
Americans for Tax Reform

Pete Sepp, President
National Taxpayers Union

Tom Schatz, President
Council for Citizens Against Government Waste

Seton Motley, President
Less Government

Wayne Brough, Chief Economist and Vice President of Research
FreedomWorks

J. Bradley Jansen, Director
Center for Financial Privacy and Human Rights

Phil Kerpen, President
American Commitment

David Williams, President
Taxpayers Protection Alliance

Bob Bauman, Chairman
Sovereign Society Freedom Alliance

Karen Kerrigan, President
Small Business & Entrepreneurship Council

Sabrina Schaeffer, Executive Director
Independent Women’s Forum

James L. Martin, Chairman
60 Plus Association

Heather Higgins, President
Independent Women’s Voice

George Landrith, President
Frontiers of Freedom

Lew Uhler, President
National Tax Limitation Committee

Terrence Scanlon, President
Capital Research Center

Tom Giovanetti, President
Institute for Policy Innovation

Andrew Langer, President
Institute for Liberty

Eli Lehrer, President
R Street Institute

Chuck Muth, President
Citizen Outreach

Support civil asset-forfeiture reform in California

July 14, 2015, 11:00 AM

The R Street Institute is a nonprofit, free-market think tank based in Washington, D.C. Our mission is to engage in policy research and outreach to promote free markets and limited, effective government. We view civil asset-forfeiture reform as a crucial step toward limiting the most egregious illustrations of state overreach into the private lives of citizens.

The need for reform in California is borne out by the striking fact that, while the number of state cases has remained consistent, the number of state cases transferred to federal jurisdiction has increased dramatically. This suggests state law-enforcement agencies are circumventing state standards in favor of more permissive federal civil asset-forfeiture standards. S.B. 443 endeavors to correct this pattern of behavior by ensuring that California law enforcement agencies conform their behavior to California law before “equitable sharing” with federal law enforcement occurs.

So long as the twin goals of civil asset-forfeiture law remain to enhance law enforcement while simultaneously maintaining due process, it is necessary to limit perverse monetary incentives that lead some to abuse the tool. Clamping down on interagency forum shopping not only accomplishes that goal, it also bolsters the significance of California’s laws. In an era in which the limits of federal power are often difficult to detect, states must jealously guard those areas over which they retain control.

For these reasons, the R Street Institute is a supporter of S.B. 443 (Mitchell) and urges a “Yes” vote. If you have any questions, please contact Ian Adams at (916)761-5269.

Two tables show how complicated music-copyright rate-setting is

July 14, 2015, 9:11 AM

Even after you’ve learned the basics of U.S. copyright law, once you delve into music copyrights, you discover an even more complex—I like to say “fractally complex”—framework at the root of today’s music industry.

At the first level, this complex framework is grounded in the compulsory mechanical license and other compulsory licenses, which set a baseline for private negotiations among songwriters, record companies and distributors (from traditional radio to new services like Apple Music, Spotify and Pandora). You’d need to study the whole combination and interaction of mandatory licensing and private negotiations to begin to get a handle on what Taylor Swift’s polite quarrel with Apple a few weeks ago was all about.

At a second level, this combination of mandatory licenses and private negotiations had been made even more complicated because, as of 1995, copyright interests in songs also are divided between the songwriters and their publishers on the one hand (sometimes represented by performance-rights organizations like ASCAP and BMI) and the owners of “sound recordings” on the other. This division can be confusing even to juries in a copyright case. In the recent legal battle between the late Marvin Gaye’s heirs and the recording artists Pharrell Williams and Robin Thicke, the jury may have “blurred the lines,” so to speak.

Helping non-expert readers to grasp the complexity of modern music licensing with just words and sentences in a blog post is probably asking too much. So we’re going to cheat a bit here by giving you two tables that show — at a “glance” — how copyright licensing plays out among distribution platforms and among the uses music lovers put to what they buy. We thank Lydia Pallas Loren, professor at Lewis & Clark Law School, for allowing us to reproduce portions of her excellent August 2014 piece in the Houston Law Review here.

SERVICE TYPE

COPYRIGHT TYPE

REVENUE (%)

Terrestrial radio

Musical work

3.7 (2011-2016) [1]

Sound recording

0.0

TOTAL

3.7

Pre-existing satellite radio (i.e., Sirius XM)

Musical work

2.4 (2008) [2]

Sound recording

9.0-11.0 (2013-2017)

TOTAL

11.4-13.4

Pre-existing cable music service

(i.e., Music Choice)

Musical work

5.5

Sound recording

8.0-8.5 (2013-2017)

TOTAL

13.5-14.0

Noninteractive

webcasters

Musical work

4.0 (2014) [3]

Sound recording

25.0-56.0

TOTAL

29.0-60.0 [4]

Interactive

webcasters

Musical work

10.5

Sound recording

Unknown [5]

TOTAL

Unknown

 

TYPE OF COPY

PRICE

Physical phonorecords

$0.091 per song or $0.0175 per minute of playing time [6]

Digital phonorecord deliveries (DPDs)

$0.091 per song or $0.0175 per minute of playing time [7]

Limited downloads (tethered devices)

3.9 percent of revenue [8]

Ringtones

$0.24 per song [9]

 

Two things you can see instantly in these tables:

  1. New digital platforms end up paying more than traditional music-distribution platforms.
  2. It’s hard to understand immediately why, with regard to songwriting rights alone, copies of songs are charged at “penny rates” with some kinds of recordings and at percentages of total song revenue other times.

There’s a whole separate story to be told about the pricing of ringtones.

 

[1] Rate extrapolated by using the 1.7 percent rate charged by ASCAP, with a 45.6 percent PRO market share for ASCAP, resulting in an industrywide rate of 3.7 percent. See Pandora Media Inc., 6 F. Supp. 3d at 361 (45.6 percent market share; id. at 366 (1.7 percent royalty rate). [2] Determination of Rates and Terms for Preexisting Subscription Services and Satellite Digital Audio Radio Services, 73 Fed. Reg. 4,080, 4,088 (Jan. 24, 2008) (to be codified at 37 C.F.R. pt. 382); Peter DiCola, Copyright Equality: Free Speech, Efficiency, And Regulatory Parity in Distribution, 93 B.U. L. REV. 1837, 1848 (2013). [3] This rate is extrapolated by using the 1.85 percent rate set for ASCAP. Using a 45.6 percent PRO market share for ASCAP, this results in an industrywide rate of approximately 4.0 percent. Pandora Media Inc., 6 F. Supp. 3d at 361 (45.6 percent market share); see id. at 366
(1.85 percent royalty rate for noninteractive services). This 4 percent approximation was confirmed by the court’s description. Id. at 346. [4] 60 percent is used here because it has been reported that “[i]n 2013, Pandora’s content acquisition costs were…over 60 percent of its revenue for that fiscal year.” Pandora Media, Inc., 6 F. Supp. 3d at 328 [5] The arrangements between interactive webcasters and sound recording copyright owners are privately negotiated and not subject to any disclosure requirements. See 17 U.S.C. § 114(e) (2012) (providing for private negotiations). [6]Mechanical License Royalty Rates, U.S. COPYRIGHT OFF., http://www.copyright.gov/licensing/m200a.pdf (last visited July 15, 2015) [7] Ibid.  [8] This rate is arrived at by taking the 10.5 percent aggregate rate set by Copyright Office regulation and subtracting 6.6 percent as the portion to be paid for the public performance right. See infra notes 85–91 and accompanying text. 6.6 percent is arrived at by extrapolating from the 3 percent that ASCAP charges interactive webcasters, using a 45.6 percent market share for ASCAP, resulting in an industrywide rate of 6.6 percent. See Pandora Media, Inc. v. Am. Soc’y of Composers, Authors, & Publishers, 6 F. Supp. 3d 317, 351, 365 (S.D.N.Y. 2014). [9] Mechanical License Royalty Rates, supra note 6. This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.

In midst of drought, Sacramento needs to prepare for flood

July 14, 2015, 8:15 AM

In the midst of a serious drought, it’s time to become concerned about a coming flood. Orbiting high above the Pacific Ocean, a Japanese weather satellite has spied the embryonic stages of a massive El Niño weather system that, once developed, is likely bound for California.

El Niño events are characterized by a prolonged warming of waters in the Pacific and strong trade winds that lead to dry winters in much of the United States and a downright diluvial season in California. The last time this type of system struck Norther California in a meaningful way was in 1997.

That year, residents throughout the region were swamped by floodwaters that broke levies and damaged infrastructure. Olivehurst, Arboga, Wilton, Manteca and Modesto all flooded to varying degrees, as the Consumnes River surged. Through sheer fortune, Sacramento itself was spared from a watery fate. There is no guarantee such luck will befall the Sacramento area again.

The “River City” rests at the confluence of the American and Sacramento Rivers, precisely where they enter the delta. The city has a history of flooding that dates back to its formation. In fact, Gov. Leland Stanford traveled to his 1862 inauguration not by horse or carriage, but rather, by boat.

While Sacramento’s geographic situation hasn’t changed since 1997, development in the area has. Sacramento proper has grown by 80,000 residents in the last 18 years. The northern Sacramento suburb of Natomas was, until a 2008 moratorium, the largest driver of the city’s growth. Much to the surprise of many of its new residents, Natomas is built – literally – in an area once designated the “Natomas flood-basin.” Meanwhile, West Sacramento has grown by 20,000 people – nearly 40 percent.

All of this growth has been a boon to the region’s economy, but left it vulnerable to extreme weather events. In spite of concerted efforts to strengthen flood-protection mechanisms, by all accounts, the frequency, intensity and severity of extreme weather events is on the rise. Barriers meant for 1-in- 500 year storms may be rendered redundant, as those storms become 1-in-100-year events. Compounding that vulnerability is the specter of a temblor of even middling severity that could breach newly bolstered defensive barriers and cause damage even without a storm.

To-date, the city has proceeded as though concern is unwarranted. In March, the City Council approved construction of 1,500 new homes in Natomas.

Residents and voters should be mindful of the fact that electoral time horizons do not correspond to natural time horizons. A politician elected today who places the city at risk for a catastrophic flood 50 years from now accrues immediate benefits without experiencing any near-term costs.

The remedy to the risks that Sacramento faces is not federally built levies, nor is it federally subsidized flood insurance. Instead, the solution is to show the restraint necessary to say no to further development in high-risk areas. When Sacramento next floods, and it will, the harm to the city could be comparable to that other seriously flood-prone metropolis: New Orleans.

 

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Should Congressional Research Service reports be public?

July 14, 2015, 7:15 AM

From Roll Call:

“Making them public would make them publicly available more equally, more equitably,” said former CRS analyst Kevin R. Kosar, who penned an essay on his decision to quit his job at the agency. “Steve Aftergood [director of the Government Secrecy Project at FAS] has so many of these reports. He may have 75 percent of the reports written. So, they’re out there, but 99 percent of Americans have no idea who Steve Aftergood is or the Federation of American Scientists or, you know, any of the other groups that have these.”

Clinton raps ‘gig’ economy as GOP rivals hail Uber

July 13, 2015, 5:30 PM

From Investor’s Business Daily:

“There is a little more of a backlash among liberals,” said Andrew Moylan, executive director of R Street Institute, a libertarian think tank. “It’s not from a customer service perspective. It’s from a labor perspective.”

Hillary Clinton, old person, does not like this newfangled Uber app

July 13, 2015, 5:00 PM

A week or so ago, my friend Lisa De Pasquale penned an article over at Breitbart about how this election cycle is shaping up to be Gen-X versus Baby Boomers. In it, she pointed out that, while Hillary Clinton might not be too old to be President (I mean, seriously, the GOP once ran John McCain, who knows so much about foreign policy because he was around with Pangea broke apart), she certainly acts old – way older than should be socially acceptable or electorally palatable.

Today, Hillary spent half her speech railing on the Wall Street banks that make up a significant part of her donor base, and the other half complaining about these young whippersnappers and their newfangled smartphones with the texting and the Facebooking and the Ubering. I mean, who do they think they are, circumventing an antiquated and burdensome, union-driven transportation boondoggle with ingenuity and common sense and a cooperative network that allows individuals to purchase products on a free market that they themselves police?

The nerve of some people’s children.

In a major campaign speech in New York City, the former secretary of state didn’t mention the ride-sharing service by name. But it was pretty clear what sort of companies she was talking about when she got to how some Americans earn money.

“Many Americans are making extra money renting out a spare room, designing websites, selling products they design themselves at home or even driving their own car,” she said at the New School.

But that sort of work comes with its own problems, she said.

“This ‘on demand’ or so-called ‘gig economy’ is creating exciting opportunities and unleashing innovation, but it’s also raising hard questions about workplace protections and what a good job will look like in the future,” Clinton added.

Mashable made a valiant attempt to come to her aid, explaining to their youthful audience that what Clinton really meant when she said Uber was “displacing…blue collar jobs” wasn’t that you should stop using Uber, but that you should want protections for Uber workers, many of whom are classified as independent contractors (even though she says that she wants to be a “small-business candidate” and there’s nothing smaller than a sole proprietorship). But that would work if she were only targeting those service-oriented programs which require a service provider. Airbnb, the other operation she mentioned, facilitates couch-surfing, not driver services, and are certainly not cruising toward a class-action lawsuit from their disgruntled apartment-renters.

So what is it then? Is it Hillary Clinton’s deep-seeded, bottom-of-her-heart compassion for the little guy? Is it her ardent belief that government can truly provide an effective service economy of its own, thus preserving her control-oriented governmental theories?

No. Hillary Clinton wants union money.

Ultimately, Uber, AirBbB and other cooperative social sharing networks and app-based service providers have sprung up in response to a corrupt establishment – a tangled web of cronyism that involves government regulators who want to tax, control and organize networks, and massive unions who seek to keep a stranglehold on jobs and industries. Uber openly subverts a scheme between local governments and labor unions to limit choice in transportation to that which is both approved by government and operated by unions. The result is inflated pricing, artificial scarcity and a market that doesn’t operate with consumers in mind. Instead of changing their system to respond to consumer needs, transportation unions would rather just shut down the subversive businesses entirely.

And that’s where Hillary Clinton comes in. As this super-helpful chart demonstrates, progressive socialist Bernie Sanders has a deadlock on union money. And while they give less, they have, ultimately, more to give overall, and plan to be aggressive in 2016. And of course they’d support Bernie: he’s as progressive as they come. The only standout is Richard Trumka, who has been trying to wave other unions off supporting Sanders because he understands that Sanders could never win in a general election, putting unions at a bargaining disadvantage. With only the AFL-CIO on her supporter list, Clinton has to move in on the other union donors.

And what better way to do that than attack the free-market scourges that threaten to make unions obsolete? In the name of social justice, of course.

The saddest part is that this is unlikely to help Clinton get union money, unless she suddenly starts believing what she’s speaking about. Even sadder is that, no matter how many tech blogs come to her defense, helping to convince their readership that Hillary Clinton is, indeed, hip and “with it” despite all evidence to the contrary, we live in a headline culture. If Hillary Clinton doesn’t get the shareable economy, Hillary Clinton is behind the times.

At least the times, however, seem to be trying to catch up with her. Just as Hillary was bemoaning that whippersnapper Uber’s apocalyptic mobile ride-sharing service, Uber was announcing a very special program for the elderly. Maybe she should look into it.

Tax pollution, not profits: a reply to Rep. John Delaney

July 13, 2015, 10:00 AM

The carbon tax is an elegant mechanism for imposing a price on carbon dioxide emissions from the energy sector, especially when compared to the alternatives.

The patchwork of federal regulations to reduce greenhouse gas emissions from the energy sector is sprawling, including standards for CAFE, renewable fuels, efficiency, building codes and drilling operations, and pending regulations for new and existing power plants under the Clean Power Plan (CPP). Taken together, these policies layer large, but attenuated, costs on the energy sector and on energy consumers. Worse, by tackling each corner of the economy differently, they fall well short of the president’s commitment to reduce emissions 26 percent below 2005 levels.

With a relatively modest carbon tax, we can wipe out existing policies and still do better at achieving emissions reductions. David Bailey and David Bookbinder use Environmental Protection Agency data to determine that an average national carbon price on the electricity sector of $27 per ton in 2020 — rising to $29 per ton in 2030— would be functionally equivalent to the CPP. The Carbon Tax Center’s carbon-pricing model suggests the price actually could start much lower, at around $2.15 in 2015, and increase to $34.40 by 2030.

The most alluring part of the carbon tax, though, is that it could open the way for conservatives to enact a host of policies they already support. Just as environmentalists have cited the threat of catastrophic climate change to solicit support for EPA overreach, agricultural interests have agitated for renewable fuel standards and business interests continue to petition for massive subsidies for renewable power, conservatives can use the threat to make the case for smaller, smarter government.

It is relatively simple to select a carbon price that will meet the carbon dioxide emissions reduction trajectory established by the suite of standards and regulations put in place by this administration. With that price established, there are plenty of policies that we can simply write off the books; we have achieved their climate targets and rendered them unnecessary.

The first place to start is EPA authority to regulate greenhouse gas reductions under the Clean Air Act (CAA). The CAA was designed to reduce the types of pollution that spawned the environmental movement of the 1970s: localized sources causing acute harm. As the CAA has been adapted to cross-state sources, low-level, long-lived pollution and climate emissions, it’s proved inadequate to the task. With a carbon tax, we can remove EPA’s regulatory authority to use the CAA for climate policy and eliminate the expensive, invasive and sprawling CPP.

Then, we must tackle the rest. The Renewable Fuel Standard is an enormous market intrusion that does a better job of supporting corn prices than reducing greenhouse gas emissions. CAFE standards for the automotive fleet are prescriptive intrusions into the automotive market that limit consumers’ ability to purchase larger, less-efficient vehicles; a carbon price could achieve those same emissions reductions without eliminating consumer choice. The Department of Energy (DOE) has released dozens of efficiency standards under this administration for everything from light bulbs to ice cream freezers, all of which are made superfluous by a price signal.

Tax incentives and subsidies also should be on the table. We spend tens of billions of dollars a year subsidizing energy sources across the board. If our aim is a diverse, lower-carbon electric supply, we can eliminate those expenditures. Loan guarantees intended to help companies commercialize technology are wasteful and unnecessary now, and would be inexcusable under a carbon-tax regime. The research and development juggernaut at DOE can be pointed to significant and meaningful advancement in energy technology, not incremental improvements in proven and commercialized technologies.

This is a short and not nearly comprehensive list of ways to shrink the footprint of government and get it out of the marketplace, all made possible by imposing a modest tax on carbon. All of this is possible before we’ve even touched the revenue.

A carbon tax raises real amounts of money. The proposal by Rep. John Delaney, D-Md., would raise more than $1 trillion in its first decade. In Washington, any purse that size will be a great temptation for special interests, so revenue treatment is enormously important. There are many options, but few winners: deficit reduction, payments to disadvantaged communities and industries, clean energy investments, climate mitigation strategies, myriad spending priorities or cuts to existing taxes.

This last priority is the most persuasive. Conservatives must insist on true revenue neutrality. Carbon policy and its resulting revenue should not be used to grow the size of government. Economists agree that cuts to existing, inefficient taxes, like the corporate income tax, will do the most to stimulate the economy at the same time that carbon policy increases energy prices. Back-of-the-envelope calculations suggest that, by imposing a relatively modest carbon tax and taxing capital gains and dividends as income, we could eliminate the corporate income tax completely.

If there are alternate priorities for spending dollars on things like research and development, innovation or other climate-related priorities, let politicians have that debate and find the money elsewhere. An effective carbon tax can only be possible with complete revenue neutrality.

Rep. Delaney has made space for an honest discussion about the direction in which we should take carbon policy. The carbon tax is an opportunity to shrink the size of government, while making real and meaningful progress on reducing carbon emissions. Dedicating the revenue to tax reduction could allow the United States to move from having the highest corporate income tax rate in the OECD to having no corporate income tax whatsoever. That’s a win-win for conservatives.

Neeley talks climate change at EarthDay Texas

July 13, 2015, 9:30 AM

R Street Texas Director Josiah Neeley sat down with Michael Quirke, executive director of the Climate Change National Forum, at the recent EarthDay Texas in Dallas to discuss how conservatives can engage on the topic of climate change. You can watch the full interview below:

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What California’s anti-SLAPP law can teach the country about free speech

July 13, 2015, 9:00 AM

Once seen as a singular source of new and useful public policy ideas, California has slowly devolved into a judicial and business hellhole, with the inevitable loss of reputation and respect that comes with that. But with any luck, the Golden State’s reputation might be burnished by the reemergence of one of its few competition-friendly laws.

The recent dust-up between Zenefits, a hungry and innovative startup, and ADP, an old-school success story and the giant of the payroll processing industry, is now playing out in the courts. The problem Zenefits faces is one shared by other emerging and small companies nationwide that confront ruin through strategically filed, anti-competition court cases.

ADP’s suit against Zenefits stems from comments made by Zenefits CEO Parker Conrad. Filed in the U.S. District Court for the Northern District of California, ADP alleges that Conrad made defamatory remarks about ADP following that company’s decision to limit the extent to which Zenefits could access its client information.

In many other states, this might mean the larger firm would be able to use a lawsuit like this to drive the smaller company to comply with its demands, or even force it out of business altogether, simply with the threat of having to mount a costly legal defense. In California, the smaller player has recourse. ADP’s decision to file suit in California has left it vulnerable to the state’s anti-SLAPP (Strategic Lawsuits against Public Participation) statute.

Anti-SLAPP motions are rooted in the First Amendment’s protection of free speech and are designed to prevent intimidation through litigation. In relevant part, California’s statute reads:

A cause of action against a person arising from any act of that person in furtherance of the person’s right of petition or free speech under the United States Constitution or the California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.

Zenefits’ anti-SLAPP motion is based on the contention that Conrad’s comments are a subject of public interest. Using a lawsuit to stifle his speech would have a deleterious impact on civil discourse. If Zenefits’ motion succeeds, ADP’s suit will be tossed from court before the costly discovery process can begin.

Whether or not Zenefits succeeds with its motion, laws preventing powerful would-be litigants from using the courts effectively to censor speech that makes them uncomfortable are a good idea. California was one of the first states in the nation to adopt an anti-SLAPP statute, which first was passed in 1971. Since then, 28 states have chosen to adopt anti-SLAPP laws in some form or another.

In spite of broad adoption of anti-SLAPP statutes, the federal government has yet to embrace one of its own. This means that defendants across the nation are without this powerful tool to protect their speech. Fortunately, that could change this year.

Reps. Blake Farenthold, R–Texas, and Anna Eshoo, D-Calif., have introduced the extravagantly named SPEAK FREE Act. Not only would this legislation provide defendants with an opportunity to forego ruinous litigation, it also includes a fee-shifting provision that apportions the cost of litigation deemed to be a “SLAPP” suit to the plaintiff. Thus, not only would it protect free speech, but the bill also remove incentives for SLAPP suits.

In the context of a fast-moving “new” economy, one in which incumbent industries quickly are disrupted by new business models, the necessity of expanding access to anti-SLAPP motions is greater than ever. If California, in spite of its worst impulses, can recognize this, why can’t an enterprise-minded Congress?

Whether or not SPEAK FREE becomes law, California and a number of other states will still offer some organizations a legal framework that can be used to force competition out of the courts and back into the marketplace, where it belongs.

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