Is republication of Mark Cuban’s tweet on Twitter non-infringing? Almost certainly it is.

Mark Cuban asks:

Here is a question for all you legal scholars out there. Is a tweet copyrightable? Is a tweet copyrighted by default when its published ? Can there possibly be a fair use exception for something that is only 140 characters or less ?

Well, sure, a “tweet” might be protected by copyright. The more creative it is, the more powerful is the protection. Cuban wouldn’t be wondering whether a 140 character poem by William Carlos Williams could be protected by copyright.

The question would only come up, though, if the author of the tweet was claiming someone had infringed his copyright. If Cuban, for example, claimed ESPN were infringing the copyright in his tweet, I strongly suspect the use would be a non-infringing fair use. Nevertheless, my ultimate conclusion would require consideration of the specific message Cuban is talking about and application of the specific facts in dispute under the appicable analysis:

(1) What is the nature and character of the allegedly infringing use? The more creative it is in its own right or the more it is an instance of the type of expression protected by the First Amendment (journalism or political speech, for example), the more likely it is to be a non-infringing fair use. The fact ESPN, an outlet for sports journalism, would be transmitting the words of Mark Cuban, the owner of a sports franchise (the Dallas Mavericks of the NBA), makes it seem more likely ESPN is engaged in legitimate journalism . . . , but

(2) What is the nature of the copyrighted work? The more creative or journalistic or political the expression, the less likely use of it without permission will be fair use. And the fact the work is available anyway would cut in favor of ESPN’s use of it being a fair use. This factor is almost impossible to determine based on Cuban’s hypothetical question. There can be 140 words that are as creative and expressive as anything can be (think Shakespeare or William Carlos Williams), or the 140 words might be utterly an utterly generic report about facts Cuban is passing on, or the 140 words might be mostly lifted from someone else. So which way and how hard this factor would cut on this hypothetical is without examining the specific words difficult to tell. It is, nonetheless, difficult to believe much creativity would be produced by Mark Cuban in a tweet. Moreover, the fact Cuban has already transmitted it via Twitter to everyone that follows him indicates that he doesn’t have that strong an interest in controlling the use of the words.

(3) How much of the copyrighted work is taken? Assuming ESPN takes the entire 140 characters, I suppose this factor cuts against ESPN’s claim of fair use, but, of course, the brevity of the entirety (under factor 2) cuts in favor of fair use, so in the abstract the two factors nullify one another. This is one reason hypothetical questions are useful, but only of limited use, in answering legal questions. One can only take abstract hypotheticals so far. 140 characters written by Shakespeare in a play are probably very different than 140 characters written by Mark Cuban in a tweet, but they might not be.

(4) How much does the allegedly infringing work affect the market for the copyrighted work? Is there a market for Mark Cuban’s tweets? It’s hard to believe there might be.

In short, I’d advise Cuban to be very light-hearted and laid back about ESPN republishing his tweets. If he really thinks he’s got something so worthwhile he should have the exclusive right to its commercial value, he shouldn’t have put it out on Twitter in the first place.

I never thought I’d agree with John Ashcroft.

Mark Danner has a remarkable article on the Bush administration’s torture policies in the current issue of the New York Review of Books.  Those policies not only were disgusting (and always plainly so to anyone paying attention), but also enormously damaging to our country’s interests both in reducing our moral stature in achieving any chance of genuinely bringing those responsible for 9/11 to justice.  I cannot but help save a special contempt, however, for the lawyers who — it is obvious to me in looking at the purported justifications for their conclusions — were obeying orders to come up with any justification, no matter how baseless, for what their bosses wanted to do.  As Danner writes:

[In] the spring and summer of 2002, the administration was devising what some referred to as a “golden shield” from the Justice Department-the legal rationale that was embodied in the infamous “torture memorandum,” written by John Yoo and signed by Jay Bybee in August 2002, which claimed that for an “alternative procedure” to be considered torture, and thus illegal, it would have to cause pain of the sort “that would be associated with serious physical injury so severe that death, organ failure, or permanent damage resulting in a loss of significant body function will likely result.” The “golden shield” presumably would protect CIA officers from prosecution. Still, Director of Central Intelligence George Tenet regularly brought directly to the attention of the highest officials of the government specific procedures to be used on specific detainees-”whether they would be slapped, pushed, deprived of sleep or subject to simulated drowning”-in order to seek reassurance that they were legal. According to the ABC report, the briefings of principals were so detailed and frequent that “some of the interrogation sessions were almost choreographed.” At one such meeting, John Ashcroft, then attorney general, reportedly demanded of his colleagues, “Why are we talking about this in the White House? History will not judge this kindly.”  

Is Michael Murphy another Shepard Fairey?

Do you think that if we ever discover the photo from which Michael Murphy derived the image for this “shadow portrait” of Obama in urethane Murphy will be accused of copyright infringement?  I do, but I don’t think it’s infringement.

Taking care of people and keeping standards high

In reviewing Philip K. Howard’s Life Without Lawyers: Liberating Americans from Too Much Law, Anthony Lewis points out that those, like Howard, who bemoan U.S. tort law, particularly in the seemingly random way it sometimes rewards people for damages caused by corporations or doctors, ignore a specific part of the socio-political realities of our country: we don’t have the safety nets other countries provide. So when a patient sues a doctor after an unsuccessful medical outcome, a jury naturally enough is going to sympathize and lean toward the injured person regardless of the doctor’s competence — to give the patient money is to give him something with which he may be able to pay for the medical needs created by the bad medical outcome.  In addition, juries are smart enough to know the award comes from insurance, not from the doctor herself. In countries which have universal health care, there’s no need to worry that the patient will be cared for.  In ours, there is.  The same thing goes for anyone arguably injured by a corporation’s product.  Better that injured person has the money to pay for the care he’ll need than not, even if that cost is spread among all the corporation’s customers (through higher prices):

Nor does Howard dig deep enough to explain the excesses of American tort law and the eagerness to seek vast damages for civil injuries. He blames the overreaching of Earl Warren’s Supreme Court in its sympathy for the little man, and the mood of antipathy to large institutions starting in the 1960s. He does not explore deeper social causes.

his country is notoriously lacking in safety nets that are taken for granted in other advanced societies. Medical care is guaranteed by the state, by one method or another, in Canada and all European countries; in the United States upward of 40 million people have no medical insurance. Around 46 percent of employed Americans get not even one day of paid sick leave-which is guaranteed by law in 145 other countries. Lawsuits are often a substitute for safety nets.

There is a historical example that makes the point: workers’ compensation. Employees injured on the job used to have to bring tort actions against their employer; that required proof of negligence, and complicated doctrines were developed by some courts to deny the claims of plaintiffs. Early in the twentieth century a movement led by Louis D. Brandeis-then a reformist private lawyer in Boston, later a Supreme Court justice-sought a system that would compensate the injured without regard to negligence, and in return would bar lawsuits. By 1949 every state had a workers’ compensation law. It is a perfect example of a safety net that assures limited compensation without the gamble of litigation.

Do doctor’s really want to reduce malpractice problems in a way that will satisfy everyone? Then create a patients’ compensation law that provides relief to patients injured by adverse medical outcomes regardless of fault.  Doing so effectively, however, will require there to remain some incentive to provide another wonderful product of our torty system: medical care in this country is provided at a higher standard than anywhere else.  Funny how Howard doesn’t mention that positive result of tort law.  How do we do motivate employers to maintain safe work places despite the fact workers’ compensation schemes have substantially relieved them of the burden of tort liability for failures to maintain safe work places?  Two ways: (1) employers finance workers’ compensation schemes, and (2) the Occupational Safety and Health Administration regulates and enforces workplace safety.

Of course, people like Howard have also argued for years that the financial system should be freed from the “burdens” posed both by tort law and state regulation.  We can see where those very successful arguments have gotten us.  

We can work it out?

War is Peace, or They can sue, but you can’t.

There is wisdom and responsible citizenship, and then there is mindless use of law to advance whatever selfish interests one has when one has them.  May my students know the difference, and may they not serve clients who want the latter at the cost of the former.

In November 2006,  the Committee on Capital Markets Regulation issued a report arguing for cutting back on regulation of financial markets, for limitations on private lawsuits and on lawsuits by state attorneys general, and for increased restrictions on the ability of the Securities and Exchange Commission to issue new rules. The Committee on Capital Markets Regulation was a private group, but it had prominence.   Its co-chairs were R. Glenn Hubbard, the dean of the Columbia University Graduate School of Business, and John L. Thornton, the chairman of the Brookings Institution, its formation was endorsed by then-Treasury Secretary Henry M. Paulson Jr., and a significant part of its funding came from the Starr Foundation, started by Maurice R. Greenberg, who had in 2006 recently been deposed as Chairman of AIG.

Greenberg and AIG were notoroius for their hostility to lawsuits.  It figures — AIG is (was?) an insurance company, and liabilities are what insurance companies are supposed to pay for.  As the founder of one law firm I worked for, Gene Anderson, always says, “Insurance companies are in the business of collecting premiums and denying claims.”

Now, though, Greenberg no longer heads AIG and AIG showed itself incapable of paying for the liabilities it had collected premiums to insure.  So their minds seem to have changed.  Greenberg has become a lawsuit enthusiast, most recently suing AIG for for securities fraud based on alleged “‘material misrepresentations and omissions’” that  caused him to acquire New York-based AIG shares in his deferred compensation profit-participation plan at an ‘artificially inflated price.’”

And I just read that AIG commenced a lawsuit last month against the federal government seeking a return of $306 million in taxes it claims it should not have paid.  The claims include taxes paid in connection with AIG’s financial products unit (“the once high-flying division that has been singled out for its role in A.I.G.’s financial crisis last fall”), and “AIG offshore entities whose function centers on executive compensation and include C. V. Starr & Company, a closely held concern controlled by Maurice R. Greenberg and the Starr International Company.”

As the New York Times puts it:

A.I.G. is effectively suing its majority owner, the government, which has an 80 percent stake and has poured nearly $200 billion into the insurer in a bid to avert its collapse and avoid troubling the global financial markets. The company is in effect asking for even more money, in the form of tax refunds. The suit also suggests that A.I.G. is spending taxpayer money to pursue its case, something it is legally entitled to do. Its initial claim was denied by the Internal Revenue Service last year.

And if you think corporations should be liable to individuals for damages their products cause, that taxes should be raised on the people who earn more than 95% of our citizens, and that we should tax the inheritances of heirs who have done nothing to earn that money, you’re accused of engaging in “class warfare”?  I’ve got news for you: they struck first.

Best bonds: AIG? Greatest Fascist Dictator: Adolf Hitler? Best Law School: ?????

What is it with the human thirst for numerical rankings, for judging one thing better than another even when the comparisons are known to be completely arbitrary or, at best, based on judgments so subjective regarding criteria so limited as to render the rankings nothing more than crude subjective judgments disguised as hard data?

Woody Allen fittingly complained:

What’s with all these awards? They’re always giving out awards. Best Fascist Dictator: Adolf Hitler.

But it’s not just the thirst for the rankings.  It’s basing one’s actions on rankings as if they have profound meaning despite their lack of meaning.

As I wrote recently, US News and World Report’s rankings of law schools are determined largely by the LSAT scores and undergraduate grade point averages of the students each law school admits even though those scores and averages bear no correlation to success as a lawyer; rather, they correlate only to success in law school, which, again, bears no meaningful correlation to success as a lawyer (as would not surprise most lawyers but, I would guess, would surprise most non-lawyers, including law students and law professors who have not practiced extensively).

Yet an overwhelming number of law applicants rely on the US News rankings.  Even more depressingly, an overwhelming number of law faculties make their educational decisions to improve those rankings, not to improve the way they educate law students to be lawyers. (As I also pointed out, Detroit Mercy, where I am currently a visiting professor and where I will continue in that capacity next year while remaining on leave from Case Western Reserve, is a rare exception to this rule.)

And today, reading in the New York Times about Moody’s, I realized another reason the US News rankings are so useless and their importance so poisonous to legal education.  It is because the US News rankings are accepted, followed, and never questioned in a way meaningful enough to threaten their influence. There is therefore little incentive to make judgments on a law school’s quality based on judgments independent of those rankings.

Moody’s is one of the private companies that rate corporate bonds.  When a corporation sells bonds to raise money (simply put, they borrow money from the purchasers of the bonds and pay back the loan at the interest rate called for by the bond), Moody’s issues “grades” to the bonds that predict the likelihood the corporation will pay back the loan.  “Junk” bonds are so-called because they are bonds issued by companies that are at high risk of being unable to pay the purchaser of the bond when payment is due.  In other words, junk bonds are “sub-prime” bonds.  Why do people loan money to companies or homeowners despite the high risk the borrowers will default?  Because those borrowers have to pay a higher interest rate.  The high interest rate on the loans that are repaid makes up for the loans that aren’t paid back.

The unconscionable innacuracy of Moody’s rankings, however, has played a major role in our financial crisis.  As the Times points out:

Moody’s rated Lehman Brothers’ debt A2, putting it squarely in the investment-grade range, days before the company filed for bankruptcy. And Moody’s gave the senior unsecured debt of the American International Group, the insurance behemoth, an Aa3 rating – which is even stronger than A2 – the week before the government had to step in and take over the company in September as part of what has become a $170 billion bailout.

Moody’s and the other major ratings companies also “put their seals of approval on countless subprime mortgage-related securities now commonly described as toxic.”

There are numerous reasons to the ratings companies were bound to fail, but the Times article brought up an interesting one I had never considered before.  There is little incentive to question anyone who is paid to judge the the quality of something unless and until the accuracy of those judgments is put to the test. As Frank Psrtnoy, a law professor at the Universitiy of San Diego and a former derivatives trader, explains it:

Imagine if you had a rabbi and said, “All the laws of kosher depend on whether this rabbi decides if food is kosher or not.”  If the rules say “You have to use this rabbi,”  he could be totally wrong and it won’t affect the value of his franchise.

In other words, if you wanted kosher food, you’d buy food approved by that rabbi and never question his judgment unless and until the accuracy of his judgments was threatened in a meaningful way. US News is that rabbi.  It has become the principal judge of law school quality and it doesn’t matter whether its judgments are legitimate or not.  Students buy its rankings guides, law faculties and deans make decisions driven solely by the desire to meet the criteria US News employs, and applicants and legal academia continue to make their educational decisions based on the criteria employed by US News rather than on their own judgments.

It’s a terrible situation, and particularly ironic when it comes to legal education.  Lawyers every day, every moment, make judgments and decisions based on incomplete, subjective, and biased information.  You can only consider the circumstances under which those decisions are made inadequate, however, if you believe it is ever possible to have all the information you would want and if all that information could be stripped of the distortions inherent in the limitations of human perception.  Making decisions based on incomplete, subjective, and biased information is what life is about. That doesn’t mean there aren’t better and worse judgments; it merely means that one can never be certain, that there is always risk, that almost every important decision one makes in one’s life cannot be reduced to a choice between black and white, right and wrong, #1 and #2.  Lawyers make their living making such difficult decisions and judgments.  The legal situations where there are clear answers don’t require lawyers, and if lawyers become involved they certainly don’t make much of a living answering those questions.

Yet law school applicants and law professors act as if the judgment that one law school is better than another can be reduced to a comparison of hard numbers, and that, therefore, those numbers should be the determinant of their actions.  They’re being as stupid as the investors in Lehman Brothers and AIG were in relying on Moody’s.

And the Times article mentions one other fact that bears on this point.  Warren Buffett — the man “known as the Oracle of Omaha,” the daddy we turn to to guide us out of our financial pit, “the closest thing that the United States economy has to a life coach”  — owns 20% of Moody’s.  But you know what?  In making his investment decsions he doesn’t rely at all on Moody’s ratings.  He has his own research department.  He makes his own judgments.  I wish more college graduates did the same.  And it maddens me beyond measure that most law professors don’t.

A better solution to the mortgage crisis, the federal governments bailout policies, and AIG’s failures to meet the obligations it took the risk of not meeting

I have several thoughts about the AIG bailout apart from what I consider the justifiable outrage over multi-million dollar bonuses being paid to the very people who set up the house of cards AIG had constructed.

First, I can’t understand why anyone would be surprised, much less outraged, that AIG paid much of the bailout money it received to other financial institutions.  Those institutions (Goldman Sachs, for example) owned mortgage backed securities and had purchased from AIG the “credit default swaps” that were, in essence, insurance that the owners of the mortgage backed securities would not earn from those securities what they were supposed to. Goldman Sachs had not received what they were owed on the mortgage backed securities because the crash in the housing market meant that homeowners were not making the mortgage payments that made up the pools of money out of which the owners of mortgage backed securities were to be paid.  Thus, when Goldman Sachs was not paid what it was supposed to be paid from the homeowners, Goldman Sachs turned to AIG and asked to be paid pursuant to the insurance policies it had purchased from AIG (that is, the credit default swaps).

AIG had never planned for such a shortfall in mortgage payments.  It had essentially sold the credit default swaps to earn easy money (the “premiums” for the sales) that it did not believe it would ever have to pay out on.  Thus, when in fact it did have to pay out on those credit default swaps, AIG was threatened with bankruptcy because its obligations to the owners of mortgage backed securities far exceeded its assets.

The U.S. could not afford to let that happen.  AIG is the world’s biggest insurer.  It’s failure would set off massive insecurity in every single aspect of life in which people and institutions depended on the availability of its insurance.  Neither could the U.S. afford to let the financial institutions fail.  That would mean a collapse of our banking system, an even greater and more profound impact on the functioning of our credit markets and other aspects of our economy — in short, a Depression on the order of The Depression.

Here’s what I don’t quite understand.  The underlying problem was that too many homeowners were unable to make their mortgage payments.  Why not readjust everyone’s mortgage payments (by, say, automatically cutting mortgage rates to the current low rates).  The owners of the mortgage backed securities would not make as much as they otherwise would have had the original rates been paid, but too many of the original rates weren’t paid to make enough of the mortgage backed securities assets with any material value.  The owners of the mortgage backed securities would make some of the money they had expected.  They would still be able to look to AIG under the credit default swaps for the difference between what they had expected to make under those securities and what they made under the readjusted, low rates, but AIG’s exposure would have been considerably lower — not the entire value of the mortage backed securities but, rather, the difference between what those securities earned under the new adjusted mortgage rates and what they originally were supposed to have been paid.  To the extent that obligation still threatened AIG’s existence, the government could make up the shortfall, but the amount of federal dollars required to do so would have been far less.

One objection, of course, is that we’d be rewarding those homeowners who took the risk of assuming mortgages they couldn’t afford.  The problem with that argument, of course, is that the owners of mortgage backed securities took the risk they wouldn’t get paid either through the securities from the pools of mortgage payments or from AIG, but we’re bailing them out.  And AIG, of course, took the risk in selling its credit default swaps that it would not be able to meet its obligations under them, but we’re bailing them out.  We’re doing so because we have to.

But we have to bail out the homeowners too.  The very existence and health of our cities depends on us doing so.  Why are the homeowners any more to be the victims of “moral hazards” than the financial institutions.

Everyone wins.  Homeowners stay in their homes at today’s mortgage rates.  The lenders don’t get what they contracted for, but they get what, given the circumstances we’re in, is a perfectly reasonable rate of return.  More importantly, the lenders don’t fail as a result of mortgage defaults and the insufficiency of foreclosure as a remedy to make up the loss resulting from the default.  The banks that own the mortgage backed securities are made whole (or almost so), and AIG is made whole (or almost s0).

Could anyone tell me what I’m missing here?  I do not claim to be an expert on these matters, but I am smart enough to follow the money and the trails of contract obligations, and I’m not quite sure where my logic fails.  I’m sure it must, but where?

A rant

I need to look a lot more closely at these bonuses AIG is paying to some of its employees.  There has been considerable discussion on various law professor listservs I lurk on regarding the legality of various means of getting this money back.  There also, of course, is the sheer political pressure.  Congress cannot abrograte contracts, but that lack of legal power didn’t stop the economic realities from forcing the UAW to make major concessions on existing contracts.

That’s one big reason I am repelled that “Wall Street types and compensation consultants agree with the president {at being outraged by the payment of these bonuses]. But from their point of view, the “fundamental value” in question here is the sanctity of contracts.”

So the sanctity of contracts is inviolable for investment bankers who make millions and who work for the company that more than any other is responsible for the financial disaster we are living through.  But they don’t say anything about the sanctity of contracts when it comes to unionized auto workers.

Why do people need several million dollars a year to live?

And I love this rationale:

“The jobs are terrible,” said Robert M. Sedgwick, an executive compensation lawyer at Morrison Cohen who represents a number of employees of banks that have taken government money. “You have to read about yourself in the paper every day. These people are leaving as soon as they can.”

Those poor, poor investment bankers.  By that reasoning factory workers in China should be getting million dollar bonuses.

There of course is the power of shame.  I’d love to identify who the recipients of the bonuses are and have their names and faces plastered everywhere all over the internet so they couldn’t help but be recognized and reviled wherever they go.

I’m sorry.  I’m pissed off tonight.

Dow v. Rohm & Haas, settled

One of the more controversial pieces I have written on this blog was in connection with the lawsuit brought by shareholders of Rohm & Haas to force Dow Chemical to complete its purchase of Rohm & Haas pursuant to a contract entered last summer that pegged the purchase price at $78 per share of Rohm & Haas.  My principal point was in response to an article written by Joe Nocera in the New York Times that to even suggest “that maybe, just maybe, deals that stop making sense ought to be called off, or at least rejiggered, especially in the middle of a once-in-a-lifetime financial crisis – invites withering scorn, especially if you say it to someone on Wall Street or in the legal profession.”

My point was that when something stops making sense, the law, if it is working properly, should not force the nonsensicle result.

Responses varied from the grateful to the withering.

The outcome, however, makes remarkable sense.  Last week, Dow and Rohm & Haas settled their dispute over the $15.3 billion merger.  Pursuant to the settlement agreement, Rohm & Haas’s shareholders will get the $78 per share Dow originally promised.  But hedge fund manager John Paulson and the Haas  family shareholders will in essence re-invest their proceeds from the sale for preferred stock in Dow. Doing so gives Dow “enough room to purchase Rohm without immediately running aground. Dow had earlier refused to close the merger, saying its business would be hurt if it had to draw heavily on risky short-term debt.”

In essence, Paulson and the Rohm & Haas family shareholders are helping Dow finance the purchase, protecting the deal they had negotiated for the rest of the Rohm & Haas shareholders.  In exchange, Paulson and the Haas family get great value in return.  Moreover, if I read the situation correctly, there may be tremendous tax advantages for the Haas family.  If the transaction is treated as an exchange of Rohm & Haas stock for Dow preferred stock, it will not be a taxable event.  Moreover, upon transfer to the Haas family heirs via testamentary disposition, those heirs would be considered to have a tax basis in those shares equal to their value upon that testamentary disposition.  In short, whatever gain the Haas family earned in the Dow transaction and whatever gain is earned in the future in the Dow stock they received in exchange will never be taxed to the Haas family or its heirs.

Everyone comes out ahead, and Dow was not forced to go through with the deal it had originally contracted for and so many thought would have to be enforced.

Friday Night Music Club: Warren Zevon, Mr. Bad Example

Of course I went to law school
And took a law degree
And counseled all my clients
To plead insanity…

The ACLU on the Nazis’ right to march in Skokie, Illinois

Shepard Fairey, lightning rod

I’ve pointed out both that I believe strongly that Shepard Fairey’s use of an AP photograph to create his Obama Hope poster does not infringe the pohotograph’s copyright and that Fairey has been the target of frequent criticism in the art community regarding his “originality” and regarding his apparent hypocrisy in asserting infringement claims against artists who had appropriated his images.

It has come to my attention that some criticize the Fair Use Project’s decision to take up Fairey’s cause in the case of the Obama Hope poster and think Fairey should be taken down because of his apparent hypocrisy.

As a lawyer, I strongly disagree with this position.  If, as I zealously believe, the Obama Hope poster is fair use, it would be self-defeating to those of us who support the explicit application of the fair use doctrine to transformative appropriation art and various other methods of “remixing” pre-existing works, regardless of our view of Fairey himself,  if we failed to support Fairey’s position in connection with the Obama Hope poster.

I cannot help but recall last year’s lawsuit brought by Yoko Ono, Sean Ono, and Julian Lennon seeking to require the makers of the documentary “Expelled” from using a 15 second excerpt of John Lennon’s song “Imagine” in their documentary.  As I wrote at the time, I believed the lawsuit was misbegotten and that the film’s use of the excerpt constituted fair use despite my love of John Lennon and my contempt for the film, which purports that “theorists” of “Intelligent Design” have unjustifiably been expelled from the conversation regarding evolution and the development of life.  The court hearing the case agreed with my position and dismissed the case. Not coincidentally, the Fair Use Project represented the producers of “Expelled” in that case.

Fair use is fair use, and if we believe in it we should support it wherever it exists, even if we despise the people asserting fair use.  I supported the right of Nazis to march in Skokie, Illinois, a community full of Holocaust survivors, because I believe that the right to demonstrate in public is protected by the First Amendment regardless of how vile the message being conveyed may be.  The Supreme Court agreed.

That doesn’t mean we can’t criticize Fairey when he seems to want his cake and eat it too.  (Though it may be that Fairey’s thoughts have evolved on these issues — while he sent a cease-and-desist letter to Baxter Orr for Orr’s appropriation of one of Fairey’s images, Fairey never followed that letter up with any other action despite Orr’s continued use of the image.)

You may not like Fairey.  But that does not mean we shouldn’t support his position when he happens to be right.  To fail to do so would be to cut off our noses to spite our faces.

The financial institutions and their lawyers could not see the big picture, redux

I’ve written before of the failure of our financial geniuses to see the “big picture” when they created their house of cards built of mortgage backed securities, credit default swaps, and the assumption that housing prices wouldn’t crash. But there’s a piece of the picture other than the inevitability of falling markets those geniuses failed to consider — what is required to foreclose on the homes that are the underlying asset giving the mortgage backed securities their value.

In order to foreclose, the owner of the mortgage has to be identified.  But no one knows who owns mortgages that have been packaged into mortgage backed securities.

The mortgages packaged into mortgage backed securities weren’t packaged whole.  In other words, if you are the owner of a mortgage backed security, you were not holding the right to collect on the loans to one or more specific homeowners.  Instead, you were holding the right to collect a portion of an enormous number of loans made to an enormous number of homeowners.  Thus, each homeowner’s mortgage is owned in by an enormous number of buyers of mortgage backed securities, to each of whom some fraction of his loan is owed.

For example, the day after I financed my house my mortgage company sold its rights to collect on my home loan to one of the companies who put together these mortgage backed securities.  Then that company likely took its right to collect on my loan, split it up in littlet pieces, and put those each of those little pieces into different mortgage backed securities along with little pieces form other loans.  Theoretically, if I owed $1000 per month on my mortgage, there could be one thousand people to whom I each owe one dollar,  or one hundred thousand people to whom I each owe one cent, and so on. Could anyone tell me who owns my mortgage? Maybe 1,000 or maybe 100,000 different individuals and institutions.  Could anyone identify them to a court hearing a foreclosure case against me?

I doubt it.

Thus, as the Foreclosure Defense Group puts it:

In Ohio and other states, the inability of the “Lender” or Mortgage Servicer [the company in the above example who purchased my mortgage the day after it was created and subsequently packaged it into mortgage backed securities] to produce the original note and mortgage, combined with their inability to produce the documentation regarding the assignment or sale of the loan has resulted in de-linking the mortgage from the security interest in the home and the cancellation of the note giving the borrower free and clear title to the property that was subject to the original loan transaction.

It’s hard to train good lawyers.  Students just want “the law.”  But practicing law isn’t just a matter of knowing the law.  Knowing the law or, as is more often the case, knowing where to find the law, is of course necessary, but it’s the easy part.  The hard part is making sure your clients make good business decisions based in part on the law and in part on all the other constraints the clients operate within (including financial constraints, constraints established by the client’s aversion or lack of aversion to risk, constraints imposed by market and social conditions, etc.).

In order to do that you always have to have in mind the “big picture,” the implications of any specific decisions to the client’s long-term interests.  Lawyers might have reviewed every single possible regulation pertaining to securities when they approved the mortgage backed securities.  What they apparently didn’t think to look at, however, were the requirements the states impose on foreclosure actions.  Without the power to foreclose, the mortgage backed securities have no mortgages to back them.

The next time someone starts talking about financial geniuses (which I hope at least won’t be for some years), run!

Good lawyering means remixing

Gerry Spence on one of the secrets of his enormous success:

The making of a lawyer

Most law schools are odd places.  I suspect most people outside the law believe a law school’s principal mission is to train lawyers.  I am a law professor, and I happen to believe that too.  But I am a very odd duck within law school academia.  Practice for twelve years and partnership in a top nationwide firm is of very little value as a qualifaction to be a law professor.  Rather, the valuable assets among law school faculty are articles published in journals edited by students and rarely read by lawyers.  Most law school classes address theory (or “doctrine”) in a manner remarkably removed from its real world application.  Qualifying for law school rests to a significant degree, perhaps primarily, on an applicant’s score on the LSAT test, which may correlate to success in law school but bears little relationship to one’ effectiveness as a lawyer.  To add to the gap between law school and legal practice, the principal criterion underlying the rankings on which law schools and applicants rely to rate the quality of a law school is the median LSAT score of the school’s students.  Those rankings provide a tremendous incentive for a law school to act in ways intended to accept applicant’s with higher LSAT scores — scores that don’t correlate to effectiveness as a lawyer — at the expense of acting in ways that increase the effectiveness of its graduates as lawyers.

So I am thrilled to read in yesterday’s New York Times that professors at the University of California, Berkeley, have studied what makes lawyers (not law students or law professors) effective and “have come up with a test that they say is better at predicting success in” practicing law than is the LSAT.  The study concluded, as I’ve long been convinced, that “LSAT scores . . . ‘were not particularly useful’ in predicting lawyer effectiveness’. . .”  What does the new test consider factors that contribute to lawyerly effectiveness?

“[T]he ability to write, manage stress, listen, research the law and solve problems.”

I am also not surprised to read that the new test is no better than the LSAT at predicting how well participants would do in law school.  As I wrote above, there is far too great a gap between most law school instruction and the actual practice to consider a test that measures effectiveness in the latter able to test effectiveness in the former.

I wish all my students would read this post.  They’ve been dealing with a considerable degree of stress of late that they blame on me and the problems I’ve given them to try to solve — problems that are down and dirty real life problems lawyers face — and they’ve been complaining a lot.  One student in my Contracts course yesterday complainied that online discussion boards made clear to him that students at other schools were covering a lot more “theory” than I am.  I looked at him a little in surprise.  That’s the whole point of my teaching.  And it’s the whole point of the rather unusual curriculum at the school where I am a visiting professor, the University of Detroit Mercy Law School, where it has been recognized that theory and practice are inextricably intertwined and that each can only be understood in the law in relation to one another.  Thus, the school offers a “revolutionary new curriculum . . . [that] complements traditional theory- and doctrine-based coursework with practical learning, providing a solid transition between law school and a legal career.

But it’s hard to teach students to manage stress, listen, and solve problems.  First, it mean subjecting them to the stress of solving problems they do not know the solutions to in advance because what lawyers do is solve problems they don’t know the solutions to in advance.  No one enjoys stress.  I like to think that the students realize the stress I am subjecting to them is not one intended to or that will break them.  It’s school.  As I’ve always told them, in law school we hurl you into the water to see if you can swim, but the water’s only about 4 feet deep, so when you can’t swim, you just get on your feet, come back, try to figure out what went wrong, and then try again.  It’s when you’re a lawyer trying to solve problems you don’t know the solutions to in advance that the stress can be truly overwhelming, especially if you have not been at all prepared for it.

Don’t look back?

London’s Times Online today has an interesting article on the fact that MBA grads, especially those who got their degree from Harvard Business School, are the “swollen class of jargon-spewing, value-destroying financiers and consultants [who] have done more than any other group of people to create the economic misery we find ourselves in”:

Harvard Business School alumni include Stan O’Neal and then of course, there’s George W Bush, Hank Paulson, the former US Treasury secretary, and Christopher Cox, the former chairman of the Securities and Exchange Commission (SEC), a remarkable trinity who more than fulfilled the mission of their alma mater: “To educate leaders who make a difference in the world.”

It just wasn’t the difference the school had hoped for.

The article’s author, Philip Delves Broughton, goes on to point to the fact that the Harvard MBA curriculum used to include such notorious entities as Enron and Royal Bank of Scotland in “case studies” as successful and innovative business models, at least until those businesses imploded under the weight of reckless and criminal conduct. At that point, though, Harvard didn’t revisit and criticize its earlier enthusiasm for what turned out to be fraudulent businesses. Rather, the school simply disappeared those case studies from its curriculum. But it’s even broader than that — despite the centrality of Harvard MBA’s in the creation of our financial disaster, there is no looking back, no reflection on what might have been wrong in the school’s approach:

You would think after failing on so many levels, the school that provides more business leaders than any other might feel some remorse. Not in the least. It’s onwards and upwards, with the very people who blew apart the world’s financial plumbing now demanding to fix the leak.

I suspect the same criticism might be leveled at law schools, or at least that faction of the law schools that has become so influential in the 28 years since I entered the University of Michigan Law School — the libertarians, the free-marketers, the Law and Economics folk, the Federalists. Their criticism of what has gone on has almost always been directed at the federal government or at any type of regulation. The Volokh Conspiracy, for example, is the home of people mostly of the laissez-faire persuasion who likely fit within some or all of the groups named above. It is also the most popular law blog there is. Yet upon searching the Volokh Conspiracy’s archives, all I can find in connection with the banking system, credit default swaps, financial derivatives, and mortgage backed securities are criticism of Fannie Mae and Freddie Mac, of former Clinton administration officials and their involvement with Fannie Mae and Freddie Mac, and of regulation that tried to limit the ability of banks to make “predatory” loans (otherwise known as loans that were doomed to default because they were on terms the borrowers could not possibly afford). At least one of the “conspirators” recognized the stupidity that was embedded in the mortgage-backed security market, but none of them came close, as far as I can tell, to suggesting that the legal system might play a role in controlling that stupidity, much less role law might play in controlling what has been described as the “greed and phenomenally excessive risk taking by these ‘Masters of the Universe’ at our ‘prestigious’ financial institutions . . . .”

I haven’t studied this question in depth; nor can I be confident that my searches through the Volokh Conspiracy’s archives were exhaustive, but it does seem there were an awful lot of law professors and lawyers arguing against the types of regulation and investigation that might have been helpful. Good god, the SEC was told at least 3 times that Bernie Madoff had to be a fraud, and Chris Cox’s agency just continued to give him gold stars. And, as Broughton doesn’t think the MBA types have reflected back on the role their ideas played, I don’t think these legal types have reflected back and examined whether their ideology might be flawed and might have been one element in the creation of our financial crisis.

Is Shepard Fairey a hypocrite?

I’ve written that I believe strongly that Shepard Fairey’s Obama Hope poster does not infringe the copyright of the AP photograph he stenciled to begin his work. First, I think the poster is a fair use of the image, and, second, I think the poster doesn’t take anything that can be copyrighted from the photo.

But Fairey’s practices have often raised questions about the originality of his art.

There are also questions about his possible hypocrisy. MYARTSPACE today focuses on the fact Fairey is trying to assert he has a trademark in the term OBEY. The blog also discusses two potential claims of copyright infringement by Fairey against other artists.

I’ll stick to the copyright claims. They involve two works that borrow significant elements from two of Fairey’s works. In fact, they borrow everything except the mask over the face of the image on Fairey’s poster:

Both images copy far more of Fairey’s original than Fairey’s Obama poster borrowed from the AP photograph. Nonetheless, there’s a very good argument that they are parodies of Fairey’s original, and thus constitute fair use. A parody uses the original work to comment on the original work rather than using the original work to express a point of view independent of the original work. That isn’t to say using the original in non-parody ways isn’t fair use; it’s only to say that the amount of copying permitted for commenting on copyrighted material is considerably greater than if the appropriating work is not commenting on the copyrighted work.

Fairey’s company sent a cease-and-desist letter to Baxter Orr (the creator of the image above). Orr nonetheless continues to sell his painting online, and Fairey has not followed up with any legal action. Nor has he taken any action at all as far as I know against Dan Nolan, the creator of the poster on the right.

I hope he doesn’t take any further action on Orr’s poster or any on Nolan’s. Nonetheless, the cease-and-desist letter might be an instance of copyright overclaiming. Most people, I think, would have taken the image off the internet rather than do what Orr has done.

Friday Night Music Club: Joan Baez sings Percy’s Song

Joan Baez sings Percy’s Song, Bob Dylan’s song about an injustice visited upon a friend of his. This clip is from Don’t Look Back.

Chief Justice John Roberts on legal writing

Bryan Garner is the most commercially successful of legal writing teachers. On his company’s web sites, he has numerous short videos with judges from around the country as well as onger interviews with the Supreme Court Justices. Here is his interview with Chief Justice John Roberts on, among other things, the centrality of writing in legal practice: