say that contractual rights are never property rights or that the Government * * Connolly, 475 U.S. at 223-25 (emphasis added; citations omitted). Cases like Connolly and Concrete Pipe, which was decided just last year, indicate the vitality of the principle that laws adjusting the benefits and burdens of economic life among private parties are analyzed deferentially by the Court and have almost never been found to constitute a taking, in contradistinction to laws that require the actual deeding over of interests in property as a condition of governmental approval, where Nollan and Dolan indicate the Court is employing a more searching review.11 We next consider the degree to which the draft legislation would "interfere[] with [reliance parties'] reasonable investment-backed expectations." At least since the original Berne Convention of 1886 Americans should have been aware that the United States was interested in entering into a convention that fully protected other nations' copyrighted works. Long before the United States formally passed the BCIA in 1988, it was known that the United States was moving toward implementation of the Berne Convention. See, e.g., Melville B. Nimmer, Implications of the Prospective Revisions of the Berne Convention and the Unites States Copyright Law, 19 Stan. L. Rev. 499, 547-54 (1967) (noting the United States almost ratified the Berne Convention in the 1930s during a period of isolation and predicting that the United States would eventually implement the Berne Convention). Indeed, Professor Nimmer argued in 1967 that a "significant" reason to ratify the Berne Convention was to enjoy the "Retroactive Application of Convention Protection," by which "protection must be accorded to all works which on the effective date of the Convention are not in the public domain in the country of origin of the works, even if on such date the works had been in the public domain in the country in which protection is claimed." Id. at 551 (emphasis in original). This eminent authority on American copyright law concluded his 1967 article with the following prediction: "The Department of Justice also has relied on this distinction in our advice to Congress: "It is wellsettled that governmental regulations pursuant to a valid exercise of the police power that merely readjust economic burdens and benefits in a manner rationally related to a legitimate public purpose are generally immune from Fifth Amendment challenge." See, eg, Letter to Honorable Chalmers P. Wylie, Ranking Minority Member, House Committee on Banking, Finance and Urban Affairs, from Carol T. Crawford, Assistant Attorney General at 1 (June 12, 1989) (citing Supreme Court cases). The last decade has seen a veritable revolution in technological means for the reproduction and dissemination of literary and artistic works. We have not yet seen the end of this scientific leap forward, but already such devices as electrostatic copiers and photoduplication machines, video tape recorders, television antenna systems, computers, and similar developments make clear that future adjustments of copyright law will be essential if the community control we call law is to keep pace with the march of science. Whatever such change may be, one can predict with some certainty that their shape and direction will in no small measure be determined by the collective counsel of the Berne Union. It can hardly be doubted that it is in the interests of the United States that its voice be heard and bear proper weight in the Berne deliberations of the future relating to these and other crucial copyright questions. Id. at 553-54. Moreover, it should have been apparent to anyone following the debates over the international protection of copyrights during this period that something very similar to draft section 104A would be passed to provide more vigorous implementation of the Berne Convention. Indeed, United States copyright owners have been forceful proponents of this international order because they have much to gain by the protection of their works in other nations who have not yet implemented Article 18 of the Berne Convention. Once again, Professor Nimmer argued in his 1967 article that "Retroactive Application of Convention Protection... is of the greatest significance to the vast number of United States authors who published their works in the United States . . . prior to the effective date [of a convention to which the United States is a party]." Id. at 551-52 (pointing out that a vast number, perhaps a majority, of works protected by United States law were not protected in the United Kingdom despite the fact that both the United States and the United Kingdom were parties to the Universal Copyright Convention). "Thus, even with respect to countries already party to the Universal Copyright Convention, accession to the Berne Convention would add considerably to the substantive rights enjoyed by the United States authors." Id. at 552. At the time Congress was debating the BCIA, it reserved the issue of removing works from the public domain. See BCIA § 12; S. Rep. No. 352, 100th Cong., 2d Sess. 48 (1988). Although it could be argued that this is evidence that the United States would fail to provide protection for works in the public domain, we believe that the courts would reject such a conclusion as unreasonable. Instead, the congressional debate provided further notice that the United States might well protect such works after further study. See H.R. Rep. No. 609, 100th Cong., 2d Sess. 51-52 (1988) ("we remain persuaded that any solution to the question of retroactivity can be addressed after adherence to Berne when a more thorough 12 Nothing short of protecting copyrights in foreign works against all other parties can afford such holders the protection required under the Berne Convention. A law that allowed reliance parties to continue to exploit the subject works would enable reliance parties to reproduce the subject works with impunity and completely undercut the actual copyright owner, while perhaps making a super-competitive profit. examination of Constitutional, commercial and consumer considerations is possible"). Given that most other parties to the Berne Convention believed that it was essential for the United States to enact legislation similar to section 104A, we question the reasonableness of any investment-backed expectations that such legislation would never be passed. 13 The economic impact of the legislation on a particular claimant will be the final significant element in the Court's analysis. As previously indicated, it is impossible to know the economic impact on any reliance party before an actual claim is presented. However, we can draw two conclusions, one from the Court's decisions, the other from an understanding of how the legislation works. First, anything short of a showing of complete loss of economic value of the entire property whose use is affected by the reinstitution of the copyright should fail to establish a takings claim. Second, it is almost inconceivable that there could be a situation in which a reliance party would in fact suffer such a complete loss. These two conclusions, combined with the consideration of the other two elements of the Court's ad hoc inquiry, lead to another conclusion: we currently know of no facts that would support a valid claim. - The Supreme Court has recently reaffirmed the principle that a "mere diminution in the value of property, however serious, is insufficient to demonstrate a taking." Concrete Pipe, 113 S. Ct. at 2291. Previous cases take the same view. See, e.g., Andrus, 444 U.S. at 66 ("a reduction in the value of property is not necessarily equated with a taking. . . [L]oss of future profits unaccompanied by any physical property restriction provides a slender reed upon which to rest a takings claim"); Penn Central, 438 U.S. at 131 ("uniformly reject[ing] the proposition that diminution in property value, standing alone, can establish a 'taking'") (citing cases where there was a large diminution of value); Goldblatt v. Hempstead, 369 U.S. 590, 594 (1962) (upholding restrictions on owners of gravel pits that substantially reduced the value of the land); Everard's Breweries v. Day, 265 U.S. 545, 563 (1924) (upholding federal prohibition law as it applied to existing stocks of liquor); Jacob Ruppert, Inc. v. Caffey, 251 U.S. 264, 302-03 (1920) (same; "there was no appropriation of private property, but merely a lessening of value due to a permissible restriction imposed upon its use"); Hadacheck v. Sebastian, 239 U.S. 394 (1915) (prohibition on production of bricks on land with a valuable bed of clay did not constitute a taking even if it reduced the value of the land by 87.5%); Mugler v. Kansas, 123 U.S. 623 (1887) (upholding prohibition of sale of intoxicating liquor). Given the operation of the draft legislation, it is hard to fathom how a reliance party's property could be rendered completely valueless by the legislation, so that all conceivable 13 Indeed, a takings claim probably will not be ripe until the reliance party has exhausted all efforts to obtain a license or fix the amount of damages in a court action, or unless the court has issued a permanent injunction against further acts of infringement because, until these steps have been taken, the economic impact is unascertainable. 14 It is important to note that Concrete Pipe was decided after Lucas, in which the Court stated that a regulation that rendered a parcel of land completely valueless amounts to a compensable physical appropriation. Below, we address the possibility that Lucas's treatment of complete loss of value would apply here. cases that may arise ought to be cases of "mere diminution," and thus within the principle just cited. In the case of a reliance party who has used the work to make a derivative work, or in some other way has employed copies of a work in a manner that would require licensing under section 106, the draft legislation contains several features that guarantee the reliance party an opportunity to gain economic returns. As described above, the reliance party will have a year after the legislation's enactment during which he can continue to make copies or engage in other Section 106 activities. After that, he will have a minimum of one year in which he can continue all such activities, including selling his derivative works, excepting only that he cannot make additional copies. Even after that time, the legislation provides only for actual damages or an injunction to be awarded in a case of successful litigation for breach of copyright until the year 2000, and it is conceivable that in some cases a court would award only a manageable amount of damages rather than issue an injunction. In other words, reliance parties have a significant amount of time during which they can liquidate their existing copies.16 15 15 The Supreme Court recently instructed that, in cases involving parody, "courts may also wish to bear in mind that the goals of the copyright law, 'to stimulate the creation and publication of edifying matter,' are not always best served by automatically granting injunctive relief when parodists are found to have gone beyond the bounds of fair use." Campbell v. Acuff-Rose Music, Inc., 114 S. Ct. 1164, 1171 n. 10 (1994) (citation omitted; noting that 17 U.S.C. § 502(a) provides a court with discretion in ordering such an equitable remedy). The Supreme Court cited with approval Abend v. MCA, Inc., 863 F.2d 1465, 1479 (9th Cir. 1988), aff'd sub nom, Stewart v. Abend, 495 U.S. 207 (1990), which the Court characterizes as finding "special circumstances" that would cause "great injustice" to defendants and "public injury" if an injunction were to issue. Campbell, 114 S. Ct. at 1171 n. 10. The facts of Abend involved an erroneous but reasonable belief by the defendants that they had a license to continue to use a short story in a film being re-released. The Ninth Circuit noted that: An injunction would also effectively foreclose defendants from enjoying legitimate profits Abend, 863 F.2d at 1479 (emphasis in original; finding that in such special circumstances "damages or a continuing royalty would constitute an acceptable resolution for infringement"). See also Universal City Studios v. Sony Corp. of America, 659 F.2d 963, 976 (9th Cir. 1981), rev'd on other grounds, 464 U.S. 417 (1984) (same; relying on 3 Melville B. Nimmer, Nimmer on Copyright § 14.06[B] (1981)). A reliance party who uses a restored work such as a poem or a picture in a much larger anthology or textbook may present an analogous "special circumstance." Although such a reliance party could not argue that he had a reasonable belief that he could continue to use the work subject to the restored copyright, the equities are arguably similar to the Abend case and the Ninth Circuit's reasoning in Abend regarding the non-severability of the derivative work and the harm to the public due to the loss of the anthology or textbook also may apply with equal force. Finally, the statement of administration action accompanying the draft version of section 104A also requests courts to follow these decisions to "ensure the proportionality of the infringement remedy and the severity of the infringement." 16 These phase-in provisions have constitutional relevance because they bear on the economic impact of the draft legislation on the reliance party's property taken as a whole. Several lower court decisions have held such phase-in periods relevant in assessing the constitutionality of legislation banning billboards, which typically impose more severe restrictions than does the proposed section 104A, by requiring the complete removal of the To be sure, a reliance party may have made investments against which he was hopeful of accruing returns for a longer period. For example, someone may have colorized a foreign movie whose copyright is to be reinstated under the draft legislation. Notwithstanding those expectations, two years is still a significant window of opportunity for exploiting the investment. A harder case would be presented if there were circumstances under which the mere knowledge that after two or so years the reliance party would no longer be free to market copies of his own product resulted in that product losing all market value immediately. Frankly, we are not aware of any facts that would give rise to such a result. Even in such a case, it is not clear that the legislation would deprive a reliance party of all economic value, and any determination one way or the other would have to await the full exploration of options available to the party. One significant option would be to seek licensing from the copyright holder, which would authorize continued sale and thus restore the market value of the works (albeit with some of the proceeds now going to the copyright holder as a licensing fee). Should a copyright holder refuse to license, a reliance party would retain the further option of seeking a court determination of damages for copyright infringement, which would have the same functional effect as a license. Only in the case of both a refusal to license and a court injunction against distributing the reliance party's work would a reliance party appear to be without options in the speculative situation under consideration. Were such an implausible case to arise, some may argue that the claim would fall within the categorical rule of Lucas. In Lucas, the Court billboards, and thus destroying the property. Still, "amortization periods" in such legislation, which allow a billboard owner a period of time to continue to earn a return on his or her investment, mitigate the effects of the ban and have constitutional relevance. One district court summarized the decisions as follows: Courts generally have held that an amortization clause may sufficiently mitigate the effect of the challenged ordinance to protect it from a takings clause attack, if the clause is reasonable in the light of the nature of the business of the property owner, the improvements erected on the land, the character of the neighborhood, and the detriment caused the property owner. Georgia Outdoor Advertising, Inc. v. City of Waynesville, 690 F. Supp. 452, 456, 458 (W.D.N.C. 1988) (considering an amortization clause of four years), vacated, 900 F.2d 783, 786 (4th Cir. 1990) (clarifying that an amortization provision cannot be viewed in isolation and does not "automatically immunize[] the ordinance from a takings challenge"). See also Naegele Outdoor Advertising, Inc. v. City of Durham, 844 F.2d 172, 177 (4th Cir. 1988) ("A majority of courts that have considered amortization periods of various lengths have approved them as a means of enabling an owner to recoup or minimize his loss."), on remand, 803 F. Supp. 1068, 1077-78 (M.D.N.C. 1992) (discussing factors relevant to the reasonableness of the amortization period), aff'd, 19 F.3d 11 (1994); Major Media of the Southeast, Inc. v. City of Raleigh, 792 F.2d 1269, 1273 (4th Cir. 1986) ("Such amortization provisions have generally been held by courts not to necessitate additional compensation, if they are reasonable;" affirming summary judgment for the City on the reasonableness of amortization period), cert. denied, 479 U.S. 1102 (1987); J.F. Ghent, Annotation, Validity of Provisions for Amortization of Nonconforming Uses, 22 A.L.R.3d 1134, 1139 (1968) (stating the majority rule that "provisions for the amortization of nonconforming uses are valid if they are reasonable"). |