Here are the remarks we were to have presented today, the second day of the 2016 Brigham-Kanner Property Rights Conference, being held in The Hague, Netherlands at the International Court of Justice. The panel subject was “Property Rights in Intangible Assets.” We were unable to deliver them due to the panel running of of time, one of the dangers of being the last speaker in a lineup of four. [Protip: if ever you’re on a speaking panel, you might want to think about slotting yourself ahead of the others; some pay no regard to those behind them in the queue, exceed their allotted time significantly (even after being notified that their time is up), and don’t even bother to acknowledge their lack of respect for others.] But no matter, here we go.
Defining and Protecting Property Rights in Intangible Assets:
New Frontiers, Uncharted Waters
As you might already be able to tell, I like property rights. I really do. But even I may have my limits. For example, a U.S. law professor has recently published a law review article that asks whether animals have property rights. Not whether animals can be property, mind you, but whether they can possess property. The author argues that animals, like humans, may have “biological underpinnings” revealing they have “created a vast network of functional property rights. Jaguars and bees, for example, acquire and protect land, and endeavor to exclude others from it. This, the author suggests, means they already exercise property rights.
And law professors may wonder whether the academy is producing scholarship that we in the practicing bar find useful. But unless you think I am judging — or worse yet, mocking — I will say that I know that cats already think they own everything, including their putative owners, so what is so outrageous about the notion that the rest of the animal kingdom can “own” things? I have my doubts about this, thinking it’s already hard enough to get governments and the courts to recognize the property rights of human beings, and we should address their concerns before we add another class of disappointed property owners to the list.
Besides until animals can assert their rights, I can’t help but be wary of any scheme that would allow humans to assert rights on behalf of animals. I suspect the animals’ main function in this circumstance would be to serve as plaintiffs in environmental lawsuits asserting that their property rights, “including ownership of hundreds of millions of acres of land” as the article posits — means that “their” land needs to be preserved from human development, all to the detriment of the property rights of their human overlords.
I bring this up because the topic of my remarks today is new and emerging areas of property — mostly intangible — and if and how our existing understandings govern these new frontiers.
And that is what a very recent decision by the august Judge Posner of the U.S. Seventh Circuit was to me — a mixed bag. Because as a property rights lawyers, it pulls me in two directions. We’ve mostly focused today on the property rights spawned by emerging technologies, but what about the property rights of those stuck in the legacy economy?
The case from the Seventh Circuit involves taxicabs and ridesharing services Uber and Lyft. In most larger U.S. cities, taxicabs need the municipality’s permission to operate by way of a medallion or permit system. Obtaining one of those limited-in-number things give the operator certain rights — to pick up fares on the streets, and (perhaps) to keep others who do not possess a medallion from doing the same thing. They are, in many cases, very expensive. People who possessed taxi medallions are understandably not excited about ridesharing services, and two cities’ failure to enforce taxi regulations against Uber and Lyft.
The court acknowledged that the taxicab industry is “tightly regulated” by the municipalities. And that was the point the plaintiffs objected to: we relied on the controlled market and have property rights in our medallions and permits, they argued, and letting these interlopers do the same thing we do without also having to get a medallion is a taking of our government-sanctioned quasi-monoply. hey sued, asserting that they cities’ allowing Uber and Lyft to operate without medallions resulted in a diminution in the value of a taxicab medallion. Yes, ridesharing services are somewhat regulated, but most critically you do not need a medallion to operate one. Following a number of other courts, Judge Posner held that this wasn’t a taking.
Although it agreed that the medallions are property, the court held no taking because owning a medallion is a property right to operate a taxicab, and isn’t a property right to stop others from driving people around the city for money. “The City has created a property right in taxi medallions; it has not created a property right in all commercial transportation of persons by automobile in Chicago.” The panel acknowledged that if the cities were to have outright confiscated the taxicab medallions (which would have prohibited the taxicab operators from operating taxicabs), it would be a taking. But allowing Uber and Lyft to operate things that look like taxis (but are not taxis) “is not confiscating any taxi medallions; it is merely exposing the taxicab companies to new competition — competition from Uber and the other TNP’s.”
Uber, Air BnB, and DogVacay aren’t taxis, or hotels, or dog walking services, they say. But they sure do look a lot like them, no? And because of that, these issues can make for some interesting decisions because they really draw the competing philosophies into focus. The police power hawks believe that these things should — like just about everything else — be controlled by regulationspublic needs to be protected! The libertarians applaud the free market forces at play. The property rights folks … well, they get a mixed bag.
And that’s what today’s decisions are to us — a mixed bag. Or at least situations where we can see some merit in both arguments.
The court held that ridesharing services are different animals than taxicabs, and Uber and Lyft are as different from cabs as dogs are from cats: you can’t physically hail down an Uber or Lyft vehicle on the street but must use a smartphone application to do it for you, and a taxi’s fare structure is determined by the city.
And that, to the court, was the critical difference. Because Uber and Lyft are not taxicabs, allowing them to drive people around the city for money doesn’t interfere with the rights of taxicabs to drive people around the city for money. Got it.
We suspect that the taxicab operators have a much different view. Because Uber and Lyft are really, really a heckuva lot like taxis, aren’t they? You hail a ride (not with your arm and a whistle, but with your fingers and your phone), you get in, you go, you get where you’re going, you pay the driver (again, with the app not by handing him/her money). But come on, is that enough of a difference to say that ridesharing isn’t cabbing? On that, we’re mostly with the cab operators. Having used Uber and Lyft more than a few times, they sure do seem like taxis with some very minor differences.
But to the court, whether to regulate ridesharing services the same as taxicabs was within the discretion of the city. In the same way that many cities require dogs to have a license, but not cats (we’re not kidding: this analogy is right there on page 6 of the opinion). Don’t like having to get a license for your pet? Be sure to get a cat. You don’t want to get a taxi medallion? Drive an Uber.
And those who already relied on the regulatory system in place to invest in a medallion who thought this was a high barrier to entry into the driving-people-around-for-money market? Chumps.* The court told them figuratively that if they think Uber and Lyft have a competitive edge over traditional taxicab services, then they should get with the program and start competing! (Or start driving for Uber or Lyft.)
As we mentioned earlier, these decisions draw us in opposite directions. We like takings, but we also like free market thinking. We’re not big on a lot of regulation, but we also favor a regulatory system, if it must exist, that allows investment without fearing the government will just decide one day to ignore its own regulatory requirements and exempt others similarly situated from regulations which govern you.
That last point is really the panel’s main thrust. See Joe Sanfelippo Cabs, slip op. at 9 (“A ‘legislature, having created a statutory entitlement, is not precluded from altering or even eliminating the entitlement by later legislation.'”). You shouldn’t rely on a regulation, unless the things you are relying on are welfare benefits or employment or other forms of “New Property.” (Then you can.) But not here.
Why there’s a difference, we can’t really say.
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*Ever since Chief Justice Roberts made “chumps” a legal term of art, see Arizona State Legislature v. Independent Redistricting Comm’n, No 13-1314 (U.S. June 29, 2015) (“What chumps!”) (Roberts, C.J., dissenting), we’ve committed to employing it every time the opportunity presents itself. You should too.