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The Dormant Commerce Clause, Explained · a16z AI Policy Brief

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  SPEAKER_02: So we've talked about how Congress can act to preempt.
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  SPEAKER_02: We've talked about limits of Congress's ability to preempt.
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  SPEAKER_02: So, Paul, can we bring you in here?
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  SPEAKER_02: How does the Dormant Commerce Clause figure into this?
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  SPEAKER_03: Sure.
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  SPEAKER_03: The dormant commerce clause is a limit on the states.
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  And it's called dormant because it's something that the courts
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  have taken by
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  SPEAKER_03: implication from the commerce clause.
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  SPEAKER_03: The commerce clause is an article one of the Constitution.
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  It's where Congress's powers are listed,
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  and it's an affirmative grant of power to Congress.
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  It says Congress shall have the power to regulate commerce with
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  foreign nations and
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  SPEAKER_03: among the states and with the Indian tribes.
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  So it's written in terms of what Congress can do,
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  not what states can't do.
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  SPEAKER_03: But despite that,
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  SPEAKER_03: for a long time,
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  SPEAKER_03: going really back to the early 1800s,
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  the Supreme Court has read the Commerce Clause as implicitly
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  limiting state power.
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  So the idea is when framers authorized Congress to regulate
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  interstate commerce,
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  what they were trying to do is create a national marketplace
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  where trade could flow
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  SPEAKER_03: freely across state lines.
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  SPEAKER_03: and to prevent states from interfering with that national market,
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  they intended for Congress's power over national commerce to be
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  exclusive.
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  SPEAKER_03: You can see this sort of going back to,
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  SPEAKER_03: there's a case in the early 1800s called Gibbons versus Ogden,
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  SPEAKER_03: where New York was trying to create a monopoly
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  SPEAKER_03: on steamboat traffic.
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  SPEAKER_03: And that law was actually struck down as preempted.
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  SPEAKER_03: But in that case,
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  Chief Justice Marshall said that the law might also violate the
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  Commerce Clause
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  because it interfered with Congress's exclusive power to
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  regulate interstate
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  SPEAKER_03: commerce.
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  Can you talk us through recent developments of the Doorway
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  Commerce Clause?
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  SPEAKER_02: I think there is
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  SPEAKER_02: just in terms of how people are generally perceiving it.
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  And if like you're paying a little bit of attention to recent
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  Supreme Court cases,
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  SPEAKER_02: but not necessarily following them line by line,
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  there's sort of the perception that the Dormant Commerce Clause
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  is becoming
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  SPEAKER_02: increasingly dormant.
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  SPEAKER_02: Is that accurate?
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  SPEAKER_02: Well,
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  it's certainly accurate that it has been a source of
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  controversy and it's been in
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  SPEAKER_03: flux a little bit.
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  SPEAKER_03: And I'm sure we can talk about the pork producers case,
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  but there was a big case that the Supreme Court decided a
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  couple of years ago.
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  SPEAKER_03: It was a case where California had banned the sale within California
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  of pork that came from other states that was from pigs that
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  were confined and
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  SPEAKER_03: raised in ways that California defined as inhumane.
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  And that law was challenged by pork producers from other states
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  who said that
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  SPEAKER_03: California was interfering with interstate commerce,
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  SPEAKER_03: the national market for pork.
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  SPEAKER_03: And the Supreme Court ultimately upheld the California law.
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  SPEAKER_03: But they did so in a very splintered decision,
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  SPEAKER_03: and that's created,
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  SPEAKER_03: I think,
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  a lot of confusion about exactly what the state of the law is
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  on the Commerce
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  SPEAKER_03: Clause.
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  SPEAKER_03: There are clearly different groups of justices,
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  SPEAKER_03: and they overlap in sometimes confusing ways,
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  SPEAKER_03: who have different views about
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  what the role of the courts should be in reviewing state law
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  under this dormant
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  SPEAKER_03: commerce clause doctrine,
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  and also different views on various aspects of the doctrine and
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  how it should
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  SPEAKER_02: apply.
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  SPEAKER_02: So what's your best guess if there if there's a state law passed,
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  SPEAKER_02: and someone was challenging it on dormant commerce clause grounds?
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  SPEAKER_02: What's your best guess at how a judge would review it?
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  Like what are the what are the various different tests they
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  might use to evaluate
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  SPEAKER_02: the law's constitutionality?
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  SPEAKER_03: Yeah, sure.
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  SPEAKER_03: So I think the doctrine has basically three branches, speaking broadly.
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  SPEAKER_03: The first branch is a rule against discrimination.
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  SPEAKER_03: And this is something that basically all the justices agree on.
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  SPEAKER_03: States cannot pass laws that discriminate against interstate commerce.
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  SPEAKER_03: So,
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  SPEAKER_03: you know,
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  SPEAKER_03: some examples of that from sort of historic cases,
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  SPEAKER_03: you know,
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  there was a case where New Jersey banned out of state garbage
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  from its landfills,
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  SPEAKER_03: said our landfills are only going to service New Jersey garbage.
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  There's a case where Hawaii gave tax breaks to liquor only if
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  it was made from
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  SPEAKER_03: produce that was grown in Hawaii.
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  SPEAKER_03: Those kinds of discriminatory laws are invalid.
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  The second branch is one that is concerned with states
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  regulating extraterritorially.
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  The idea is that a state can only regulate things that happen
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  within its borders or
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  SPEAKER_03: that have a sufficient connection to the state.
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  SPEAKER_03: The state can't reach out and regulate what's going on in other states.
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  And that's a branch of the doctrine that really has been thrown
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  a little bit into
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  SPEAKER_03: confusion after the pork producer's decision.
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  I think it still has some force where states are really
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  reaching out and regulating
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  SPEAKER_03: outside of their borders,
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  SPEAKER_03: but exactly how much force that doctrine has after pork producer's
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  SPEAKER_03: is a source of debate.
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  SPEAKER_03: And then the third branch is what's called pike balancing.
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  SPEAKER_03: This comes from a case called Pike versus Bruce Church.
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  SPEAKER_03: And it's basically a test where the court asks,
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  SPEAKER_03: is this state law imposing an undue burden on interstate commerce?
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  And the court is supposed to weigh the burden that the law
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  places on interstate
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  SPEAKER_03: commerce against the localized benefits of the law.
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  SPEAKER_03: And if the burdens are clearly excessive in comparison to the benefits,
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  SPEAKER_03: then the court is supposed to strike down the law.
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  I want to get into the controversy around extraterritoriality
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  in a second and would
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  SPEAKER_02: love all you to weigh in on that.
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  But before we go there,
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  can we just talk a little bit about pike balancing?
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  So how did judges I think are obviously they do balancing tests
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  all the time.
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  SPEAKER_02: I think when you hear about a cost benefit analysis,
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  SPEAKER_02: at least I sort of think in economist terms,
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  SPEAKER_02: I'm not an economist,
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  SPEAKER_02: but I think about that as an economics exercise.
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  SPEAKER_02: How would a judge go about trying to do that in a disciplined way?
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  SPEAKER_03: Yeah, it's very difficult.
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  SPEAKER_03: And this is why,
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  SPEAKER_03: you know,
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  SPEAKER_03: as we saw in the Port case,
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  there is a distinct minority of justices on the Supreme Court
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  who think that courts
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  SPEAKER_03: shouldn't be doing this at all.
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  SPEAKER_03: They say,
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  SPEAKER_03: you know,
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  this is really a balancing exercise that requires judges to
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  sort of compare
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  SPEAKER_03: incommensable values,
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  SPEAKER_03: to weigh things that can't really be weighed against each other.
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  SPEAKER_03: in any legal way that requires courts to make value judgments.
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  SPEAKER_03: For example,
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  SPEAKER_03: if the burden on interstate commerce is that it's harder,
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  it's more expensive for businesses to engage in trade and
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  commerce across state
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  SPEAKER_03: lines,
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  SPEAKER_03: but the localized benefits are...
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  potentially greater safety for state residents or maybe even
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  serving the moral
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  SPEAKER_03: values of state residents,
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  as in the case of that California law where California had a
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  moral objection to the
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  SPEAKER_03: way certain pigs were being confined.
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  SPEAKER_03: It's a really hard question.
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  SPEAKER_03: How are judges supposed to determine whether,
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  SPEAKER_03: for example,
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  California's moral interest is outweighed by the economic
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  burdens on commerce?
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  And,
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  you know,
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  we can talk about different ways that courts have approached
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  that.
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  But I think one way to think about it is that courts are really
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  looking for red flags.
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  They're looking for cases where either the burdens on commerce
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  are especially
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  SPEAKER_03: severe and disruptive.
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  SPEAKER_03: and slash or the benefits to the local market are really speculative.
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  So cases where states are imposing really severe burdens for
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  reasons that seem
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  SPEAKER_03: far-fetched or maybe even potentially pretextual.
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  SPEAKER_03: And just to take sort of an example,
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  SPEAKER_03: You know,
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  there are some cases historically where states have imposed
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  really problematic
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  SPEAKER_03: restrictions on traffic through the state.
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  So there's a case where Iowa prohibited trucks from traveling
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  on Iowa roads with 65
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  foot trailers and 65 foot trailers were basically the standard
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  in all of the other
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  SPEAKER_03: states in the Midwest.
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  SPEAKER_03: But if you wanted to drive your trailer through Iowa,
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  SPEAKER_03: you had to either you had to either not do it,
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  SPEAKER_03: navigate around and go through other states,
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  or you had to transfer everything to a smaller truck while you
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  went through Iowa.
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  SPEAKER_03: And Iowa said this has benefits in terms of local safety.
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  SPEAKER_03: And the court said, first of all, this is really burdensome.
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  This is going to be really disruptive to commercial traffic
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  throughout the Midwest.
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  SPEAKER_03: And also, we just don't believe you about the safety benefits.
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  SPEAKER_03: We've looked at this.
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  SPEAKER_03: We think this is really far-fetched.
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  SPEAKER_03: There's really no clear benefit.
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  65-foot trailers aren't any more dangerous than 55-foot
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  trailers,
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  which Iowa permitted.
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  And so those kinds of laws where the balance really seems out
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  of whack are the ones
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  SPEAKER_03: that courts tend to be comfortable striking down.
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  So I want to I think your truck example is making me want to
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  get to an application of AI.
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  SPEAKER_02: How do we think about these laws in an AI context?
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  SPEAKER_02: But before we get there,
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  SPEAKER_02: Paul,
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  SPEAKER_02: you did allude to this controversy around how much weight to put on the
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  SPEAKER_02: extraterritorial crong versus potentially on others.
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  We wrote a piece on Dormant Commerce Clause where we focus
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  primarily on pike
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  SPEAKER_02: balancing,
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  SPEAKER_02: and we looked a little bit at extraterritorial effects.
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  SPEAKER_02: But within the pike balancing context,
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  Can you talk a little bit about how these two different prongs
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  might be weighted?
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  SPEAKER_02: Like another law professor,
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  SPEAKER_02: Kevin Frazier at the University of Texas has put a lot of weight on the
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  SPEAKER_02: extraterritoriality prong,
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  SPEAKER_02: not just from the Dormant Commerce Clause,
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  SPEAKER_02: but from other constitutional principles.
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  So how much of that survives and how would that be relevant to
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  thinking about analysis in AI?
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  So it's a little bit unclear how much survives and therefore
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  exactly how it would apply.
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  When we're talking about extraterritoriality,
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  we're talking about one state's attempt
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  to essentially regulate conduct or commerce or something that
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  takes place in another state.
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  And it's often not something that can sort of cleanly be
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  divided into what happens
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  SPEAKER_00: in one state versus another.
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  SPEAKER_00: So you could take the example of a transaction that involves,
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  let's say a sale between someone in Iowa selling a good made in
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  Minnesota to
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  SPEAKER_00: someone in Maine.
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  SPEAKER_00: And the question is, what state does that transaction take place in?
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  SPEAKER_00: It's a little bit hard to know.
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  SPEAKER_00: Or in some instances,
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  you could have the use of a product in one state that has
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  spillover effects into
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  SPEAKER_00: another.
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  And so it's not actually clear in that instance that you would
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  necessarily be
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  regulating the out-of-state conduct as opposed to the causing
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  of effects within the
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  SPEAKER_00: state.
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  And for that reason,
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  I think it doomed the argument in California's case because
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  of the pork producer challengers because really what the
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  California law applied to
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  SPEAKER_00: was the sale within California of meat that had certain characteristics.
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  SPEAKER_00: Now,
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  SPEAKER_00: it's true that in order to comply with the law,
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  SPEAKER_00: if you are an out-of-state producer,
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  SPEAKER_00: you might have to take certain steps outside the state.
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  SPEAKER_00: But nevertheless,
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  the thing that actually puts you on the wrong side of the law
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  happened wholly
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  SPEAKER_00: within the state of California.
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  SPEAKER_00: You can contrast that to an instance where a state passed a law
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  SPEAKER_00: that says essentially you can't take some step abroad.
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  And let's say they tried to use as an in-state hook the fact
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  that the company just
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  is registered to do business within the state or has employees
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  within the state.
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  But nevertheless,
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  the thing that is being regulated is the out-of-state conduct.
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  SPEAKER_00: And in that instance,
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  I think you would still have some vulnerability under the
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  anti-extraterritoriality
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  SPEAKER_00: principle.
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  SPEAKER_00: That said, the majority in pork producers
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  SPEAKER_00: suggested,
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  SPEAKER_00: although didn't squarely hold,
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  that the only types of laws that are per se invalid under the
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  principle are laws
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  that essentially tie the price of goods in one state to the
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  price of goods in
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  SPEAKER_00: another state.
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  SPEAKER_00: So there were a number of laws,
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  SPEAKER_00: primarily in the area of liquor sales,
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  where one state would essentially force a liquor seller to
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  affirm that the prices
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  SPEAKER_00: made available within the state
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  are no higher than they are made available in other neighboring
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  states and the
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  supreme court struck those down and those rulings are still
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  good law but the the
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  pork producers majority suggested that it's possible that other
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  laws that don't
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  have to do expressly with tying might not get the same
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  treatment but one caveat is
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  at the same time it said even if those laws aren't invalid
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  under the dormant
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  commerce clause they still nevertheless might run afoul of
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  other constitutional
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  SPEAKER_00: principles including the separation of powers
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  and the sort of inherent limitations that each state's
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  sovereignty imposes on the
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  SPEAKER_00: sovereignty of a sister state.
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  SPEAKER_00: And so it would infringe the sovereignty of Iowa,
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  SPEAKER_00: for instance,
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  if Florida were to enact a law saying that people are not
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  allowed to engage in
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  SPEAKER_00: certain conduct within Iowa because
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  That would be an instance of Florida projecting its own
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  sovereign authority outside
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  SPEAKER_00: its own state.
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  SPEAKER_03: I'll say that the way I think about it,
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  and I think there are different views on this and it's not
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  clear yet where courts
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  SPEAKER_03: are going to come out.
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  But I think one clear takeaway from the pork producers case is
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  that a law is a
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  state law is not going to be invalid just because it has
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  practical effects outside
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  SPEAKER_03: of the state.
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  SPEAKER_03: So in pork producers,
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  what California was regulating was the sale within the state of
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  pork that had
• 12:52
  certain characteristics that came from pigs that were treated
• 12:55
  in certain ways.
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  SPEAKER_03: But the the object of regulation was the in-state sale.
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  SPEAKER_03: And the farmers were saying,
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  SPEAKER_03: yeah,
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  SPEAKER_03: you're regulating the in-state sale,
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  SPEAKER_03: but that's going to have a whole lot of effects on our business in Iowa,
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  SPEAKER_03: North Carolina and other states.
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  SPEAKER_03: And the court said,
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  those kinds of out of state practical effects just aren't
• 13:14
  cognizable under the Commerce Clause.
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  SPEAKER_03: We're not concerned about that.
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  SPEAKER_03: I think on the other hand,
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  what is still open after pork producers is when a state is
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  actually directly
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  SPEAKER_03: regulating what happens outside of the state.
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  SPEAKER_03: So for example,
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  SPEAKER_03: if you imagine sort of a tweak on the law in the pork producers case,
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  SPEAKER_03: if instead of California saying it is illegal to sell pork in California,
• 13:38
  SPEAKER_03: if it comes from pigs that were treated in a certain way,
• 13:41
  SPEAKER_03: suppose California said,
• 13:43
  it is illegal to raise pigs in an inhumane way if that pork
• 13:48
  later makes its way
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  SPEAKER_03: into California.
• 13:51
  SPEAKER_03: In that case,
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  SPEAKER_03: the object of the regulation is the way the pigs are being raised in,
• 13:56
  SPEAKER_03: for example,
• 13:57
  SPEAKER_03: Iowa.
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  SPEAKER_03: And it still has a connection to California,
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  SPEAKER_03: but I think that's a fundamentally different mode of regulation.
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  And that,
• 14:07
  I think,
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  still raises some serious questions under the Commerce Clause.
• 14:12
  One other thing that the Supreme Court emphasized in the pork
• 14:15
  producer's case is
• 14:16
  that if there is a way to essentially change your method of
• 14:21
  production or your way
• 14:22
  SPEAKER_00: of doing business in order to comply with an enacting state's law,
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  then it severely undercuts and in some instances renders
• 14:32
  impossible dormant
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  SPEAKER_00: commerce clause argument.
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  SPEAKER_00: And in that case, one of the things the court pointed out is that
• 14:40
  you could simply have a different method of production for
• 14:43
  California or just
• 14:44
  SPEAKER_00: choose not to sell in the state whatsoever.
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  SPEAKER_00: And therefore it was essentially up to the pork producers themselves
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  to figure out how to comply with the law and that engaging in
• 14:54
  commerce in a
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  SPEAKER_00: particular way,
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  SPEAKER_00: in a particular preferred manner,
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  SPEAKER_00: is not something that the Dormant Commerce Clause.
• 14:59
  SPEAKER_03: Well,
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  SPEAKER_03: just to pick up on that,
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  SPEAKER_03: because I'm interested in my fellow panelists' views on this,
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  SPEAKER_03: I think the point that Alon just made,
• 15:08
  SPEAKER_03: as I understand it,
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  is a view that was only taken by four justices and was
• 15:13
  disagreed with by five
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  SPEAKER_03: justices.
• 15:15
  SPEAKER_03: But despite that,
• 15:17
  SPEAKER_03: under what's called the Marx principle,
• 15:19
  SPEAKER_03: which is supposed to help you figure out when the justices are divided,
• 15:23
  what is the controlling rationale that lower courts are
• 15:27
  supposed to follow,
• 15:28
  there's an argument that that rationale that said there's no
• 15:34
  burden on interstate
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  SPEAKER_03: commerce if you can change your method of doing business,
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  It is controlling,
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  even though a majority of the court disagreed with it.
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  SPEAKER_03: So it puts you in a tricky position if you're a lower court judge.
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  SPEAKER_03: You know,
• 15:47
  am I supposed to follow this minority view because it was
• 15:49
  technically controlling
• 15:51
  or should I take into account the fact that five justices seem
• 15:55
  to have disagreed
• 15:55
  SPEAKER_03: with it?
• 15:57
  Just one thing to observe is that some justices really don't
• 16:00
  like the dormant
• 16:00
  SPEAKER_01: commerce clause,
• 16:01
  but support for the idea that one state can't regulate things
• 16:05
  in other states might
• 16:07
  SPEAKER_01: not be limited to the dormant commerce clause.
• 16:09
  SPEAKER_01: There are some alternative theories.
• 16:10
  There are some lower court cases and even some older Supreme
• 16:13
  Court cases that spin
• 16:15
  SPEAKER_01: out some alternative theories like under the due process clause.
• 16:18
  So we're going to spend most of today talking about the dormant
• 16:21
  commerce clause,
• 16:21
  SPEAKER_01: but there are some alternatives that
• 16:24
  SPEAKER_01: a litigant would probably keep in their back pocket.
• 16:26
  SPEAKER_02: Can you say a little bit more about that?
• 16:28
  SPEAKER_02: So due process clause, can you explain the rationale there?
• 16:30
  And then what else,
• 16:31
  are there other hooks to draw on beyond due process clause?
• 16:35
  SPEAKER_01: Due process clause,
• 16:36
  SPEAKER_01: I think,
• 16:36
  SPEAKER_01: is the main one,
• 16:37
  SPEAKER_01: but the,
• 16:37
  SPEAKER_01: you know,
• 16:38
  SPEAKER_01: the,
• 16:39
  whatever Justice Gorsuch meant when he wrote in the court
• 16:42
  producer's case about the
• 16:43
  SPEAKER_01: horizontal separation of powers,
• 16:46
  SPEAKER_01: like that,
• 16:46
  SPEAKER_01: that's not a,
• 16:47
  SPEAKER_01: specific provision of the Constitution,
• 16:49
  it might be a reference to a whole bunch of different aspects
• 16:52
  of the Constitution
• 16:53
  SPEAKER_01: that keep states in their own lanes.
• 16:56
  But the one on which there is the most case law is the Due
• 16:59
  Process Clause,
• 16:59
  SPEAKER_01: which is the idea that you can't be deprived of life,
• 17:03
  SPEAKER_01: liberty,
• 17:04
  SPEAKER_01: or property without due process.
• 17:06
  SPEAKER_01: And having a state punish you,
• 17:10
  taking away your liberty or property for something that the
• 17:12
  state has no valid
• 17:13
  SPEAKER_01: connection with.
• 17:15
  SPEAKER_01: So if
• 17:16
  SPEAKER_01: you've never been to Idaho,
• 17:18
  but Idaho passes a law that says if anyone who goes from
• 17:23
  Virginia to England and
• 17:28
  drinks a pint and eats stinky cheese shall pay a fine to the
• 17:33
  state of Idaho,
• 17:36
  Idaho's got no connection with that travel and it would violate
• 17:39
  due process to
• 17:40
  SPEAKER_01: impose that kind of punishment.
• 17:43
  SPEAKER_01: There have been a handful of examples often involving some
• 17:46
  SPEAKER_01: international angle and not just interstate angle in the past.
• 17:50
  SPEAKER_01: The Supreme Court hasn't had to reach that in a long time.
• 17:53
  So I think it's good we spent as long as we have on the
• 17:56
  foundation because it kind
• 17:57
  SPEAKER_02: of gives us the analytical lens to now look at state AI laws.
• 18:01
  SPEAKER_02: So I'd love to get your thoughts on some of the ones that we've seen.
• 18:04
  SPEAKER_02: I'll list three.
• 18:05
  SPEAKER_02: Two of them have been passed.
• 18:06
  SPEAKER_02: One of them's pending.
• 18:08
  SPEAKER_02: And maybe Willie,
• 18:09
  SPEAKER_02: maybe we can start with you to give some thoughts on like,
• 18:11
  what are the kinds of elements of these laws that raise
• 18:13
  concerns and which are the
• 18:15
  SPEAKER_02: things maybe that are more likely to survive a potential challenge?
• 18:18
  So one is California's SB 53,
• 18:20
  which is a set of disclosure requirements for model developers.
• 18:25
  SPEAKER_02: There's Colorado's SB 205,
• 18:27
  SPEAKER_02: which was passed a couple of years ago,
• 18:29
  SPEAKER_02: is now set to go into effect,
• 18:30
  SPEAKER_02: I believe this summer.
• 18:43
  SPEAKER_02: algorithmic discrimination.
• 18:45
  Neither the California law nor the Colorado law include any
• 18:48
  provision limiting the
• 18:50
  scope of the law to development or deployment within the
• 18:52
  borders of their state.
• 18:54
  SPEAKER_02: So I'm curious how you guys would assess that.
• 18:56
  SPEAKER_02: And then the final one is the Rays Act in New York, which hasn't been
• 19:04
  SPEAKER_02: on the governor's desk for signature.
• 19:07
  And that would require developers to implement safety and
• 19:09
  security protocols,
• 19:11
  to describe in detail the testing procedure they use to assess
• 19:14
  a model's potential
• 19:15
  SPEAKER_02: for harm,
• 19:16
  and then to implement safeguards to prevent unreasonable risk
• 19:19
  of critical harm.
• 19:20
  SPEAKER_02: Willie,
• 19:20
  SPEAKER_02: starting with you,
• 19:21
  what are the things in these laws that give rise to more of the
• 19:25
  kinds of concerns
• 19:26
  SPEAKER_02: that might be taken into account in a dormant commerce clause challenge?
• 19:30
  SPEAKER_01: Well, there are some examples in, I think,
• 19:33
  SPEAKER_01: more than one of these laws that say,
• 19:35
  SPEAKER_01: for example,
• 19:36
  SPEAKER_01: until you have filed a set of disclosures with our state,
• 19:42
  you may not market a model that has been developed or deployed
• 19:53
  in certain ways.
• 19:55
  SPEAKER_01: In other words, it purports to just be a disclosure requirement
• 20:01
  But the teeth in the disclosure requirement are that you're not
• 20:05
  supposed to be
• 20:07
  SPEAKER_01: deploying the model anywhere,
• 20:11
  including outside the state with the state law until you've
• 20:15
  filed the paperwork in
• 20:16
  SPEAKER_01: the state.
• 20:17
  SPEAKER_01: And while that may not seem like a very large burden,
• 20:20
  SPEAKER_01: and if we were just balancing benefits and burdens,
• 20:23
  SPEAKER_01: that might not be a huge obstacle.
• 20:26
  SPEAKER_01: It's still sort of the camel's nose into the tent that you need
• 20:31
  York or California's permission to go and do things in the
• 20:36
  interstate or even
• 20:37
  SPEAKER_01: international market.
• 20:39
  SPEAKER_00: And Matt,
• 20:40
  one of the things to pay attention to with these laws is
• 20:45
  whether they specifically
• 20:47
  SPEAKER_00: articulate a geographic reach for the law.
• 20:50
  SPEAKER_00: And if they don't,
• 20:51
  SPEAKER_00: how those states courts would interpret the laws,
• 20:54
  because a lot of times you'll have a law that's sort of stated
• 20:57
  in general terms,
• 20:59
  SPEAKER_00: no one is allowed to do
• 21:01
  SPEAKER_00: something to engage in some activity.
• 21:03
  SPEAKER_00: But nevertheless,
• 21:04
  in order to avoid dormant commerce clause and other
• 21:07
  constitutional concerns,
• 21:08
  the law might be interpreted as applying only to the product as
• 21:13
  deployed or used or
• 21:14
  SPEAKER_00: sold within the state,
• 21:16
  SPEAKER_00: as opposed to its sale deployment or development outside the state.
• 21:20
  SPEAKER_00: And so there's a question,
• 21:22
  SPEAKER_00: I think,
• 21:22
  SPEAKER_00: for at least some of those state laws,
• 21:24
  SPEAKER_00: whether they are genuinely intended to reach out of state conduct
• 21:29
  SPEAKER_00: even if it's not connected to any sort of direct in-state commerce.
• 21:32
  I think this raises a really good question because there's the
• 21:35
  question of like
• 21:36
  what's written in the law and then the realities of AI
• 21:38
  development and deployment
• 21:39
  SPEAKER_02: and how those two intersect.
• 21:41
  SPEAKER_02: So if you take New York,
• 21:42
  SPEAKER_02: which is,
• 21:42
  I think the language is roughly developed or deployed in whole
• 21:46
  or in part within
• 21:47
  SPEAKER_02: New York.
• 21:48
  SPEAKER_02: So that is clearly a provision that limits the scope of the legislation.
• 21:56
  I'm curious how you think that would work with the realities of
• 21:59
  AI development.
• 22:00
  SPEAKER_02: So like you might have an open source developer in California,
• 22:03
  SPEAKER_02: for instance,
• 22:03
  SPEAKER_02: who's going to have,
• 22:04
  SPEAKER_02: who's going to develop the technology in California,
• 22:07
  SPEAKER_02: but then have no control sort of by definition over its deployment,
• 22:11
  SPEAKER_02: including this potential deployment in New York.
• 22:14
  SPEAKER_02: You can have the reverse as well.
• 22:15
  How would you think about the realities of AI development
• 22:19
  against the provisions,
• 22:20
  SPEAKER_02: a jurisdictional provision in a bill like Ray's?
• 22:23
  And I think this goes back to the point we were just discussing
• 22:26
  in the pork
• 22:26
  producers case about whether you can segregate your production
• 22:31
  into different
• 22:31
  SPEAKER_00: markets.
• 22:32
  SPEAKER_00: So in the pork producers instance,
• 22:34
  SPEAKER_00: at least theoretically,
• 22:35
  SPEAKER_00: it was possible for pork producers to say,
• 22:37
  here is meat that is destined for the California market that
• 22:41
  satisfies California
• 22:42
  SPEAKER_00: standard.
• 22:43
  SPEAKER_00: And then here is a stream of production for all the other states.
• 22:47
  SPEAKER_00: And there's a question in the instance of AI technology,
• 22:51
  SPEAKER_00: whether you can have that same sort of segregation of markets.
• 22:55
  SPEAKER_00: In some instances,
• 22:56
  SPEAKER_00: it might be possible through geofencing or other technologies to say,
• 23:00
  you just can't access the website if you're trying to do it
• 23:03
  from an IP location in
• 23:04
  SPEAKER_00: a state that has a ban on it.
• 23:07
  SPEAKER_00: In other instances, it might not.
• 23:09
  If you're talking about open source technology that essentially
• 23:12
  can be used and
• 23:13
  SPEAKER_00: deployed by anyone redeployed,
• 23:15
  SPEAKER_00: used,
• 23:16
  SPEAKER_00: incorporated into technology downstream,
• 23:19
  It may be that the AI developer loses any ability to segregate
• 23:23
  into different
• 23:24
  SPEAKER_00: geographical streams.
• 23:26
  SPEAKER_03: Paul, how do you see it?
• 23:29
  SPEAKER_03: Yeah, I agree with that.
• 23:30
  I think a really important question that courts ask when
• 23:34
  they're thinking about the
• 23:35
  SPEAKER_03: Commerce Clause,
• 23:36
  SPEAKER_03: and also when they're thinking just about personal jurisdiction,
• 23:39
  is can you be essentially found in violation of New York law
• 23:44
  without having
• 23:45
  SPEAKER_03: directed your conduct toward New York?
• 23:49
  And so if you if you look at how courts have thought about
• 23:52
  state regulation of the
• 23:53
  SPEAKER_03: Internet over time,
• 23:54
  SPEAKER_03: in the early days of the Internet,
• 23:56
  SPEAKER_03: there were some cases where courts said,
• 23:58
  SPEAKER_03: you know,
• 24:00
  Vermont cannot regulate what's on a blog or a Web page because
• 24:04
  that that's just
• 24:05
  SPEAKER_03: going out to the whole world.
• 24:07
  SPEAKER_03: And we can't if we let Vermont regulate it,
• 24:09
  SPEAKER_03: that Vermont will be controlling conduct in all of the other states.
• 24:12
  SPEAKER_03: And then Elan mentioned geofencing.
• 24:14
  SPEAKER_03: As geofencing technology became better,
• 24:16
  SPEAKER_03: you started to see courts saying,
• 24:18
  SPEAKER_03: for example,
• 24:19
  there was a case involving a California law that required CNN
• 24:23
  to put closed
• 24:24
  SPEAKER_03: captions on videos on its website.
• 24:27
  SPEAKER_03: And CNN challenged that under the Commerce Clause.
• 24:29
  SPEAKER_03: And California said,
• 24:31
  SPEAKER_03: it's fine because you can detect,
• 24:34
  you can use technology to identify when someone from California
• 24:37
  is accessing your
• 24:38
  SPEAKER_03: website.
• 24:39
  SPEAKER_03: and you can just provide closed captions to those people,
• 24:42
  SPEAKER_03: and you don't have to provide closed captions in other states.
• 24:44
  So I think that is going to be a really important part of how
• 24:48
  courts look at AI regulation.
• 24:50
  SPEAKER_03: They're going to ask,
• 24:52
  is this state law only going to apply to AI developers or
• 24:58
  deployers who are
• 24:59
  actively engaged in conduct within the state or directing their
• 25:02
  conduct to the
• 25:03
  SPEAKER_03: state,
• 25:04
  SPEAKER_03: or is it potentially going to reach out and affect
• 25:07
  open source developers and developers who are not actually
• 25:11
  directing their conduct
• 25:12
  towards the regulating state and are just being pulled in
• 25:15
  because their product
• 25:16
  SPEAKER_03: through the stream of commerce somehow made it to the state.