by James Daily
Superheroes who can fly under their own power, however, are probably exempt from current FAA regulations. The FAA’s regulations apply to “aircraft,” which are defined by statute as “any contrivance invented, used, or designed to navigate, or fly in, the air.” 11 The word “contrivance” is also used in the US Code to define vehicles and vessels, and so the implication is clear that a “contrivance” is limited to an artificial device of some kind rather than an innate ability. 12 As a result, Superman and other self-propelled superheroes are out of bounds for the FAA, whereas heroes like Batman, Iron Man, and arguably even the Green Lantern would have to deal with FAA regulations.
Pharmaceuticals, Medicine, and the FDA
Then there’s the issue of medical and pharmaceutical regulation. The Food and Drug Administration (FDA) and the Drug Enforcement Administration (DEA) regulate the pharmaceutical market pretty tightly. But interesting drugs and other medical procedures are staples of comic book stories, from the military experiments that gave Wolverine his adamantium skeleton and Deadpool his healing factor, the mind-control drugs of Professor Pyg, or the Extremis virus. All of these are problematic, because under federal law, no medical procedure, device, or drug may be used on a human subject without the involvement and approval of the FDA (and DEA where appropriate).
For supervillains, this isn’t all that much of an issue, as if one is planning to destroy all of New York City, an additional charge of violating FDA regulations is the least of one’s worries. But for someone like Tony Stark, who maintains a highly public persona as the head of a generally law-abiding multibillion-dollar corporation, this is not the sort of thing one messes with.
One of the reasons that these plot devices are so compelling—particularly of the Weapon X sort—is that the US and other governments did engage in widespread secret medical experimentation throughout the Cold War. The CIA’s Project Bluebird involved experiments with mind-control devices, psychedelic drugs hoped to have applications as truth serums, hypnosis, sleep deprivation, and basically everything short of brain surgery in an attempt to develop espionage and counterespionage techniques. What other governments did—especially China—was rumored to be so horrifying that movies like The Manchurian Candidate took on an aura of eerie verisimilitude. In essence, what a lot of comic book stories seem to do is to assume that some of these experiments actually worked. So while private individuals conducting bizarre medical experiments in secret labs is pretty implausible given the reach and power of the FDA, stories involving off-book military experiments and rogue operatives are distressingly believable.
The FDA Approval Process
Not all comic book medicine is the work of supervillains, however. Reed Richards has tried for years to reverse Ben Grimm’s transformation into the Thing, Bruce Banner has sought to cure himself, and many mutants have wished for a way to reverse their mutations, as in X-Men: The Last Stand. What would the process look like if these researchers followed the proper protocol for developing a new drug or vaccine?
Once a potential drug has been identified, the next step is usually animal testing. Without a convincing body of research showing that the new treatment was safe and effective in animals, the FDA is unlikely to allow human testing. Animal testing is itself subject to laws and regulations, particularly if the researchers or the institution receives federal funding. 13
Wait…Are you even a real doctor? And you want me to do what now? Stan Lee, Jack Kirby et al., The Hulk vs. the Thing, in FANTASTIC FOUR (VOL. 1) 25 (Marvel Comics April 1964).
After animal testing has been done, the researchers submit an Investigational New Drug (IND) application to the FDA. If the FDA approves, then Phase I clinical trials can begin. These trials are done with a small number of human subjects, and the purpose is typically to determine safety rather than efficacy. If the drug appears to be safe, then Phase II trials are conducted, which use a larger group of patients and determine both safety and efficacy. Finally, Phase III trials are large, long-term studies that compare the new drug with existing treatments.
Each of these trials are typically required to be overseen by an institutional review board, which ensures that the research is conducted in an ethical manner. If there is a problem with the study or if it is clear that the drug is unsafe or ineffective, then the FDA can stop the testing at each step of this process. If all of the results are promising, however, then the researchers can submit a New Drug Application (NDA). Once the FDA approves the NDA, then the drug can be sold on the market.
In emergency situations, the FDA can waive some of these procedural requirements. It is unlikely, though, that the FDA would ever allow a doctor to repeatedly experiment on a single patient (such as the Thing) without oversight, even if the patient consented.
In the real world this process often takes years and a large number of patients, so it’s no surprise that comic books usually omit these details, especially when dealing with a unique disease. X-Men: The Last Stand probably comes closest to the reality of drug development: a long, expensive process conducted with significant oversight.
Superman and Taxes
The federal agency that we all butt into eventually is the IRS, and superheroes aren’t immune to the long arm of tax law. For example, in Superman III Superman crushes coal into a diamond and gives it to Lana Lang. This iconic gift has become closely associated with the Superman character, but because we are attorneys we have to ask: Does someone have to pay tax on that? It might seem strange to think that the IRS would bother trying to come after Superman, but as mentioned earlier in this chapter, it’s happened before. And speaking of which, just what about Superman’s plan to claim the whole world as his dependent? First, we’ll talk about the diamonds, which are also mentioned by the IRS agent in Superman #148.
There are actually two different questions in this case: (1) are the diamonds taxable income for Superman (or Clark Kent) and (2) are they taxable income for a recipient such as Lana Lang?
The answer to the first question is “probably not.” A traditional, almost fundamental principle of income tax is that a gain in value must be realized before it can be taxed, although the definition of “realized” has expanded over the years, somewhat eroding the principle. The Internal Revenue Code provides that one example of income is “gains derived from dealings in property.” 14 “Dealings” are not defined in the statute, but 26 U.S.C. § 1001 (a) defines the computation of “the gain from the sale or other disposition of property.” It seems clear that improving the value of the carbon by turning it from coal to a diamond is not such a taxable event, since there is neither a sale nor disposition of the property. An analogy might be made to painting a picture or one that appreciates in value; the increase in value is not taxed until the painting is sold or otherwise transferred to someone else.
The answer to the second question is very different. If the diamond is given to Lana Lang, that is a gift, which has its own set of special rules. In the United States, gifts are generally not taxable income for the recipient. 15 But there is a gift tax that is ordinarily paid by the giver. 16 However, there is a significant exclusion for gifts that currently stands at thirteen thousand dollars per recipient per year, as well as a unified lifetime credit. 17 This credit may not solve the problem, however. Superman may have made other gifts that already used up the credit; he has certainly been around long enough to have done so! Presuming the diamond was given as a gift today and the lifetime credit was not available, would they exceed the exclusion?
Obviously this depends on the size and quality of the diamond and the state of the diamond market, but for example the diamond given to Lana Lang in Superman III appears to be about 3.5–4 carats and of very good quality. A similar diamond would cost somewhere between $150,000 and $400,000, depending on the particulars, which is far beyond the gift exclusion. So how much would Superman be on the hook for? The answer is “a lot.” For example, if the ring were valued between $150,000 and $250,000, then the gift tax would be $38,800 plus 3
2 percent of the excess beyond $150,000, so potentially as much as $70,800.
But is the fair market value of the diamond simply that of an ordinary diamond of like size and quality? The general rule for computing the value of gift of property is given in 26 C.F.R. § 25.2512-1: “The value of the property is the price at which such property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell, and both having reasonable knowledge of relevant facts.” The unusual origin of the diamond is almost certainly a relevant fact, and if diamonds created by Superman are rare, which seems to be the case, then this particular diamond would command a significant premium, and the tax would be correspondingly higher.
This is a problem, since Clark Kent probably doesn’t make enough money to pay the tax, and Superman probably doesn’t want to get tangled up with the IRS. It is possible to perform a “net gift” for which the recipient pays the tax, but it is unlikely that Lana has the money for that either. She could sell the ring to pay the tax, of course, but that would defeat the purpose of the gift. Alternatively, Superman could give her several diamonds with the intention that she keep one as a ring and sell the others to pay the taxes on all of the diamonds. As complicated as that would be, it might be the only way to keep things aboveboard.
There is a way for Superman to avoid the gift tax, however. Unlike gifts of property, gratuitous services are not taxed (on the other hand, neither are they tax deductible if performed for a charity). Instead of giving Lana a diamond, Superman could crush a piece of coal that she owned, transforming it into a diamond. There are few ways in the real world to transform essentially worthless material into something extremely valuable with relatively little effort—celebrity autographs are one example—so the tax code doesn’t bother trying to tax gratuitous services. In short, this is a tax loophole for Superman!
What if Lana doesn’t have a lump of charcoal handy for Superman to transform into a diamond? Couldn’t he give her a lump of coal (a low-value gift) and then perform the gratuitous service? Alas, the courts and the IRS would look past the form of the transaction to its substance18 In this case, the substance of the transaction would be that Superman is really giving Lana a diamond rather than improving the value of a piece of property that she already had.
And speaking of Superman and tax loopholes, could he really claim everyone in the world as a dependent? We think not. The law allows two kinds of dependents, qualifying children and qualifying relatives, and most of the world is neither from Superman’s point of view. 19 Among other requirements, a qualifying child must be a son, daughter, stepchild, foster child, or a descendant of any of them (e.g., a grandchild) or brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them (e.g., a niece or nephew). Most versions of Superman have few or no such close relatives, so we don’t even need to consider the other requirements for a qualifying child (age, residency, support, and the joint return test).
Similarly, there are several requirements for being a qualifying relative, but the killer is that the person must either live with you year-round or be related to you in one of several specified ways, none of which apply in Superman’s case. 20 Alas, it looks like this particular tax dodge won’t work.
1. Robert Bernstein et al., Superman Owes a Billion Dollars!, in SUPERMAN (VOL. 1) 148 (DC Comics October 1961).
2. This is particularly true of some of the agencies Roosevelt set up to manage various aspects of the war effort, e.g., the Office of Scientific Research and Development, which was run more or less as the personal fiefdom of Vannevar Bush.
3. Pub. L. No. 79-404, 60 Stat. 237 (codified at 5 U.S.C. § 500 et seq.).
4. Essentially, before a rule becomes effective, the agency proposing it must give public notice of the proposed rule and respond to comments by the public on that rule. This is where a lot of lobbying happens.
5. On a more technical note, the CIA and other military agencies are not specifically exempted from the requirements of the APA, and they would seem to count as an “administrative agency” under 5 U.S.C. § 701. Regardless, as a matter of practice, the CIA does not comply with most of the requirements of the APA. The same goes for most other intelligence agencies and Department of Defense projects.
6. For example, see the discussion of the draft in chapter 1.
7. Well, sort of anyway. The specifics of the law are never really worked out all that well, and S.H.I.E.L.D., the fictional Office of National Emergency, and the real-life Department of Homeland Security are inconsistently depicted as having responsibility for varying aspects of the law’s implementation. It seems likely that the editors never sat everyone down and decided how this was going to work, which would explain a lot of consistency problems in the event.
8. Which is actually a pretty controversial political issue and has led to a perceived “revolving door” between government and industry. The issue is that putting former industry executives in charge of regulating their own industries does little to allay suspicions of sweetheart deals and even outright corruption.
9. Some agencies, like the Federal Reserve, are “independent,” meaning they do not answer directly to…well anyone really. But these are the minority among agencies.
10. For example, see Marvel’s various Fifty State Initiative stories to see superheroes at work in Philadelphia, Chicago, and Detroit, among other cities.
11. 49 U.S.C. 40102(a)(6).
12. 1 U.S.C. 3–4 (defining “vessel” and “vehicle”).
13. The Animal Welfare Act requires that federally funded animal research be reviewed by an Institutional Animal Care and Use Committee, which reports to the National Institutes of Health Office of Laboratory Animal Welfare.
14. 26 U.S.C. § 61(a)(3).
15. 26 U.S.C. § 102(a).
16. 26 U.S.C. § 2501(a)(1) and 26 U.S.C. § 2502(c).
17. 26 U.S.C. § 2503 and 26 U.S.C. § 2505. The unified lifetime credit counts against the estate tax credit of 26 U.S.C. § 2010.
18. Gregory v. Helvering, 293 U.S. 465 (1935).
19. 26 U.S.C. § 152.
20. These include children, stepchildren, foster children, or a descendant of any of them; siblings, half siblings, and stepsiblings; parents, grandparents, or other direct ancestors but not foster parents; stepparents; sons and daughters of a sibling or half sibling; aunts and uncles; and siblings-in-law, parents-in-law, and children-in-law. 26 U.S.C. § 152(d)(2).
CHAPTER 9
Intellectual Property
Intellectual property issues come up in comic books more often than one might think, sometimes explicitly and sometimes implicitly. As an area of law, intellectual property includes patents, copyrights, and trademarks. Each of these protects different subject matter, and comic books provide examples of all of them.
Patents
Broadly speaking, patents protect inventions. 1 Numerous superheroes and supervillains rely on gadgets, doomsday weapons, and other advanced technologies, so it makes sense that they would be interested in patent protection. In fact, Reed Richards (a.k.a. Mr. Fantastic) finances the Fantastic Four in part through licensing his patents. Both Wayne Enterprises and Stark Industries are multinational conglomerates that almost certainly rely on patents. A little further out on the fringes are issues like whether the movie version of Spider-Man (who was bitten by a genetically modified spider) might infringe a gene patent simply by developing superpowers.
Congress is empowered to grant patents by the Constitution’s Patent and Copyright Clause: “Congress shall have power to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” 2 Combined with the Supremacy Clause 3 and the doctrine of preemption, this means that states cannot enact their own patent or patent-like laws. 4 This is important because the same patent laws apply all over the country, including in Gotham—and thus to Wayne Enterprises—no matter which state Got
ham is actually located in.
Batman and Patents
Batman’s use of gadgets developed by Wayne Enterprises poses an intellectual property strategy problem for the company. Specifically, Batman’s public use of the inventions may actually prevent Wayne Enterprises from obtaining patent protection. Luckily, there’s a solution, albeit one that requires a little help from Bruce Wayne’s friends in the Department of Defense.
Reed Richards funds the Fantastic Four in part through patent licenses and sales but not always under the best circumstances. Selling the patents to the government is actually a reasonable thing to do. The federal government can own patents—in fact, it owns quite a few—and although the government cannot be enjoined from infringing a patent, it must pay reasonable compensation for any unlicensed use of a patented technology. 28 U.S.C. § 1498(a). Thus, the government might be interested in buying Reed’s patents either in order to license the patents itself or to avoid having to pay Reed royalties. Mark Waid, Mike Wieringo et al., Hereafter Part 1, in FANTASTIC FOUR (VOL. 1) 509 (Marvel Comics March 2004).