The National Law Forum

Supreme Court Rules Against Freezing “Untainted” Assets

In a ruling that could have far-reaching implications for criminal defendants’ right to counsel of their choice, the Supreme Court decided on March 30, 2016 that the government cannot freeze “untainted” assets that are not related to any alleged wrongdoing. Reaching this conclusion, the Court overturned an Eleventh Circuit decision affirming an order freezing a defendant’s assets that, while not obtained as a result of, or traceable to, the criminal conduct alleged, represented property of “equivalent value” to the illegal proceeds.

Writing for the majority in Luis v. United States, 578 U.S. ___ (2016), Justice Breyer, joined by Justice Roberts, Ginsburg and Sotomayor, drew a bright constitutional line, rooted in principles of property law, between tainted and untainted assets. The Court stated that the latter “belongs to the defendant, pure and simple. In this respect, it differs from a robber’s loot, a drug seller’s cocaine, a burglar’s tools, or other property associated with the planning, implementation, or concealing of a crime.” Weighing these property rights, together with the “fundamental character” of a criminal defendant’s Sixth Amendment right to counsel, against the government’s stated interests, the Court reasoned that “in our view, insofar as innocent (i.e., untainted) funds are needed to obtain counsel of choice, we believe that the Sixth Amendment prohibits the court order that the Government seeks.”

The Court found further support for its decision in the fact that, absent the ability to use untainted funds to secure counsel, “[t]hese defendants, rendered indigent, would fall back upon publicly paid counsel, including overworked and underpaid public defenders” and that “increasing the government-paid-defender workload [would] render less effective the basic right the Sixth Amendment seeks to protect.”

The majority’s opinion also sought to address the concerns of the dissenting justices that, given the fungible nature of money, “sometimes it will be difficult to say whether a particular bank account contains tainted or untainted funds.” Justice Breyer noted that “the law has tracing rules that help courts implement the kind of distinction we require in this case.”

Notably, while the petitioner’s assets in Luis had been frozen under a statute applying to violations of health care laws,” see 18 U.S.C. § 1345(a), the same statute also applies to a wide range of white collar crimes, including bank theft and bribery, as well as money laundering.

Article By Glen A. Kopp & David A. Shargel of Bracewell LLP

Supreme Court Rules Against Freezing "Untainted" Assets

Article By Glen A. Kopp & David A. Shargel of Bracewell LLP

The Smart Phone Patent Saga Continues: Apple Inc. v. Samsung Electronics Co., Ltd., et al.

In a case involving suits, countersuits and multiple appeals by the two giants of the mobile phone space, the US Court of Appeals for the Federal Circuit reversed a jury’s finding of infringement, voiding the accompanying award to Apple of more than $119 million. Apple Inc. v. Samsung Electronics Co., Ltd., et al., Case Nos. 015-1171, -1195, -1994 (Fed. Cir., Feb. 26, 2016) (Dyk, J).

In this case’s third appeal, the Federal Circuit was asked to deal with “the core infringement and invalidity issues with respect to the asserted patents.” At issue were five patents asserted by Apple against Samsung (four of which a jury found to be infringed) and two patents asserted by Samsung against Apple (one of which the same jury found to be infringed).

After the district court entered judgment on the jury verdict ($120 million to Apple and $160,000 to Samsung), both sides appealed.

The Apple Patents

With regard to the Apple “click structure” patent, the Federal Circuit found that no reasonable jury could have concluded that the accused Samsung devices included the claimed “analyzer server,” and reversed the judgment of infringement. Before trial, neither party sought construction of “analyzer server,” agreeing that it should be given its ordinary meaning. On the last scheduled day of the trial, the Federal Circuit construed this term (in the Motorola case) as “a server routine separate from a client that receives data having structures from the client.” The district court adopted this construction and permitted the parties to recall their expert witnesses to provide testimony under this construction. However, the Federal Circuit concluded that Apple failed to present sufficient testimony that the accused software library programs in the Samsung phones ran separately from the programs they served (i.e., the Browser and Messenger applications), as required by the Federal Circuit’s construction. Accordingly, the Federal Circuit reversed the district court’s denial of judgment as a matter of law (JMOL) of non-infringement.

Apple also asserted its “slide to unlock” patent, whereby a user can slide a moving image across the screen with a finger in order to unlock the phone, and its “auto correct” patent, whereby a phone automatically corrects typing errors. At the district court, Samsung sought JMOL that both of these patents were invalid as obvious. The Federal Circuit agreed.

For the “slide to unlock” patent, Apple did not dispute that the prior art combination disclosed all of the claimed features. Rather, Apple argued that the jury could have reasonably found that one of the references taught away from using the “slider toggle” feature, and that a skilled artisan would not have been motivated to combine these references, since the slide toggle reference describes a wall-mounted touch-screen device, not a mobile phone. The Federal Circuit disagreed, concluding that “[t]he fact that [the prior art reference] notes that users did not prefer the particular design of the slider toggle is not evidence of teaching away.” The Federal Circuit reasoned that a motivation to use the teachings of a particular prior art reference need not be supported by a finding that the feature is the “preferred, or the most desirable” option.

The Federal Circuit also concluded that no reasonable jury could find that the reference is not analogous art since it concerned user interfaces for touch-screen devices, noting that the asserted patent and the reference both disclose essentially the same structure: a touch-screen device with software that allows the user to slide his or her finger across the screen to change interface states.

The Federal Circuit also dismissed Apple’s secondary considerations argument, noting that although Apple identified the unsolved problem as the lack of an “intuitive” method of unlocking a touch-screen portable device, it provided no evidence showing that the asserted need was recognized in the industry. With respect to industry praise, the Court noted that evidence of approval by Apple fans—who may or may not have been skilled in the art—is not legally sufficient.

With respect to copying, the Federal Circuit noted the only evidence of copying went to an unlock mechanism using a fixed starting and ending point for the slide—a feature disclosed in the prior art. Finally, with respect to commercial success, the Federal Circuit reasoned that Apple’s evidence was not sufficient to show a “nexus” between the patented feature and the commercial success of the iPhone. Accordingly, the evidence of secondary considerations was insufficient as a matter of law to overcome the prima facie obviousness case.

Apple also asserted its “universal search” patent that permits a user to search for results from both the phone and the internet based on a single search term. On appeal, the issue was whether the search feature on the Samsung phones “locates” information on the internet. The district court found that Samsung devices do not search the internet, but rather blend data previously retrieved from a Google server and a local database. Apple argued that the plain meaning of the claim covered search information previously downloaded from the internet, a construction the district court denied. The Federal Circuit agreed with the district court’s denial.

The Samsung Patents

Samsung asserted a patent directed to capturing, compressing and transmitting videos. In its claim construction order, the district court construed “means for transmission”—a means-plus-function claim limitation—to require software in addition to hardware. Samsung argued that the district court erred in its construction because the specification did not “require any software for transmission, and including such software [in addition to hardware] as necessary structure was error.” The Federal Circuit agreed with the district court that the term “transmission” implies communication from one unit to another, and the specification explains that software is necessary to enable such communication. The Federal Circuit noted that software is necessary because hardware alone does nothing without software instructions telling it what to do, and affirmed the district court’s construction of the term and the judgment of non-infringement.

As for Samsung’s patent directed to a camera system for compressing, decompressing and organizing digital files, the jury found that Apple had infringed, and the district court denied Apple’s post-trial motion for JMOL of non-infringement. Apple argued that no reasonable jury could have found that the Apple products met the “compressor” and “decompressor” limitations of the claim because these limitations require components that compress or decompress both still images and videos, and its products use separate and distinct components to compress and decompress still images and videos. The Federal Circuit rejected this argument, finding that Samsung presented testimony that identified a single Apple design chip with circuitry that performs compressing/decompressing methods for both images and videos.

Practice Note: Assuming this decision resolves the utility patent fight, the only remaining battle shifts to the Supreme Court of the United States, which has now agreed to hear Samsung’s appeal on the issue of damages in connection with design patent infringement. See CertAlert in this issue of IP Update.

Article By

Nitin Gambhir

McDermott Will & Emery

Supreme Court Rules Public Sector Union Agency Fees Still Alive

The U.S. Supreme Court was equally divided 4-to-4 on a case that asked the Justices whether to overturn long-established law that allows a public sector union to charge an agency or service fee to those employees who choose not to join the union. With the Court equally split, the lower court’s decision is automatically affirmed, and public sector unions can continue to charge agency fees to employees who do not join the union.

**Overturning Abood Appeared A Real Possibility**

In the 1977 Abood v. Detroit Board of Education decision, the Supreme Court ruled that unions could charge an agency fee to public employees who chose not to join the union to cover the union’s costs to negotiate a contract that covers all the public employees. For over thirty years, that has been settled law. In 2014, however, the Court suggested it might be willing to overturn Abood, questioning its analysis on several grounds, including whether a mandatory agency fee violates a non-union member’s First Amendment right to free speech.

That apparent willingness to overturn Abood set up the First Amendment challenge to public union agency fees in this term’s case of Friedrichs v. California Teachers Association. At the oral argument in Friedrichs in January, the Court’s more conservative Justices appeared ready to overrule Abood. Even the four more liberal Justices appeared to concede that the First Amendment argument may be tough to uphold but instead focused on the importance of not overturning prior rulings unless there is a compelling reason to do so. The long-standing Abood precedent appeared in jeopardy.

Justice Scalia’s Death Creates Stalemate

Justice Antonin Scalia’s unexpected death in February left the Court at a 4-to-4 stalemate in Friedrichs. With the even split, the Ninth Circuit’s ruling applying Abood stands.

Opponents of unions and the Abood decision will have to wait for another case to work its way through the judicial system to raise the issue for consideration by a future Court. Of course, depending on who fills Justice Scalia’s vacancy, the majority of Justices may no longer have an appetite to reconsider Abood. We’ll all have to wait and see. In the meantime, public sector unions may continue to charge agency fees to those employees not paying union dues.

Article By Jason S. Ritchie of Holland & Hart LLP

Ohio v. Sierra Club: The Integrity of the Clean Air Act

EPA Yesterday, the Supreme Court of the United States announced it will not grant Certiorari in Ohio v. Sierra Club, et al. In this case, the Sixth Circuit found an area must adopt required pollution-control measures before the EPA can designate it as having satisfied the law’s health-based pollution standards.

In 1997, the EPA created the National Ambient Air Quality Standards of fine particulate matter in the air. When the EPA created these standards, regions were designated as having met, or not met the air quality standards. In order to meet the standards, states were required to adopt “reasonable measures and technologies” to reduce the pollution in the problematic areas. In 2011, the EPA deemed Ohio to have met the appropriate standards because the air quality had improved. Ohio, however, had never created a pollution regulatory plan as the Clean Air Act required. In response, the Sierra Club filed suit alleging the EPA acted illegally by designated the areas as having met air quality standards.

Creating a pollution regulatory plan is crucial, according to Sanjay Narayan, the managing attorney for the Sierra Club on the case. Before 1990, the Clean Air Act had no requirement that states produce an implementation plan. According to Narayan, the expectation was “we [the EPA] don’t care how you get there, we aren’t going to tell you how to get there, we’re just going to check in at the deadline and expect you to have made it. And what happened was that the vast majority of the states did not meet the deadline.”

Narayan describes the implementation plan as “a show your math” requirement. This has been very useful in helping states create lasting change in their air quality–by creating a regulatory framework that shows how they can reduce air pollution, the states are more likely to meet their deadline. Narayan points out “It’s also useful for other areas to know what worked and what successful areas did. Here’s what turned out to be cost effective, that kind of record is tremendously useful as we move forward on what was meant to be a nation-wide campaign for healthy air for the public.”

In Ohio v. Sierra Club, there are a few details to consider. Pollution decreased, and that’s the goal. However, it might not be that simple. In the years preceding Ohio’s drop in air pollution, the economy crashed. Narayan draws comparisons to the Beijing Olympics, saying, “When people aren’t running their [industrial] plants for economic reasons, the air cleans up a little bit. But it turns around quickly once you turn the plants back on.” However, Ohio did meet the standard, and according to Narayan, to comply with the Clean Air Act they’d simply need to go back and show their work. He says, “They did meet the standard, and they say they have all the controls they need in place. There is a procedural step that Ohio hasn’t taken, and it shouldn’t be hard for Ohio to take it.”

The Sixth Circuit decision that currently stands requires Ohio to take those regulatory steps. In the current case, the Sixth Circuit agreed that the entire portion of the Clean Air Act must be followed, and that it wasn’t enough for Ohio to have simply met the standards. Ohio has appealed to the Supreme Court.

Narayan says, “It’s about the integrity of the clean air act.” These requirements are crucial in ensuring the air gets cleaned up in a timely manner. Narayan says, Decades of experience has shown us that without these requirements, states miss deadlines, air pollution lasts for much longer than it should and the public really suffers. The pollution sends kids to the hospital with asthma, it creates respiratory disease in the elderly-delay is a disaster for public health.”

Article By Eilene Spear & Nicole Cudiamat Minnis of The National Law Review / The National Law Forum LLC

California Employers: New Poster to be Posted April 1, 2016

Did you recently update your workplace posters? Time to do it again.

In California, all employers have obligations to satisfy workplace posting, such as posting information related to wages, hours and working conditions. The workplace posters must be placed in an area frequented by employees where these posters may be easily read during the workday.

As a result of new amended regulations pertaining to the California Fair Employment and Housing Act (“FEHA”) going into effect on April 1, 2016, certain covered employers must post a new poster on April 1, 2016. Employers with 5 or more employees (full-time or part-time) are covered by the FEHA and must post a specific notice, which replaces Pregnancy Disability Leave (“PDL”) Notice A. This new poster, titled “Your Rights and Obligations as a Pregnant Employee,” provides clarifications of the PDL, including, but not limited to, the following:

Eligible employees are entitled up to four months of leave per pregnancy, and not per year;
The four months means the working days the employee would normally work in one-third of a year or 17 1/3 weeks; and
PDL does not need to be taken all at once, but can be taken on an as-needed basis as required by the employee’s health care provider.

For a copy of this poster, click here.

Under the California Code of Regulations, “[a]ny FEHA-covered employer whose work force at any facility or establishment is comprised of 10% or more persons whose spoken language is not English shall translate the notice into every language that is spoken by at least 10 percent of the workforce.” The Spanish version of the foregoing notice should be available soon here.

Any time employers are required to update their posters and/or new (or amended) regulations are issued, employers should take the opportunity to ensure their workplace posters and their employee handbooks and policies are up to date and compliant.

Article By Pascal Benyamini of Drinker Biddle & Reath LLP

Superman Breyer v. Batman Lourie Battle in Sequenom Petition for Cert.

This is an amplification of my last post on the Sequenom petition for cert. in Sequenom v. Ariosa. I have been arguing for some years that the patent world will never be at rest where diagnostic claims are concerned until the patent eligibility of a simple “If A, then B” claim is addressed by the Fed. Cir. and/or the Supreme Court.

This is the type of claim criticized by Justices Breyer, Souter and Stevens in the “Metabolite Labs dissent” of 2006, when the Court declined to decide the patent-eligibility of a method of detecting a deficiency of cobalamin or folate by assaying a body fluid for an elevated level of homocysteine and correlating the elevated level with a cobalamin or homocysteine deficiency.” Justice Breyer just called the claim a law of nature with a mental step.

Fast forward to 2012 and the Mayo decision (132 S.Ct. 1289), and the Supreme Court invalidated an awkwardly drafted claim that I will re-write here as a method of medical treatment claim:

A method of treating an immunoregulatory disorder by administering a [known drug] so that the metabolite levels of said drug in the blood are between 1 and 10 um/l. (I made up the concentrations, but they represent, on the low side, minimal acceptable efficacy and, on the high side, unacceptable side effects. This is what the Court viewed as a natural phenomenon or correlation).

The Alice decision led the Court to the “Mayo Rule,” that a claim reciting a natural law, phenomenon or abstract idea had to be inspected to see if, in combination with the additional steps, it contained a further inventive concept that would render the claim patent-eligible under s. 101. Little guidance has been provided by the courts or the PTO as to how this rule should be applied in the case of life science claims, particularly to diagnostic claims. (Dicta in Mayo suggested that the Court did not view the claim as directed to a diagnostic method.)

Enter Arisoa. The Fed. Cir. held that the Mayo Rule rendered all the appealed claims patent-ineligible as directed to a natural phenomenon combined with well-known laboratory techniques. And, in fact, most of the appealed claims are broad. Here is claim 1 of US 6,258,540:

A method for detecting a paternally inherited[cffDNA] …which method comprises amplifying a paternally inherited nucleic acid of fetal origin from a serum or plasma sample [from a pregnant female] and detecting the presence of cffDNA in the sample.

That’s it. In an earlier post, I noted that only claim 21 recites that a diagnostic test is carried out of the amplified cffDNA. The final step of this claim reads: “providing a [prenatal] diagnosis based on the presence and/or quantity and/or sequence of the foetal nucleic acid.”

The Federal Circuit opinion below noted that this claim was on appeal but did not mention it again in its opinion. But, in Sequenom’s petition it is the only claim that is reproduced in full. Sequenom states that “Claim 21 situates [the steps of amplification and detection of cffDNA] within a larger diagnostic method that up-ended conventional practice.”

Sequenon knew both that a claim to cffDNA in maternal blood was unpatentable as a natural phenomenon. The isolated and purified cffDNA obtained after amplification and detection is a patent-ineligible natural product thanks to Myriad. So Sequenom’s decided that its best approach was to argue that the isolation and detection steps where not conventional because they had never previously been used to isolate and detect the target biomarker, cffDNA. So the Question posed to the Supreme Court might have been: “Is a method directed to isolating a biomarker from a patient sample where it had not been known by the art to occur, patent-eligible under s. 101?” But that is not exactly how Sequenom saw it in its petition, when it wrote that the Question Presented is:

“Whether a novel method is patent-eligible where; (1) a researcher is the first to discover a natural phenomenon; (2) that unique knowledge motivates him to apply a new combination of known techniques to that discovery, and (3) he hereby achieves a previously impossible result without preempting other uses of that discovery.”

The “Question” is more difficult to interpret than many claims, and raises more questions than it answers. Why does the method have to be novel to meet the requirements of s. 101? What is the “natural phenomenon”? But these are minor quibbles that Judge Breyer seems to have answered to his own satisfaction. In other words, any diagnostic test will be based on the discovery of a natural phenomenon. In this case it is not the correlation between cffDNA and any pathological state, it is the existence of cffDNA in maternal blood. Remember, only claim 21 recites carrying out a diagnostic assay based on the cffDNA, but the claim does not recite the condition that is detected.

To continue, the “unique knowledge” [of cff DNA in maternal blood] motivates researcher to apply a new combination of known techniques to that discovery. But the only conceivable difference between the known techniques used to amplify and detect cffDNA and the known techniques to measure elevated homocysteine, does not lie in the analytic techniques but in the marker that is being detected or measured. In other words, the known techniques are in “new combination” because of the marker to which they are applied.

The last factor in the Sequenom Question requires the researcher to achieve a previously impossible result without preempting other uses of the discovery. This can be no more than an tautological attempt to save the claims that do not recite carrying out a diagnostic test. But what is the impossibility that has been overcome? The previously impossible result can only be a blood test that can yield information about the state of the fetus. And all practitioners soon learn the danger of labeling the results of an invention as previously impossible.

But doesn’t any new diagnostic test achieve a result that is “impossible” before it was discovered? To come full circle, it was surely “impossible” to predict the likelihood of a man’s developing prostate cancer before the PSA assay was discovered – e.g., before it was discovered that PSA was a fairly reliable biomarker for imminent or present prostate cancer. (And there were other uses for the homocysteine assay as well – at least in 2006, lack of preemption would not have saved that claim from Justice Breyer.)

Until the recognition of the significance of a natural correlation by a researcher is given weight as an “unconventional step” per se, the relentless degradation of patent claims for both diagnostic methods and methods of medical treatment [remember my Mayo claim, above] will continue. That’s why Judges Lourie and Moore are my current superheroes, since, in their Ariosa concurrence, they wrote that “the patent’s claims merely ‘rely on or operate by, but do not recite [claim?] a natural phenomenon…and that barring such inventions under s. 101 would mean that ‘nothing in the physical universe would be patent eligible.’” Sequenom wants the Supreme Court to reverse on the basis that the Fed. Cir. is applying the Mayo Rule too broadly. I don’t think they are wrong. I just don’t like the condition of the horse they rode in on.

Article By Warren Woessner of Schwegman, Lundberg & Woessner, P.A.

Olympus to Pay $632.2 Million to Resolve Allegations of Kickbacks

Olympus Corporation of the Americas, the United States’ largest distributor of endoscopes and related medical equipment, recently agreed to pay $623.2 million to resolve criminal charges and civil claims, according to a United States Department of Justice (DOJ) press release on March 1, 2016. The settlement is a result of a qui tam action alleging violations of the Federal False Claims Act (FCA), Federal Anti-Kickback Statute (AKS), and analogous state statutes for paying kickbacks to physicians and hospitals to induce the purchase of Olympus medical and surgical equipment. Olympus was required to enter into a Corporate Integrity Agreement and a Deferred Prosecution Agreement that, among other things, includes an executive financial recoupment program that will cause company executives to forfeit certain compensation if they are associated with future misconduct.

The relator and government alleged that, because the Olympus equipment used for treatment was purchased as a result of a kickback, Olympus caused the physicians and hospitals to file false claims for treatment under Medicare, TRICARE, and Medicaid in violation of the FCA and state law. The kickbacks themselves were prohibited under the AKS. Both federal laws have separate penalties that were combined in this settlement, which is a reminder to the health care industry that liability under the FCA and AKS can reach staggering amounts.

What Providers Should Know

If an employee raises a compliance concern, investigate and appropriately address the concern. Do not retaliate. While the Olympus relator was a former Chief Compliance Officer with a long employment history at Olympus, individuals at all levels and experiences may have insight into company practices sufficient to identify areas of compliance vulnerability (thereby later arming themselves with information sufficient to file a qui tam action should the company choose to ignore individuals’ concerns or otherwise fail to correct non-compliance).
Prohibited remuneration under the AKS may take many forms. For instance, the remuneration that Olympus allegedly provided to physicians and hospitals included free use of medical equipment, unprotected discounts, payments disguised as grants for educational or research programs, payments to physicians in excess of fair market value for speaking engagements, vacations, meals, and entertainment.
If referring health care providers receive remuneration, the compensation arrangements should be carefully structured to meet applicable AKS safe harbors. Providing remuneration in the form of medical equipment discounts, leases or payments for speaking engagements may increase a company’s exposure under the AKS. Where such remuneration is provided, it is best to structure the arrangement with relevant AKS safe harbor protection.
An effective and robust compliance program is essential. In addition to allegations of kickbacks, the federal government also focused on Olympus’ alleged lack of appropriate training, knowledgeable compliance staff, and compliance programs to prevent and identify violations of the AKS and other federal health care laws.

Background and Alleged Misconduct – Kickbacks and More Kickbacks

The relator in the qui tam action was an 18-year employee of Olympus and was appointed to be Chief Compliance Officer of Olympus in 2009. Prior to 2009, Olympus had no compliance department. As the Chief Compliance Officer, the relator alleged that the he began to try to “eliminate the illegal and systemic practices” described below, but was met with inaction, retaliation, harassment, and severe resistance. In March 2010, Olympus relieved the relator of all his compliance duties and months later terminated his employment. The relator thereafter filed a qui tam action against Olympus.

The relator and government alleged that, from 2006 to 2011, Olympus induced physicians and hospitals to purchase Olympus endoscopes and other medical and surgical equipment by way of the following:

Providing free medical equipment and discounts to hospitals and physicians to induce them to purchase surgical consumables produced by Olympus.
Paying sales reps stipends of $2,300 that were meant to be used to entertain physicians.
Paying physicians tens of thousands and as much as $100,000 per year for consulting services, often without written agreements.
Providing physicians and hospitals with millions of dollars worth of free medical equipment, categorized as “permanent loans,” “leases,” “promotions,” “demo units,” “samples,” and “trade-ins.” In one case, the relator and the government alleged that Olympus provided a physician with approximately $400,000 in endoscopes and other equipment to use without charge in the physician’s private practice, allegedly resulting in one hospital’s decision to purchase millions of dollars of Olympus products.
Leasing products to physicians on a debt forgiveness program under which Olympus wrote off debt if the physician entered into a new lease for new products.
Paying physicians honorariums for speaking engagements, often without speaker agreements.
Paying out grants of hundreds of thousands of dollars from a grant committee made up entirely of sales reps, marketing people, and customer relation personnel.
Paying for physicians’ golf trips and vacations, including week-long trips to Japan with sightseeing excursions and lavish entertainment included.

Relator alleged that, because of the aforementioned conduct, Olympus facilitated more than $600 million in sales, earning more than $230 million in gross profits.

Agreements to the Olympus Settlement

The Olympus settlement contains three written agreements: a Civil Settlement Agreement, a Deferred Prosecution Agreement (DPA), and a Corporate Integrity Agreement (CIA). Collectively, these agreements reiterate the monetary and non-monetary consequences to settling allegations of kickbacks and also provide invaluable insight into the government’s view of an effective compliance program.

Civil Settlement Agreement. To settle civil claims, Olympus agreed to pay the federal government and affected state governments $306 million total plus interest, with $263.16 million going to the federal government and the remaining $42.84 million to be divided among the states. The realtor was awarded $43.4 million from the federal government’s share. Olympus also agreed to enter into a CIA with the government for five years as part of the civil settlement agreement.
Deferred Prosecution Agreement. The DPA indicates that the federal government will file on, or shortly after, the effective date of the DPA a criminal complaint charging Olympus with conspiracy to commit violations of the AKS. Under the DPA, Olympus agreed to pay the federal government $306 million plus interest in exchange for a three-year deferral of criminal prosecution, provided Olympus takes specific remedial actions. Such remedial actions include: (i) the development and implementation of an effective corporate compliance program; (ii) retention of an independent monitor to evaluate and monitor compliance with the DPA and review Olympus’ procedures and practices related to tracking loaned equipment, selecting and paying consultants, considering and awarding grants, and training and education programs; (iii) performance of specific duties by Olympus’ Chief Compliance Officer; and, (iv) enhancement and maintenance of existing training and education programs for all sales, marketing, legal, and compliance employees and senior executives. The DPA also includes an executive financial recoupment program that will cause company executives to forfeit certain compensation if they are associated with future misconduct. If Olympus fulfills its obligations, the government will not thereafter pursue a criminal conviction and will seek dismissal of the criminal complaint the federal government filed in connection with the alleged conduct.
Corporate Integrity Agreement. Olympus entered into a five year CIA with the government to review and approve its compliance program, in exchange for the government’s promise not to seek exclusion of Olympus from Medicare, Medicaid, or TRICARE. The CIA sets forth many general obligations for Olympus to meet, including: (i) compliance responsibilities of specific Olympus employees and the board of directors; (ii) development and implementation of a health care compliance code of conduct and policies and procedures regarding the operation of Olympus’ compliance program; (iii) training and education programs; (iv) risk assessment and mitigation; and, (v) establishment of a mechanism, e.g., compliance hotline, to enable individuals to disclose any identified issues or questions with compliance

The CIA further directs Olympus to meet the following specific requirements related to the alleged misconduct:

Consulting arrangements. Olympus must require all consultants who are health care professionals to enter written agreements describing the scope of work to be performed, the fees to be paid, and compliance obligations for the consultant. Olympus will pay consultants according to a centrally managed, pre-set rate structure that is determined based on a fair-market value analysis.
Grants and Charitable Contributions. Olympus must establish a grants management system that will be the exclusive mechanism through which requestors may request or be awarded grants.
Management of Field Assets. Olympus must establish a system to manage medical and surgical equipment and products provided to health care professionals on a temporary basis.
Review of Travel Expenses. Olympus must establish processes for the review and approval of travel and related expenses for health care professionals.

Article By Jennifer L. Evans, Dayna C. LaPlante, Ryan M. McAteer & Stephen M. Angelette

Polsinelli PC

Solazyme Becomes TerraVia, Shifts Focus To Food And Specialty Ingredients

On March 11, 2016, Solazyme announced a name change to reflect a new focus on food, nutrition, and specialty ingredients instead of biofuels. TerraVia™ (TerraVia), as Solazyme is now known, will create value in plant-based food through a transformational algae innovation platform. TerraVia will focus on developing AlgaVia^® Whole Algae ingredients (lipid rich powder and protein) and AlgaWise™ Algae Oils, as well as consumer food products that currently include Thrive^® Culinary Algae Oil. The Company will also focus on animal nutrition ingredients and personal care ingredients, including AlgaPur Oils. The fuels, industrial oils, and Encapso™ business previously run by Solazyme have been moved to a unit called Solazyme Industrials, which is likely to be sold off. This shift towards high-value, low volume product areas is not surprising given the current low oil prices that are hurting biofuel profits, and is a key component in the continued success of the biobased industry.

Article By Kathleen M. Roberts of Bergeson & Campbell, P.C.

Breaking: CPSC Obtains Record $15.45 Million Civil Penalty in Settlement Agreement with Gree

This morning, the U.S. Consumer Product Safety Commission (CPSC) announced that it has obtained a record-breaking $15.45 million civil penalty in a settlement agreement with Gree Electric Appliances of China, Hong Kong Gree Electric Appliances Sales Co. of Hong Kong, and Gree USA Sales of California (Gree) over dehumidifiers sold under 13 different brand names. This civil penalty amount shatters the largest previous amount levied by the CPSC against a company, $4.3 million.

The amount of this civil penalty—the maximum permitted under the Consumer Product Safety Act (CPSA)—is consistent with a series of recent remarks made by CPSC Chairman Elliot Kaye. In 2015, Kaye remarked at the annual ICPHSO product safety conference that he was directing staff to seek significantly higher civil penalties against companies for violations of the CPSA. Last month, at the 2016 ICPHSO conference in Washington, D.C., Kaye doubled down (literally) by stating that he wanted to see “double digit” civil penalties based on certain fact patterns as that is what Congress intended when it increased the civil penalty ceiling in the Consumer Product Safety Improvement Act of 2008 (CPSIA).

According to the settlement agreement, the CPSC alleged that Gree did the following: (1) knowingly failed to report a defect and unreasonable risk of serious injury to the CPSC immediately with dehumidifiers sold under thirteen brand names; (2) knowingly made misrepresentations to the CPSC; (3) sold dehumidifiers bearing the UL safety certification mark knowing that the dehumidifiers did not meet UL flammability standards. The CPSC alleged further that Gree’s subject dehumidifiers had a defect that caused them to overheat, and, on occasion, catch fire, causing a purported $4.5 million in property damage.

Gree denied the CPSC’s allegations and also set forth in the settlement agreement that it voluntarily notified the Commission in connection with the dehumidifiers, carried out a voluntary recall in cooperation with the Commission and acted to reduce the potential risk of injury.

In addition to paying the $15.4 million civil penalty to settle the CPSC’s charges, Gree has agreed to implement a stringent compliance program to ensure future compliance with the CPSA. Such compliance programs have become common elements in civil penalty settlement agreements.

The vote to approve the settlement agreement was 4-1 in favor, with Commissioner Ann Marie Buerkle voting against. Although voting in favor of the agreement, Commissioner Joe Mohorovic issued a statement expressing reservation that the public facing documents do not reveal enough detail (in Mohorovic’s words the “compelling facts”) for the regulated community to draw lessons. Mohorovic has expressed these same concerns previously.

Article By Matthew Cohen & Matthew R. Howsare of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

The National Law Forum

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