The National Law Forum

UNDER SURVEILLANCE: Police Commander and City of Pittsburgh Face Wiretap Lawsuit

Hi CIPAWorld! The Baroness here and I have an interesting filing that just came in the other day.

This one involves alleged violations of the Pennsylvania Wiretapping and Electronic Surveillance Act, 18 Pa.C.S.A. § 5703, et seq., and the Federal Wiretap Act, 18 U.S.C. § 2511, et seq.

Pursuant to the Pennsylvania Wiretapping and Electronic Surveillance Act, 18 Pa.C.S.A. § 5703, et seq., a person is guilty of a felony of the third degree if he:

(1) intentionally intercepts, endeavors to intercept, or procures any other person to intercept or endeavor to intercept any wire, electronic or oral communication;

(2) intentionally discloses or endeavors to disclose to any other person the contents of any wire, electronic or oral communication, or evidence derived therefrom, knowing or having reason to know that the information was obtained through the interception of a wire, electronic or oral communication; or

(3) intentionally uses or endeavors to use the contents of any wire, electronic or oral communication, or evidence derived therefrom, knowing or having reason to know, that the information was obtained through the interception of a wire, electronic or oral communication.

Seven police officers employed by the City of Pittsburg Bureau of Police team up to sue Matthew Lackner (Commander) and the City of Pittsburgh.

Plaintiffs, Colleen Jumba Baker, Brittany Mercer, Matthew O’Brien, Jonathan Sharp, Matthew Zuccher, Christopher Sedlak and Devlyn Valencic Keller allege that beginning on September 27, 2003 through October 4, 2003, Matthew Lacker utilized body worn cameras to video and audio records Plaintiffs along with utilizing the GPS component of the body worn camera to track them.

Yes. To track them.

Plaintiffs allege they were unaware that Lacker was utilizing a body worn camera to video and auto them and utilizing the GPS function of the body worn camera. Nor did they consent to have their conversations audio recorded by Lacker and/or the City of Pittsburgh.

Interestingly, Lackner was already charged with four (4) counts of Illegal Use of Wire or Oral Communication pursuant to the Pennsylvania Wiretapping and Electronic Surveillance Act. 18 Pa.C.S.A. § 5703(1) in a criminal suit.

So now Plaintiffs seek compensatory damages, including actual damages or statutory damages, punitive damages, and reasonably attorneys’ fees.

This case was just filed so it will be interesting to see how this case progresses. But this case is an important reminder that many states have their own privacy laws and to take these laws seriously to avoid lawsuits like this one.

Case No.: Case 2:24-cv-00461

PTO to Patent Examiners: Make Interpretation of Means-Plus-Function Claims Clear in the Record

On March 18, 2024, the US Patent & Trademark Office (PTO) issued a memorandum to patent examiners addressing means-plus-function and step-plus-function claim limitations and how to clearly articulate, in the prosecution record, the PTO’s interpretation of such claim limitations. The goal of the memorandum is to ensure consistency in connection with the examination of such limitations, provide both the applicant and the public with notice regarding the claim interpretation used by the patent examiner, and provide the applicant an opportunity to advance a different claim interpretation early in the prosecution.

As stated in 35 U.S.C. §112(f), “[a]n element in a claim for a combination may be expressed as a means or step for performing a specified function without the recital of structure, material, or acts in support thereof, and such claim shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalents thereof.” The memorandum does not suggest any changes in interpretation of the statute.

One aspect of the memorandum is to remind examiners of the resources and guidance available when examining means-plus-function and step-plus-function claim limitations, specifically MPEP §§ 2181-2187 and refresh training. In accordance with the guidance, the primary steps when examining such claim elements include:

Determining whether a claim limitation invokes § 112(f)
Ensuring the record is clear with respect to invoking § 112(f)
Evaluating the description necessary to support a § 112(f) claim limitation under §§ 112(a) and (b).

To determine whether a claim limitation invokes §112(f), the guidance instructs examiners to employ the three-prong analysis set forth in MPEP § 2181, subsection I. Using this analysis, recitation of the terms “means” or “step” in association with functional language, rather than structure, material or acts for performing that function, should be interpreted as claim limitations invoking § 112(f). However, where these terms are accompanied by structure, materials or acts for performing the function, § 112(f) is not invoked. On the other hand, a limitation reciting functional language along with a generic placeholder term instead of “means,” which fails to recite sufficiently definite structure for performing the function, would nonetheless invoke § 112(f), according to a proper analysis. Examples of such generic placeholders include “mechanism for,” “module for,” “device for,” “unit for,” “component for,” “element for,” “member for,” “apparatus for,” “machine for” and “system for.”

An important caveat in the memorandum states that “[e]stablishing the interpretation of § 112(f) limitations in writing during prosecution is critical in supporting the agency goal of establishing a clear prosecution record.” The guidance advises examiners that form paragraphs are available in support of meeting this objective, which serve to inform “the applicant, the public, and the courts . . . as to the claim construction the examiner used during prosecution. This further informs the applicant, the public, and the courts (and the PTO for any post-grant review procedures) as to how the examiner searched and applied prior art based on the examiner’s interpretation of the claim.”

The memorandum further emphasizes the need to evaluate whether claims under §112(f) meet the written description and enablement requirements of § 112(a) and the definiteness requirement of § 112(b). Regarding the latter, the specification must clearly disclose a structure that is clearly linked to or associated with the function, which would be understood by one skilled in the art to perform the entire recited function. Further, “[f]or computer-implemented § 112(f) claim limitations, the specification must disclose an algorithm for performing the claimed specific computer function . . . [and] sufficiency of the disclosure of the algorithm must be determined in light of the level of ordinary skill in the art.”

The memorandum further states that an indefinite § 112(f) claim limitation “based on failure of the specification to disclose corresponding structure that performs the entire claimed function will also lack adequate written description and may not be sufficiently enabled to support the full scope of the claim under § 112(a).” Thus, in any § 112(f) analysis, an examiner must determine whether the specification establishes possession of the claimed invention and whether sufficient information is provided to enable one skilled in the pertinent art to make and use the claimed invention.

For further details, see the memorandum here and the Federal Register notice here.

DOJ Plan to Offer Whistleblower Awards “A Good First Step”

The Department of Justice (DOJ) will launch a whistleblower rewards program later this year, Deputy Attorney General Lisa Monaco, announced today. Monaco stated that other U.S. whistleblower award programs, such as the SEC, CFTC, IRS and AML programs, “have proven indispensable” and that the DOJ plans to offer awards for tips not covered under these programs.

“This is a good first step, but the Justice Department has miles to go in creating a whistleblower program competitive with the programs managed by the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC),” said Stephen M. Kohn.

“We hope that the DOJ will follow the lead of the SEC and CFTC and establish a central Whistleblower Office that can accept anonymous and confidential complaints. Such a program has been required under the anti-money laundering whistleblower law for over three years, but Justice has simply failed to follow the law,” added Kohn, who also serves as Chairman of the Board of the National Whistleblower Center.

According to Monaco, “under current law, the Attorney General is authorized to pay awards for information or assistance leading to civil or criminal forfeitures” but this authority has never been used “as part of a targeted program.” The DOJ is “launching a 90-day sprint to develop and implement a pilot program, with a formal start date later this year,” she stated.

While the specifics of the program have yet to be announced, Monaco did state that the DOJ will only offer awards to individuals who were not involved in the criminal activity itself.

“The Justice Department’s decision to exclude persons who may have had some involvement in the criminal activity is a step backwards and demonstrates a fundamental misunderstanding as to why the Dodd-Frank and False Claims Acts work so well,” continued Kohn. “When the False Claims Act was signed into law by President Abraham Lincoln in 1863 it was widely understood that the award laws worked best when they induced persons who were part of the conspiracy to turn in their former associates in crime. Justice needs to understand that by failing to follow the basic tenants of the most successful whistleblower laws ever enacted, their program is starting off on the wrong foot.”

Geoff Schweller also contributed to this article.

Regeneron v Novartis and Vetter: Walker Process Client Update

In an appeal that attracted a dozen amici, including the Department of Justice, the Federal Trade Commission, five states, and the District of Columbia, the Second Circuit gave the Walker Process antitrust doctrine a shot in the arm in a patent dispute related to pre-filled syringes (“PFSs”) used for injection of anti-VEGF biologic medicines into patients’ eyeballs (i.e., intravitreal injections).¹ Under Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 177 (1965), patentees who obtain patents through fraudulent behavior or inequitable conduct can be liable under the Sherman Antitrust Act. In a complaint filed in the Northern District of New York, Regeneron alleged Novartis and Vetter committed a Walker Process violation by obtaining and asserting patents for PFSs. The Second Circuit held that the district court made a mistake by dismissing Regeneron’s suit because it focused on the functional similarities in the markets for anti-VEGF medicines in PFSs and vials. In reversing, the Second Circuit held that the correct approach must focus on an economic market analysis rather than a functional market analysis, and that Regeneron’s complaint plausibly alleged that anti-VEGF PFSs constituted their own economic product market. As the amicus interest signals, the decision may have significant implications, both for the blockbuster market for anti-VEGF medicines and, more broadly, for defining the markets for different pharmaceutical methods of administration.

In its complaint, Regeneron alleges that in 2005, it had contracted with Vetter, a company providing pharmaceutical filling services, to collaborate on a PFS for its blockbuster anti-VEGF product, EYLEA.² It alleges that its agreement with Vetter granted Regeneron ownership in any patent related to EYLEA PFSs. Id. Notwithstanding its agreement with Regeneron, Vetter later entered into a confidential agreement with Novartis to develop a PFS for anti-VEGF biologics, which are used to treat macular degeneration and other retinal conditions. Id. Indeed, both parties agree on the benefits of PFSs for patients and providers of anti-VEGF medicines—ease in administration, improved safety, and greater efficiency—compared to vials, which must be used to fill a separate syringe.³ Novartis has an anti-VEGF biologic, LUCENTIS, which Genentech markets in the United States.

Regeneron alleges that Vetter contributed to Novartis’s invention of U.S. Patent No. 9,220,631 (the “’631 Patent”) and that Novartis concealed Vetter’s contribution to inventorship from the PTO to avoid alerting Regeneron to its contractual violations. Id. Concealing inventorship from the PTO can constitute inequitable conduct and form the basis for a Walker Process claim. (Regeneron also alleges Novartis improperly withheld key prior art references from the PTO during prosecution.) Novartis’s resulting ’631 Patent specifically claims EYLEA’s active ingredient as a treatment for use in Novartis’s patented syringe.⁴ Regeneron contends that the defendants’ pattern of conduct delayed its entry into the PFS market, resulting in significant damages.⁵ Regeneron also alleges that, after the ’631 Patent issued, Vetter leaned on it in contract negotiations to enter a long-term deal and to agree not to challenge the validity of the ’631 Patent.⁶ Novartis sued Regeneron on the ’631 Patent in the ITC and the Northern District of New York in 2020, and there is a pending Federal Circuit appeal regarding the validity of the patent.⁷

The Second Circuit held that “the district court improperly concluded that Regeneron failed to plead adequately the existence of a distinct anti-VEGF PFS market because it… placed improper weight on the functional, rather than economic, similarities between anti-VEGF PFSs and vials.”⁸ Rather than look to the functional similarities in the markets for PFSs and vials (i.e., same drug, same medical condition), the Second Circuit held that the proper analysis was economic. That is, whether products are “reasonably interchangeable by consumers for the same purposes,” as assessed by examining “sufficient cross-elasticity of demand.”⁹ Regeneron’s complaint alleges that physicians transferred 80% of patients from vials to PFSs when they were offered for LUCENTIS. The Second Circuit found Regeneron’s allegation adequately pled a hypothetical monopoly market by pleading that the physicians’ switching behavior showed that a “small, but significant, price increase in the PFS version would not cause physicians to substitute the vial version for PFS.”¹⁰

Second, the Second Circuit held that the district court was wrong to decide that an antitrust market cannot be coextensive with a patent’s scope. Instead, “once an antitrust plaintiff has demonstrated that [1] a patent was obtained through fraud, it must [2] separately explain how the fraudulently obtained patent enabled the defendants to achieve market power within the relevant market.”¹¹ Regeneron’s allegations regarding inventorship and improperly withheld prior art satisfied the “fraudulently obtained” prong of the test.¹² Next, the Second Circuit found that Regeneron’s complaint adequately pled the “market power” prong, crediting Regenoron’s allegation that Novartis and Vetter attempted to use the ’631 patent to coerce Regeneron into a long-term exclusive PFS filling relationship and demanding other modifications to Regeneron and Vetter’s 2005 agreement.¹³

Why the Decision Matters

The Second Circuit’s decision stands out for two reasons. First, anti-VEGF biologics are a big business for innovator companies, biosimilar makers, and government payers. EYLEA’s total revenue for 2023 was nearly $5.9 billion.¹⁴ Roche, which through its subsidiary Genentech commercializes LUCENTIS in the US, reported $460 million CHF in 2023 revenue, down from approximately $1 billion CHF in 2022 after entry from two biosimilars, with more pending.¹⁵ Biosimilars referencing EYLEA are also pending FDA approval or in clinical trials.¹⁶ Government payers are naturally interested in age-related macular degeneration (AMD) medications: among Americans over 65, the CDC estimates that approximately 1.3 million have vision-threatening AMD, with another 10.9 million having milder AMD.¹⁷ Indeed, the state amici’s brief supporting Regeneron noted the states’ interest in the markets for AMD drugs.¹⁸

Second, and more broadly, a product’s presentation or method of administration—pill vs. liquid; standard vs. extended release; IV vs. subcutaneous injection—has major implications for patients, providers, and product lifecycle. Different methods of administration may expand a product’s commercial reach and, as this case shows, provide additional patent protection (and possibly market exclusivity). Antitrust scrutiny directed to narrowly defined markets for methods of administration—here PFSs—is noteworthy. The amicus brief from the DoJ and FTC makes clear that it is supporting neither side and “take[s] no position as to whether the complaint adequately pleads a relevant antitrust market or states an antitrust claim.”¹⁹ However, the Federal government’s amicus brief also stated that the district court erred in its decision, and the brief’s analysis of the proper market definition parallels the reasoning ultimately adopted by the Second Circuit^.20

This decision relates to a motion to dismiss under Rule 12(b)(6), where the court only looks for a plausible, well-pled complaint. Novartis will have its day in court at the summary judgment and trial stages, where Regeneron will owe a higher burden of proof. However, antitrust claims are powerful tools because they carry the monetary risk of treble damages as well as the possibility of scrutiny from regulators. These risks must be weighed, not just by outside counsel and CLOs, but by CEOs and boards of directors.

Footnotes

[1] See Regeneron Pharm., Inc. v. Novartis Pharma AG et al., No. 22-427, slip op. at 1 (March 18, 2024). As the Second Circuit explains, “[t]he products in question are prescription medications used to treat the overproduction of vascular endothelial growth factor (‘VEGF’), a naturally occurring protein that, if overproduced, can lead to various eye disorders and, in some cases, to permanent blindness.”

[2] Slip op. at 9

[3] Id. at 8-9

[4] See ’631 Patent at Claim 12

[5] See slip op. at 10-11.

[6] Id. at 13-14.

[7] Id. at 15-16.

[8] Id. at 19.

[9] Id. at 20-21 (citing Brown Shoe Co. v. United States, 370 U.S. 294 (1962) and United States v. Am. Express. Co., 838 F.3d 179 (2d Cir. 2016)).

[10] Slip op. at 26; see, e.g., Am. Express, 838 F.3d at 199 (small but significant non-transitory increase in price (“SSNIP”) may demonstrate that the proposed market is relevant market).

[11] Slip op. at 30(citing Walker Process, 382 U.S. at 177).

[12] Id. at 30-31.

[13] Id. at 31-32. In addition to reversing the district court’s decision on the antitrust claim, the Second Circuit reversed the court’s dismissal of Regeneron’s claim for tortious interference with contract as time barred, crediting Regeneron’s equitable estoppel arguments.

[14] “Regeneron Reports Fourth Quarter and Full Year 2023 Financial and Operating Results,” Feb. 2, 2024, https://investor.regeneron.com/news-releases/news-release-details/regeneron-reports-fourth-quarter-and-full-year-2023-financial (last visited March 20, 2024).

[15] “Roche Finance Report 2023,” at 16, https://assets.roche.com/f/176343/x/3b1fb647e2/fb23e.pdf (last visited March 20, 2024).

[16] See, e.g., “New and Upcoming biosimilar launches,” at 6 https://www.cardinalhealth.com/content/dam/corp/web/documents/Report/cardinal-health-biosimilar-launches.pdf (last visited March 20, 2024).

[17] See “Prevalence of Age-Related Macular Degeneration (AMD), at Table 1, https://www.cdc.gov/visionhealth/vehss/estimates/amd-prevalence.html (last visited March 20, 2024).

[18] See Brief of Amici Curiae Nevada, District of Columbia, Illinois, Louisiana, Minnesota, and New Mexico as Amicus Curiae in Support of Plaintiff-Appellant, Regeneron Pharmaceuticals, Inc., Case 22-427, Dkt. 106 at 2.

[19] See Brief for the United States and the Federal Trade Commission as Amici Curiae in Support of Neither Party, Case 22-427, Dkt. 90 at 1.

[20] Id. at 12.

Recent Updates to State and Federal Climate Disclosure Laws

Last year, California became the first state to pass laws requiring companies to make disclosures about their greenhouse gas (“GHG”) emissions as well as the risks that climate change poses for their businesses and their plans for addressing those risks. These new laws now face funding and legal hurdles that are delaying their implementation.

While California’s new laws navigate these challenges, the U.S. Securities and Exchange Commission (“SEC”) adopted its own final climate disclosure rule on March 6. Formally entitled The Enhancement and Standardization of Climate-Related Disclosures for Investors (“SEC Rule”), it requires public companies to make disclosures about the climate-related risks that have materially impacted, or are reasonably likely to have a material impact on, a registrant’s business strategy, operations, or financial condition, and also to disclose their Scope 1 and Scope 2 GHG emissions. The SEC Rule is significantly scaled-back from what the SEC originally proposed in March 2022; most notably, it does not require disclosure of Scope 3 GHG emissions. It too faces legal challenges.

California’s New Laws[1]

On October 7, 2023, California Governor Gavin Newsom signed into law two sweeping climate disclosure bills, Senate Bill 253 (“SB 253”), the Climate Corporate Data Accountability Act, and Senate Bill 261 (“SB 261”), the Climate-Related Risk Act.

Under SB 253, companies that do business in California and have more than $1 billion in annual revenue will be required to disclose emissions data to the California Air Resources Board (“CARB”) each year, starting in 2026. The new law will affect more than 5,400 companies. Under the new law, CARB can levy fines of up to $500,000 per year for violations thereunder. The new reporting requirements apply to both public and private companies, unlike the SEC Rule, which applies only to certain public companies.

Under SB 261, companies with more than $500 million in annual revenue will be required to disclose on a biennial basis how climate change impacts their business, including reporting certain climate-related financial risks and their plans for addressing those risks. These disclosures also begin in 2026 and will affect roughly 10,000 companies.

Funding Hurdles

Funding is necessary for CARB to develop and implement regulations for both climate disclosure laws, as well as to review, administer, and enforce the new laws. To implement SB 253, CARB estimated that it required $9 million in the 2024-25 fiscal year and $2 million in the 2025-26 fiscal year. For SB 261, CARB estimated that it needed an aggregate of $13.7 million over the 2024-25 and 2025-26 fiscal years to identify covered entities, establish regulations, and develop a verification program.

Governor Newsom’s $291.5 billion budget proposal for the 2024-25 fiscal year did not allocate any funding for the implementation of the new laws. The sponsors of the two laws, SB 253’s Senator Scott Wiener and SB 261’s Senator Henry Stern, immediately released a statement sharply critical of this aspect of the Governor’s budget proposal.[2] With limited exceptions, the budget proposal defers all new discretionary spending decisions to the spring, pending input from the legislature, with a final spending plan expected in July of 2024.

The budget process in California can be a lengthy negotiation. The Governor proposes a budget, but then must work with the Legislature to develop the final budget. In this regard, it is important to note that Senator Wiener was appointed to chair the Senate Budget Committee earlier this year. Thus, it’s possible that funding will be provided to implement the laws, though CARB already faced an aggressive set of deadlines for developing the regulations.

Legal Challenges

Some companies, including tech giants like Apple and Salesforce, want the new rules implemented quickly. Large businesses may have an interest in implementing the legislation expeditiously for the benefit of operational certainty and because they have the resources to absorb costs that their smaller competitors cannot. Other companies view the new rules as needlessly burdensome and are committed to halting the legislation in its tracks.

In January, the U.S. Chamber of Commerce joined the American Farm Bureau Federation, California Chamber of Commerce, Central Valley Business Federation, Los Angeles County Business Federation and Western Growers Association in filing a lawsuit^[3]in federal district court challenging the climate disclosure laws under the theory that they violate the First Amendment of the U.S. Constitution and are preempted by federal law.

According to the complaint, the climate disclosure requirements violate the First Amendment of the U.S. Constitution by “forc[ing] thousands of companies to engage in controversial speech that they do not wish to make, untethered to any commercial purpose or transaction…for the explicit purpose of placing political and economic pressure on companies to “encourage” them to conform their behavior to the political wishes of the State.” The plaintiffs argue that, in the event that the State seeks to compel a business to speak noncommercially on controversial political matters, such action shall be presumed by a reviewing court to be unconstitutional unless the government proves that it is narrowly tailored to serve a compelling state interest. The plaintiffs also allege that the new climate disclosure laws are not narrowly tailored to further any legitimate interest of the state, let alone a compelling one.

The lawsuit also contends that the federal Clean Air Act preempts California’s ability to regulate GHG emissions beyond its jurisdictional borders. According to the plaintiffs, the new laws seek to regulate out-of-state emissions “through a novel program of speech regulation.” The complaint further argues that, because the new disclosure requirements operate as de facto regulations of GHG emissions nationwide, they “run headlong” into the Dormant Commerce Clause and broader principles of federalism. The plaintiffs ask the court to enjoin California from implementing or enforcing the new rules, thereby making them null and void.

A more serious preemption challenge may be that the California climate disclosure laws are preempted by the SEC Rule. The issue was addressed during the March 6 SEC hearing (discussed below), and it’s been reported that SEC General Counsel Megan Barbero answered that “nothing” in the Rule “expressly preempts any state law.” However, she added that the issue could arise as a question of “implied preemption,” which “would be determined by a court in a future judicial proceeding.” The question would be whether the SEC has “occupied the field” to such an extent that it preempts state rules in the space. Those would be questions of fact largely turning on how the climate laws are being applied and enforced, and thus any such challenge is likely to await CARB’s implementation of the laws.

The SEC Rule

On March 6, 2024, the SEC adopted the final SEC Rule which will require public companies to include certain climate-related disclosures in registration statements and annual reports. The final SEC Rule requires registrants to disclose material climate-related risks, activities undertaken to mitigate or adapt to such risks, information regarding the board of directors’ oversight of climate-related risks and management of material climate-related risks, and information about climate-related targets or goals that are material to the company’s business, operations, or financial condition.

To add transparency to investors’ assessments of certain climate-related risks, the SEC Rule also requires disclosure of material Scope 1 and Scope 2 GHG emissions, the filing of an attestation report in connection thereof, and disclosure of impacts that severe weather events and other climate-related conditions have on financial statements, including costs and losses. The final SEC Rule includes a phased-in compliance period for all registrants, with compliance dates ranging from fiscal year 2025-26 to 2031-32, depending on the registrant’s filer status and the content of the disclosure. In general, the SEC Rule requires less than the California climate disclosure laws, as Senator Wiener observed[4].

Key Takeaways

Implementation and/or enforcement of SB 253 and SB 261 is delayed for the time being due to a lack of funding, and thus the roll-out of the regulatory regime for the two laws appears likely to slip, such that the laws’ 2026 compliance deadlines may also slip.
The lawsuit challenging SB 253 and SB 261 adds some uncertainty to the process of ensuring compliance with climate disclosure requirements, and may cause further delay.
The delayed implementation of the new laws affords companies additional time to develop a compliance strategy. Due to the lessened scope of the SEC Rule, companies that are prepared to comply with the California laws are likely to be prepared to comply with the SEC Rule. And implementation of the SEC Rule may be delayed by legal challenges as well, thereby creating more time for companies to develop a compliance strategy.

FOOTNOTES

[1] A prior article describing these laws in more detail is here.

[2] See Senators Wiener & Stern Respond to Governor Pausing Funding To Implement Landmark Climate Laws | Senator Scott Wiener (ca.gov)

[3] Chamber of Commerce of the United States of America, et al. v. Cal. Air Resources Board, et al. (Cal. Central Dist., Western Div.) (Case No. 2:24-cv-00801).

[4] See Senator Wiener Responds to Watered Down SEC Climate Rule: “California’s Climate Leadership is More Critical than Ever” | Senator Scott Wiener).

California PFAS Ban in Products: 6th Largest Global Economy Enters the Fray

We reported extensively on the landmark legislation passed in Maine in 2021 and Minnesota in 2023, which were at the time the most far-reaching PFAS ban in the United States. Other states, including Massachusetts and Rhode Island, have subsequently introduced legislation similar to Maine and Minnesota’s regulations. While we have long predicted that the so-called “all PFAS / all products” legislative bans will become the trend at the state levels, it is significant to note that California, the world’s sixth largest economy, recently introduced a similar proposed PFAS ban for consumer products.

The California proposed legislation, coupled with the existing legislation passed or on the table, will have enormous impacts on companies doing business in or with the state of California, as well as on likely future consumer goods personal injury lawsuits. The California PFAS ban must therefore not be overlooked in companies’ compliance and product development departments.

California PFAS Ban

California’s SB 903 in its current form would prohibit for sale (or offering for sale) any products that contain intentionally added PFAS. A “product” is defined as “an item manufactured, assembled, packaged, or otherwise prepared for sale in California, including, but not limited to, its components, sold or distributed for personal, residential, commercial, or industrial use, including for use in making other products.” It further defines “component” as “an identifiable ingredient, part, or piece of a product, regardless of whether the manufacturer of the product is the manufacturer of the component.”

While the effective date of SB 903’s prohibition would be January 1, 2030, the bill gives the California Department of Toxic Substances Control (“DTSC”) the authority to prohibit intentionally added PFAS in a product before the 2030 effective date. It also allows DTSC to categorize PFAS in a product as an “unavoidable use”, thereby effectively creating an exemption to the bill’s ban, although California exemption would be limited to five years in duration. Similar carve outs were also included in the Maine and Minnesota bans. In each instance, certain information must be provided to the state to obtain an “unavoidable use” exemption. In California, an “unavoidable use” exemption would only be granted if:

There are no safer alternatives to PFAS that are reasonably available.
The function provided by PFAS in the product is necessary for the product to work.
The use of PFAS in the product is critical for health, safety, or the functioning of society.

If a company sells a products containing PFAS in the state of California in violation of the proposed law, companies would be assessed a $1,000 per day penalty for each violation, a maximum of $2,500 per day for repeat offenders, and face possible Court-ordered prohibition of sales for violating products.

Implications To Businesses From The Minnesota PFAS Legislation

First and foremost of concern to companies is the compliance aspect of the California law. The state continues to modify and refine key definitions of the regulation, resulting in companies needing to consider the wording implications on their reporting requirements. In addition, some companies find themselves encountering supply chain disclosure issues that will impact reporting to the state of California, which raises the concern of accuracy of reporting by companies. Companies and industries are also very concerned that the information that is being gathered will provide a legacy repository of valuable information for plaintiffs’ attorneys who file future products liability lawsuits for personal injury, not only in the state of California, but in any state in which the same products were sold.

It is of the utmost importance for businesses along the whole supply chain to evaluate their PFAS risk. Public health and environmental groups urge legislators to regulate these compounds. One major point of contention among members of various industries is whether to regulate PFAS as a class or as individual compounds. While each PFAS compound has a unique chemical makeup and impacts the environment and the human body in different ways, some groups argue PFAS should be regulated together as a class because they interact with each other in the body, thereby resulting in a collective impact. Other groups argue that the individual compounds are too diverse and that regulating them as a class would be over restrictive for some chemicals and not restrictive enough for others.

Companies should remain informed so they do not get caught off guard. Regulators at both the state and federal level are setting drinking water standards and notice requirements of varying stringency, and states are increasingly passing PFAS product bills that differ in scope. For any manufacturers, especially those who sell goods interstate, it is important to understand how those various standards will impact them, whether PFAS is regulated as individual compounds or as a class. Conducting regular self-audits for possible exposure to PFAS risk and potential regulatory violations can result in long term savings for companies and should be commonplace in their own risk assessment.

Smart Lawyer Marketing: The Benefits of Becoming an Adjunct Professor or Guest Lecturer

If you’re a lawyer looking to stand out and grow your practice, here’s a strategy worth considering: becoming an adjunct professor or guest lecturer. This isn’t just about adding a title to your resume; it’s about enriching your professional credentials, elevating your personal brand, building connections with the community and opening doors to new opportunities. Here’s why venturing into academia could be a smart move for your legal career and how to do it.

A Spotlight on Your Expertise: Engaging in a teaching role will elevates your visibility within the academic and legal communities. Universities are vibrant ecosystems of learning, networking and professional exchange. By sharing your knowledge and experience in such settings, you not only enrich the learning environment but also spotlight your expertise to a broader audience. It’s an effective way to get noticed and remembered in the circles that matter.
Networking with Purpose: Teaching at a university isn’t just about imparting knowledge; it’s a dynamic platform for meaningful networking. Every semester offers a new opportunity to connect with ambitious students, fellow educators, and visiting professionals. These connections can lead to new business opportunities, collaborations and referrals. Building a network in such a rich environment can provide a steady stream of advantages for your legal practice.
Establishing Your Thought Leadership: There’s no better place to showcase your legal acumen than in a classroom or lecture hall. Teaching allows you to demonstrate your depth of knowledge and commitment to your field, helping to establish you as a thought leader among your peers and potential clients. Engaging with students and faculty on complex legal issues not only reinforces your standing but also keeps you at the cutting edge of legal developments.
The Dual Benefit of Learning: While teaching, lawyers often find themselves learning alongside their students. Because a professor and lecturer must stay current and deeply understand the subjects they teach acts as a catalyst for personal and professional growth. This continuous learning cycle not only enhances your legal practice but also ensures that your teaching is informed, relevant and highly valued.

How to Become an Adjunct Professor or Guest Lecturer

If you’re interested in becoming an adjunct professor or guest lecturer, here are some steps to get you started:

Get Your Credentials and Experience in Order: An advanced degree is usually required for adjunct positions, but if you’re eyeing more prestigious spots or specialized subjects, a PhD might be necessary. Beyond degrees, real-world experience in your field isn’t just icing on the cake—it’s another layer of cake. It shows you can apply what you teach outside the classroom, making your lessons more relevant and engaging.
Network Like a Pro: Building connections is key in academia, but think of it as making friends rather than networking. Attend events, engage in discussions and be active in online communities related to your field. It’s about finding your tribe—people who share your interests and can tip you off to opportunities you might not find on your own.
Bolster Your Teaching Credentials: If teaching isn’t something you’ve done a lot of, look for opportunities to get some practice. This could be anything from volunteer teaching gigs, leading workshops or even taking on a teaching assistant role. These experiences are valuable not just for what they teach you about instructing others, but they also give you stories and insights you can share when you apply for jobs.
Polish Your Application: Your application is your chance to shine. Make sure your CV is not only comprehensive but clear and engaging. Cover letters should be tailored to each application, showing why you’re excited about the position and what makes you a great fit. Don’t forget a teaching statement that reflects your unique approach and philosophy towards education.
Apply Thoughtfully: While casting a wide net could result in the kind of role you are seeking, aim for opportunities that truly resonate with your expertise and teaching style. Explore various institutions, from community colleges to universities, and don’t overlook less traditional teaching environments that might be in need of your particular skill set.
Stay Curious and Keep Growing: Staying informed and continually developing your skills is important. Seek out professional development opportunities, stay abreast of new research in your field and be open to new teaching techniques (including technology advancements) and methodologies. Your growth as a professional not only enriches your teaching but also makes you more attractive to potential employers.

KEY TAKEAWAYS

Enhanced Visibility: Teaching roles at universities put you in front of an engaged audience, amplifying your professional visibility.
Strategic Networking: The academic environment offers unparalleled networking opportunities with future and current lawyers, colleagues and industry experts.
Thought Leadership: Sharing your expertise as a teacher reinforces your status as a knowledgeable and respected professional in your field.
Continuous Learning: The act of teaching encourages ongoing education, keeping you at the forefront of legal developments and practices.

Teaching as an adjunct professor or guest lecturer offers a lawyers strategic benefits beyond traditional networking and marketing efforts. It provides a platform for visibility, a hub for networking, a stage for establishing thought leadership and an opportunity for personal growth.

California’s Housing Overhaul Brings Significant Changes for Landlords and Tenants in 2024

California Senate Bill 567, i.e., the Homelessness Prevention Act, which goes into effect on April 1, 2024, seeks to cap rent hikes at 10% and prevents landlords from evicting tenants without a legal cause. California Assembly Bill 12, i.e., the new residential security deposit law, which goes into effect on July 1, 2024, limits the amount landlords can charge for security deposits. Both bills were signed into law in 2023 by Governor Newsom, and while they signal new protections and legal benefits for tenants, the potential financial exposure for landlords is elevated.

Senate Bill 567

SB 567 changes the rules by which California property owners may remove tenants in certain instances. Effectively, this new law directly impacts two sets of property owners:

Property owners and their close family members (i.e. spouse, domestic partner, children, grandchildren, parents, or grandparents) who plan to move into an occupied/leased property before the expiration of the lease term with the tenant.
“Fix and flip” investors planning on substantially remodeling or rebuilding an occupied/leased property for resale.

Under the current law (California Civil Code § 1946.2), after a tenant has continuously and lawfully occupied a residential property for 12-months, the landlord is prohibited from terminating the tenancy without “just cause.” In fact, the “just cause” must be stated in the written notice to the tenant for the termination of the tenancy to be effectuated. Of note, existing law distinguishes between “at-fault just cause” and “no-fault just cause,” wherein “no-fault just cause” has nothing to do with the nonpayment of rent and/or criminal activity on premises, but rather is defined as:

the intent to occupy the premises by the owner and/or the owner’s spouse, domestic partner, children, grandchildren, parents, and/or grandparents;
the withdrawal of the residential real property from the rental market;
the owner complying with specific government orders that necessitate vacating the real property; or
the intent to demolish or to substantially remodel the residential real property.

Regarding an eviction based on an intent to occupy, the new law now requires the owner and/or the owner’s family member(s) under such a scenario to occupy (i.e., move into) the residential real property within 90-days for a minimum of 12 continuous months, and to use the property as the person’s primary residence. Historically, it was quite simple for property owners to use the “move in” provision under the law as an excuse to evict a tenant that they did not like or as a means to increase the rent by evicting the old tenant and moving in a new tenant who was willing to pay a higher rent. There were no specific guidelines and/or restrictions in this regard. But now, a strict timeline regarding personal occupancy has been codified into law, the violations of which could result in financial exposure for the property owner including, but not limited to, a civil monetary award to the tenant with potential for treble damages (3-times the actual damages amount) and punitive damages.

This new law also requires an owner who displaces a tenant in order to substantially remodel or demolish a unit to provide the tenant with written notice that includes a description of the substantial remodel to be completed and the expected duration of the repairs or the expected date by which the property will be demolished, as well as a copy of the permits required to undertake the substantial remodel or demolition. This means that the property owner must do more than just advise the existing tenant that they are being evicted due to the substantial remodeling of the property or because of the intent to demolish it. Under the new law, the property owner must provide the tenant with written notice and documents setting forth a construction timeline and copies of the permitting for said work.

Importantly, the new law prescribes new enforcement mechanisms, including making an owner who attempts to recover possession of a rental unit in material violation of this new law liable to the tenant in a civil action for damages up to three times the actual damages amount, as well as punitive damages and attorney’s fees/costs. Furthermore, the new law also authorizes the California’s Attorney General, and/or the City Attorney, and/or County Counsel within whose jurisdiction the rental unit is located, to bring actions for injunctive relief against the owner who is in violation of this new law. Also, many cities and counties throughout California have different (and often more restrictive) requirements when removing tenants. As such, it is always recommended for landlords to check the rules, regulations, and laws related to the jurisdiction where the property is located for any additional guidelines and requirements.

When using any of the “no fault” grounds for removing a tenant, the tenant is entitled to relocation costs equal to one month’s rent. However, landlords should be mindful that many cities and counties throughout California have even more stringent and/or more substantial relocations costs and requirements. As such, landlords should always check to see if there are any additional jurisdictional costs and/or requirements for removing a tenant.

Further, until January 1, 2030, the current existing law prohibits an owner of residential real property from, over the course of any 12-month period, increasing the gross rental rate for a dwelling or a unit more than 5% plus the percentage change in the cost of living, or 10%, whichever is lower, of the lowest gross rental rate charged for that dwelling or unit at any time during the 12-months before the effective date of the increase, subject to specified conditions. This new law, however, makes an owner who demands, accepts, receives, or retains any payment of rent in excess of the maximum increase allowed liable in a civil action to the tenant from whom those payments are or were demanded, accepted, received, or retained for certain relief including, upon a showing that the owner acted willfully or with oppression, fraud, or malice, damages up to three times the amount by which any payment demanded, accepted, received, or retained exceeds the maximum allowable rent. This new law also authorizes the California attorney general and/or the city attorney or county counsel within whose jurisdiction the residential property is located to enforce the new law’s provisions and to bring action for injunctive relief.

Assembly Bill 12

Under AB 12, landlords are permitted to ask for security deposits equivalent to one month’s rent for both furnished and unfurnished dwellings. This is a notable shift given that under the current existing law, landlords can charge up to two months’ rent for an unfurnished dwelling and three months’ rent for a furnished one. This law does not take effect until July 1, 2024, allowing landlords time to make any necessary adjustments to their practices given this new approach on the security deposit amount.

Also, please note that this new law has an exception for “small landlords” (as defined), if they own no more than two residential rental properties that collectively include no more than four dwelling units that are offered for rent. Additionally, to qualify as a “small landlord,” the owner must hold the real estate as a natural person, as a limited liability company where all members are natural persons, or as a family trust. If all these conditions are met, then the “small landlord” is permitted to collect up to two months’ rent as a security deposit. Again, AB 12 does not take effect until July 1, 2024, which gives California landlords who do not qualify as “small landlords” to make necessary adjustments. In enacting this new law, the California state legislators are hoping to make housing more accessible and affordable, especially for those residents who are struggling financially. Ironically, the law also is effectuating at a time when landlords are facing multiple hardships including limited rent increases, financial risk in the form of potential damage to their property and/or unpaid rent for which there will be no compensation, increasing maintenance and operational costs, having to navigate the complexities of local and state-level regulations, and stalled and/or slowed evictions of tenants who owe back-rent since the COVID-19 pandemic. These factors, amongst others, could hamstring landlords financially and potentially lead to significant portions of the housing market to fall into disrepair, as well as to cause a slow-down of development projects and community engagement. It also may cause landlords to become stricter with the screening processes of their tenants, including adopting higher income requirements and/or charging higher application fees, which can result in an even more challenging housing landscape for high-risk and/or low-income tenants. At this juncture, only time will tell.

Now What?

If you are a landlord, these new laws may seem onerous and riddled with potentially damaging financial exposure. We recommend consulting with a trusted attorney before entering into a landlord-tenant relationship, and also before terminating an existing lease in both the “at-fault just cause” or “no-fault just cause” scenarios.

The Imperatives of AI Governance

If your enterprise doesn’t yet have a policy, it needs one. We explain here why having a governance policy is a best practice and the key issues that policy should address.

Why adopt an AI governance policy?

AI has problems.

AI is good at some things, and bad at other things. What other technology is linked to having “hallucinations”? Or, as Sam Altman, CEO of OpenAI, recently commented, it’s possible to imagine “where we just have these systems out in society and through no particular ill intention, things just go horribly wrong.”

If that isn’t a red flag…

AI can collect and summarize myriad information sources at breathtaking speed. Its ability to reason from or evaluate that information, however, consistent with societal and governmental values and norms, is almost non-existent. It is a tool – not a substitute for human judgment and empathy.

Some critical concerns are:

Are AI’s outputs accurate? How precise are they?
Does it use PII, biometric, confidential, or proprietary data appropriately?
Does it comply with applicable data privacy laws and best practices?
Does it mitigate the risks of bias, whether societal or developer-driven?

AI is a frontier technology.

AI is a transformative, foundational technology evolving faster than its creators, government agencies, courts, investors and consumers can anticipate.

In other words, there are relatively few rules governing AI—and those that have been adopted are probably out of date. You need to go above and beyond regulatory compliance and create your own rules and guidelines.

And the capabilities of AI tools are not always foreseeable.

Hundreds of companies are releasing AI tools without fully understanding the functionality, potential and reach of these tools. In fact, this is somewhat intentional: at some level, AI’s promise – and danger – is its ability to learn or “evolve” to varying degrees, without human intervention or supervision.

AI tools are readily available.

Your employees have access to AI tools, regardless of whether you’ve adopted those tools at an enterprise level. Ignoring AI’s omnipresence, and employees’ inherent curiosity and desire to be more efficient, creates an enterprise level risk.

Your customers and stakeholders demand transparency.

The policy is a critical part of building trust with your stakeholders.

Your customers likely have two categories of questions:

How are you mitigating the risks of using AI? And, in particular, what are you doing with my data?

And

Will AI benefit me – by lowering the price you charge me? By enhancing your service or product? Does it truly serve my needs?

Your board, investors and leadership team want similar clarity and direction.

True transparency includes explainability: At a minimum, commit to disclose what AI technology you are using, what data is being used, and how the deliverables or outputs are being generated.

What are the key elements of AI governance?

Any AI governance policy should be tailored to your institutional values and business goals. Crafting the policy requires asking some fundamental questions and then delineating clear standards and guidelines to your workforce and stakeholders.

1. The policy is a “living” document, not a one and done task.

Adopt a policy, and then re-evaluate it at least semi-annually, or even more often. AI governance will not be a static challenge: It requires continuing consideration as the technology evolves, as your business uses of AI evolve, and as legal compliance directives evolve.

2. Commit to transparency and explainability.

What is AI? Start there.

Then,

What AI are you using? Are you developing your own AI tools, or using tools created by others?

Why are you using it?

What data does it use? Are you using your own datasets, or the datasets of others?

What outputs and outcomes is your AI intended to deliver?

3. Check the legal compliance box.

At a minimum, use the policy to communicate to stakeholders what you are doing to comply with applicable laws and regulations.

Update the existing policies you have in place addressing data privacy and cyber risk issues to address AI risks.

The EU recently adopted its Artificial Intelligence Act, the world’s first comprehensive AI legislation. The White House has issued AI directives to dozens of federal agencies. Depending on the industry, you may already be subject to SEC, FTC, USPTO, or other regulatory oversight.

And keeping current will require frequent diligence: The technology is rapidly changing even while the regulatory landscape is evolving weekly.

4. Establish accountability.

Who within your company is “in charge of” AI? Who will be accountable for the creation, use and end products of AI tools?

Who will manage AI vendor relationships? Is their clarity as to what risks will be borne by you, and what risks your AI vendors will own?

What is your process for approving, testing and auditing AI?

Who is authorized to use AI? What AI tools are different categories of employees authorized to use?

What systems are in place to monitor AI development and use? To track compliance with your AI policies?

What controls will ensure that the use of AI is effective, while avoiding cyber risks and vulnerabilities, or societal biases and discrimination?

5. Embrace human oversight as essential.

Again, building trust is key.

The adoption of a frontier, possibly hallucinatory technology is not a build it, get it running, and then step back process.

Accountability, verifiability, and compliance require hands on ownership and management.

If nothing else, ensure that your AI governance policy conveys this essential.

Lawsuit Challenges New USCIS Fee Rule

Significant increases to U.S. Citizenship and Immigration Services (“USCIS”) filing fees are set to go into effect on April 1, 2024. However, a lawsuit filed in U.S. District Court for the District of Colorado may delay that implementation. The plaintiffs in the lawsuit, the ITServe Alliance (a group that represents technology companies), the American Immigrant Investor Alliance, and a Canadian investor, have asked for a preliminary injunction to stop the planned fee increases.

As previously reported, the fee rule would require employers to pay 70% more for H-1B petitions, 201% more for L-1 petitions, and 129% more for individuals on O-1 petitions. One of the more controversial aspects of the new rule requires a $600 Asylum Program Fee to be charged to certain petitioners who are filing an I-129 Petition for Nonimmigrant Worker or an I-140 Immigrant Petition for Alien Workers, which are common forms employers use when filing employment-based nonimmigrant and immigrant visa petitions.

The lawsuit argues three things:

1. The fee rule was promulgated without following proper rule making procedures;

2. The fee rule doubles immigrant investor fees through the EB-5 program in violation of law. Specifically, the USCIS imposed new fees on immigrant investors and regional centers without completing the fee study that Congress required as part of the EB-5 Reform and Integrity Act of 2022; and

3. The asylum-related fee “arbitrarily and without legal justification” shifts the burden to certain employers to fund the government’s handling of asylum cases.

The full complaint can be accessed here.

As of today, the fee increases are scheduled to go into effect on April 1.

The National Law Forum

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