Category: Litigation

Good News for Companies: Seventh Circuit Holds Removal of Plaintiffs’ Biometrics Privacy Claims to Federal Court OK

In a widely watched case, the Seventh Circuit decided last week that companies that collect individuals’ biometric data may be able to defend their cases in federal court when plaintiffs allege a procedural violation of Illinois’ Biometric Information Privacy Act (BIPA).

In Bryant v. Compass Group USA, Inc., the Seventh Circuit held that certain procedural violations of Illinois’ BIPA constituted actual injuries and therefore satisfied the requirements for federal court standing. Relying on Spokeo, the seminal U.S. Supreme Court case addressing what constitutes an actual injury for standing purposes, the court held that the plaintiff’s allegations, if proven, would demonstrate that she suffered an actual injury based on the fact that Compass did not obtain her consent before obtaining her private information. Therefore, the case could remain in federal court.

The decision now gives defendants that want to defend BIPA claims in federal court a roadmap for their arguments, including access to a larger jury pool, the Federal Rules of Procedure, and other federal court-related advantages. It is also notable because BIPA defendants have attempted to remove BIPA cases to federal court and then file motions to dismiss them for lack of standing. However, the federal courts have typically remanded these cases, forcing defendants back into state court and sometimes even requiring them to pay just costs and any actual expenses, including attorney fees, incurred as a result of the removal.[1]

What Happened in Bryant v. Compass Group USA

In Compass Group USA, a customer sued a vending machine manufacturer after she scanned her fingerprint into a vending machine to set up an account during her employer’s orientation. She then used her fingerprint to buy items from the vending machine.

The plaintiff filed a putative class action lawsuit on behalf of herself and all other persons similarly situated in state court alleging that Compass violated her statutory rights under BIPA by 1) obtaining her fingerprint without her written consent and 2) not establishing a publicly available data retention schedule or destruction guidelines for possession of biometric data as required by the statute.

Shortly after the plaintiff filed suit in Cook County Circuit Court, Compass filed a notice to remove the case to the Northern District of Illinois. Opposing the motion, the plaintiff argued that she did not have federal standing for her BIPA claims because she had not alleged an injury-in-fact as required by Article III.

Compass argued that the plaintiff had alleged an injury-in-fact under Article III, pointing to the recent Illinois Supreme Court case, Rosenbach v. Six Flags Ent. Corp., which held that plaintiffs can bring BIPA claims based on procedural violations, even if they have suffered no actual injury. Rosenbach held that, if a company, for example, fails to comply with BIPA’s requirement of establishing destruction guidelines for possession of biometric data, that violation alone – without any actual pecuniary or other injury – creates an actual injury.

The district court sided with the plaintiff and concluded that Rosenbach merely established “the policy of the Illinois courts” to allow plaintiffs to bring BIPA claims without alleging an actual injury. Rosenbach did not interpret procedural BIPA violations to be actual injuries.

Because the plaintiff’s claims did not establish Article III standing, the district court granted the plaintiff’s motion to remand the case back to state court.

The Seventh Circuit reversed, relying on Spokeo. It interpreted Spokeo as holding that injuries may still be particularized and concrete – i.e., actual – even if they are intangible or hard to prove. The court also cited Justice Thomas’ concurrence in Spokeo that distinguished between private rights (which courts have historically presumed to cause actual injuries) and public rights (which require a further showing of injury).

The court held that the plaintiff had alleged that she suffered an actual injury when Compass collected her biometric data without obtaining her informed consent because this was a private right. The court also relied on Fed. Election Comm’n v. Atkins, 525 U.S. 11 (1998).  In Atkins, the Supreme Court held that nondisclosure can be an actual injury if plaintiffs can show an impairment of their ability to use information in a way intended by the statute. The court in Compass similarly held that the defendant had denied the plaintiff the opportunity — and statutory right — to consider whether the terms of the defendant’s data collection and usage were acceptable. As a result, the court held that the plaintiff alleged an actual injury.

By contrast, the court determined that the plaintiff’s other claim – that the defendant violated BIPA by failing to make publicly available a data retention schedule and destruction guidelines for possession of biometric data – implicated a public right and did not cause the plaintiff an actual injury.

[1] See, e.g. Mocek v. Allsaints USA Ltd., 220 F. Supp. 3d 910, 914 (N.D. Ill. 2016) (“Defendant’s professed strategy of removing the case on the basis of federal jurisdiction, only to turn around and seek dismissal with prejudice—a remedy not supported by any of defendant’s cases—on the ground that federal jurisdiction was lacking, unnecessarily prolonged the proceedings. . . . For the foregoing reasons, I grant plaintiff’s motion for remand and attorneys’ fees and deny as moot defendant’s motion to dismiss. Because defendant has not objected to the specific fee amount plaintiff claims, which she supports with evidence in the form of affidavits and billing records, I find that plaintiff is entitled to payment in the amount of $58,112.50 pursuant to § 1447(c).”)

© 2020 Schiff Hardin LLP
For more on BIPA, see the National Law Review Communications, Internet, and Media Law section.

To Promote Innovation, Congress Should Lessen Restrictions on Injunctive Relief for Patent Owners

Under the U.S. Constitution, a patent conveys an “exclusive right” to inventors so they can prevent others from stealing their inventions. And since the enactment of the Patent Act of 1790, the law has deemed patents to be a form of personal property and specifically provided for injunctive relief, a court order stopping a proven infringer from continuing to use or sell someone else’s invention. Yet, today in the United States, despite this constitutional mandate and grounding in law, many patent holders no longer have exclusive rights to their inventions, nor the ability to obtain iinjunctions.

For much of our country’s history, permanent injunctions were the norm once patent infringement and validity were proven at trial by the patent owner. And getting an injunction depended on facts, not the patent owner’s business model – for example, whether they manufactured or licensed their invention. The practice was stable for all of that time – until recently.

In 2006, in the Supreme Court’s eBay Inc. v. MercExchange, L.L.C. decision, the Court upended this settled practice, ruling that injunctions should not be automatically issued in patent cases and clarifying that courts must apply a four-part test to determine whether an injunction should be granted. The opinion of the Court, authored by Justice Thomas, said little more than that the four factors should determine when an injunction is allowed. However, two concurring opinions expanded on the role of injunctions in patent cases – one, written by Chief Justice Roberts, defended the historic practice of allowing injunctions in most cases, while the other, by Justice Kennedy, pushed in the opposite direction, basing the injunction determination on who the patent owner was and how they used the patent.

For some years after, the pattern of injunction grants changed little. But eventually, it shifted greatly, as lower courts began to make injunction determinations based primarily on the patent owner’s identity. Those who manufacture products continued to get injunctions, while those who chose to license their patents instead, no longer did. This misapplication of the ruling by lower courts has become so widespread that it is now almost impossible for inventors who license their patents to obtain an injunction, even in the face of proven infringement.

It was almost as if the Kennedy minority concurrence became the majority opinion.  And the Roberts concurrence was mostly ignored by the lower courts – even though that opinion highlighted the settled historical practice of granting injunctions for most cases of infringement.

It may not be entirely coincidental that such an outcome was implored by a massive lobbying and public relations campaign conducted by a group of Big Tech mega corporations, mostly based in Silicon Valley. In an effort to reduce patent licensing fees for using technology created by other inventors in their products, these Big Tech companies set out to demonize the patent licensing business model and undermine the ability of inventors to defend patents against infringement. Among their asks, they specifically urged that injunctions should be largely limited to companies “practicing” their inventions by making products and denied to those following the licensing business model, so-called “non-practicing entities,” or NPEs.

Well, this campaign and its complaints about patent licensing, though lacking in evidence, apparently caught the eye of Justice Kennedy, who wrote in his concurring eBay opinion: “An industry has developed in which firms use patents not as a basis for producing and selling products but, instead, primarily for obtaining licensing fees… For these firms, an injunction, and the potentially serious sanctions from its violation, can be employed as a bargaining tool to charge exorbitant fees to companies that seek to buy licenses to practice the patent.”

This line of reasoning overlooks the fact that the patent licensing business model is not a new phenomenon in the commercialization of patented innovation, but has been around since our country’s founding and has served a key role in advancing U.S. innovation. Iconic American inventors, such as Thomas Edison, Alexander Graham Bell, the Wright Brothers, Charles Goodyear and Elias Howe Jr., all licensed their patented inventions to others, who then manufactured the final product and brought it to the masses. And today, many of our nation’s best innovators license their inventions, including universities, hospitals, startups, engineering firms and independent inventors.

What is most striking is that while the U.S. no longer provides injunctive relief to many patent holders, our competitors in Europe and Asia, including China, routinely grant injunctions in similar cases of patent infringement. This is undermining our competitiveness as innovative companies in the U.S. and around the world have an incentive to conduct R&D and patent inventions outside the U.S., where patent protections are now stronger.

Fortunately, Senator Chris Coons (D-DE) and Representative Steve Stivers (R-OH) are sponsoring bipartisan legislation, known as the STRONGER Patents Act, that would restore the traditional right of injunctions to all patent owners, including those who license their innovations. If we have learned nothing else from the Covid-19 crisis, it is the need to incentivize all the technological advances we can, especially the development of new human health technologies. That incentive system works best when all patent owners can equally and fairly use their constitutional “exclusive right” to their innovations. Let’s hope that insight will help jumpstart the legislative advance of the STRONGER Patents Act or other measures to strengthen patent rights and restore injunctive relief.

The opinions and views stated herein are the sole opinions of the author and do not reflect the views or opinions of the National Law Review or any of its affiliates.

© The National Law Forum. LLC
ARTICLE BY Chief Judge Paul Michel (ret.) US Court of Appeals for the Federal Circuit
For more on patenting inventions, see the National Law Review Intellectual Property law section.

IMS Insights Episode 11: COVID-19 Analysts Briefing on Litigation Impacts

To better understand how the COVID-19 pandemic is impacting the commercial litigation community, IMS ExpertServices conducted analysis and gathered input during the first half of April from more than 400 attorneys, in-house counsel, experts, and stakeholders throughout the commercial litigation community.

In this special podcast feature, you’ll hear commentary from the April 30 Analysts Briefing hosted by IMS on the study’s top findings and other key trends for commercial litigators, with discussion from a panel of thought leaders including:·

·         James Crane, Chief Revenue Officer at IMS ExpertServices

·         Rudhir Krishtel, Certified Co-Active Coach and Facilitator with Krishtel Coaching, Former Senior Patent Counsel at Apple, Former Partner at Fish & Richardson, and IMS Thought Leader and Contributor

·         Nate Robson, Litigation Editor at The American Lawyer

·         Eilene Spear, Operations and Project Manager at The National Law Review

·         Ty Sagalow, Commercial insurance expert and IMS thought leader and contributor

© Copyright 2002-2020 IMS ExpertServices, All Rights Reserved.

For more on COVID-19 litigation, see the National Law Review Coronavirus News section.

 

TransUnion to Seek Supreme Court Review After Ninth Circuit Finds Class Members Had Standing and Partially Upholds Punitive Damages Award

A hotly contested ruling in a Fair Credit Reporting Act (“FCRA”) class action case will soon be appealed to the Supreme Court of the United States.  The Ninth Circuit in Ramirez v. TransUnion LLC, Case No. 17-17244, recently granted the parties’ Joint Motion to Stay the Mandate, seeking to stay the Ninth Circuit’s mandate pending TransUnion’s filing of a petition for writ of certiorari in the Supreme Court.  The Motion to Stay comes soon after the court denied TransUnion’s Petition for Rehearing or Rehearing En Banc regarding the Ninth Circuit’s decision in Ramirez v. TransUnion LLC, 951 F.3d 1008 (9th Cir. 2020).

In Ramirez, the Ninth Circuit held for the first time that every class member in a class action lawsuit needs “standing” to recover damages at the final judgment stage.  The 8,185 member class alleged that TransUnion, knowing that its practice was unlawful, violated the FCRA by incorrectly placing terrorist alerts on the front page of consumers’ credit reports and later sending the consumers misleading and incomplete disclosures about the alerts and how to remove them.  The court held that each class member was required to, and did, have standing, even though the credit reports of over 75% of the class were not actually disclosed to a third party because TransUnion’s alleged violation of the consumers’ statutory rights under the FCRA, by itself, constituted a concrete injury.  The Ninth Circuit also found that the jury’s punitive damages award of 6.45 times the statutory damages award was unconstitutional, and reduced it to 4 times the statutory damages award.  The Ramirez decision is discussed in more detail here.

In its Petition for Rehearing, TransUnion claimed that the dissent had the correct view, and the majority’s decision “not only conflicts with Supreme Court teachings, but puts the Ninth Circuit on the wrong side of a lopsided circuit split.”  TransUnion argued that the class of consumers did not have standing for their FCRA claims unless their credit reports were disclosed to a third party.  TransUnion further alleged that the class should have been decertified because Ramirez, the named plaintiff, “was radically atypical of the class he purported to represent” since there was no evidence that any other class member’s credit report was disseminated.  Finally, TransUnion disputed the court’s punitive damages award because a reduction to 4 times the statutory damages award was not enough.  According to TransUnion, the Supreme Court requires, at a maximum, a punitive damages award “equal to compensatory damages . . . when compensatory damages are substantial.”

TransUnion concluded its Petition for Rehearing by stating:

It is no exaggeration to say that, for many class members, the first indication that they were injured at all will be when they receive a $4,925.10 check in the mail. That absurd result is the product of ignoring basic requirements of Article III, Rule 23, and due process.

As of the date this article is published, TransUnion has not yet filed its petition for writ of certiorari in the Supreme Court, but we will continue to monitor the case for updates.

Copyright © 2020, Hunton Andrews Kurth LLP. All Rights Reserved.

For more on the Fair Credit Reporting Act, see the National Law Review Financial Institutions & Banking law page.

Ticketmaster, Live Nation Get Booed: Concert-Goers File Class Action for “Unchecked” Abuse of Market Power

Live Nation Threatens Anyone Who Doesn’t Play Along, Plaintiffs Allege

Concert-goers tired of paying “supracompetitive fees” on ticket purchases from Ticketmaster LLC filed a class action against the company and its parent, promoter Live Nation Entertainment, Inc., in U.S. District Court for the Central District of California on April 28 for abusing its more than 70% share of the primary ticketing market (i.e. where tickets are initially sold) for major concerts. The merged companies are also aggressively deploying anticompetitive tactics in pursuit of the lucrative “secondary ticketing” market where tickets are re-sold, typically at higher prices.

Ticketmaster achieved its dominant position through a “web of long-term exclusive dealing agreements” and other anticompetitive activity, the plaintiffs maintain. The companies merged in 2010, putting the ticketing giant together with the nation’s “most dominant concert promoter.” Live Nation controls 60% of the promotion business for major concerts. AEG Live is a distant number two, with 20% market share. Now, the plaintiffs say, Live Nation uses Ticketmaster as a loss leader to bludgeon its competitors and strong-arm venues (Iderstine v. Live Nation Entertainment, Inc. and Ticketmaster LLC, No. 1:20-CV-03888-PA-GJS, C.D. Calif., Western Div.).

“Subsidized by the supracompetitive profits Ticketmaster’s business generates from its domination of primary ticketing services for major concert venues, Live Nation Entertainment is able to keep a stranglehold on concert promotion services – losing tens of millions of dollars annually – by paying its clients exorbitant amounts,” the complaint reads. Live Nation “regularly threatens” concert venues with eliminating them from big-act tours if they use a Tickemaster competitor for ticketing services.

Live Nation has apparently become such an emboldened market bully that its CEO, Michael Rapino, openly boasted last year that if a venue doesn’t use Ticketmaster it will suffer economically because “we don’t hold the revenue.”  This stiff-arm anticompetitive style hasn’t been lost on the Department of Justice Antitrust Division or anyone who’s paying attention in the industry. It’s become the norm. The DOJ said U.S. venues have come to accept that if they don’t use Tickmaster they will lose big-star performers and significant revenue. “Given the paramount importance of live event revenues to a venue’s bottom line, this is a loss most venues can ill-afford,” the DOJ observed.

We recently wrote in our post — DOJ: Event Powerhouse Live Nation Punished Concert Venues for Using Competing Ticketers Despite Bar – of the government’s charge that Live Nation has been violating the DOJ-ordered ban on anticompetitive behavior for years. Now, Live Nation is operating under what the DOJ calls “the most significant enforcement action” of an existing antitrust consent decree in its history, one intended, at least, to secure stricter and longer lasting conditions designed to rein in the event conglomerate’s anticompetitive behavior. The DOJ action began more than a decade ago after the company acquired Ticketmaster. A 2010 final judgment permitted the merger but prohibited the company from retaliating against concert venues for using competing ticket companies, threatening concert venues, or taking other actions against concert venues for 10 years (United States v. Ticketmaster Entertainment, Inc., et al., Case No. 1:10-cv-00139-RMC [July 30, 2010]).

These are highly profitable companies. Live Nation’s 2018 revenues were $10.8 billion. Ticketmaster, a wholly-owned subsidiary following their merger in 2010, made $1.5 billion in 2018.

Despite the 2010 judgment, the DOJ announced earlier this year that Live Nation had been repeatedly violating it for years. The government hopes the modified and extended judgment clarifies for Live Nation what conduct is out of bounds and gives consumers and venues the relief the DOJ wanted in the first place.

Historically, structural remedies (such as divestitures) have been preferable to behavioral remedies (like consent decrees) in addressing antitrust concerns over proposed mergers. As Live Nation and Tickmaster are demonstrating, behavioral remedies are too easily ignored or abused by post-merger behemoths. Too often the benefits of violation outweigh the punishment. Their behavior also highlights the anticompetitive effects that can result from large-scale vertical mergers, which have been rampant in recent years. Bundling, tying, and exclusive contracts are just a few of the competitive concerns that we see playing out here, not to mention a stagnation in the entry of new competitors in various complementary markets.

Seeking relief under Sections 1 and 2 of the Sherman Act, Tickemaster and Live Nation, the Iderstine v. Live Nation complaint says:

  • Engage in anticompetitive exclusive dealing with concert venues;
  • Improperly wield the conditional copyright license Ticketmaster employs to grant access to its online platform, blocking, for example, purchases of a large number of tickets. This forces ticket brokers into exclusivity with Ticketmaster, and not its competitor;
  • Bar individuals from transferring tickets unless they use Ticketmaster to do so;
  • Prevent secondary ticket service providers from being able to do business – and charge consumers lower fees – by forcing venues to use both their concert promotion and concert ticketing services. In other words, tying. Ticketmaster enjoys double-digit annual growth as a result of its “unchecked” anticompetitive conduct, the complaint says.
  • Use “coercion of and threats against disloyal customers, ticket brokers, and others”;
  • Execute vertically arranged boycotts.

Ticketmaster has “clearly engaged in blatant, anti-consumer behavior for years,” the plaintiffs say. In addition to its “behind-the-scenes efforts to feed ticket brokers huge amounts of supply if they sold on Ticketmaster’s secondary platform,” the plaintiffs cite the DOJ’s extension of the 2010 consent decree. It’s only recently come to the attention of ticket-buyers that Live Nation has been “shamelessly” violating the consent agreement for years.  It also notes that the Federal Trade Commission ordered Ticketmaster to stop implying ticket prices were higher on its primary platform than its secondary re-sale platform, when the opposite is true.

The complaint seeks certification of two subclasses:

  1. Primary Ticketing Services Consumer Class. “All end-user purchasers in the United States who purchased a primary ticket and paid associated fees for primary ticketing services for an event at a major concert venue in the United States from Ticketmaster or one of its affiliated entities owned, directly or indirectly, by Live Nation Entertainment, Inc. at any point since 2010.”
  2. Secondary Ticketing Services Consumer Class. “All end-user purchasers in the United States who purchased a secondary ticket and paid associated fees for secondary ticketing services for an event at a major concert venue in the United States from Ticketmaster or one of its affiliated entities owned, directly or indirectly, by Live Nation Entertainment, Inc. at any point since 2010.”

© MoginRubin LLP

U.S. District Court Issues Temporary Restraining Order for Silver Products Fraudulently Promoted as a Treatment for COVID-19

On April 29, 2020, the U.S. District Court for the District of Utah issued a temporary restraining order (TRO) to halt the sale of a fraudulent coronavirus (COVID-19) treatment.  The U.S. Department of Justice (DOJ) announced the court’s decision in an effort to halt the sale of silver products fraudulently claimed to prevent and cure COVID-19.

DOJ filed a civil complaint on April 27, 2020, against defendants Gordon Pedersen of Cedar Hills, Utah and his companies, My Doctor Suggests LLC and GP Silver LLC.  The complaint alleges that defendants began fraudulently promoting and selling various silver products in early 2020 with claims that the silver products would treat and prevent COVID-19.  Some of the alleged false and misleading claims made by defendants include that having silver particles in the bloodstream would block the virus from attaching to cells, that silver would “usher” the virus out of the body, and that silver would destroy all forms of viruses and protect against COVID-19.

The U.S. Food and Drug Administration (FDA) issued a statement on the Utah case that “FDA will continue to help ensure those who place profits above the public health during the COVID-19 pandemic are stopped” and that FDA is “fully committed to working with the Department of Justice to take appropriate action against those jeopardizing the health of Americans by offering and distributing products with unproven claims to prevent or treat COVID-19.”

The enforcement action will be prosecuted in a coordinated action by the U.S. Attorney’s Office for the District of Utah and the DOJ Civil Division Consumer Protection Branch, with the assistance of the FDA’s Office of Criminal Investigations and Office of the Chief Counsel.  In addition to the TRO, prosecutors obtained a separate court order temporarily freezing the defendants’ assets in order to preserve the court’s ability to grant effective final relief and to maintain the status quo.  A hearing on the DOJ’s request for a preliminary injunction is set for May 12, 2020.  If the case proceeds to trial, the government will need to prove its allegations to obtain a permanent injunction against the defendants.

In another case, DOJ announced on April 17, 2020, that the United States District Court for the Southern District of Florida issued a TRO to halt the sale of an unapproved and potentially dangerous industrial bleach product being marketed as a “miracle” treatment for COVID-19.  The FDA and the U.S. Federal Trade Commission (FTC) had issued a warning letter to the defendant, Genesis II Church of Health and Healing, on April 8, 2020.  According to the FDA, oral ingestion of the defendant’s product called the Miracle Mineral Solution can cause nausea, vomiting, diarrhea, and severe dehydration.  The FDA and the FTC have issued nearly 40 separate warning letters in 2020 to companies selling unapproved or misbranded products with claims to prevent or to treat COVID-19.

Commentary

Particulate elemental silver and silver salts can be effective antimicrobial agents, and numerous products containing these active ingredients are currently registered for various antimicrobial uses.  The U.S. Environmental Protection Agency, along with other federal agencies, are working to ensure that necessary reviews and approvals of legitimate products intended to address COVID 19 are as expeditious as possible.  Products that need these regulatory reviews and approval, but that are marketed without them, are and will likely continue to be a current enforcement focus.

©2020 Bergeson & Campbell, P.C.

For more in COVID-19 fraud prevention, see the National Law Review Coronavirus News section.

Court Rules That Whistleblower Must Face Trial On Former Employer’s Claims

Life is not necessarily all skittles and beer for whistleblowers.  Sometimes, they are sued by the very companies on which they blew the whistle.  Such is the case in the ongoing case of Erhart v. Bofi Holding, Inc., 2020 U.S. Dist. LEXIS 57137.  Judge Cynthia Bashant limns the background facts as follows:

“Charles Erhart was an internal auditor for BofI Federal Bank. After Erhart discovered conduct he believed to be wrongful, he reported it to BofI’s principal regulator. BofI responded by allegedly defaming and terminating him. Erhart then filed this lawsuit for whistleblower retaliation under state and federal law. The next morning, The New York Times published an article summarizing the lawsuit’s allegations—causing BofI’s stock price to plummet. The Bank quickly commenced a countersuit against Erhart claiming he committed fraud, breached his duty of loyalty, and violated state and federal anti-hacking statutes. The Court consolidated BofI’s countersuit with Erhart’s whistleblower-retaliation action.”

In the cited decision, Judge Bashant grants in parts and denies in part Erhart’s and Bofi’s motions for summary adjudication.  The ruling is lengthy and tackles a variety of issues, some of which I hope to address in future posts.  Nonetheless, a key point for whistleblowers is that Judge Bashant is allowing Bofi’s claims against Erhart to proceed to trial, albeit on a limited basis.

When “Whistleblower” First Became Figurative

Recently, I endeavored to identify the first figurative use of the term “whistleblower” in a reported California opinion.  I was surprised that earliest case dates to the presidency of Ronald Reagan.  Interestingly, the Court addresses the very tension at the heart of Erhart:

“There is a great public interest in the truthful revelation of wrongdoing, and in protecting the ‘whistleblower’ from retaliation; there is very little public interest in protecting the source of false accusations of wrongdoing.”

Mitchell v. Superior Court, 37 Cal. 3d 268, 283, 690 P.2d 625, 634, 208 Cal. Rptr. 152, 161 (1984).  Many cases dating back to the mid 19th Century mention the blowing of whistles, but the references are to actual, not figurative, whistles.

© 2010-2020 Allen Matkins Leck Gamble Mallory & Natsis LLP

For more on whistleblowers, see the National Law Review Litigation & Trial Practice Section.

Supreme Court Rules That Certain, But Not All, Discharges to Groundwater May Require Permitting Under the Clean Water Act

In a 6-3 decision on Thursday, the United States Supreme Court vacated and remanded the opinion of the Ninth Circuit Court of Appeals and found that the Clean Water Act (“CWA”) regulated discharges from point sources “if the addition of the pollutants through groundwater is the functional equivalent of a direct discharge from the point source into navigable waters.” The Supreme Court distinguishes its opinion from the Ninth Circuit by determining that the “fairly traceable” test established by the lower courts was too broad to require a permit under the CWA.

The case concerned the city of Maui’s Lahaina Wastewater Reclamation Facility, which treats millions of gallons of sewage each day and injects the treated waste into wells deep underground. A study ordered by the United States Environmental Protection Agency demonstrated that the waste could be traced from the facility to the ocean.  As a result of the study, environmentalists argued that a permit under the CWA was required.

Prior to the Supreme Court ruling, both the federal district court and the court of appeals sided with environmental groups, and established a standard to require a permit under the CWA when pollutants are “fairly traceable” from the pipe to navigable waters, despite the fact that the discharge initially entered groundwater before entering a navigable water.

The Supreme Court found that the “fairly traceable” standard was too broad, citing the “power of modern science” to detect pollutants years after their release in minute quantities. Justice Stephen Breyer, writing for the majority, stated that a permit is required only when the indirect pollution in navigable waters via groundwater is the “functional equivalent of a direct discharge.”

“If the pipe ends 50 miles from navigable waters and the pipe emits pollutants that travel with groundwater, mix with much other material, and end up in navigable waters only many years later, the permitting requirements likely do not apply,” he wrote.

In dissenting opinions, Justices Thomas, Gorsuch and Alito stated that the CWA mandated a permit only for direct discharges of pollutants into navigable waters and that the majority opinion was unworkable and incomprehensible.

“Instead of concocting our own rule, I would interpret the words of the statute, and in my view, the better of the two possible interpretations is that a permit is required when a pollutant is discharged directly from a point source to navigable waters,” Alito wrote.

The case is County of Maui v. Hawaii Wildlife Fund, No. 18-260.

© Steptoe & Johnson PLLC. All Rights Reserved.

For more on SCOTUS’s Clean Water Act decision, see the National Law Review Environmental, Energy & Resources law page.

Supreme Court Preserves Availability of Profits Award for Both “Willful” and “Innocent” Trademark Infringement

On April 23, 2020, the U.S. Supreme Court unanimously held in Romag Fasteners, Inc. v. Fossil Group, Inc., 590 U.S. ___ (2020), that the Lanham Act does not impose a “willfulness” prerequisite for awarding profits in trademark infringement actions.

Disgorgement of a defendant’s profits has long been a critical remedy available to brand owners seeking remediation for the infringement of its trademarks.  A profits award can be a proxy for the actual damages suffered by the trademark owner, as actual damages are often very difficult to prove in trademark cases.  Profits awards also serve to deprive infringers of their unjust gains, and can be an important deterrent against infringing activities.  Some federal courts have considered an infringer’s intent as a factor, but not a prerequisite, to awarding a defendant’s profits to the prevailing plaintiff.  Other courts have required proof that the defendant’s infringement was willful before awarding damages measured by its profits, complicating the availability of this important trademark infringement remedy in certain jurisdictions.

The U.S. Supreme Court has resolved this split, finding that a categorical rule requiring a showing of willfulness cannot be reconciled with the statute’s plain language.  Accordingly, prevailing trademark owners do not have to prove willfulness to be awarded the infringer’s profits.

Background

The parties had an agreement allowing Fossil to use Romag’s fasteners in Fossil’s handbags and other products. Romag discovered that the factories Fossil hired in China to make its products were using counterfeit Romag fasteners. Unable to resolve its concerns amicably, Romag sued, alleging that Fossil had infringed its trademark and falsely represented that its fasteners came from Romag.

The U.S. District Court for the District of Connecticut found Fossil liable, and the jury awarded Romag $6.7 million of Fossil’s profits to “deter future trademark infringement.”  The trial court overturned the jury’s damages award because the jury found Fossil acted “callously,” rather than “willfully,” as required by the controlling Second Circuit precedent for a profits award. The U.S. Court of Appeals for the Federal Circuit affirmed the district court’s decision, and the U.S. Supreme Court vacated that judgment and remanded for further proceedings consistent with its opinion.

Overview of Court’s Opinion

Section 15 U.S.C. §1117(a) of the Lanham Act, which governs remedies for trademark violations, states:

When a violation of any right of the registrant of a mark registered in the Patent and Trademark Office, a violation under section 1125(a) or (d) of this title, or a willful violation under section 1125(c) of this title, shall have been established . . . , the plaintiff shall be entitled, subject to the provisions of sections 1111 and 1114 of this title, and subject to the principles of equity, to recover (1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action. (Underlined emphases added).

Although acknowledging that a defendant’s mental state is a highly important consideration in determining whether a profits award is appropriate, the Court rejected the categorical rule applied in certain lower courts (including controlling Second Circuit precedent) that a plaintiff can win a profits award only after proving that the defendant willfully infringed its trademark.  The Court relied on the plain language in 15 U.S.C. §1117(a) to find that Congress intended to limit such willfulness precondition to a profits award in a suit under Section 1125(c) for trademark dilution. It rejected Fossil’s position that the phrase “subject to the principles of equity” in Section 1117(a) should be read as imposing a willfulness requirement, especially given that Congress prescribed a “willfulness” requirement elsewhere in the very same statutory provision. In no uncertain terms, the Court noted that “the statutory language has never required a showing of willfulness to win a defendant’s profits” in claims under Section 1125(a) for false or misleading use of trademarks (i.e., trademark infringement).

Conclusion

The Court’s decision resolves a split amongst the lower courts and preserves a critical deterrent against trademark infringement by clarifying that Congress intended to allow a trademark owner to recover a defendant’s ill-gotten profits, regardless of whether such infringement was willful.

©2020 Pierce Atwood LLP. All rights reserved.

ARTICLE BY Jonathan M. Gelchinsky and Michael C. Hernandez of Pierce Atwood LLP.

 

For more Trademark Cases, see the National Law Review Intellectual Property Law section.

The Court of Appeals for the Federal Circuit Clarifies that Trademark Protection Is Available for “Graduated” and “Undefined” Color Schemes

There are a number of famous colors that are trademark-protected – such as the color brown, which is registered by UPS, and the color “robin egg blue”, which is registered by Tiffany & Co. This protection stems from the fact that such marks are “inherently distinctive”. That is, the colors have become so readily recognized by the purchasing public as being associated with goods or services. However, some color marks that comprise “undefined” multiple colors, including graduated colors (i.e., where one color fades into another) have generally been treated as never being able to rise to the level of being inherently distinctive.

On April 8, 2020, the United States Court of Appeals for the Federal Circuit (CAFC), held that the Trademark Trial and Appeal Board (TTAB) erred in ruling that an “undefined” color trademark on products and product packaging cannot be distinctive enough for registration unless consumers already recognize it as an indicator of product source. In Re: Forney Industries, Inc., Fed. Cir., No. 19-1073, Opinion 4/8/20.

In its federal registration application, Forney Industries, Inc. described its multi-color trademark as “a solid black stripe at the top” and “[b]elow the solid black stripe is the color yellow which fades into the color red” (emphasis added). Early on, the Examining Attorney at the United States Patent and Trademark Office (USPTO), and later the TTAB, decided that Forney multi-color scheme could not be inherently distinctive.

The TTAB cited two Supreme Court decisions supporting its position – that product and packaging marks using color without defined borders or shape also cannot be inherently distinctive. The CAFC found that the board’s decision overstated the Supreme Court precedent and ruled that the TTAB erred by holding that: (1) a multi-color mark can never be inherently distinctive, and (2) product packaging marks that employ color cannot be inherently distinctive in the absence of a well-defined peripheral shape or border.

The CAFC stated that the correct standard to apply in determining inherent distinctiveness is a legal question, which it could review de novo. The CAFC then recognized that neither the Supreme Court nor it, has directly addressed whether a multi-color mark such as described by Forney can ever be inherently distinctive. Recognizing the “Forney is not attempting to preempt the use of the colors red, yellow, and black, but instead seeks to protect only the particular combination of these colors, arranged in a particular design”, the CAFC concluded that there are instances when a multi-color mark, as well as single-color marks, can be inherently distinctive and, therefore, federally protected via the USPTO.

If your products or product packaging is recognizable by your customers, you may want to consider taking the extra step of applying for federal registration of that color, even if the color is not uniform and blends into other colors. Also, consider consulting an attorney who is well-versed in the area of trademark law to make sure that the description of your color mark is worded the best way possible.

There are a number of famous colors that are trademark-protected – such as the color brown, which is registered by UPS, and the color “robin egg blue”, which is registered by Tiffany & Co. This protection stems from the fact that such marks are “inherently distinctive”. That is, the colors have become so readily recognized by the purchasing public as being associated with goods or services. However, some color marks that comprise “undefined” multiple colors, including graduated colors (i.e., where one color fades into another) have generally been treated as never being able to rise to the level of being inherently distinctive.

On April 8, 2020, the United States Court of Appeals for the Federal Circuit (CAFC), held that the Trademark Trial and Appeal Board (TTAB) erred in ruling that an “undefined” color trademark on products and product packaging cannot be distinctive enough for registration unless consumers already recognize it as an indicator of product source. In Re: Forney Industries, Inc., Fed. Cir., No. 19-1073, Opinion 4/8/20.

In its federal registration application, Forney Industries, Inc. described its multi-color trademark as “a solid black stripe at the top” and “[b]elow the solid black stripe is the color yellow which fades into the color red” (emphasis added). Early on, the Examining Attorney at the United States Patent and Trademark Office (USPTO), and later the TTAB, decided that Forney multi-color scheme could not be inherently distinctive.

The TTAB cited two Supreme Court decisions supporting its position – that product and packaging marks using color without defined borders or shape also cannot be inherently distinctive. The CAFC found that the board’s decision overstated the Supreme Court precedent and ruled that the TTAB erred by holding that: (1) a multi-color mark can never be inherently distinctive, and (2) product packaging marks that employ color cannot be inherently distinctive in the absence of a well-defined peripheral shape or border.

The CAFC stated that the correct standard to apply in determining inherent distinctiveness is a legal question, which it could review de novo. The CAFC then recognized that neither the Supreme Court nor it, has directly addressed whether a multi-color mark such as described by Forney can ever be inherently distinctive. Recognizing the “Forney is not attempting to preempt the use of the colors red, yellow, and black, but instead seeks to protect only the particular combination of these colors, arranged in a particular design”, the CAFC concluded that there are instances when a multi-color mark, as well as single-color marks, can be inherently distinctive and, therefore, federally protected via the USPTO.

If your products or product packaging is recognizable by your customers, you may want to consider taking the extra step of applying for federal registration of that color, even if the color is not uniform and blends into other colors. Also, consider consulting an attorney who is well-versed in the area of trademark law to make sure that the description of your color mark is worded the best way possible.

© 2020 Davis|Kuelthau, s.c. All Rights Reserved

For more on trademark enforcement, see the National Law Review Intellectual Property Law section.