Category: Litigation

Mode of Operation Potentially Creates New Theory of Liability Against Retailers for Premises Liability

This article will address the use of “mode of operation” theory in so-called negligent stacking cases against retailers for premises liability. Adding mode of operation analysis into the mix creates new considerations for retailers in defense of cases of falling merchandise. While many courts look solely to the method of stacking standing on its own in making this determination, some have introduced the concept of mode of operation into the analysis. By introducing this consideration, courts invite inquiry into the reasonably foreseeable interference of customers. Being on the lookout for this issue is important early in the pleading process as well as during the presentation of evidence at trial.

Typically, in premises liability cases, including those involving falling merchandise, a retailer is not the insurer of the safety of its customers. See, e.g. Garvin v. Bi-Lo, Inc., 343 S.C. 625 (2001); Mounsey v. Ellard, 363 Mass. 693 (1973); Meek v. Wal-Mart Stores, Inc., 72 Conn. App. 467, 806 A.2d 546 (2002). However, a plaintiff may recover if she can show that the manner of stacking a shelf was dangerous. “The merchant must use reasonable care in placing goods on the store shelves. Merchandise must not be stacked or placed at such heights, widths, depths, or in such locations which would make it susceptible to falling.” See e.g. Pullia v. Builders Square, Inc., 265 Ill.App.3d 933, 937, appeal denied, 158 Ill.2d 565, 645 N.E.2d 1368 (1994); Dougherty v. Great Atlantic & Pacific Tea Co., 221 Pa.Super. 221, 289 A.2d 747 (1972). The jury also may consider the method of stacking, the presence or absence of lateral support, and the stacked item’s dimensions and center of gravity. Meek v. Wal-Mart Stores, Inc., 72 Conn. App. 467 (2002); Wal-Mart Stores, Inc. v. Sholl, 990 S.W.2d 412 (Tex. App. 1999); Fleming v. Wal-Mart, Inc., 268 Ark. 241 (1980).

These cases, relying on a simple formulation of negligent stacking present clear areas for the defense to emphasize. Any deficiency in the plaintiff’s presentation as to orientation, heights, and weights must be highlighted for the finder of fact. Unless the case is brought in a jurisdiction that sanctions res ipsa loquitur liability in these situations, the plaintiff cannot simply rely on the occurrence of the accident to support a case. In addition to highlighting deficiencies in the plaintiff’s case, the defense may also benefit from the right expert. Testimony from a structural engineer or other qualified expert to affirmatively establish the stability of the retailer’s chosen display and compliance with industry standards.

In some jurisdictions, courts have employed a mode of operation analysis to allow a plaintiff to establish liability for falling merchandise. For example, in Meek v. Walmart, 72 Conn. App. 467, 806 A.2d 546 (2002), the Connecticut Appellate Court held that “the store’s mode of operation may be taken into account by the fact finder when it considers whether the method of display was unsafe.” Consequently, “one of the factors to be considered in establishing and maintaining a display in a department store is that the merchandise is going to be inspected by the customers.” This ruling extended the mode of operation analysis to Connecticut in line with the more than twenty other states. See Kelly v. Stop and Shop, Inc., 281 Conn. 768 (2007).

Adding mode of operation analysis into the mix creates new considerations for retailers in defense of cases of falling merchandise. Although the jurisdictions that allow mode of operation liability employ different tests, generally speaking, there needs to be a business model that encourages customers to handle merchandise making a “particular resultant hazard readily foreseeable.” See e.g. Fisher v. Big Y Foods, Inc., 298 Conn. 414, 428, 3 A.3d 919, 928 (2010). Such modes of operation typically concern a particular method of operation within the self-service context, rather than the self-service model itself. See Jasko v. F.W. Woolworth Co.,supra, 177 Colo. at 420, 494 P.2d 839 (“defendant’s method of selling pizza” created dangerous condition); Gump v. Wal-Mart Stores, Inc., supra, 93 Hawai’i at 418, 5 P.3d 407 (specifically limiting application of rule to circumstances of case, i.e., when “a commercial establishment, because of its mode of operation, has knowingly allowed the consumption of ready-to-eat food within its general shopping area”). The fact that customers are allowed to select merchandise off of a shelf typically will not satisfy a mode of operation analysis. See e.g. Fisher v. Big Y Foods, Inc., 298 Conn. 414, 428, 3 A.3d 919, 928 (2010).

Therefore, when confronted with a claim of mode of operation case for falling merchandise, the defense should initially consider a motion to contest the sufficiency of the allegation if the mode of operation alleged is merely that customers are allowed to select and carry away their own merchandise. Without identifying a specific practice within a self-service context, the plaintiff’s allegation may be legally insufficient.

If unable to dispense of such an allegation through a pre-trial motion, it will be incumbent upon the defense to present evidence at trial negating the mode of operation claim. A well-prepared defense witness on compliance with internal standards and practices showing proper stacking methods and inspections will go a long way towards a successful defense. Further, evidence showing lack of injury from the merchandise display method at issue will bolster the defense. This can be done through presenting evidence as to industry practice as well as demonstrating an absence of regularly occurring falling merchandise. Retailers can best achieve this by regularly documenting any claims and having in place a system for monitoring such accidents. By showing that the practice at question was not peculiar to a particular aspect of the retailer’s operation or that the hazard was not so regularly occurring as to be foreseeable, a defendant should be able to avoid liability.

© 2019 by Raymond Law Group LLC.

For more on legal liability, see the National Law Review Products Liability law page.

Federal Judge Limits the Reach of the WOTUS Rule

Introduction

During the Obama Administration, the Environmental Protection Agency (“EPA”) and the United States Army Corps of Engineers (collectively, “the Agencies”) adopted a rule amending the regulatory definition of “waters of the United States” (the “WOTUS Rule” or “Rule”).  As explained in a previous alert, the WOTUS Rule has far-reaching implications for project development and landowners across the energy, water, agricultural, construction, and transportation sectors, and it has been the subject of extensive litigation, as well as rulemaking by the Trump Administration.

On Wednesday, August 21, 2019, the United States District Court for the Southern District of Georgia ruled in Georgia v. Wheeler that the WOTUS Rule impermissibly extended the Agencies’ authority beyond the scope of the Clean Water Act (“CWA”) and failed to comply with the Administrative Procedure Act (“APA”). The Court remanded the WOTUS Rule back to the Agencies and extended its preliminary injunction of the Rule.

Background

Since its enactment, the WOTUS Rule has been the subject of many legal challenges, and it was enjoined in numerous states. Additionally, under the Trump Administration, the Agencies proposed a new rule that would have delayed the effectiveness date of the WOTUS Rule for two years (the “Suspension Rule”). As previously discussed, the Suspension Rule was the subject of a nationwide injunction in South Caroline Coastal Conservation League v. Pruitt.  A federal judge in the Western District of Washington then vacated the Suspension Rule in Puget Soundkeeper Alliance v. Wheeler.

After the vacatur of the Suspension Rule, the WOTUS Rule continued to provide fodder for litigation. To date, the WOTUS rule is enjoined in 27 states: Alaska, Alabama, Arizona, Arkansas, Colorado, Florida, Georgia, Idaho, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, Nevada, North Carolina, North Dakota, South Carolina, Oregon, South Dakota, Texas, Utah, West Virginia, Wyoming, and Wisconsin.  The Rule remains effective in 22 other states and the District of Columbia.

The Opinion

In Georgia v. Wheeler, the Court—relying primarily on Justice Kennedy’s concurrence in Rapanos v. United States—held that the WOTUS Rule impermissibly extended the Agencies’ jurisdiction beyond their delegated authority under the CWA.

The Court also held that the Agencies’ definitions of interstate waters, tributaries, adjacent waters, and case-by-case waters violated the CWA, and that the Rule significantly interfered with lands and waters that were traditionally under state authority without clear congressional intent.

Additionally, the Court determined that the Rule failed to comply with the APA both procedurally and substantively. These topics are further discussed below.

Definition of Interstate Waters

The Court found that the definition of interstate waters, which considers all interstate waters to be a “water of the United States” irrespective of navigability, disregarded the Supreme Court’s ruling in Rapanos. In particular, the Court found that WOTUS reads the term “navigability” out of the CWA. As such, under the WOTUS Rule, a non-navigable interstate water with no significant nexus to a “water of the United States” would still be regulated. According to the Court, that result extends beyond the Agencies’ authority under the CWA.

Definition of Tributaries

The Court also concluded that the Rule’s definition of “tributaries” was over-inclusive because it used the presence of an ordinary high water mark (“OHWM”) and bed and banks as physical indicators of volume sufficient to create a regulated “tributary.”  The Court took particular issue with provisions in the WOTUS Rule discussing situations in which these physical indicators are “absent in the field,” but are nevertheless determined to be present by “other appropriate means,” such as “lake and stream gage data, elevation data, spillway height, historic water flow records, flood predictions, statistical evidence, the use of reference conditions, or through . . . remote sensing and desktop tools.”  The Court found this approach inconsistent with Justice Kennedy’s concurrence, noting that “the physical indicators that the Agencies assert provide evidence of sufficient volume and flow to adhere to Justice Kennedy’s significant-nexus test need not actually be physically present in a geographic area so long as computer programs can decipher that they exist and need not presently exist so long as those programs can conclude that they have existed at sometime in the past.”

The Court was also troubled by the application of the “tributaries” definition in the Arid West, citing evidence that the physical indicators of a tributary often appear around water bodies in the Arid West, even when they are wholly isolated from navigable waters. The Court found that the definition of tributaries could inadvertently regulate dry areas that may contain attributes of an OWHM and a bed and bank due to an extreme weather event—a result that Justice Kennedy’s concurrence in Rapanos sought to avoid. Accordingly, Court concluded that the “tributaries” definition extended too far.

Definition of Adjacent Waters

According to the Court, the definition of “adjacent waters” clearly conflicted with Justice Kennedy’s opinion in Rapanos by erroneously including waters adjacent to non-navigable tributaries. The Court recognized that, while adjacency is a permissible factor to consider when determining jurisdiction under the CWA, that factor must still be subject to Kennedy’s significant-nexus test.  The Court reasoned that the definition impermissibly extended jurisdiction over isolated and inconsequential waters.

Case-by-Case Waters

The Court presumed that the case-by-case category was the Agencies’ attempt to implement Justice Kennedy’s significant-nexus test. Because the Agencies relied on impermissible definitions of “interstate waters” and “tributaries” in formulating their criteria for the case-by-case category of waters, the criteria were also invalid to the extent they were the logical outgrowth of these definitions. Because the definitions of “interstate waters” and “tributaries” were already overbroad, the Agencies could not base case-by-case category waters of those definitions, as they too would impermissibly expand federal jurisdiction. Notably, the Court concluded that the Agencies’ reliance on erroneous definitions of “tributaries” and “interstate waters” was the only error in the WOTUS Rule’s case-by-case category under the CWA.

The WOTUS Rule Substantially Interferes with Traditional State Power

The Court also found that the Rule substantially encroached on traditional state power. Recognizing that the CWA permits the federal government to regulate waters in order to protect the biological and physical integrity of the Nation’s waters, the Court also emphasized the Congressional policy in the CWA stating that states should retain primary responsibility over land and water resources. The Court found that the WOTUS Rule as written would result in the federal government regulating immense stretches of intrastate land not contemplated by that CWA.  To support this finding, the Court cited statements made by the Agencies under the Trump Administration in a recently-proposed rule to rescind the WOTUS Rule that the WOTUS Rule “may have altered the balance of authorities between the federal and State governments, contrary to the agencies’ [prior] statements,” and to statistics suggesting the WOTUS rule was estimated to increase the scope of federal jurisdiction over waters by at least two percent — an increase the Court characterized as “a substantial intrusion into lands and waters traditionally left to state authority.” According to the Court, this significant increase in jurisdiction improperly stripped states of their traditional authority to regulate these types of lands and waters.

The Rule failed to comply with APA and was arbitrary and capricious

The Court found that the rule violated the APA in two ways: (1) the final Rule was not the logical outgrowth of the Agencies’ previously-proposed version of the Rule; and, (2) there were parts of the Rule that were arbitrary and capricious. The Rule failed to be the logical outgrowth of the Agencies’ proposed rule for three reasons. First, while the proposed Rule did not include distance limitations when defining “neighboring waters,” the final Rule did. Second, the proposed Rule similarly did not include distance limitations for adjacent waters in the case-by-case categories, while the final Rule did. Lastly, the proposed Rule did not contain any explicit farming exemption, but the final Rule contained a farming exemption for adjacent waters. The Court agreed with Plaintiffs’ argument that, had they known that there was going to be a farming exemption for adjacent waters, they would have also commented that there should be a farming exemption for tributaries.

The Court also determined that portions of the Rule were arbitrary and capricious. The Court found that the Agencies’ inclusion of a farming exemption for adjacent waters but not tributaries was arbitrary and capricious because it failed to treat similar cases in a similar manner without justification. The Court also found that the Agencies’ decision to use FEMA 100-year floodplain maps to define adjacent and case-by-case waters was arbitrary because of the inaccuracies of outdated flood maps, and because the Agencies failed to sufficiently explain why the 100-year floodplain was the proper limit. Lastly, the Agencies’ use of a distance limitation for adjacent waters was arbitrary because the Agencies only gave broad, conclusory reasons why the limit was selected and failed to explain their decision.

Practical Implications

Georgia v. Wheeler represents yet another federal court to examine the merits of the WOTUS Rule and to find it exceeding the Agencies’ statutory authority under the CWA and violating provisions of the APA.  The Court did not vacate the rule, but simply remanded it back to the Agencies, and therefore the Rule remains effective where not enjoined. This case continues the patchwork implementation of the WOTUS Rule, which is now enjoined in 27 states, but is still effective in 22 other states and the District of Columbia.

This patchwork situation may not last long, as appeals will likely be filed challenging the Georgia v. Wheeler decision and other decisions enjoining or declining to enjoin the WOTUS Rule. Additionally, the Agencies under the Trump Administration are expected in the near future to publish a final version of their proposed new WOTUS Rule, which is also very likely to face legal challenges.

As a result on the ongoing litigation and rulemaking processes, the regulated community is unlikely to see true certainty on the question of the geographic scope of the CWA until Congress takes action to clarify its scope or the Supreme Court issues a new substantive decision addressing this issue.

© 2019 Van Ness Feldman LLP

Jury Rules for NCAA in First Sports Concussion Case Tried to Verdict

In a landmark decision, a Pennsylvania jury ruled in favor of the defendant National Collegiate Athletic Association (NCAA) in the first sports concussion case tried to verdict. In a 10−2 decision, the jury in Onyshko v. NCAA, No. C-63-CV-201403620 (Wash. Cty. Ct. Comm. Pleas, PA) (filed 6/27/14, originally filed in federal court on 12/17/13) found that the NCAA was not negligent in its dealings with plaintiff Matthew Onyshko when he was a student at California University of Pennsylvania.

In 2008, five years after his college football career ended, Onyshko was diagnosed with amyotrophic lateral sclerosis (ALS), a progressive neurodegenerative disease usually diagnosed between age 40 and 70. Onyshko and his wife sued NCAA for claims of negligence and loss of consortium. The complaint stated that, during his college football career, Onyshko experienced numerous, repeated blows to the head, lost consciousness for at least 30 seconds on three separate occasions, and that repeated blows to the head caused him to develop ALS.

The NCAA is the main regulatory body for college sports to promote safe participation. According to Onyshko, the NCAA knew from at least the 1980s that football-induced brain injuries cause long-term damage, but it failed to adequately supervise, regulate, and minimize the risk of long-term brain injury resulting from repeated head impacts.

NCAA’s pre-trial motion to dismiss, which argued that the complaint failed to adequately plead the existence of the legal duty, was denied by the court on December 3, 2014. Subsequently, NCAA moved for summary judgment, arguing that (1) the action was barred by the statute of limitations, (2) NCAA did not have a duty to plaintiff, (3) NCAA did not breach a duty to protect against the long-term risks of concussion and (4) plaintiff’s alleged head injuries incurred while playing college football did not cause his later development of ALS. In denying the motion, the court found that plaintiffs’ expert opinions created a genuine issue of material fact about whether concussive and sub-concussive blows to the head while playing collegiate football could cause ALS.

After years of litigation and substantial discovery, the case went to trial, with jury selection beginning on April 29, 2019. During the trial, which lasted almost a month, Onyshko, now 38 years old, used a computerized device controlled by eye movement to give testimony. According to Onyshko, he sustained at least 20 concussions as a college football player during which he blacked out, but was never taken off the field in a stretcher. He further testified that he did not report the episodes to a trainer because he did not know that these were an issue. He said that the diagnosis of ALS in 2008 was a shock because it did not run in his family.

During cross-examination, the NCAA’s attorney brought up Onyshko’s deposition testimony that Onyshko first experienced headaches, dizziness, and memory problems in 1999, before he played any collegiate games. Video recordings of games in which plaintiff played were shown to refute plaintiff’s claims of the multiple head injuries he allegedly sustained.

In his closing statement, plaintiffs’ attorney requested compensatory damages of $9.6 million. Deliberation began the afternoon of June 5, 2019. After seven and a half hours, the jury found in favor of NCAA on liability. The plaintiffs announced plans to appeal and re-file the matter as a wrongful death case under Pennsylvania law when Onyshko dies.

© 2019 Wilson Elser

Beware of the Barter: A Cautionary Tale

A recent ruling by Tennessee’s top court sends a strong message: be leery of waiving traditional forms of payment in favor of accepting goods or services. In TWB Architects, Inc. v. The Braxton, LLC, et al., an architecture firm and a cash-strapped developer executed an agreement for the architect to receive a penthouse condominium instead of his design fee. When the developer could not deliver a deed for the condominium, the architecture firm sued the developer for its fees.

So far, the ensuing litigation has lasted over 10 years and, most recently, resulted in an opinion by the Supreme Court of Tennessee that reversed summary judgment in favor of the architect and remanded the matter back to the trial court for still more proceedings.

The parties originally entered in a standard Architect Agreement, whereby the plaintiff, TWB Architects, was to be paid for its design services based on two percent of the construction costs for the project. After failing to obtain sufficient financing for the project, the defendant, The Braxton, informed TWB that it could not pay the design fees and suggested TWB accept a condominium in the project as payment instead. TWB agreed, and the parties executed the Condominium Agreement.

Thereafter, TWB’s owner acted as though he owned the condominium contemplated in the deal, which just so happened to be a penthouse. He invested nearly $40,000 in upgrades and repeatedly referred to the penthouse as “his penthouse.” In December 2008, he moved into the penthouse and represented himself as its owner.

However, shortly thereafter, issues arose with Braxton’s ability to deed the condominium to TWB’s owner. At that point, TWB decided to change course. It claimed that it was still entitled to the original design fee under the Architect Agreement and filed a mechanic’s lien for the unpaid fees. Braxton claimed the Condominium Agreement had acted as a novation, nullifying the Architect Agreement and, accordingly, TWB’s ability to collect its fee thereunder.

The trial court granted summary judgment in favor of TWB, holding it could still recover its design fees because there was insufficient evidence that the parties intended a novation by substituting the Architect Agreement for the Condominium Agreement. The court of appeals affirmed, but the Tennessee Supreme Court reversed. The Supreme Court found that summary judgment was improperly granted because disputed questions of material fact existed about whether TWB and Braxton intended a novation when they executed the condominium agreement.

Unless the parties can settle the matter, the case will now require a trial to determine whether TWB can recover its fees. It’s unknown whether TWB’s owner is still living in the penthouse.

This case is a great example of how a tempting barter – like accepting a penthouse from a cash-strapped developer – may sound like a nice solution at the time, but can lead to further headaches and protracted litigation.

© 2019 BARNES & THORNBURG LLP

For more developer-architect concerns, see the National Law Review Real Estate law or Construction Law pages.

Sometimes You Feel Like a Nut

In a spit decision, the First Circuit reversed a dismissal of a putative class action in a Massachusetts consumer protection case. Dumond v. Reily Foods Co., No. 18-2055 (1st Cir. Aug. 8, 2019)

The defendant New England Coffee Company sells a “Hazelnut Crème” coffee. The plaintiff sued because the coffee contains no nut – it’s all coffee, no nut, only nut flavored. The district court dismissed the complaint without leave to amend on the basis that the complaint wasn’t sufficiently specific. After rejecting that ground for dismissal and also rejecting a preemption argument, the majority noted that the defendants argued as an alternative ground to support the dismissal that the factual allegations complaint failed to state a plausible claim, and that’s the part of the decision that interests us.

Whether the label was deceptive, Judge Kayatta, writing for himself and Judge Torruella, opined was a question of fact. While the label said it was “100% Arabica coffee” and listed no hazelnut as an ingredient, Judge Kayatta said that perhaps a reasonable factfinder could conclude the name of the product was sufficient, without having to read the “fine print,” “much like one might easily buy a hazelnut cake without studying the ingredients list to confirm that the cake actually contains some hazelnut.”

Responding to the dissent, Judge Kayatta wrote:  “Our dissenting colleague [Judge Lynch] envisions a more erudite reader of labels, tipped off by the accent grave on the word “crème,” and armed perhaps with several dictionaries, a bit like a federal judge reading a statute. We are less confident that ‘common parlance’ would exhibit such linguistic precision. Indeed, we confess that one of us thought “crème” was a fancy word for cream, with Hazelnut Crème being akin, for example, to hazelnut butter, a product often found in another aisle of the supermarket.”

Judge Kayatta further wrote: “None of this is to say that our dissenting colleague’s reading is by any means unreasonable. To the contrary, we ourselves would likely land upon that reading were we in the grocery aisle with some time to peruse the package.”

In her dissent, Judge Lynch said that she disagreed with the majority that this presented a “close” question – in her view “a reasonable consumer plainly could not view the phrase ‘Hazelnut Crème’ as announcing the presence of actual hazelnut in a bag of coffee which also proclaims it is ‘100% Arabica Coffee.’”  Aside from noting that the package ingredient only said it included 100% Arabica coffee and never said it contained an actual nut, Judge Lynch explained how the word “Crème” means, both in the dictionary and in common parlance, a cream or cream sauce as used in cookery or a sweet liqueur, with the latter usually “used with the flavor specified” (citing Webster’s) – in short, “hazelnut Crème” clearly indicates a flavoring, not an ingredient. The majority’s hazelnut cake analogy was inapt because cakes are “made up of many ingredients.” .

My thoughts on this opinion are, first, it sounds like a lively chambers discussion, and second, I wonder about the degree to which each of the members of the panel does his or her own grocery shopping, and, if so, whether he or she reads labels, and whether this, consciously or not, influenced their thinking.

Since according to the majority opinion, either Judge Kayatta or Judge Torruella thought “Hazelnut Crème” meant hazelnut butter (really? in coffee? And despite the fact no dairy product was listed on the label?), did the majority reason that it follows that a reasonable consumer could be confused, because obviously the members of the majority are reasonable consumers? As noted above, the majority stated that “we” would “likely” realize there was no actual hazelnut in the coffee “were we in the grocery aisle with some time to peruse the package.” Are they saying that’s not the reasonable consumer standard –someone with time to peruse a package? It’s unreasonable to have them look at the ingredients? Or is the majority saying “likely” isn’t good enough to avoid a jury question?

©2019 Pierce Atwood LLP. All rights reserved.

New York’s New Child Victims Act Expands Opportunity for Filing Abuse Claims and The Path for Victims’ Justice

This week, a one-year “revival” period of statute of limitations began for individuals who assert civil claims of child abuse to file claims against institutions and individuals pursuant to New York’s Child Victims Act, even if those claims had already expired and/or were dismissed because they were filed late. The premise behind the Child Victims Act is that children are often prevented from disclosing abuse due to the social, psychological and emotional trauma they experience.

Additionally, the  Child Victims Act, also expands the statute of limitations for bringing criminal claims against alleged perpetrators of child sexual abuse, and  permits alleged victims of these crimes to file civil lawsuits up until they reach age 55. This aspect of the legislation will have a significant impact on the volume of criminal cases, and even more so civil lawsuits, 385 of which were filed in the first hours of the revival period, with hundreds more geared up for filing in the upcoming weeks and months. Indeed, the New York State court system has set aside 45 judges specifically to handle the expected crush of cases.

Institutional Changes Following the New Child Victim’s Act

Religious, educational and other institutions that are committed to providing a safe environment for children should be thinking about how they can implement safeguards against child abuse within their institutions. An important step is keeping internal lines of communication with staff and families open, as well as educating staff and leadership as to their reporting obligations under New York law and on how to provide appropriate support if child abuse is suspected.

The Child Victims Act joins the Sex Harassment Bill also signed into law by Gov. Cuomo as significant changes by New York Legislators involving sexual abuse and harassment in New York State.

©2019 Epstein Becker & Green, P.C. All rights reserved.

Genotyping Patent Claims Do Not Escape The Reach of s. 101

In Genetic Veterinary Sciences, Inc. v. Laboklin GMBH & Co., the University of Berlin, App. No. 2018-1565 (Fed. Cir., Aug. 9, 2019), a Fed. Cir. panel affirmed the district court’s JMOL ruling that the claims of the University’s U.S. Pat. No. 9,157,114 were patent-ineligible because they merely involved the discovery of a natural phenomenon. Interestingly, the Judges on the panel were Wallach, Hughes and Stoll, all of whom dissented from the refusal of the Fed. Cir. to rehear the Athena decision en banc. However, Athena was a straightforward “If A, then B” diagnostic test, while the claims of the ‘114 patent were not written as diagnostic claims, but as “method of genotyping” claims:

An in vivo method for genotyping a Labrador Retriever comprising:

  1. obtaining a biological sample from the Labrador Retriever,
  2. genotyping a SUV39H2 gene encoding the polypeptide of SEQ ID NO:1[;] and
  3. detecting the presence of a replacement of a nucleotide T with a nucleotide G at position 972 of SEQ ID NO:2.

This “genotyping method” detected a single point mutation in the gene that confirms the presence of a skin condition, HNPK, in the dog, that is heritable if both parents possess the mutation. It can also be used to confirm whether or not a skin condition present in the dog is HNPK.  However, the absence in the claim of a step directed to drawing a diagnostic conclusion from the presence of the mutation, while in accord with the PTO’s 2014 101 Guidance, did not save this claim from the judicial exception prohibiting claiming a law of nature. Rather, the claim jumped from a legal frying pan of Athena into the legal fire of Ariosa, that bars patenting the mere discovery or observation of a natural phenomenon:

“Similarly [to Ariosa], In re BRCA1 – & BRCA2-Based Hereditary Cancer Test Patent Litigation, we concluded that the claims were directed to a patent ineligible law of nature because the claims’ “methods, directed to identification of alterations of the gene, require[d] merely comparing the patient’s gene with the wild–type gene and identifying any differences that ar[o]se”. 774 Fed.. Cir.755, 763 (Fed. Cir. 2014). In each of these cases, the end result of the process, the essence of the whole, [Ed. note: Is this some new poetic legal standard?] was a patent-ineligible concept”. [Ed. note: “concept” seems to be veering into abstract idea-land.]…Taken together, the plain language of claim 1 demonstrates that it is directed to nothing more than ‘observing or identifying’ the natural phenomenon of a mutation in the SUV39H2 gene….Thus the asserted claims are directed to a natural phenomenon at Alice step 1.”

Since the next section of the opinion is entitled “The Asserted Claims Do Not Recite an Inventive Concept”, you know this opinion is going to end badly for Labokin, the exclusive licensee of the university patent. Given that this opinion was written by the dissenters in the Athena petition for rehearing in banc, might this case turned out differently? Could the existence of the mutation in some of the SUV39H2 genes have been part of a public data base but its significance be unknown until the inventor discovered that the mutation could be correlated to the presence of HPNK? In other words, could the panel have begun by giving weight to the fact that one could observe the mutation without knowing what it means?

To get “credit” for the discovery of the utility of the mutation, claim 1, at the least, would need a mental process step that draws a diagnostic conclusion, a la Athena. Now the Athena dissenters would argue that the discovery of the utility of the correlation should provide the “inventive step” required by Alice step 2. But the Fed. Cir.’s Meriel decision precludes that outcome, since that panel ruled that the discovery of the utility of a correlation cannot meet the “inventive step” requirement. (Genetics Techs. v. Meriel is cited at page 25 of the slip opinion, but only as supporting a finding a lack of inventive step when the laboratory techniques employed to carry out the diagnostic procedure are routine, conventional, etc.)

So to get this claim past the “inventive concept” gatekeepers, it would also need to recite a positive action step of some sort. Here, the panel cites and distinguishes Vanda because it taught “a specific method of treatment for specific patients, using a specific compound at specific doses to achieve a specific outcome.” Remember, the claims of Vanda recited a first genotyping step, and then drawing a conclusion from that step, but didn’t stop there. This case did not give the dissenters much to work with, so they wrote a decision that Siri could have come up with. This case could at least have taken a swing at the failure of the Alice test to consider the claim elements in ordered combination. Judge Newman may yet get to write for a panel that has the nerve to distinguish Mayo and to find that an “If A, then B” diagnostic claim based on the discovery if the utility of a natural correlation is patent eligible because the steps, considered as a whole, are not conventional or well-known to the art.

© 2019 Schwegman, Lundberg & Woessner, P.A. All Rights Reserved.

For more on patent eligibility see the National Law Review Intellectual Property law page.

Case Closed?: Not Quite Yet, But Serial TCPA Litigator Testing Court’s Patience

Well, no one can say that he did not get his day in Court.

Plaintiff Ewing, a serial TCPA litigator who filed yet another case assigned to Judge Battaglia, narrowly escaped dismissal of all his claims, and was permitted leave to amend for a second time.  See Stark v. Stall, Case No. 19-CV-00366-AJB-NLS, 2019 U.S. Dist. LEXIS 132814 (S.D. Cal. Aug. 7, 2019).  But in the process, the Judge called attention to the Plaintiff’s unprofessional conduct in an earlier case, ruled that he failed to name a necessary party, and found that he inadequately plead the existence of an agency relationship between the defendant and the necessary party that he had failed to join in the lawsuit.

At the outset, the court dismissed the claim brought by co-plaintiff Stark, as the Complaint contained no allegations that any wrongful telephone calls were placed to that particular individual.

In 2015, Ewing had already been put on notice of the local rules of professionalism and their applicability to him, despite his status as a pro se litigator.  Thus, the Court easily granted defendant’s motion to strike Plaintiff’s allegations to the effect that defendant had made a “derogatory remark” simply by pointing out that he was designated as a vexatious litigator.

The two most important pieces of the case for TCPAWorld are the Court’s rulings about Plaintiff’s failure to join a necessary defendant and his insufficient allegations to establish vicarious liability.

Plaintiff had failed to name as a defendant the entity (US Global) that allegedly made the calls to him.  The court determined that this company is a necessary party that must be added in order for the court to afford complete relief among the parties.  We often see situations where only a caller but not a seller, creditor, employer, franchisor, etc. are named, or vice versa, so it is encouraging to see courts strictly enforce Federal Rule 15 in the TCPA context.

The court further held that the relationship between Defendant and US Global was not such that Defendant could be held liable for violations of the TCPA that were committed by US Global.  While Plaintiff made unsubstantiated allegations that an agency relationship existed, the Court treated these as merely legal conclusions and granted dismissal based on insufficient allegations of facts to establish a plausible claim that there is a common-law agency relationship between Defendant and US Global.  Simply stated, the bare allegation that Defendant had the ability to control some aspects of the caller’s activity was insufficient to establish control for purposes of TCPA vicarious liability principles.

Plaintiff’s amended pleading is due on August 31—anticipating another round of motion practice, we will track any further developments in this case.

© Copyright 2019 Squire Patton Boggs (US) LLP

For more TCPA cases, see the Communications, Media & Internet law page on the National Law Review.

Will the Supreme Court Weigh in on the Copyright Lawsuit of the Decade?

When two tech titans clash in court, the outcome can reverberate widely. In what has been dubbed the “copyright lawsuit of the decade,” Oracle sued Google in 2010 for infringing its copyrights in 37 Java Application Programming Interface (API) packages used in Google’s Android software platform for mobile devices (as explained further below, API packages consist of pre-written computer programs that perform specified functions).

At the first trial in 2012, a jury found that Google infringed Oracle’s copyrights. The judge, however, concluded that the Java API packages were not copyrightable as a matter of law. In 2014, the Federal Circuit reversed and remanded for a second jury trial on Google’s fair use defense. Oracle Am., Inc. v. Google Inc., 750 F.3d 1339 (Fed. Cir. 2014). The Supreme Court denied Google’s cert petition.

In 2016, a second jury found in favor of Google on its fair use defense, and the trial court denied Oracle’s motion for judgment as a matter of law. In 2018, the Federal Circuit overturned the jury’s verdict, concluding that Google’s use of the 37 Java API packages was not fair use as a matter of law. Oracle Am., Inc. v. Google LLC, 886 F.3d 1179 (Fed. Cir. 2018).

On January 24, 2019, Google petitioned the Supreme Court for a writ of certiorari. It identified the issues presented as:

(i) whether copyright protection extends to a software interface; and

(ii) whether Google’s use of a software interface in the context of creating a new computer program constitutes fair use.

The Federal Circuit’s rulings sent shockwaves through the software industry, and fifteen parties—ranging from corporations like Microsoft to software-related associations, and intellectual property scholars—filed amicus briefs in support of Google’s petition. Microsoft warned that the Federal Circuit’s approach “threatens disastrous consequences for innovation” in the software industry by depriving third parties of access to and reuse of functional code used to “facilitate interoperability across myriad software platforms and hardware devices.” An association representing over 70,000 software developers worldwide asserted that the Federal Circuit’s conclusions had spawned confusion concerning whether longstanding practices such as sharing libraries of common software functions constitute copyright infringement. Likewise, Professor Peter S. Menell and Professor David Nimmer (the editor of Nimmer on Copyright) maintained that the Federal Circuit had “upended nearly three decades of sound, well-settled, and critically important decisions of multiple regional circuits on the scope of copyright protection for computer software.”

On March 27, 2019, Oracle filed its opposition to the petition. The tech giant identified the issues as:

(i) Whether the Copyright Act protects Oracle’s computer source code that Google concedes was original and creative, and that Oracle could have written in any number of ways to perform the same function?

(ii) Whether the Federal Circuit correctly held that it is not fair use as a matter of law for Google to copy Oracle’s code into a competing commercial platform for the purpose of appealing to Oracle’s fanbase, where Google could have written its own software platform without copying, and Google’s copying substantially harmed the actual and potential markets for Oracle’s copyrighted works?

After Google filed its reply, the Supreme Court invited the Solicitor General to file a brief expressing the views of the United States. This is where the case presently stands.

The Java Programming Language

Oracle’s predecessor, Sun Microsystems, Inc. (“Sun”) developed the Java programming language to allow programmers to write programs that run on different types of computing devices without having to rewrite the programs from scratch for each type of device. To that end, Java’s motto is “write once, run anywhere.”

To provide programmers with shortcuts for executing specific functions, Sun created the Java API, which consists of packages (akin to a bookshelf in a library), classes (akin to books on the shelves), and methods (akin to “how-to” chapters in each book). See Oracle Am., Inc. v. Google Inc., 872 F. Supp. 2d 974, 977 (N.D. Cal. 2012), rev’d and remanded, 750 F.3d 1339 (Fed. Cir. 2014).

Each method performs a specific programming function (for example, choosing between the greater of two integers). The key components of a method are: the “declaring code” that defines the package, class and method names, form of inputs and outputs, and the “implementing code” that provides instructions to the computer concerning how to carry out the declared function using the relevant inputs.

Google began negotiating with Sun in 2005 to license and adapt Java for its emerging Android software platform for mobile devices. After those negotiations failed, Google decided to use Java anyway, and copied verbatim the declaring code in 37 Java API packages (consisting of 11,500 lines of code), as well as the structure and organization of the packages (referred to as the SSO). However, Google wrote its own implementing code for the relevant methods.

In 2007, Google began licensing the Android platform free of charge to smartphone manufacturers. It earned revenue—$42 billion from 2007 through 2016—from advertising on the phones. In 2010, Oracle acquired Sun, and promptly sued Google for infringement.

The Copyright Question

In 2014, the Federal Circuit reversed the lower court’s ruling that the declaring code and SSO were not entitled to copyright protection. Importantly, while the Federal Circuit only has jurisdiction over patent-related matters, it handled the appeal because Oracle’s complaint had also included patent claims (which the jury rejected). The Federal Circuit, however, applied Ninth Circuit law to the copyright questions presented.

The Federal Circuit began by noting that “copyright protection extends only to the expression of an idea—not to the underlying idea itself.” Moreover, to the extent the particular form of expression is necessary to the use of the idea, then using the expression to that extent is not copyright infringement. This is known as the “merger doctrine” which states that if there are a limited number of ways to express an idea, the idea is said to “merge” with its expression—and the expression becomes unprotected. Further, the “scenes a faire doctrine,” bars certain standard, stock, or common expressions from copyright protection.

Thus, to use a simple example, while a book on arithmetic can be copyrighted, the idea of adding, subtracting, multiplying, and dividing cannot be. Moreover, if using symbols like “+” and “x” are necessary or commonly used to express the concepts of adding and multiplying, those expressions are not copyrightable.

Applying these principles, the Federal Circuit first observed that copyright protection extends to expressive elements of a computer program. It then rejected Google’s argument that Oracle’s expression merged with unprotectable ideas, noting that Oracle had unlimited options as to the selection and arrangement of the declaring code that Google copied. The Federal Circuit also rejected Google’s reliance on the scenes a faire doctrine. Because at the time the code was written, its composition was not dictated by external factors like “mechanical specifications of the computer” or “widely accepted programming practices within the computer industry.”

The Fair Use Question

After determining that Oracle’s declaring code and SSO were subject to copyright protection, the Federal Circuit remanded for a jury trial on Google’s fair use defense. As noted, the jury found that Google had established the defense, but the Federal Circuit overturned that verdict.

The fair use defense is a judge-made doctrine that has been incorporated into the federal copyright statute as Section 107, which provides that “the fair use of a copyrighted work…for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright.” To determine whether particular copying constitutes fair use, the statute identifies the following factors as:

(1) “The purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes.”

(2) “The nature of the copyrighted work.”

(3) “The amount and substantiality of the portion used in relation to the copyrighted work as a whole.”

(4) “The effect of the use upon the potential market for or value of the copyrighted work.”

The Federal Circuit ultimately concluded that because Google’s copying was for a highly commercial purpose, was not qualitatively insignificant, and substantially harmed Oracle’s own licensing efforts; the copying was not fair use as a matter of law, notwithstanding the jury’s verdict to the contrary.

Because APIs are key to broad acceptance of standardized software functions, IMS computer and software expert Dr. John Levy believes that were the Supreme Court to affirm the Federal Court’s ruling, it may severely limit the spread of useful API’s to important code bases. As an example, Dr. Levy notes that a small company will usually want to make its declaring code available to all users and developers, so that the underlying application code will get the broadest possible use and market share. The developer counts on having a competitive set of implementing code to make money.

According to Dr. Levy, the Federal Circuit may have been influenced by the fact that Google made so much money using the copied declaring code. But as evidenced by the large number of amicus briefs, the broader software industry cares more about defending a broad reading of “fair use” than assessing damages against companies who make money from copied declaring code.

Dr. Levy sees the issues in the Oracle case as similar to those in a case he worked on as an expert back in the 80386 chip days. In that case, Intel owned the instruction set of the 386 chip. But because Intel customers didn’t want to be limited to a single source for these Intel-compatible processors, Intel licensed the instruction set to other chip manufacturers.

“One licensee produced chips that performed the Intel-owned instruction set. Intel sued that licensee for copyright infringement of the underlying microcode (the implementation of the instruction set in the chip designed by the licensee company),” recalled Dr. Levy.

A federal court ruled that the microcode (firmware) was indeed copyrightable, but that there was no infringement under the “limited expression” doctrine explained above. There simply were not many ways to implement the licensed instructions in microcode, and therefore the licensee’s implementation did not infringe Intel’s own implementation. In the Oracle case, however, the Federal Circuit concluded that there were many ways for a programmer to select and arrange the declaring code that Google copied.

© Copyright 2002-2019 IMS ExpertServices, All Rights Reserved.

This article was written by Joshua Fruchter of IMS ExpertServices.
For more copyright cases, see the National Law Review Intellectual Property law page.

Big Food Price-Fixing Update: Court Certifies Three Putative Classes in Packaged Seafood Litigation

What started out as a proposed merger between two of the largest packaged seafood manufacturers spawned a lengthy criminal investigation into antitrust violations in the tuna industry by the Department of Justice (DOJ) and multiple class and individual civil lawsuits. After four years of litigation, a major development in the class action lawsuits occurred– the Court certified three putative classes.

In 2015, the Department of Justice investigated a proposed merger between Thai Union Group P.C.L. (the parent company of Chicken of the Sea) and Bumble Bee Foods LLC. As the DOJ’s civil attorneys reviewed information related to the merger, they discovered materials that appeared to raise criminal concerns.[1]

Chicken of the Sea then “blew the whistle” to the DOJ regarding their anticompetitive conduct. This admission helped DOJ reach plea agreements with two other manufacturers, Bumble Bee[2] and Starkist,[3] as well as three packaged seafood executives—two from Bumble Bee[4],[5] and one from Starkist[6]. In connection with its guilty plea, Bumble Bee agreed to pay a $25 million fine, while Starkist’s fine is still pending. Bumble Bee’s CEO has also been indicted, and faces up to 10 years in a federal penitentiary. [7]

Now, the tuna manufacturers face a new challenge in the related civil actions. In 2015, on the heels of the DOJ investigation, three separate class actions were filed in the Southern District of California. Plaintiffs alleged that Defendants took part in various forms of anti-competitive conduct, including agreeing to fix certain net and list prices for packaged tuna. Plaintiffs alleged that the conspiracy began as early as November of 2010 and lasted until at least December 31, 2016.

On July 30, 2019, Judge Janis L. Sammartino granted the respective Motions for Class Certification filed by the Direct Purchaser Plaintiffs, as well as the two indirect classes–the Commercial Food Preparer Plaintiffs, and the End Payer Plaintiffs.[8] Judge Sammartino found that each class had satisfied Rule 23’s requirements and—contrary to the Defendants arguments—that common issues predominate over individualized issues within each class. For example, Plaintiffs contended that common evidence exists that would be used to prove the existence and scope of Defendants’ purported price fixing conspiracy.

The certification orders represent a major victory for each of the classes. They can now proceed to summary judgment and trial without any concern that their claims may be narrowed due to the mechanics of the proposed class. While dispositive motions are scheduled to be submitted later this month, no trial date is currently set. With certification rulings issued and merits briefing on the horizon, renewed settlement discussions are likely to come.

[1] https://www.justice.gov/atr/division-operations/division-update-spring-2017/civil-investigations-uncover-evidence-criminal-conduct

[2] https://www.justice.gov/opa/pr/bumble-bee-agrees-plead-guilty-price-fixing

[3] https://www.justice.gov/opa/pr/starkist-co-agrees-plead-guilty-price-fixing

[4] https://www.justice.gov/opa/pr/packaged-seafood-executive-agrees-plead-guilty-price-fixing-conspiracy

[5] https://www.justice.gov/opa/pr/first-charges-brought-investigation-collusion-packaged-seafood-industry

[6] https://www.justice.gov/opa/pr/former-packaged-seafood-executive-pleads-guilty-price-fixing

[7] https://www.justice.gov/opa/pr/bumble-bee-ceo-indicted-price-fixing

[8] Case No.: 15-MD-2670 JLS (MDD) United States Court of Southern District of California

© 2019 Bilzin Sumberg Baena Price & Axelrod LLP
This article was written by Jerry Goldsmith and Lori Lustrin of Bilzin Sumberg.
For more food industry news, see the Biotech, Food & Drug page on the National Law Review.