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EEOC Sues McDonald's for Disability Discrimination

mcdonalds logoFast Food Giant Denied Sign Language Interpreter for Deaf Applicant

KANSAS CITY, Mo. — McDonald’s Corporation and McDonald’s Restaurants of Missouri violated federal law by refusing to accommodate and hire a deaf applicant, the U.S. Equal Employment Opportunity Commission (EEOC) charged in a lawsuit filed today.

According to the suit, Ricky Washington, who is deaf, applied online for a job at a McDonald’s restaurant in Belton, Mo. in June 2012. Washington indicated on his application that he attended Kansas School for the Deaf. Washington also said he had previous job experience working as a cook and clean-up team member at a McDonald’s restaurant in Louisiana in 2009. When the Belton restaurant manager learned Washington needed a sign language interpreter for his job interview, she canceled the interview and never rescheduled it, despite Washington’s sister volunteering to act as the interpreter. Restaurant management continued to interview and hire new workers after Washington made several attempts to schedule an interview.

Such alleged conduct violates the Americans with Disabilities Act of 1990 (ADA), which prohibits discrimination against people with disabilities in employment and requires employers to make reasonable accommodations for job applicants so they will have equal opportunities during the application process. EEOC filed its lawsuit (EEOC v. McDonald’s Corporation, et al, 4:15-cv-01004-FJG) in U.S. District Court for the Western District of Missouri after first attempting to reach a pre-litigation settlement through its conciliation process. EEOC seeks back pay, compensatory and punitive damages, and injunctive relief, including training for all McDonald’s managers on accommodations for applicants with disabilities, particularly those who are deaf.

EEOC St. Louis District Director James R. Neely, Jr. said, “Removing obstacles in the hiring process for people with disabilities is a national priority for EEOC. All employers, but especially large ones, should join with the agency to make sure everyone has equal access to the employment process.”

“People with disabilities have one of the highest unemployment rates in the country,” added EEOC Regional Attorney Andrea G. Baran. “Providing equal employment opportunities to all job applicants – including those with disabilities – is not just the law, it is good for our economy and our workplaces.”

According to company information, McDonald’s is a global fast food provider that serves over sixty-nine million customers per day in 100 different countries.  The Belton, Mo. restaurant is owned and operated by the corporation’s world-wide headquarters in Oak Brook, Illinois.

Eliminating barriers in recruitment and hiring is one of six national priorities identified by EEOC’s Strategic Enforcement Plan (SEP).

The St. Louis District Office oversees Missouri, Kansas, Nebraska, Oklahoma and a portion of southern Illinois.

EEOC is responsible for enforcing federal laws prohibiting employment discrimination.

The original content can be viewed here.

© Copyright U.S. Equal Employment Opportunity Commission

SEC Releases Crowdfunding Rules for Securities Offerings

Investors will be able to purchase securities through Internet crowdfunding platforms under new final rules released by the Securities and Exchange Commission (SEC) in October. The final rules, known as “Regulation Crowdfunding,” originated in Title III of the Jumpstart Our Business Startups Act of 2012 (JOBS Act). The rules will take effect in May 2016.

Alongside Regulation Crowdfunding, the SEC also proposed amendments to Rules 147 and 504 under the Securities Act of 1933 (the Proposed Amendments). A brief review of Regulation Crowdfunding and the Proposed Amendments is provided below for companies or investors eager to discover new capital raising or investment opportunities and for broker-dealers interested in expanding into the crowdfund arena.

Key Points: What to Know About Regulation Crowdfunding

The Regulation Crowdfunding rules are extensive, but they can be more readily understood and categorized as: 1) operative provisions; 2) disclosure mandates; and 3) crowdfunding platforms.

Operative Provisions

Regulation Crowdfunding will: i) enable companies to raise up to $1 million, in the aggregate, over a 12-month period; ii) for individual investors whose annual income or net worth is less than $100,000, enable such investors to spend the greater of $2,000 or five percent of the lesser of their annual income or net worth on crowdfunding investments over a 12-month period; iii) for individual investors whose annual income or net worth equals or exceeds $100,000, enable such investors to spend ten percent of the lesser of their income or net worth on crowdfunding investments over a 12-month period. The goal is to allow more people to dabble in investments, and to level the playing field for investments by ensuring that even the wealthiest of individual investors cannot spend more than ten percent of their income or net worth on crowdfunding offerings in a given 12-month period. Also crucial to note are the following points:

  • Securities purchased in a crowdfunding transaction will be considered restricted securities and will be subject to resale restrictions for one year in most circumstances;

  • All of the new crowdfunding offerings will need to be completed with the assistance of a registered broker-dealer or done through a registered “funding portal,” to be discussed in greater depth below; and

  • Some companies are unable to use the exemption, including foreign companies, publicly-traded companies, and companies that are subject to disqualification under Regulation Crowdfunding.

Disclosure Mandates

Companies seeking to raise money through crowdfunding will have to meet specific disclosure requirements under Regulation Crowdfunding including:

  1. The price of the securities to be offered;

  2. How the price was determined;

  3. The target offering amount;

  4. The deadline to reach the target offering amount;

  5. The funding deadline;

  6. Whether the company intends to accept investments that will cause the target offering amount to be exceeded;

  7. A discussion of the company’s financial health;

  8. A discussion of the business and how proceeds from the offering will be used;

  9. Information about directors, officers, and owners of 20 percent or more of the companies;

  10. Certain related-party transactions; and

  11. Financial statements of the company that may or may not need to be audited, depending on a fairly complex set of circumstances.

Crowdfunding Platforms

Regulation Crowdfunding contemplates the creation of crowdfunding portals to facilitate Internet-based transactions that, in theory, reduce costs and boost efficiency. The “funding portals” will need to be registered with the SEC via a new form – Form Funding Portal – and such portals will need to be registered as members of a national securities association (i.e., FINRA). In short, the funding portals will be the intermediary platforms through which all crowdfunding will be conducted, and these portals will need to comply with the following requirements:

  1. Provide investors with informative materials explaining how to use the platform, what is being offered, and all relevant disclosures about the company, resale restrictions, investment limitations, and the like;

  2. Take measures to reduce fraud risks, including by verifying with the companies offering securities that such companies are in compliance with Regulation Crowdfunding and that the companies are maintaining up-to-date records of their security holders;

  3. Post and maintain mandatory disclosures for 21 days before any offerings are live (i.e., a waiting period of 3 weeks) and throughout the actual offering period;

  4. Make available forums or other communication venues for investors to discuss offerings on the platform;

  5. Explain how the intermediary is being compensated for hosting the transactions;

  6. Require investors to set up accounts officially before being allowed to buy securities;

  7. Have a reasonable basis to believe that investors are in compliance with the investment limitations (i.e., they will need to ensure investors are not exceeding their spending limits in a given 12-month period);

  8. Provide adequate notices and confirmations at each step of the investment process;

  9. Comply with maintenance and transmission of funds requirements; and

  10. Comply with any requirements dealing with completion, cancellation, and re-confirmation of offerings requirements.

Crowdfunding intermediaries will be prohibited from providing access to companies they believe pose fraud or other problems that could negatively impact investor protections; holding financial interests in companies offering securities on their platforms, unless such financial interests are being used as consideration to pay the intermediaries for their services (subject to certain conditions); and paying third parties to provide information that will personally identify any investors or potential investors who may be using or planning to use the platform. Specific to funding portals as intermediaries, Regulation Crowdfunding also prohibits such portals from: offering investment advice or making purchase recommendations; soliciting purchases, sales, or offers; soliciting purchases, sales, or offers via promoters or other persons for pay; and holding or handling investors’ funds or securities. Despite the numerous prohibitions, Regulation Crowdfunding is intended to make transactions smoother and provide a safe harbor (i.e., set of guidelines) for funding portals, such that, if the portals follow the guidelines precisely, they can be assured that they are in compliance with Regulation Crowdfunding.

Key Points: What to Know About the Proposed Amendments

In an effort to balance the need to help smaller companies raise capital with the need to protect investors from fraudulent and misleading securities sales, the SEC has proposed amending Rules 147 and 504 as follows:

  • Rule 147 – This rule currently allows a safe harbor for exemption from costly registration for offers and sales made entirely within one state. The amendments are intended to make it easier for companies to make intrastate offerings of their securities by: 1) eliminating restrictions on offers (i.e., general solicitation and advertising will be allowed), though sales would still need to be made only to residents of the issuer’s state or territory; and 2) expanding the meaning of “intrastate offering” and the issuer eligibility requirements. The amended Rule 147 would apply to offerings registered in-state or conducted under an exemption from state law registration that caps the amount of securities allowed to be sold by an issuer at $5 million over a given 12-month period, along with spending limits for investors.

  • Rule 504 – This rule currently provides a safe harbor exemption from registration for certain small offerings. The amendments would boost capital-raising by increasing the aggregate amount of securities allowed to be offered and sold under Rule 504 from $1 million to $5 million, during any 12-month period. The amendments would boost protection for investors by prohibiting a set of defined “bad actors” from participating in such offerings.

Conclusion: Timelines for Regulation Crowdfunding and the Proposed Amendments

The new Regulation Crowdfunding rules and forms will be effective 180 days after they get published in the Federal Register (i.e., in May 2016). The forms that will enable funding portals to get registered with the SEC will become effective on January 29, 2016, thereby allowing the funding portals to be active or ready for transactions months before any transactions under the new rules are allowed by law.

Regarding the Proposed Amendments to Rules 147 and 504, the SEC is welcoming public comments, and will continue to do so for a 60-day period, which will end approximately by the end of the year. Crowdfunding has been the subject of much discussion and debate as evidenced by the nearly three years it took the SEC to promulgate Regulation Crowdfunding. It is still too early to predict whether crowdfunding will emerge in 2016 as a successful alternate path for capital-raising for small companies. Indeed, only time will tell whether the SEC will manage to balance its primary goal of investor protection with the ambitious aim of offering a more grassroots-level option of raising money.

To review the text of Regulation Crowdfunding and the Proposed Amendments, see the following links from the SEC: http://www.sec.gov/rules/final/2015/33-9974.pdf and http://www.sec.gov/rules/proposed/2015/33-9973.pdf.

Article By Corporate Services at Dickinson Wright of Dickinson Wright PLLC

© Copyright 2015 Dickinson Wright PLLC

Delicious Look At Cookie Press Patent

I like to bake cookies, and this time of year gives me the perfect excuse to bake a lot of cookies. One of my favorite recipes uses a cookie press, which made me curious about cookie press patents. There are only a few granted U.S. patents with “Cookie Press” in the title, but U.S. Patent 6,708,853 seems to claim technology that I put to good use every December.

The Cookie Press Patent

U.S. Patent 6,708,853 names Hugh Melling asthe inventor and is assigned to Wilton Industries, Inc. Claim 1 recites:

1. An apparatus for dispensing a food substance comprising: a) a housing; b) a barrel connected to the housing and adapted to receive the food substance; c) a plunger slidably positioned within the barrel; d) a rod having teeth thereon and connected to the plunger; e) an advancing mechanism movably positioned within the housing and including: i) an escapement body; ii) a driver slidably positioned within the escapement body; iii) a spring engaging the driver and the escapement body so that the driver is biased toward said rod so that the driver engages a tooth of said rod; f) a lever pivotally attached to the housing and engaging said advancing mechanism so that when said lever is pressed towards said barrel, the driver moves said rod so that said plunger is advanced to dispense the food substance from the barrel.

According to the description in the specification, the spring may be a feature that distinguishes this cookie press over prior art cookie presses.The spring is located in the “escapement assembly 50″ but is not identified in Figure 3, reproduced below.

Cookie Press Patent Figure

As explained in the patent “a disc 20 is positioned at the bottom of the cookie barrel. The disc 20 includes openings 21 arranged in a variety of patterns to form a template for dispensing cookie dough. A bottom cap 16 with an opening 17 therethrough secures the disc 20 to the bottom of the cookie barrel. … [C]ookie dough is dispensed through the openings 21 of the disc 20 when the lever 22 of FIGS. 1 and 2 is manipulated.” This makes it easy to make fancy-looking cookies like these:

holiday cookies

Happy Holidays!

Article By Courtenay C. Brinckerhoff of Foley & Lardner LLP
© 2015 Foley & Lardner LLP

EEOC’S Lawsuit Against Costco to Proceed

Costco smallA federal district court judge ruled that the U.S. Equal Employment Opportunity Commission’s (EEOC) claim that Costco violated Title VII of the Civil Rights Act of 1964 by failing to prevent a male customer from stalking and harassing a female employee at the company’s Glenview, Ill. warehouse will be decided by a jury.

Judge Ruben Castillo, the chief judge of the U.S. District Court for the Northern District of Illinois in Chicago, denied Costco’s motion for summary judgment on EEOC’s claim it failed to protect one of its former employees from a sexually hostile work environment. The decision in EEOC v. Costco Wholesale Corp., 14-cv-6553, was entered on Dec. 16, 2015. The court announced it will select a jury trial date at a status hearing in January.

The court said it found evidence the employee was subjected to harassing behavior by a customer for more than a year, including ominous staring, unwanted physical touching, unwanted requests for dates and overly intrusive personal questions. The court found evidence the customer interactions continued to escalate, even though he had been talked to by Costco’s managers and the Glenview police to avoid her. The court also concluded that, added together and given the length of time over which the incidents occurred, they amounted to a level of a hostile work environment.

The court also found evidence Costco failed to take reasonable steps to stop the harassment, noting that Costco waited more than a year to ban the customer from the store. The court granted summary judgment for Costco on EEOC’s constructive discharge claim.

Costco is an international membership warehouse retailer which, according to its website, has over 650 locations worldwide, annual revenues over $100 billion, and over 125,000 employees in the United States.

EEOC’s Chicago District Office is responsible for processing discrimination charges, administrative enforcement and the conduct of agency litigation in Illinois, Wisconsin, Minnesota, Iowa, and North and South Dakota, with area offices in Milwaukee and Minneapolis.

EEOC enforces federal laws prohibiting employment discrimination. This information was previously published on the EEOC website, www.eeoc.gov.

Article By U.S. Equal Employment Opportunity Commission
© Copyright U.S. Equal Employment Opportunity Commission

DNC, Bernie Sanders’ Data Breach – Breaches Are Not Just About Social Security Numbers or Payment Cards

Are pundits discussing the personal information allegedly accessed by a campaign staffer for Bernie Sanders? No, not really, and that is the point.

In Saturday’s debate at St. Anselm College in Manchester, New Hampshire, Democratic presidential candidates Bernie Sanders and Hillary Clinton jousted over an alleged intrusion into Clinton’s voter data by a Sanders campaign staffer. According to reports, the staffer accessed confidential voter data maintained by a vendor, NGP VAN, while the firewall protecting that data had been removed. (hmmm…a third party vendor) In response, the Democratic National Committee (DNC) terminated the Sanders campaign’s access to all voter data, including the campaign’s own data. Litigation followed, a deal was reached, but reverberations continue. Turn to your favorite cable news channel.

One hears “data breach” and immediately Social Security numbers, credit card data, or medical information come to mind. In this case, the personal information reported to be involved included names, addresses, ethnicity, and voting history, hardly considered to be sensitive personal information in the United States. In fact, none of the state data breach notification laws would require notification based solely on these data elements. (But see, e.g., FTC settlement involving email addresses). But, some of the information, particularly analytical data concerning voter preferences, can be tremendously helpful to a campaign. So it is easy to see why it is causing such a stir, particularly for the Sanders campaign.

Why is this important beyond presidential politics?

Organizations are beginning to recognize the need for data breach preparedness. This is good – we are seeing more internal teams being assembled and comprised of key stakeholders within organizations. They are meeting, learning and developing data breach response plans including sample investigation checklists and policies, template notification letters, vendor relationships and engaging in tabletop exercises.

Their initial focus, however, is often exclusively on breaches involving personal information that would trigger notification obligations under federal (e.g., HIPAA) and state laws. The Sanders breach and others before it should make clear that these teams need to look beyond Social Security numbers and payment cards and account for data breaches that could initiate an entirely different set of concerns, exposures, considerations and mitigation steps.

If breached, an organization’s proprietary data, internal email communications among executives and management, customer or client data, sales information, and as we are seeing even voter data can have catastrophic consequences for an organization. A breach exposing insensitive email correspondence in the c-suite about customers, or suggesting systemic discriminatory employment practices, or outlining detailed labor management strategies can have significant implications for a company’s market position and workforce management. It can also trigger unwanted litigation and adversely impact the organization’s reputation. Putting data belonging to others at risk also could result in the loss of access to critical business information help by others, as in the Sanders breach. These are only a handful of examples and one need only think about some of the sensitive business information maintained or accessed by their own organizations that is not personal information to understand the effects of a breach of that information.

Organizations cannot prevent all unflattering emails that are sent and received by members of their workforce, they cannot avoid collecting or accessing sensitive business information entirely, nor can they prevent all data breaches from occurring. But they can take steps to be prepared in the event of a breach and in doing so, should consider the broad range of breaches they could encounter. Organizations engaged in data breach response planning, therefore, need to consider a wide range of data breaches that could affect their organizations – those affecting personal information and those affecting other sensitive and critical business information.

Article By Joseph J. Lazzarotti of Jackson Lewis P.C.

Jackson Lewis P.C. © 2015

Ten Rainmaking Tips for Finders, Minders and Grinders

This past week, I was speaking at an IP firm here in Chicago. The Managing Partner and I met ahead of time and discussed the group dynamics. He said, “Steve there are three types of attorneys that you’ll be presenting to today; the finders, the minders and the grinders. The finders are out there looking for business. The minders are thinking about looking for new business. And the grinders are too busy and disinterested to even think about developing new business.”

While I had heard these terms and definitions before, it struck me funny because I have worked well with all three of these groups to successful outcomes. Whether you are indeed a finder, minder or a grinder, remember that all you need to be successful in developing new business is the right motivation and education. If you are interested in learning how to improve your business development skills and see value in doing so, there’s hope for you yet.

Regardless of what group you fit into, here are TEN solid tips to motivate and educate the finders, minders and grinders.

  1. You must become a great lawyer, before becoming a great rainmaker. Without understanding the law and how it applies to the real world, it is nearly impossible to speak intelligently about your services. I have worked with hundreds of attorneys and they all agree that selling legal services requires knowledge and experience of the law.

  2. Developing your skills as a networker right out of law school can dramatically help you in advancing your career 2-3 years ahead of your peers. Building new relationships and leveraging existing contacts can unearth all types of opportunities. Make sure you have a solid elevator speech or a few sentences that describe what you do and how you help people. Also, be ready and willing to find ways to help the people you are meeting with. Networking is all about reciprocation, so try to think strategically about whom you are helping and how that help might be reciprocated over time.

  3. While social media is all-the-buzz, the only one you need to really think about is LinkedIn. The reason I say this is because LinkedIn has become the Google for business professionals. Instead of going to google to find an attorney, people just use LinkedIn. So be sure to have a complete profile with a picture. Also, it’s incredibly easy to find good connections through LinkedIn if you know how to use it. If you are looking for introductions from your clients, connect with them on LinkedIn and search through their contacts to see who they know. It’s just that easy!

  4. One of the biggest mistakes attorneys make in trying to grow a practice is not having a plan for growth and success. This plan doesn’t have to be a fifty page MBA level plan, just a 2-3 page plan that outlines how you will focus your time on a daily, weekly and monthly basis. The key is to write a one sentence objective, followed by strategies and tactics. A strategy could be; develop quality introductions from my existing clients. The tactics would then describe how, when and what you are going to do in order to accomplish those strategies.

  5. Talking about your goals with your peers is another way to push yourself into achieving them. If you commit to losing ten pounds and never tell anyone, it’s easy to back out of it. On the other hand, you’re more likely to stick to the goal if you tell everyone because of the possible embarrassment of not following through. It also can be helpful to partner up with someone for accountability. Find a partner at your firm or a lawyer at another firm and share your goals. Speak or meet monthly to discuss progress and encourage one another. This works for losing weight and also works for building books of business. A little friendly competition never hurts as well.

  6. Hiring a coach or finding a mentor can change your life! Why do all the top athletes have professional coaches? Aren’t they already at the top of their game? The reality is that we can all learn from people more experienced than ourselves. I have personally hired 4 coaches over the past ten years and it has been the best investment I have ever made. Do your research and find a coach or mentor that is highly regarded and recommended.  Meet with the coach and discuss your issues and goals.  If it feels right, pull the trigger and give it your all.  Waiting for things to change on their own rarely improves one’s book of business.

  7. Finding a niche’ is another way to grow your book of business. Every lawyer knows who the top specialists are in different categories. How about the best generalists? Not so much. Find an area of law that you excel in and enjoy and start working more aggressively in that area.  Read the paper and try to find the legal issues that are trending.  If you are in health care law, look into medical marijuana laws right away.  You might have an edge in getting an article published or speaking on the subject.

  8. Stop those awful “pitch meetings” that you keep having. No one wants to be sold to and no one likes a fast talking blowhard. My mantra has always been “Prescription before diagnosis is malpractice.” This means that we should focus on learning about the prospect’s needs and wants before saying too much. Ask open ended questions and really try to listen. You’ll be amazed at how well the meeting goes. Plus, think about how good your presentation will be once you understand more about your prospective client’s needs.

  9. Always target and go after low hanging fruit. You may have clients, strategic partners and friends around you that could be referring business your way. Before investing huge amounts of time attending new networking events, think about your best contacts. Spending an hour calling them to set up coffee or lunch meetings will be a much better return on your investment of time and energy.  Once you’re meeting with your best contacts, be sure to ask for quality introductions. Some of my clients are amazed at how easy this was to accomplish once they actually did it.

  10. In addition to being a good attorney, it has never been more important today to be a resource for your clients. The Godfather had a consigliore, so why not be a counselor for your clients. This means helping your clients achieve their goals beyond simply doing the “work.” To have client loyalty you must go way above and beyond their expectations. I recommend finding them business, being a source of new information and investing time to know them personally.

By thinking about and using these ten tips, you can dramatically improve your practice. Whether you find, mind or grind, everyone needs to do his part in assuring your firm is successful today and well into the future. Try to select one or two of my top ten points to help guide you in your journey. Sometimes even small steps forward can produce a dramatic result for someone who is interested in learning.

Article By Steve Fretzin of Sales Results, Inc.

Copyright @ 2015 Sales Results, Inc.

When Quirk of Copyright Law Creates Christmas Classic: It’s Wonderful Life and Public Domain

Christmas treeGeorge Bailey stands on a bridge begging for another chance at life. Upon being granted a second chance, he joyously runs home to embrace his family. As the community of Bedford Falls rallies around him and raises funds to save the endangered Building and Loan and George Bailey personally from an unjustified failure, someone proclaims a toast to George Bailey, “the richest man in town.” It’s a powerful ending to a beloved holiday classic, and it would have been forgotten over time but for accidentally allowing a copyright to expire.

The 1909 Act is the copyright act that governs copyrightable works created before 1964. The Act created two, distinct copyright terms for each individual work: a 28-year initial term and a 28-year renewal term. The initial term applied automatically, but the copyright owner had to file a renewal application with the U.S. Copyright Office to get the second term. If the owner failed to file a renewal application before the first 28-year term expired, the work automatically entered the public domain.

Into this copyright framework, a movie called It’s a Wonderful Life was released in December 1946. It was directed by Frank Capra and starred James Stewart. Upon its release, it was not the booming success that one might imagine based on its reputation now. While it was not a complete box-office failure, it struggled financially and never came close to reaching its break-even point. Capra and Stewart would never work together again. In fact, it was a major blow to Capra’s reputation, and in the aftermath of the film, Capra’s production company went bankrupt.

More holiday movies were created over the years, and the film was largely forgotten. At the end of the initial 28-year copyright term in 1974, a clerical mistake prevented the copyright owner of It’s a Wonderful Life from filing a renewal application, and the movie went into the public domain. TV studios, eager for inexpensive content to show during the holidays, began showing the movie every year because they were not required to pay any royalties while the film was in the public domain. Over the next approximately 20 years, the film was shown repeatedly every holiday and claimed its current status as a holiday classic.

Everything changed in 1993. In response to a Supreme Court ruling in Stewart v. Abend, the current copyright owners of It’s a Wonderful Life were able to enforce a copyright claim to the movie. The Court in Steward v. Abend held that a current copyright owner has the exclusive right to exploit derivative works, even in light of potentially conflicting agreements by prior copyright holders. Coincidentally, the Steward v. Abend case involved another James Stewart movie, Rear Window.

Because the current copyright owners of It’s a Wonderful Life still owned the movie rights of the original story on which the movie is based, the current copyright owners argued that their rights to the story told in It’s a Wonderful Life still existed and were enforceable to prevent unauthorized showing of the movie in its current form. The newly-returned owners were thus able to stop any unauthorized showings of the movie, but by then the movie was firmly entrenched as a holiday classic. It has been popular ever since. So the next time you sit down to watch George Bailey offer to lasso the moon for Mary or watch them dancing over an expanding swimming pool, just remember that we all might have missed this movie entirely if not for a clerical mistake causing a renewal application not to be filed.

Article By Lisa Adams & Derek E. Constantine of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
©1994-2015 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

Smartphone Wars – Supreme Court Awakens: Samsung Files Petition for Certiorari in New Hope to Harmonize Design Patent Law

On Monday, in the latest episode of the smartphone wars, Samsung filed a petition for certiorari with the Supreme Court.

Smartphone Wars

Samsung is appealing a Federal Circuit decision that upheld a $399 million judgment against Samsung for infringing three of Apple’s design patents. Samsung argues that the decision, if left unchecked by the Supreme Court, could dramatically increase the value of design patents. While the Supreme Court is the ultimate power in patent jurisprudence, it was a long time ago that it last considered a design patent case; more than 120 years ago according to Samsung. Samsung’s petition presents two fundamental questions concerning design patents:

1. Where a design patent includes unprotected non-ornamental features, should a district court be required to limit that patent to its protected ornamental scope?

2. Where a design patent is applied to only a component of a product, should an award of infringer’s profits be limited to those profits attributable to the component?

With respect to the first question – whether a district court should be required to limit the protection of a design patent to only ornamental features – Samsung argues that the Federal Circuit’s decision conflicts with both Section 171 of the Patent Act and with the Supreme Court’s precedent requiring judicial construction of patent claims.

According to Samsung, the Federal Circuit refusal “to cabin design patents to their protected ornamental scope” conflicts with Section 171 and allows infringement to be “found based on the use of nonornamental attributes.” Thus, argues Samsung, the Federal Circuit broadened the protectable scope of design patents, which are limited to “any new, original and ornamental design for an article of manufacture,” under section 171. Samsung argues the Federal Circuit’s ruling also creates tension with other areas of intellectual property law that routinely enforce limitations to protectable scope, such as copyright doctrine of “filtration” and trademark law’s doctrine of functionality.

Samsung also maintains that the ruling is contrary to Supreme Court precedents in the analogous context of utility patents, which recognize that district courts have a duty to construe patent claims and eliminate unprotected features. In Samsung’s view, similar to a Markman hearing, a district court should instruct a jury to identify non-ornamental features of a design patent and exclude them from the infringement analysis.

Turning to the second question – whether damages should be limited to the profits attributable to the infringing component – Samsung argues that the Federal Circuit’s decision conflicts with Section 289 of the Patent Act and the basic principles of causation and equity.

Samsung urges that “the Federal Circuit’s holding as a matter of law that an infringer of a design patent is liable for all of the profits it made from its entire product, no matter how little the design contributed to the product’s value or sales” be corrected. Samsung argues that the Federal Circuit’s conclusion that the article of manufacture is the entire smartphone, and not specific subcomponents, is wrong based on a natural reading and purpose of Section 289 of the Patent Act, contemporary extrinsic evidence regarding the definition of “articles of manufacture,” and non-controlling case law (see note below).

According to Samsung, the Federal Circuit’s “interpretation of Section 289 also flies in the face of well-settled tort principles of causation” and “ignores that disgorgement of the defendant’s profits is a classic equitable remedy for which the accepted measure of recovery generally is ‘the net profit attributable to the underlying wrong.’” “The cardinal principle of damages in Anglo-American law is that of compensation for the injury caused to plaintiff by defendant’s breach of duty,” This is the backdrop in which Section 289 was adopted. “Where disgorgement is available in patent cases, it has [] been ‘given in accordance with the principles governing equity jurisdiction, not to inflict punishment but to prevent an unjust enrichment by allowing injured complainants to claim ‘that which … is theirs, and nothing beyond this.’”

Samsung claims that certiorari should be granted because the Federal Circuit’s decision dramatically increases the value of design patents relative to other forms of intellectual property. Without correction, design patents will have whatever scope juries choose to give them, and a design-patent holder will be entitled to the infringer’s profits on the entire product even if the patented design applies only to a part of the product, and contributes to only a minor faction of the overall value. The Federal Circuit’s decision allows design patent owners to obtain the infringer’s total profits – a remedy not available under utility-patent law. Samsung contends that such leverage “poses a real danger for companies everywhere,” that it will lead to an “explosion of design patent assertions and lawsuits.”

Will the Supreme Court agree with Samsung that the Federal Circuit has caused a great disturbance in design patent jurisprudence? Difficult to see. Always in motion is the future.

Bush & Lane Piano Co. v. Becker Bros., 222 F. 902, 904 (2d Cir. 1915), (allowed an award of infringer’s profits from the patented design of a piano case but not from the sale of the entire piano, holding that “recovery should be confined to the subject of the patent.”); Young v. Grand Rapids Refrigerator Co., 268 F. 966 (6th Cir. 1920), (Affirmed the denial of all profits from the sale of refrigerators where the infringed patent related only to the design of the refrigerator’s door latch, explaining that it was not even “seriously contended” that the patentee could recover all profits from sales of refrigerators containing that latch.)

Article By, Patrick T. Driscoll, James Wodarski, Michael T. Renaud & Michael C. Newman of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
©1994-2015 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

Legal Executive Institute 23rd Annual Marketing Partner Forum – January 20-22 Orlando

Join Thomson Reuters’ Legal Executive Institute next January as Marketing Partner Forum heads to Orlando for a three day summit on transformative value in law firm profitability and business development. Set against the Tuscan luxury of the Loews Portofino Bay Hotel, Marketing Partner Forum will welcome law firm marketing partners, rainmakers, practice group heads, business development leaders and esteemed corporate counsel for a dynamic and vibrant conference designed for the industry’s elite.

For more information and to register, call 1-800-308-1700.

Why You Should Attend

  • Hear from venerable thought leaders both within and outside of the legal industry.
  • Network with colleagues and enjoy the family-friendly adventure of Universal Orlando®.
  • Broaden your horizons through a number of interactive seminars that ask participants to collaborate.
  • Participate in a number of compelling sessions designed for law firm partnership.
  • Interact with clients and network for new business.
  • Focus on global business development and the impact of “glocalization” on legal services.
  • Depart the event with practical takeaways to share with peers and firm leadership.

Who Should Attend

  • Law Firm Partners
  • Managing Partners
  • Marketing Partners
  • Practice Group Heads
  • Chief Marketing Officers
  • Senior Business Development Professionals

Testing Waters: Supreme Court Agrees To Hear Army Corps’ Clean Water Act Determinations Challenge

On Friday, the U.S. Supreme Court agreed to hear a challenge to the Eighth Circuit’s April 2015 ruling that U.S. Army Corps of Engineers’ (“Army Corps”) jurisdictional determinations are final agency actions subject to judicial review. The Eighth Circuit’s decision is contrary to a July 2014 Fifth Circuit ruling and thus created a circuit split. The Supreme Court’s decision could resolve that split and settle the question of whether parties may challenge Army Corps’ jurisdictional determinations.

Many types of development projects may impact “waters of the U.S.” under the Clean Water Act (CWA). Such activities might therefore be subject to the Army Corps’ requirements for permitting and implementation of mitigation measures. Whether “waters of the U.S.” may be impacted by a project is often far from clear, so project developers and property owners frequently request jurisdictional determinations from the Army Corps before proceeding with a project. The Army Corps’ long-standing position is that its jurisdictional determinations are not judicially reviewable final decisions since a party is not required to act or refrain from acting based solely on the decision. Rather, the Army Corps has taken the position that a party’s rights are not affected until a party is either denied a permit or subject to enforcement proceedings for acting without a permit. Developers and property owners have long struggled with this position, since a party must either go through the time intensive and costly permitting process before being able to seek review of the underlying jurisdictional decision, or choose to act without a permit and then possibly be subject to enforcement proceedings.

The Fifth Circuit Decision

In Belle Co. LLC et al. v. U.S. Army Corps of Engineers, 761 F.3d 383 (5th Cir. 2014), the Army Corps had issued a jurisdictional determination that a portion of the property in question was a “water of the U.S.”

On appeal to the Fifth Circuit, the Court decided that the Army Corps’ jurisdictional determinations are not final agency actions subject to judicial review, but are simply “notifications” regarding a property’s classification. The Fifth Circuit explained that for an agency action to be final it must: 1) be the “consummation of the agency’s decisionmaking”, and 2) the action must be a vehicle “by which rights or obligations have been determined, or from which legal consequences will flow.” The Fifth Circuit ruled that although jurisdictional determinations are the consummation of agency action, they do not determine legal rights or consequences, these decisions merely serve as a “notice.” Agreeing with the Army Corps’ position, the Court reasoned that the jurisdictional determination did not force the companies to refrain from acting on the property, and did not impose a penalty scheme for continuing with the project.

The Eighth Circuit Decision

The more recent Eighth Circuit decision, Hawkes Co., Inc., et al v. U.S. Army Corps of Engineers, 782 F.3d 994 (8th Cir. 2015), dealt with the Hawkes Company’s plan to mine peat. The Army Corps determined there were “waters of the U.S.” on the proposed mining site so the company would need a CWA permit before it could start mining. At the first stage of judicial review, the District Court denied Hawkes’ challenge, agreeing with the Fifth Circuit’s view that the determination was not a final agency action. The Eighth Circuit reversed, holding that Army Corps’ jurisdictional determinations are judicially reviewable final agency actions under the Administrative Procedure Act. The Eighth Circuit held that the Fifth Circuit had misapplied the law in ruling otherwise.

The Eighth Circuit noted that without judicial review the Hawkes Company had no choice other than “to incur substantial compliance costs (the permitting process), forego what they assert is lawful use of their property, or risk substantial enforcement penalties.” These options adversely affected the property and business interests of the company. The Court reasoned: “the prohibitive costs, risk, and delay of these alternatives to immediate judicial review evidence a transparently obvious litigation strategy: by leaving [property owners] with no immediate judicial review and no adequate alternative remedy, the Corps will achieve the result its local officers desire . . . without having to test whether its expansive assertion of jurisdiction” would ultimately be upheld in the courts. The Eighth Circuit found the jurisdictional determination process analogous to the administrative order process at issue in the 2012 Supreme Court decision in Sackett. There the Court ruled “[t]here is no reason to think that the Clean Water Act was uniquely designed to enable the strong-arming of regulated parties into ‘voluntary compliance’ without the opportunity for judicial review – even judicial review of the question whether the regulated party is within the [federal agency’s] jurisdiction.” Sackett v. EPA, 132 S. Ct. 1367, 1374 (2012).

The Eighth Circuit found the Army Corps’ contention that Hawkes had adequate alternative remedies – either seeking a permit or acting without one and then challenging any compliance action that resulted – was untenable and failed to consider that Hawkes could never recover the time it lost or expense it incurred in taking either action.

Practical Implications of a Supreme Court Decision

The Supreme Court’s upcoming decision could have important practical implications for project developers and property owners. The Army Corps’ long-term position has left the regulated community with few pre-permitting or enforcement options. The Eighth Circuit decision, and the Supreme Court’s decision to review this issue, provide some hope to developers and property owners that they may soon be able to seek judicial review of jurisdictional determinations before going through the permitting process.

Article By Sarah A. Slack & Amanda K. Beggs of Foley & Lardner LLP

© 2015 Foley & Lardner LLP