The National Law Forum

As Drones Hit the Sky Lawsuits Predicted to Fly

The rise of Unmanned Aerial Vehicles (“UAV”), also known as drones, is well-documented. In fact, the global market for non-military drones has recently been estimated as a $2.5 billion industry that is growing at approximately 15 to 20 percent annually. See Clay Dillow, Get Ready for ‘Drone Nation,’ Fortune, Oct. 27, 2014. Companies large and small are heavily investing in drone technology and generating business capabilities based on their potential.

While some of the most highly publicized forays into drone usage include Fortune 500 shipping companies – such as Amazon investigating the potential use of drones for their delivery service – less publicized industries are ripe for drone operation. These industries include agriculture, construction, energy, and mining. Id. All of which are industries in which it is easy to imagine the benefits of aerial data.

In fact, the Association for Unmanned Vehicle Systems International predicts that eventually 80 percent of the commercial drone market will relate to agriculture. See Christopher Doering, Growing Use of Drones Poised to Transform Agriculture, USA Today, Mar. 23, 2014. This is because a drone’s ability to assist farmers in identifying and analyzing insect problems, watering issues, crop yield, missing cattle, and fertilizing make for a natural union with the industry.

While some farmers may purchase and operate their own drones, it is expected that specialized companies will fill this demand. One such company is goFarm LLC (“goFarm”)^[1], a Michigan-based agri-data business – one of the few companies authorized by the Federal Aviation Administration to legally operate commercial drones in this arena. GoFarm performs field surveys by drones operating at low altitudes that collect imagery in visible and non-visible bands to determine health of crops. By analyzing hundreds or thousands of images, goFarm performs detailed assessments of the condition of entire fields and individual plants.

Whether such data is collected by end-user farmers or by specialized third-party companies such as goFarm, all individuals and companies involved need to be cognizant that with great opportunity also comes risk.

Beyond, the obvious risks of property damage that could result from wayward drones, many jurisdictions have, or are in the process of, passing legislation aimed at addressing privacy concerns. The most recent example of such legislation comes out of Florida. On May 14, 2015, Florida Governor Rick Scott signed a drone privacy bill into law. This bill establishes a private right of action for people photographed in their homes by drones without their consent. Some speculate that this legislation will trigger a wave of litigation. See Carolina Bolado, New Fla. Drone Privacy Law Could Trigger Litigation Wave, Law360, May 15, 2015.

Legislation similar to that passed in Florida creates substantial risk to drone based companies, even those operating in rural locations typically associated with industries such as agriculture and mining. GoFarm’s Chief Technology Officer, Eric Silberg, explains that “when conducting their assessments, in order to ensure adequate coverage, inevitably pictures are taken of the areas directly surrounding the field goFarm operators are contracted to assess. These pictures may include property that does not belong to goFarm’s customer, even if the drone never flies over land not belonging to the customer. This extraneous data is removed during the analysis process, and is not available in any product.” While companies utilizing drones for photographic purposes will need to alter their operations to comply with any local rules and regulations, inadvertent photographs could result in litigation exposure.

In order to protect themselves from privacy related claims, as well as other liability exposures, companies utilizing drones need to assess their insurance portfolios to ensure adequate coverage. In particular, companies need to analyze the breadth of their liability policies, including the language of any potentially applicable exclusion contained therein – such as exclusions associated with aviation risk. This analysis should be conducted with the help of an experienced insurance broker and/or insurance coverage counsel.

In the event that the company’s liability policies are deemed not broad enough to cover its contemplated operations, the company should investigate purchasing UAV coverage. Given the relative infancy of the drone market, insurance companies are developing and releasing new products associated with drone activity at a breakneck speed. Consequently, coverages and pricing will likely vary across carriers. Risk managers should speak with their insurance experts to ensure that an appropriate and cost-effective insurance solution is identified and implemented.

_{[1] http://www.gofarminc.com.}

ARTICLE BY

Jason S. Rubinstein of Gilbert LLP

Apple-Samsung Trade Dress Case Demonstrates Potential Value of Design Patents

A jury awarded Apple more than $1 billion in damages after finding that smartphones sold by Samsung diluted Apple’s trade dress and infringed Apple’s design and utility patents. After a partial retrial limited to determining the appropriate amount of damages, Apple still arose victorious with a $930 million award. Samsung moved for judgment as a matter of law and for a new trial. The district court denied those motions, and Samsung appealed. On May 18, 2015, the Federal Circuit upheld the jury’s verdict of design and utility patent infringement, but reversed the finding of trade dress dilution.

Trade Dress Claims

At issue on appeal was whether Apple’s purported registered and unregistered trade dress associated with its iPhone 3G and 3GS products is functional. Because trademark law gives the trademark owner a “perpetual monopoly,” a design that is functional cannot serve as protectable trade dress. Apple Inc. v. Samsung Elecs. Co., Ltd., No. 14-1335, slip op. at 7 (Fed. Cir. May 18, 2015). The standard is even higher when the owner claims trade dress protection over the configuration of a product, as opposed to product packaging or other forms of trade dress. Slip op. at 8. In fact, the court noted that Apple had not cited a single Ninth Circuit case finding trade dress of a product configuration to be non-functional. Id.

Apple claimed the following elements as its unregistered trade dress:

a rectangular product with four evenly rounded corners;
a flat, clear surface covering the front of the product;
a display screen under the clear surface;
substantial black borders above and below the display screen and narrower black borders on either side of the screen; and
when the device is on, a row of small dots on the display screen, a matrix of colorful square icons with evenly rounded corners within the display screen, and an unchanging bottom dock of colorful square icons with evenly rounded corners set off from the display’s other icons.

Slip op. at 9. “In general terms, a product feature is functional if it is essential to the use or purpose of the article or if it affects the cost or quality of the article.” Id. (quoting Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 850 n.10 (1982)). Because this case came to the Federal Circuit on appeal from a district court sitting in the Ninth Circuit, the Federal Circuit applied the Ninth Circuit’s Disc Golf test for determining whether a design is functional. Under that test, courts consider whether: (1) the design yields a utilitarian advantage; (2) alternative designs are available; (3) advertising touts the utilitarian advantages of the design; and (4) the particular design results from a comparatively simple or inexpensive method of manufacture. Slip op. at 10. Because this purported trade dress was not registered, Apple had the burden to prove its validity, which required Apple to show that the product features at issue “serve[] no purpose other than identification.” Id. (citing Disc Golf Assoc., Inc. v. Champion Discs, 158 F.3d 1002, 1007 (9th Cir. 1998)). The court of appeals applied those factors and found extensive evidence supporting Samsung’s claim that the alleged trade dress was functional. Slip op. at 12–14.

In addition to the unregistered product configuration discussed above, Apple also asserted a claim based on US Registration 3,470,983, which covered the design details in each of the 16 icons on the iPhone’s home screen framed by the iPhone’s rounded-rectangular shape with silver edges and a black background. Slip op. at 15. Although Apple enjoyed an evidentiary presumption of validity for its registered trade dress, the court again looked to the Disc Golffactors and found that Samsung met its burden of overcoming that presumption and proving the trade dress was functional and the registration invalid. Slip op. at 16. Because the court held Apple’s purported trade dress was functional, it vacated the jury’s verdict on Apple’s claims for trade dress dilution and remanded that portion of the case for further proceedings. Slip op. at 17.

Design Patent Claims

Apple fared better on its design patent claims. Here, Apple asserted three design patents directed to the “front face” (D’677 patent), “beveled front edge” (D’087 patent) and “graphical user interface (GUI)” (D’305 patent) of its iPhone products.

Samsung challenged the court’s claim construction and jury instructions for failing to “ignore[]” functional elements of the designs from the claim scope, such as rectangular form and rounded corners. Slip op. at 20. The court disagreed, finding that Samsung’s proposed rule to eliminate entire elements from the scope of design claims was unsupported by precedent. Id. Rather, the court found that both the claim construction and jury instructions properly focused the infringement analysis on the overall appearance of the claimed design. Id. at 21.

This victory was financially significant for Apple, as the court found they were entitled to Samsung’s entire profits on its infringing smartphones as damages. Like the district court, the court of appeals found that 35 U.S.C. § 289 explicitly authorizes the award of total profit from the article of manufacture bearing the patented design, rather than an apportionment of damages based only on the infringing aspects of the device (i.e., external features and not internal hardware/software). The court of appeals interpreted Samsung’s argument as imposing an “apportionment” requirement on Apple—a requirement the Federal Circuit previously rejected in Nike, Inc. v. Wal-Mart Stores, Inc., 138 F.3d 1437, 1441 (Fed. Cir. 1998). Thus, Apple maintains a claim to at least a significant portion of the $930 million damages award in the case.

Summary and Takeaways

Ultimately, after holding that Apple’s purported trade dress covering elements of the iPhone’s overall shape, black-bordered display screen, and matrix of colorful square icons was invalid, the district court upheld the jury’s verdict that Samsung’s devices infringed Apple’s design patents relating to the iPhone’s overall shape, display screen, and matrix of colorful square icons. The image depicted in Apple’s now-invalid trade dress registration is below on the left. Figures from two of its still-valid design patents are on the right. Although the overlap in what was claimed in these different forms of intellectual property is readily apparent, Apple lost on one set of claims and prevailed on the other.

It remains to be seen how damages associated with the design patent claims differ from damages associated with the now-invalid trade dress claims. But this much is clear: the Federal Circuit has given a reason for companies to reevaluate the role of design patents in their intellectual property portfolios. The time and expense associated with obtaining design patents will not suit all products, but for the right product, they can provide a valuable method of recovery in litigation involving similar product designs.

ARTICLE BY Kristin J. Achterhof, Karen Artz Ash, Richard P. Bauer & Floyd A. Mandell of Katten Muchin Rosenman LLP

USCIS Suspends Premium Processing for H-1B Extensions

USCIS has announced that it will suspend premium processing for all H-1B extension petitions between May 26, 2015, and July 27, 2015. It will use this time to implement the Employment Authorization for Certain H-4 Spouses and ensure that these applications for work authorization will be adjudicated in a timely manner.

Premium processing allows certain petitions and applications to be expedited. A decision or Request for Evidence (“RFE”) must be issued within 15 calendar days of filing the premium processing request. For this service, USCIS requires a $1,225 filing fee to be included with the petition.

USCIS will continue to process cases filed using premium processing prior to May 26, 2015. If an H-1B extension is filed under premium processing before May 26, 2015, but a decision is not issued within the 15-day period, USCIS will refund the premium processing fee. All other petitions are still eligible for premium processing.

ARTICLE BY Jessica Feinstein of Jackson Lewis P.C.

Are Cosmetics Gaining Higher Congressional and FDA Scrutiny?

Currently, FDA regulates cosmetics to ensure they are not adulterated or misbranded, but does not have the authority to order cosmetic recalls or require adverse event reporting. Senators Dianne Feinstein (D-CA) and Susan Collins (R-ME) seek to change that.

On April 20, 2015, they introduced the Personal Care Products Safety Act (S.1014). The Act, if passed, would modify Chapter VI of the Federal Food, Drug, and Cosmetic Act (FDCA) to strengthen FDA’s oversight of, and regulatory authority over, cosmetic products.

Title I of the Act (“Cosmetic Safety”) gives FDA authority to order cosmetic recalls, as well as require manufacturers to:

Report adverse events,
Label ingredients not appropriate for children,
Post complete label information (including ingredients and product warnings) online, and
Register their facilities with FDA.

In addition to this significant new authority over manufacturers, the Act also requires FDA to work with industry and consumer groups to annually select and review at least 5 ingredients or non-functional constituents.

The first 5 ingredients, if the law is passed, will be:

Diazolidinyl urea
Lead acetate
Methylene glycol/methanediol/formaldehyde
Propyl paraben
Quaternium-15

Title II of the Act (“Fees Related to Cosmetic Safety”) outlines the costs associated with enforcement of the new standards. With an annual implementation cost estimated at $20.6 million, it is to be funded by annual fees from all registered owners or operators of cosmetic facilities engaged in manufacturing or processing in the United States.

The Act has wide industry support, including the Personal Care Products Council (a 600+ member company trade association), large cosmetics manufacturers, and consumer groups. Since it was introduced, it has gained two co-sponsors, Senators Barbara Boxer (D-CA) and Amy Klobuchar (D-MN).

The Act is consistent with FDA’s current priorities related to cosmetics. Two of these priorities have been reporting of adverse events (with the majority of issues seen in hair care products), and maintaining a distinct line between over-the-counter drugs and cosmetics, because cosmetics need not currently undergo the additional scrutiny that OTC drugs must.

More information on the Personal Care Products Safety Act can be found in Senator Feinstein’s statement upon its introduction.

ARTICLE BY Michelle Gillette & Katherine Fox of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

Executive Order Provides Sanctions Aimed at Fighting Cyberattacks

On April 1, the president signed Executive Order 13694, which created a new sanctions regime for fighting cyberattacks. This creates opportunities for companies that are facing or may face cyberattacks. The Executive Order provides additional tools for victims of cyberattacks to punish the perpetrators by working with the government. The Executive Order creates framework to allow the government to take action in response to attacks on private companies and take all measures necessary to punish co-conspirators. The Executive Order also creates several issues that individuals and companies with international dealings should consider taking into consideration to avoid potential liability.

The Executive Order grants the Secretary of the Treasury authority to “block” the assets of anyone who conducts or aids “cyber-enabled activities . . . reasonably likely to result in, or have materially contributed to, a significant threat to the national security, foreign policy, or economic health or financial stability of the United States . . . .” The Executive Order also grants the power to sanction any individual or entity that gives support to, assists in anyway, or sponsors such a cyber-attacker. The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) will work in coordination with other U.S. government agencies to identify individuals and entities that engage in prohibited cyber activities and designate them for sanctions. Persons designated under this Executive Order will be added to OFAC’s list of Specially Designated Nationals and Blocked Persons (SDN List). U.S. persons are prohibited from engaging in most all transactions with designated individuals and entities named on the SDN List or entities owned by such designated persons. Additionally, designated persons sanctioned under the Executive Order will be blocked from entering the United States.

Given the growing nature of cyberattacks and the Executive Order’s potentially broad reach, individuals and companies with international business should consider taking steps to ensure their business partners do not meet the criteria of cyberattackers. For example, payments from persons designated as cyberattackers will be blocked by U.S. financial institutions and U.S. persons that engage in transactions with such persons could be subject to substantial penalties. Accordingly, U.S. businesses engaged in international transactions should consider updating their compliance programs and screening procedures to ensure they are not dealing with any persons designated on the SDN List, or that are owned 50 percent or more by such designated persons.

The Executive Order represents a turning point for the administration. It signals that the administration will take a more active role in fighting attacks that are often diffuse and difficult to investigate. Barnes & Thornburg has worked with the government to track down hackers who have levied corporate cyberattacks. In light of the Executive Order, there can be little doubt that the government will redouble its efforts to help victim companies, presenting opportunities for companies to work with the government in its efforts to track down and stop the perpetrators. This is good news for fighting cyberattacks.

ARTICLE BY

Scott N. Godes & Karen A. McGee of Barnes & Thornburg LLP

Department of Justice Settles Virtual Currency Enforcement Action

The US Attorney’s Office in the Northern District of California recently settled an enforcement action against Ripple Labs Inc., a Delaware corporation providing virtual currency exchange services. According to the settlement agreement, Ripple Labs was not registered with the Financial Crimes Enforcement Network (FinCEN) as a money services business (MSB) pursuant to the Bank Secrecy Act of 1970 while engaged in currency trading, and lacked required anti-money laundering controls.

Ripple Labs is a virtual currency exchange service dealing in XRP, the second-largest cryptocurrency by market capitalization after Bitcoin. Between at least March and April 2013, Ripple Labs sold XRP in its exchange. During the time of the sales, Ripple Labs was not registered with FinCEN. In March 2013, FinCEN’s released guidance clarifying the applicability of registration requirements to certain participants in the virtual currency arena. Ripple Labs also lacked an adequate anti-money laundering program, and did not have a compliance officer to assure compliance with the Bank Secrecy Act.

The settlement agreement reached by Ripple Labs and the US Department of Justice (DOJ) called for a $450,000 forfeiture to the DOJ, as well as a civil money penalty of $700,000 to FinCEN. Ripple Labs agreed to cooperate with any DOJ or regulatory request for information. In addition, Ripple Labs agreed to operate its XRP exchange as an MSB registered with FinCEN and to maintain all necessary registrations. Ripple Labs also agreed to implement and maintain an effective anti-money laundering program, complete with a compliance officer and training program. Finally, Ripple Labs agreed to conduct a review of prior transactions for evidence of illegal activity, as well as monitor transactions in the future to avoid potential money laundering or illegal transfer activity.

U.S. Department of Justice Settlement Agreement (May 5, 2015)

ARTICLE BY

Michael M. Rosensaft & Zachary D. Denver of Katten Muchin Rosenman LLP

BMI Wins Summary Judgment of Copyright Infringement After Restaurant Owner Fails to Respond to Requests for Admission

Plaintiff Broadcast Music, Inc. (“BMI”), a music rights management organization that offers licenses to a massive catalogue of popular songs on behalf of copyright owners, brought suit for copyright infringement against the owners of the La Roue Elayne restaurant for unlicensed performance of live cover versions of eight songs in a single evening. This suit was part of a series of suits brought by BMI for copyright infringement against restaurants in Connecticut. The Court granted summary judgment in favor of BMI for copyright infringement, permanently enjoining further copyright infringement and awarding $6,000 in statutory damages and an additional unspecified amount for attorneys’ fees.

Drew Friedman, the only defendant who appeared in the case, had opposed summary judgment on the grounds that a fact issue remained as to whether he had sufficient control over the restaurant and the cover band to support vicarious liability for copyright infringement. Mr. Friedman claimed to have been cut out of the management and control of La Roue Elayne before the night in question. Interestingly, his failure to object or respond to BMI’s Requests For Admission (RFAs) doomed his opposition. Mr. Friedman never responded to RFAs asking him to admit or deny that he hired the offending cover band and that he had the right to supervise persons employed by the restaurant.

In fact, Mr. Friedman’s opposition failed to address the issue of the ignored RFAs and he never moved for leave to provide untimely responses. On that basis, the Court held that the RFAs must be deemed admitted pursuant to Federal Rule of Civil Procedure 36. The Court appeared reluctant to deem the RFAs admitted, but indicated that after a diligent search it failed to find any precedent for a sua sponte withdrawal of a represented party’s response to RFAs where the party failed to even acknowledge the existence of the request.

The case is Broadcast Music, Inc. v. The Hub at Cobb’s Mill, LLC. A copy of the Court’s Order is available here.

ARTICLE BY Anthony Cataldo of Proskauer Rose LLP

Maker’s Mark Defeats “Handmade” Class Action Lawsuit

Could consumers have plausibly believed that one of the country’s top-selling bourbon brands is “handmade”? Not according to one federal district court in Florida, which recently dismissed a class action alleging Maker’s Mark deceived consumers by labeling its whiskey as “handmade.” The decision by U.S. District Judge Robert Hinkle comes on the heels of a California federal court’s decision not to dismiss outright a similar consumer class action involving Tito’s Handmade Vodka. Compare Salters v. Beam Suntory, Inc., 14-cv-659, Dkt. 31, (N.D. Fla. May 1, 2015) with Hofmann v. Fifth Generation, Inc., 14-cv-2569, Dkt. 15 (S.D. Cal. Mar. 18, 2015)). These divergent opinions suggest that courts are still puzzling over just how much credence to grant putative class claims based on allegedly deceptive liquor labels at the motion to dismiss stage, particularly under the U.S. Supreme Court’s decision in Bell Atlantic Corp v. Twombly, 550 U.S. 544 (2007). In Twombly, the Court made clear that plaintiffs must include enough facts in a complaint to make their claim to relief not just conceivable, but plausible—or else face dismissal.

Salters, the Florida case, is part of a wave of recently filed class actions accusing alcoholic beverage producers of violating state consumer protection statutes. In the typical case, as here, the plaintiffs claim to have purchased the brand in reliance on allegedly deceptive labeling and contend they would not have purchased it or would have paid less otherwise. The Salters plaintiffs claimed they were damaged because Maker’s Mark sold “their ‘handmade’ Whisky to consumers with the false representation that the Whisky was ‘handmade’ when, in actuality, the Whisky is made via a highly-mechanized process, which is devoid of human hands.”

Judge Hinkle flatly rejected the idea that this could support a claim. Citing Twombly, he noted that although whether a label is false or misleading is generally a question of fact, a motion to dismiss should be granted if the complaint’s factual allegations do not “render plaintiffs’ entitlement to relief plausible.” The court observed that taken literally, all bourbon is handmade, because it is not a naturally occurring product; construed less literally, which was apparently the plaintiffs’ approach, “no reasonable consumer could believe” that bourbon could be made by hand, presumably without commercial-scale equipment, “at the volume required for a nationally marketed brand like Maker’s Mark.” In any event, court found the plaintiffs’ claims implausible under any definition of “handmade,” writing:

In sum, no reasonable person would understand “handmade” in this context to mean literally made by hand. No reasonable person would understand “handmade” in this context to mean substantial equipment was not used. If “handmade” means only made from scratch, or in small units, or in a carefully monitored process, then the plaintiffs have alleged no facts plausibly suggesting that statement is untrue. If “handmade” is understood to mean something else . . . the statement is the kind of puffery that cannot support claims of this kind.

The court appears to have concluded that when applied to a product as popular as Maker’s Mark, the word “handmade” is more an unactionable “general, undefined statement that connotes greater value,” like describing a bourbon as “smooth,” than a factual representation easily capable of being false or misleading. Though this may pass the common sense test, it is less clear whether other courts will agree. In the Tito’s case, for instance, the court declined to accept at the motion to dismiss stage an argument similar to the one that persuaded the Maker’s Mark judge, holding that “the representation that vodka that is (allegedly) mass-produced in automated modern stills from commercially manufactured neutral grain spirit is nonetheless “Handmade” in old-fashioned pot stills arguably could mislead a reasonable consumer.”

These cases highlight the need to carefully examine product labeling and advertising claims and consider whether consumers (or plaintiffs’ attorneys) could challenge them as untrue. This is relatively simple when claims involve factual issues such as where a product is produced, but less so with words like “handmade,” which could arguably qualify as either non-actionable “puffery” or a quantifiable claim.

ARTICLE BY Jennifer Aronoff of McDermott Will & Emery

SEC Is Sued Again For Doing Nothing

Have you heard about a lawsuit filed earlier last week against the Securities and Exchange Commission due to its failure to respond to a petition asking the Commission to adopt political spending disclosure requirements?

But must the Commission act on the petitions that are submitted to it? Rule 192 of the Commission’s Rules of Practice requires only that the Commission acknowledge receipt and give notice of any action taken by the Commission:

The Secretary shall acknowledge, in writing, receipt of the petition and refer it to the appropriate division or office for consideration and recommendation. Such recommendations shall be transmitted with the petition to the Commission for such action as the Commission deems appropriate. The Secretary shall notify the petitioner of the action taken by the Commission.

At least three fundamental requirements are absent from Rule 192. First, the rule doesn’t require the Commission to take action. Second, the rule doesn’t require the Commission to act promptly. Finally, the rule doesn’t require the Commission to explain its reasons for denying a petition. Indeed, Rule 192 falls far short of the requirements of the Administrative Procedure Act as explained by then Circuit Court Judge Ruth Bader Ginsberg:

Section 4(e) of the Administrative Procedure Act, 5 U.S.C. § 553(e), commands that “[e]ach agency shall give an interested person the right to petition for the issuance … of a rule.” Section 6(a), 5 U.S.C. § 555(e), requires “prompt notice” in the event an agency denies such a petition. Further, section 6(a) directs that when a denial is not self-explanatory, “the notice shall be accompanied by a brief statement of the grounds for denial.”

Ass’n of Investment Bankers v. Securities and Exchange Commission, 676 F.2d 857, 864 (1982).

One obvious issue for the plaintiff in this most recent lawsuit is whether judicial review is even available. The plaintiff doesn’t allege that the Commission has actually denied his petition. To the contrary, the plaintiff admits that “To date, the SEC has given no indication it is still considering whether to recommend the issuance of such a proposed rule, nor has it otherwise responded to the pending rulemaking petitions”. The complaint cites WWHT, Inc. v. Federal Communications Com., 656 F.2d 807 (D.C. Cir. 1981) but that case involved an actual order denying a petition for rulemaking.

Even if the court decides that a failure to respond is tantamount to a denial, plaintiff will still have an uphill climb. As Judge Edwards observed in WWHT, Inc. review is “very limited”. The court will also have to grapple with the conundrum of how to conduct a review when there is no record.

ARTICLE BY Keith Paul Bishop of Allen Matkins Leck Gamble Mallory & Natsis LLP

Employer’s Use of DNA Test to Catch Employee Engaging in Inappropriate Workplace Behavior Violates Federal Law

If someone continually, yet anonymously, defecated on the floor of your workplace, you’d probably want to use any and all legal means at your disposal to identify and discipline the perpetrator. Your methods might include surveillance or perhaps some form of forensic or other testing to link the offensive conduct to a specific individual. You would probably not be overly concerned that your efforts to rid the workplace of this malefactor might give rise to a discrimination claim, but is that really a safe assumption?

Background

In a case exemplifying the gentility of labor-management relations, a Georgia federal court grappled with how far an employer may go in this situation. In Lowe v. Atlas Logistics Group Retail Services, LLC, (N.D.Ga. May 5, 2015), the employer, Atlas Logistics Group Retail Services (Atlanta), LLC, which provides long-haul transportation and storage services for the grocery industry, discovered in 2012 that one or more employees had been using a common area in one of its warehouses as a lavatory. As part of its investigation into this matter, the company retained the services of a DNA testing lab and requested cheek swabs from two employees it considered suspects so that it could compare their DNA with that of the mystery defecator. After Atlas determined that neither employee was responsible for the unwelcome contributions to its workplace, the employees filed a lawsuit alleging that the company violated the Genetic Information Nondiscrimination Act (GINA) by requesting and requiring them to provide genetic information.

GINA prohibits discrimination on the basis of genetic characteristics and makes it unlawful for an employer to request, require or purchase genetic information with respect to an employee.

The Court Finds Atlas Violated GINA

The court held that Atlas’ argument that GINA only prohibited genetic testing that revealed an individual’s propensity for disease – which the test in this case did not do – was inconsistent with the statute’s text and legislative history as well as the applicable EEOC regulation. In the court’s view, this argument “render[ed] other language in GINA superfluous.” In particular, the court noted that the statute contained specific exceptions permitting certain testing that did not involve an individual’s propensity for disease, and if testing revealing a propensity for disease were the only prohibited testing, then those exceptions would not have been necessary. The court further rejected Atlas’ argument that GINA’s legislative history demonstrated an intent to limit violations to testing that revealed a propensity for disease, explaining that although a group of senators favored this interpretation during the legislative debate, all of the evidence indicated that Congress chose to reject this view in favor of a broad construction. Finally, the court held that an EEOC regulation listing eight examples of “genetic tests” did not support Atlas’ narrow definition of that term because the list included testing that also did not relate to one’s propensity for disease and, therefore, “would go beyond the scope of the statute” if the law were as narrow as Atlas claimed.

Conclusion

This case’s distasteful facts, which will undoubtedly remind many human resource specialists how coarse employee relations challenges often are in practice, should not distract employers that currently perform DNA tests from the fact that GINA may apply more broadly than some initially believed. Although the decision should not have a significant impact on the narrow range of situations where workplace DNA testing is a legitimate practice, such as those involving health and safety concerns, it should serve as notice to employers investigating misconduct that they should find methods other than DNA testing to identify culpable employees.

ARTICLE BY George M. Patterson of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

The National Law Forum

As Drones Hit the Sky Lawsuits Predicted to Fly

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