Tag: congress

Firewall on the Hill: The Cybersecurity Information Sharing Act

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U.S. Treasury Secretary Jack Lew is urging Congress to pass legislation to bolster the country’s cyber defenses. The proposed bill—the Cybersecurity Information Sharing Act of 2014 (CISA)—may unleash a brute-force attack in the cyber war, but opposition based on privacy and civil liberties concerns could stop the bill dead in its tracks.

The CISA would enable companies to

  • share information with one another, including an antitrust exemption for the exchange or disclosure of a “cyber threat indicator,” which is broadly defined and includes information that indicates any attribute of a cybersecurity threat;
  • share information with the federal government, including the absence of any waiver of privilege or trade-secret protection and the retained ownership of the disclosed information;
  • launch countermeasures and monitor information systems under broad sets of circumstances, potentially expanding the information to be shared; and
  • monitor and share the information under an umbrella of protection from liability relating to the permitted activities, including a good-faith defense (absent gross negligence or willful misconduct) for activities not authorized by the CISA.

The CISA includes some protections for individuals. Namely, the U.S. Attorney General would develop governing guidelines to limit the law’s effect on privacy and civil liberties. Moreover, companies would be required to remove information that is known to be personal information (and not directly related to a cybersecurity threat) before sharing a cyber threat indicator.

In sum, companies could decide to share a wealth of information with one another and with the federal government if the CISA is passed, when sharing personal information depends on the reach of any future guidelines. If an extensive information-sharing program materializes, and there is at least a perception that sensitive personal information is being shared, companies could feel pressure from customers and advocacy groups to disclose their CISA activities and policies in their privacy statements. Companies should stay informed about developments in cybersecurity legislation, but the potential fallout regarding privacy could substantially weaken or postpone any new system. For every cybersecurity legislative effort, there will be bold countermeasures.

ARTICLE BY

Doneld G. Shelkey
A. Benjamin Klaber
OF:
Morgan, Lewis & Bockius LLP

Proposal to Resuscitate Federal Highway Funding

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House Republican leaders, Boehner, Cantor, and McCarthy have a proposal to address the Highway Trust Fund’s desperate funding problems and the reauthorization of MAP-21, which is set to expire on September 30, 2014.

As discussed in an earlier post, one of the biggest challenges facing Congress in the MAP-21 reauthorization process is what to do about the fiscal condition of the Highway Trust Fund (HTF) which supports funding of the federal highway and transit programs.  Simply stated, the HTF is on the verge of insolvency.  It has both a short term and long term problem.  In the short term, the HTF will not have sufficient revenue to pay the bills through September 30 and it will go into the red sometime in August.  In the long term, the HTF simply cannot support current highway and transit funding levels much less the higher levels that are needed to modernize the Nation’s national transportation network so that American businesses can compete in today’s highly-competitive global marketplace.

The House Republican Leaders’ proposal has three parts to it.  First, the proposal would transfer about $12 billion in general revenues into the Highway Trust Fund.  This would keep the HTF solvent until May 2015 at current funding levels.  Under current House Rules and under recent practice, a transfer of general funds into the Highway Trust Fund must be offset.  The Leaders’ memorandum suggests two potential offsets:  ending the delivery of some Saturday mail; and transferring the current balance remaining in the Leaking Underground Storage Tank Trust Fund.

Adoption of both suggestions would offset the $12 billion general fund transfer into the HTF and would allow MAP-21 to be extended until May 2015 at current funding levels.  It would solve the HTF’s short-term funding problem but it would not address the long-term issues.

Second, with MAP-21 expiring this September 30th, the memorandum contemplates a short-term extension, probably until May 2015, of MAP-21 programs rather than a multi-year reauthorization of the programs.  This short-term extension would be combined with the HTF short-term fix discussed above into one bill that Congress would consider over the next couple of months.  The goal would be to enact it before the August recess.

Third, consideration of the HTF’s long-term funding problems and MAP-21 reauthorization would be put off until 2015.  The rationale for this approach is that the serious work needed to achieve this structural reform has not been done yet.

This overall approach will undoubtedly disappoint many in the House and Senate who wanted to enact a long-term reauthorization bill this year.  There will also be considerable controversy over the postal reform offset.  But the bottom line is that something has to be done by the end of July or there will be a disruption of ongoing construction projects in August—right in the middle of the construction season and just months before congressional elections.

Article By:

Jack L. Schenendorf
Of:
Covington & Burling LLP

Congress and the President Spar over Immigration Reform Prospects: Tempest in a Teapot

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At a recent White House law enforcement event, President Barack Obama took the opportunity to pressure Republicans in the House of Representatives to present an immigration reform bill this summer in advance of the November mid-term elections.

House Speaker John Boehner (R-Ohio) has made comments supportive of immigration reform and issued a “statement of principles” developed by House Republican leadership addressing immigration reform in January. As reported by the Cincinnati Inquirer, the Speaker was careful earlier this month to distinguish that proposed roadmap to legal status for some illegal aliens from an outright amnesty.  ”I reject that premise. … If you come in and plead guilty and pay a fine, that’s not amnesty,” he said.  Regardless of how reform measures are characterized, though, patience is flagging and significant progress remains stubbornly elusive.

The President’s comments on immigration reform, while also asking his secretary of the Department of Homeland Security, Jeh Johnson, to delay releasing details of a recent study on the country’s deportation system, were seen as giving lawmakers time to propose and debate new legislation,   but continuing to hold out the threat of an executive order should Congress fail to act.  Activists on the left are pressuring the President to act. They urge an executive order similar to the one issued in 2012 extending temporary status and work authorization to some unauthorized aliens brought to the U.S. as children. The new measure for example, could extend the same type of protection to parents of those children, advocates contend.

Nearly two million illegal immigrants have been deported since the President took office, according to a New York Times review and official records. The President asked the DHS secretary to evaluate how to make the deportation system more humane.  Further executive action on immigration may spur additional controversy and make comprehensive immigration reform negotiations in Congress more difficult.

An example of this type of challenge is in seen in the obstacles besetting the bi-partisan “ENLIST Act“(H.R. 2377), a bill designed to extend legal permanent residence to immigrants who were brought to the U.S. illegally as children and who enlist in the U.S. armed forces.  Hopes for easy passage have been set back.    Contrary to the expectations of many supporters, including the bill’s sponsor, Rep. Jeff Denham (R-Calif.), the measure was not taken up for discussion as part of the annual defense bill.   This is discouraging for proponents of reform.   Political brinksmanship, rather than a genuine willingness address the nation’s dysfunctional immigration system, appears to be the order of the day.

Article By:

Sean G. Hanagan
Of:
Jackson Lewis P.C.

The Top Ten Things You Should Know About The Innovation Act of 2013 (For Now)

Andrews Kurth

 

Companies that find themselves either defending against patent infringement lawsuits or enforcing their own patent infringement claims should pay close attention to the Innovation Act of 2013 (H.R. 2639). The Innovation Act (“the Act”), which was introduced by Representative Bob Goodlatte (R-VA), made it out of committee and has now been passed by the House, is aimed squarely at non-practicing entities (“NPEs”), i.e., companies that own patents but that do not sell any products or provide any services themselves. While NPEs may be the primary target, the Innovation Act, if passed, will impact all patent litigation, not just NPE efforts. Likewise, while primarily having a potentially negative impact on plaintiffs, the Act will also have potentially negative impacts on defendants. With bipartisan support and the backing of the White House, the Innovation Act may be the first such legislation to pass.

The Innovation Act makes numerous amendments to Title 35, the section of U.S. Code embodying U.S. patent law. These changes include introducing a discovery delay and other discovery changes, fee shifting, customer suit staying and party-of-interest transparency, heightening pleading requirements and expanding post-grant review. If nothing else, NPEs and their targets should know the following about these changes and the Innovation Act:

Discovery: Perhaps the most expensive and intrusive aspect of any U.S. patent litigation is the discovery process. Indeed, the expense and process of discovery is often the most effective tool used by plaintiffs to bring defendants to settlement, as the process can begin early in the case before any substantial determinations regarding the merits are decided. As a result, defendants are often forced to spend up to hundreds of thousands of dollars going through the discovery process before having any idea whether infringement is a substantial risk or not. The Innovation Act significantly neuters this tool and makes other significant changes to discovery in patent cases:

1. The Act limits discovery to only matters relevant to interpreting the claims until such time as the claims are actually interpreted. Claim interpretation is often dispositive of the merits of the case. Consequently, defendants would be able to dispose of frivolous cases before the expensive discovery process or make settlement decisions more fully informed of the risks; and

2. The Act seeks to better balance discovery costs between the parties, ordering the Judiciary Conference to address the presumably unfair burden placed on defendants and place a higher burden of costs on plaintiffs.

Fee Shifting: Another area in which U.S. patent litigation, indeed U.S. litigation as a whole, differs from foreign litigation is that, except in extreme cases, each party bears its own litigation costs. Currently, NPEs often file suit against multiple defendants. Each defendant is often offered a settlement for an amount much less than that defendant’s anticipated litigation costs. As defendants settle, the settlement price typically is increased for other defendants, further encouraging early settlement. Consequently, many defendants that otherwise believe they have a strong non-infringement case will settle because the cost of achieving victory is substantially higher than settling. This strategy would not work in most foreign countries since, in those countries, the losing party pays the winning party’s fees and costs. The Innovation Act would align U.S. patent litigation with this practice and eliminate the strategy of leveraging high litigation costs for early settlement.

3. In other words, under the Act the Court can force the losing party to pay the winning party’s attorney fees and costs. If passed, this would have a dramatic effect on patent litigation defendants’ decision making process and the typical enforcement strategy of many NPEs. By allowing Courts to shift the litigation costs to the losing side, defendants may be significantly motivated to litigate when they have a strong case even if the price of settlement is relatively low. Combined with the discovery delay described above, defendants will have considerable incentive to remain in the case at least through claim interpretation and to fight infringement claims if the claim interpretation is favorable…

4. …but, by allowing Courts to shift litigation costs to the losing side, defendants’ potential exposure may also be much higher. If the defendant ultimately loses a case, the Court presumably could order them to pay the plaintiff’s litigation costs, particularly if it was apparent that they should have settled. Consequently, the Act’s changes will necessitate defendants making smart decisions about their risk exposure. Fortunately, the discovery delay will enable defendants to economically make more effective decisions by delaying significant discovery costs until after claim interpretation.

5. The Act’s fee-shifting provisions also allows for the limited joinder of parties (such as those covered by transparency provisions described below) to satisfy the award of litigation costs. In principle, this provision could be used against defendants as well as plaintiffs.

The other changes mentioned above may also cast a chill on the NPE business and other patent plaintiffs.

Customer Suit Staying

6. The Innovation Act requires the staying of patent lawsuits against a defendant’s customer. Plaintiffs often sue a defendant’s customers in order to pressure the defendant into settling, often on terms less favorable than the defendant’s actual liability would dictate. Under the Act, an action against a customer may be stayed if the customer agrees to be bound by the results of a suit against the manufacturer. Consequently, customer suit staying takes away another pressure point for plaintiffs.

Post-Grant Review Expansion

7. The Innovation Act expands the post-grant review available against covered business methods (“CBMs”), making CBM review a more effective tool to fight back against patent lawsuits. Specifically, the Act makes the CBM review program permanent and codifies the broad interpretation of what is a CBM.

Heightened Pleading Requirements

8. Currently, many plaintiffs merely name the patents infringed and, in some cases, the products or services infringing. Heightened pleading requirements require more detailed initial pleading by plaintiffs, including greater details describing how a defendant’s products or services infringe the asserted patent claims.

Party-of-Interest Transparency

9. The actual parties of interest are often not discernible from patent complaints. Many NPEs are shell companies that serve the purpose of hiding the actual party asserting the patent. The Innovation Act requires detailed descriptions of the plaintiff’s business and identification of the real party or parties-of-interest behind the asserting plaintiff. Such transparency makes next to impossible for plaintiff’s to hide their true identity and may impact litigation strategies currently used by NPEs and other plaintiffs.

10. Additionally, the party-of-interest transparency provisions of the Act also permit possible joinder of the real party or parties-of-interest behind the asserting plaintiff. This provision gives real teeth to the Fee Shifting provisions of the Act as it may prevent a real party-of-interest from hiding behind a shell company with limited or no resources and avoiding the consequences of the Fee Shifting provisions.

Keep in mind that the Innovation Act will not just affect the Act’s main target, NPEs. Indeed, the Innovation Act has the potential to affect others. Defendants that choose to fight a patent lawsuit rather than settle could find themselves on the losing end of the fee-shifting provisions. Also, the Act may encourage a delay in sharing sales numbers until after claim interpretation, with the result that defendants that may have previously settled for reasonable amounts may find themselves paying much higher amounts if the claim interpretation goes poorly. On a different front, the amounts NPEs and others are willing to pay for patents may be reduced because of the greater risks and costs involved in enforcement. This could reduce the market for patents that provide additional sources of revenue for many patent owners. This in turn could reduce the overall value of patents, the amount companies are willing to spend on patenting and result in an overall chilling effect on research and development and ultimately innovation. As the Innovation Act evolves through the legislative process, some or all of the points above may vary, but the clear direction of the Act, the limitation of patent litigation by NPEs, will remain.

Article by:

Sean S. Wooden

Of:

Andrews Kurth LLP