Tag: Litigation

Supreme Court – Being Unanimous Appears to be Part of the Justices’ DNA

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On June 13, 2013, the U.S. Supreme Court unanimously decided in Association for Molecular Pathology v. Myriad Genetics, Inc. that naturally occurring DNA segments are not patent eligible because they are products of nature and merely isolating such segments does not change their status for patent eligibility. However, complementary DNA (cDNA) is patent eligible because it is not naturally occurring.

Isolated DNA sequences – patent ineligible

In the third opinion since 2010 dealing with the scope of patent eligibility,1 the Court found that Myriad’s claims directed towards isolated DNA segments fell “squarely within the law of nature exception.” Slip op. at 13.  Myriad discovered an “important and useful gene, but separating that gene from its surrounding genetic material is not an act of invention.” Slip op. at 12. The Court rejected the idea that isolation of DNA segments requires severing of chemical bonds, which creates a non-naturally occurring molecule. While Myriad may have expended a significant amount of research effort to discover the location of the genes of interest, effort alone does not render such subject matter patentable.

For landmark Supreme Court decisions regarding patent eligibility, please click here.

cDNA sequences – patent eligible

The Court noted that cDNA differs from isolated DNA segments and does not present the same obstacles for patent eligibility. Notable distinctions, according to the Court, are that cDNA’s creation results in an exons-only molecule, which is not naturally occurring. While acknowledging that the nucleotide sequence of cDNA is dictated by nature, the Court focused on the fact that creation of cDNA “unquestionably creates something new.” Slip op. at 17. cDNA is distinct from the DNA from which it was derived, and thus is not a product of nature. However, the Court noted that, in some instances, such as a very short segment of DNA having no intervening introns, the cDNA may be indistinguishable from the DNA. In such a situation, that cDNA is not patent eligible.

What the Court did not decide

The Court was careful to note that its decision did not implicate method claims, patents on new applications based on discoveries related to specific genes, or patentability of DNA in which the order of naturally occurring nucleotides has changed. Thus, the eligibility of methods of manipulating DNA, applications of knowledge learned from DNA segments, and manipulations of DNA sequences are questions still on the table.

Standing

An additional interesting aside is the Court’s approach to the declaratory judgment standing issue. The Court, in footnote 3, simply indicates that under all of the circumstances presented, the MedImmune standard had been met. Whether this opens the door to additional declaratory judgment actions in the future is uncertain.

Impact

This decision will likely not have a devastating impact on the patent portfolio of genetic diagnostic companies. These companies typically focus more on patents directed towards multi-gene products, methods, and cDNAs than on claims directed to isolated DNA sequences to protect their genetic tests. Nevertheless, should a company seek to assert a patent with claims directed to isolated DNA sequences, such an assertion will now be subjected to summary judgment motions based on the patent ineligibility of such claims.

In the long term, however, today’s decision will likely have a big impact on businesses engaged in developing chemical and biological therapeutics, with patents directed to isolated naturally occurring compounds. The Court has held that merely separating a segment of DNA from its natural surrounding is “not an act of invention.” How such analysis could be applied in the chemical and pharmaceutical arts remains to be seen. The Court’s opinion likely will be used to attack chemical and pharmaceutical patents directed towards naturally occurring compounds like proteins, antibodies, and other naturally occurring biomolecules. Whether such patents fall within chemical compositions or focus on the chemical changes, which result from isolation that the Court has suggested may be patentable, will likely be determined on a case by case basis.

Lastly, in an era of ever polarizing politics, it is fascinating to see that this decision, like most other recent U.S. Supreme Court decisions involving patents,2 is a 9-0 decision.  All of the current justices unanimously agree on what is the appropriate scope of patent eligibility.

1 Bilski v. Kappos, 130 S. Ct. 3218 (2010) and Mayo Collaborative Services v. Prometheus Lab., Inc., 132 S. Ct. 1289 (2012) are two unanimous U.S. Supreme Court decisions dealing with the patent eligibility of method claims.

2 See Bilski v. Kappos, 130 S. Ct. 3218(2010); Mayo v. Prometheus, 132 S. Ct. 1289(2012); Caraco Pharm. Lab., Ltd. v. Novo Nordisk A/S, 132 S. Ct. 1670 (2012); Kappos v. Hyatt, 132 S. Ct. 1690 (2012); Bowman v. Monsanto Co., No. 11-796 (2013).

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Costco Claims Tiffany & Co. is Generic Re: Trademark Infringement and Genericide

Katten Muchin

One of the biggest threats to a brand owner is genericide, whereby widespread usage of a mark in the marketplace causes the term to be considered by the public to be a generic term for a particular product rather than a source identifier. Some well-known examples of marks which became generic over time in certain jurisdictions are “aspirin” and “escalator”. When genericide occurs, a mark can no longer function as a trade mark, as it ceases to identify a particular source or to distinguish the origin of the product from competing products. Once a mark has become generic, the law deems it available for all parties to use and the now-former brand owner no longer has exclusive rights to it.

The threat of genericide is something that brand owners work very hard to try and avoid, since the result would be that they no longer have a trade mark.  Similarly, if a mark has become generic, third parties have the right to use it.  Therefore, a claim that a particular mark has become generic is a defense to an allegation of trade mark infringement.

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The general test for whether a designation has become generic is whether the public believes that such designation connotes the generic name of a product or a brand indicating the source of the product. This issue will soon be considered by the courts in a lawsuit initiated by Tiffany & Co against Costco.

In the lawsuit, Tiffany accused Costco of trade mark infringement and false advertising, objecting to Costco’s offering of rings which were promoted as “Tiffany diamond engagement rings”. Rather than deny Tiffany’s accusations, Costco took an aggressive defensive position, claiming that a “Tiffany setting” is generic for an engagement ring setting comprised of multiple slender prongs extending upward from a base to hold a single gemstone. Costco further alleged that although a design called a “Tiffany setting” may have started out as a trademark, frequent third-party use had caused it to become genericide. As part of its counterclaims, Costco claimed that certain of Tiffany’s trade mark registrations are invalid. Not surprisingly, Tiffany has vehemently objected to Costco’s claims of genericide. The legal battle is just getting underway but this matter will be one that is highly publicized and closely monitored.

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Supreme Court Ruling on Defense of Marriage Act (DOMA) Could Lead to Refunds of Federal Taxes

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Employers providing benefits for employees’ same-sex spouses may want to consider the availability of federal payroll tax refunds if the Supreme Court of the United States finds Section 3 of the Defense of Marriage Act (DOMA) unconstitutional.  Employers currently must impute income to an employee for the fair market value of benefit coverage for a non-dependent same-sex spouse.  Such imputed income is subject to federal income and payroll taxes, as well as state income taxes in the majority of states.

The Supreme Court of the United States is expected to rule in late June on the constitutionality of Section 3 of the Defense of Marriage Act (DOMA).  A ruling that DOMA is unconstitutional will favorably reverse the federal tax treatment of employer-provided benefits for non-dependent same-sex spouses.  Such a reversal may lead to refunds of federal payroll taxes paid by employers and federal income taxes paid by employees on income imputed to employees for same-sex spouse benefit coverage.

Current Law

The Supreme Court is considering the constitutionality of Section 3 of DOMA in United States v. Windsor.  Windsor is a surviving spouse who was required to pay $350,000 in federal estate taxes after her same-sex spouse died—taxes she would not have had to pay if her same-sex marriage that was legally recognized in her home state of New York was also recognized under federal law.  Section 3 of DOMA provides that for all purposes of federal law, the word “marriage” means “only a legal union between one man and one woman as husband and wife,” and the word “spouse” refers “only to a person of the opposite-sex who is a husband or wife.”

Employees who enroll a non-dependent same-sex spouse or partner under an employer-sponsored benefit plan currently must pay federal income taxes on the fair market value of such coverage.  While federal law excludes amounts that an employer pays toward medical, dental or vision benefits for an employee and the employee’s opposite-sex spouse and dependents from the employee’s taxable income, employers that provide these same benefits to employees’ same-sex spouses or partners are required to impute the fair market value of the benefits as income to the employee that is subject to federal income tax, unless the same-sex spouse or partner otherwise qualifies as the employee’s “dependent” as defined for federal income tax purposes.  Employers are required to withhold federal payroll taxes from the imputed amount, including income, Social Security and Medicare taxes.  In addition, employers must pay their share of Social Security and Medicare taxes on the imputed amount, as well as Federal Unemployment Tax Act taxes.  The majority of states follow the federal income tax rules approach and also require employers to impute income on the value of such benefits for state income tax purposes.

Consider Filing a Protective Claim Now

Employers that have imputed income on the fair market value of benefits for employees’ same-sex spouses should consider filing protective FICA tax refund claims and should be poised to change their systems to allow for the future exclusion of benefits provided to same-sex spouses.  Although filing a complete refund claim can be burdensome from an administrative perspective, it is relatively easy for an employer to file a protective claim to preserve the statute of limitations on employment tax refund claims for open years and later file a supplementary claim with necessary employee consents and exact calculations. 

In general, the statute of limitations for tax refund claims is three years.  The due date for the protective claim is three years from April 15 of the calendar year following the year in which the income was imputed to the employee.  For example, for employment taxes paid on income imputed in 2010, a protective claim should be filed by April 15, 2014.  If not filed already, a refund claim cannot be filed with respect to employment taxes paid on income imputed before 2010 as the statute has run for that year.

If an employment tax refund had already been filed and the Internal Revenue Service (IRS) issued a notice of claim disallowance, the taxpayer must either bring suit to contest the disallowance within two years after the issuance of the notice or obtain an extension of the time to file such a suit with the IRS—this process can be initiated by filing IRS Form 907, Agreement to Extend the Time to Bring Suit.

Next Steps

Until the Supreme Court rules on Windsor, employers are advised to continue imputing income on the value of benefit coverage for employees’ non-dependent same-sex spouses and partners and to continue withholding and paying federal payroll taxes on the imputed amount.

View “Supreme Court Oral Arguments on DOMA, Proposition 8: Potential Employee Benefit Plan Implications” for more information on the employee benefit plan implications of the Supreme Court’s possible rulings on the constitutionality of DOMA in Windsor and California’s Proposition 8 in Hollingsworth v. Perry.

Fourth Circuit Reverses District Court and Trend, Finding Death from Driving While Intoxicated to be An “Accident”

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In Johnson v. Am. United Life Ins. Co., 2013 U.S. App. LEXIS 10528 (4th Cir. May 24, 2013), the Fourth Circuit reversed the District Court’s holding, 2012 U.S. Dist. Lexis 32718 (M.D.N.C. 2012), a decision we reported in March of last year.  In the District Court, Magistrate Judge Patrick Auld concluded that a death resulting from driving while intoxicated, under the circumstances of the case, was not an “accident” for purposes of an Accidental Death & Disability (AD&D) benefit under an ERISA-qualified employee benefit plan.  The Fourth Circuit Court’s reversal illustrates again the struggle to define the word “accident” in a situation when a driver intentionally becomes highly intoxicated and intentionally drives, knowing the inherent dangers, yet probably not intending to crash, sustain injury or die.

In Johnson, a participant of an employee benefit plan insured by AUL died after his truck left the road at high speed, hit a sign, and overturned several times. The post-mortem toxicology report showed a blood-alcohol concentration (BAC) of .289, more than three times the legal limit.

As did Judge Auld in the District Court below, the Fourth Circuit Court of Appeals explored a spectrum of interpretations of the word “accident.”  AUL argued for the definition adopted in Eckleberry v. ReliaStar Life Ins. Co. 469 F. 3d 340 (4th Circ. 2006), in which the Court interpreted the policy’s definition of “accident” to exclude losses from death or injury that were “reasonably foreseeable.”  Under the Eckleberry test, AUL argued, Mr. Johnson’s death was not the result of an accident because injury or death from driving while intoxicated was reasonably foreseeable.  The Fourth Circuit rejected AUL’s argument, distinguishing Eckleberry in two pivotal ways.  First, unlike the policy in the Eckleberry case, AUL’s policy did not empower it with discretionary authority sufficient to trigger the “abuse of discretion” standard of review.  Secondly, the plan in Eckleberry defined “accident” to suggest a “reasonable foreseeability” test, while, by contrast the term “accident” was not defined in AUL’s policy.  (This is not uncommon. As the Court recognized in the seminal case, Wickman v. Northwestern Nat’l Ins. Co., 908 F. 2d 1077, 1087 (1st Cir. 1990),  the word “accident” eludes articulation.)

Reviewing AUL’s denial de novo, the Johnson Court characterized the term “accident” as ambiguous because it was undefined, and applied the contra proferentum doctrine, (cf.  Carden v. Aetna Life Ins. Co., 559 F.3d 256, 260 (4th Cir. S.C. 2009) in which the Court held that the doctrine did not to apply in a review for abuse of discretion.).

Moving on from Eckleberry, the Court considered two other interpretations that were  skewed “against the drafter” more than the “reasonable foreseeability test.  The first was the test espoused by Wickman, supra:  When there was no evidence of the deceased’s actual (subjective) intentions and expectations (as is often the case), the Court asks the question of whether a reasonable person would have viewed the injury as “highly likely to occur” as a result of the deceased’s intentional conduct.  If so, then the loss was not the result of an accident.

Secondly, the Court considered the definition of “accident” under N.C.G.S. § 58-3-30(b), the test adopted by Judge Auld in the District Court.  Under this statute, which uses an “accidental result” test, a loss resulting from an intentional, voluntary act is still accidental if the injury (or result) is unanticipated and unexpected, unless the result was “substantially certain” to occur from the actions.

When Judge Auld applied this test, he found that “a crash by a speeding driver in Mr. Johnson’s [intoxicated] condition [is] as much an anticipated and expected result as a bullet hitting the head of someone who chooses to play Russian Roulette,” (giving a nod to the Wickman Court’s illustration of an unreasonable expectation of survival, even if death were not actually intended.)  However, the Court of Appeals came to the opposite conclusion: While Eckleberry’s “reasonable foreseeable” test would most likely exclude coverage here, evidence of driving while intoxicated, even at a BAC level of .289, by itself, did not establish that the insured’s death was “substantially certain,” under the statute’s definition, or even “highly likely,” under the Wickman test.  The Court’s conclusion was based upon statistics published by the CDC that an intoxicated driver’s chances of a fatal crash are 1 in 9,128.  (The other 9,127 apparently survive.)

Query:  How many drunk drivers with a BAC of .289 make it home safely?

Don’t Overlook The Gems In Equal Employment Opportunity Commission (EEOC) Files

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A recent decision out of a Louisiana federal court demonstrates that all employers who are sued in cases where the Equal Employment Opportunity Commission (EEOC) handled an administrative charge should promptly send out a FOIA request to obtain the EEOC’s file.

In Williams v. Cardinal Health Systems 200, LLC, a female employee reported to her employer that her husband had gotten into a fistfight with one of her co-workers, allegedly because the co-worker was sending her inappropriate text messages. The employee was fired shortly thereafter on Sept. 26, 2011.

Nine months later in June of 2012, a lawyer wrote to the employer on behalf of the former employee, suggesting that his client had suffered sexual harassment. The lawyer also suggested that the employer had retaliated against the employee for complaining of the sexual harassment when it fired her. A few weeks later, the lawyer helped the employee fill out and submit an EEOC intake questionnaire form.

After receiving the questionnaire, the EEOC advised the former employee that her questionnaire was incomplete, and that, among other things, she needed to sign and verify her allegations. Her lawyer eventually provided the necessary information, and the EEOC sent out a notice of charge of discrimination to the employer in October 2012, followed by a notice of right to sue. The employee then filed a lawsuit against the company in December 2012.

The employer filed a motion to dismiss the lawsuit, arguing that the employee had waited too long to bring her claim. The court noted that the employee had 300 days from the date of the alleged retaliation—or until July 22, 2012, to raise her claims with the EEOC. She had contacted the EEOC before then, but her questionnaire was incomplete. The charging party and her lawyer did not complete it before July 22. Thus, her claims were time-barred and her case dismissed.

The case provides a good example of an important litigation tool. The dismissal hinged on the EEOC’s file, which proved when the employee submitted her questionnaire, what the questionnaire contained, how the EEOC responded, and when and how her lawyer supplied the additional information. Employers typically are not privy to these communications and would not even know about them unless they obtain a copy of the agency’s file. And there is the lesson: all employers who are sued should make sure to request the EEOC or charging agency file as soon as possible. You never know what gems might be hiding in there just waiting for you to find them.

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“Lawfully Made Under This Title” – The New, Global Reach of U.S. Copyright Law’s “First Space” Doctrine

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The U.S. Copyright Act grants a copyright owner certain exclusive rights, including the right to distribute copies by sale or other transfer of ownership. 17 U.S.C. § 106(3). But while these exclusive rights are extensive, they are not limitless. Section 109(a), for one, sets forth the “first sale” doctrine:

“Notwithstanding the provisions of section 106(3), the owner of a particular         copy…lawfully made under this title…is entitled, without the authority of the copyright      owner, to sell or otherwise dispose of the possession of that copy.” 17 U.S.C. § 109(a).

In effect, Section 109(a) exhausts the distribution right by permitting the owner of a particular copy to dispose of that copy as she wishes.

Notably, however, the first sale doctrine is itself qualified in that it only applies to copies “lawfully made under this title.” 17 U.S.C. § 109(a) (emphasis added). That this language applies to copyrighted works made and distributed in the U.S. is clear enough. A more difficult question is to what extent the first sale doctrine applies to works produced and/or acquired abroad.

The U.S. Supreme Court partly addressed Section 109(a)’s reach in Quality King Distributors, Inc. v. L’anza Research International, Inc., 523 U.S. 135 (1998). In Quality King, the copyrighted works were manufactured in the U.S., but first sold abroad at prices 35% to 40% less than identical U.S. products. Some of the discounted foreign products were then imported back into the U.S. and sold to unauthorized retailers. The copyright owner sued alleging violation of the Copyright Act’s importation provision, 17 U.S.C. § 602(a)(1) (then §602(a)), which makes importation of a copyrighted work without the authority of the copyright owner an infringement of the distribution right. The Supreme Court, however, found that the first sale doctrine exhausts the copyright owner’s right to prohibit importation of U.S. produced works first sold abroad. In other words, the owner of a copy of a U.S. produced work acquired abroad is free to bring that copy into the U.S. without fear of retribution from the copyright holder.

Because Quality King involved only U.S. produced works – which are unquestionably “lawfully made under” the Copyright Act – the Court had no need to consider any broader implications of Section 109(a). And so, the reach of the first sale doctrine in connection with works manufactured abroad remained in doubt after Quality King.

As a graduate student in California, Supap Kirtsaeng (“Kirtsaeng”) learned that publishers often sell their U.S. textbooks for substantially more than the identical books in Thailand. Seeing an opportunity, Kirtsaeng had friends purchase textbooks in Thailand and mail them to the U.S. where he sold them on EBay. By this simple arbitrage, Kirtsaeng generated roughly $900,000 before one the publishers, John Wiley & Sons, Inc. (“Wiley”), sued.

Wiley claimed that Kirtsaeng’s unauthorized importation of the foreign-produced textbooks violated Wiley’s distribution right via the Copyright Act’s importation prohibition. Unlike in Quality King, however, Wiley argued that the first sale doctrine did not exhaust its rights because its foreign version textbooks were produced and distributed entirely outside the U.S., and thus were not “lawfully made under [the U.S. Copyright Act],” as required by Section 109(a).

Kirtsaeng countered that “lawfully made under this title” merely means “made in accordance with U.S. copyright law,” i.e., made without infringing copyright. According to Kirtsaeng, because Wiley had authorized the production and distribution of its foreign produced textbooks, they were “lawfully made under [U.S. copyright law]” and thus the first sale doctrine applied. In other words, Kirtsaeng argued, Section 109(a) works a global exhaustion of the copyright holder’s distribution right.

The Supreme Court found – after considerable discussion of statutory construction and the common law history of the “first sale” doctrine – that the phrase “lawfully made under this title” has no geographic significance. Rather, the first sale doctrine applies to copies of works that are lawfully made anywhere in the world. Thus, Section 109(a) effects a global exhaustion of the Copyright Act’s distribution right and the lawful owner of any lawfully made copy, wherever produced and wherever acquired, is free to bring that copy into the U.S. and dispose of it as she wishes.

The Court’s non-geographical interpretation of the first sale doctrine likely will have far reaching effects.

On the one hand, organizations such as libraries, used book dealers, and museums view the Kirtsaeng ruling as a victory because it clarifies that they will not have to seek permission from copyright holders to lend or sell their books or display their artwork acquired from foreign sources. Additionally, the Court’s majority believes its holding will protect the right of American consumers to resell a broad range of foreign produced products that contain copyrighted software.

On the other hand, in the Digital Age, where it is easy to shop for, purchase and ship products globally, Kirtsaeng will greatly limit a copyright holder’s ability to maintain geographic price disparities, as historically necessitated by regional economics. Consequently, one effect of Kirtsaeng may be a trend toward global price equilibration, at least for internationally interchangeable products, such as books. Some goods, however, such as technology products, may be less affected by Kirtsaeng, where various regulations outside of copyright law tend to make the products less internationally fungible.

Kirtsaeng may also foretell a rise in leases or rentals. By its terms, Section 109(a) extends first sale protection to the “owner of a particular copy.” 17 U.S.C. § 109(a) (emphasis added). Lessees are unprotected. So, a copyright holder can circumvent the effects of Section 109(a) by renting works to its customers. In the Internet age, where a myriad of products can be delivered, consumed, and deleted digitally, rental rather than sale may be an attractive way for some industries to protect current regional pricing structures.

Moreover, the Kirtsaeng decision may have implications for the exhaustion doctrine under U.S. patent law. Similar to the first sale doctrine, the exhaustion doctrine limits a patent owner’s exclusive rights in a particular item upon the first authorized sale. In 2005, the Federal Circuit Court of Appeals explained that the exhaustion doctrine only applies to the first sale in the U.S. because the U.S. patent system “does not provide for extraterritorial effect.” Fuji Photo Film Co., Ltd. V. Jazz Photo Corp., 394 F.3d 1368, 1376 (Fed. Cir. 2005). Kirtsaeng, however, casts that reasoning in doubt. While the Supreme Court recently denied certiorari in a case that would have reexamined the exhaustion doctrine, it is widely expected that the Federal Circuit will at some point revisit the issue in light of Kirtsaeng.

Finally, in the wake of Kirtsaeng, one would expect certain rights holders to pressure Congress to rewrite Section 109(a). After Quality King, copyright holders were successful in getting the House to pass a proposed amendment that would have limited Section 109(a) to copies authorized for distribution in the U.S. This proposed “domestic exhaustion” amendment, however, ultimately died in reconciliation. Only time will tell whether copyright holders could ultimately prevail to blunt the impact of Kirtsaeng.

American Invents Act (AIA) Post-Grant Practice Rapidly Integrates Federal Circuit and Board Decisions

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AIA post-grant practice has many advantages over other proceedings, but one of the great benefits of AIA post-grant practice that we have not discussed is the speed in which AIA post-grant proceedings adopt recent patent decisions from different sources.  This is really an exciting and challenging feature of AIA post-grant practice that has become even more apparent in recent filings.  One of the reasons that AIA proceedings are so quick to adopt changes in patent law is that the PTAB offers a panel of patent judges who are already versed in patent law, so the Board does not have a large learning curve to process new decisions from the Federal Circuit and laws from Congress.  Another reason is that AIA patent trials are relatively fast-paced proceedings, which by their very nature will apply legal decisions quicker than routine district court practice.  Yet another reason is that many of the changes in practical post-grant practice are being driven by the Board itself, so the Board can quickly and consistently synthesize inputs from other sources and deploy its own procedural and legal changes.  The result is a petitions practice that can adapt quickly to a rapidly changing patent legal landscape.

One example of rapid integration of recent decisions is shown by a recent CBM petition filed on behalf of LinkedIn (CBM2013- 00025) that challenges claims 1-17 of U.S. Patent No. 7,856,430 (the ’430 Patent) owned by AvMarkets, Inc.  This CBM petition is a convergence of findings from the recent Federal Circuit decision in CLS Bank lnt’l v. Alice Corp. Pty. Ltd., 2013 WL 1920941, at *9 (Fed. Cir. May 10, 2013) and the recent CBM petition and trial (SAP v. Versata, CBM2012-00001).  LinkedIn’s petition is notable for both what it includes and what it omits.  For example, the petition includes a single challenge of patent eligibility under 35 U.S.C. § 101 akin to the ultimate patentability challenge in SAP v. Versata and incorporating the recent CLS Bank decision.  For example, pages 4-5 of the LinkedIn petition borrows from the SAP v. Versata CBM:

The Board has concluded that the AlA’s definition of CBM patents should “be broadly interpreted and encompass patents claiming activities that are financial in nature, incidental to a financial activity or complementary to a financial activity.” SAP America, Inc. v. Versata Development Group, Inc., No. CBM2012- 00001, at 21-22 (P.T.A.B. January 9, 2013) (Decision regarding the Institution of Covered Business Method Review), citing 77 Fed. Reg. 157 (August 14, 2012) at 48736. In particular, the Board has held that it does “not interpret the statute as requiring the literal recitation of the terms financial products or services [and that the] term financial is an adjective that simply means relating to monetary matters.” id. at 23. “At its most basic, a financial product is an agreement between two parties stipulating movements of money or other consideration now or in the future,” and encompasses “patents [that] apply to administration of business transactions.” ld., quoting 157 Cong. Rec. S5432 (daily ed. Sept. 8 2011) (statement of Sen. Schumer).

And pages 22-23 of the LinkedIn petition also incorporates findings from CLS Bank:

Moreover, the ’430 Patent ultimately claims nothing more and nothing less than the abstract idea of generating sales leads by putting product data in a searchable index, adding only the instruction to “apply it” in the broadest field of use imaginable-the Internet. Mayo, 132 S. Ct. at 1294. That does not suffice to make these claims patentable. The idea of cataloguing customer and product data in the field of use of”the Internet” necessarily implies putting them in the formats known to be searchable on the Internet. The claims add nothing that is not already implicit in the abstract idea. Because the steps are “as a practical matter … necessary to every practical use” of the abstract idea of making commercial data searchable on the Web, they are “not truly limiting.” CLS Bank, 2013 WL 1920941 at * 11 ,citing Mayo, 132 S. Ct. at 1298 (Lourie, J. concurring); see id. at *28-*29 (Rader, J., concurring) (key inquiry is “whether the claim covers every practical application of [the] abstract idea” but even if not, ” it still will not be limited meaningfully if it . .. only … identiflies] a relevant audience, a category of use, field of use, or technological environment”). The Internet is in fact so broad an area of application, it can barely be said to limit the claim even to a field of use.  CyberSource Corp. v. Retail Decisions, Inc., 620 F. Supp. 2d 1068, 1077 (N.D. Cal. 2009) (“The internet continues to exist despite the addition or subtraction of any particular piece of hardware … [T]he internet is an abstraction …. One can touch a computer or a network cable, but one cannot touch ‘the internet.”‘), aff’d, 654 F.3d 1366.

Also notable is that LinkedIn’s filing omits several things found in other CBM petitions, like a challenge based on prior art, an expert declaration offering evidence, and use of every available page (LinkedIn’s petition is only 27 pages of a possible 80 pages afforded CBM petitions).  With this approach, LinkedIn keeps the cost of challenge to a minimum and reduces estoppel to the single ground asserted should the Board issue a final decision upholding the patent.  Of course, the petition was recently filed on May 29, 2013, so it is too early to tell if it will be successful, but the concept of challenging a patent based on a petition with relatively few pages and no initial expert testimony is the latest adaptation of post-grant practice courtesy of the America Invents Act.

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California’s Future Uncertain as U.S. Bureau of Land Management (BLM) Postpones Oil and Gas Lease Auctions

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Recently, the U.S. Bureau of Land Management (BLM) announced that it would postpone all oil and gas lease auctions in California until at least October 2013.  The agency cited the toll of litigation and other costs as factors behind the decision.

Many attribute the postponement to an April 2013 federal district court ruling in Center for Biological Diversity, et al. v. Bureau of Land Management, et al., United States District Court for the Northern District of California, Case No. 11-06174 PSG, in which the court held that BLM violated the National Environmental Policy Act by failing to analyze potential environmental impacts of “fracking” on 2,700 acres of federal lands in Monterey and Fresno Counties before leasing the lands to oil companies.  Hydraulic fracturing, or fracking, involves injecting high-pressure mixtures of water, sand or gravel, and chemicals into rock to extract oil.  The technique has been used for decades in California, and is also used in other states to recover natural gas.  However, fracking has recently been under increased scrutiny, amid concerns that the practice could contaminate groundwater.

The court’s decision in Center for Biological Diversity does not void the leases that were the subject of the case, but requires BLM to go back and take a closer look at the potential impacts of fracking.  The ruling is largely limited to the specific facts that were before the court, and the case is unlikely to have sweeping application as a legal precedent, but it marks a victory for environmental groups attempting to stop, or at least delay, fracking in California.

BLM’s decision to postpone oil and gas lease auctions in California coming on the heels of the Center for Biological Diversity decision suggests that policy impacts of the case may be more widely felt.  BLM announced this month that it will put off a previously scheduled late May auction for leases to drill almost 1,300 acres of public lands near the Monterey Shale.  The Monterey Shale is one of the largest deposits of shale oil in the nation, containing an estimated 15.4 billion barrels of recoverable oil.  Another auction for about 2,000 acres in Colusa County was also put on hold.

“Our priority is processing permits to drill that are already in flight rather than work on new applications,” Interior Secretary Sally Jewell told reporters in Washington.  The decision to postpone leasing doesn’t mean that drilling on existing leases will stop, but it does raise questions about what BLM will do in the fall, when the postponement expires, and how the postponement decision will impact oil and gas production more broadly.

California accounts for 6 percent of the 247 million acres under BLM control, and oil and gas drilling on BLM lands has been on the rise as advances in horizontal drilling and fracking have made hard-to-reach deposits recoverable.  The impact of litigation such as the Center for Biological Diversity matter on BLM, and on the industry as a whole, is therefore significant.

For California at least, the future is uncertain.  “We want to get the greenhouse gas emissions down, but we also want to keep our economy going,” said Governor Jerry Brown (D, California), during a March 13 press conference.  “That’s the balance that is required.”  Amid budget concerns, financially strapped government agencies may be increasingly risk-averse when it comes to potential litigation, leading to decisions like the California postponement that have industry-wide implications.

As published in Oil & Gas Monitor.

EEOC Files Two Genetic Information Nondiscrimination Act Lawsuits in Two Weeks

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The EEOC recently filed its first-ever lawsuit alleging a violation of the Genetic Information Nondiscrimination Act (GINA) – and subsequently filed its second GINA lawsuit one week later.

The first lawsuit settled, with a fabrics distributor paying $50,000 and agreeing to take other specified actions (i.e. posting an anti-discrimination notice, among other things) after the EEOC alleged a violation of GINA and the Americans with Disabilities Act (ADA). Specifically, with respect to GINA, the EEOC charged that the distributor violated the Act when it asked the woman for her family medical history in a post-offer medical examination, including questions relating to the existence of heart disease, hypertension, cancer, tuberculosis, diabetes, arthritis, and “mental disorders” in her family.

The second lawsuit remains pending and was filed against a nursing and rehabilitation center. The EEOC similarly charged that the center violated GINA when it requested family medical history in a post-offer, pre-employment medical examination. The second lawsuit also alleges violations of the ADA and Title VII of the Civil Rights Act.

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According to the EEOC, GINA “makes it illegal to discriminate against employees or applicants because of genetic information, which includes family medical history; and also restricts employers from requesting, requiring or purchasing such information.”

As noted in both press releases, one of the six national priorities identified by the EEOC’s Strategic Enforcement Plan is for the agency to address emerging and developing issues in equal employment law, which includes genetic discrimination. As this recent EEOC action signals a focus on GINA issues, employers are encouraged to ensure their policies related to employee medical information and examination comply with the Act.

Large Damages OK, but Injunctive Relief Too Broad Re: Versata Software, Inc. v. SAP America, Inc. Patent Infringement Case

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Addressing a finding of infringement that resulted in a lost-profits and reasonable royalty damages award of more than $300 million, the U. S. Court of Appeals for the Federal Circuit affirmed a lower court’s ruling of infringement and damages, finding that sufficient evidence supported the findings.  Versata Software, Inc. v. SAP America, Inc., Case No. 12-1029 (Fed. Cir., May 1, 2013) (Rader, C.J.).

Versata sued SAP in 2007 over two patents that provide particularized pricing data based on factors such as the type of customer, type of product and size of the order.  Starting in the mid-1990s Versata sold its software, called Pricer, to many large companies, including as IBM, Lucent and Motorola.  SAP began offering software that provided customized pricing as part of its enterprise software in 1998.  As acknowledged by the Federal Circuit, when “SAP entered the market by bundling hierarchical pricing into its enterprise software, the market for Pricer disappeared.”

At a first trial, SAP was found to have infringed both patents, but the lower court later granted SAP judgment as a matter of law (JMOL) of non-infringement as to one of the patents and ordered a new trial on damages based on a change in governing law.  In a second trial, the jury awarded Versata $260 million in lost profits and $85 million in reasonable royalties.  Further, the district court permanently enjoined SAP from continuing to sell its customized pricing software. Predictably, SAP appealed.

SAP argued to the Federal Circuit that its accused products did not infringe and that, in any event,  the lost-profits and royalties damages, as well as the permanent injunction, should be set aside as improper for various reasons.  On the infringement issue, SAP argued that it could not infringe because its software is not capable of performing the necessary tasks (required by the claims) without additional computer instructions.  As for damages, SAP argued that the lost profits and reasonable royalty damages were improperly calculated as a matter of law and should be set aside.  SAP also argued that the injunction was overbroad in that it would prevent the company from offering maintenance and additional licenses to previously existing users.

As to the issue of infringement, the Federal Circuit found sufficient evidence to support the jury’s verdict of infringement.  The Court noted that the record “clearly support the jury’s conclusion that SAP’s accused products infringe the asserted claims without modification or additional computer instructions.”

In considering SAP’s arguments on damages, the Federal Circuit rejected some of SAP’s arguments on lost profits damages noting that they should have been raised under a Daubert challenge.  The Court found that sufficient evidence supported the jury’s damages findings on lost-profits and reasonable royalty damages.

However, the Federal Circuit agreed that the permanent injunction as entered was overbroad and remanded the case to the district court for modification of the injunction.

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