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Supreme Court Determines that Seal Violation Does Not Mandate Dismissal

On December 6, 2016, the Supreme Court of the United States decided State Farm Fire and Casualty Co. v. United States ex rel. Cori Rigsby and Kerri Rigsby. At issue was whether a qui tam relator’s violation of the seal requirement, 31 U.S.C. § 3730(b)(2), requires a court to dismiss the suit. In a unanimous decision, the Court concluded that violation of the seal does not mandate dismissal, affirming a lower court decision to deny the defendant’s motion to dismiss.

Section 3730(b)(2) requires qui tam complaints to be filed under seal for at least 60 days and provides that they shall not be served on the defendants until the court so orders. The purpose of the seal is to give the government time to investigate. In practice, the government often seeks numerous extensions while it investigates the conduct alleged in the relator’s complaint.

Justice Kennedy, writing for the Court, reasoned that the text of the False Claims Act (FCA) makes no mention of a remedy as harsh as dismissal. The Court also noted that the FCA was intended to protect the government’s interests, whereas mandatory dismissal would run contrary to those interests, as it would put an end to potentially meritorious qui tam suits. Although the Court made no definitive ruling as to what sanction would have been appropriate, it did note that dismissal “remains a possible form of relief,” while “[r]emedial tools like monetary penalties or attorney discipline remain available to punish and deter seal violations even when dismissal is not appropriate.”

We previously wrote about this matter, here.

ARTICLE BY Evan Panich of McDermott Will & Emery

U.S Supreme Court Revisits Design Patent Damages

On December 6, 2016, the U.S. Supreme Court, in Samsung Electronics Co. Ltd., v. Apple Inc., 580 U.S. ____ (2016), unanimously ruled that in multicomponent products, the “article of manufacture” subject to an award of damages under 35 U.S.C. §289 is not required to be the end product sold to consumers but may only be a component of the product.

In 2007, when Apple launched the iPhone, it had secured several design patents in connection with the launch. When Samsung released a series of smartphones resembling the iPhone, Apple sued Samsung, alleging that the various Samsung smartphones infringed Apple’s design patents. A jury found that several Samsung smartphones did infringe those patents. Apple was awarded $399 million in damages for Samsung’s design patent infringement, the entire profit Samsung made from its sales of the infringing smartphones. The Federal Circuit affirmed the damages award, rejecting Samsung’s argument that damages should be limited because the relevant articles of manufacture were the front face or screen rather than the entire smartphone.

The Supreme Court reversed and remanded the case back to the Federal Circuit. In its unanimous opinion, the Court reasoned that for purposes of a multicomponent product, the relevant “article of manufacture” for arriving at a damages award (based on 35 U.S.C. §289) need not be the end/finished product sold to the consumer but may be only a component of that product. The Court determined that “The Federal Circuit’s narrower reading of the ‘article of manufacture,'” limiting it to the end product, “cannot be squared with the text of §289.” How to arrive at §289 damages? According to the Supreme Court, “Arriving at a damages award under §289 thus involves two steps. First, identify the ‘article of manufacture’ to which the infringed design has been applied. Second, calculate the infringer’s total profit made on that article of manufacture.”

This decision could have potential impact on future design patent infringement cases, especially when calculating infringement damages. It remains to be seen, what kind of guidance the Federal Circuit will provide in addressing the scope of the “article of manufacture” for multicomponent products.

ARTICLE BY Sudip K. Mitra of Vedder Price

Salman Decision: Supreme Court Weighs in on Insider Trading

Significant decision comes after nearly two decades of silence. For the first time in nearly 20 years, the US Supreme Court has weighed in on insider trading law and handed a victory to the government and its insider trading enforcement efforts. In Salman v. United States,^[1] the Court put to bed confusion generated by the US Court of Appeals for the Second Circuit’s decision in United States v. Newman.^[2] In Newman, the Second Circuit held that to be guilty of insider trading, (i) a tippee must know that the insider/tipper breached a duty of confidentiality in exchange for a “personal benefit” and (ii) the personal benefit must be an “an exchange that is objective, consequential, and represents at least a potential gain of a pecuniary or similar valuable nature.”

The second part of this holding posed more questions than it answered because it appeared to conflict with the Supreme Court’s 1983 decision in Dirks v. SEC.^[3] The Court in Dirks found that an insider/tipper may be liable for insider trading, and a tippee derivative liable, only if the insider disclosed confidential information in exchange for a personal benefit. And this “personal benefit,” Dirks found, can be shown when an insider “makes a gift of confidential information to a trading relative or friend.” But in 2014, Newman injected a pecuniary-gain element into the personal-benefit test, leaving the government and defense counsel to wonder what is required when a tipper gifts information to a relative or friend who then trades on the information. As discussed below, Salman has dispelled this confusion by following Dirks in holding that an insider’s gift of confidential information to a trading relative is a sufficient personal benefit.

The Newman Case

In Newman, defendants Todd Newman and Anthony Chiasson were “remote” or “downstream” tippees charged with trading on material nonpublic information (MNPI) that they received from other tippees concerning earnings information at two prominent technology companies.

At trial, Newman and Chiasson urged the court to adopt jury instructions that predicated guilt upon a showing that they knew the insiders tipped the MNPI in exchange for a personal benefit. US District Judge Richard J. Sullivan found that although such an instruction could be supported by Dirks, he was obliged to follow the Second Circuit’s decision in SEC v. Obus,^[4] which, arguably, only required a showing that the tippee knew of a tipper’s breach of duty to establish scienter.^[5] Newman and Chiasson were convicted at trial.

On appeal, the Second Circuit reversed both convictions. The court held that a tippee only knows of the tipper’s breach of fiduciary duty if “he knew the information was confidential and divulged for personal benefit.”^[6] In other words, the court agreed with defendants that knowledge of a tipper’s breach of fiduciary duty required knowledge that the confidential tip was made in exchange for a personal benefit.^[7] But the court further held that a personal benefit cannot be inferred “by the mere fact of a friendship”; rather, it must be established through “proof of a meaningfully close relationship that generates an exchange that is objective, consequential, and that represents at least a potential gain of a pecuniary or similarly valuable nature.”^[8] The government appealed the Second Circuit’s decision, but the Supreme Court declined to hear the case.

The Salman Case

In the summer of 2015, the US Court of Appeals for the Ninth Circuit decided United States v. Salman,^[9] in which defendant Bassam Yacoub Salman, a remote tippee, had received and traded on MNPI from his brother-in-law Michael Kara, who in turn had obtained the information from his older brother Maher Kara, an investment banker at a large bank. Evidence showed that Salman was aware that the MNPI originated with Maher, and that from 2004 to 2007, Salman and Michael had profited from trading in securities issued by the bank’s clients just before major transactions were announced, but there was no evidence that Maher received any pecuniary benefit for his tips. Salman was convicted at trial.

On appeal, Salman argued that under Newman, the evidence was insufficient to show that Maher had tipped the information to his brother in exchange for a pecuniary benefit or that Salman knew of any such benefit. The court dismissed this argument as a strained misreading of Newman, holding that Newman did not seek to undermine Dirks’s crucial observation that a tipper may obtain a personal benefit when (s)he “makes a gift of confidential information to a trading relative or friend.” Otherwise, as the court noted, “a corporate insider . . . would be free to disclose [MNPI] to her relatives, and they would be free to trade on it, provided only that she asked for no tangible compensation in return.” Notably, the Ninth Circuit held that Newman’s personal-benefit language must be interpreted in a narrower way than others might attempt to use it, and that to the extent Newman cannot be interpreted so narrowly, the Ninth Circuit would “decline to follow it.”^[10] Salman appealed the Ninth Circuit’s holding, and the Supreme Court granted certiorari.

The Supreme Court’s Decision

In Salman v. United States,^[11] the Court unanimously affirmed the Ninth Circuit’s holding. The Court squarely rejected Salman’s argument that an insider must receive a pecuniary quid pro quo from a tippee for there to be a sufficient personal benefit. The Court found that Dirks made clear that a tipper breaches a fiduciary duty—and receives a personal benefit—by making a gift of confidential information to a “trading relative or friend,” which clearly happened in this case. Notably, the Court declined to adopt the government’s broader argument that “a tipper personally benefits whenever the tipper discloses confidential trading information for a noncorporate purpose.”^[12] Rather, the Court found that Dirks “easily resolves the narrow issue presented here.”^[13] In applying Dirks, the Court found that “Maher, a tipper, provided inside information to a close relative, his brother Michael. Dirks makes clear that a tipper breaches a fiduciary duty by making a gift of confidential information to ‘a trading relative,’ and that rule is sufficient to resolve the case at hand.”^[14]

Regarding the Second Circuit’s holding in Newman, the Court found that “[t]o the extent the Second Circuit held that the tipper must also receive something of a ‘pecuniary or similarly valuable nature’ in exchange for a gift to family or friends, Newman, 773 F.3d, at 452, we agree with the Ninth Circuit that this requirement is inconsistent with Dirks.”^[15] The Court held that Salman’s jury was properly instructed that a personal benefit includes the benefit one would obtain from simply making a gift of confidential information to a trading relative, and, accordingly, upheld the Ninth Circuit’s judgment.

The Supreme Court’s decision is extremely significant. Salman resolves confusion raised by Newman by specifically rejecting—as inconsistent with Dirks—the Second Circuit’s requirement that the tipper must receive something of a “pecuniary or similarly valuable nature” in exchange for the information and that a gift to family or friends was insufficient. In so doing, and on the issue of what constitutes a “personal benefit,” the Salman decision essentially turns back the clock on the law of tipper liability to its status pre-Newman, which had partially derailed the government’s insider trading enforcement efforts. Thus, it appears that Salman is a boon to the government’s ability to get its insider trading efforts back on track.

ARTICLE BY David I. Miller, Nathan J. Hochman, Kenneth I. Schacter, E. Andrew Southerling & Grant R. MacQueen of Morgan, Lewis & Bockius LLP

^{[1] 580 U.S. __ (2016).}

^{[2] 773 F.3d 438, 450 (2d Cir. 2014).}

^{[3] 463 U.S. 646 (1983).}

^{[4] 693 F.3d 276 (2d Cir. 2012).}

^{[5] See United States v. Newman, 1:12-cr-00121-RJS-2, Docket No. 215, pp. 3594-3605 (S.D.N.Y. Dec. 10, 2012).}

^{[6] 773 F.3d 438, 450 (2d Cir. 2014) (emphasis added).}

^{[7] Newman, 773 F.3d at 447-49 (“[W]e conclude that a tippee’s knowledge of the insider’s breach necessarily requires knowledge that the insider disclosed confidential information in exchange for personal benefit.”).}

^{[8] Id., 773 F.3d at 452.}

^{[9] 792 F.3d 1087 (9th Cir. 2015).}

^{[10] Id., 2015 WL 4068903 at *6.}

^{[11] 580 U.S. __ (2016).}

^{[12] Slip op., at 7.}

^{[13] Slip op., at 8.}

^{[14] Slip op., at 9.}

^{[15] Slip op., at 10.}

Impact of Presidential Election on Key United States Supreme Court Cases

America’s next President will potentially have the authority to nominate more than one United States Supreme Court Justice before the end of his or her presidency. Notably, during the final debate, this subject of Supreme Court appointments by the President Elect was one of the six topics for discussion and was identified as one of the top issues among voters. Employers should take note because the Supreme Court may hear several cases in the upcoming term that could have significant implications for employers across the country with respect to (1) the enforceability of class action waivers, (2) pre-suit obligations of the Equal Employment Opportunity Commission (“EEOC”) in discrimination complaints, and (3) the issue of transgender rights.

(1) The Enforceability of Class Action Waivers in Arbitration Agreements

Following the Court’s ruling in 2011 in ATT Mobility LLC v. Concepcion¹, where the Court in a 5-4 decision held that the Federal Arbitration Act preempted California from refusing to enforce class action waivers in consumer contracts, many employers have utilized waivers in arbitration agreements as a method of avoiding, or reducing, the risks of class or collective actions by employees alleging employment-related claims such as wage-and-hour violations and unlawful discrimination.

However, the safe haven apparently created under Concepcion has been under attack and led to inconsistent federal circuit court rulings applying its holding. Now, the Supreme Court has the opportunity to reconcile a split in the federal circuits regarding the enforceability of class action waivers in arbitration agreements. Because former Justice Scalia authored the Concepcion opinion, his replacement could impact its holding.

(2) EEOC Obligations with Respect to Discrimination Complaints

Recent discrimination cases have challenged aspects of the EEOC’s pre-suit obligations to investigate and attempt to conciliate discrimination charges before filing a lawsuit. Many judicial opinions have cited MachMining LLC v. EEOC², a case in which the Supreme Court held that the EEOC’s statutory obligation to attempt conciliation with an employer as a prerequisite to a Title VII suit is subject to judicial review—although the scope of that review is narrow—and also established that form letters announcing the initiation and conclusion of the conciliation process alone do not satisfy the statutory obligation to attempt to facilitate conciliation with the employer.

In October 2016, the Supreme Court denied certification in EEOC v. Sterling Jewelers Inc.³, a matter of first impression in which the Second Circuit cited MachMining LLC v. EEOC in a decision permitting the EEOC to pursue a nationwide sex discrimination lawsuit on behalf of female retail store employees. Sterling Jewelers Inc.⁴ established that while a court may review whether the EEOC conducted an investigation into a formal charge of discrimination as a prerequisite for bringing an enforcement action under Title VII, it may not review the sufficiency of the agency’s investigation.

The case to watch is The Geo Grp. v. EEOC⁵, which is being docketed for review by the Supreme Court. The Ninth Circuit cited MachMining⁶ in a decision that allows the EEOC to litigate 19 sex discrimination claims despite the fact that the agency did not identify the alleged victims until after filing the lawsuit on the basis that MachMining⁷ permits the identification of a class of people as an alternative to identifying the individual alleged victims.

While many believe that the 2015 MachMining opinion could have potentially reversed the Ninth Circuit’s holding in Geo Grp., the Court (with a newly appointed Justice) could possibly walk back the limited judicial review permitted by the previous Court or establish a broader scope of judicial discretion in determining whether or not an attempt of conciliation with an employer took place in order to satisfy the EEOC’s statutory requirement under Title VII.

(3) Transgender Rights

In August, the Supreme Court stayed the Fourth Circuit Court of Appeals ruling in Gloucester Cnty. Sch. Bd. v G.G.⁸, keeping Grimm, an individual who was born a female, but identifies as a male, from using the boys’ restroom at school, while it decided whether it would take the case. On Friday, October 28, the Supreme Court announced it would in fact take up the issue. The Court’s holding on whether the U.S. Department of Education’s interpretation of the word “sex” is appropriate, as it relates to Title IX discrimination cases, could have wide ranging impact on litigation involving H.B. 2 from North Carolina and employers as they address transgender issues in the workplace.

ARTICLE BY Marc D. Katz, Isabel Crosby & Jason R. Regas of Andrews Kurth Kenyon

_{1. ATT Mobility LLC v. Concepcion, 563 U.S. 333 (2011).}

_{2. MachMining LLC v. EEOC, 135 S. Ct. 1645, 126 FEP Cases 1521 (2015).}

_{3. Sterling Jewelers Inc. v. E.E.O.C., No. 15-1329; EEOC v. Sterling Jewelers Inc., 801 F.3d 96 (2nd Cir. 2016).}

_{4. Id.}

_{5. The Geo Grp. v. EEOC, No. 16-302; Arizona ex rel. Horne v. Geo Group, Inc., 816 F.3d 1189 (9th Cir. 2016).}

_{6. MachMining LLC v. EEOC, supra.}

_{7. Id. at 1648.}

_{8. 136 S. Ct. 2442 (2016) (per curiam).}

U.S. Supreme Court Denies Redskins’ Petition to Join SLANTS Case

U.S. Supreme Court today, without comment, refused the Redskins’ Petition to join the SLANTS case challenging the U.S. Trademark Office’s ban on “offensive” trademarks. Since both cases involved a provision in Section 2(a) of the Lanham Act, the football team hoped to have both cases considered concurrently by the high Court. However, this now means that the outcome of the SLANTS case will have a huge impact on the Redskins’ appeal still pending before the Fourth Circuit. Although the team’s case will not be heard with the SLANTS case, it will have the opportunity to file amicus briefs in the proceeding.

See our previous post about this here.

ARTICLE BY Susan Neuberger Weller of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

Supreme Court Set to Settle Dispute over Washington Redskins Trademark Registration

There has been another twist in the story of the long battle by Native American interest groups to obtain revocation of the U.S. registration of the infamous Washington Redskins trademark. This is another step in the 20-year journey that began with the initial challenges to the team name.

On Thursday, September 29, 2016, the U.S. Supreme Court granted certiorari to review the Federal Court’s ruling in the case of Lee v Tam. That case involved a rock band called “The Slants”. The leader of the band, Simon Tam, appealed the denial by the U.S. Patent and Trademark Office of the band’s request for trademark registration of the band’s name. The US PTO had denied the band’s application on the grounds that it was offensive to Asian-Americans.

The Federal Circuit Court sided with the band and overturned the US PTO’s ruling. The Court stated that the government “cannot refuse to register disparaging marks because it disapproves of the expressive messages conveyed by the marks.” This decision is summarized in more detail in our prior blog posts on that ruling.

The ruling by the Federal Circuit Court was particularly important to Native Americans and tribes because it was contrary to the prior ruling by the Fourth Circuit Court in a case challenging the Washington Redskins trademark. In that case, Pro-Football, Inc. v Amanda Blackhorse, et al, the Court had sided with the US PTO on the same issue. The Court found that the Redskins trademark was disparaging and invalidated its federal trademark registration.

That case is still pending. Thus, the ruling by the Supreme Court on the validity of the US PTO ruling in Lee v Tam will have important consequences (indeed, it will most likely be decisive) for the Pro-Football case.

The Supreme Court, as in almost all actions granting certiorari review, did not state any reasons for its action, but it is typical for the Supreme Court to accept cases involving issues of national impact when there has been a split in the lower courts. It is good to see that the high court appreciates the importance of this controversial matter, and we will all have to wait and see what the result will be.

ARTICLE BY Fred Schubkegel of Varnum LLP

Supreme Court Reinvigorates Effectiveness of Obtaining an Opinion of Counsel to Defend against Potential Enhanced Damages for Willful Infringement in Halo Electronics

On June 13, 2016, the U.S. Supreme Court again reversed a decision of the Federal Circuit—the Circuit specially designated to hear all patent appeals—this time, in articulating the test for determining whether to award enhanced damages for willful patent infringement in Halo Electronics, Inc. v. Pulse Electronics, Inc.¹ This is the third time in two years that the Court has reversed the Federal Circuit on remedies in high-stakes patent litigation.² In an opinion that harkens, in part, back to 1980’s patent law, Chief Justice Roberts and a unanimous Supreme Court held that parties who have actual knowledge that their activities may infringe another’s patent must subjectively believe that their actions are legal, and no longer can rely on theories of objective reasonableness first developed at the time of trial to avoid enhanced damages.

I. Opinions of Counsel at The Federal Circuit

The Halo Electronics decision expressly overruled a 2007 Federal Circuit case, In re Seagate Technologies, which had used a two-part test to determine whether the defendant willfully infringed. Under Seagate, courts first had to find that the actions taken by the alleged infringer were objectively reckless.³ Second, the Court had to find that the defendant acted in a subjectively reckless manner: that they actually acted in bad faith to infringe the plaintiff’s patent.⁴

The Seagate test created a situation where defense counsel could place the weight of their strategy on showing that the defendant’s conduct was objectively reasonable after the fact at trial. Under this test, it was sufficient to show just one scenario where it would have been reasonable to believe that the defendant’s conduct would not have fallen under the plaintiff’s patent, or that the patent would be invalid.⁵ This emphasis on what the defendant could have thought, rather than what it actually had thought, resulted in the prospect of enhanced damages becoming very difficult to obtain.⁶

Seagate itself represented a shift away from the Federal Circuit’s earlier test, established by Underwater Devices in 1983, which placed an “affirmative duty” on the defendant to obtain a competent opinion of counsel to avoid the threat of treble damages.⁷ Such an opinion of counsel represented the documented legal understanding of the defendant as to whether it believed the plaintiff’s patent was valid, and/or covered the defendant’s activities. A defendant relied upon the opinion of counsel to avoid a finding of willfulness if its actions were later deemed infringing.

To be competent, an opinion of counsel had to investigate the file histories of the patents to determine both their validity and their applicability to the defendant’s actions.⁸ Additionally, whether the opinion came from a licensed patent attorney, and the extent to which the attorney was affiliated with the defendant, also were considered in determining the competency of the opinion.⁹ The Federal Circuit made it clear that conclusory opinions made by affiliated in-house counsel, lacking in patent training and expertise, would not be deemed competent.¹⁰

The Federal Circuit’s shift away from Underwater Devices came with industrywide changes in the field of patent litigation.¹¹ With the rise in lawsuits pursued by non-practicing entities, the Federal Circuit recognized that many defendants lacked the resources to obtain a competent opinion of counsel every time they received a cease-and-desist letter from a patent holder. In this regard, the Halo Supreme Court also agreed with the Federal Circuit that the “affirmative duty” standard of Underwater Devices was inappropriate.

II. What Halo Electronics Means for Patent Defendants

The Supreme Court, in overruling Seagate, held that a showing of subjective recklessness nonetheless would be required for Courts to consider awarding enhanced damages.¹² By removing Seagate’s “objectively reasonable standard” prong, Halo Electronics has the effect of shifting the timeline in which the defendant must establish the reasonableness of its actions. Rather than permitting an after-the-fact showing of objective reasonableness through theories devised for trial, Halo Electronics places an onus on defendant to prove that it believed, at the time of its actions, that it did not infringe another’s patent, or that the patent was invalid.

The Court seemed most troubled by the idea that a truly malicious infringer could avoid treble damages under the Seagate test solely as a result of its trial lawyer’s creative trial presentation of what the defendant could have thought.¹³ Rather than provide defendants with beforehand and after-the-fact defenses, the Halo Electronics decision encourages defendants to be proactive. Although Halo Electronics reduces the number of options available to a defendant, the options that remain include a clear and safe path around the threat of potential enhanced damages by way of an opinion.

III. Halo Electronics Shields Patent Defendants Who Proactively Obtain an Opinion of Counsel

In some ways, Halo Electronics represents a shift back to the Underwater Devices era, with at least one critical difference. Underwater Devices made obtaining a competent opinion of counsel an affirmative duty for defendants in order to avoid enhanced damages. In contrast, the Halo Electronics decision rejected the notion of an “affirmative duty” as in Underwater Devices.

As Justice Breyer noted in his concurrence, Halo Electronics does not create any rigid affirmative duties akin to those in Underwater Devices.¹⁴ Instead, it implicitly holds that a competent opinion of counsel, though not necessary to avoid treble damages, nearly always would be sufficient to avoid them. By acting in honest reliance on documented, independent legal advice stating that the patents are either invalid or do not cover the conduct at issue, the defendant cannot act with the bad faith the Court requires. Thus, proactively obtaining a competent opinion of counsel can be a highly effective way to shield potential infringers from the threat of enhanced damages.

On a practical level, the up-front cost of obtaining an opinion of counsel pales in comparison to the cost of protracted litigation to determine the willfulness of the defendant’s actions. Ultimately, by relying on a competent opinion of counsel, a defendant can protect itself against the threat of enhanced damages well before trial at the pleadings or summary judgment stages. Moreover, the removal of enhanced damages also disarms a critical weapon plaintiffs could wield in settlement negotiations.

IV. Opinions of Counsel at Cadwalader

One area of practice of the Intellectual Property Group at Cadwalader specializes in advising clients regarding potential patent infringements and developing defenses once a client becomes aware of a potentially problematic patent. The IP Group has prepared hundreds of opinions of counsel in a diverse array of technologies, from electronics to pharmaceuticals and mechanical devices.

ARTICLE BY Dorothy R. Auth Ph.D. of Cadwalader, Wickersham & Taft LLP

_{¹ Halo Elecs., Inc. v. Pulse Elecs., Inc., 579 U.S. ___ (2016).}

_{² See Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., 134 S. Ct. 1744 (2014); Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014); see generally Ronald Mann, Opinion analysis: Where have I read this before? Justices tread familiar path limiting Federal Circuit control over remedies in patent cases, SCOTUSblog (Jun. 16, 2016, 8:04 AM), http://goo.gl/DzNlIC.}

_{³ In re Seagate Tech., LLC, 497 F.3d 1360, 1384 (Fed. Cir. 2007).}

_{⁴ “[Defendant’s] subjective beliefs may become relevant only if [plaintiff] successfully makes this showing of objective unreasonableness.” Id. Accord Prof’l Real Estate Inv’rs, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 61 (1993) (describing similar objective, then subjective, two‑part test determining when litigation is a “sham” for antitrust purposes); Octane Fitness, 134 S. Ct. at 1751-52 (refusing to further extend Prof’l Real Estate’s definition of “sham” litigation in context of patent litigation).}

_{⁵ “Under that standard, someone who plunders a patent—infringing it without any reason to suppose his conduct is arguably defensible—can nevertheless escape any comeuppance under § 284 solely on the strength of his attorney’s ingenuity.” Halo Elecs., 579 U.S. at ___ (slip op. at 10).}

_⁶ Id.

_{⁷ Underwater Devices Inc. v. Morrison-Knudsen Co., 717 F.2d 1380, 1389 (Fed. Cir. 1983).}

_{⁸ Id. at 1390.}

_⁹ Id.

_¹⁰ Id.

_{¹¹ “Seagate, it would seem . . . would reflect the Federal Circuit’s directed response to patent trolls. . . .” Dov Greenbaum, In re Seagate: Did It Really Fix the Waiver Issue? A Short Review and Analysis of Waiver Resulting from the Use of A Counsel’s Opinion Letter As A Defense to Willful Infringement, 12 Marq. Intell. Prop. L. Rev. 155, 183 (2008).}

_{¹² Halo Elecs., 579 U.S. at ___ (slip op. at 10).}

_{¹³ Id. at ___ (slip op. at 9).}

_{¹⁴ “[C]onsulting counsel may help draw the line between infringing and noninfringing uses,” but it is not required. Id. at ___ (slip op. at 3) (Breyer, J., concurring).}

Are Your Anti-Harassment Initiatives Working? EEOC Says NO

It has been thirty years since the U.S. Supreme Court ruled that workplace harassment was a form of discrimination prohibited by Title VII of the Civil Rights Act of 1964. In a series of court and agency decisions since that time, we have been provided some guidance on what the courts and the EEOC expect employers to do in order to protect their employees from unlawful harassment, but never has the guidance been more clear than in a report the EEOC released in June.

The report is the result of an EEOC task force charged with examining workplace harassment and methods for preventing and addressing it. The report is clear – it’s time for a reboot of workplace harassment prevention and compliance initiatives. The report is rich with statistics and examples, and worth a read for the list of 12 harassment risk factors and recommendations. Pay particular attention to the section on training. The report unequivocally states: training should be conducted by qualified, live, and interactive trainers. In addition, the EEOC advises what we have long believed to be the case: in order to be effective, anti-harassment training should be delivered “live” with the top level of leadership present and participating.

So, we encourage you to take pause and inventory your anti-harassment initiatives. Is your current program effective and are your training dollars well-spent?

You can find a copy of the EEOC’s report here.

ARTICLE BY Christine McLaughlin of Godfrey & Kahn S.C.

Affirmative Action Policy Upheld By Supreme Court

Race may be taken into account when public universities and colleges admit students, ruled the U.S. Supreme Court today. For the second time, the Court was asked to decide whether the University of Texas at Austin’s admissions policy, which uses a variety of affirmative action factors to increase the diversity of its student population, violates the Equal Protection Clause of the Constitution. In a 4-to-3 decision (with Justice Kagan taking no part in the decision), the Court ruled that the race-conscious admissions program in question is lawful under the Equal Protection Clause. Fisher v. University of Texas at Austin, 579 U.S. __ (2016).

White Applicant Denied Admission Challenged Policy

Abigail Fisher, a white applicant who was denied admission to the University of Texas at Austin, sued the University alleging that its use of racial preferences in undergraduate admissions decisions is unconstitutional. She asserted that by including race in its admissions decisions, the University disadvantaged her and other Caucasian applicants.

The District Court in Texas that considered Fisher’s claims ruled in favor of the University, and the Fifth Circuit Court of Appeals agreed. Fisher appealed to the Supreme Court and in 2013, the Court kept her claims alive by sending them back to the Fifth Circuit so that the University’s admissions policy could be evaluated under the proper strict scrutiny standard. The Fifth Circuit reexamined the policy but came up with the same result, ruling in favor of the University. Fisher appealed to the Supreme Court again.

Court Finds Compelling Interest In Diversity of Students

In Fisher I, the Court ruled that the University’s affirmative action process, in which race was only one factor in assigning a numerical admissions score, needed to further a constitutionally permissible and substantial purpose or interest in order to meet the strict scrutiny standard. In today’s decision, the Court found that the University’s desire to provide its students the educational benefits that flow from having a diverse student body was a compelling interest sufficient to overcome the strict scrutiny standard.

Fisher had argued that the University failed to state more precisely what level of minority enrollment would constitute a “critical mass” at which time race would no longer need to be an admissions consideration. The Court rejected Fisher’s argument, stating that the educational benefits promoted by a diverse student body should not be reduced to pure numbers, especially in light of the fact that the University is prohibited from having a quota for minority student enrollment.

The Court also rejected Fisher’s assertion that the University had already achieved “critical mass” of minority enrollment, finding that the University had studied both statistical and anecdotal evidence that showed that race-neutral programs had not achieved its diversity goals. In addition, the Court rejected Fisher’s position that there were other workable race-neutral means of meeting the University’s educational goals.

University Must Continue to Evaluate Use Of Race In Admissions

Although a slim majority of the Court upheld the University’s ability to use race as a factor in its admissions policy, the Court wrote that the University has a continuing obligation to satisfy the burden of strict scrutiny in light of any changing circumstances. It stated that the University must conduct periodic reassessments of its admissions program and continue to examine data to ensure that “race plays no greater role than is necessary to meet its compelling interest” in promoting the educational benefits advanced by diversity among students.

Three Justices Dissent

Chief Justice Roberts, as well as Justices Thomas and Alito, disagreed with their four colleagues in the majority. Justice Thomas wrote that “a State’s use of race in higher education admissions decision is categorically prohibited by the Equal Protection Clause.” Justice Alito separately wrote that the University had failed to show that its race-conscious plan was narrowly tailored to serve compelling interests so “[b]y all rights, judgment should be entered in favor of [Fisher.]”

Had Justice Antonin Scalia not passed away in February, he almost certainly would have voted along the lines of the dissenters. That would have resulted in an evenly divided court at 4-to-4. Justice Kagan did not participate because she had participated in the government’s part of the case when she was U.S. Solicitor General prior to being appointed to the Court. A 4-to-4 decision would have meant that the Fifth Circuit’s decision would stand, so the University would still have prevailed—but the decision would have had no precedential impact outside of the Fifth Circuit. But now, with Justice Scalia’s absence, the Supreme Court decision upholding the constitutionality of a race-conscious affirmative action plan is a precedential ruling that applies nationwide.

Affirmative Action in the Employment Context

Even though the Fisher case examined affirmative action in higher education admissions programs, the decision may have ripple effects in the employment context. By upholding the use of race-conscious affirmative action plans, the Court may have limited or foreclosed some constitutional challenges to affirmative action in employment policies as well. But race-based programs will still need to meet strict scrutiny standards to pass constitutional muster. Employers seeking a diverse workforce through the use of affirmative action plans will need to articulate the compelling interest that supports their use of race as a consideration in hiring, backed up by data and other evidence that no other race-neutral means are available to achieve the employer’s goal. As such, employers seeking to implement such policies should still proceed with caution.

ARTICLE BY R. Calder Huntington of Holland & Hart LLP

Supreme Court Tie Blocks Expansion of DACA and Creation of DAPA

DACA DAPA Supreme Court ruling — Law concept for immigration reform, with a wooden court gavel and a plaque that reads immigration.

Disappointing many, the U.S. Supreme Court has tied 4-4 in a case appealing a nationwide injunction on the Obama Administration’s executive action expanding the Deferred Action for Childhood Arrivals (DACA) and creating the Deferred Action for Parents of Americans and Lawful Permanent Residents (DAPA) programs. United States v. Texas, No. 15-674 (June 23, 2016).

The eagerly anticipated decision will have a far-reaching and adverse impact to millions of undocumented immigrants. The Supreme Court deadlock upheld the appeals court ruling and continues to block programs. The effect of the decision means that up to five million undocumented immigrants may not be allowed legal work authorization in the United States or be protected from deportation.

The Obama Administration utilized executive action to create DACA in 2012. Under DACA, certain undocumented immigrants who arrived as minors were able to defer deportation and receive employment authorization. The Administration expanded DACA and introduced DAPA in 2014 with further executive action. The DACA expansion would have increased the period of employment authorization for DACA beneficiaries to three years, instead of two. DAPA would have allowed parents of U.S. citizens or lawful permanent residents (green card holders) to apply for deferred deportation and employment authorization.

In February 2015, Judge Andrew S. Hanen of the U.S. District Court for the Southern District of Texas entered a preliminary injunction, blocking the 2014 DACA expansion and DAPA creation. The U.S. Circuit Court of Appeals for the Fifth Circuit, in New Orleans, affirmed the lower court’s injunction. The Obama Administration appealed the decision to the U.S. Supreme Court.

The U.S. Supreme Court’s decision strongly indicates that executive action on immigration on a widespread basis may be difficult in the future and any chance of immigration reform may not be possible without Congressional involvement. It also indicates that immigration will continue to be a high priority in the upcoming Presidential and Congressional elections.

ARTICLE BY KoKo Ye Huang of Jackson Lewis P.C.

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