Can a company introduce an improved product if it knows doing so will take sales from its competitors?   “Well, of course,” you say.  “Isn’t that called competition?”  In the near future, the Second Circuit will have to answer this question.  Hopefully it will agree. 

In People of the State of New York v. Actavis PLC, No. 14-4624, the New York Attorney General attacked a practice known as product reformulation, or more often by its unfortunate moniker, “product-hopping.”  This practice describes the roll-out by a branded pharmaceutical company of an improved version of a patent-protected drug combined with the discontinuance of the older drug at or near the time the patent will expire.  The effect of this action is to neutralize the impact of state substitution laws – which either demand or permit the substitution by pharmacists of a generic version of the branded product.  State substitution laws, combined with other pricing pressures from third-party payers (e.g., insurance companies), typically shift a monstrous share of the market for a pharmaceutical (80 percent or higher) from the innovator to the generics at the expiration of the patent.

The case currently is before the Second Circuit on an emergency motion due to the district court’s unprecedented decision to impose an injunction on the defendants, Actavis plc and Forest Laboratories (collectively referred to as “Forest Labs”) requiring that they continue to manufacture and market the older version of the drug until after the patent expires.  Oral arguments were heard by a three judge panel in mid-April.

The Second Circuit has the opportunity to address some interesting issues.  First and foremost, where does one draw the line between Trinko’s dictate that there is no duty under the antitrust laws to assist competitors, and Aspen Skiing’s holding that there could be in certain situations?  

Recall that in Trinko it was alleged that the defendant actually violated its regulatory obligations to aide its competitors.  Despite this fact, the Supreme Court found for the defendant telephone company.  Here, there is no allegation that Forest Labs violated any such regulation or law.  Perhaps this case ultimately will give the Supreme Court the opportunity to demonstrate just how much it regrets Aspen Skiing.

Almost as important, should courts subject companies to antitrust liability where there are no clear rules to guide conduct? The Supreme Court has made it quite clear in Trinko and again in linkLine that this is not a great idea.  The underlying rationale is obvious.  Unclear rules of engagement dilute companies’ competitive vigor, lest they inadvertently cross some inchoate line.         

Unlike some of the prior product-hopping cases where there were allegations of other predatory conduct – such as delisting or raising questionable safety concerns about the older product – the current case is relatively “clean.”  Forest Labs rolled out a new product with apparent benefits and sought to effectively discontinue its older product within months of the expiration of the patent.  It also appears from the district court opinion that Forest Labs made no bones about why it did this. It did it to neutralize the impact of the state substitution laws.  Other than the reformulation and withdrawal, there do not appear to be any other allegations of any real predatory conduct.

Just as Trinko has impacted conduct outside the telecommunications industry, the Second Circuit’s opinion likely will impact more than just pharmaceutical companies.  Putting aside my view as to the proper outcome, let us hope that – whatever the Second Circuit decides – it provides some clear guidance and avoids imposing subjective standards such as those advocated in a 2012 FTC amicus brief filed in Mylan v. Warner Chilicott.

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Harris v. Quinn

Posted on July 2, 2014 08:52 by Tim Coates

In Harris v. Quinn, 11-681, the United States Supreme Court, by a 5-4 vote, struck down an Illinois law requiring home healthcare workers paid with Medicaid funds to belong to a public employee union or pay an agency fee equivalent to union dues to support the union. The court held that requiring the home healthcare workers to belong to, or support a public employee union violated their rights of free association and expression under the First Amendment in that it required them to fund and support union activities, including lobbying activities with which they might not agree. 

In so holding, the court distinguished its prior decision in Abood v. Detroit Board of Education, 431 US 209 (1977) where the court had held that public employees could be required to pay union dues, even if not union members, so long as they were provided with a refund of the union dues reflecting an amount that had been expended by the union of for lobbying activity, as opposed to activities that benefit all workers, such as negotiation of wages and working conditions. In Harris, the court emphasized that unlike in Abood, the home healthcare workers at issue were essentially not public employees at all, with the state merely providing their wages via Medicaid, but with individual employers supervising their work and determining their working conditions on a day-to-day basis. The court concluded that the state could not demonstrate a compelling interest served by the mandatory union fee provision sufficient to offset the significant imposition on the home healthcare workers’ rights to free speech and association under the First Amendment. Since the union provided little more than wage and benefit negotiation, with the balance of work-related conditions left to individual employers of the home healthcare workers, the state was unable to show that dues paid by willing union members were insufficient to fund the relatively limited union activities that benefitted all home healthcare workers. As a result, there was no justification to impinge on the First Amendment rights of non-union members by requiring them to fund the union and its activities.

Harris is significant for two reasons. First, it may spawn challenges to similar mandatory agency fees paid by non-member public employees to unions, with the success of any challenge likely centering on the degree to which the government employer actually controls the day to day activities of the individual employee, and hence the degree to which the unions activities actually benefit the non-member employees. Second, the majority all but overrules Abood, making it clear that its prior decision rests on shaky grounds, thus inviting an outright challenge to Abood which would jeopardize the ability of public employee unions to compel non-members to fund any aspect of union activity, including collective bargaining and other measures that directly concern working conditions and wages. If Abood is eventually overruled, it would be a substantial blow to public employee unions.

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Pregnancy Discrimination Act:

Young v. UPS. The issue in Young is " Whether, and in what circumstances, the Pregnancy Discrimination Act, 42 U.S.C. § 2000e(k), requires an employer that provides work accommodations to non-pregnant employees with work limitations to provide work accommodations to pregnant employees who are “similar in their ability or inability to work.”

In Dart Cherokee Basin Operating Company, LLC v. Owens, the issue is "Whether a defendant seeking removal to federal court is required to include evidence supporting federal jurisdiction in the notice of removal, or whether it is enough to allege the required “short and plain statement of the grounds for removal.”

Appelability of the dismissal of an action consolidated with other suits:
In Gelboim v. Bank of America Corporation, the issue is "Whether and in what circumstances the dismissal of an action that has been consolidated with other suits is immediately appealable." 

In Integrity Staffing Solutions v. Busk, the issue is " Whether time spent in security screenings is compensable under the Fair Labor Standards Act, as amended by the Portal-to-Portal Act."

Labor Law:
In M&G Polymers USA, LLC v. Tackett, the issues are: "(1) Whether, when construing collective bargaining agreements in Labor Management Relations Act (LMRA) cases, courts should presume that silence concerning the duration of retiree health-care benefits means the parties intended those benefits to vest (and therefore continue indefinitely), as the Sixth Circuit holds; or should require a clear statement that health-care benefits are intended to survive the termination of the collective bargaining agreement, as the Third Circuit holds; or should require at least some language in the agreement that can reasonably support an interpretation that health-care benefits should continue indefinitely, as the Second and Seventh Circuits hold."

Judicial enforcement of the EEOC's mandatory duty to conciliate:
In Mach Mining v. EEOC, the issue is: "Whether and to what extent a court may enforce the Equal Employment Opportunity Commission's mandatory duty to conciliate discrimination claims before filing suit."

Juror Dishonesty:
In Warger v. Shauers, the issue is "Whether Federal Rule of Evidence 606(b) permits a party moving for a new trial based on juror dishonesty during voir dire to introduce juror testimony about statements made during deliberations that tend to show the alleged dishonesty."

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At Thursday's weekly conference, SCOTUS will discuss the petition for writ of certiorari in Myers v. Koopman. The issue raised in this case has two parts: "(1) whether a malicious prosecution claim under § 1983 exists under the Fourth Amendment against an investigating detective; and (2) whether Wallace v. Kato applies to a § 1983 malicious prosecution claim under the Fourth Amendment not involving a conviction so that the applicable statute of limitations begins running when the claimant was detained pursuant to the arrest warrant."

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A lawyer has an ever evolving duty to safeguard confidential client information. We don’t just lock our doors and keep our voices down—we encrypt our files, we scrub our metadata—and now, we tackle the issue of how we safeguard our communications with foreign clients. 

The 2008 amendments to the Foreign Intelligence Surveillance Act permit the Director of National Intelligence and the Attorney General to jointly authorize warrantless electronic surveillance, for one-year periods, targeted at a foreigner who is abroad. There is limited, if any, protection for foreigners engaged in communications with American attorneys. Communications that American lawyers take for granted—our phone calls and e-mails with client—may be subject to interception when they involve a foreign client. 

The Edward Snowden scandal brought apparent legitimacy to this previously hypothetical concern. The documents already “disclosed” through the Snowden affair reveal N.S.A. actions in the foreign monitoring of communications between an American Law Firm and its foreign client. As explained in a recent New York Times Article, Spying by N.S.A. Ally Entangled U.S. Law Firm by James Risen and Laura Poitras, the Snowden documents reveal that the American firm was monitored while representing a foreign government in a trade dispute with the United States. Although the surveillance was conducted by the government of Australia, the documents demonstrate apparent acquiescence, approval, and use by the United States government - notwithstanding the very trade dispute at issue. 

If you think the Supreme Court would not stand for this, it appears five justices might disagree. When the ACLU challenged the 2008 amendments in Clapper v. Amnesty International, lawyers raised the concern that their communications would be targeted and intercepted as part of the Act. The Court dismissed these concerns as “speculative,” and declined to provide protection.  It is unclear whether that position would remain the same in this post-Snowden era. Nevertheless, the best way to safeguard foreign client information may be the oldest: face-to-face. On the bright side, if your client is in a tropical paradise, perhaps you finally have that excuse to expense your long awaited client visit. 

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On Friday, the Supreme Court announced that it granted certiorari and will hear Limelight Networks, Inc.’s appeal from the Federal Circuit’s fractured en banc decision in Akamai Technologies, Inc. v. Limelight Networks, Inc. (U.S. Supreme Court Case No. 12-786, Federal Circuit Case No. 2009-1372)

Akamai sued Limelight, alleging that it directly infringed and induced others to infringe its patented method for more efficiently delivering content on the internet by placing content elements on replicated servers and modifying a web page to retrieve certain information from those replicated servers, as opposed to the original servers. Limelight maintained a network of servers that replicated content providers’ web pages, but Limelight did not modify the web pages. Instead, it provided instructions for the content providers to do so themselves.

So, the key issue in the Limelight case involves whether a defendant may be held liable for patent infringement if it performed only some of the steps of a claimed method in a patent, another independent party (or parties) performed the remaining steps, and no single individual performed all of the steps. These joint infringement issues have created enforcement issues for patentees in the past, especially where the claims of the patent are written in such a way that more than one party will likely perform the steps in the claim.

It is important to note that the case did not involve the situation where a defendant contracts with or controls the actions of the other individual. The Federal Circuit has long recognized (and continues to recognize) that in those circumstances, the actions of the controlled party are imputed to the controlling party, and the controlling party is liable for direct infringement. Instead, the question presented in Limelight is whether there can be infringement when two independent parties together perform all of the steps in a method claim.

Under prior Federal Circuit precedent, there could not be infringement of a method claim unless a single entity performed all of steps in the claim, either directly or through its control of all the parties performing the steps. This sometimes led to situations where a patentee was left with no recourse when multiple, independent parties performed the steps of the claim. This was the circumstance in Limelight, and the district court entered JMOL in favor of Limelight because no single entity performed all of the steps in the claim.

In a 6-4-1 en banc decision, the Federal Circuit radically disagreed as to what the law should be in these circumstances. The majority (in a per curiam decision), chose to recast the question from one of whether there can be direct infringement when multiple, independent parties perform the steps in the claim to whether there can be liability for induced infringement in these circumstances. First, the majority found that infringement occurs whenever all of the steps are performed, even if there is no direct infringement because no single entity performed all the steps. It then concluded that if one party (the inducer) causes, urges, encourages, or aids another such that this infringement occurs, that party could be liable for inducing infringement. The majority did note that induced infringement is not a strict liability offense, like direct infringement is. Instead, to be liable, a patentee must show that the inducer knew of the patent, that it induced another to perform some (or all) of the steps, and that all of the steps were ultimately performed by either itself or the induced party.

Judge Linn, in a dissent joined by three other judges, strongly disagreed with the majority’s analysis and its decision to recast the question originally presented to the en banc panel. It believed that the prior Supreme Court and Federal Circuit case law correctly required that a single party perform all of the steps in a method claim for there to be infringement and that the majority’s decision was improper policy making. In particular, the dissent noted that this approach has been the law for a long time and that Congress has had numerous opportunities to fix any “mistakes” by the courts, but has chosen not to. In particular, the dissent noted that Congress expanded what constitutes patent infringement on other occasions to address ANDA applications and extra-territorial infringement, without changing the law of joint infringement.

Finally, Judge Newman, writing only for herself, took an entirely different approach and advocated abolishing the single-entity rule entirely. She would hold that all parties involved in performing any of the steps in a method claim could be liable as direct infringers.

Having lost at the Federal Circuit, Limelight petitioned for a writ a certiorari, which the Supreme Court granted. The Supreme Court invited the US Solicitor General to file an amicus brief before deciding whether to grant the writ. The Solicit General sided with Limelight, urging that the Supreme Court reverse the Federal Circuit and affirm the prior approach, as advocated in Judge Linn’s dissent.

Joint infringement can be a difficult problem for patentees, especially when they have written their claims in a way that requires or allows multiple parties to perform the steps in a method claim. The Federal Circuit’s complete change in direction has the potential to create greatly expanded liability for defendants, so the Supreme Court’s decision potentially will have broad implications for both patentees and defendants. 

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On August 21st, the U.S. Court of Appeals for the Ninth Circuit in Richards v. Ernst and Young held that an employer’s arbitration agreement could be enforced, despite any limitation on joint or class actions.

The decision came after defendant; Ernst & Young LLP appealed the district court’s decision denying its motion to compel arbitration of state wage and hour claims brought by its former employee, Michelle Richards. The district court ruled that the defendant had waived its right to arbitration by failing to raise the agreement as a defense early in litigation. However, plaintiff Richards’ action was consolidated with other former employees’ claims at a later date.

In reversing the district court’s decision, the Court of Appeals noted that waiver of a contractual right to arbitration is not favored. Therefore, any party arguing waiver of the right has a heavy burden of proof which includes demonstrating: (1) knowledge of an existing right to compel arbitration; (2) acts inconsistent with that right; and (3) prejudice to the party opposing arbitration resulting from the inconsistent acts.

The plaintiff argued prejudice as a result of the defendant’s failure to compel arbitration at an earlier date, after she had already provided pretrial information and incurred expenses. However, the Court of Appeals ruled this was insufficient prejudice. Plaintiff further argued she was prejudiced as there were meritorious arguments and as a result of compelling arbitration, some of her claims were dismissed. However, the Court noted that one of her claims was dismissed without prejudice, which did not constitute a decision on the merits. Furthermore, another of her claims was resolved when it was determined that she lacked standing to bring the claim- a decision that precedes and does not involve any analysis of the merits.

Last of all, the plaintiff argued that the Court should follow a decision of the National Labor Relations Board (NLRB) in D.R. Horton, 357 N.L.R.B. No. 184, 2012 WL36274 (Jan. 3, 2012) in which it was held that an arbitration agreement that did not allow employees to file joint, class, of collective employment related claims was invalid. The Court of Appeals declined to entertain the argument, as it was not properly raised before the district court for argument. However, it more importantly noted that it, as well as a majority of courts, have declined to follow the NLRB’s decision because it conflict with explicit pronouncements of the U.S. Supreme Court and the Federal Arbitration Act (FAA) 9 U.S.C. §§ 1–16. It specifically noted that the U.S. Supreme Court recently reiterated the importance of courts enforcing arbitration agreements, including those whose subject matter involves claims of federal law violations.

This case is important for employers, who may be able to limit their exposure to class actions by utilizing mandatory arbitration agreements such as the one in this case. Employers should be careful to understand the benefits of litigation versus arbitration and seek advice from an experienced attorney regarding the use of such an agreement in its employment contracts.

This blog was originally posted on September 19 on the Jampol Zimet website. Click here to read the original entry. 

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The U.S. Supreme Court’s decision in Mutual Pharmaceutical Co., Inc. v. Bartlett, No. 12-142, decided June 24, 2013, may assist defense counsel in defending product liability cases involving FIFRA-regulated products such as herbicides and pesticides. Although Bartlett involved design defect claims against manufacturers of generic drugs, which are regulated by FDA, the principles enunciated in Bartlett potentially have much greater application.

In Bartlett, the court held that the Federal Food, Drug and Cosmetic Act preempts state-law design defect claims against manufacturers of generic drugs. The court rejected outright plaintiff’s contention that under the so-called “stop-selling” theory, a generic manufacturer could comply with both federal and state law merely by removing its drug from the market.

In rejecting that argument, Justice Samuel Alito, writing for the majority, held that “the incoherence of the stop-selling theory becomes plain when viewed through the lens of our previous cases. In every instance in which the court has found impossibility pre-emption, the ‘direct conflict’ between federal and state law duties could easily have been avoided if the regulated actor had simply ceased acting.”

Thus, in reversing the First Circuit decision, the court slammed the door on plaintiffs hoping to circumvent the preemption defense by contending that a manufacturer might merely stop selling the product.

In an article in Law360 titled, “Bartlett’s Benefits Will Extend Beyond Generic Drug Makers,” 6/28/13, commentators offer the view that pesticide manufacturers may now be protected from plaintiff alleging a stop-selling theory of liability.  If the case’s holding is so extended, plaintiffs should no longer be able to allege that an herbicide manufacturer should not have placed a pesticide into commerce in the first instance. In essence, this is a variation of the often espoused argument that a product should not be marketed because its risks outweigh any potential benefits.  After all, the whole point of federal regulation is the underlying assumption you are going to market the product. 

This blog was originally posted on July 2 by William A. Ruskin on Toxic Tort Litigation blog. Click here to see the original post. 

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Today, the United States Supreme Court unanimously ruled in Association for Molecular Pathology v. Myriad Genetics, Inc., No. 12-398, that a naturally-occurring DNA segment (or gene) is not patent eligible even if it has been isolated from a genome (reversing the Federal Circuit). The Court also ruled that cDNA (complementary DNA) is patent eligible because it is not naturally occurring (affirming the Federal Circuit). Justice Thomas wrote the opinion for the unanimous Court, and Justice Scalia wrote a short concurrence. We have been following this case for some time (see here, here, and here).

The Court began by restating its position that laws of nature, natural phenomena, and abstract ideas are not patentable subject matter under 35 U.S.C. § 101. The question for the Court was whether Myriad’s patents claimed any new and useful composition of matter.

To answer this question, the Court looked at what Myriad claimed. With respect to the DNA claims, Myriad claimed the DNA segment it found in nature, and it did not change or alter any of the genetic information in that segment. Because it claimed something naturally found in nature, it was not patent eligible subject matter.

With respect to the cDNA claims, the Court reached a different result. The cDNA is not found in nature, but is created in the laboratory. This key difference meant that it was patent eligible subject matter. The Court did not address whether these claims met the other requirements of the patent statute, such as §§ 102, 103, and 112.

The Court was also very clear on what it was not deciding in this case. There were no method claims at issue, such as an innovative method for manipulating genes. Similarly, there were no  claims directed to how this new knowledge might be applied to achieve some useful result. The Court suggested (without holding) that those types of claims would be patent eligible. Finally, it noted that the claims were not directed to naturally occurring genetic code that had been altered to create some new and not natural DNA. The Court refused to suggest how it might address claims like those.

In the end, the Court stated that “[w]e merely hold that genes and the information they encode are not patent eligible under § 101 simply because they have been isolated from the surrounding genetic material.”

This blog was originally posted by Robert Wagner on June 13 on the PIT IP Tech Blog, An Intellectual Property and Technology Law Blog from the Pittsburgh Law Firm of Picadio Sneath Miller & Norton, P.C. Click here to see the original post. 

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With the DC Circuit having invalidated President Obama’s recess appointments to the National Labor Relations Board, employers are finding increasingly more ways to challenge the Board’s authority to act.

The Court’s decision in Noel Canning v. NLRB held that the recess appointment of three Board members in 2012 were unconstitutional. Consequently, the Court held, the Board had no authority to decide pending cases because it lacked a quorum. Nearly 1600 published and unpublished Board decisions were declared void as a result.

Employers immediately used the case to challenge the Board’s decisions, including controversial decisions widely perceived as expanding the Board’s historical authority.  As Thomson Reuters reports, employers now are using Noel Canning to challenge the authority of the Board’s regional representatives and administrative law judges, and its ability to issue subpoenas, hold hearings, and preside over union elections.

The Board, for its part, maintains that it has authority to continue operating as usual.

The Supreme Court ultimately will decide the validity of the President’s recess appointments and the numerous decisions flowing from those appointments.

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