Teva Pharmaceuticals Industries Ltd and Sun Pharmaceutical Industries Ltd settles a lawsuit against Pfizer and Takeda Pharmaceutical Co Ltd, says this article.
***
Pfizer Inc said Teva Pharmaceuticals Industries Ltd and Sun Pharmaceutical Industries Ltd would pay $2.15 billion to settle a patent infringement lawsuit related to its acid-reflux drug Protonix.
Japan's Takeda Pharmaceutical Co Ltd, Pfizer's partner on the drug, will receive 36 percent or about $774 million from the settlement.
Pfizer won a protracted 10-year legal battle in April 2010 when a New Jersey jury ruled that Teva had infringed the Protonix patent. Teva started selling a generic version of the drug in 2007.
A trial to determine damages began on Monday.
The patent was held by Nycomed - now a Takeda subsidiary. Protonix was licensed to Wyeth, which is now owned by Pfizer.
Israel-based Teva, the world's largest generic drugmaker, will pay $1.6 billion - half this year and the rest by October 2014. India's Sun Pharma will pay $550 million this year.
Teva said in February that it may face legal losses of up to $2.07 billion to resolve the case.
Sun Pharma set aside 5.84 billion rupees, or about $100 million, last November towards potential damages to Pfizer. The company will now have to shell out a further $450 million as final settlement.
"This is not a very positive out-of-court settlement. The agreed amount is way too high for such a settlement," said Daljeet Kohli, head of research at brokerage IndiaNivesh in Mumbai. "It will also restrict Sun's ability to look for acquisitions."
Pfizer's shares were up about 1 percent at $28.66 before the bell, while Teva's U.S.-listed shares were down about 1 percent at $39.51.
Sun Pharma closed little changed at 980.70 rupees, while Takeda's stock closed down 1.4 percent at 4,355 yen.
($1 = 58.4950 Indian rupees)
Evan Granowitz is a civil litigator who was named a Super Lawyers Rising Star in 2009, 2010, and 2011. Visit this website for more information about him and his practice areas.
Showing posts with label Policy making. Show all posts
Showing posts with label Policy making. Show all posts
Wednesday, June 19, 2013
Sunday, June 16, 2013
REPOST: When mandatory arbitration replaces litigation, consumers lose
Paul Samakow argues for litigation and against required arbitration procedures
for employer, consumer, and civil rights disputes as he shares details
on why a proposed legislation that would eliminate mandatory arbitration
would bring fairness back to consumer and employee rights cases. Read
about it here:
Legislation that would eliminate required arbitration for employee, consumer and civil rights disputes was proposed last month. It should be passed. Congress must act to restore fairness.
Big business and corporate money, along with a corporate friendly Supreme Court, have been enough in the past to defeat efforts to bring fairness back to the arena of routine consumer and employee rights. Unfortunately, the same thing is likely to happen again, and the Arbitration Fairness Act of 2013 that has been introduced in the House (and a similar bill in the Senate) will likely fail.
As the law exists now, you do not have the right to file a lawsuit for many consumer and employee and civil rights complaints. In these situations, the law requires you to submit to binding arbitration. Binding means no further review, no other options, no going to court.
If the arbitration process were neutral, independent and not connected to corporate purse strings, it might not be so bad. Unfortunately, in most consumer, employment and civil rights cases, the likelihood of the “little guy” prevailing is almost zero.
The existing law of our land, the Federal Arbitration Act, has been interpreted by the pro-big business Supreme Court and thus gives businesses a significant advantage in resolving disputes with us. We are forced into binding arbitration, and the Court says this is legal. Legislation is needed to turn back the clock and restore fairness.
Most contracts we sign with big business today include mandatory arbitration clauses. These include contracts for cell phones, credit cards, mom’s or dad’s nursing home, and even on-line user agreements. Thus, when presented with these contracts, where the arbitration clauses are in fine print and often in difficult-to-understand legalese, we routinely sign, and thus, we “voluntarily” give up the right to file a lawsuit if there are problems.
The same thing happens in routine employment civil rights matters. Most big business or large corporation employee handbooks state that the employee cannot sue their employers, and that they must submit to a binding arbitration process for almost any issue.
The arbitration process is usually secretive and it is far from independent. Hearings are closed, unlike what you see in courtrooms across America or even on television. There is no appeal or next level review.
Arbitration panels are overwhelmingly funded by big business. Thus, to assure they keep getting the work, arbitrators almost always rule in favor of the business. They understand that decisions against the business will result in their firms not being used again.
When we lose access to the courts, corporations are effectively given a license to steal. Our ability to seek justice in the courts, even when up against the most powerful corporate interests, is an essential part of our democracy.
Here are selected portions of the proposed legislation:
Section 2: Findings:
(3) Most consumers and employees have little or no meaningful choice whether to submit their claims to arbitration. Often, consumers and employees are not even aware that they have given up their rights.
(4) Mandatory arbitration undermines the development of public law because there is inadequate transparency and inadequate judicial review of arbitrators’ decisions.
Section 4: Definitions:
(2) civil rights dispute means a dispute—
(A) arising under—
(i) the Constitution of the United States or the constitution of a State; or (ii) a Federal
or State statute that prohibits discrimination on the basis of race, sex, disability,
religion, national origin…in education, employment, credit, housing, public
accommodations and facilities, [or] voting….
(3) consumer dispute means a dispute between an individual who seeks or acquires
real or personal property, services (including services relating to securities and other
investments), money, or credit for personal, family, or household purposes….
(4) employment dispute means a dispute between an employer and employee arising
out of the relationship….
Sec. 402. Validity and enforceability
(a) In General- Notwithstanding any other provision of this title, no pre-dispute arbitration agreement shall be valid or enforceable if it requires arbitration of an employment dispute, consumer dispute, antitrust dispute, or civil rights dispute.
This legislation broadly defines “employment dispute,” and in it “consumer dispute” is defined broadly enough to include a wide range of legal conflicts. If passed, this bill would eliminate arbitration as the required course of action for employee claims – as well as those brought by consumers – unless all parties agreed to arbitration once the dispute was identified.
U.S. Representative Hank Johnson (D-GA) and Senator Al Franken (D-MN) introduced this needed legislation. Johnson said in so doing that “forced arbitration clauses undermine our indelible Constitutional right to take our disputes to court.”
“Mandatory arbitration can be a huge disadvantage to consumers, often limiting their ability to have any meaningful legal recourse when they are wronged,” Sen. Franken said. “I’ve reintroduced the Arbitration Fairness Act to ensure that consumers maintain their right to their day in court when they are cheated.”
The Supreme Court, an ally of big business and corporate interests over the last several years, has helped those interests in several holdings and in so doing has further eroded consumers’ rights. In one case, Stolt-Nielsen v. Animal Feeds International, 2010, the Court upheld as valid required arbitration agreements for class action claims. In another, AT&T Mobility LLC v. Concepcion, 2011, the Court held that arbitration agreements may ban class actions even when such a ban was expressly prohibited by state law.
These holdings seriously harmed consumers’ rights and served to further protect corporations from accountability. Class actions were designed to allow many individuals with similar claims, too small in nature or dollars to prosecute by themselves, to join together to try to right a common and recurring wrong. By stripping the class from the right to file a unified lawsuit, requiring instead arbitration, the little guy is once again kept down and effectively never heard from.
The existing law, the Federal Arbitration Act (FAA), was originally passed to make sure that the courts enforced commercial arbitration agreements, that is, between companies, not between companies and consumers. The Supreme Court’s rulings allow big business and corporate America to insulate themselves from liability in small one-by-one cases and in attempted larger, what-would-have-been class action claims.
Because of the rulings by the Supreme Court that interpret the Act in an expansive anti-consumer fashion, Congress must act in order to restore fairness.
Representative Johnson and Senator Franken have been consistent advocates for the little guy. In 2009 Sen. Franken passed legislation with bipartisan support that restricted funding to defense contractors who committed employees to mandatory binding arbitration in cases of sexual assault and other civil rights violations. Rep. Johnson, a longtime advocate of workers’ and consumer rights, first introduced the Arbitration Fairness Act in 2007.
Their proposed legislation would change the FAA by:
1. Invalidating agreements that require arbitration in employment, consumer or civil rights disputes;
2. Restoring the rights of workers and consumers by allowing them to seek justice in the courts (and court process is open and transparent, so all of the world can see and decide if claims and defenses are legal, valid and reasonable);
3. Protecting the intent of the Civil Rights Act, the Equal Pay Act, the Americans with Disabilities Act, and the Age Discrimination in Employment Act, and more.
Let your elected officials know that the current state of the law in this country regarding mandatory arbitration needs significant change.
Find more noteworthy news on legal matters on this Evan Granowitz Facebook page.
Legislation that would eliminate required arbitration for employee, consumer and civil rights disputes was proposed last month. It should be passed. Congress must act to restore fairness.
Big business and corporate money, along with a corporate friendly Supreme Court, have been enough in the past to defeat efforts to bring fairness back to the arena of routine consumer and employee rights. Unfortunately, the same thing is likely to happen again, and the Arbitration Fairness Act of 2013 that has been introduced in the House (and a similar bill in the Senate) will likely fail.
As the law exists now, you do not have the right to file a lawsuit for many consumer and employee and civil rights complaints. In these situations, the law requires you to submit to binding arbitration. Binding means no further review, no other options, no going to court.
If the arbitration process were neutral, independent and not connected to corporate purse strings, it might not be so bad. Unfortunately, in most consumer, employment and civil rights cases, the likelihood of the “little guy” prevailing is almost zero.
The existing law of our land, the Federal Arbitration Act, has been interpreted by the pro-big business Supreme Court and thus gives businesses a significant advantage in resolving disputes with us. We are forced into binding arbitration, and the Court says this is legal. Legislation is needed to turn back the clock and restore fairness.
Most contracts we sign with big business today include mandatory arbitration clauses. These include contracts for cell phones, credit cards, mom’s or dad’s nursing home, and even on-line user agreements. Thus, when presented with these contracts, where the arbitration clauses are in fine print and often in difficult-to-understand legalese, we routinely sign, and thus, we “voluntarily” give up the right to file a lawsuit if there are problems.
The same thing happens in routine employment civil rights matters. Most big business or large corporation employee handbooks state that the employee cannot sue their employers, and that they must submit to a binding arbitration process for almost any issue.
The arbitration process is usually secretive and it is far from independent. Hearings are closed, unlike what you see in courtrooms across America or even on television. There is no appeal or next level review.
Arbitration panels are overwhelmingly funded by big business. Thus, to assure they keep getting the work, arbitrators almost always rule in favor of the business. They understand that decisions against the business will result in their firms not being used again.
When we lose access to the courts, corporations are effectively given a license to steal. Our ability to seek justice in the courts, even when up against the most powerful corporate interests, is an essential part of our democracy.
Here are selected portions of the proposed legislation:
Section 2: Findings:
(3) Most consumers and employees have little or no meaningful choice whether to submit their claims to arbitration. Often, consumers and employees are not even aware that they have given up their rights.
(4) Mandatory arbitration undermines the development of public law because there is inadequate transparency and inadequate judicial review of arbitrators’ decisions.
Section 4: Definitions:
(2) civil rights dispute means a dispute—
(A) arising under—
(i) the Constitution of the United States or the constitution of a State; or (ii) a Federal
or State statute that prohibits discrimination on the basis of race, sex, disability,
religion, national origin…in education, employment, credit, housing, public
accommodations and facilities, [or] voting….
(3) consumer dispute means a dispute between an individual who seeks or acquires
real or personal property, services (including services relating to securities and other
investments), money, or credit for personal, family, or household purposes….
(4) employment dispute means a dispute between an employer and employee arising
out of the relationship….
Sec. 402. Validity and enforceability
(a) In General- Notwithstanding any other provision of this title, no pre-dispute arbitration agreement shall be valid or enforceable if it requires arbitration of an employment dispute, consumer dispute, antitrust dispute, or civil rights dispute.
This legislation broadly defines “employment dispute,” and in it “consumer dispute” is defined broadly enough to include a wide range of legal conflicts. If passed, this bill would eliminate arbitration as the required course of action for employee claims – as well as those brought by consumers – unless all parties agreed to arbitration once the dispute was identified.
U.S. Representative Hank Johnson (D-GA) and Senator Al Franken (D-MN) introduced this needed legislation. Johnson said in so doing that “forced arbitration clauses undermine our indelible Constitutional right to take our disputes to court.”
“Mandatory arbitration can be a huge disadvantage to consumers, often limiting their ability to have any meaningful legal recourse when they are wronged,” Sen. Franken said. “I’ve reintroduced the Arbitration Fairness Act to ensure that consumers maintain their right to their day in court when they are cheated.”
The Supreme Court, an ally of big business and corporate interests over the last several years, has helped those interests in several holdings and in so doing has further eroded consumers’ rights. In one case, Stolt-Nielsen v. Animal Feeds International, 2010, the Court upheld as valid required arbitration agreements for class action claims. In another, AT&T Mobility LLC v. Concepcion, 2011, the Court held that arbitration agreements may ban class actions even when such a ban was expressly prohibited by state law.
These holdings seriously harmed consumers’ rights and served to further protect corporations from accountability. Class actions were designed to allow many individuals with similar claims, too small in nature or dollars to prosecute by themselves, to join together to try to right a common and recurring wrong. By stripping the class from the right to file a unified lawsuit, requiring instead arbitration, the little guy is once again kept down and effectively never heard from.
The existing law, the Federal Arbitration Act (FAA), was originally passed to make sure that the courts enforced commercial arbitration agreements, that is, between companies, not between companies and consumers. The Supreme Court’s rulings allow big business and corporate America to insulate themselves from liability in small one-by-one cases and in attempted larger, what-would-have-been class action claims.
Because of the rulings by the Supreme Court that interpret the Act in an expansive anti-consumer fashion, Congress must act in order to restore fairness.
Representative Johnson and Senator Franken have been consistent advocates for the little guy. In 2009 Sen. Franken passed legislation with bipartisan support that restricted funding to defense contractors who committed employees to mandatory binding arbitration in cases of sexual assault and other civil rights violations. Rep. Johnson, a longtime advocate of workers’ and consumer rights, first introduced the Arbitration Fairness Act in 2007.
Their proposed legislation would change the FAA by:
1. Invalidating agreements that require arbitration in employment, consumer or civil rights disputes;
2. Restoring the rights of workers and consumers by allowing them to seek justice in the courts (and court process is open and transparent, so all of the world can see and decide if claims and defenses are legal, valid and reasonable);
3. Protecting the intent of the Civil Rights Act, the Equal Pay Act, the Americans with Disabilities Act, and the Age Discrimination in Employment Act, and more.
Let your elected officials know that the current state of the law in this country regarding mandatory arbitration needs significant change.
Find more noteworthy news on legal matters on this Evan Granowitz Facebook page.
Wednesday, May 22, 2013
REPOST: North Carolina May Ban Tesla Sales To Prevent “Unfair Competition”
This article from Slate.com reports on a bill that would prevent automakers from selling their cars unless it is done through third-party dealerships. The reason behind this bill is the prevention of unfair competition, but it is unclear what exactly makes selling cars directly to consumers unfair. Read more about it below:
From the state that brought you the nation’s first ban on climate science comes another legislative gem: a bill that would prohibit automakers from selling their cars in the state.
The proposal, which the Raleigh News & Observer reports was unanimously approved by the state’s Senate Commerce Committee on Thursday, would apply to all car manufacturers, but the intended target is clear. It’s aimed at Tesla, the only U.S. automaker whose business model relies on selling cars directly to consumers, rather than through a network of third-party dealerships.
The bill is being pushed by the North Carolina Automobile Dealers Association, a trade group representing the state’s franchised dealerships. Its sponsor is state Sen. Tom Apodaca, a Republican from Henderson, who has said the goal is to prevent unfair competition between manufacturers and dealers. What makes it “unfair competition” as opposed to plain-old “competition”—something Republicans are typically inclined to favor—is not entirely clear. After all, North Carolina doesn’t seem to have a problem with Apple selling its computers online or via its own Apple Stores.
Still, it’s easy to understand why some car dealers might feel a little threatened: Tesla’s Model S outsold the Mercedes S-Class, BMW 7 Series, and Audi A8 last quarter without any help from them. If its business model were to catch on, consumers might find that they don’t need the middle-men as much as they thought.
Incidentally—not that he would be in any way swayed by this—I couldn’t help but notice that Apodaca received $8,000 in campaign contributions from the North Carolina Automobile Dealers Association last year, the maximum amount allowed by state law. I’ve reached out to the senator for further comment and will update this post if he replies.
Tesla’s vice president of corporate and business development, Diarmuid O'Connell, told me he’s hopeful that the state legislature will amend the bill so that it doesn’t prohibit Tesla from doing business there. He said the company has already sold 80 cars in North Carolina, mostly through the Web, and has about 60 more orders in the works. It also has plans to build its first showroom in the state next year. The Raleigh-Durham Research Triangle in particular appears to be a hotbed of Tesla interest, O'Connell said, which makes sense given its similarities to Silicon Valley.
In its current form, North Carolina’s bill would be the harshest of a handful of anti-Tesla regulations around the country. In Texas, the company is fighting a law under which the employees of its “showroom” in Austin are not allowed to sell any vehicles, offer test drives, or even tell customers how much the car costs. But at least Texas still lets people buy the car online, which North Carolina’s law would prohibit.
Tesla’s O’Connell rejects the idea that laws prohibiting automakers from selling their cars are designed to protect consumers, as trade groups like the North Carolina dealers’ association claim. He says the franchise-dealer model might work fine for giant automakers, but not for a startup like Tesla—especially since Tesla’s products represent a challenge to the traditional auto industry on which dealerships rely. “How do you sell the future if your business depends on the present?” he asked.
Robert Glaser, president of the dealers association, told the News & Observer that the law prohibiting Tesla sales isn’t just about his industry’s self-interest. Pointing to the Tesla representatives at a recent hearing, he said, “You tell me they’re gonna support the little leagues and the YMCA?”
If that’s the real issue, then I may have some good news for all concerned: I asked O’Connell, and he assured me Tesla would be happy to support the little leagues and the YMCA if that’s what North Carolina requires in order to do business there. Problem solved! Right, Mr. Glaser?
Evan Granowitz is an attorney who currently does his practice in Wolf Group L.A. His practice is focused on civil litigation matters, including breach of contract disputes, unfair competition, and business torts among others. Find more links to interesting cases through this Twitter page.
 |
| Image source: slate.com |
From the state that brought you the nation’s first ban on climate science comes another legislative gem: a bill that would prohibit automakers from selling their cars in the state.
The proposal, which the Raleigh News & Observer reports was unanimously approved by the state’s Senate Commerce Committee on Thursday, would apply to all car manufacturers, but the intended target is clear. It’s aimed at Tesla, the only U.S. automaker whose business model relies on selling cars directly to consumers, rather than through a network of third-party dealerships.
The bill is being pushed by the North Carolina Automobile Dealers Association, a trade group representing the state’s franchised dealerships. Its sponsor is state Sen. Tom Apodaca, a Republican from Henderson, who has said the goal is to prevent unfair competition between manufacturers and dealers. What makes it “unfair competition” as opposed to plain-old “competition”—something Republicans are typically inclined to favor—is not entirely clear. After all, North Carolina doesn’t seem to have a problem with Apple selling its computers online or via its own Apple Stores.
Still, it’s easy to understand why some car dealers might feel a little threatened: Tesla’s Model S outsold the Mercedes S-Class, BMW 7 Series, and Audi A8 last quarter without any help from them. If its business model were to catch on, consumers might find that they don’t need the middle-men as much as they thought.
Incidentally—not that he would be in any way swayed by this—I couldn’t help but notice that Apodaca received $8,000 in campaign contributions from the North Carolina Automobile Dealers Association last year, the maximum amount allowed by state law. I’ve reached out to the senator for further comment and will update this post if he replies.
Tesla’s vice president of corporate and business development, Diarmuid O'Connell, told me he’s hopeful that the state legislature will amend the bill so that it doesn’t prohibit Tesla from doing business there. He said the company has already sold 80 cars in North Carolina, mostly through the Web, and has about 60 more orders in the works. It also has plans to build its first showroom in the state next year. The Raleigh-Durham Research Triangle in particular appears to be a hotbed of Tesla interest, O'Connell said, which makes sense given its similarities to Silicon Valley.
In its current form, North Carolina’s bill would be the harshest of a handful of anti-Tesla regulations around the country. In Texas, the company is fighting a law under which the employees of its “showroom” in Austin are not allowed to sell any vehicles, offer test drives, or even tell customers how much the car costs. But at least Texas still lets people buy the car online, which North Carolina’s law would prohibit.
Tesla’s O’Connell rejects the idea that laws prohibiting automakers from selling their cars are designed to protect consumers, as trade groups like the North Carolina dealers’ association claim. He says the franchise-dealer model might work fine for giant automakers, but not for a startup like Tesla—especially since Tesla’s products represent a challenge to the traditional auto industry on which dealerships rely. “How do you sell the future if your business depends on the present?” he asked.
Robert Glaser, president of the dealers association, told the News & Observer that the law prohibiting Tesla sales isn’t just about his industry’s self-interest. Pointing to the Tesla representatives at a recent hearing, he said, “You tell me they’re gonna support the little leagues and the YMCA?”
If that’s the real issue, then I may have some good news for all concerned: I asked O’Connell, and he assured me Tesla would be happy to support the little leagues and the YMCA if that’s what North Carolina requires in order to do business there. Problem solved! Right, Mr. Glaser?
Evan Granowitz is an attorney who currently does his practice in Wolf Group L.A. His practice is focused on civil litigation matters, including breach of contract disputes, unfair competition, and business torts among others. Find more links to interesting cases through this Twitter page.
Tuesday, May 21, 2013
REPOST: A Judicial Solution To Non-Practicing Patent Holders' Suits Vs. End Users?
This article from Forbes.com shares details about lawsuit claims by patent-assertion entities versus end users, and what recent cases could mean for technology end users:
Litigation by “patent-assertion entities” (PAE) was back in the news again last weekwith a jury decision from the Eastern District of Texas. The jury found that patents held by Alexsam Inc. which purportedly cover a system for processing pre-paid electronic gift cards were valid, allowing Alexsam’s infringement claims against Best Buy BBY -0.33%, Barnes & Noble NE +3.94%, Gap GPS +0.24%, Home Depot HD -0.13%, McDonald's MCD 0%, JC Penny, and other retailers to advance. Whether the actions will proceed or the retailers decide to cut their losses and settle is unclear.
Claims by patent-assertion entities rarely get to the stage at which the gift card litigation currently stands. This is especially true when patent holders target purchasers and users of technology which allegedly infringe on their rights, rather than (or in addition to) the technology’s producers. When posed with the choice of investing six-figures defending a product you didn’t even create, or paying the PAE a four- or five-figure licensing fee, most small businesses will choose the latter, no matter how weak the legal claims may be.
Online technology journal Ars Technica has shined a spotlight on some of these PAE litigation threat campaigns. Several stories (here and here) document one anonymous patent holder’s systematic targeting of small businesses and even some individuals who use scanners that can send the scanned files via e-mail. The “scanner-trolling scheme,” as Ars calls it, divides up the U.S. into six areas, and in each area, a separate shell company demands $800-$1,200 licensing fees per employee to avoid a lawsuit. Another story focuses on how a Luxembourg-based PAE is suing cash-strapped public transit systems over their use of vehicle-tracking systems. The Electronic Frontier Foundation recently stepped in to request a reexamination of this PAE’s patent. Other stories have documented the litigation crusade of Innovatio, which has sued businesses offering Wi-Fi service on their premises. One law firm even has an entire section of its website devoted to the suits.
Such targeting of end users has led to calls from leaders in business and Congress to immunize such companies and individuals from patent lawsuits. While that may sound promising to under-assault small businesses, their next thought will likely be, “how many years did it take to pass the America Invents Act?”
In the meantime, technology end users should consider the academic advice recently offered by a Santa Clara University Law School professor and a law firm partner in a forthcoming Boston University Law Review article, “Expanding Patent Law’s Customer Suit Exception.” Authors Brian Love and James Yoon encourage the federal courts to revive and modernize a doctrine “ lurking in the forgotten recesses of patent caselaw” which allows for the stay of patent suits against customers if the seller/manufacturer files a declaratory judgment action against the same patent plaintiff.
As Love and Yoon explain, the courts (primarily the Federal Circuit) have imposed severely limiting conditions on the customer suit exception, including that the customer defendants are “mere resellers” and that the manufacturer is the sole source of the infringing product. Judges also frame their analysis around the interest of judicial economy, and don’t consider the broader policy benefits of deterring future litigation and empowering the entity best positioned to question infringement: the manufacturer.
These limits undermine the doctrine’s effectiveness in this new era of patent litigation, where products are “overwhelmingly constructed (at least in part) using discrete components sourced from multiple manufacturers.” Love and Yoon recommend changes to the customer suit exception that reflect this new reality, such as expanding it beyond the context of customers as resellers. They also urge that when judges evaluate the interests of judicial economy, they “consider more than just the short-term consequences.”
Such common law doctrine evolution doesn’t happen quickly, and it won’t happen at all unless targets of PAE litigation — manufacturers and end users alike — give the courts a reason and an opportunity to act. But thanks to this first-of-its-kind scholarly article, at least there is a road map of sorts for opening a new front in the fight for reform.
Atty. Evan Granowitz is one of Wolf Group LA's finest litigators. Find more links to articles on interesting cases through this Twitter page.
Litigation by “patent-assertion entities” (PAE) was back in the news again last weekwith a jury decision from the Eastern District of Texas. The jury found that patents held by Alexsam Inc. which purportedly cover a system for processing pre-paid electronic gift cards were valid, allowing Alexsam’s infringement claims against Best Buy BBY -0.33%, Barnes & Noble NE +3.94%, Gap GPS +0.24%, Home Depot HD -0.13%, McDonald's MCD 0%, JC Penny, and other retailers to advance. Whether the actions will proceed or the retailers decide to cut their losses and settle is unclear.
Claims by patent-assertion entities rarely get to the stage at which the gift card litigation currently stands. This is especially true when patent holders target purchasers and users of technology which allegedly infringe on their rights, rather than (or in addition to) the technology’s producers. When posed with the choice of investing six-figures defending a product you didn’t even create, or paying the PAE a four- or five-figure licensing fee, most small businesses will choose the latter, no matter how weak the legal claims may be.
Online technology journal Ars Technica has shined a spotlight on some of these PAE litigation threat campaigns. Several stories (here and here) document one anonymous patent holder’s systematic targeting of small businesses and even some individuals who use scanners that can send the scanned files via e-mail. The “scanner-trolling scheme,” as Ars calls it, divides up the U.S. into six areas, and in each area, a separate shell company demands $800-$1,200 licensing fees per employee to avoid a lawsuit. Another story focuses on how a Luxembourg-based PAE is suing cash-strapped public transit systems over their use of vehicle-tracking systems. The Electronic Frontier Foundation recently stepped in to request a reexamination of this PAE’s patent. Other stories have documented the litigation crusade of Innovatio, which has sued businesses offering Wi-Fi service on their premises. One law firm even has an entire section of its website devoted to the suits.
Such targeting of end users has led to calls from leaders in business and Congress to immunize such companies and individuals from patent lawsuits. While that may sound promising to under-assault small businesses, their next thought will likely be, “how many years did it take to pass the America Invents Act?”
In the meantime, technology end users should consider the academic advice recently offered by a Santa Clara University Law School professor and a law firm partner in a forthcoming Boston University Law Review article, “Expanding Patent Law’s Customer Suit Exception.” Authors Brian Love and James Yoon encourage the federal courts to revive and modernize a doctrine “ lurking in the forgotten recesses of patent caselaw” which allows for the stay of patent suits against customers if the seller/manufacturer files a declaratory judgment action against the same patent plaintiff.
As Love and Yoon explain, the courts (primarily the Federal Circuit) have imposed severely limiting conditions on the customer suit exception, including that the customer defendants are “mere resellers” and that the manufacturer is the sole source of the infringing product. Judges also frame their analysis around the interest of judicial economy, and don’t consider the broader policy benefits of deterring future litigation and empowering the entity best positioned to question infringement: the manufacturer.
These limits undermine the doctrine’s effectiveness in this new era of patent litigation, where products are “overwhelmingly constructed (at least in part) using discrete components sourced from multiple manufacturers.” Love and Yoon recommend changes to the customer suit exception that reflect this new reality, such as expanding it beyond the context of customers as resellers. They also urge that when judges evaluate the interests of judicial economy, they “consider more than just the short-term consequences.”
Such common law doctrine evolution doesn’t happen quickly, and it won’t happen at all unless targets of PAE litigation — manufacturers and end users alike — give the courts a reason and an opportunity to act. But thanks to this first-of-its-kind scholarly article, at least there is a road map of sorts for opening a new front in the fight for reform.
Atty. Evan Granowitz is one of Wolf Group LA's finest litigators. Find more links to articles on interesting cases through this Twitter page.
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