Global Warming and Droughts Not New Information; Project Opponents Must Fairly Present Claims Before Filing CEQA Lawsuit

On May 19, 2011, the California Court of Appeal for the Fourth Appellate District upheld an Addendum to an Environmental Impact Report (“EIR Addendum”) over claims that the lead agency failed to follow statutory procedures for adopting a Water Supply Assessment (“WSA”) and that a supplemental EIR (“SEIR”) was required to analyze “new” environmental impacts related to drought and global warming.

Citizens for Responsible Equitable Environmental Development v. City of San Diego involved an Addendum to an EIR initially prepared for a 664-acre master planned community in the City of San Diego in 1994. The EIR Addendum addressed environmental impacts from the last phase of the master planned community — a 1,500-unit multi-family project (“Project”).

WSA Approval Procedure

Before the lead agency approved the Project, the City’s water department prepared a WSA, which was then approved by the City Council at the Project’s public hearing through a resolution certifying the EIR Addendum. The resolution did not specifically reference the WSA. The Citizens for Responsible Equitable Environmental Development (“CREED”) argued the California Water Code[1] required the City Council, acting as the water department’s legislative body, to approve the WSA in advance at a separate hearing because the Legislature deemed the coordination of water supply planning and land use planning too important to adopt as just an ordinary technical report supporting the EIR Addendum’s water supply analysis.

The Court of Appeal disagreed. Unlike many other jurisdictions that have a separate water agency governing board, the City’s water department is governed by the same entity (the City Council) as the lead agency; thus no separate hearing or resolution was required. The court held that requiring the same legislative body to hold two different hearings on the matter, or approve a WSA and CEQA document in different motions, would not enhance public review or local agency decision-making. Instead, it affirmed that the “purpose of CEQA is to inform government decision-makers and their constituency of the consequences of a given project, not to derail it in a sea of administrative hearings and paperwork.” (Long Beach Sav. & Loan Assn. v. Long Beach Redevelopment Agency (1986) 188 Cal. App. 3d 249, 263.)

Drought Not New Information

The City Council adopted the project despite then Governor Schwarzenegger’s drought declaration and a notice from the Department of Water Resources that it would be reducing water deliveries to the City due to the statewide drought and a separate court order to reduce water pumping from the Bay/Delta area to protect endangered Delta Smelt. CREED argued that the drought declaration and notice of reduced water deliveries occurred after the WSA was completed and therefore was the type of “new” information that required the City to process a SEIR, instead of an EIR Addendum.

The court dismissed CREED’s claim finding that CREED failed to satisfy its burden of proof to address all the information regarding available water supply, including the WSA’s references to water supply during multiple dry years. The court affirmed that it was proper for the City to rely on testimony from the City’s planning staff during the public hearings that the drought was only temporary and the City had adequate water supply to serve the project in the long term.

Global Warming Not New Information

CREED argued that the 1994 EIR contained no references to global warming and that the passage of state global warming laws, such as AB 32 and SB 97, revealed new information about the scientific link between global warming and human development activities. The court dismissed this claim because lead agencies may not require preparation of a SEIR unless “[n]ew information, which was not known and could not have been known at the time of [EIR] was certified as complete, becomes available.” (Cal. Pub. Res. Code § 21167(c).) The court found that by the time the EIR was certified in 1994, there was enough information available from various executive orders, international scientific panels, and the National Academy of Sciences demonstrating the link between global warming and human activities that an impact analysis could have been included in the 1994 EIR. Because the statute of limitations on the 1994 EIR had long since passed, CREED was time-barred from raising those issues in a legal challenge against the 2009 EIR Addendum, where public policy favors finality. The evidence that there was sufficient information about global warming in 1994 came from the City of Los Angeles’ 1990 lawsuit against the National Highway Safety Administration[2] and the U.S. Supreme Court opinion in Massachusetts v. EPA (2007) 549 U.S. 497, where the high court summarized the history of official government actions related to global warming from the 1970s to 2007.

Failure to Exhaust Administrative Remedies

During the six years the City reviewed the Project, CREED did not submit a comment opposing the Project when the Notice of Preparation was issued, the Draft EIR Addendum was circulated, community outreach hearings were held, the Planning Commission’s hearing was held or participate in the City Council hearings for the Project. Instead, hours before the City Council was scheduled to review the Project in a January 20, 2009 public hearing, CREED attempted to preserve its right to sue the Project approval in court by filing with the City Clerk’s office a two page letter with general allegations that the Project violated CEQA and referring to an attached DVD with 5,000 pages of general information about water supply, drought, global warming, and copies of previous EIRs around the state discussing water supply and global warming issues. The City Council postponed the hearing until February 17, 2009 for other reasons and only later discovered CREED had submitted the letter. During the month between the two letters, the Project’s air quality consultant provided a letter analyzing the Project’s greenhouse gas impacts.

Then, on the morning of the February 17, 2009 hearing, CREED filed a second two-page letter with an attached DVD with several thousand more general documents about global warming and droughts. CREED did not participate in the City Council’s hearing to elaborate on its comments. When the City refused to include the second DVD in the administrative record, the trial court judge denied CREED’s Motion to Augment the Record, finding that under the totality of the circumstances, CREED failed to fairly present its arguments to the City Council in a manner that the City could reasonably be expected to respond. CREED did not appeal the motion.

The CEQA statute prohibits judicial review “unless, the alleged grounds for noncompliance with [CEQA] were presented to the public agency orally or in writing by any person during the public comment period provided by this division or prior to the close of the public hearing…” (Cal. Pub. Res. Code § 21177(a).) Nevertheless, the Court of Appeals took the next step and found that CREED’s January 20, 2009 letter with 5,000 pages of exhibits was insufficient to exhaust the administrative remedies available to CREED even though it was submitted a month in advance of the City Council’s final hearing on the Project.

The court noted that “To advance the exhaustion doctrine’s purpose ‘[t]he “exact issue” must have been presented to the administrative agency….’ [Citation omitted] and “[T]he objections must be sufficiently specific so that the agency has the opportunity to evaluate and respond to them.” (Sierra Club v. City of Orange (2008) 163 Cal.App.4th, 523, 535-536.) The court held that CREED failed to satisfy the exhaustion doctrine because its letters only contain general, unelaborated objections. The letters did not contain the term “drought” or object to the content of the WSA. The letters made only general, unelaborated objections such as, “global climate change has been raised as a significant environmental issue that has been frequently analyzed in current environmental documents” and the “project will cause direct and indirect greenhouse-gas emissions that, when considered cumulatively, are significant.”

The court affirmed that “The City cannot be expected to pore through thousands of documents to find something that arguably supports CREED’s belief the project should not go forward. Additionally, CREED did not appear at either CEQA hearing to elaborate its position. It appears from CREED’s haphazard approach that its sole intent was to preserve an appeal.” The court noted that if Petitioners were not required to give specific objections so the agency has the opportunity to evaluate and respond to them, every project approval would be subject to litigation on new or expanded issues.

Significant Conclusions from the Case

The case is significant for a number of reasons.

First, for a developer or lead agency that wants to amend entitlements to respond to market changes, but is concerned that the state’s new global warming laws will automatically require an exhaustive SEIR, this case affirms that holders of post-1994 entitlements can likely amend their entitlements without an SEIR. The expedited EIR Addendum procedure is available where development project changes do not otherwise trigger new or more severe unmitigated environmental impacts compared to those disclosed in the original EIR, even where the original EIR contains no information on the project’s global warming impacts. With the passage of state and local legislation (SB 1185, AB 333, and possibly SB 208 later this year), the “life” of projects with vesting tentative maps, tentative maps, and parcel maps has been extended due to the economic downturn. There are likely more older, unfinished development projects whose build-out can be facilitated with an EIR Addendum.

Second, the opinion may improve the quality of the debate at public hearings on development projects because it discourages “stealth” legal attacks and encourages a clear discussion of the merits of a project. Project opponents who wait to the last day to submit a long list of CEQA based project objections risk losing their right to appeal on those grounds if the information is not presented in an organized manner that gives the lead agency a fair opportunity to respond. Even project opponents who submit documents a month in advance of a public hearing must be cautious to present the information in an organized manner that identifies the exact issue so the lead agency has a fair opportunity to respond to the specific issues raised. Furthermore, the risk of courts finding that a project opponent failed to exhaust remedies is likely greater where the project opponent is represented by legal counsel and fails to indentify the specific issues that are the basis for its claims. CEQA attorneys will therefore now need to identify carefully what specific evidence support their legal claims against a project.

Third, it may improve the quality of the response from lead agencies, resulting in better development projects. When specific objections to a project are made, the lead agency can better decide whether those objections have merit and either make necessary changes in the project or determine if there is other substantial evidence to rebut the claim. Where the objections do not have merit, the lead agency is assured it can rely on expert opinion from its planning staff during a public hearing.

Fourth, WSA findings that address the availability of water during multiple dry years can be used to reject claims that drought conditions trigger the need to prepare an SEIR.

Fifth, cities and counties that govern water supply departments without a separate governing board can approve a project’s WSA without conducting duplicative hearings or special approvals for the WSA. The WSA can be treated like any other technical report supporting a CEQA document.

Finally, the case affirms that CEQA petitioners who repeat the evidence in opposition to a project fail to satisfy their legal burden of proof when they do not address all the evidence in the record supporting the lead agency’s decisions. The court is not a forum to revisit debate over a project’s public policy merits, but instead is a forum to determine if the lead agency had any substantial evidence to support its findings.

Agree to Assign vs. Hereby Assign: In Stanford v. Roche, the Wording of Assignment Agreements Determines Patent Ownership

In yet another decision by the U.S. Supreme Court to impact intellectual property rights, the Court now maintains a centuries-old law that the rights to an invention belong to the inventor. In a decision issued on June 6, 2011, in Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc., the Supreme Court held the rights to inventions supported by federally funded research are not vested with the institutional recipient of those federal funds.

In 1980, Congress enacted The Bayh-Dole Act to allocate the rights to federally funded inventions between the Federal Government and the recipient of the federal funds. In Stanford v. Roche, Stanford argues that one consequence of the Bayh-Dole Act is that institutional recipients of federal funds for research are automatically vested with the ownership rights to inventions made by their employees from those funds.

The issue in Standford v. Roche begins in 1988 with a research fellow at Stanford University, Dr. Holodniy, developing an assay for quantifying HIV levels in patients using PCR. Because he was unfamiliar with the technique, Holodniy went to the company that developed PCR, Cetus. Holodniy worked at Cetus developing the assay, and then returned to Stanford where he pursued the research further. Stanford eventually obtained the assignment rights for the invention from Holodniy and acquired three patents as a result. In 1991, Roche acquired Cetus, and Roche commercialized the assay developed by Holodniy while he was at Cetus.

Importantly, Holodniy signed an agreement upon joining Stanford that stated he “agree[d] to assign [his] right, title and interest in” inventions resulting from his employment to Stanford. However, in order to initially gain access to Cetus, Holodniy signed a confidentiality agreement that stated he “will assign and do[es] hereby assign [his] right, title and interest in each of the ideas, inventions and improvements [made] as a consequence of [his] access” to Cetus. Thus, it was at issue to whom Holodniy had actually assigned his rights.

In 2005, Stanford brought suit against Roche asserting that Roche’s commercial assay infringed on the patents held by Stanford. Roche argued that they were co-owners in the patents because Holodniy had assigned his rights to Cetus when he signed the confidentiality agreement. Thus, Stanford could not sue Roche for infringement of patents they co-owned. Stanford countered that they had already acquired Holodniy’s rights under the Bayh-Dole Act because the research was federally funded. Therefore, Holodniy had no rights to assign. The District Court agreed that Holodniy had assigned his rights to Roche. However, the court agreed with Stanford that Holodniy had no valid rights to assign because of the Bayh-Dole Act. On appeal, the U.S. Court of Appeals for the Federal Circuit concluded that Holodniy’s agreement with Stanford to “agree to assign” his rights was a promise to assign his rights at some point in the future. Whereas, in his agreement with Cetus to “hereby assign” his rights,he actively assigned them away right then and there. Furthermore, the Federal Circuit found Agree to Assign vs. Hereby Assign: I that under the Bayh-Dole Act, an inventor’s rights are not automatically relinquished to his employer when the invention is federally funded. Therefore, Roche was part owner of the patents in question, and Stanford lacked standing to file suit.

In a 7-2 decision, the Supreme Court agreed with the Federal Circuit that the Bayh-Dole Act did not supersede centuries of patent law and automatically assign an inventor’s ownership rights to his employer as a consequence of using federal funds. The Court found that the Bayh-Dole Act only confers to recipients of federal funding the right to retain that which they already have the rights to hold, and that the Act’s main purpose is to prevent a “Government-imposed impediment to retaining title” to federally funded inventions. Consequently, because Stanford never received Holodniy’s rights due to the wording of his employment agreement, they could not retain that which they never had the right to hold. Put another way, under Bayh-Dole, Stanford could not re-obtain that which Holodniy had already given away. The dissent stated that under the majority’s opinion, inventors working from federal funds could assign their rights to a third-party who never was a recipient of the federal money. Thus, circumventing the purpose of the Bayh-Dole Act. Furthermore, the dissent contended that since the parties had not fully argued the assignment question, the case should be remanded back to the Federal Circuit.

The decision in Stanford v. Roche will certainly have an impact in the area of technology transfer. Employers generally have policies to insure that the inventions of their employees will be assigned to the employer. However, if employers want to better protect themselves as eventual owners of the inventions of their employees, it will be necessary to draft better employment agreements that assign patent ownership rights in an active manner at the start of employment. The use of the phrase “agree to assign” will likely not protect an employer against an employee’s inadvertent assignment of their invention rights to another party.

Supreme Court: Bayh-Dole Act Does Not Eclipse Inventor’s Rights

On June 6, 2011, the United States Supreme Court ruled that the Small Business Patent Procedures Act of 1980 (a/k/a the Bayh-Dole Act)1 does not displace the centuries-old maxim that “rights in an invention belong to the inventor.” Board of Trustees of the Leland Stanford Junior Univ. v. Roche Molecular Sys(opens in a new window)., 563 U.S. —, 2011 WL 2175210, at *4 (June 6, 2011). “Although much in intellectual property law has changed in the 220 years since the first Patent Act, the basic idea that inventors have the right to patent their inventions has not.” Id. at *6. “[U]nless there is an agreement to the contrary, an employer does not have rights to an invention which is the original conception of the employee alone.” Id. at *7. This rings true even when the Federal Government is footing the bill.

In 1985, scientists at Cetus Corp. developed a revolutionary method that allows billions of copies of DNA sequences to be made from a small initial blood sample. This technique became known as the polymerase chain reaction or PCR. In 1988, Dr. Mark Holodniy, a professor at Stanford University, sought to work with Cetus to use the PCR method in an effort to develop a method for quantifying HIV levels in patient blood samples. As a condition of accessing Cetus’ facilities and methodology, Holodniy signed a Visitor’s Confidentiality Agreement (“VCA”), which stated that Holodniy “will assign and do[es] hereby assign” to Cetus his “right, title and interest in each of the ideas, inventions and improvements” made “as a consequence of [his] access” to Cetus.

Upon returning to Stanford, Holodniy disclosed his new method of quantifying HIV to Stanford and Stanford filed a series of patent applications. In 1991, Roche Molecular Systems acquired Cetus’s PCR-related assets, including the rights Cetus obtained through the VCA signed by Holdoniy. Roche subsequently developed and commercialized the procedure. Standford then filed suit against Roche contending that Roche’s HIV test kits infringed Stanford’s patents. In response, Roche claimed that it was a co-owner of Holdoniy’s inventions based on Holdoniy’s assignment of rights in the VCA, while Stanford argued that it had superior rights to Holodniy’s inventions under the Bayh-Dole Act. The District Court agreed with Stanford, finding that although “the VCA effectively assigned any rights that Holodniy had in the patented invention to Cetus, . . . Holodniy had no interest to assign” because of the operation of the Bayh-Dole Act. Id. at *5 (internal quotation marks and citation omitted). The Court of Appeals for the Federal Circuit, however, disagreed. The court determined (1) that the Bayh-Dole Act “does not automatically void ab initio the inventors’ rights in the government-funded inventions and (2) that Holodniy’s assignment to Roche, with the “hereby assigns” language, trumped the one he made earlier to Stanford’s because Stanford’s assignment stated that Holodniy “agree[d] to assign” to Stanford his “right, title and interest in” inventions resulting from his employment at Stanford. Id. at *1, *6 (internal quotation marks and citation omitted). Stanford appealed, arguing that the Bayh-Dole Act gave Stanford superior rights.

In affirming the Federal Circuit, Chief Justice Roberts concluded that “[t]he Bayh-Dole Act does not confer title to federally funded inventions on contractors or authorize contractors to unilaterally take title to those inventions; it simply assures contractors that they may keep title to whatever it is they already have.” Id. at *9. That is, the Act “serves to clarify the order of priority of rights between the Federal Government and a federal contractor in a federally funded invention that already belongs to the contractor. Nothing more.” Id. Simply put, absent an express written agreement to the contrary, an inventor’s rights to an invention reign supreme over an employer’s interest, even when the invention is financed by the Federal Government.2

This holding poses particular challenges for universities and other educational institutions, which often receive federal funding leading to patentable inventions. Such institutions cannot assume that ownership rights are certain by virtue of receiving federal funding. Thus, these institutions must “enter into agreements with their employees requiring the assignment to the university of rights in inventions” to ensure their ownership stake. Id. at *11.

In addition, the Supreme Court’s decision exposes a vulnerability in the Bayh-Dole Act that enables organizations to avoid the Act’s “marching orders” by ensuring that federally funded inventions remain assigned to their individual inventors. Indeed, as Justice Roberts makes clear, inventions only fall within the scope of the Bayh-Dole Act if federally funded and effectively assigned to the contracting organization. It is now up to Congress to patch this loophole by amending the Act to expressly vest title in federally funded inventions in the contracting organizations.

For now, however, this decision acts as a guidepost and warning to all employers to ensure that those involved in the inventive process have signed written agreements specifying employer rights with respect to each invention. Moreover, it underscores the importance of a company meticulously requesting visitors to execute confidentiality agreements in which the visitor assigns all rights, title and interest to inventions made as a result of the access provided by the company. Without such agreements, organizations risk being able to ensure their own rights, which in turn threatens their future ability to license or transfer their rights to third parties. Accordingly, all organizations (but especially federal contractors) should undertake the following protective measures:

  1. Inventory all inventions arising out of past and present research and development projects;
  2. Identify all employees and independent contactors involved in inventive processes relating such inventions;
  3. Ensure that all employees and independent contractors involved in the inventive processes have signed written agreements specifying the employer’s rights to any related inventions; and
  4. Keep track of all confidentiality agreements executed by employees seeking to gain access to third party facilities.

This list may also prove beneficial when conducting due diligence of an acquisition target, a potential licensing deal, or technology transfer opportunity.

Supreme Court decides Stanford v. Roche – Clarifies Scope of Bayh-Dole Act

On June 6, 2011, the Supreme Court rejected Stanford’s arguments that provisions of the Bayh-Dole Act created university ownership rights to inventions made by university employees with federal funding. In effect, the Court held that an assignment in hand is worth (more than) two rights to elect under the Act. Stanford was trying to read the provisions of the Act that give universities the right to elect to retain title to inventions made with government funding to, in fact, vest title in the universities at the time the invention was made; essentially Stanford wanted the Court to read “retain” to mean “acquire or receive.” The Court rejected this interpretation, finding that “You cannot retain something unless you already have it” and, without an assignment from the inventor in hand, Stanford had nothing to retain. Any language in the Act relating to its superiority over other acts disposing of rights, the Court held, does not displace the basic principle that, in the first instance, an inventor owns the rights to his/her invention.

The Court felt that this disposition of rights was only fair since, otherwise, a university could assert rights to inventions conceived prior to the inventor’s employment, so long as reduction of practice used any amount of federal funding while the inventor was an employee. Also, a very small amount of federal funding, combined with funding from other sources, would permit the university to claim title to the entirety of the invention.

Universities and other non-profit research institutions must now be more careful than “usual” to obtain early assignments from their researcher-employees. In the past, many universities operated with “patent policies” requiring employees to assign inventions made with “university support”— e.g., on campus — to the university, but did not uniformly require employees to sign the policies before beginning employment, much less to sign blanket assignments of future inventions, like the one Roche/Cetus had in place for visitors/consultants. Rather, the university would wait until the filing of a patent application to obtain an assignment. Even with such early-assignment policies, it was not uncommon for prospective professor-hires to contract out of such policies, so that inventions conceived prior to their taking new positions would not be owned by their new employers. A lot of inventions were conceived while the professors were traveling from one university to another. Recently, I have been seeing invention disclosure forms that contain built-in assignments, so that when a professor submits the form to the tech transfer office, he/she is simultaneously assigning it. This is good practice IF the professor still has rights to assign.

 The decision can be found here

Even Under Bayh-Dole, Employee Inventor Has First Dibs

The Supreme Court of the United States recently delivered a blow to the university technology transfer world by holding 7-2 that federal contractors do not have an automatic right to claim title to inventions.  Because all ownership rights stem initially from the inventor, even in the case of federally funded research, the inventor’s ownership rights trump the Bayh-Dole vesting provision.

In its second affirmance of a U.S. Court of Appeals for the Federal Circuit decision in the span of two weeks, the Supreme Court of the United States, in a blow to the university technology transfer world, held (7-2) that federal contractors do not have an automatic right to claim title to inventions.  The statutory rights of the inventor, even in the case of federally funded research, trump the Bayh-Dole vesting provision.  Stanford Junior University v. Roche Molecular Systems, Case No. 09-1159, 563 U.S. ____ (June 6, 2011) (Roberts, Chief Justice) (Sotomayor, Justice, concurring) (Breyer, Justice, dissenting).

The Bayh-Dole Act dates back to 1980 and is largely responsible for the vast increase in university licensing of the fruits of federally funded research.  In the present case, the issue is raised as to whether the patent rights ownership provision of Bayh-Dole immediately vests ownership in a federally funded invention in the contractor, in this case Stanford University (See Cert Alert; IP Update, Vol. 13, No. 11).  On June 6, the Supreme Court answered it does not.  While Bayh-Dole clarifies the priority of allocation of rights as between the government and the contractor—all ownership rights stem initially from the inventor.

Background

Stanford sued Roche for infringement of three patents that claim methods for using the polymerase chain reaction (PCR) to measure the amount of HIV in blood samples and using those measurements to infer the effectiveness of antiretroviral drugs.

The standing question arose because Mark Holodniy, one of the named inventors of the patents, “signed multiple contracts defining his obligations to assign his invention rights.”   First, upon joining Stanford, Holodniy signed a Copyright and Patent Agreement (CPA) in which he agreed “to assign or confirm in writing to Stanford and/or Sponsors that right, title and interest in” any inventions he conceived of or first reduced to practice.  At the behest of Stanford, however, Holodniy also visited Cetus Corp., a company collaborating with Stanford, to acquire background knowledge about PCR technology.  In doing so, Holodniy signed a Visitor’s Confidentiality Agreement (VCA) with Cetus, which stated: “I will assign and do hereby assign to CETUS, my right, title, and interest in each of the ideas, inventions and improvements” (emphasis added).

In 1991 Roche purchased Cetus’s PCR business, including its agreements with Stanford and its researchers, and began making HIV detection kits.  In 1992 Stanford filed the patent application to which the three patents-in-suit claim priority.  After extensive negotiations between the two entities, Stanford filed suit against Roche in 2005.  In its defense, Roche alleged, inter alia, that it possessed ownership rights in the patents-at-issue and, as a result, Stanford lacked standing.  In response, Stanford argued that it was a bona fide purchaser and that the Bayh-Dole Act superseded any transfer of rights from Holodniy to Cetus.

The Federal Circuit Decision

The Federal Circuit found that Stanford did not possess standing to sue for infringement of the patents-in-suit because the CPA between Stanford and Holodniy was merely a promise to assign, while the VCA was a present transfer of Holodniy’s future inventions to Cetus.  (IP Update, Vol. 12, No. 10).  Thus, according to the Federal Circuit, “Cetus immediately gained equitable title to Holodniy’s inventions” and any subsequent assignment to Stanford was negated.  The Federal Circuit also dismissed Stanford’s claim that it was a bona fide purchaser.  Because “[a]n organization can be charged with notice of its employees’ assignments” the court found that “Stanford had at least constructive or inquiry notice of the VCA.”  Therefore, Stanford did not qualify as a bona fide purchaser.  Finally, the Federal Circuit rejected Stanford’s argument that “the Bayh-Dole Act negated Holodniy’s assignment to Cetus because it empowered Stanford to take complete title to the inventions.”  Rather, the Federal Circuit concluded that while Bayh-Dole empowers the government to take title to certain inventions under specified circumstances, it neither “automatically void[s] ab initio the inventors’ rights in government-funded inventions” nor “voids prior contractual transfers of rights.”  Similarly, “claiming title under Bayh-Dole does not override prior assignments.”

The Supreme Court

In affirming the Federal Circuit, Chief Justice Robert, writing for the majority, explained that since its genesis, U.S. patent laws have “operated on the premise that rights in an invention belong to the inventor” and that Bayh-Dole does not “displace” that norm and “automatically” vest title to federally funded inventions in federal contractors.

Specifically, the Supreme Court rebuffed the argument posed by Stanford (and supported by the United States as amicus curiae) that Bayh-Dole reorders the normal priority of rights in an invention conceived or first reduced to practice in the course of federally funded research by vesting title in such inventions to the federal contractor, i.e., the inventor’s employer.  As concluded by the Supreme Court, “nowhere in the Act are inventors deprived of their interest in federally funded inventions.  Instead the Act only provides that contractors may elect to retain title to any subjection invention” (emphasis added).

According to the provision of Bayh-Dole, granting a right to “elect” confirms that the act does not vest title.  Rather, as explained by Chief Justice Roberts, at the time of conception, rights to an invention lie with the inventor.

Although much in intellectual property law has changed in the 220 years since the first Patent Act, the basic idea that inventors have the right to patent their inventions has not.  Our precedents confirm the general rule that rights in an invention belong to the inventor.  It is equally well established that an inventor can assign his rights in an invention to a third party.  Thus, although others may acquire an interest in an invention, any such interest – as a general rule – must trace back to the inventor.

In accordance with these principles, we have recognized that unless there is an agreement to the contrary, an employer does not have rights in an invention ‘which is the original conception of the employee alone.’  Such an invention ‘remains the property of him who conceived it.’  In most circumstances, an inventor must expressly grant his rights in an invention to his employer if the employer is to obtain those rights.

Dissent and Concurrence

Justice Breyer, joined by Justice Ginsburg, dissented.  Quoting the order granting cert, Justice Breyer noted “the question presented is whether rights in inventions arising from federally funded research can be terminated unilaterally by an individual inventor through a separate agreement purporting to assign the inventor’s rights to a third party.”

In the view of the dissent, “the answer to this question is likely no.  But because that answer turns on matters that have not been fully briefed (and are not resolved by the opinion of the Court) [Justice Breyer] would return this case to the Federal Circuit for further argument.”

The dissent explained that Congress enacted Bayh-Dole “against a background norm that often, but not always, denies individual inventors patent rights growing out of research for which the public has already paid.  This legal norm reflects the fact that patents themselves have both benefits and costs.”  Citing back to the letters of founding fathers Jefferson and Madison to the effect that patent monopoly was a “compensation” for the “community benefit” that a patent bestowed, Justice Breyer explained “the importance of assuring this community ‘benefit’ is reflected in legal rules that may deny or limit the award of patent rights where the public has already paid to produce an invention, lest the public bear the potential costs of patent protection where there is no offsetting need for such protection to elicit that invention.  Why should the public have to pay twice for the same invention?”

Justice Sotomayor agreed with the majority because Stanford didn’t raise the issues raised in the dissent, but noted her understanding that “the majority opinion [would] permit consideration of these arguments in a future case.”

Patent Owner Stay Motion Successful Based on Defendants’ Reexam Requests Filed on Eve of Markman

In Fifth Market, Inc. v. CME Group Inc, et al., (1-08-cv-00520, D. Del), the Patent Owner/Plaintiff (Fifth Market, Inc.) sued multiple Defendants on two patents (U.S. Pat. No. 6,418,419 and U.S. Pat. No. 7,024,387) in 2008.  Three amended complaints were subsequently filed, the last one on January 10, 2011.  The Defendants answered on February 7, 2011, asserting affirmative defenses and counterclaims to the thir amended complaint.  A Markman hearing was held on April 5, 2011 and on April 21, Patent Owner/Plaintiff filed a motion to stay pending reexaminations.  According to the Court’s order, the timing of events was this:

  • March 28 – Defendants’ counsel, Banner & Witcoff, files an ex parte reexamination request of the ’419 patent
  • April 1 – Defendants’ counsel, Brinks Hofer Gibson & Lione, files an ex parte reexamination request of the ’419 patent
  • April  4 – Plaintiff discloses that Defendant provided it a copy of a request for ex parte reexamination of the ’419 patent filed on April 1, 2011 by Defendants’ counsel Brinks Hofer Gibson & Lione; Plaintiff also discloses that it received a copy of a draft request for ex parte reexamination of the ’387 patent (and that Defendants informed Plaintiff that it would be filed by Defendants).
  • April 5 – Markman Hearing
  • April 15 – Plaintiff received a copy of the second ex parte reexamination request for the ’419 patent from Defendants’ counsel, Banner & Witcoff, that had been filed on March 28, 2011.
  • April 21 – Motion to Stay by Patent Owner/Plaintiff

The motion to stay was opposed by the Defendants; however, the motion was ultimately granted by Chief District Judge Sleet after the traditional three factor test was applied (state of discovery, whether a stay will simplify issues, and prejudice to nonmoving party).  The Order for the stay stated:

The court understands the plaintiff’s concern about the defendants’ timing and tactics.  The facts and procedural history of this case are interesting.

In particular, the Court found:

  • prior to the Markman hearing, Defendants had already filed two separate requests for reexamination of the ’419 patent and were “contemplating filing” a reexamination request of the ’387 patent;
  • no persuasive evidence of undue prejudice or clear tactical disadvantage to Defendants;
  • that the stay would simplify the issues in the case;
  • that both patents-in-suit may be before the Patent Office, and that numerous prior art challenges in the requests will simplify issues for the court for any claims that survive and streamline the litigation;
  • that although the trial date of March 26, 2012 was indeed set, discovery is not yet complete; and
  • that Plaintiff timely filed its motion within weeks of learning about the reexamination requests.

What is not clear from the record is why the reexamination request of March 28 was not known or served on Plaintiff sooner than April 15.  And the record shows that the reexamination request filed on April 1 was actually filed electronically on April 2, and was accorded an April 29 filing date due to a defect in the filing.  Regardless, this case shows yet another example of the fact-dependent analysis involved in decisions to stay litigation pending reexamination.

KINDER Not Confusingly Similar to TiMi KINDERJOGHURT

The Court of Justice of the European Union (CJEU) has upheld a decision of the EU General Court rejecting an invalidity action brought by the owner of trademarks for KINDER against a Community Trademark incorporating the words TiMi KINDERJOGHURT.   Ferrero SpA v. Office of Harmonisation in the Internal Market, Tirol Milch reg.Gen.mbH, Innsbruck, Case C-552/09 (CJEU, March 24, 2011).

In 1998, Tirol Milch filed a figurative Community Trademark application for a sign incorporating the words TiMi KINDERJOGHURT covering yoghurt and related goods in class 29.  Ferrero, which owns marks incorporating KINDER for a range of confectionary products, opposed the application. Ferrero’s opposition failed on the grounds that the parties’ marks were insufficiently similar.

After Tirol Milch registered TiMi KINDERJOGHURT, Ferrero brought cancellation proceedings against the mark before the Cancellation Division of the Office for Harmonisation in the Internal Market.  Ferrero succeeded in its cancellation proceeding, but the Board of Appeal overturned the decision.  Ferrero appealed to the EU General Court, arguing that the similarity of the marks and goods gave rise to a likelihood of confusion and infringement under Art 8(1)(b) of the CTM Regulation (40/94/EEC, now replaced by 2009/207/EC).  Ferrero also argued that its KINDER mark was a well-known mark, and thus the registration of TiMi KINDERJOGHURT took unfair advantage of, or damaged, its reputation or distinctive character without due cause under Article 8(5).

The EU General Court held that notwithstanding the fact that the word “KINDER” was present in both parties’ signs, a number of visual and phonetic differences existed that precluded the signs from being perceived as similar.  The Court held that that even if the reputation of Ferrero’s earlier marks and the similarity of the parties’ goods could be considered in assessing the likelihood of confusion, it did not affect the assessment of the similarity of the signs.  Ferrero appealed to the CJEU.

The CJEU rejected Ferrero’s appeal, holding that the existence of a similarity between the earlier mark and the challenged mark was a precondition for the application of both Article 8(1)(b) and Article 8(5).   The court explained that likelihood of confusion must be assessed globally, taking into account all of the relevant factors, which included not only the similarity between the conflicting marks but also the strength of the earlier mark’s reputation.   However, the reputation and distinctive character of the marks were not relevant for purposes of assessing whether the marks at issue were similar, but whether the relevant section of the public makes a link between the marks.

Although the global assessment of the existence of a link between the earlier mark and challenged mark under Art 8(5) implied some interdependence between the relevant factors, such that a low degree of similarity between the marks could be offset by the strong distinctiveness of the earlier mark, the court determined that the reputation of the KINDER mark and the fact that the parties’ goods were identical or similar was not sufficient to establish a likelihood of confusion between the marks or that the public would make a link between them.  In order for Article 8(1)(b) or Article 8(5) to apply, the court held that the marks must be identical or similar.  Accordingly, those provisions did not apply because the court had ruled that the marks were not similar.

Further, the court acknowledged that it was settled case law that the existence of a “family” of marks was a relevant element to consider in assessing likelihood of confusion.   However, that element was irrelevant for assessing similarity between the parties’ marks, the court explained, and only became relevant once similarity between the marks had been found.   Consequently, the CJEU held that the General Court did not err in its holding that the parties’ marks are not similar based upon the existence of several visual and phonetic differences.

The moral of the story? No amount of fame and reputation can make two marks similar when they are not.

KUBA KUBA Held to be Geographically Deceptively Misdescriptive for Cigars

The determination of whether a mark is geographically misdescriptive involves only the “primary significance” of the mark when viewed in connection with the goods applied for, not any potential alternative meanings of the mark, even if those alternative meanings are non-geographic. This holding, along with the rejection of a heightened materiality standard, was the result of the Trademark Trial and Appeal Board (TTAB)’s opinion in In re Jonathan Drew Inc d/b/a Drew Estate (Serial No 77099522, January 28 2011), which found the mark KUBA KUBA to be primarily geographically deceptively misdescriptive when used in connection with cigars.

The TTAB began by stating the Federal Circuit’s test for finding a mark to be primarily geographically deceptively misdescriptive under Section 2(e)(3) of the Lanham Act:

  • whether the mark’s primary significance is a generally known geographic location;
  • whether consumers would likely believe (falsely) that the goods originate from that place; and
  • whether the misrepresentation is a material factor in the consumers’ decision.

The applicant’s primary argument was that, due to the mark’s numerous other meanings and its spelling differences from ‘Cuba’, consumers would not identify the mark with the country Cuba. The TTAB, however, rejected each of those arguments. First, it noted that ‘Kuba’ is a mere one letter misspelling of ‘Cuba’, and that misspellings are considered the equivalent of the official name for the purposes of determining the primary meaning of a mark. The two words were not only similar in both appearance and pronunciation, but there was “nothing fanciful or unusual” about substituting a ‘K’ for a ‘C’ in English. Additionally, according to TTAB precedent, the repetition of the word ‘Kuba’ did not distract from the meaning of the word by itself.

Second, the TTAB rejected the argument that consumers would associate the mark with alternative meanings for ‘Kuba’, in particular the applicant’s argument that it would be associated with the ‘Kuba Kingdom‘ of 16th-century Africa. Using Wikipedia as a source, the TTAB found that the African kingdom was not only obscure, but known primarily for textiles, masks and other regalia – not cigars. Without disputing that it was an alternative meaning, the TTAB said that it was not relevant to the analysis because the mark’s primary meaning must be considered “in relation to the goods with which the mark is (or will be) used and from the perspective of the relevant purchasers”. The TTAB found that ‘Kuba Kingdom’, as well as the other alternative meanings suggested by the applicant (including little-known locations around Europe and acronyms from South Korea), would be “obscure to most consumers”, while ‘Cuba’ was well known to consumers of cigars. Therefore, the TTAB found that the primary meaning of the mark KUBA KUBA was a reference to the country Cuba.

Although the applicant’s goods did not originate from Cuba, the TTAB found that, because Cuba is famous for cigars, consumers would likely believe that the goods came from Cuba. It rejected the applicant’s argument that consumers would not believe that the goods came from Cuba due to the embargo on Cuba by the US government, as the applicant had no evidence beyond its legal briefs that the embargo would “have any effect on the perception” of the mark.

Finally, to establish the third and final element of the test, there must be an indication that “a substantial portion of the relevant consumers” will be “materially influenced” by the geographic meaning of the mark. The TTAB found that cigars are an important product of Cuba, and that Cuba is known for high-quality tobacco and cigars. Therefore, the TTAB held that at least a substantial portion of consumers would be influenced by the geographic deception into purchasing the goods. The TTAB rejected the applicant’s argument that recent Federal Circuit cases required a higher showing of deceptiveness, and that a mere inference is not enough to establish deceptiveness. According to the TTAB, the case that argument was based on, In re California Innovations Inc (329 F3d 1334 (Fed Cir 2003)), involved a mark without a strong goods/place association. Because in this case there was “a strong or heighted goods/place association”, an inference of deception was sufficient to support a finding of materiality.

Therefore, the examiner’s refusal to register KUBA KUBA on the grounds that the mark was primarily geographically deceptively misdescriptive was affirmed.

Gedeon Richter plc v Bayer Schering Pharma AG: “Obvious to Try” and “Fair Expectation of Success”

In  Gedeon Richter plc v Bayer Schering Pharma AG [2011]  EWHC 583 (Pat), Gedeon Richter plc applied to have  two  divisional patents belonging to Bayer Schering Pharma AG  revoked for invalidity (the ‘301 and ‘069 patents).  One of the  grounds of invalidity was that the patents were obvious in  respect of four items of prior art.

The patents were for the combination of two steroidal  hormones, ethinylestradiol (EE) and drospirenone (DSP), both  of which regulate the female menstrual cycle and are used as a  contraceptive.  Both patents under examination were aimed at  finding an effective and safe formulation of the hormones in  the development of an oral contraceptive pill.  They were  directed towards a skilled formulation team working specifically in the area of the development of oral contraceptives.

Both sides in this case were agreed that there was  nothing  inventive  per se in embarking on in vitro pre-formulation  testing to determine the physico-chemical characteristics of the  ingredients concerned. Such tests would be performed in  ignorance of the results of the testing and in ignorance of  whether any particular formulation strategy would have a fair  expectation of success. But they would nevertheless be an  obvious thing to do. They were said to be obvious because the  evidence showed that the skilled person would do them  anyway, as part of his routine work. The question was,  however, how would the skilled person proceed after having  undertaken such obvious tests?  This question would, Floyd J  said, involve more in the way of a value judgment.  Further, he  said, the mere fact that such further steps could be characterised  as being performed in order to make an informed decision did  not prevent those steps necessarily from contributing to a  finding of inventiveness.

Floyd J summarised the case law on obviousness and  looked  also at the “obvious to try” test.

“Where, therefore, the evidence reveals that to arrive at the  invention, the skilled person has to embark on an experiment or  series of experiments where there was no fair expectation of  success, the conclusion will generally be that the invention was  not obvious.  Mr Thorley submitted that one had to distinguish  between experiments which were conducted in order to make  an informed decision as to what to do, and experiments which  are conducted only because it is believed that they will produce  the desired end result.  The former type could be obvious  experiments to do, notwithstanding that they were performed  without any prior knowledge of the result, or whether the result  would predict a successful outcome of the whole project.  There  was an independent motive for driving the project forward,  namely to find out whether a solution to the problem was  possible.” 

Further, in Floyd J’s view, there was no general rule:  the  guiding principle must be that one has to look at each putative  step that the skilled person is required to take and decide  whether it is obvious.  Even then, he said, one has to step back  and ask an overall question as to whether the step  by step  analysis, performed after the event, may not in fact prove to be  unrealistic or driven by hindsight.

The expert witnesses differed in their analysis of what steps the  skilled person would take after having undertaken the in vitro  tests to determine the rate of dissolution in an acidic  environment.  The expert witness for the Defendant said that he  would take the results of dissolution to mean that  an enteric  coat (a layer added to oral medications to allow the active  ingredient to pass through the stomach and be absorbed in the  intestine) needed to be adopted and that he would not take an  immediate release formulation (i.e., an uncoated ingredient)  into animal trials.  The expert witness for the Claimant said,  however, that he thought it would be prudent to proceed to an  animal model to assess the relative merits of both an uncoated  and a coated formulation.

Floyd J was not able to conclude that it would be routine to do  animal tests on an uncoated formulation.  It would, he said, be a  matter for the skilled judgment of the formulator.  Therefore, it  was not, in Floyd J’s view, obvious on the basis of the  information acquired by in vitro testing.  Further, it would not  be a step that the skilled person would be able to take with the  necessary “fair expectation of success”.  The skilled formulator 2  would have well in mind, he said, that success in this field  included near certainty of efficacy in all patients.  The  difficulties likely to be encountered if the drug were allowed to  pass unprotected into and through the stomach would not,  therefore, be productive of confidence.

However, while claim 1 of the ‘301 patent and claim 6 of the  ‘069 patents were not found to be obvious, Floyd J  found that  the two claims that set out the steps taken to improve the rate of  dissolution by surface coating inert particles with DSP or by  spraying were obvious.  Floyd J found that it would be obvious  to a skilled person to surface coat inert particles in order to  achieve a better dissolution rate.  As for spraying, this was  found to be part of the common general knowledge for  achieving rapid dissolution of a poorly soluble ingredient.   Therefore, these claims were both found to lack inventive step.

Federal Circuit Invalidates Claims to Fully Human Antibodies for Lack of Written Description When Specification Is Limited To Murine and Chimeric Antibodies

On February 23, 2011, the Federal Circuit held invalid for lack of written description a patent owned by Johnson & Johnson’s subsidiary Centocor Ortho Biotech in an appeal from a judgment that Abbott’s product Humira (adalimumab), a fully human monoclonal antibody specific to tumor necrosis factor used to treat rheumatoid arthritis and some other autoimmune diseases, infringed the patent.

Centocor’s U.S. Patent 7,070,775 was originally based on the discovery of murine and chimeric antibodies to TNF-α. The chimeric antibody was comprised of a murine variable region and human constant region, which made it less immunogenic than the murine antibody. However, because it still contained a murine variable region, it was more likely to elicit an immune response than a fully human antibody. Some eight years after the priority date, Centocor submitted claims to a fully human antibody. An illustrative claim, rewritten in independent form and shortened for clarity, was:

An isolated recombinant anti-TNF-α antibody comprising a human constant region and human variable region, wherein said antibody (i) competitively inhibits binding of A2 to human TNF-α, and (ii) binds to a neutralizing epitope of human TNF-α in vivo with an affinity of at least 1x 108 liter/mole.

After a 5-day trial in the Eastern District of Texas, the jury found Abbott willfully infringed, rejected its argument that the asserted claims were invalid, and awarded Centocor over $1.67 billion in damages. The district court denied Abbott’s motion for judgment as a matter of law, and Abbott appealed.

The Federal Circuit reversed, holding the claims invalid for lack of written description under 35 U.S.C. § 112.

The specification of the ’775 patent detailed the characteristics of the chimeric antibody, including its ability to bind TNF-α with high affinity, neutralizing activity, and A2 specificity. It also identified the sequence of TNF-α and contained examples of making and using chimeric antibodies to TNF-α. The specification provided the amino acid sequence of a murine variable region of an antibody that had the desired characteristics of high affinity, neutralizing activity, and specificity, but did not illustrate making fully human antibodies with these characteristics.

The Federal Circuit found the specification’s failure to illustrate a fully human antibody with the desired characteristics rendered the asserted claims a mere wish-list of properties that a fully human anti-TNF-α antibody should have, i.e., high affinity, neutralizing activity, and A2 specificity.

The opinion recognized that the written-description requirement does not in all cases demand working examples or an actual reduction to practice for a patent’s description to be found sufficient under 35 U.S.C. § 112. Responding to Centocor’s argument, the court acknowledged that Noelle v. Lederman, 355 F.3d 1343 (Fed. Cir. 2004), taught that disclosure of a well-characterized antigen would sometimes be sufficient to describe claims to antibodies to that antigen. However, it clarified that the adequacy of the description in such cases was premised on discovery of a new antigen to which antibodies were raised using routine methods. In the case at bar, by contrast, the antigen (TNF-α) was in the prior art and the claimed “invention” was a class of antibodies with desirable therapeutic properties that the applicants had never made.

The opinion also discussed the PTO’s Written Description Guidelines example in which the full characterization of an antigen was said to support claims to isolated antibodies capable of binding to that antigen, even without working examples of such antibodies. As with its discussion of the Noelle case, the court explained that this example assumed that the specification described a new antigen and that the production of antibodies to that antigen was routine. By contrast, the production of fully human antibodies was assuredly not routine as of the priority date of the ’775 patent, rendering the example in Guidelines of no help to Centocor.

The court’s distinction of Noelle and the Written Description Guidelines illustrates an often unstated interplay between written description and obviousness. Here, for example, the known role of TNF-α in certain autoimmune diseases and the known desirability of blocking TNF-α with a therapeutically acceptable monoclonal antibody would render obvious the idea of a fully human monoclonal antibody with high and specific affinity for TNF-α that binds in a neutralizing manner. But claiming that desired result in a patent is not the same as doing the work. Stated differently, claiming the solution to a recognized problem without having made a real contribution toward actually realizing that solution—which in this case was the hard work of actually making the fully human antibodies—is not the type of activity the patent laws are intended to promote and protect.

The court also noted that Centocor had not itself made fully human antibodies to TNF-α and instead waited until after they had been made by Abbott before adding the asserted claims to a pending application. It did not rely on this fact for its holding that the claims were invalid for lack of written description, but the relative timing of the amendment and the creation of the accused infringing product—coupled with the applicants’ failure to themselves make the desired antibodies—did not make out a factually appealing case for Centocor.

No Standing if Plaintiff’s Exclusive Rights Were Limited in Time

Evaluating ownership of a sound recording under both the Indian Copyright Act and U.S. Copyright Act, the U.S. Court of Appeals for the Eleventh Circuit upheld a district court’s grant of summary judgment to defendants in a copyright infringement action, finding that the plaintiff lacked standing to sue because the underlying agreement granted exclusive rights that were limited in time.   Saregama v. Timbaland, et al.   Case No. 10-10626 (11th Cir., March 25, 2011) (Marcus, J.)

Saregama asserted that hip hop producer Timbaland and other defendants infringed its sound recording copyright by digitally sampling a portion of the Indian song “Baghor Mein Bahar Hai” in the song “Put You on the Game.”   Saregama claimed ownership of the copyright in the sound recording through an agreement between Saregama’s predecessor and another company, which was governed by Indian law.   The agreement provided the plaintiff with exclusive rights in certain sound recordings for a two-year period.   The district court granted the defendants’ motion for summary judgment, holding that Saregama did not possess a valid copyright, as the agreement limited the plaintiffs’ exclusive rights to the sound recording to a two-year period.  Second, the district court determined that the defendants’ digital sample was not substantially similar to the plaintiff’s asserted work.

On appeal, the 11th Circuit affirmed the grant of summary judgment to defendants.   The 11th Circuit held that Saregama possessed only a two-year right to the sound recording, which had since lapsed, such that the plaintiff did not own a copyright as to possess the standing required to institute an infringement lawsuit.

Because the underlying work originated in India, the court first looked to the Indian Copyright Act to analyze the ownership issue.   Comparing the Indian Copyright Act with the U.S. Copyright Act, the court ultimately concluded that the result would be the same under either law.   While the agreement conveyed Saregama an exclusive right to certain sound recordings, that right was limited to two years. After those two years, the other company had the unambiguous right to allow third parties to record the song, although the plaintiff retained non-exclusive rights to the song.  Because the exclusive right granted to Saregama in the agreement became non-exclusive, the court explained that the plaintiff, at most, possessed a two-year exclusive license.  As such, Saregama did not possess the requisite exclusive rights to confer standing.

Football Dataco Ltd v Sportradar GmbH: Copyright and Database Right Infringement and Jurisdiction

Allowing Sportradar’s appeal in part, the Court of  Appeal of  England and Wales has ruled that Dataco’s copyright claim in  relation to a database of football statistics failed because what  was allegedly copied was “mere data”, not the database itself.   Lord Justice Jacob, however, dismissed Sportradar’s appeal on  jurisdiction over database right infringement claims insofar as  they were based on allegations that Sportradar were joint  tortfeasors with its UK customers.  Further and most  significantly, on the question of primary infringement by  Sportradar of Dataco’s database rights, Jacob LJ has decided to  refer the reutilisation issue to the Court of Justice of the  European Union (CJEU).

BACKGROUND 

Dataco creates and exploits data relating to football matches in  the English and Scottish leagues.  Sportradar provides live  scores, results and other statistics relating to football and other  sports, including UK football matches, to the public  via the  internet.  A number of Sportradar’s customers provide betting  services for and aimed at the UK market.  In Football Dataco  Ltd and others v Sportradar GmbH and another [2010] EWHC  2911 (Ch) Dataco argued that Sportradar copies data from  Dataco.

Sportradar denied copying and commenced proceedings against  Dataco in Germany, seeking declarations that its activities did  not infringe Dataco’s rights.  Sportradar contended that the  English proceedings did not disclose a “good arguable case”  against the company and so the German court is the court first  seised with the dispute.

DECISION 

Copyright Claim

Jacob LJ accepted Sportradar’s submission that the data alleged  to have been copied (goals, goal scorers, etc.,) were matters of  fact that were precluded from copyright protection  as mere  “contents” of a database.  It followed, therefore, that when the  proceedings started, the English court was not seised of a claim  in copyright to the necessary standard.

Database Right:  Joint Tortfeasorship 

The issue here was not subsistence of database rights but  whether Dataco’s claim identified properly any cause of action  justiciable in the English courts.    Jacob LJ agreed with Dataco’s submissions, finding  that the  English courts were first seised of the dispute insofar as  Dataco’s claim alleged that Sportradar was joint tortfeasor with  businesses in the United Kingdom over which the court had  jurisdiction.  If Dataco was right about copying, it was arguable  clearly that Sportradar and its customers were acting in concert  to enable access in the United Kingdom to the copied data.

Database Right:  Primary Infringement

On the question of primary infringement, Jacob LJ decided to  refer to the CJEU questions on the meaning of “reutilisation”  under Article 7.2 of the Database Directive (96/9/EC).   Dataco’s claim of primary infringement by Sportradar turned  on the definition of infringement in the Directive, which  includes transmission.

Transmission over the internet, in Dataco’s submission,  involves both the acts of hosting the website and also the act of  the user in accessing it.  Sportradar’s case is that acts of  transmission occur only in the place from where the data  emanates.  Jacob LJ decided that “this very important and  difficult question” should be referredto the CJEU.

COMMENT 

Dataco’s claim that Sportradar is directly liable for breach of  database right is now stayed pending the outcome of the  reference to the CJEU, whilst its claim in joint tortfeasorship,  which is not dependent on the questions asked, is allowed to  proceed.  Given the far reaching consequences of a  decision  that transmission can “occur” where the user accesses the  information, the CJEU’s view is eagerly anticipated.

BP Alaska to Pay $25 Million Penalty for Alaskan North Slope Oil Spill

WASHINGTON – The U.S. Environmental Protection Agency (EPA), the U.S. Department of Justice and the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) today announced that BP Exploration Alaska, Inc. will pay $25 million in civil penalties and implement a system-wide pipeline integrity management program for spilling more than 5,000 barrels of crude oil from the company’s pipelines on the North Slope of Alaska. The penalty is the largest per-barrel penalty to date for an oil spill.

“Today’s settlement with BP Alaska imposes a tough penalty and requires the company to take action to prevent future pipeline oil spills on the Alaska North Slope,” said Cynthia Giles, assistant administrator for EPA’s Office of Enforcement and Compliance Assurance. “The Clean Water Act gives the U.S. authority to assess higher penalties when oil spills are the result of gross negligence, and this case sends a message that we intend to use that authority and to insist that BP Alaska and other companies act responsibly to prevent pipeline oil spills.”

“This penalty should serve as a wake-up call to all pipeline operators that they will be held accountable for the safety of their operations and their compliance with the Clean Water Act, the Clean Air Act and the pipeline safety laws,” said Ignacia S. Moreno, Assistant Attorney General for the Environment and Natural Resources Division of the Department of Justice. “Companies like BP Alaska must understand that they can no longer afford to ignore, neglect or postpone the proper monitoring and maintenance of their pipelines. This agreement will help prevent future environmental disasters and protect the fragile ecosystem of Alaska’s North Slope.”

“This penalty is a stern reminder to pipeline operators to follow orders issued by PHMSA or risk a federal civil lawsuit and steep fines,” said PHMSA Administrator Cynthia L. Quarterman. “Also, it is a warning that operators must know, test and maintain their pipelines or risk harming people and the environment and having to spend, as in this instance, hundreds of millions of dollars replacing those pipelines.”

In March 2006, BP Alaska spilled approximately 5,054 barrels of crude oil on the North Slope in Alaska. A second spill occurred in August 2006 with approximately 24 barrels of crude oil spilled. Investigators from EPA and PHMSA determined that the spills were a result of BP Alaska’s failure to properly inspect and maintain the pipeline to prevent corrosion. PHMSA issued a Corrective Action Order to BP Alaska that addressed the pipeline’s risks and ordered pipeline repair or replacement. When BP Alaska did not fully comply with the terms of the corrective action, PHMSA referred the case to the Department of Justice. Today’s settlement also addresses Clean Air Act violations arising out of BP Alaska’s improper asbestos removal along the pipeline in the aftermath of the spill.

Today’s settlement requires BP Alaska to develop a system-wide program to manage pipeline integrity for the company’s 1,600 miles of pipeline on the North Slope based on PHMSA’s integrity management program. The program will address corrosion and other threats to these oil pipelines and require regular inspections and adherence to a risk-based assessment system. The program will cost an estimated $60 million over three years and is in addition to the approximately $200 million BP Alaska has already spent replacing the lines that leaked on the North Slope.

Of the $25 million penalty, $20.05 million will be deposited in the Oil Spill Liability Trust Fund established under the Clean Water Act. The remainder, $4.95 million, will be paid to the U.S. Treasury. The funds paid to the Oil Spill Liability Trust Fund will be used to finance federal response activities and provide compensation for damages sustained from future discharges or threatened discharges of oil into water or adjoining shorelines. Oil spills are known to cause both immediate and long-term harm to human health and ecosystems, including the suffocation of wildlife and the contamination of nesting habitats.

In 2007, BP Alaska pled guilty to one misdemeanor violation of the Clean Water Act for the March 2006 spill and was sentenced to three years probation, ordered to pay a $20 million criminal penalty, including a $12 million fine, $4 million to the National Fish and Wildlife Foundation to support research and activities on the North Slope and $4 million in restitution to the state of Alaska.

The consent decree is subject to a 30-day public comment period and final court approval.

More information on the settlement: http://www.epa.gov/compliance/resources/cases/civil/cwa/bpnorthslope.html

Software Compilation Not A Trade Secret Under State Law

The U.S. Court of Appeals for the Fourth Circuit vacated and remanded a grant of summary judgment to Defendants on Plaintiff’s claims for misappropriation of trade secrets and breach of contract against defendant Sentia Group and several former employees of the plaintiff.  Decision Insights, Inc. v. Sentia Group, Inc et al., Case No. 09-2300, (4th Cir., March 15, 2011) (per curiam).

Decision Insights offers software used as an analytical tool in preparing negotiation strategies.   In 2006, Decision Insights filed suit against a group of former employees alleging that they improperly used the plaintiff’s propriety source code and breached non-disclosure agreements in forming Sentia Group, a competing software company.   Decision Insights also alleged that the defendants used materials containing the plaintiff’s trade secrets, such as marketing and research reports, client information and information contained in its software user manual.

To qualify as a trade secret under Virginia law, information must possess independent economic value, not be generally known or readily ascertainable by proper means and   be subject to reasonable efforts to maintain secrecy.

The district court granted summary judgment for the defendants, holding that Decision Insights failed to establish that its software qualified as a trade secret, because the plaintiffs did not show that the software was not generally known or ascertainable.   The district court also dismissed the plaintiff’s trade secret claims towards the additional, non-software materials, finding that because the plaintiff’s claims failed towards its source code, the plaintiff’s other claims also failed.

On appeal, the 4th Circuit determined that the deposition testimony and testimony of Plaintiffs’ expert witnesses created sufficient issues of fact to merit consideration by a jury and on that basis vacated and remanded the summary judgment determination.   One of the plaintiff’s expert witnesses, a co-author of the original source code at issue, opined that certain elements of the source code had never been published, supporting a finding that the plaintiff’s source code qualified as a trade secret.   A second expert witness, also a co-author of the source code, testified that portions of the source code and its sequence had been purposefully kept confidential.

Further, the 4th Circuit determined that the district court improperly granted summary judgment without considering the other two elements required for trade secret protection – whether the plaintiff’s source code possessed independent economic value and whether Decision Insights engaged in reasonable efforts to maintain secrecy.   Further, the 4th Circuit directed the district court to consider the plaintiff’s trade secret claims towards non-source code materials independently from the trade secret claim concerning the plaintiff’s source code.

Comprehensive Summary of the Final Regulations to the ADA Amendments Act

On March 25, 2011, the U.S. Equal Employment Opportunity Commission (EEOC) published final regulations implementing the ADA Amendments Act of 2008 (ADAAA), a statute that now greatly expands the number of employees and applicants who will be considered “disabled.”  The final regulations fundamentally change the manner in which an employer must treat and manage employees with medical conditions in the workplace, since it now will be much easier for individuals to establish that they are disabled.  This Comprehensive Summary provides an overview of some of the key provisions in the final ADAAA regulations to help employers better understand the key changes in the law and adopt strategies to minimize liability.

Background

As originally enacted, the Americans with Disabilities Act (ADA) defines an individual with a disability as a person who has a physical or mental impairment that “substantially limits” one or more “major life activities.”  Individuals may also be covered under the ADA if they have a “record of” a disability or are “regarded as” disabled.  Since the ADA took effect, the Supreme Court and lower federal courts have construed the definition of disability in a relatively narrow fashion.  On September 25, 2008, President Bush signed the ADAAA into law.  Although the ADAAA retains the same definition of “disability” under the original Act, it makes sweeping changes to the manner in which these terms are to be construed.

In short, the ADAAA and its final regulations now shift the focus of virtually every situation that implicates the ADA.  Before the amendments, the interpretation of the ADA largely focused on whether an individual was substantially limited in a major life activity and, therefore, disabled under the ADA.  Under the ADAAA’s broader construction, the focus is not directed toward the actual definition of disability, but rather on discrimination and reasonable accommodation.  Given the ADA’s new statutory framework and new regulations that stretch the statute even further, employers should be prepared now more than ever before to respond to accommodation requests, make accommodations where necessary, and take precautions to avoid discriminatory decisions involving employees and applicants with medical conditions.

A copy of the final regulations can be found here.  The EEOC also has issued a guidance sheet and a fact sheet to aid employers in understanding the final regulations.

The final regulations address key issues, which are covered in this executive summary.

  • Will certain impairments always be considered “disabilities”?
  • What constitutes a “major life activity?”
  • What does it mean to be “substantially limited” in a major life activity?
  • To what extent are temporary or episodic impairments considered disabilities?
  • How do “mitigating measures” affect the analysis of whether an individual is disabled?
  • What does it mean for an employee to be “regarded as” disabled?

Broad Construction of the Definition of “Disability”

Taking its lead from the ADAAA, the final regulations provide that the definition of “disability” should be “broadly” construed “to the maximum extent permitted by the terms of the ADA.”  (The message from Congress and the EEOC to employers could not be any clearer: Stop focusing on whether an individual is disabled and focus instead on reasonable accommodation.)  Although the final regulations track the definition of “disability,” a term which remained intact, the regulations clarify that there is a shift in focus to whether employers have complied with their obligations and whether discrimination occurred, as opposed to whether an individual meets the definition of a “disability.”

Certain impairments “virtually always” covered

Further illustrating the point, in spite of the ADAAA’s (and the final regulations’) rejection of the notion of a “per se” disability, the final regulations take the extraordinary step of listing certain impairments that “will, as a factual matter, virtually always be found to impose a substantial limitation on a major life activity.”  The EEOC suggests that these assessments should be “particularly simple and straightforward” (tellingly, the title of the subsection is “Predictable Assessments”).  These impairments include:

This list includes many conditions that often were not substantially limiting impairments under the pre-ADAAA.  Nevertheless, the list tends to undermine the EEOC’s long-held position that an “individualized assessment” should be conducted to determine whether an impairment is indeed a disability.

Notably, the final regulations removed a section from the proposed regulations that listed certain impairments that “may be disabling for some individuals but not for others,” such as asthma, back/leg impairment, carpal tunnel syndrome, high blood pressure, psychiatric impairment (less severe than major depression) and learning disability.  In light of the expansive sweep of the final regulations, however, plaintiffs with impairments like these, as well as others, likely will not face a difficult task in convincing a court that they are disabled.

Less Demanding Standard for “Substantially Limits”?

To be disabled, one must have an impairment that “substantially limits” a major life activity.  Under the pre-ADAAA, employers often questioned the extent to which an impairment must “substantially limit” before an individual is considered disabled.  Unfortunately for employers, the EEOC declined to quantify the term “substantially limits” in the final ADAAA regulations, explaining that “a new definition would…lead to greater focus and intensity of attention on the threshold issue of coverage than intended by Congress.”  As such, the final regulations offer employers little concrete guidance in identifying the threshold at which an impairment qualifies as “substantially limiting,” aside from the presumption that it must be a lower threshold than previously adopted by the U.S. Supreme Court in its decisions leading up to passage of the ADAAA.

Instead, the regulations provide “nine rules of construction” to be applied in determining whether an impairment “substantially limits” a major life activity.  Most of the rules come directly from the language of the ADAAA, but several have been added by the EEOC:

  1. “The term ‘substantially limits’ shall be construed broadly in favor of expansive coverage, to the maximum extent permitted by the terms of the ADA.  ‘Substantially limits’ is not meant to be a demanding standard.”
  2. The determination of whether an impairment is “substantially limiting” should be made by comparing the ability of an individual to the general population.  The impairment does not need to “prevent, or significantly or severely restrict” the performance of a major life activity in order to be substantially limiting.
  3. In all ADA cases, the focus should be on whether the employer has complied with its statutory obligations, since the “threshold issue” of substantially limits should not require extensive analysis.
  4. “The determination requires an ‘individualized assessment,’ but the assessment should be done by requiring “a degree of functional limitation that is lower than the standard for ‘substantially limits’ applied prior to the ADAAA.”
  5. Comparing an individual’s performance of a major life activity to the general population should not generally require scientific, medical or statistical analysis.
  6. The determination should be made without regard to the “ameliorative effects of mitigating measures” other than ordinary contact lenses and eyeglasses.
  7. “An impairment that is episodic or in remission is a disability if it would substantially limit a major life activity when active.”
  8. An impairment need not limit more than one major life activity.
  9. The effects of an impairment lasting or expecting to last fewer than six months can be “substantially limiting.”

The Effect of Condition, Manner and Duration

Commenting further on the “substantially limits” prong, the final regulations explain that, to determine whether an individual is “substantially limited” in a major life activity, it may be useful to consider the condition under or the manner in which an individual performs a major life activity; the duration of time it takes the individual to the activity as compared to most people in the general population; and the difficulty, effort, pain or amount of time required to perform the activity.

For example, under the new regulations, it does not matter whether an individual with a learning disability can read and write like the majority of people in the general population.  The regulations focus instead on how difficult it was for the individual to reach the level of literacy, (i.e., how long it took and the conditions which the individual had to overcome).  As a result, an individual may be substantially limited in a major life activity even if he or she can perform the activity at the same level as the general population, if it took more time, effort or work to become proficient compared to most people in the general population.

The Interpretation of “Major Life Activities” is Expanded Further

To be disabled under the law, one must have a physical or mental impairment that “substantially limits” one or more “major life activities”.  When determining whether an individual is substantially limited in a major life activity, according to the final regulations and EEOC’s interpretive guidance provide, the process should “not demand extensive analysis” and “usually will not require scientific, medical or statistical analysis.”

Notably, the final regulations expand an already “non-exhaustive” list of what may be deemed major life activities to include eating, sleeping, standing, lifting, bending, reading, concentrating, thinking and communicating.  The final regulations also include additional examples of major life activities, such as sitting, reaching and interacting with others.  When determining other examples of major life activities, the final regulations expressly reject the pre-ADAAA interpretation that the activity must be of “central importance to daily life,” a rule which expressly rejects the Supreme Court’s ruling in Toyota Motor Manufacturing v. Williams.  In effect, an activity no longer is required to be of “central importance.”

In a significant departure from the past, the ADAAA and final regulations expand the definition of “major life activities” to include the “operation of major bodily functions,” such as the immune system and normal cell growth, and neurological, bowel, bladder, circulatory and reproductive functions.  The final regulations list several additional functions, such as cardiovascular, lymphatic and musculoskeletal, and specify that the operation of a major bodily function includes the operation of an individual organ within the body (such as the liver or heart).  The appendix to the final regulations provides several examples of impairments that affect major bodily functions, e.g., cancer affects normal cell growth; diabetes affects functions of the pancreas and endocrine system; and rheumatoid arthritis affects musculoskeletal functions.

Work as a “major life activity”

The regulations also breathe new life into the “major life activity” of working.  Under the pre- ADAAA, a plaintiff’s claim that he or she was substantially limited in the major life activity of work almost always was dismissed by the court, largely because the employee was unable to show that the impairment substantially limited the employee’s ability to perform a “broad range” of jobs.  The final regulations maintain this requirement but lower the employee’s burden, claiming that this previous standard was “overly strict.”  Under the new regulations, if an individual’s job requires heavy lifting but the employee cannot lift heavy items and cannot perform the job or other jobs that require heavy lifting, then the employee is substantially limited in performing the class of jobs that require heavy lifting.  Is this shift in the rule all for naught?  As the final regulations point out, an impairment that substantially limits working will in most situations also substantially limit another major life activity.

Other Significant Regulatory Changes

Nearly All “Mitigating Measures” Are No Longer Considered

Under prior Supreme Court and federal appellate court precedent, employers were allowed to consider “mitigating measures” in determining whether an individual’s impairment substantially limits a major life activity under the ADA.  For example, if an individual used a hearing aid or cochlear implant due to a hearing impairment, it typically was not considered a disability because the individual was not substantially limited in the major life activity of hearing.  Because of the mitigating measure (i.e., the hearing aid), they could hear perfectly well.  Under the new regulations, however, employers are no longer allowed to consider such measures.  As a result, employers will be required to analyze each individual’s impairment in its unmitigated state.  Thus, the individual with a hearing aid would likely be substantially limited in hearing because we are obligated now to consider them without the use of a hearing aid.

The final regulations do provide one important exception: employers are permitted to consider the ameliorative effects of using ordinary eyeglasses or contact lenses.  The term “ordinary eyeglasses or contact lenses” is defined as lenses that are intended to fully correct visual acuity or to eliminate refractive error.  For example, an individual with severe myopia whose visual acuity is fully corrected is not substantially limited in seeing because the ameliorative effect of the lenses must be considered.  Similarly, eyeglasses or contact lenses that are the wrong or outdated prescription may nevertheless be “ordinary” if there is evidence that a proper prescription would fully correct visual acuity or eliminate refractive error.

What is also important to note is that both the ameliorative and non-ameliorative effects of mitigating measures, as well as the individual’s use or non-use of such measures (e.g., taking or refusing to take medication, even though prescribed by a physician) can be considered when determining whether the employee is a “qualified” individual with a disability or whether the employee poses a direct threat to safety; however, it will not affect whether the individual meets the definition of being disabled.

Temporary and Episodic Impairments May Constitute disabilities

Under the final regulations, short-term impairments and chronic impairments with short-term symptoms may be considered disabilities.  In the past, many courts declined to extend ADA coverage to individuals whose impairments were substantially limiting for only a short or limited period of time.  The new regulations reject this reasoning and prescribe that the duration of an impairment or symptom should not be dispositive in determining whether an individual is disabled.

Temporary and Short-Term Impairments

Clearly, one of the most significant changes to the final regulations is the EEOC’s decision to reject the long-held view that temporary impairments are not substantially limiting.  The EEOC previously took the position that the duration or expected duration of an impairment should be considered in determining whether the impairment is disabling.  That no longer appears to be the case.  The final regulations ambiguously state that “an impairment lasting or expected to last fewer than six months can be substantially limiting.” (Emphasis added).  When this language was first proposed, many commenters expressed that the new language would create confusion as to how long an employer’s impairment must last or be expected to last in order to impose ADA obligations on the employer.  (Further complicating matters, the regulations state that an employee who is regarded as having a “transitory and minor” impairment that is expected to heal shortly is not considered disabled.  Thus, it is conceivable that individual with a temporary impairment, such as a broken hand, may be disabled because the impairment substantially limits a major life activity, but may not be “regarded as” disabled for purposes of the Act.)

In response to these concerns, the EEOC opined that specifying a durational minimum for a disability would impose a more stringent standard than what Congress required.  In fact, the final regulations go even further than the proposed regulations on this point.  In the proposed rules, the EEOC identified a category of temporary non-chronic impairments that usually would not be considered a disability—for example, the common cold, seasonal influenza, a sprained joint, minor and non-chronic gastrointestinal disorders, a broken bone expected to heal completely, appendicitis and seasonal allergies.  The EEOC deleted this category in the final regulations, explaining that the provision caused confusion and was too limiting.

The EEOC’s position on the issue of temporary impairments is debatable.  It is not clear that Congress intended to extend ADA coverage to short-lived impairments.  Moreover, it is still likely that certain impairments of short duration which are expected to heal quickly, such as a common cold or a sprained ankle, will not be considered disabilities.  However, the regulations make clear that employers must consider all impairments, even short term ones, on a case-by-case basis.

Episodic Impairments

Under the ADAAA and the final regulations, an episodic impairment or impairment in remission is a disability if the impairment would substantially limit a major life activity when active.  This means that an individual with a serious chronic condition such as epilepsy or cancer could be considered disabled under the Act even if that person rarely or never experiences symptoms that would impact their employment.  The regulations provide specific examples of impairments that may be episodic in nature, including epilepsy, cancer, multiple sclerosis, hypertension, diabetes, asthma, major depressive disorder, bipolar disorder and schizophrenia.

The Act’s express inclusion of episodic impairments presents some practical challenges for employers.  Many episodic impairments are unpredictable in their effects on the individual.  For example, an employee diagnosed with asthma may not experience an attack for several months.  However, the fact that an asthma attack could limit a major life activity may require the employer to provide a reasonable accommodation.  The same is true for progressive impairments, such as Parkinson’s or Alzheimer’s Disease.  Many Parkinson’s and Alzheimer’s patients do not experience any symptoms in the early stages of the disease.  Nevertheless, the fact that an individual could at some point in the future experience symptoms that would substantially limit a major life activity likely would render the person disabled even before the condition worsens and (practically speaking) substantially limits a major life activity.

“Regarded As” Individuals Need Only Prove Perception of an “Impairment”

Under the original ADA as interpreted by the courts, an individual was “regarded as” disabled only when the employer perceived the individual to have an impairment that “substantially limited” him or her in a major life activity.  Under the final regulations, the same individual seeking to bring a “regarded as” claim need not prove that the employer believed the individual to have an impairment that substantially limits a major life activity, but merely that the employer perceived the employee as having an “impairment,” and based an employment decision on that perception.

Under the ADAAA, an individual subjected to a prohibited action (e.g., failure to hire, denial of promotion, termination or harassment) because of an actual or perceived impairment will meet the “regarded as” definition of disability whether or not the impairment “substantially limits” a major life activity unless the impairment is both transitory and minor.  The ADAAA further clarifies that a person who is “regarded as” disabled is not entitled to a reasonable accommodation unless the person also fits within one of the other two prongs of the definition of “disability.”

Notably, the final regulations specify that the “regarded as” prong should be the primary means of establishing coverage in ADA cases that do not involve reasonable accommodation, and that consideration of coverage under the first and second prongs will generally not be necessary except in situations where an individual needs a reasonable accommodation.

The final regulations further clarify that establishing that an individual is “regarded as having such an impairment” does not, by itself, establish liability.  Thus, even where an individual proves that an employer made a decision on the basis of an actual or perceived impairment, the employee must still show that he was “qualified” for the position in question in order to establish an ADA violation (i.e., he can perform the essential job functions of the position with or without a reasonable accommodation).   The employer may also utilize any otherwise available statutory defenses.  For example, an employer may still defend a decision to refuse to hire an applicant on the grounds that the individual would pose a “direct threat” to health and safety due to the nature of his impairment.

The proposed regulations originally identified several concrete examples of “transitory and minor” impairments that would not be sufficient to meet the “regarded as” prong of the statute, such as a broken bone that is expected to heal normally or a sprained wrist that was expected to heal in three weeks.  Unfortunately, these concrete examples were omitted from in the final regulations, leaving employers without clear guidance as to what constitutes a “transitory and minor” impairment.  Instead the appendix to the final regulations stress only that the inquiry as to whether an impairment is “transitory and minor” is an objective standard and provides these examples:

For example, an employer who terminates an employee whom it believes has bipolar disorder cannot take advantage of this exception by asserting that it believed the employee’s impairment was transitory and minor, since bipolar disorder is not objectively transitory and minor.  At the same time, an employer that terminated an employee with an objectively ‘‘transitory and minor’’ hand wound, mistakenly believing it to be symptomatic of HIV infection, will nevertheless have ‘‘regarded’’ the employee as an individual with a disability, since the covered entity took a prohibited employment action based on a perceived impairment (HIV infection) that is not ‘‘transitory and minor.’’

Notably, the final regulations give no example of an impairment that EEOC would find to be “transitory and minor” under this standard.

What about an employee’s symptoms?

In a nod to employers, the final regulations do not include a provision contained in the proposed regulations providing that actions taken because of an impairment’s symptoms (or because of the use of mitigating measures) constitute actions taken because of an impairment under the “regarded as” prong.  Employer commentary pointed out that this proposed standard could create liability for an employer when, for example, disciplining an employee for violating a workplace rule, even where the violation resulted from a symptom of an underlying impairment of which the employer was unaware.  This would have resulted in a clear departure from the EEOC’s existing policy guidance and court decisions, which recognize, among other things, that an employer may discipline an employee for job related misconduct resulting from a disability if the rule or expectation at issue is job related and consistent with business necessity.  EEOC Enforcement Guidance on the Americans with Disabilities Act and Psychiatric Disabilities, EEOC Notice No.  915.002 Mar. 25, 1997 http://www.eeoc.gov/policy/docs/psych.html.  The preamble to the Final Regulations states that this prior Guidance remains in effect, at least for now.

How Do Employers Respond to the New Regulations?

One might ask whether any employee is considered disabled under these new regulations.  Clearly, the ADAAA and its final regulations change how employers respond to and manage employees with medical conditions and who request accommodations in the workplace.  At a minimum, we suggest employers take the following approach to the “new” ADA.

  • The range of impairments that may substantially limit a major life activity has widened considerably.  Although not every impairment will constitute a disability, the analysis of whether an impairment “substantially limits” a major life activity will not be the focus of a court’s inquiry.  In light of this change in emphasis, employers should not focus on whether an employee is actually “disabled;” rather, they should focus on insuring that they are in compliance with the statute.  Therefore, as an initial matter, employers should review and revise workplace reasonable accommodation policies to ensure employees are aware of the policies and to make clear the lines of communication as to accommodations in the workplace.  Similarly, employers should maintain processes for identifying, evaluating, documenting and providing reasonable accommodations as required.
  • Employers should be proactive about engaging in an interactive process with employees who have an impairment.  In doing so, they should identify which among their personnel will be responsible for addressing issues of accommodation, and actually engage in an interactive process when an individual makes a request for assistance in the workplace.  An employer’s best tactic in defending an ADA lawsuit is to demonstrate that it made good faith efforts to accommodate an employee, rather than questioning or challenging the employee’s medical condition.  Thus, the interactive process above must become the norm.
  • Review all job descriptions to ensure they specifically and accurately describe the essential functions of the job.  Notably, under the new definition of a “regarded as” disability, any decision that relies in whole or in part on any perceived or actual physical impairment will be subject to scrutiny under the ADAAA.  It is now more important than ever to insure that any physical or mental job requirements are truly necessary.Employers should insure that all anti-harassment policies explicitly prohibit harassment based on disability, or perceived or actual physical or mental impairments.  Potential liability for disability-related harassment claims has increased because offensive statements that relate in any way to a mental or physical impairment may give rise to liability, regardless of whether the alleged victim actually suffered from an impairment or was otherwise disabled.  For example, an employee who calls a co-worker “psycho” or “retarded” could potentially create an actionable hostile work environment under the ADA even if the co-worker has no mental health history and has an above-average IQ.
  • Properly and contemporaneously document employment decisions involving an employee who is an individual with a disability or has a record of a disability.
  • Analyze pre- and post-employment testing and screening (including language contained in employment applications) to ensure they are job-related and consistent with business necessity.
  • Train supervisors and managers as to the broad coverage of the ADAAA and their responsibilities under the new Act.  At a minimum, the focus of training should include: 1) how they identify requests for workplace modifications; and 2) who they partner with in Human Resources as to the “interactive process” regarding modifications.

Judicial Economy Is Not a Trump Factor in Deciding Transfer Motions

The U.S. Court of Appeals for the Federal Circuit granted a petition for writ of mandamus and ordered a suit to be transferred out of the Eastern District of Texas to the Northern District of Texas.  The panel concluded that all parties would experience greater convenience in that forum when litigating the plaintiff’s claims.  In re Verizon Business Network Services, Inc., Misc. Order 956, 2011 WL 1026623 (Fed. Cir., Mar. 23, 2011) (Linn, J.).

Applying Fifth Circuit law, the Federal Circuit reviewed the district court’s balancing of public and private convenience factors under 28 U.S.C. §1404(a).  Notably, the presiding magistrate Judge had also found that Dallas (in the Northern District of Texas) would be a more convenient venue than Marshall (in the Eastern District of Texas), but nevertheless ordered that the case remain in Marshall as a result of a previous lawsuit brought in the same court, by the same plaintiff, roughly five years earlier.  The district court emphasized that keeping the case in Marshall would enhance judicial economy because the court had developed an in-depth understanding of the claimed technology by construing 25 terms in the earlier case.  Thus, the district court concluded that the identified “built-in efficiencies” were not outweighed by the facts relevant to the private interest factors and the issuance of a reexamination certificate years after the earlier case had settled. Verizon sought mandamus at the Federal Circuit.

The Federal Circuit’s precedential order departed from the district court’s reasoning most significantly on the issue of judicial economy.   The Court found the connection with the earlier suit against Level 3 Communications, Inc. (settling in 2003) to be “distant” and “too tenuous a reason” to keep the case in Marshall.   The panel also reversed on the relevance of the reexamination certificate, noting that this portion of the file history was not part of the record when the patent was construed in 2003 and the U.S. District Court for the Eastern District of Texas would have to not only familiarize itself with the reexamination materials, but also relearn the underlying technology.

As the Court noted in the order, this case is distinguishable from another recent decision weighing the influence of judicial economy in a transfer analysis.  In In re Vistaprint Ltd., (see IP Update, Vol. 13, No. 12) the Federal Circuit affirmed a decision to keep the case in the Eastern District of Texas where the district court had already construed the asserted patent and was also presiding over co-pending litigation involving the same plaintiff and the same claims.  Here, the Federal Circuit makes clear that claim construction will not afford a patent owner a “free pass” to maintain all future litigation in the venue where the first claim construction issued, especially if there are not related cases before the same judge.

Practice Note:   The Federal Circuit analogized the facts in this case to the facts presented in In re Volkswagen of Am., Inc.   (see IP Update, Vol. 11, No. 11)  As in Volkswagen, the panel noted that many of the witnesses reside within 100 miles of the Dallas courthouse and that the plaintiff, Red River Fiber Optic Corp., had no legitimate connection to Marshall.  (The plaintiff conceded it operated from Oklahoma.)  The reasoning in this case, however, goes a step farther in offering specific guidance that the efficiencies gained through adjudication of a previous suit must still be appropriately weighed against other competing considerations such as cost, time, and travel for identified witnesses.

Appeals Court Overturns Stem Cell Ban

On April 29th, in Sherley v. Sebelius, the U.S. Court of Appeals for the D.C. Cir., overturned the injunction imposed by the district court, which had blocked the implementation of the 2009 NIH Guidelines on finding research using human embryonic stem cells. 74 Fed. Reg. 32170(2009). The Guidelines, in turn, had been formulated to implement President Obama’s executive order 13505 that lifted President Bush’s executive order banning such funding. The suit, brought by two researchers working with adult stem cells, argued that the Guidelines were in conflict with the 1996 Dickey-Wicker Act, which banned funding for both research that would create human embryos for research purposes or would destroy human embryos. For more background, see this post from Sept. 1, 2010.

The Court found that preliminary injunction was improperly granted “because Dickey-Wicker is ambiguous and the NIH seems reasonably to have concluded that, although [D-W] bars funding for the destructive act of deriving an ESC from an embryo, it does not prohibit funding a research project in which an ESC will be used.”  In other words, if some other unfunded entity disassembles an unwanted embryo obtained with informed consent of the donor from an in vitro fertilization clinic and provides the ESCs to a researcher, the researcher can obtain federal funding to study them. Since establishing the Guidelines, the NIH has approved additional ESC lines for federal funding. While this is good news for researchers working with embryonic stem cell lines approved under the NIH Guidelines, the underlying suit will continue to threaten the administration’s more liberal view of stem cell research.