Monday, June 9, 2014

Federal preemption, settlements and releases, patent and copyright infringement, and Texas chili with grass fed beef, cumin seed, oregano, organic tomatoes and peppers, and Chipotle chiles

Bankruptcy -- An explicit general release in favor of debtor's principal on behalf of all parties with claims against debtor, contained in confirmed plan of reorganization which was never appealed, is binding on a creditor that had adequate notice of plan terms and opportunity to object where the language of the plan and confirmation order covered the claim
In re: FFS DATA, INC., LIVE DATA GROUP, INC., Debtors. U.S. Bankruptcy Court, Southern District of Florida, West Palm Beach Division.

Banks -- Settlement of checks -- Federal preemption -- Class action alleging that out-of-state state bank's act of charging a fee to cash a check presented in person violated Florida statute providing that a financial institution “may not settle any check drawn on it otherwise than at par” -- Florida statute is preempted by regulations promulgated by Office of Comptroller of the Currency pursuant to National Bank Act -- Claims of unjust enrichment premised on same facts are also preempted -- District court did not err in dismissing complaint
DEREK PEREIRA, CAMILA DE FREITAS, individually and on behalf of all others similarly situated, Plaintiffs - Appellants, v. REGIONS BANK, an Alabama Banking Corporation, Defendant - Appellee. 11th Circuit.

Bond v. United States
Docket: 12-158
Opinion Date: June 2, 2014
Judge: Roberts
Areas of Law: Constitutional Law, Criminal Law

Bond sought revenge for her husband’s affair by spreading toxic chemicals on Haynes’s car, mailbox, and door knob, in hopes that Haynes would develop a rash. Haynes suffered a minor chemical burn that she treated by rinsing with water. Federal prosecutors charged Bond with violating the Chemical Weapons Convention Implementation Act, which forbids any person knowingly to possess or use "any chemical weapon,” 18 U.S.C. 229(a)(1). A “chemical weapon” is “[a]toxic chemical and its precursors, except where intended for a purpose not prohibited under this chapter.” A “toxic chemical” is “any chemical which through its chemical action on life processes can cause death, temporary incapacitation or permanent harm to humans or animals … regardless of their origin or of their method of production, and regardless of whether they are produced in facilities, in munitions or elsewhere.” “[P]urposes not prohibited by this chapter” is defined as“[a]ny peaceful purpose related to an industrial, agricultural, research, medical, or pharmaceutical activity or other activity,” and other specific purposes. Bond pleaded guilty but reserved the right to appeal. On remand, the Third Circuit rejected her Tenth Amendment argument and an argument that section 229 does not reach her conduct. The Supreme Court reversed. Section 229 does not reach Bond’s simple assault. Seeing “no need to interpret the scope of the international Chemical Weapons Convention,” the Court stated that Bond was prosecuted under a federal statute, which, unlike the treaty, must be read consistent with the principles of federalism. There is no indication that Congress intended to reach purely local crimes; an ordinary speaker would not describe Bond’s feud-driven act of spreading irritating chemicals as involving a “chemical weapon.” The chemicals at issue here bear little resemblance to those whose prohibition was the object of an international Convention. Pennsylvania’s laws are sufficient to prosecute assaults like Bond’s, and the “global need to prevent chemical warfare does not require the Federal Government to reach into the kitchen cupboard.“

Breslow v. Wells Fargo Bank, N.A.
Docket: 12-14564
Opinion Date: June 5, 2014
Judge: Tjoflat
Areas of Law: Communications Law, Consumer Law
Plaintiff, individually and on behalf of her minor child, filed suit alleging that Wells Fargo violated the Telephone Consumer Protection Act of 1991's (TCPA), 47 U.S.C. 227(b)(1)(A)(iii), prohibition on autodialing cell phones without the express consent of the called party. Wells Fargo had called the cell phone number used by the child to collect a debt from a former customer who had listed the phone number on a Wells Fargo account application. Wells Fargo was unaware that the cell phone number was no longer assigned to the former customer and the former customer never revoked his consent or requested that Wells Fargo cease calling the number. The court concluded that "called party," for purposes of section 227(b)(1)(A)(iii) means the subscriber to the cell phone service or user of the cell phone called. Accordingly, the court affirmed the district court's grant of partial summary judgment in plaintiff's favor.

Broadcast Music, Inc. v. Meadowlake Ltd.
Docket: 13-3933
Opinion Date: June 6, 2014
Judge: Sutton
Areas of Law: Copyright, Entertainment & Sports Law

Rafters Bar and Grill, a golf-course restaurant in Canton, Ohio, offers music and dancing, sometimes turning on a recording, sometimes bringing in live performers, but it hosts performances of the music without getting the copyright owners’ permission. BMI, an organization of songwriters and composers that licenses music and collects royalties on behalf of its members, sent Rafters more than a score of letters, warning the restaurant not to infringe its copyrights and offering to license its music. It got no response. BMI sued for copyright infringement. Roy, the owner of Rafters, argued that he did not perform any of the copyrighted music. The bands that played at the restaurant and the people who turned on the recordings did that. The district court granted BMI summary judgment. The Sixth Circuit affirmed, noting that a defendant becomes vicariously liable for a direct infringement of a copyright “by profiting from [the] infringement while declining to exercise a right to stop or limit it.” A defendant’s ignorance about the infringement or the performances does not negate vicarious liability.

Eastham v. Chesapeake Appalachia, L.L.C.
Docket: 13-4233
Opinion Date: June 6, 2014
Judge: Grifin
Areas of Law: Contracts, Energy, Oil & Gas Law

In 2007, the Easthams entered into a five-year lease with Chesapeake, granting the right to extract oil and gas from the Easthams’ 49 acres in Jefferson County, Ohio. The Easthams were granted a royalty of one-eighth of the oil and gas produced from the premises. Until a well was commenced on the premises, the Easthams were entitled to “delay rental” payments of $10 per acre annually. The lease stated “Upon the expiration of this lease and within sixty (60) days thereinafter, Lessor grants to Lessee an option to extend or renew under similar terms a like lease.” In 2012, Chesapeake filed a notice of extension with the County Recorder and sent the Easthams a letter stating that it had extended the lease on the same terms for an additional five years, with a delay rental payment for $490.66. The Easthams later claimed that they did not read and did not understand the lease, but were not pressured into signing it. They filed a class action, seeking a declaration that the lease expired and that title to the oil and gas underneath the property be quieted in their favor. They claimed that the agreement did not give Chesapeake the option to unilaterally extend, but required that the parties renegotiate at the end of the initial term. The district court entered summary judgment for Chesapeake, concluding that the lease’s plain language gave Chesapeake options either to extend the lease under its existing terms or renegotiate under new terms. The Sixth Circuit affirmed

In Re: Deepwater Horizon
Docket: 12-30883
Opinion Date: June 4, 2014
Judge: Benavides
Areas of Law: Energy, Oil & Gas Law, Environmental Law

BP and Andarko appealed the district court's grant of summary judgment in favor of the the government on the question of their liability for civil penalties under 33 U.S.C. 1321(b)(7)(A). Section 1321(b)(7)(A) imposes mandatory penalties upon the owners of facilities "from which oil or a hazardous substance is discharged." The court found no genuine dispute as to defendants' liability for civil penalties where the well's cement failed, resulting in the loss of controlled confinement of oil such that the oil ultimately entered navigable waters. Therefore, the well is a facility "from which oil or a hazardous substance was discharged""into or upon the navigable waters of the United States." Andarko and BP "shall be subject to a civil penalty" calculated in accordance with statutory and regulatory guidelines and this liability is unaffected by the path traversed by the discharged oil. Nor is liability precluded by any culpability on the part of the vessel's owner or operator. Accordingly, the court affirmed the judgment of the district court.

In re: Thomas
Court: U.S. 6th Circuit Court of Appeals
Docket: 13-8048
Opinion Date: June 3, 2014
Judge: Humphrey
Areas of Law: Bankruptcy, Family Law

Thomas and Jennifer married and purchased a family home with a first mortgage, then obtained a second mortgage. In a 2003 divorce consent decree, Thomas agreed to relinquish any interest in the home. Jennifer agreed to assume and hold him harmless from the obligation to pay both mortgages. Thomas agreed to pay child support. The couple remarried in 2004, but, in 2007, this marriage also ended in divorce. The 2007 consent decree waived spousal support; Thomas again agreed to give up any interest in the house, which he had never conveyed under the 2003 decree. Jennifer agreed to assume the first mortgage. Thomas's child support obligation was reduced and they agreed to split the second mortgage obligation. Thomas deeded his interest in the house. A $8,082.37 judgment lien was not addressed in the 2007 decree although it attached to the property before the second divorce. Jennifer sold the house in 2008. The first and second mortgage debts were satisfied. Jennifer negotiated release of the judgment lien for $5,000.00 and paid $836.14 to close the transaction. The state court entered an order in the 2007 divorce proceeding, requiring Thomas to reimburse Jennifer $7,500.00 for the second mortgage and $5,000.00 for the judgment lien. Thomas filed a petition for Chapter 13 bankruptcy relief, listing an unsecured priority claim for child support and a $15,000.00 unsecured claim on Schedule F. Jennifer asserted a priority unsecured claim for “[a]limony, maintenance, or support” of $12,500.00 for the second mortgage and judgment lien debts. Thomas objected, arguing that the claim was “satisfied when the real estate was sold,” and not a domestic support obligation. The bankruptcy court applied the Calhoun test and found Jennifer’s claim was in the nature of “alimony, maintenance or support.” The Sixth Circuit Bankruptcy Appellate Panel affirmed.

Limelight Networks, Inc. v. Akamai Techs, Inc.
Docket: 12-786
Opinion Date: June 2, 2014
Judge: Alito
Areas of Law: Intellectual Property, Patents

Akamai is the exclusive licensee of a patent that claims a method of delivering electronic data using a content delivery network (CDN). Limelight also operates a CDN and carries out several of the steps claimed in the patent, but its customers, rather than Limelight itself, perform a step of the patent known as “tagging.” Under Federal Circuit case law, liability for direct infringement under 35 U.S.C. 271(a) requires performance of all steps of a method patent to be attributable to a single party. The district court concluded that Limelight could not have directly infringed the patent at issue because performance of the tagging step could not be attributed to it. The en banc Federal Circuit reversed, holding that a defendant who performed some steps of a method patent and encouraged others to perform the rest could be liable for inducement of infringement even if no one was liable for direct infringement. The Supreme Court reversed. A defendant is not liable for inducing infringement under section 271(b) when no one has directly infringed. The Federal Circuit’s contrary view would deprive section 271(b) of ascertainable standards and require the courts to develop parallel bodies of infringement law. Citing section 271(f), the Court stated that Congress knows how to impose inducement liability predicated on noninfringing conduct when it wishes to do so. Though a would-be infringer could evade liability by dividing performance of a method patent’s steps with another whose conduct cannot be attributed to the defendant, a desire to avoid this consequence does not justify fundamentally altering the rules of inducement liability clearly required by the Patent Act’s text and structure.

Lotes Co., Ltd. v. Hon Hai Precision Industry Co.
Court: U.S. 2nd Circuit Court of Appeals
Docket: 13-2280
Opinion Date: June 4, 2014
Judge: Katzmann
Areas of Law: Antitrust & Trade Regulation, Business Law

Plaintiff filed suit under the Sherman Act, 15 U.S.C. 1,2, alleging that defendants, a group of five competing electronics firms, have attempted to leverage their ownership of certain key patents to gain control of a new technology standard for USB connectors and, by extension, to gain monopoly power over the entire USB connector industry. The court held that, under principles articulated in a line of recent Supreme Court decisions extending from Arbaugh v. Y&H Corp. to Sebelius v. Auburn Regional Medical Center, the requirements of the Foreign Trade Antitrust Improvement Act (FTAIA), 15 U.S.C. 6a, are substantive and nonjurisdictional in nature. Because Congress has not clearly stated that these requirements are jurisdictional, they go to the merits of the claim rather than the adjudicative power of the court. In so holding, the court overruled the court's prior decision in Filetech S.A. v. France Telecom S.A. The court also concluded that, although the FTAIA's requirements are nonjurisdictional and thus potentially waivable, the court rejected plaintiffs' argument that defendants somehow have waived them by contract in this case; foreign anticompetitive conduct can have a statutorily required direct, substantial, and reasonably foreseeable effect on U.S. domestic or import commerce even if the effect does not follow as an immediate consequence of defendant's conduct, so long as there is a reasonably proximate causal nexus between the conduct and the effect; the court rejected the interpretation of "direct...effect" advanced by the Ninth Circuit in United States v. LSL Biotechnologies in favor of the interpretation advocated by amici curiae the United States and the FTC and adopted by the Seventh Circuit in its en banc decision in Minn-Chem, Inc. v. Agrium, Inc.; and the court need not decide, however, whether plaintiff here has plausibly alleged the requisite "direct, substantial, and reasonably foreseeable effect" under the proper standard. Accordingly, the court affirmed on alternative grounds the judgment of the district court dismissing plaintiff's claims.

Nautilus, Inc. v. Biosig Instruments, Inc
Docket: 13-369
Opinion Date: June 2, 2014
Judge: Ginsburg
Areas of Law: Intellectual Property, Patents

A patent specification must “conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the applicant regards as [the] invention,” 35 U.S.C. 112. The 753 patent involves a heart-rate monitor used with exercise equipment; it asserts that prior monitors were often inaccurate in measuring the electrical signals accompanying each heartbeat (ECG signals) because of the presence of other electrical signals generated by the user’s skeletal muscles that can impede ECG signal detection. The invention claims to improve on prior art by detecting and processing ECG signals in a way that filters out the interference. Claim 1 refers to a “heart rate monitor for use by a user in association with exercise apparatus and/or exercise procedures.” The claim comprises a cylindrical bar fitted with a display device; electronic circuitry including a difference amplifier; and, on each half of the bar, a “live” electrode and a “common” electrode “mounted ... in spaced relationship with each other.” The exclusive licensee alleged that Nautilus, without obtaining a license, sold exercise machines containing its patented technology. The district court granted Nautilus summary judgment on the ground that the claim term “in spaced relationship with each other” failed the definiteness requirement. The Federal Circuit reversed, concluding that a patent claim passes the threshold so long as the claim is “amenable to construction,” and, as construed, is not “insolubly ambiguous.” The Supreme Court vacated. A patent is invalid for indefiniteness if its claims, read in light of the patent’s specification and prosecution history, fail to inform, with reasonable certainty, those skilled in the art about the scope of the invention. Section 112’s definiteness requirement must take into account the inherent limitations of language. The standard mandates clarity, while recognizing that absolute precision is unattainable. The Federal Circuit inquired whether the claims were “amenable to construction” or “insolubly ambiguous,” but such formulations lack the precision section 112 demands. To tolerate imprecision just short of that rendering a claim “insolubly ambiguous” would diminish the definiteness requirement’s public-notice function and foster the innovation-discouraging “zone of uncertainty.” The Court remanded so that the Federal Circuit can reconsider, under the proper standard, whether the relevant claims in the 753 patent are sufficiently definite.

Riva v. Pella Corp.
Court: U.S. 7th Circuit Court of Appeals
Docket: 13-2133
Opinion Date: June 2, 2014
Judge: Posner
Areas of Law: Class Action, Consumer Law, Legal Ethics, Products Liability

A 2006 class action against Pella, a window manufacturer, alleged that certain windows had a design defect that allowed water to enter behind exterior aluminum cladding and damage the wooden frame and the house itself. The district judge certified a class for customers who had already replaced or repaired their windows, seeking damages and limited to six states, and another for those who had not, seeking only declaratory relief nationwide. Initially, there was one named plaintiff, Saltzman. His son-in-law, Weiss, was lead class counsel. Weiss is under investigation for multiple improprieties. The Seventh Circuit upheld the certifications. Class counsel negotiated a settlement in 2011 that directed Pella to pay $11 million in attorneys’ fees based on an assertion that the settlement was worth $90 million to the class. In 2013, before the deadline for filing claims, the district judge approved the settlement, which purports to bind a single nation-wide class of all owners of defective windows, whether or not they have replaced or repaired the windows. The agreement gave lead class counsel “sole discretion” to allocate attorneys’ fees; Weiss proposed to allocate 73 percent to his own firm. Weiss removed four original class representatives who opposed the settlement; their replacements joined Saltzman in supporting it. Named plaintiffs were each compensated $5,000 or $10,000 for their services, if they supported the settlement. Saltzman, as lead class representative, was to receive $10,000. The Seventh Circuit reversed, reversed, referring to “eight largely wasted years,” the need to remove Saltzman, Weiss, and Weiss’s firm as class representative and as class counsel, and to reinstate the four named plaintiffs.

Source Vagabond Sys., Ltd. v. Hydrapak, Inc.
Docket: 13-1270
Opinion Date: June 5, 2014
Judge: Wallach
Areas of Law: Civil Procedure, Legal Ethics, Patents

Source manufactures water reservoirs in which drinking water can be stored inside backpacks for use during outdoor activities and is the assignee of the 276 patent, which focuses on a reservoir with a hermetic seal to prevent leakage and a wide opening for easier cleaning and filling. Attorney Yonay prosecuted the 276 patent application. Yonay and his partner signed the complaints in an infringement action against Hydrapak, which also manufactures a flexible hydration reservoir, the Reversible Reservoir. Hydrapak served a sanctions motion under Federal Rule of Civil Procedure 11, which allows the party against whom the sanctions will be sought 21 days to withdraw the offending claim. Source declined to withdraw its amended complaint. The district court granted Hydrapak summary judgment and sanctions, stating that there was “nothing complicated or technical” about the claim limitation “slot being narrower than the diameter of the rod,” and that none of the words of this limitation “requires definition or interpretation beyond its plain and ordinary meaning.” The court determined that in Hydrapak’s products the slot is larger than the diameter of the rod, even under Source’s proposed construction. After the Federal Circuit affirmed and denied Hydrapak sanctions for a frivolous appeal, the district court imposed a sanction of $200,054.00. The Federal Circuit affirmed.

STC.UNM v. Intel Corp.
Docket: 13-1241
Opinion Date: June 6, 2014
Judge: Rader
Areas of Law: Civil Procedure, Patents

The 321 patent, titled “Method for Manufacture of Quantum Sized Periodic Structures in Si Materials,” resulted from contributions of Brueck, Zaidi, Chu, employed by UNM, and Draper, employed by Sandia, and issued in 1998. In 1996, the four executed an assignment to UNM that defined all assignors as employees of UNM. UNM executed an assignment to Sandia to correct Draper’s assignment. While the 321 application was pending, in 1997, Brueck and Zaidi filed the application that led to the 998 patent, titled “Method and Apparatus for Extending Spatial Frequencies in Photolithography Images.” The application incorporated the 321 patent by reference, but did not claim priority to any earlier application. Draper was not listed as an inventor and had no inventive contribution. UNM obtained assignments from Brueck and Zaidi. During prosecution the PTO rejected claims for double patenting. UNM filed a terminal disclaimer, which specified that “any patent granted on this instant application shall be enforceable only for and during such period” that the 998 and 321 patents “are commonly owned.” UNM stated that it was the owner of a 100 percent interest in the application. The 998 patent issued in 2000. In 2008 successfully sought a certificate of correction indicating that the 998 patent is a continuation-in-part of the 321 patent. In 2010 UNM filed an infringement suit concerning the 998 patent. Although Sandia had an ownership interest since the Draper Assignment, Sandia had never claimed any interest in the 321 patent. The district court dismissed for lack of standing. The Federal Circuit affirmed. Sandia did not voluntarily join as a co-plaintiff and could not be involuntarily joined. All co-owners must ordinarily join in an infringement suit .

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