Government Utilizes the “Responsible Corporate Officer” Doctrine with a Vengeance

The Responsible Corporate Officer (RCO) doctrine has long occupied an anomalous but obscure corner of American criminal law.  It allows corporate officers to be charged with a crime for wrongdoing at their companies, without any showing of personal fault – other than a showing that they were in charge at the time the wrongdoing occurred.  Such no-fault crimes are rare in American law, but the U.S. Supreme Court has upheld RCO convictions with the rationalization that penalties in RCO cases “commonly are relatively small, and conviction does no grave danger to the person’s reputation.”

Apparently, FDA and HHS did not get the message.  They have been pursuing RCO convictions against senior executives at pharmaceutical companies whose employees improperly promoted drug sales, then using the convictions to impose draconian penalties on executives.  Such penalties raise serious constitutional concerns.

Earlier this month, a federal district court in Washington, D.C. upheld a 12-year exclusion from the drug industry (effectively a life-time ban) for three senior executives of Purdue Frederick Co. after they pled guilty to RCO charges.  WLF filed an amicus brief urging that the exclusion be overturned.  Continue reading

Video Game “Bot” Provides Platform for Latest Judicial Pronouncement on Copyright & Software

Guest Commentary

Brad R. Newberg, Reed Smith LLP*

On December 14, 2010, the U.S. Court of Appeals for the Ninth Circuit continued its clarification of copyright law as it relates to the use of software.  In an interesting follow-up to September’s Vernor v. Autodesk, Inc. decision, the Court of Appeals decided in MDY Industries, LLC v. Blizzard Entertainment, Inc. that although gamers’ use of “bots” to manipulate game-play violated the users’ license in the software, the violation was not so tied to copyright as to destroy the user’s license and turn the RAM copies on his computer into infringements.  As such, the bot’s creator could not be liable for contributory infringement.  However, the bot’s use of mechanisms to evade detection and expulsion by the game did violate the anti-circumvention sections of the Copyright Act and constituted violation of the DMCA by the bot creator.

In Vernor, the same court faced the issue of whether copies of software are typically licensed or sold.  There, Vernor bought used copies of software and tried to resell them on eBay.  Like most software, the copies Vernor bought contained a license agreement stating that any purchaser was not actually buying a copy of the software, but was being given a nontransferable license to use the software within certain restrictions.  So, in the most basic of terms, the court had to determine:  when you go to a store, pay, and bring home some software, did you actually buy the copy of the software (which would enable you to resell it pursuant to the “first sale” exception in the Copyright Act), or did you just license it?  The Vernor court held that you just licensed it, so you cannot then sell your used copies of software (or the nontransferable license) because that violates the copyright owner’s exclusive distribution right. Continue reading

Settlement-Trolling Patent Plaintiff Gets Snagged on a Half-Million Dollar Sanction

Cross-posted by Forbes.com at its “On the Docket” site

Two prominent governors, Rick Perry of Texas (here, subscrip. requir.) and Mitch Daniels  of Indiana (here) recently expressed their support for making the losing party to litigation pay the winner’s legal costs.  Nations around the world rely on this “English rule” (a.k.a. “loser pays” or as some have accurately called it, “the everywhere but here rule”) to deter frivolous litigation.  America and its economy could no doubt use more tools to stop profit-seeking plaintiffs’ lawyers from gaming the civil justice system, especially at the state level.  Lawsuit abuse persists in many areas of the U.S., a reality the American Tort Reform Association reminds us of at this time each year with its irreplaceable Judicial Hellholes® report.  The 2010 edition is online now. 

As WLF has argued for several decades, however, since anti-lawsuit abuse tools like loser pays must be legislatively enacted, an active and vigilant judiciary, for better or worse, must continue to be a consistent watchdog against the litigation industry’s excesses.  

Judges can police lawsuit abuse.   U.S. Supreme Court precedents Iqbal and Twombly have effectively encouraged judges to require greater particularity in plaintiffs’ complaints.  A properly higher pleading standard has broadly impacted civil litigation, ranging from personal injury to patent infringement matters.  For instance, just last week, a federal judge relied upon these precedents to throw out patent troll Interval Licensing’s barebones infringement complaint against Google, Facebook, Yahoo, Netflix, and others.  Also, judges can deny certification to abusive class actions, a vehicle which will gain added force if the U.S. Supreme Court reverses the of the Ninth Circuit’s ruling in Dukes v. Wal-Mart next year.  And as the Seventh Circuit recently demonstrated in Thorogood v. Sears, judges can use devices like the All Writs Act to slow the spread of copycat class actions.  That ruling by Judge Richard Posner so infuriated Thorogood’s counsel that he penned an acerbic motion for rehearing, which the Posner-led panel denied with its own rhetorical flair.

As Judge Posner wrote in that rehearing denial, it is “the right and indeed the duty of judges to criticize lawyers who try the patience of the members of the bar, and the courts.”  Federal and state civil procedure rules and the judiciary’s inherent authority allow judges to go beyond criticism when necessary and punish lawyers and litigants.  Judges can impose sanctions and issue orders that defendants’ (or plaintiffs’) must pay the attorneys’ fees of its opponent. 

The world of patent trolling offers us a potent example of judicial sanction authority and the financial discomfort it can create for plaintiffs (and their lawyers) who step over the line. Continue reading