Update: DOJ and FTC Petitioned to “Encourage” Standard-Setting Organizations Towards More Self-Policing

carrot-with-stickIn our March 15 post Are Antitrust Agencies Nudging Standard Setting Bodies on Patent Licensing?, we discussed a journal article authored by two current and one former senior economists from U.S. and European antitrust agencies which called on patent standard-setting organizations (SSOs) to take a stronger stand against anti-competitive behavior. The economists’ hope was that SSOs could nip in the bud controversies over standard-essential patent holders seeking injunctions or what constitutes a reasonable (i.e. “RAND”) licensing fee.

Yesterday, the American Antitrust Institute (AAI) petitioned the Justice Department and the Federal Trade Commission (FTC) to escalate the nudge into a menacing carrot and stick combination. The petition urges the agencies to adopt joint enforcement guidelines that could act as a “safe harbor” for SSOs from antitrust liability. Why would SSOs need such a safe harbor? Because AAI feels that SSOs should be held responsible for the anti-competitive activity of their members if SSOs don’t have in place “important safeguards against monopoly power.”

The petition suggests that the DOJ/FTC guidelines should require SSOs to adopt as part of their agreements, which are binding on their standard setting members, the following patent policies:

  1. Disclosure of patents as well as anticipated and pending patent applications supported by “good faith reasonable inquiry”
  2. Breach of the foregoing disclosure obligation should result in a zero royalty license if an undisclosed patent is incorporated into the standard
  3. Ex Ante RAND licensing commitment
  4. Stipulation that participants whose patents are incorporated into the standard are prohibited from seeking injunctions and exclusion orders against willing licensees
  5. Licensing terms run with the patent
  6. Licensees should have cash-only licensing options on individual SEPs
  7. Efficient, cost-effective process to resolve disputes over RAND royalty and non-royalty rates.

As we noted in our March 15 post, SSOs have been reluctant to adopt more demanding policies to which standard-setting participants must adhere, though the United Nation’s International Telecommunications Union intimated last October that it might be open to such changes. A stick-wielding carrot such as a joint DOJ-FTC guidance would likely move SSOs like the ITU beyond mere contemplation.

The DOI’s “New” Hydraulic Fracturing Proposal Leaves Much to Desire

BLMGuest Commentary

by Taylor Darby, a 2013 Judge K.K. Legett Fellow at the Washington Legal Foundation and a student at Texas Tech School of Law.

In what could be called a second bite at the apple, the Department of Interior has released a revised draft proposal regarding hydraulic fracturing on all public and Indian lands. An initial proposal was released in 2012 but was subsequently withdrawn following criticism from both sides of this debate, including oil and gas associations as well as environmental groups. The proposal flatly states that “[t]he estimated cost range[s] from $12 million to $20 million per year,” while also admitting that the cost variance reflects the “uncertainty about the generalization of costs across all hydraulic fracturing operations.” (43 CFR 3160). Criticisms remain the same with regards to the “uncertain” costs, as well as for the regulation’s purpose and rationale to begin with.

Released on May 16th,the DOI’s new proposal gives the Bureau of Land Management (“BLM”) vast control to ensure “that hydraulic fracturing operations . . . follow certain best practices.” 43 CFR 3160. These “certain best practices” include three objectives aimed to ease “public concern” from the expansion of hydraulic fracturing: (1) public disclosure of chemicals used; (2) wells used meet appropriate construction standards; and (3) requiring operators to have a plan to manage flowback waters. The regulations are “designed to reduce the environmental and health risk that can be posed by hydraulic fracturing operations. . .” 43 CFR 3160. Essentially, this shows that this costly proposal is driven by “public concerns” rather than actual harm and actual risk. Continue reading “The DOI’s “New” Hydraulic Fracturing Proposal Leaves Much to Desire”

Law Triumphed Over Anti-Biotech Scare Tactics in Bowman Supreme Court Case

monsantocapGuest Commentary

by John Andren*

After much noise and debate over genetically-enhanced crops and agribusiness leading up to the arguments in Bowman v. Monsanto, the swiftness with which the Supreme Court delivered its concise, unanimous decision might have left some wondering what all the hype was about. And indeed, it turns out there wasn’t much beyond the noise. The Court didn’t lend much credence to Bowman’s “blame-the-bean” defense, and affirmed its own precedent and the patent exhaustion doctrine as it has been understood for years. Pretty much exactly what WLF and most experienced observers had expected of the case.

It is worth applauding the Court, however, for deciding the case solely on its legal merits instead of turning the case into a referendum on so-called GMOs and the companies which create them, as some activist legal groups had attempted to goad them into doing. Continue reading “Law Triumphed Over Anti-Biotech Scare Tactics in Bowman Supreme Court Case”

Finger on the Pulse: From Our Blogroll and Beyond

  • Vermont attorney general sues purported patent troll for misleading and deceptive statements in licensing demand letter (Ars Technica)
  • Cloud Computing and Its Unexpected Jurisdiction Under Corrupt Practices Act (Corporate Counsel)
  • Coalition for Responsible Regulation SCOTUS appeal (in which WLF filed amicus supporting cert) could be the biggest regulatory case in years, or be quickly denied (SCOTUSblog)
  • Retailers’ efforts to throw out false advertising cases on lack of standing grounds in California just got harder (Product Liability Monitor)
  • As we await outcome in generic drug preemption case Bartlett, Supreme Court asked to review other drug & device preemption issues (FDA Law Blog)
  • Gift, travel, and entertainment expenses under the Foreign Corrupt Practices Act: When’s it ok to pay, when’s it not? (FCPA Professor)
  • Can a South Carolina resident bring a nationwide class action in federal court based on New Jersey consumer protection law? The 3d Circuit says NO (Class Defense)

Update: Court Throws Out Class Action Claiming Yogurt Wasn’t “Yogurt”

activia-vanillaSeveral past Legal Pulse posts have discussed food labeling class action suits against yogurt makers, including this one on a case against Clover-Stornetta Farms for its allegedly misleading use of the term “evaporated cane juice.” That suit is currently pending in the Food Court Northern District of California.

Another yogurt-related class action suit, this one claiming that the use of milk protein concentrate (MPC) rendered Activa yogurt misbranded, recently reached a welcome end in the Southern District of New York (Conroy v. The Dannon Company, Inc.).

Conroy alleged injury under a number of state common law theories as well as provisions of New York General Business Law. None of those theories or laws are referenced beyond the opinion’s first page; instead, Judge Vincent Briccetti devoted his analysis entirely to whether MPC is an allowable “other optional ingredient” under Food and Drug Administration (FDA) standards for “yogurt.” If it wasn’t, Conroy’s claims would no doubt have proceeded.

Had one started reading in the middle of the opinion, one would fairly think the complaining entity was FDA, not a random yogurt consumer. Judge Briccetti found that FDA’s views on yogurt were that MPC was permitted as an “other optional ingredient.” FDA’s views, Judge Briccetti wrote, were contained in “a FDA-issued memorandum from the Milk Safety Branch to all Regional Food and Drug Directors.” The document memorialized an answer given by an FDA employee at a Regional Milk Seminar to a question specifically on MPC.

A memo restating the answer to a question at an obscure seminar in 2004 circulated among regional FDA directors — not exactly our idea of good federal rulemaking practice, but enough, it seems to get a class action suit dismissed. That is what Judge Briccetti ultimately did do: grant Dannon’s motion to dismiss as well as its request that the plaintiff be prohibited from amending her complaint.

Patent Litigant Targeting Retailers’ Use of Gift Card Activation Prevails in Federal Circuit

bethShaw-0580editConvertedProfile-e1360002102239Featured Expert Column

Beth Z. Shaw, Brake Hughes Bellermann LLP

The U.S. Court of Appeals for the Federal Circuit on May 20 upheld the validity of two claims of a patent for activating gift and pre-paid phone cards, U.S. Patent No. 6,000,608 (“the ’608 patent”), in a divided panel opinion authored by Judge Dyk and joined by Judge Moore (Alexsam, Inc. v. IDT Corporation ). Judge Mayer dissented, writing that patent should be held invalid under 35 U.S.C. § 101. The plaintiff, Alexsam, Inc. (“Alexsam”) has filed suit against a wide array of merchants, seeking damages for infringement whenever a conventional or online retailer uses an existing banking network to process gift and pre-paid cards.

The ’608 patent is directed to a system for activating gift and pre-paid telephone cards at the time that they are purchased. In the past, retailers often installed dedicated “activation terminals” in their stores in order to activate such cards. The inventor on the ’608 patent decided that the activation process could be made more efficient if gift and pre-paid telephone cards could be activated using the point-of-sale terminals that are used for processing credit card transactions. Instead of activating a card by swiping it through a dedicated activation terminal, a store employee could simply swipe it through the terminal used for processing credit card transactions. Continue reading “Patent Litigant Targeting Retailers’ Use of Gift Card Activation Prevails in Federal Circuit”

Update: Judge in “All Natural” Food Labeling Class Action Won’t Wait for FDA Action

all naturalIn our ongoing discussion of and commentary on class actions alleging consumer fraud in food labeling,  we’ve assessed numerous cases where use of “natural” or “all natural” allegedly rendered the labeling false or misleading (our latest here and here). These crusading lawyers have rushed into the void left by the Food and Drug Administration (FDA), which has refused to issue a formal definition of “natural” for use on food labels.

Defendants in such cases have routinely argued that FDA policy statements on the meaning of natural should preempt state law-based consumer protection claims, or that courts should defer to the federal agency under the prudential “primary jurisdiction” doctrine. The preemption arguments have been unsuccessful, but some judges have put class action suits on hold and urged FDA action. Such action has not been forthcoming.

Judge Hamilton of the Northern District of California addressed these issues on May 10 in Janney v. General Mills.  The suit involves General Mills’s Nature Valley® line of products and claims that certain sweeteners in those products are not “natural.” The defendants sought dismissal based on the primary jurisdiction doctrine. They pointed to a November 2012 Northern District ruling, Astiana v. Hain Celestial,  that dismissed claims against the use of “natural” on cosmetics packaging based on FDA’s primary jurisdiction.

Though Judge Hamilton called the question “a close one,” she said General Mills’s motion must be denied “at least at this stage of the litigation.” She acknowledged the cosmetics case precedent, but reasoned that because FDA has “signaled its relative lack of interest” in defining natural, the Janney case was different from the Astiana case because FDA had “issued no guidance.” Because “any referral to the FDA would likely prove futile,” Judge Hamilton declined to stay or dismiss Janney’s suit.