7th Circuit Reminds District Court: Manifest Disregard of the Law Is Not Grounds for Vacating an Arbitration Award

by Lee Gesmer on November 10, 2011

One of the risks of electing to resolve a dispute in arbitration is that, apart from a few narrow exceptions, the decision of the arbitrator is non-appealable.  This can be very hard on the losing party, who believes the arbitrator completely misapplied the law or, in the terminology of the courts, “manifestly disregarded” the law.

Affymax believed it was faced with such a situation when an arbitration panel ruled in favor of Otho-McNeil-Janssen on certain issues in a complicated patent dispute.  Affymax challenged the panel’s decision, and the federal district court reversed part of the arbitration panel’s award.

Wrong, said Chief Judge Easterbrook of the 7th Circuit Court of Appeals in Affymax, Inc. v. Ortho-McNeil-Janssen Pharmaceuticals, Inc., decided on October 3, 2011:  “Manifest disregard of the law” is not a ground on which a court may reject an arbitrator’s award.  The First Circuit, where I practice, has made this clear as well.  See Ramos-Santiago v. United Parcel Service, 524 F.3d 120, 124 n.3 (1st Cir. 2008) (“manifest disregard of the law is not a valid ground for vacating or modifying an arbitral award in cases brought under the Federal Arbitration Act”).

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Cases Cited in My 2011 MCLE Noncompete Chapter Update

by Lee Gesmer on November 7, 2011

Cases Cited in My 2011 MCLE Noncompete Chapter Update

Earlier this year Massachusetts Continuing Legal Education  (MCLE)  asked me to update my 2009 chapter on Employee Noncompetition Agreements.   The revised chapter, part of the 2-volume Massachusetts Employment Law series, was published in June.

Below are links to the cases I added to this chapter.   I’ve also included a sentence or two regarding each case.  However, I did not make an effort to describe every legally significant aspects of each case.

  • Ethicon Endo-Surgery, Inc. v. Pemberton, 27 Mass. L. Rptr. 541 (Super. Ct. 2010).  This case, decided by Judge Peter Lauriat  in the Suffolk Business Litigation Session, applies New Jersey non-compete law, but Massachusetts procedural law for purposes of ruling on a preliminary injunction.  The former employee filed suit in California first, but Judge Lauriat  refused to dismiss this case based on the “first filed” rule.  The court enforced an 18 month covenant not to compete against the former employee.
  • Inner-Tite Corp. v. Brozowski, No. 2010-0156 (Worcester Super. Ct. 2010).  This lenghy decision was written by Judge Janet Kenton-Walker, sitting in Worcester County, following a bench trial.   The judge enforced a one year convenant not to compete against an employee who had worked for Inner-Tite in Georgia.  Given Brozowski’s  relatively low salary, and the fact that he was asked to sign the non-compete after beginning work for Inner-Tite, this contract would not have been enforceable under the various proposed Massachusetts non-compete statutes.  Either ground would have invalidated the agreement.  This was a tough outcome for the former employee, and one which might have had a different outcome in Suffolk, Middlesex or Norfolk counties, which tend to have more liberal leanings in these cases.

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Jury Consultants post – Rajaratnam: Are They Worth It?

by Lee Gesmer on May 26, 2011

Jury Consultants post – Rajaratnam: Are They Worth It?

I was interested to read the The Wall Street Journal’s report that Raj Rajaratnam spent $300,000 on jury consultants before the trial in which he was convicted on all 14 counts of securities law violations.  As my teenage daughter might say, “fail”!

OK, I admit that I’m being a bit unfair.  From everything I read in the press regarding this trial it would have been astounding if Mr. Rajaratnam had been acquitted. After all, the government had something quite rare in insider trading cases: audiotapes of the defendant, convicting him with his own words.  A jury consultant “fantasy team” comprised of Sigmund Freud and a certified psychic probably wouldn’t have been able to help in this case.

Nevertheless, it’s no great surprise that Raj’s attorneys chose to use jury consultants in this case.  $300,000 was a drop in the bucket given the “spare no expense” approach taken by defense counsel in this case.  Mr. Rajaratnam”s lawyers undoubtedly concluded that jury consultants might help, and couldn’t hurt.  The decision to utilize jury consultants probably was a prudent step in minimizing future regret.  (“If only we had used a jury consultant our client might not have been convicted! Darn.”).

Trial lawyers have long been deeply divided on the question of whether jury consultants are “worth it.” Some of the consultants’ recommendations in this case  (as reported in the WSJ), are so obvious that it your lawyer doesn’t know them without a jury consultant’s advice, get a new lawyer.  For example, the Journal reports that the consultantants concluded that jurors who were members of ethnic minority groups were more sympathetic to Mr. Rajaratnam, who was born in Sri Lanka.  Hmm . . . . did OJ’s lawyers need jury consultants to tell them that people of color might be more favorably disposed to OJ than whites?  I hope not.  Lawyers shouldn’t need jury consultants to tell them that people are predisposed to like people  like themselves.  If my client is an ultra orthodox Jew, I want a jury of the same.  If my client is a native American . . . . well, you get it.

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How to (or Not to) Write for the Supreme Court

by Lee Gesmer on May 20, 2011

How to (or Not to) Write for the Supreme Court

“I’m sorry this letter is so long, I didn’t have time to make it shorter.”
— George Bernard Shaw

Non-lawyers see lawyers arguing before judges on television and in the movies, and they get the mistaken impression that oral argument is the heart and soul of lawyering.  In fact, it’s not.  Most judges based their decision on a careful reading of the legal briefs submitted to them.  That’s particularly true of the Supreme Court, where each side to a case may spend hundreds or thousands of hours preparing their written briefs, and get all of 30 minutes per side for oral argument.  This wasn’t always the case – until the mid-1800′s the time for argument was unrestricted, and could go for days.  In 1849 the time per side was limited to two hours.  This was reduced to one hour in 1925, and 30 minutes in 1970.  And, as Justice Alito recently noted, half of the words spoken during those 30 minutes are spoken by the Justices themselves, while questioning the lawyers.

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Trial Practice: If You Can’t Fix It, Feature It (or at least mention it before the other side does)

by Lee Gesmer on May 14, 2011

Trial Practice: If You Can’t Fix It, Feature It (or at least mention it before the other side does)

One of the oldest, most hoary rules of the trial practice is this: if you have a bad fact, reveal it to the jury before your opponent does.  Otherwise, the theory goes, the jury (or judge) will think you are trying to hide it from them, and will count it against you. Worst case, you will lose credibility as an advocate – if this lawyer will try to hide a significant fact from me this time, what else is he or she hiding?  Why should I trust this attorney?

Disclosing the bad fact is OK, but even better, figure out some way to turn the “bad” fact to your advantage – “if you can’t fix it, feature it.”  For example, “my client was convicted of criminal fraud ten years ago.  We want you to know about this, jurors, and to know that he has paid his price to society, and been free of any allegations of wrong doing since.  Since then he has married, he is the father of triplets, and he hasn’t gotten into trouble since.  We all make mistakes – don’t hold this one against him.”

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Apple, Google, Have You No Shame? Really!

by Lee Gesmer on October 1, 2010

Apple, Google, Have You No Shame? Really!

While the debate over whether Massachusetts should adopt a law restricting the enforceability of non-compete agreements rages on (well, at least among a group of maybe 100 economists, lawyers and business people), California proudly observes that noncompete agreements are unenforceable in that state (except under very limited circumstances).   And, economists argue, that is one reason why the high-tech industry in Silicon Valley is more successful than its counterpart Massachusetts.

Now, come to learn, things were not quite what they seemed.  I’m sure that 99% of California companies are in fact impacted by the California law — that is, they cannot impose covenants not to compete on their employees.  But a few companies — Google, Apple, Pixar, Adobe, Intuit and Intel — figured out an end-run around this law.  Apparently, the Federal Trade Commission tumbled to the fact that each of these companies agreed, with one or more of the others, not to solicit that company’s employees. For example, according to the FTC Apple and Google put each others employees on “Do Not Call” lists.

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Runescape Copyright and CFAA Case Fails at Preliminary Injunction Stage, But Runescape is Not Down for the Count: Jagex v. Impulse Software

by Lee Gesmer on September 25, 2010

Runescape Copyright and CFAA Case Fails at Preliminary Injunction Stage, But Runescape is Not Down for the Count: Jagex v. Impulse Software

A decision in Jagex v. Impulse Software, issued by Massachusetts U.S. District Court Judge Gorton in August, has some interesting (albeit not nonobvious) lessons for software developers seeking to protect their websites from copying or reverse engineering.  The decision arises in the context of a preliminary injunction – a request by Jagex to provide it with legal relief at the outset of the case, before discovery or trial – so Jagex may yet prevail in this case, particularly since most of the reasons the court denied it relief that this stage can be corrected before the case progresses much further.

The plaintiff, Jagex operates an online role-playing game called “Runescape.”  Runescape is a “massively multiplayer online role-playing game” (MMORPG for short, but we’ll just call it “the game”).

Impulse offers online cheat tools – software that lets users advance through the levels of the game without actually playing the game.  Moving to higher and more challenging levels is the goal of the game, and the Impulse software allows users to reach those hallowed grounds without investing the time and effort the game expects users to endure.  And, it is possible to invest a great deal of time and effort with this game – Judge Gorton noted that the top three Runescape players averaged about 20,000 hours of playing time.

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Hey Dude, That Program’s Mine! Vernor v. Autodesk

by Lee Gesmer on September 17, 2010

Hey Dude, That Program’s Mine! Vernor v. Autodesk

You’re out cruising garage sales on a hot summer Sunday morning when you spot an unopened copy of AutoCAD sitting on a card table for $40 – 40 buckeroos for a program people spend $700 for new.  Yeah, it’s a couple of versions back, but you figure you can get $340 for it on eBay, and not break a sweat.  You buy it from the clearly clueless seller, and the next thing you know you’re watching bids come in at over $300.  Except that Autodesk, proud owner of this high-end computer aided design program, objects.  You don’t own that program, they say, we licensed it to the original seller, and she had no right to sell it, no right at all.  You are infringing our copyright by reselling the software, so take it off eBay right now, Autodesk’s lawyers insist in a hand delivered, “sign-here-to-acknowledge-receipt-sir” letter.  In the meantime, they’ve sent eBay a DMCA take-down notice and eBay has killed your sale.

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Decision in Viacom v. YouTube: Dog Bites Man (Mark Cuban was wrong)

by Lee Gesmer on June 25, 2010

Decision in Viacom v. YouTube: Dog Bites Man (Mark Cuban was wrong)

Despite all the hoopla, this week’s copyright decision in Viacom v. YouTube (link on Scribd) was predicatable – a decision in the opposition direction would have been a shocker.  Viacom accused YouTube (owned by Google) of massive copyright infringement.  The court dismissed the case on summary judgment in favor of YouTube.

Of course, there is no question that copyright infringement is taking place on YouTube every instant of the day.  The court noted that video is being uploaded to YouTube at the rate of 24 hours per minute.  My calculator tells me that this is over 12.6 million hours of video per year.  It’s no secret that people are uploading copyright material at a fantastic rate – a search of YouTube will find that almost any popular song can be located.  it’s a simple matter to download the clip (either video of just audio), and share it with friends or on peer-to-peer networks.   YouTube “ground zero” for online copyright infringement.

However, as I’ve noted in the past, the Digital Millenium Copyright Act – the DMCA – is a federal law that protects publishers such as YouTube as long as they follow the DMCA’s “notice and take-down” procedures (aka “whack-a-mole”), which YouTube has faithfully done.  Thus, YouTube was able to claim that it followed “the letter of the law” and therefore its conduct fell within this statutory safe harbor.

Southern District of New York Federal District Court Judge Louis L. Stanton rejected Viacom’s argument that YouTube was aware of, and ignored, massive copyright infringement by YouTube users.  The DMCA, the judge held, does not permit Viacom to establish liability based on “a general awareness that there are infringements.”   The DMCA requires specific knowledge, and when YouTube had that knowledge (usually based on notice from Viacom), it “took down” the copyrighted work.

The atmospherics of the case were also helpful to YouTube.  Unlike music sharing sites like Grokster, which were shown to have been aware of infringement but turned a blind eye to it (See Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913 (2005)), there were very few “smoking gun” emails uncovered by Viacom in discovery, so YouTube was able to credibly argue that it was not encouraging or turning a blind eye to infringement.

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Don’t Mess With Texas

by Lee Gesmer on May 14, 2010

Don’t Mess With Texas

I’ve written before about how generous juries in the federal courts in the Eastern District of Texas (EdTX) are to patent plaintiffs. (link).  After I wrote about this a year ago there was a feeling that this trend might be reversing itself. However, Johnson & Johnson’s $1.6 billion judgment against Abbott and i4i’s $200 million verdict against Microsoft last summer put an end to those thoughts.

So, when Apple, Sirius XM and others were recently sued for patent infringement in EdTX they quite naturally looked for a way out.  Massachusetts, they told the Texas district court, was a far better choice, particularly when you considered the fact that that the patent owner, a non-practicing entity, had set up a Texas company shortly before filing suit, and located its business in the offices of its Texas lawyers.

But, it’s not that easy.

After the EdTX trial court refused to transfer the case to Massachusetts, Apple and its co-defendants filed a “mandamus” with the Federal Circuit.  Mandamus is a rare procedural tool.  Its a way to ask a court (typically an appellate court) to take an action that isn’t really an appeal (because the there is no final judgment), and no specific statute authority authorizing interlocutory appeal. I think it fair to say that fewer than one in a hundred lawyers has ever filed a “writ of mandamus,” (more likely fewer than one in five hundred).

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Mass Moca Loses to Büchel Under VARA

by Lee Gesmer on March 10, 2010

Image courtesy of Wikimedia.org

Nice post title, eh?  Mass MoCA is the Massachusetts Museum of Contemporary Art Foundation a contemporary art museum in North Adams, MA.  Christoph Büchell is a Swiss “installation artist.”  Think very large, very avant-garde.  The New York Times describes his work “dense, fraught creations, which compress masses of material and objects into historically charged labyrinthine environments through which viewers walk, climb and crawl.”   Wow.  Sounds just right for good old, left-leaning western Mass.  Not.

VARA is the Visual Artists Rights Act, a section of the U.S. Copyright Statute that gives grants artists “moral rights.”   For example, part of the law provides that the author of a “visual work” has -

the right to prevent the use of his or her name as the author of the work of visual art in the event of a distortion, mutilation, or other modification of the work which would be prejudicial to his or her honor or reputation

The First Circuit held that the Museum violated this right when, after installation of a work that called for, among other things, according to the Times, “a burnt-out fuselage of a 737 airliner” it displayed the work without the artist’s consent.   That is, the artist stormed off after artistic differences with the museum, and  museum prepared to present the work, entitled “Training Ground for Democracy,” like or not.  Büchel sued under VARA, lost in U.S. District Court, but prevailed in the First Circuit, which is (I suppose) more sympathetic to moral rights than U.S. District Court Judge Ponsor had been.

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My firm’s Client Advisory on Massachusetts Data Security Regulations, Which Took Effect (at long last) on March 1st

by Lee Gesmer on March 3, 2010

Image via Purples Log / Flickr

My partner Joe Laferrera has been incredibly active in connection with the Massachusetts Data Security Regulations, which took effect on March 1, 2010 after multiple delays (initial deadline was January 1, 2009; second deadline May 1, 2009; third deadline January 1, 2010).

Among other things, Joe has co-chaired the Boston Bar Association Privacy Committee last year and this, and organized what seems like countless programs on the regulations.  He has also spoken to legal and business groups around the country on the topic (example of presentation materials here, and White Paper here).

Continue Reading My firm’s Client Advisory on Massachusetts Data Security Regulations, Which Took Effect (at long last) on March 1st

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