March 2009

CAFC to Patent Applicant: "Read Our Lips – We Really Don't Like Business Method Patents"

March 14, 2009

In In re Lewis Ferguson, a March 6, 2009 decision from the Court of Appeals for the Federal Circuit, the applicant sought to patent “a marketing paradigm for bringing products to market.” After the application was denied by the various levels of the Patent Office bureaucracy for lack of patentable subject matter, the applicant appealed. The CAFC court quoted this claim from the application as an example: A paradigm for marketing software, comprising: a marketing company that markets software from a plurality of different independent and autonomous software companies, and carries out and pays for operations associated with marketing of software for all of said different independent and autonomous software companies, in return for a contingent share of a total income stream from marketing of the software from all of said software companies, while allowing all of said software companies to retain their autonomy. Novel and nonobvious? It may just be me, but if this isn’t a distribution system that’s been implemented a million times, I’ll be damned. The CAFC didn’t like it either, but they didn’t even get that far. Relying on In re Bilski, 545 F.3d 943 (Fed. Cir. 2008) (en banc), the Court observed: Applicants’ method claims are not tied to any particular machine or apparatus. Although Applicants argue that the method claims are tied to the use of a shared marketing force, a marketing force is…

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Judge Posner is Not Afraid to Use the "D" Word

March 12, 2009

The redoubtable Seventh Circuit Appeals Court Judge Richard Posner (“the most cited legal scholar of all time”; “probably the greatest living American jurist”), isn’t afraid to call it as he sees it, and given Posner’s brains, experience, and economic cred as an antitrust expert, he may be more credible than your average, run-of-the-mill economist (“economists exist to make astrologers look good”). In Posner’s newest book, A Failure of Capitalism: The Crisis of ’08 and the Descent Into Depression, he states: The world’s banking system collapsed last fall, was placed on life support at a cost of some trillions of dollars, and remains comatose. We may be too close to the event to grasp its enormity. A vocabulary rich only in euphemisms calls what has happened to the economy a “recession.” We are well beyond that. We are in the midst of the biggest economic crisis since the Great Depression of the 1930’s. It began as a recession — that is true — in December 2007, though it was not so gentle a downturn that it should have taken almost a year for economists to agree that a recession had begun then. (Economists have become a lagging indicator of our economic troubles.) The word itself is taboo in respectable circles, reflecting a kind of magical thinking: if we don’t call the economic crisis a “depression,” it can’t be one. But no…

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Jerry Spence On the Art of Cross Examination

March 11, 2009
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Judge Stearns: No Market Power, No Illegal Tying

March 8, 2009

U.S. District Court Judge Richard Stearns has issued a summary judgment decision dismissing AVX Corp.’s claims of an an antitrust violation by Cabot Corporation, based on allegations of illegal tying by Cabot. A tying arrangement is where a seller says, “I’ll sell you product A, but only if you also buy product B.”  Product B is said to be “tied” to product A, the “tying product.”  A little thought and common sense would cause even an economist to conclude that if the seller doesn’t have market power in product A, rather than be forced to buy product B a rationale buyer will look around for another seller, who can sell it product A without the “tie.”  In fact, this is just the conclusion the Supreme Court reached in the Illinois Tool case in 2006. In the AVX v. Cabot case Judge Stearns noted that “AVX offers no evidence that Cabot had a sufficiently dominant market position to ‘force’ it into a multi-year purchase agreement for a product that it did not want.”  The fact that AVX was unable to satisfy this element of an illegal tying arrangement doomed its antitrust claim. If this wasn’t enough, Judge Stearns also found that AVX was unable to produce reliable evidence of damages, another essential element of its claim. Based on Judge Stearns’ opinion, it appears that AVX missed the mark in this case…

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Not Every Great Idea Is a Trade Secret

March 7, 2009

You have a brainstorm: there is a market for dumpster rentals, and what better place to make the rentals than The Home Depot? You go to Home Depot and have it sign a non-disclosure agreement before you disclose this idea to it. You disclose the dumpster idea to Home Depot executives, but after much discussion and a great deal of back and forth over several years with many Home Depot employees, Home Depot turns you down. The next thing you know, Home Depot is renting dumpsters, using a business model not too different from the one you proposed. You cry foul. You sue Home Depot in Massachusetts state court for misappropriation of trade secrets. Home Depot removes the case to Massachusetts federal district court where it grinds through a couple of years of discovery. During that process you claim that the damages you’ve suffered are between $19 and $60 million. Home Depot files a motion for summary judgment. U.S. District Court Judge Douglas Woodlock grants summary judgment. Judge Woodlock observes that the idea of renting dumpsters through Home Depot is not a trade secret. (1) the idea of Home Depot renting and (2) the idea of renting dumpsters [was not a trade secret] . . . anyone even vaguely familiar with the home improvement industry could have put these two concepts together easily based upon information in the public domain….

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Key Legal Issues Involving Downsizing and Corporate Officers in Troubled Companies

March 6, 2009

While I shy away from posting PowerPoint outlines on this blog, the materials from two talks that my partner Sean Gilligan recently gave to attorneys in our firm are sufficiently comprehensive as to be an exception. Both outlines are on scribd.com, and are embedded below: Issues Facing Officers and Directors in Financially Troubled Companies Publish at Scribd or explore others: Academic Work Business review culture Key Issues for Corporations Facing Downsizing, Insolvency or Liquidation Publish at Scribd or explore others: culture corporate

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Schumpeter, Creative Destruction and the Golden Age of Capitalism

March 5, 2009

In the late 1970s and early 1980s, the American economy was in crisis after years of stagflation. Mortgage rates were 17%, business loans carried 20% interest rates and productivity had collapsed. On April 21, 1980, Time magazine ran a cover story that asked the question: “Is Capitalism Working?” Today, the crisis that the American economic system faces is greater than that during the darkest days of stagflation. In this opinion piece, George M. Taber, former business editor of Time magazine and author of the 1980 cover story, asks and answers the same question — 29 years later. [Continue reading at Knowledge@Wharton] Taber still agrees with the final sentence of his 1980 article in Time: For all its obvious blemishes and needed reforms, capitalism alone holds out the most creative and dynamic force that any civilization has ever discovered: the power of the free, ambitious individual. And, he warns that despite the pain inflicted by the boom and bust business cycle that is the downside of unfettered capitalism — pain that we are suffering from now – well-intentioned, but unwise, changes in the nature of American capitalism could do damage that will be felt for decades . . . The American brand of capitalism rests on creative destruction, innovation and, ultimately, entrepreneurs. It is impossible to rebuild the superstructure of U.S. prosperity by destroying its foundation.

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What? Marshall, Texas?

March 5, 2009

It would be nice if lawyers didn’t have to call their clients and tell them that their company had been sued for patent infringement in the Eastern District of Texas (EdTX). “Where? Where’s that?” “What, you’ve never heard of Marshall, Texas?” you reply. “Never been to Tyler, Beaumont or Lufkin? Kind of quiet evenings after the sidewalks are rolled up, but your choice of BBQ rib joints is almost endless, and traffic isn’t a problem.” As I’ve written before EdTX has evolved into a hotbed of patent litigation, although it has cooled a bit as of late. When you’re talking to a lawyer in Boston and you learn that he or she is heading to Texas, it’s a good bet that the destination is somewhere in the Eastern District. The EdTX has assembled some frightening statistics regarding number of patent cases (large) and the success rate of plaintiffs (high). The lawyers in that part of the country joke that they used to do PI law (personal injury), and now they do IP law (intellectual property). But, everyone has known for a while that this couldn’t last forever, and that EdTX might lose its hold on patent litigation once W left office. Indeed, the patent reform litigation just filed in the House and Senate has the EdTX in its crosshairs. The Senate bill states (excerpted): A party shall not manufacture venue by…

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First Circuit Weighs in on the Law of Unjust Enrichment in Massachusetts

March 3, 2009

The terms “unjust enrichment,” “restitution,” “quasi-contract” and “constructive trust” cause the average lawyer to recoil with apprehension (although she doesn’t show it, of course). We were forced to grapple with some of these ancient legal concepts in law school, but we quickly migrated to more modern legal principles, and although we may have remembered the terms (any lawyer worth his salt can throw around the terms unjust enrichment and restitution), the depth of knowledge of most lawyers on these topics is shallow at best. We were relieved when we could move on to things like the Uniform Commercial Code, which dates back only to the early 1950′s. In fact, it’s easy to trace “unjust enrichment” and related terms back as far as the 1600s, and earlier. A search on Google Book Search reveals a volume titled “Unjust Enrichment in England before 1600.” References to Roman Law are also not difficult to find. When you start dealing with legal principles forged during the Middle Ages or Roman times, you know it’s going to be difficult. Imagine, then, how QLT, Inc., a Canadian-based biopharmaceutical company, felt when it learned that it had been sued in federal court in Massachusetts and that the outcome of the case hinged on the application of these ancient legal doctrines? That was the situation that QLT faced. Even worse, QLT found itself in the courtroom of U.S….

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Can I Say That? Based on the First Circuit’s Interpretation of a 1902 Law, Maybe Not

March 3, 2009

It’s perfectly monstrous the way people go about nowadays saying things against one, behind one’s back, that are absolutely true” Oscar Wilde “Gossip needn’t be false to be evil – there’s a lot of truth that shouldn’t be passed around.” Frank A Clark “The defendant in an action for writing or for publishing a libel may introduce in evidence the truth of the matter contained in the publication charged as libellous; and the truth shall be a justification unless actual malice is proved” Entire text of Mass. Generals Laws, Chapter 231, Section 92, enacted in 1902 —————————- “The truth is an absolute defense to a claim of defamation.”  This is something that all lawyers know, and we have told this to clients countless times.  However, we will have to temper this advice following a recent decision from the  First Circuit U.S. Court of Appeals.  The case, for reasons that should be apparent, is attracting a lot of attention. First the case, then the law, then a few brief observations. Facts of the Case Alan Noonan was an employee of Staples. After an investigation, Staples concluded that Noonan had padded his expense account, and terminated him for cause. The day after the termination a Staples executive sent the following email to 1500 Staples employees: It is with sincere regret that I must inform you of the termination of Alan Noonan’s employment…

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