June 2007

Supreme Court Changes the Rules on Vertical Price Fixing

June 29, 2007

As recently as 1977 virtually all “vertical restraints” were per se illegal under the federal antitrust laws. This included “nonprice” restraints, which are agreements between firms operating at different levels than the manufacturer that restrict the conditions under which firms may resell goods. An example might be a restriction on the locations from which a retailer may sell a manufacturer’s product. Supreme Court precedent also restricted both vertical “maximum” price restrictions (example: “you may not price this product higher than $12/unit”) and vertical “minimum” price restraints (example: “you may not price this produce at less than $10/unit”). However, over the last 30 years the Supreme Court has, in effect, withdrawn each of these antitrust prohibitions, holding that these restraints must be subject to the “rule of reason” (requiring an economic examination in every case to determine whether the harms outweigh the benefits), rather than the per se doctrine (per se illegal = automatically illegal; no excuse will do). In 1977 the Supreme Court dropped the per se rule on “nonprice” restraints in the case of Continental T.V., Inc. v. GTE Sylvania, Inc. I had the pleasure (is there an emoticon for sarcasm?) of writing a Law Review Note on that case: Sylvania and Vertical Restraints on Distribution, 19 Boston College Law Rev. 751 (1978). Twenty years later, in State Oil Co. v. Khan, the second leg of this three-legged stool…

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Incase v. Timex: Rare Trade Secret Case From First Circuit

June 21, 2007

It’s rare for a trade secret case to reach the First Circuit Court of Appeals. In fact, based on a Westlaw search only about five cases dealing with trade secret issues (except in passing) have reached the First Circuit in the last ten years. So, a trade secret decision from a court of that eminence is worth noting. In Incase Inc. v. Timex Corp., Incase (a packaging design and manufacturing company based in Hopedale, Massachusetts), sued Timex after Timex commissioned Incase to design watch packaging for the secure retail display of Timex watches. After Incase designed the cases Timex bought some cases from Incase, but far fewer than had been discussed. Instead, Timex off-shored most of the manufacturing work to a Philippines company, using Incase’s designs and prototypes. The Philippine product was very similar to the Incase design. An Incase employee stumbled across Timex watches displayed in the Philippine company’s package in a Target store. Miffed, Incase began a long and arduous litigation against Timex. After a trial in federal court in Boston before Judge F. Dennis Saylor, the jury found in favor of Incase on several claims, of which only the trade secret claim is of interest here. Judge Saylor, however, took the trade secret verdict away from Incase following the trial (yes, judges can do that), holding that Incase did not take reasonable steps to preserve the secrecy…

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First Circuit Applies the CDA to Protect Lycos

June 20, 2007

I’ve written often about Section 230 of the Communications Decency Act (CDA), which protects “interactive computer services” as follows: No provider or user of an interactive computer service shall be treated as the publisher or speaker or any information provided by another information content provider And – No provider or user of an interactive computer service shall be liable on account of — (A) any action voluntarily taken in good faith to restrict access to or availability of material that the provider or user considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected � Put simply, this law allows web site operators to avoid liability for certain types of publications on their sites by people outside their control, and to police their sites as they wish. The most obvious example is any kind of bulletin or message board that allows comments by members of the public. The site operator is not the “publisher,” and therefore is not liable for tort claims, such as defamation. The First Circuit Court of Appeals recently applied this law for the first time in this circuit, in the case of Universal Communication Systems, Inc. (UCS) v. Lycos, Inc. Lycos, the owner of the Raging Bull website, allows the public to discuss the fortunes of public companies. The Raging Bull message board for UCS…

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Everything Old is New Again – The Cost of Failing to Get IP Ownership Assigned

June 19, 2007

When I began to practice in the area of technology law area in the early 1980s one of the issues we often brought up with clients was the need to get clear ownership assignment of their technology. We wrote articles about this, spoke on the topic, and generally beat the subject to death in publications and seminars. It’s surprising (but not too surprising) that seemingly sophisticated businessmen still don’t focus on this. Two cases we recently settled are illustrative of this issue. In the first case, a start-up company hired a part-time/consultant level programmer. He ultimately became an “employee,” but the company allegedly failed to fulfill some of the obligations in his employment agreement, and failed to treat him as an employee in all respects, raising an issue as to whether he truly became an “employee” for legal purposes. In any event, even under the best of circumstances, some of the programming he did occurred before he became an “employee.” After the programmer left the company under unpleasant circumstances, he claimed ownership of the software. Following substantial and expensive litigation our firm was brought into the case and we successfully settled it shortly thereafter (based on the ongoing costs of the litigation and our assessment of the risks to our client). The settlement included a full assignment by the programmer, but it cost the client a great deal of money…

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Jury Trials In IP Cases – "Not"

June 6, 2007

A few months ago I wrote a blog entry titled “Jury Trials In Massachusetts – “Not” Today I received an email/promotion from the ABA promoting some IP books and treatises. The email also contained these statistics. Since they come from the ABA IP Litigation Committee, I give them a high degree of reliability: Number of IP cases filed in 2002: 7,445 Number resolved by trial verdict: 140 That’s 1.9% of IP cases filed in 2002 resolved by trial verdict. The balance were either decided on summary judgment or settlement. Discouraging for lawyers who like to get into court, to say the least. No one can forsee the future, but it would surprise me if this trend reverses itself in the lifetime of anyone reading this post. Civil trials have become too expensive and too risky to “go the distance”. Society is rapidly coming up with ways to avoid trials in the commercial context: arbitration, mediation, better contracts and agreements to start with, higher sophistication among decision makers, and the realization that litigation is often a losers game for both side.

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