I recently wrote about the Bear Stearns v. Sharon case. (See here and here). Here is a link to a Business Week article, “Bailing out of Bear,” that tells the gruesome story behind the Bear Stearns financial debacle and Bears’ suit against Doug Sharon, the star broker at Bear Stearns who left for Morgan Stanley.
Until the recent passage of a new state law (effective July 13, 2008), the Massachusetts Wage Statute contained a provision that provided for trebled damages at the discretion of the judge. An “innocent” violator had a chance of avoiding treble damages; a repeat offender was likely to get whacked.
No more. As of July 13th, treble damages are mandatory. My partner Joe Laferrera has written a Client Advisory explaining in more detail this change in the law. Click here to read the Advisory.
Lately, I’ve had a number of cases where the lawyer for a co-defendant wants to cooperate. Because this usually involves sharing attorney-client privileged information, we agree that our discussions are covered by the “joint defense privilege,” and sometimes enter into a “joint defense agreement.”
Recent discussions in this area reminded me that I never mentioned the Massachusetts Supreme Judicial Court’s 2007 decision in Hanover Insurance Company v. Rapo, where the SJC, for the first time, gave broad approval to cooperation between attorneys whose clients share a common interest. The court held (or suggested) that the “common interest doctrine,” which enables joint defense agreements, covers not only co-defendants, but co-plaintiffs, nonparties to litigation, and a party and a nonparty. A shared interest agreement need not be in writing, and the clients need not have been aware of it or consented to it. The interests of the parties need not be identical, as long as they are similar.
Not an earthshaking decision, since many attorneys assumed this to be the law, but worth a mention, now that it clearly is the law in Massachusetts.
The First Circuit has published a complex decision involving copyright preemption of a state law claim for an accounting of profits between co-authors of a copyrighted work. The case, Cambridge Literary Properties, Ltd. v.W. GoebelPorzellanfabrik G.m.b.H & Co. KG (1st Cir. Dec. 13, 2007), has a tortured procedural history. In fact, the First Circuit issued an earlier decision in the case as far back as 2002.
The case is quite complex, and involves the chain of copyright ownership in the famous Hummel figurines designed in Germany in 1931 The fundamental holding is that the federal Copyright statute bars a state law action for an accounting of profits between co-owners (co-owners of a copyright work are have a duty to account to each other for profits) because the condition precedent for that claim — co-authorship status — is premised on copyright law, which has a three year statute of limitations. Here the co-ownership claim was barred by this statute of limitations.
First Circuit Judge Conrad K, Cyr, who recently assumed senior status on the First Circuit, wrote a strong dissent, calling the majority’s decision “unprecedented and potentially pernicious,” and arguing that the majority improperly interposed federal law to frustrate what was properly a state law issue.
This case addresses some very thorny issues involving the intersection of federal copyright law and state law claims, and will bear close scrutiny by litigants whose cases raise issues of federal preemption or state-federal jurisdiction.
Investments by angel groups have become too complicated. As groups get more aggressive in pursuing profits, and seek more protection against downside risk, their deals have become as complex as venture capital deals. This complexity costs time and money, reducing the benefit to both investors and companies. By streamlining the transaction structure, angel groups could simplify negotiations, shorten the time it takes to do a deal, reduce transaction costs, put more money to work building new companies and ultimately improve their own returns.
Click here to continue reading this article, by my partner Bill Contente, which was published in the November 9, 2007 issue of the Boston Business Journal.
And, as long as I’m shamelessly showing off all the brilliant people I’ve been able to surround myself with, here is an article recently published by my partner Andy Updegrove in the October 26, 2007 issue of Mass High Tech:
How often have you heard it said that “patents foster innovation?” That phrase rings true in pharmaceuticals, where investment requirements are enormous and failure common. But does it also apply in areas such as software? Does it really take the promise of a legal monopoly to motivate a typical founder or CTO to innovate? And what about the advantages patents give big companies over emerging ones, simply because the former can credibly threaten expensive patent litigation while the latter cannot?
Click here to continue reading Measuring the Value of Software Patents Versus Innovation.
ScotusBlog is, in my view, an example of just how good a legal blog can be. A group of lawyers at Akin Gump, assisted by attorneys at several other firms and universities, provide in-depth, daily briefing and commentary on the Supreme Court of the United States (SCOTUS). If you are inclined to follow the Supreme Court, this is the first place to go. You may never need to go elsewhere.
Now ScotusBlog has added ScotusWiki, a companion site that provides comprehensive information on each SCOTUS case and will, presumably, allow universal editing, a la Wikipedia.
However, even in its current, nascent form the wiki is facsinating. The editors dedicate a page to each case, where they provide a case summary and links to all of the briefs, and more, for each case. For example, here is a link to the page dedicated to Stoneridge v. Scientific-Atlanta, a case that received enormous attention leading up to oral argument. The issue was under what (if any) circumstances private investors can sue accountants, lawyers, financial advisors or other businesses that allegedly participate in a scheme to violate the federal securities laws. The wiki page dedicated to this case includes the opinion below, the cert petitions, the briefs on the merits (including the many amici briefs), a summary of the issues, a link to the oral argument transcript, and articles, blogs and podcasts concerning the case.
This is a resource that could scarcely been imaginable only a few years ago.
I’d fallen behind on some reading, but in catching up I noticed two copyright “fair use” cases that I thought were pretty interesting.
The first was decided by the 9th Circuit Court of Appeals in California. This case is similar to a situation that we encounter often, but on a scale that I’ve never seen before. Briefly, the L.A. County Sheriff’s Department entered into a license that allowed it to make approximately 3600 copies of a software program on its computers. Through inadvertence, poor record keeping, or poor supervision, the Sheriff’s Department installed the software on approximately 6,000 computers. Exceeding the scope of a license is copyright infringement, and the software owner so claimed. The Sheriff’s Department’s main line of defense was that it’s actions were “fair use.” In all the cases I’ve handled of this nature, it had never occurred to me to assert a fair use defense, and I don’t regret my failure to come up with this imaginative defense. The Sheriff’s Department lost on all of the “fair use factors.“
Amazingly, this case went through trial and then appeal, with the Sheriff’s Department losing at every stage, and the software owners being awarded a fairly large judgment for its troubles. This is representative of how difficult it is to sue a government entity. They often will fight long beyond the point that a private defendant would have recognized the economics of the situation and settled the dispute.
Rex non potest peccare. A link to the full decision is here.
The second case involved the publication of a 480 page coffee-table style book that is a chronological history of the Grateful Dead. The book, entitled Grateful Dead: The Illustrated Trip, contained around 2000 images and illustrations. Unfortunately for the publisher, it included seven images from Grateful Dead event posters and tickets owned by the Bill Graham Archives (Bill Graham, the famous rock promoter died in 1991; his archives are now owned by Wolfgang’s Vault).
Although the book publisher had attempted to license the seven images before publication, it had been unable to strike a deal with the Bill Graham Archives. Regardless, the publisher used the images, apparently hoping to plead copyright fair use, should it be forced to defend its actions.
After the Bill Graham Archives brought suit for copyright infringement, the federal district court in New York dismissed the case based on the fair use defense. The second circuit upheld this decision after engaging in a fairly exhaustive analysis of the fair use doctrine in this context. Critical to the court’s conclusion was the fact that the chronological arrangement of the images was “transformative,” that their use in the book emphasized their historical value, and that the images were used in reduced form.
Decision here.
In my opinion, the federal appeals courts were “two for two” in these fair use decisions.
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 of their design. To wit, Incase never told Timex the design was confidential and never had Timex sign an NDA.
Clients often ask us to advise them on the tension between showing a confidential idea to a potential investor/customer/distributor who refuses to sign an NDA, and by doing so losing trade secret rights to the idea, or not revealing the idea at all and losing the commercial opportunity. This case shows that the risk of misplaced trust can be significant.
A careful study of this case also shows that seemingly still waters run deep in this area of business practice, and that businesses on either side of the transaction should be guided by competent counsel, lest they get caught in currents similar to those that snared both Incase and Timex.
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.
Tim Wu and Stuart Sierra, a Columbia Law School professor and web designer respectively, have launched Project Posner, a web site offering unheard of access to Judge Richard A. Posner‘s legal opinions, in searchable format. And yes, the creators — who are certainly not alone in this view — pronounce that “Richard Posner is probably the greatest living American jurist.”
If, however, you still find yourself wondering: why should I care?, Project Posner has you covered. Project Posner offers the following explanation for its existence:
… While Posner’s books and popular writings are easily available to the public, his opinions are difficult or expensive for the public to access, let alone search. This site, for the first time, collects almost all of his opinions in a single searchable and easily readable database.
For lawyers and those interested in law, Posner’s opinions have a particular substantive value. One thing that distinguishes the opinions is the effort to try and get at why a given law actually exists, and an effort to try and make sense of the law. That can make them more useful than most case reports.
In addition, the opinions often develop the American general and state common law. Posner is among the judges who feels free to take the rule of Erie as more suggestion than injunction.
Finally, some of the opinions are funny.
If you’re still not satisfied (or you’d like to learn more about Judge Posner), take a look at his University of Chicago Law School faculty biography, his personal site, the Becker-Posner blog (maintained jointly with Gary S. Becker, American economist and winner of the 1992 Nobel Prize) or see what Wikipedia has to say. Posner’s professional accomplishments are second to none and his writings are as diverse as they are prolific. Notwithstanding, the proof, as they say, is in the pudding. And this is why Project Posner is a gold mine where the digging is easy.
Update: all of the websites highlighted above have stopped publishing or faded into history
Laurence H. Reece, III, was a partner at our firm for two years at the end of the 1990s. Following that, he started his own firm in 2000. Larry died of cancer in August 2004.
Larry was the “Dean of the Bar” in Massachusetts when it came to the law of trade secrets and covenants not to compete. He was a nationally recognized expert in these practice areas and a prolific author, writing seminal articles on these topics.
Life moves on, and out of concern that these articles would turn to dust on the bookshelves and in the libraries of Massachusetts attorneys, I asked Larry’s wife, Patricia Manson, for permission to publish some of Larry’s best articles on this blog. She agreed enthusiastically. While the copyrights to these articles belong to the publishers, I believe that this nonprofit, educational publication falls well within fair use. (Warning: these are lengthy PDF files).
This was, and remains, the seminal article on trade secret law in Massachusetts.
This is the counterpart to the 1986 article.
An update on noncompetition agreements.
A valuable and comprehensive guide to trade secret protection programs.
A 2003 comprehensive update to the 1991 article.
These articles remain an important and valuable resource for lawyers and judges in the state, and I hope that they will prove useful, and help keep Larry’s memory alive.
Courts. Although Allan van Gestel’s recall to the Suffolk County Business Litigation Session received moderate publicity last year, both Thayer Fremont-Smith (bio) and Hiller Zobel’s recall this year has received almost no attention at all. If these recalls were reported by Mass Lawyers Weekly, I can’t find it. Both judges are sitting in Middlesex for now.
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Lee Gesmer