Can a company introduce an improved product if it knows doing so will take sales from its competitors?   “Well, of course,” you say.  “Isn’t that called competition?”  In the near future, the Second Circuit will have to answer this question.  Hopefully it will agree. 

In People of the State of New York v. Actavis PLC, No. 14-4624, the New York Attorney General attacked a practice known as product reformulation, or more often by its unfortunate moniker, “product-hopping.”  This practice describes the roll-out by a branded pharmaceutical company of an improved version of a patent-protected drug combined with the discontinuance of the older drug at or near the time the patent will expire.  The effect of this action is to neutralize the impact of state substitution laws – which either demand or permit the substitution by pharmacists of a generic version of the branded product.  State substitution laws, combined with other pricing pressures from third-party payers (e.g., insurance companies), typically shift a monstrous share of the market for a pharmaceutical (80 percent or higher) from the innovator to the generics at the expiration of the patent.

The case currently is before the Second Circuit on an emergency motion due to the district court’s unprecedented decision to impose an injunction on the defendants, Actavis plc and Forest Laboratories (collectively referred to as “Forest Labs”) requiring that they continue to manufacture and market the older version of the drug until after the patent expires.  Oral arguments were heard by a three judge panel in mid-April.

The Second Circuit has the opportunity to address some interesting issues.  First and foremost, where does one draw the line between Trinko’s dictate that there is no duty under the antitrust laws to assist competitors, and Aspen Skiing’s holding that there could be in certain situations?  

Recall that in Trinko it was alleged that the defendant actually violated its regulatory obligations to aide its competitors.  Despite this fact, the Supreme Court found for the defendant telephone company.  Here, there is no allegation that Forest Labs violated any such regulation or law.  Perhaps this case ultimately will give the Supreme Court the opportunity to demonstrate just how much it regrets Aspen Skiing.

Almost as important, should courts subject companies to antitrust liability where there are no clear rules to guide conduct? The Supreme Court has made it quite clear in Trinko and again in linkLine that this is not a great idea.  The underlying rationale is obvious.  Unclear rules of engagement dilute companies’ competitive vigor, lest they inadvertently cross some inchoate line.         

Unlike some of the prior product-hopping cases where there were allegations of other predatory conduct – such as delisting or raising questionable safety concerns about the older product – the current case is relatively “clean.”  Forest Labs rolled out a new product with apparent benefits and sought to effectively discontinue its older product within months of the expiration of the patent.  It also appears from the district court opinion that Forest Labs made no bones about why it did this. It did it to neutralize the impact of the state substitution laws.  Other than the reformulation and withdrawal, there do not appear to be any other allegations of any real predatory conduct.

Just as Trinko has impacted conduct outside the telecommunications industry, the Second Circuit’s opinion likely will impact more than just pharmaceutical companies.  Putting aside my view as to the proper outcome, let us hope that – whatever the Second Circuit decides – it provides some clear guidance and avoids imposing subjective standards such as those advocated in a 2012 FTC amicus brief filed in Mylan v. Warner Chilicott.

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New EU Regulation on Antitrust Damages

Posted on January 9, 2015 02:51 by Ana Flores

The new EU regulation on antitrust damages is in force since the 25th of December 2014; the deadline for the transposition of this Directive is December 27th, 2016. 

It is the first specific regulation on this issue within the EU, thus a big step to reinforce the effectiveness of antitrust regulation by mean of making easier to individuals (consumers and companies, especially SME) to claim compensation before national courts for the harm caused to them by an infringement of those provisions.

The main changes introduced by the new regulation are: i) clarification of the legal consequences of “passing-on” and of the terms of “passing-on defence”, a legal construction of USA Law which had been already admitted and applied by EU Courts (e.g. in Germany Case ORWI, in Spain Case Sugar Cartel); ii) final decisions of a national competition authority will constitute prima facie evidence of infringement before the Courts of other Member States; iii) explicit recognition of the right to full compensation of the harm; iv) easier access to evidence, including the possibility of a judicial order requesting to other parties or third parties disclosure of documents if they are proportionate and provided that confidential information is duly protected; v) limitation period to claim damages will be 5 years since the victims have the possibility to discover that they have suffered harm, but this period will be suspended if a competition authority starts infringement proceeding and after final infringement decision the victims will have 1 year to bring damages claims; vi) presumption that cartels cause harm if no opposing evidence is offered. 

Update: on November 24, 2014 the Brussels Commercial Court has rejected a claim of the European Commission for damages caused by four Belgian elevator cartel members due to lack of evidence. The result might have been different under the presumption that cartels causes damages according to Art.9 2 EU Directive on Antitrust Damages Claims.

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Categories: Commercial Litigation | Damages

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The Seventh Circuit has issued an opinion in City of Greenville, Illinois, v. Syngenta Crop Protection LLC, which limits the presumption of public access to non-privileged documents filed with a court to only those documents that influenced or underpinned a judicial decision. 

In City of Greenville, environmental groups intervened to seek access to the defendant's internal emails and business deliberations that plaintiffs had filed in opposition to a motion to dismiss. A protective order entered by the district court did not apply to materials filed in connection with a dispositive motion. The Seventh Circuit refused to permit access to uncited documents that were not considered by the district court in ruling on the motion to dismiss explaining "the presumption of public access turns on what the judge did, not on what the parties filed."  Because the documents did not affect the district court's decision, the Seventh Circuit held they need not be disclosed to the public. 


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DRI Online Communities

Posted on May 22, 2014 02:28 by Admin

On May 21, DRI rolled out the new committee online communities.  The new communities will enhance DRI’s web presence and will allow committee members to connect with each other and share information more easily.  Each community will have a discussion list, which will replace the current list serve, as well as a document library, blog, and calendar.  Committees will also be able to post announcements about their seminars and publications, and promote open positions and volunteer opportunities.  All posts are sent to members as a daily digest from the communities, unless a member changes his or her settings to real-time delivery.   The communities are designed to be the hub for all committee activity. 

There are six substantive law committees serving as the pilot group: Commercial Litigation, Employment and Labor Law, Product Liability, Women in the Law, Workers’ Compensation, and Young Lawyers.  Additional committee communities will go live over the course of the year.

Members can access the communities through the DRI website, www.dri.org  (there is a new link in the top blue navigation bar).  Committee members are automatically members of the respective community and are being notified via email. Members should call (312) 695-6221 if they are having trouble logging in to the site.


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An important federal appeals court has determined that a Connecticut court has jurisdiction over a Canadian citizen whose only act in Connecticut was accessing information on a computer server located in Connecticut.  In MacDermid, Inc. v. Deiter, 702 F.3d 72 (Dec. 26. 2012), a Connecticut-based company, MacDermid, Inc., sued its former employee, Deiter, a Canadian citizen who worked from Canada, in federal court in Connecticut for misappropriation of MacDermid’s trade secrets.  MacDermid alleged that Deiter sent confidential company information from her company email account to her personal email account.  The lower court dismissed the case, saying that Connecticut courts did not have jurisdiction over Deiter because she never set foot in Connecticut and only used a computer terminal in Canada.  MacDermid appealed.  The U.S. Court of Appeals for the Second Circuit, in New York, reversed, holding that it was proper for a Connecticut court to exercise personal jurisdiction over a Canadian employee of a Connecticut company because, even though she was located in Canada and physically interacted only with a computer in Canada, she “used” a server in Connecticut.


Background

MacDermid is a chemical company located in Connecticut.  Dieter, a resident of Ontario, Canada, worked for MacDermid’s Canadian subsidiary.  The email system for both MacDermid and its Canadian subsidiary is located on a server in Waterbury, Connecticut.  Just before Dieter was about to be fired, she forwarded what MacDermid claims is confidential information from her MacDermid email account to her personal email account.  In doing so, Dieter accessed MacDermid’s email server in Connecticut, even though she did so while located in Canada and physically interacting only with her computer terminal in Canada (albeit a company computer).  MacDermid sued Dieter in Connecticut for trade secrets misappropriation, and Dieter moved to dismiss, arguing that Connecticut courts did not have jurisdiction over her, as she had never left Canada.  The issue was whether the Connecticut “long arm” statute gave Connecticut courts jurisdiction over someone outside of Connecticut, and whether such jurisdiction would be constitutional.  One section of the “long arm” statute gives Connecticut courts jurisdiction over someone who “uses a computer” or “a computer network” located in Connecticut.  Therefore, the issue became whether accessing email via a server located in Connecticut constituted “using” a Connecticut computer or network.

Analysis

The lower court dismissed the case because it found that Dieter had not “used” a Connecticut computer or Connecticut computer network, but had only sent email from one computer in Canada to another computer in Canada.  The Second Circuit court disagreed.  It concluded that “using” a computer or network may involve more than just the act of physically interacting with a computer.  While Dieter had physically interacted only with her terminal in Canada, she had “used” MacDermid’s network in Connecticut by accessing it electronically when she sent an email from her company account to her personal account.  The Second Circuit pointed out that the “long arm” statute does not require that user be located in Connecticut, but only that the computer or network – i.e., the thing that is “used” – be located there.  In other words, the “long arm” statute extends to people who access Connecticut computers or networks remotely.

But, having determined that Connecticut’s “long arm” statute extended to Dieter, the Second Circuit still had to determine whether exercising jurisdiction over Dieter would be  constitutional.  It found that it was.  The court found that Dieter knew that, in using MacDermid’s email system, she was accessing a server in Connecticut.  Even though Dieter would have to travel from Ontario to Connecticut to defend herself in the lawsuit, that would not be an unreasonable burden on her.  Furthermore, according to the court, Connecticut has a significant interest in interpreting its misappropriation laws.  The Second Circuit concluded that it was proper for Dieter to be sued in Connecticut for the wrong she was alleged to have committed.

Implications

While this decision was based on Connecticut law, the Second Circuit federal appeals court covers New York, Connecticut, and Vermont.  Moreover, it is considered an important authority on commercial law.  So its analysis on personal jurisdiction could be persuasive in other courts.

Lesson

The lesson here is that if you think you are safe from suit in a particular state in the U.S. just because you access a computer from the comfort of a faraway state – or even, as in this case, another country – you might be gravely mistaken.

Walter Judge is a litigation partner at Downs Rachlin Martin PLLC who blogs on intellectual property litigation topics
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The recent experience of the passengers the Carnival Triumph debacle once again raises the question of remedies sought and available for cruise passengers who suffer harms while at sea.  As with the Costa Concordia shipwreck a year ago, and with most hospitality-related providers, there are limitations on how and what guests can recover.  Forum selection clauses, of a similar type to what most of our clients use, frequently limit where suits can be brought.  For cruise passengers, who frequently travel from another location to the port city, the limitation on permissible fora can be an insurmountable hurdle to bringing suit.  For the passengers on the Triumph, any claims face the additional obstacle that recoveries are likely limited to only those individuals who suffered some physical harm as a result of the incident. 

These limitations are once again causing outrage among some who believe that the recourse of cruise passengers is too limited.  But before jumping on that bandwagon, it is important to consider the consequences of opening the floodgates to more claims.  For example, invalidating the forum selection clauses on cruise ship agreements could also open up hospitality providers like ski resorts or amusement parks, to claims far outside their operating jurisdictions. 

Extending the ability of a party to recover damages for emotional “injuries” without any physical harm could also dramatically change the legal landscape.  Would that allow individuals who claim to receive a “bad” dinner or view an “offensive” show the ability to recover damages for their claimed emotional injuries even without a physical harm?  Even with limitations for only egregious conduct, the implications could be far-reaching for those throughout the hospitality industry and beyond.

It seems as though Carnival is attempting to thwart the legal onslaught, and possibly the push for legal changes, by offering full refunds to passengers plus cash and a voucher for future travel.  We will see if it is enough.  In the meantime, I wonder if those vouchers are transferrable? 

Cynthia P. Arends, carends@nilanjohnson.com


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What does Rocky Mariciano, one of the greatest heavyweight boxers of all time, have to do with evidentiary privileges? Plenty, as it turns out, for it was a libel case arising from Mariciano’s comments following his famous 1952 fight against Jersey Joe Walcott that solidified the then-evolving theory that the government-information privilege applies in civil actions.

The Government-Informant Privilege

The government-informant privilege protects from compelled disclosure the identity of persons, or informers, who supply information about legal violations to the appropriate law-enforcement personnel. Despite the name’s implication, the privilege belongs to the government, not the informer, but protects informers from retaliation or retribution and encourages citizens to communicate their knowledge of violations of law to government officials.

The privilege is qualified, meaning that it may be overcome upon a sufficient showing of need by the defendant. In a landmark decision, the Supreme Court in Roviaro v. United States, 353 U.S. 53 (1957), explained that the privilege must “give way” when disclosure of the informer’s identity is relevant and helpful to the defense or is essential to a fair determination of the cause. And to determine whether either of these standards is met, courts must balance the public’s interest in keeping the informer’s identity confidential against the defendant’s right to prepare a defense.

There is no fixed rule on when disclosure is required; courts must make the assessment on a case-by-case basis,and have sole discretion to determine whether the evidence justifies disclosure.  The court must consider several factors when balancing the competing interests, such as the crime charged, the possible defenses, significance of the informer’s testimony, and danger to the informant if his identity is revealed.

Does the Privilege Apply in Civil Actions?

The government-informant privilege is routinely asserted in criminal cases, with the typical situation involving a criminally accused seeking to discover the identity of the informer who provided police with the tip that led to the accused’s arrest.  But the question arises whether this privilege may be applied in civil actions and, if so, whether the same standard governs the privilege.

The situation can arise in two situations.  First, a plaintiff may seek disclosure of an informer’s identity during a civil action against the government, such as a civil rights action under 42 U.S.C § 1983.  Similarly, a party involved in a civil action against another private party may seek third-party discovery from a law-enforcement agency.  Second, the question arises whether private entities may assert the government-informant privilege to preclude disclosure of a whistleblower, or one who reported misconduct up the corporate chain of command in addition to a regulatory enforcement agency.

In the latter situation, most courts hold that the privilege does not apply where the whistleblower’s identity is sought from the private entity, but in the former situation, most courts hold that the privilege applies where the informer’s identity is sought from a governmental agency.  And a case involving one of the greatest fights–and knockout punches–of Rocky Marciano’s career illustrates the point.

Rocky Marciano & the Greatest Punch of All-Time

With a record of 49-0, Rocky Marciano is the only boxer to retire as heavyweight champion with an undefeated record and is recognized as one of the greatest boxers of all time.  Marciano won his title on September 23, 1952 when he defeated reigning champion Jersey Joe Walcott by a Round 13 knockout.  Marciano later described the knockout punch as “the best punch I ever landed,” and boxing historians generally agree that Marciano’s punch was one of the greatest punches in all of boxing history. 

As originally posted on November 27 on Presnell on Privileges
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ON YOUR MARK…., GET SET…., SHOP!

Posted on November 15, 2012 02:17 by Philip M. Gulisano

With the start of the holiday shopping rush just a week away, retailers should be mindful of their responsibility to keep customers safe when large crowds gather to take advantage of well-advertised and highly-anticipated sales. Customers, drawn by the promise of “doorbuster savings” and warned of limited quantities, do not always act in the most courteous manner when rushing to enter the store and running toward the products they desire.  Sadly, it has become all too common for injury, whether accidental or intentional, to occur as customers dash into and through stores during these special sales, and when a customer is injured during the clamor, a retailer can be held liable.

Although the law varies from state to state, in many states, a retailer’s duty to use reasonable care to protect customers from reasonably anticipated injuries includes foreseeing that large crowds might gather due to the advertised sales and that individuals might be injured due to the overcrowding, the congestion at the door, or the unruliness of the other customers.  Consequently, a retailer may be held liable to a customer who is injured due to pushing, crowding, trampling, or jostling by other customers when the retailer conducts a promotional activity or sale that will foreseeably cause crowds to gather and push.

At least one jury has determined that reasonable care when undertaking a special promotion that might cause people to run, push, and shove includes the retailer giving warnings of the dangers involved, taking steps to control or police the crowd, using loud speakers to warn the crowd not to run over people, and warning the elderly or children to stay out of the crowd.    Given the tragedies that have occurred in the past several years during “Black Friday Sales,” it is advisable for retailers to, at the very least, implement the above measures.  However, the above measures may not be sufficient given the particular circumstances of a retailer.  That is why each retailer should conduct a careful risk assessment evaluation that is tailored to its location and history.  This assessment will allow the retailer to develop and implement a plan that keeps its customers safe and happy during this holiday season. Now go shopping!

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On Tuesday October 30th, the NCAA Board of Directors announced the adoption of a new enforcement structure that, among other things, creates additional levels of infractions, enhances accountability for head coaches, and seeks to punish violators with sanctions that more appropriately align with the actions that occurred.  The most striking of these new initiatives, to be implemented beginning in August of 2013, is the creation of the new four-tiered structure for violation classification.  

Under the current model, violations are classified as either major or secondary.  The new system sets forth violations as follows: Level I, Severe breach of conduct; Level II, Significant breach of conduct; Level III, Breach of conduct; and Level IV, Incidental issues.  A copy of the NCAA’s press release may be found here.  This new structure is the product of a year-long effort by the thirteen-member Board comprised of presidents, athletic directors, and conference commissioners.   President Mark Emmert described the changes as part of a devotion to “protecting the collegiate model,” in part by “remov[ing] the ‘risk-reward’ analysis that has tempted people.”   

These changes come on the heels of increasing external pressure for a more consistent and transparent process, with a number of major infractions cases serving as the backdrop for this magnified criticism.   Greater accountability and stricter sanctions is undoubtedly a step in the right direction when it comes to enforcement of what would be considered major infractions under the current framework.  The NCAA should be applauded for taking measures to ensure consequences for coaches who plead ignorance while violations blatantly occur on their watches.  But at the same time, the new violation structure is troublesome.   Despite admirable efforts to construct a better system, this new four-tiered structure for violation classification fails to ameliorate many of the common concerns expressed with respect to NCAA Bylaws and enforcement of the same.  Hopefully, this will be cleared-up with the upcoming changes to the substantive “rules” in the Bylaws.    

The NCAA Bylaws are often denounced as too lengthy and too complex, and deservedly so.  Moving from a two-tiered violation structure to a four-tiered system, if not matched-up with more common sense in rule substance, is an obvious step backward, and is counterintuitive if the desired outcome is a more workable framework.  Increased confusion is even more likely when one considers the near endless interpretations that could be attributed to the definitions describing each tier.  For example, consider the difference between a violation that “threatens the integrity of the NCAA,” versus a violation that merely “provides more than a minimal, but less than a substantial…advantage.”  One definition classifies a Level I violation, while the other corresponds with Level II, but is there really a difference?   The definitions may mean something different to a coach versus someone in compliance at a school or enforcement at the NCAA, so how then is the goal of deterrence met for the problem that President Emmert describes as a calculation of risk vs. reward made by coaches who currently do not have sufficient risk to their livelihoods or respective programs.

Under this system, inconsistencies may abound to an even greater degree than under the current model.  This is likely to complicate the NCAA’s investigative measures, which is problematic given the Association’s already limited resources; resources so limited that some have even suggested that the NCAA get out of the enforcement business altogether (for a more in depth discussion of this proposal, see this well-done piece by Attorney Stephen A. Miller, recently published in The Atlantic).  Finally, if the NCAA is really student-athlete first, then this measure does nothing to address the countless Bylaws that punish student-athletes for technical violations that provide no competitive advantage, and do little more than burden an already overwhelmed enforcement staff.  Again, it is worth pondering, is an “incidental issue” even worth sanctioning?  I hope that reforms not just in terms of a scholarship enhancement, but in terms of rules affecting student-athletes’ behavior on a day-to-day basis are addressed in the coming months.

Since the NCAA has chosen to divert its attention first to the method in which these intricate and often superfluous regulations are classified, my worry is that dealing with the substance later will lead to a continuance in seeing violations shoe-horned into a rigid framework that sometimes, but does not always fit.  For those that desire more consistency in results, do you want the NCAA to have something akin to Federal Sentencing Guidelines, or more common sense in results?  I am not yet convinced that the new enforcement structure will get us more common sense in results, which many (myself included) would like to see as opposed to more rigidity.

Over time, perhaps this will prove to be a positive step toward a streamlined, consistent, and fair process.  For now though, a more detailed systemization of the NCAA’s enforcement structure only seems to complicate matters further if there is not significant overhaul to the substance of the rules themselves.  While my experiences may leave me a bit biased, until we see a comprehensive reassessment of the actual Bylaw language (promised in the next few months), I foresee this self-proclaimed “overhaul” as little more than a re-branding exercise.

Originally published on Sportslawblog *Hat tip to Brian Konkel for his work on this piece.

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DC Comics has filed a trademark infringement suit against a Florida barbershop owner in federal court.  The suit accuses the owners of “Supermen Fades to Fros LLC” of using signs, promotion materials and logos which bear DC Comics’ trademarked “Superman” materials.

DC Comics requested that the shop owner cease the use of the marks on multiple occasions without result.  DC’s complaint notes that “DC has never at any time authorized defendants to utilize the infringing promotions in conjunction with any barbershop business and/or the sale or offer for sale of hair groom services.  Defendants’ use of the infringing promotions is likely to cause confusion, to cause mistake and to deceive as to the affiliation, connection or association of defendants’ infringing barbershops with DC.”

The complaint also alleges that “Supermen Fades to Fros” shops use barber capes bearing the Superman logo and utilizes Superman imagery for advertisement purposes on the company’s website.  Aside from trademark infringement in violation of the Lanham Act, the suit also puts forth claims under the Federal Anicybersquatting Consumer Protection Action, and claims for dilution and unfair competition under Florida state and common law.

Republished with permission from sportslawblog.com  

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