Mass Law Blog

. . . the Supreme Court can only decide a couple of patent cases even in a banner year. And, many important patent issues may be so obscure as to discourage its generalist judges from addressing them. The rest, necessarily, are left to us. We have the expertise and the will to resolve doctrinal problems. What we lack is mainly the opportunity. Why for example did it take a full decade to revisit State Street? Because no one asked us to until recently. The same can be said of the central issue decided in KSR. It was never simply presented to us in a petition for en banc treatment. Oddly, we receive over a hundred a year. Yet few raise such fundamental issues as eligible subject matter under §101, or the Teaching-Suggestion-Motivation test, or the proper methodology for assessing requests for the permanent injunction, or barring them, future damages.

Speaking at the Harvard Law School Conference On Intellectual Property Law, September 9, 2008.

Click here for full text of speech.

The department of consumer affairs and business regulation shall adopt regulations relative to any person that owns or licenses personal information about a resident of the commonwealth. Such regulations shall be designed to safeguard the personal information of residents of the commonwealth …

M.G.L. Chapter 93H: Section 2

_____________________________

Here is a link to the Executive Order signed by Governor Patrick on September 19, 2008 – Order Regarding the Security and Confidentiality of Personal Information.

And here is a link to the new state regulations, Standards for the Protection of Personal Information of Residents of the Commonwealth (effective Jan. 1, 2009).

The Executive Order applies to State agencies; the regulations apply to the private sector.

The regulations are of particular interest. They require private sector entities who keep personal information about individuals to meet “minimum” security standards for paper and electronic records. They apply broadly to “persons who own, license, store or maintain personal information about a resident of the Commonwealth of Massachusetts”. They require the creation of a “written information security program” which must be “reasonably consistent with industry standards.” The most minimal requirements of such a program are (to my eye) quite extensive (and burdensome). I think it is an understatement to say that the regulation and Executive Order will attract a great deal of attention and preparation between now and year-end, and will likely spawn a new (or expanded) industry of compliance consultants.

Here is the text of new Federal Rule of Evidence 502, eliminating waiver resulting from inadvertent disclosures of attorney-client privileged or work-product materials in federal litigation:

Federal Rule of Evidence 502
(signed into law September 19, 2008)

The following provisions apply, in the circumstances set out, to disclosure of a communication or information covered by the attorney-client privilege or work-product protection.

(a) Disclosure made in a federal proceeding or to a federal office or agency; scope of a waiver. —

When the disclosure is made in a federal proceeding or to a federal office or agency and waives the attorney-client privilege or work-product protection, the waiver extends to an undisclosed communication or information in a federal or state proceeding only if:

(1) the waiver is intentional;

(2) the disclosed and undisclosed communications or information concern the same subject matter; and

(3) they ought in fairness to be considered together.

(b) Inadvertent disclosure. —

When made in a federal proceeding or to a federal office or agency, the disclosure does not operate as a waiver in a federal or state proceeding if:

(1) the disclosure is inadvertent;

(2) the holder of the privilege or protection took reasonable steps to prevent disclosure; and

(3) the holder promptly took reasonable steps to rectify the error, including (if applicable) following Fed. R. 25 Civ. P. 26(b)(5)(B).

(c) Disclosure made in a state proceeding. —

When the disclosure is made in a state proceeding and is not the subject of a state-court order concerning waiver, the disclosure does not operate as a waiver in a federal proceeding if the disclosure:

(1) would not be a waiver under this rule if it had been made in a federal proceeding; or

(2) is not a waiver under the law of the state where the disclosure occurred.

(d) Controlling effect of a court order. —

A federal court may order that the privilege or protection is not waived by disclosure connected with the litigation pending before the court – in which event the disclosure is also not a waiver in any other federal or state proceeding.

(e) Controlling effect of a party agreement. —

An agreement on the effect of disclosure in a federal proceeding is binding only on the parties to the agreement, unless it is incorporated into a court order.

(f) Controlling effect of this rule. —

Notwithstanding Rules 101 and 1101, this rule applies to state proceedings and to federal court-annexed and federal court-mandated arbitration proceedings, in the circumstances set out in the rule. And notwithstanding Rule 501, this rule applies even if state law provides the rule of decision.

(g) Definitions. —

In this rule:

(1) “attorney-client privilege” means the protection that applicable law provides for confidential attorney-client communications; and

(2) “work-product protection” means the protection that applicable law provides for tangible material (or its intangible equivalent) prepared in anticipation of litigation or for trial.

This rule comes too late for the many lawyers spending their weekday mornings in dark bars, drinking their memories away, their careers ruined by inadvertent disclosure of privileged client documents. It also comes too late to save the hundreds of millions of dollars spent on document review over the last few decades, in an effort to make sure that privileged materials aren’t produced to opposing counsel. But, better late than never. Click here to read the explanatory note on this rule.

Click here to read an earlier post on this issue: The Agony of Inadvertant Disclosure.

[Update: decision denying Blockshopper's Motion to Dismiss]

[Update: Jones Days' Opposition to Blockshopper's Motion to Dismiss]

Blockshopper.com is one of many small web sites that have sprung up to follow local residential real estate markets. So far, the site highlights purchases in upscale neighborhoods in Chicago, St. Louis, South Florida and Las Vegas. The site identifies purchasers by name, street address of the property and the price paid. Of course, this information is available in local real estate publications (like Banker & Tradesman here in Boston) or at the local registry of deeds. Blockshopper also performs an Internet search on the person, and based on what it finds identifies the purchaser’s job title and employer. When it can, the site pulls a photo of the person from somewhere on the Internet (like the purchaser’s company site), and pastes it into the item. If the home purchaser has an online bio, the site will link to it.

Example: I saw on Blockshopper that Juan Luis Goujon had recently purchased a property in Chicago. I Googled “Juan Luis Goujon,” and the first hit I got was to Blockshopper, profiling the property, linking to Mr. Goujon’s company, and posting a photo of him from the site. Mr. Goujon is not a celebrity or a politician, and he may not be thrilled with this publicity (if anyone truly cares). However, the information regarding the address of the property, the purchase price, and Mr. Goujon’s job as an executive at a Chicago HR firm, are all public, factual information.

So, if you are Mr. Goujon, or any one of the many other real estate purchasers profiled by Blockshopper, just too bad, eh? In the age of almost unlimited information, factual, public information like this can be pulled together and posted on the Internet, right? So you would think, but not so fast.

Jones Day is one of the largest law firms in the U.S., with over 2,000 lawyers worldwide. That’s a heck of a lot of lawyers, no matter how you slice it. As many lawyers know, Jones Day is one of the premier law firms in the United States, respected by its clients and feared by its adversaries. These are not people to trifle with.

Blockshopper encountered Jones Day after Blockshopper profiled several Jones Day associates who had purchased real estate in Chicago. No big deal here – the properties were not exactly big ticket items, and you wouldn’t think that anyone would be very interested, with the possible exception of the attorneys’ friends and co-workers at Jones Day. And, as it often does, Blockshopper posted photos of the attorneys (from the Jones Day web site) and provided a link to their bios on the Jones Day site.

But Jones Day was very interested. It filed suit against Blockshopper in U.S. Federal District Court in Chicago. After reminding the court that Jones Day is “one of the world’s most famous law firms” (probably unnecessary), the complaint goes on to assert that:

• the photos of the associates were “proprietary.” (Recall: they can be viewed on Jones Day’s public web site).

• the references to Jones Day on Blockshopper were likely to cause “confusion and mistake” as to the source of the services provided on the site. In other words, people looking at Blockshopper could be misled to think that the site was affiliated with, or sponsored by, Jones Day. Accordingly, Jones Day claimed that Blockshopper was infringing Jones Day’s trademark rights.

Of course, these allegations (along with some others that I’ll skip over here) would seem to fail the laugh test. It challenges my imagination to think that anyone would conclude that the link to a couple of Jones Day associates on this site suggested that Jones Day had sponsored the site or was in some way associated with the site. After all, the World Wide Web is built on links – millions of them, if not billions. Everyone who uses the Internet for a few hours quickly realizes that a link does not mean that the “linked to” site has anything to do with the “linked from” site. And, the Blockshopper site links to hundreds of other purchasers, often with links to their web sites. Does Jones Day think that users of the site will conclude that the employers of those real estate purchasers are also sponsors of the site? (Interestingly, Blockshopper’s reported real estate purchases seem to involve a disproportionately large number of lawyers).

When you file a suit that doesn’t pass the laugh test, you attract unwanted attention, especially when you are “one of the world’s most famous law firms” and the suit threatens what many would consider First Amendment rights of expression. When it comes to the First Amendment, the Internet is very protective of its own.

And so, Jones Day’s lawsuit has attracted a great deal of attention. A Google search (“Jones Day” and Blockshopper) results in hundreds of hits, almost all (based on my quick survey) critical of Jones Day. The old expression is that “there’s no such thing as bad publicity,” but in this case, I have to wonder. On the other hand, the owners of Blockshopper must be drinking Dom Pérignon champagne and eating Beluga caviar – they could never have bought this much publicity for their site. I doubt that very many people in Chicago were even aware of the site. (Hey guys, when are you opening a Boston branch?).

It takes muscle to fight muscle, and the Electronic Frontier Foundation (the pre-eminent civil liberties group focused on digital media), has come to the rescue in Blockshopper’s defense. The EFF has filed a motion to dismiss the case which (in my opinion) makes mincemeat of Jones Day’s claims.

I expect a quick retreat by Jones Day. But, as a matter of principal, I think that Blockshopper (with the EFF’s encouragement and support) will demand that Jones Day drop its suit without terms. However, we’ll have to wait to see how this plays out; after all, Jones Day is not known to back down from a fight.

Nevertheless, I the lawyers at Jones Day who filed this case, and the associates whose real estate purchases led to the case, may be asking themselves, “what was I thinking”? And other lawyers at Jones Day may be wondering whether, after this is all over, their future real estate purchases will be targeted for special attention by Blockshopper.

The release of the Google Chrome web browser on September 2nd attracted a huge amount of publicity. The release of the browser was accompanied by a 38 page comic book, featuring cartoon figures of real-life Google employees, and explaining some of the features and technology associated with the browser. The comic book was illustrated by “cartoon theorist” Scott McLoud.

This is pretty cool stuff – hiring a top cartoonist to help you explain a new software product. Much better than a traditional technical manual!

A link to the comic book on scribd.com is below. (And here is a link to the comic on McLoud’s own web site, which might be easier to read online).

Meta tags consist of words and phrases that are intended to describe the contents of a website. These descriptions are embedded within the website’s computer code. Although websites do not display their meta tags to visitors, Internet search engines utilize meta tags in various ways. First, when a computer user enters particular terms into an Internet search engine, the engine may rank a webpage that contains the search terms within its meta tags higher in the list of relevant results. Second, when a particular webpage is listed as a relevant search result, the search engine may use the meta tags to provide the searcher a brief description of the web page.

Brookfield Commc’ns, Inc. v. W. Coast Entm’t Corp., 174 F.3d 1036, 1045 (9th Cir. 1999)

—————–

The First Circuit has affirmed a finding of trademark infringement based on the defendant’s use of meta tags to attract potential customers of the plaintiff using search engines to find the plaintiff’s web site. The case is Venture Tape v. McGill tried in U.S. District Court by Judge Morris E. Lasker. The defendant’s actions were described as follows by the First Circuit:

The record contains numerous admissions that meta tags and invisible background text on [defendant's] website incorporated [plaintiff's] exact marks. … [Defendant] even admitted that he intentionally used [plaintiff's] marks for the express purpose of attracting customers …

The background text used by the defendant was “white lettering on a white background screen,” sort of a “poor man’s” meta tag.

If you don’t know what meta tags are, go to any web page, and in your browser click VIEW/PAGE SOURCE (or similar terms, depending on your browser). You’ll see the HTML code for the page, and you’ll see the meta elements in the head section of the document.

We’ve been following the lower courts’ interpretation and application of eBay v. MercExchange since the case was decided by the Supreme Court in May 2006. In eBay the Court held that post-judgment injunctions were not “automatic” for successful patent plaintiffs, but rather that the trial court had to apply the traditional equitable test to determine whether an injunction or ongoing royalties were the appropriate remedy.

In June I gave a presentation at Massachusetts Continuing Legal Education on developments in this area in the two years since the decision. (Warning – the Powerpoint won’t make a lot of sense without the voice-over, but it gives some idea of the landscape).

As I discussed then, a constellation of issues was forming around the question of how to assess future royalties if it is determined that this was the appropriate remedy after final judgment. By then, of course, the jury has gone home. Was it up to the judge to determine the royalty? Would there be a new trial (jury or otherwise) on this issue alone? Would the pre-judgment royalty be used for future royalties (as some courts have done)?

Not surprisingly, a U.S. District Judge in the Eastern District of Texas has taken the first real “shot” at this issue. In early August Federal District Court Judge Clark issued an order in several cases, advising the parties that he expected the issue of future royalties to be tried with liability and past damages. He stated:

Should an injunction issue, a jury finding on a future royalty could be used to set a reasonable amount to be paid into escrow during the period of any stay which might be granted. If an injunction is not warranted, the jury verdict might be used by the parties as one factor in agreeing on a license, or by the court in arriving at an ongoing royalty rate for a compulsory license. In either case, time and expense can be saved by having the damages experts testify once, rather than hold a separate mini-trial on the issue of future damages post-verdict. This procedure would encourage the experts to keep their testimony about past and future damages logically consistent, and to give reasons for any differences.

Judge Clark explained that this procedure would not automatically result in an award of future damages in the amount advised by the jury (as described by the judge, the jury’s findings are not binding on the court), or be determinative in any way of the decision whether to issue an injunction or award future royalties.

Although this procedure would add another dimension of cost and complexity to a patent trial, it may make sense where there is a reasonable likelihood that future royalties (rather than a permanent injunction) will be the final remedy.

However, one would hope that a trial judge would not impose this procedure in cases where a preliminary determination concludes that the likelihood of future royalties is weak (for example, as in the case of direct competition between the patent holder and the defendant). It’s worth watching to see whether this approach catches on with other judges in the EdTX and in other districts, and if so how it evolves.

Damages experts must be sharpening their pencils and working overtime this summer ….

Here is a link to the slides used by Dr. Irving Wladawsky-Berger (Chairman Emeritus of the IBM Academy of Technology) in his talk entitled Cloud Computing and the Coming IT Cambrian Explosion. This was presented at Xconomy’s Cloud Computing event in Cambridge in June.

While there is no audio, I think the slides communicate the message loud and clear. A favorite expression of mine is “important if true.” On these predictions, I will say “important if prescient.”

U.S. District Court Judge William Young’s recent decision in Talentburst, Inc. v. Collabera, Inc. is worth study. Talentburst is the former employer of Raj Pallerla. While employed by Talentburst, Pallerla signed a noncompete agreement with Talentburst. He then resigned and went to work for Collabera, Inc. For ease of reading I’ll refer to these three parties as Former Employer, New Employer and Employee.

When the Former Employer discovered that its Employee had gone to work for New Employer, it pursued an unorthodox legal strategy: rather than sue the employee for breach of the noncompete agreement, it sued only the new employer, alleging that the New Employer had “aided and abetted” a breach of fiduciary duty by the Employee. It also claimed that by hiring the Employee the New Employer “interfered” with the noncompete contract. The case was filed in Massachusetts Superior Court, but the Former Employer was able to “remove” it to federal court (based on diversity jurisdiction). To the Former Employer’s misfortune, the case was drawn by Judge Young, who was almost certain to give the case closer scrutiny than it would have received in state court.

The Former Employer filed a motion to dismiss, which is usually a long shot. However, Judge Young allowed the motion and dismissed the suit on the basis of the complaint alone. In his decision Judge Young reasoned that the Employee, who was a non-managerial “worker bee,” did not owe a fiduciary duty to his employer. The New Employer could not have interfered with a non-existent fiduciary duty, and therefore this claim failed.

As to the tortious interference claim, the judge zeroed in on the requirement of “improper means or motive.” Mere advancement of one’s economic interests is not, however, “improper,” and since the Former Employer couldn’t make anything more than a “generalized” allegation of improperness, this claim failed as well.

I have a few observations about this case.

First, in addition to Massachusetts appellate precedent, Judge Young relied heavily on “unpublished” Superior Court decisions (using Westlaw citations when available). I can’t think of a federal district court decision that has made as much use of Massachusetts trial court decisions as this one. However, Judge Young is a former Massachusetts trial court judge, and he often expresses his great respect for that court. The use of state court decisions is also a function of the Business Litigation Session, which has produced many more written decisions than other sessions of the trial court.

Second, Judge Young rejected the Former Employer’s argument that it was not required to make anything more than a generalized allegation of improper means/motive at the pleading stage, holding the plaintiff to the higher pleading standard established by the Supreme Court in the Bell Atlantic v. Twombly decision in 2007. As noted in this post, this standard has now been adopted by the Massachusetts Superior Court as well. Although Twombly was an antitrust case, this is another example of its broad application, extending here so far as to bar a state tort claim; before Twombly, this case likely would have survived dismissal. It probably would have survived dismissal if it had remained in state court.

Third, and lastly, what the plaintiff/Former Employer had in mind when it sued the New Employer but not its Former Employee (against whom it appears it had the stronger claim) continues to elude me, but the strategy clearly back-fired in a major way.

Bottom line: This case is important precedent in the area of employee breaches of fiduciary duty, by reason of its careful legal analysis and the gravitas of the judge who authored it. I expect the case to become part of every business lawyer’s legal arsenal when issues of employee fiduciary duty are raised.