Insurance for IP Infringement Plaintiffs
May 23rd, 2012
Thanks to Annette Freeman, one of the world’s leading intellectual property authorities, I read an interesting article about insurance for intellectual property plaintiffs. Small companies worried about the cost of protecting their IP can buy this insurance, which will subsidize the cost of enforcing IP rights in court.
The devil is in the details, of course, so the policy has to be read quite closely to see what is covered, and what happens if you win.
“[S]ome of these policies may require you to reimburse the carrier for the cost of the litigation (although not all policies require this). This reimbursement obligation is triggered when you receive any type of benefit as a result of the case—not just a financial benefit. For example, if your case won an injunction that stopped the infringer (but didn’t recover money) then you obtained a benefit, and you would need to repay the carrier for what it paid for the prosecution of the litigation.”
In order to get the insurance company to pay for the litigation, the insurance company hires a “neutral” IP lawyer who decides if the case has merit. If the neutral’s review concludes the case is likely to win, the insurance company will finance the litigation — with a “copay” of course — and probably does not recognize the hourly fees regularly charged by IP litigators, so be prepared for a double co-pay.
There are lots of caveats, such as the IP has to be registered, so trade secrets are not protected. Still, in a world in which many defendants can rely upon insurance for “advertising injury,” wronged IP plaintiffs have a way of paying to protect their IP.
Geese on Parade
May 4th, 2012
California Supreme Court: Employers Do Not Have to Ensure Employees Take Breaks
April 26th, 2012
The state Supreme Court has finally clarified California employer obligations regarding employee meal periods and rest breaks. As we predicted after the oral arguments in Brinker Restaurant Corp. v. Superior Court (“Brinker”), the Court determined employers have no duty to ensure that employees perform no work during meal breaks. The Court also ruled on the number and timing of meal and rest breaks required under state law.
Brinker was one of a large number of class action cases filed after back pay and penalties became available in 2000 for the denial of meal and rest breaks. Employers breathed a sigh of relief following the Court of Appeal’s holding that the law did not require them to ensure employees were taking meal breaks; however, in 2008, the Supreme Court accepted review of that decision, throwing the world of employment law back into limbo. The Court delayed deciding Brinker for over three years, creating concern among employers about their risk of retroactive liability. Meanwhile, the logjam of cases whose resolution depended on the outcome in Brinker grew ever larger. The Court’s unanimous 54-page decision offered much needed guidance.
Meal Breaks. Both employers and employees had asked the justices to resolve certain key issues, including the meaning under California Labor Code § 512 of ‟providing” employees with a 30-minute meal break for each five hours of work time. The plaintiff employees argued that the term provide imposed an affirmative duty to ensure that employees took meal periods, while the employer, Brinker, argued employers were only obligated to make meal breaks “available.” At oral argument, some justices worried about the outcome if employers faced penalties when employees voluntarily kept working. Justices noted the irony that diligent employees would be vulnerable to discipline, even termination, for working through lunch.
The Court concluded that an employer meets its obligation related to meal periods by relieving the employee of all duty for 30 minutes for every five-hour shift. The Court expressed the opinion that a positive obligation to ensure employees do no work during this time may be inconsistent with the obligation to ‟relinquish any employer control over the employee and how he or she spends the time.” The decision made it clear the employee is ‟at liberty to use the meal period for whatever purpose he or she desires, but the employer need not ensure that no work is done.” At the same time, if the employer knows or has reason to know the employee is working, the employee must be paid at straight time.
The Court also addressed the timing of multiple meal breaks. An employee scheduled to work more than 10 hours is entitled to two meal breaks. At oral argument, it appeared the Court might adopt a rolling five-hour rule, requiring the employer to allow the second break five hours after the first. The Court ultimately held the applicable Wage Order and Labor Code sections contained no such requirement.
Rest Breaks. The Court affirmed that an employer must provide a 10-minute rest period for each four hours of work, or ‟major fraction thereof,” which the Court defined as a two-hour period. No rest break is due, however, for a shift lasting less than 3.5 hours. The Court rejected the argument that a rest break must always occur before a meal break. Because of the potential for confusion about the timing of rest and meal breaks, we have provided a summary and charts below.
The Bottom Line. Now that Brinker has supplied the missing guidance, here is what employers of non-exempt employees need to know in order to avoid liability, including back pay and penalties, for missed breaks.The Court rejected the argument that a rest break must always occur before a meal break. Because of the potential for confusion about the timing of rest and meal breaks, we have provided a summary and charts below. Generally, employers must authorize and permit breaks and must not structure the work environment to impede or discourage them; however, employers will not face penalties if employees voluntarily perform work during breaks.
Rest Breaks (See the Industrial Welfare Commission Wage Orders)
• A rest break is a 10-minute period during which the employee is relieved of all duty.
• A rest break is counted as time worked, meaning it is paid time.
• Rest breaks must be given as close to the middle of the four-hour work period as is practicable. The break may be at a later time if justified by the nature or circumstances of the work.
• For an 8-hour shift, the general rule is that one rest break should fall on either side of the meal break; however, an employer may alter this based on work flow, customer needs, or other legitimate factors.
• Restroom breaks cannot be counted as rest periods; however, an employer may place reasonable limits on the amount of time an employee is away from the workstation.
• Employers are required to provide access to a suitable rest area or break room, separate from the toilets.
• There is no requirement to keep records of rest breaks.
• See the chart below to determine how many rest breaks an employee is entitled to based on the length of the scheduled shift.
Meal Breaks (See California Labor Code § 512)
• A meal break is an uninterrupted period of at least 30 minutes during which the employee is relieved of all duty and is free to leave the premises.
• During the meal period, an employee must not be under any employer control whatsoever and must be free to attend to any personal business he or she chooses.
• Meal breaks are generally unpaid time, but if the employer knows or has reason to know the employee is working through the meal period, the employee must be paid at straight time.
• The employer must keep records of meal breaks.
• Meal breaks may be waived in limited circumstances. For example, an employer must allow a meal break for a 6-hour shift, but because the shift will end within an hour of when the break is due, there may be a mutual agreement to waive it. For a shift of no more than 12 hours, the second break may be mutually waived only if the first was not waived. These waivers should be in writing and are revocable by the employee at any time.
• If the nature of the work cannot be interrupted, an ‟on-duty” meal period is permitted by written mutual agreement. Due to the potential for large penalties, seek consultation if this applies to your business.
• See the chart below to determine how many meal breaks an employee is entitled to based on the length of the scheduled shift, in the absence of a waiver.
The summary above is an overview, rather than a comprehensive list of employer requirements related to breaks.
Please contact Bay Oak Law if you have questions about specific situations or want assistance putting in place policies to protect your business. Ask about our customizable employee handbook and forms that will help you reduce your risk of liability and ease your mind about meeting your obligations under federal and state law.
From Consumer to Producer
April 22nd, 2012
The Economist reports that China is getting more serious about protecting intellectual property:
“[T]he changes are also the result of China’s legal system getting better. Two decades ago, many judges were political or military appointees and ill-equipped to try technical cases. Thanks to better training, particularly in Shanghai, Beijing and Shenzhen, that is now much less common.”
As China moves from passively receiving intellectual property to creating IP, China will increasingly value it in court. China’s development reminds me of another country that followed the route from IP rogue to IP mainstay.
In the 1830s and 1840s, Charles Dickens’ books were popular on both sides of the Atlantic, but he got nothing from his books when they were published in the United States. He was subjected to extensive copyright infringement, as others profited from publishing his works. To turn the tide of money toward him, he toured extensively in the US, and was one of the first to discuss international copyrights.
Malware Alert
April 21st, 2012
There is malware out there that is planning on taking over computers come July. Your antivirus software might not detect it because the malware neutralizes the antivirus software. Click here to see if your computer is infected. It only takes a second, and if there is an infection, it will show you how to get rid of it.
Taking advantages of weaknesses in Microsoft Windows, hackers turned off antivirus updates that could detect and fix the problem, and changed the way the computers work with the Internet’s domain name system. The FBI believes more than 500,000 computers have been infected.
April 20th, 2012
UPDATE: The Federal Court of Appeals for the District of Columbia has delayed enforcement of the posting of the collective bargaining rights poster to allow for an appeal. A Federal District Court in South Carolina has also struck down the rule, and that will likely be appealed. The D.C. Circuit probably will not hear the case until later in the summer, and a decision might not be made for several months after that. Until further notice, employers do not need to put the poster on the wall.
Wisdom of the Supremes
April 19th, 2012
“For protection against abuses by legislatures the people must resort to the polls, not to the courts.”
Munn v. Illinois, 94 US 113, 134 (1877).
Courts are good at procedural issues, and rights protection. They are ill-equipped to decide the best way to do things.
ADA – Be Proactive
April 19th, 2012
The volume of “snail mail” is down tremendously compared to a few years ago, so when a business owner gets a letter in the mail claiming that the business has a disability access problem, it should stand out. Unfortunately, it doesn’t, even when it should. A letter about “ADA” is not something about your great-grandmother’s elderly neighbor: it is about the law regarding disability access. This is one of the truest cases where a little prevention saves a lot later.
The ADA. In 1990, Congress passed and President George H.W. Bush signed the Americans with Disabilities Act (“ADA”). The ADA sought to stop discrimination against those with disabilities, and bring as many of the disabled as possible into the mainstream of society. It required that businesses provide “reasonable accommodations” for those who are disabled. This led the ADA to be called the “Full Employment for Lawyers Act,” as lawyers were brought in to decide what is “reasonable” under what circumstances.
One of the ADA’s most contentious portions is Title III, the Public Accommodations Act. It sought to ensure that no one is prevented from enjoying any place of public accommodation – like restaurants, hotels, sports stadiums, schools, and universities – because of their disability. Congress did not require such places from rebuilding everything anew. Congress imposed the requirement only when there was “new” construction – which included any modifications or alterations, even if the “modifications” had nothing to do with disability access. Many businesses ignored the requirement, to their loss.
Thomas Frankovich is a disability access lawyer who was in the legal press recently. Some serial ADA plaintiffs have filed dozens, if not hundreds, of ADA lawsuits. They actually seem to make a living from suing businesses that have failed to cure problems. The ADA makes this possible, because it allows a successful party in ADA litigation to recover their attorneys’ fees – something not normally the case in the United States.
I have encountered Frankovich a few times. I could never get away with dressing like Frankovich. However, he was professional, fair, and knew both the law in general and the facts of the particular case. He did not draft the ADA, nor did he draft California’s Unruh Civil Rights Act, which allows damages of at least $4,000 and attorneys’ fees. Congress and the California Legislature drafted these laws; Frankovich and his clients cannot be blamed for taking advantage of them, anymore than Sandy Koufax and Bob Gibson could be blamed for being only 60 feet, six inches from home plate when they fired their fastballs at hitters.
In my experience, Frankovich and his clients give three written warnings to companies to fix the disability problems. While one of Frankovich’s clients was sanctioned several years ago for repeatedly claiming the same physical injuries in multiple cases on the same day (and actually 13 cases over five days), Frankovich largely prevailed in a state bar proceeding based upon the same case; the bar found there was a lack of evidence that Frankovich engaged in any unprofessional conduct (other than improperly communicating with a represented party on a two minute phone call). My single reservation, based upon my own experience, is that most of defendant businesses are run by first-generation immigrants, who may not have as thorough understanding of the laws here in the United States.
There are defenses to the ADA — modifications to meet the ADA only need to be done when there is other work done on the property, but after 20 years few properties fit this definition anymore. There can also be insurance under the general liability insurance policy, but insurers are diligently trying to erase that possibility. But the best thing to do is to invest in some preventive maintenance, to make the property compatible under current ADA guidelines.
There are two morals of this story. First, obey the law; don’t just ignore letters claiming a disability access violation. Second, don’t make scapegoats out of those who use the laws Congress passes; take complaints to the ones who wrote the laws, not to those who work under them.
Can We Inhibit Cell Phone Theft? Aye, Mate!
April 17th, 2012
News Flash: cellular providers here in the US are going to work together to inhibit cell phone theft, by shutting down access to the cell phone system for a phone reported stolen. We’d be more impressed with the progress if it hadn’t been done in Australia nearly a decade ago. It may not stop thieves wanting a new paperweight or data on the phone (like contacts, texts, files, or other things), but it will end the resale value, and thus the incentive to steal them.
A Few (Not Fifty!) Shades of Grey
April 17th, 2012
The Supreme Court will be taking another crack at solving the grey market conundrum in a copyright infringement case that started here in California.
In 2010, the Supreme Court granted certiorari in Costco v. Omega, a Ninth Circuit case in which the maker of Omega watches sued Costco for legally buying Omega watches overseas at a far lower price, then importing them to sell to Costco customers in the US. The Supreme Court deadlocked at 4-4 — Justice Kagan had recused herself because she had worked on the matter while she was the federal government’s Solicitor General. While that upheld the Ninth Circuit’s ruling in favor of Omega, it did not do anything to dispel the many shades of grey involved in this grey market question.
In Kirtsaeng v. John Wiley and Sons, John Wiley & Sons published textbooks overseas that were sold in Thailand at a fraction of the cost found here in the United States — but seemed to be identical to those published and sold here in the US. Mr. Kirtsaeng was a graduate student at USC. In 2007 and 2008, he had his family buy the textbooks in Thailand (and printed outside the US) and sent them to him to sell here in the United States on eBay and similar sites. The publisher then sued him in New York, and won a judgment of $75,000.
The Second Circuit affirmed the judgment, finding that section 602 of the Copyright Act, forbidding the importation of copyrighted works, takes priority over section 109, which allows the buyer of a copyrighted work to dispose of the work without interference from the copyright owner. This is called the “First Sale” Doctrine, and allows you to resell videos, books, and the like without needing the permission of the copyright owner.
Mr. Kirtsaeng’s will likely turn on whether he could argue the First Sale Doctrine in an era when some items are made in the United States, while identical copies are made overseas. When is an article “made” under American copyright law — when it is prepared in the United States, or when it is printed in a foreign country? Under current law, the US copy could be resold after being bought overseas, and the foreign copy (because it had not been subject to American jurisdiction before) could not. In an era when producing and moving goods between countries is growing ever cheaper, the production location distinction is quickly losing its validity — at the cost of American consumers and workers. We’ll see if this grey market issue will turn Justice Kagen’s hair grey.