Archive for the ‘Cases’ Category

Tribal Lending Poses Online Obstacle to Effective Payday Regulation

leave a comment

Recent class action lawsuits and state regulators are confronting head-on the tribal payday lending business model. [1] Tribal lenders are companies that originate small dollar (payday) loans online from servers located within Indian Country, permitting them to largely bypass state regulatory scrutiny. The payday lending industry as a whole generates an estimated $40 billion annually. [2] Online lending is estimated to comprise 36% of the payday lending market. [3] Payday loans are unsecured short-term loans with fixed fees. For example, an average payday loan might involve a $30 fee for a two-week cash advance of $200. This fee “corresponds to an annual interest rate of almost $400%.” [4] Besides the initial fee, payday lenders profit from the penalty fees accrued by payday borrowers who roll over their loans. In fact, payday lenders amass “90% of their profits from borrowers who roll over their loans five or more times during a year.” [5] Roughly half of all payday loans are renewals of existing loans. [6] As a result, payday loans are “arguably designed to take advantage of consumers’ optimism bias and their consistent underestimation of the risk of nonpayment.” [7] Online payday lending is on a larger scale than other payday lenders, in the sense that they make larger loans. Advertisements tout available lending of up to $10,000 in one day. But “the catch: if you stick to the suggested payment plan, a $5,000 loan will cost a grand total of $40,872, more than eight times the original loan.” [8] The regulation of payday lending occurs mostly at the state level through consumer protection laws that set loan terms, fees and conditions. Tribal lending companies assert that tribal sovereign immunity applies to state investigatory enforcement actions, including state consumer protection efforts. [9] Tribal lending has escaped scrutiny from state courts by originating loans with arbitration clauses requiring individual arbitration in tribal jurisdiction. Tribal payday lender immunity is now being challenged by a number of state actors, including New York, Michigan, Georgia, Oregon, Colorado, Minnesota and Maryland. [10] These states have sued prominent payday lender Western Sky Financial for engaging in in predatory lending in violation of state usury laws. The New York State Department of Financial Services blocked online payday lenders from accessing its Automated Clearing House network, which processes the loan transactions. In August, New York called upon the major commercial banks to assist the state’s efforts; these banks have since cutoff online payday lenders from accessing borrower’s bank accounts. Several tribes operating payday loan companies filed an injunction against the state. Federal regulators are also stepping forward to challenge tribal lending. The Federal Trade Commission has an ongoing action against Western Sky Financial and its affiliates for alleged violations of the Credit Practices Rule, addressing unfair collection practices, and the Electronic Fund Transfer Act, prescribing preauthorized fund transfers as a condition to an extension of credit. [11] The Dodd Frank Act created a federal agency to promote consumer protection, the Consumer Financial Protection Bureau (CFPB). The CFPB has not yet issued rules that address the payday lending industry specifically. [12] However, on November 6, 2013, CPFB announced it would accept complaints about payday lending problems from the public. [13] Some speculate enforcement actions and regulations are soon to follow. [14]

[4] Oren Bar-Gill & Elizabeth Warren, Making Credit Safer. 157 U. Pa. L. Rev. 1, 45. (2008) citing Ronald J. Mann & Jim Hawkins, Just Until Payday, 54 UCLA L. Rev. 855, 857 (2007).
[5] Id. at 45.
[6] Id. at 55.
[7] Id.
[9] See e.g. Cash Advance & Preferred Cash Loans v. State 242 P.3d 1099 (Colo. 2010).
[11] F.T.C. v. PayDay Financial LLC, CIV-11-3017 RAL. (D. S.D. Sept. 30 2013) (order granting in part and denying in part plaintiff’s motion for summary judgment).

Written by

December 6th, 2013 at 4:53 pm

Judge has ruled in landmark copyright case: Google Books is here to stay

leave a comment

If you are anything like the average college student, you have probably scrambled for a book desperately needed for a research project in the last few days before said project is due. The most common fix to this problem is a technique perfected over the last decade – just google it. Google Books contains millions of scanned pages of books that are a click away from being your research project savior. Eight years ago, all that was thrown into jeopardy when an organization called The Authors Guild filed a class action lawsuit against Google’s mass digitization project for copyright infringement. The Authors Guild, along with several authors whose works appear on Google Books without permission, argue that Google benefits financially from their work, thereby violating copyright law. On November 14, 2013, however, federal district judge Denny Chin granted Google’s motion for summary judgment, dismissing the suit. In his 30-page opinion, Judge Chin declared that Google Books met the requirements for the “fair use” defense to copyright infringement. This defense permits the fair use of copyrighted works “to fulfill copyright’s very purpose, to promote the Progress of Science and useful Arts.” Judge Chin found that Google Books met the four factors of the fair use defense: 1) nonprofit educational purposes, 2) nature of the copyrighted work, 3) sustainability of the portion used in relation to the copyrighted work as a whole, and 4) effect of the use on the potential market for or value of the copyrighted work. Wired provides a great summary of Google’s fulfillment of the four factors.

In his opinion, Judge Chin largely focused on the many benefits of Google Books, such as its efficiency in obtaining books as a reference tool, increasing general access, and allowing scholars to analyze massive amounts of data. Judge Chin acknowledged the legitimacy of plaintiff’s main argument that Google Books is a for-profit commercial enterprise, but emphasized that the scanned pages themselves are not for sale, and no advertisements are present on the pages containing the snippets of the book. Therefore, Google “does not engage in the direct commercialization of copyrighted books.”

Judge Chin further explained that by providing links to where the book may be purchased, Google Books actually enhances the sale of the books to the benefit of copyright holders. In fact, many authors have noticed online databases such as Google allows readers to find their work, thereby increasing their audiences.

The only factor that Judge Chin did mark as weighing slightly in the plaintiff’s favor is the third: sustainability of the portion used in relation to the copyrighted work as a whole. Google scans the full text of these books, and provides certain sections for different searches. Google does, however, limit the amount of text displayed for each search, and therefore Judge Chin found this factor only “slightly against” a finding of fair use. In response to the dismissal of its suit, the Authors Guild has declared an intention to appeal after expressing their disappointment and disagreement with the decision. This case, however, has lasted almost a decade, and is not likely to be reversed due to the overwhelming public benefits for Google Books. Not only is Google Books “highly transformative” in the way we research, but it also allows authors to get noticed. The key sticking point is that this service benefits authors far more than it hinders them. Google Books will most likely be here to stay, much to the relief of student procrastinators (and realistically, everyone else who likes books) everywhere. For another look at this landmark decision, see http://www.mttlrblog.org/2013/11/24/google-one-step-closer-to-world-domination-seriously/.

Written by

November 24th, 2013 at 12:09 pm

Google One Step Closer To World Domination, Seriously

leave a comment

In yet another unfortunate turn of events in the Authors Guild’s fight to enforce their interpretation of copyright law, the United States District Court in Manhattan ruled in favor of Google in Authors Guild v. Google, Inc. The court held that by digitizing books and provided only snippets, Google’s use of the material was transformative and not harmful to the market for the original work, this making it a fair use under the Copyright Act. Judge Denny Chin’s view is that such a service will draw in new readers who were previously unaware of the books and thereby boost sales. That is certainly a possibility, but it seems equally likely that Google’s rather generous snippets will allow users to immediately find what they are searching for and never bother with procuring the entire work, thus preventing a purchase. The fair use factors are highly fact specific and predicting the outcome of fair use cases is often difficult. But some say that this is not a problem here because of another recently decided case in the Second Circuit, Authors Guild, Inc v. HathiTrust. In this case the Authors Guild sued a consortium of academic institutions for partnering with Google to make digitized works available to their educational communities. Judge Chin referenced HathiTrust in the Google decision and said that “if there is no liability for copyright infringement on the libraries' part, there can be no liability on Google's part.” While the decision in HathiTrust is certainly persuasive, it is not necessarily controlling. That case held that the HathiTrust’s use of books scanned by Google for educational purposes was a fair use under the Copyright Act, a statute with multiple provisions that allow educational institutions such as libraries and universities to do certain things that would otherwise be infringement. Google, on the other hand, is amassing a gigantic collection of text and making certain portions almost indiscriminately available. It is naïve to think that Google’s motivations are perfectly aligned with the academic institutions that make up the HathiTrust. Google is emphatically not a library, university, or other institution devoted to education or serving the public—it is a business. And it’s a business that has been aggressively expanding of late. Like libraries, Google is a place to find information. But unlike libraries, Google does not provide information solely as a way to benefit the community or further education. Instead, Google has very successfully monetized information gathering and storage. Not only do searchers on Google.com view advertisements above and alongside their search results, many Gmail users now see advertisements formatted to look like emails when they open their inbox. Then, perhaps the most persuasive part of the HathiTrust case was the decision not to enjoin the Orphan Works Project, an attempt to make works of unclear authorship available to the public. Judge Baer, in holding that the issue lacked ripeness, said “[w]ere I to enjoin the OWP, I would do so in the absence of crucial information about what that program will look like should it come to pass and whom it will impact.” Judge Chin may not have considered Google’s penchant for monetizing the previously “un-monetizable,” but it certainly could yet happen. For another look at this landmark decision, see http://www.mttlrblog.org/2013/11/24/judge-has-ruled-in-landmark-copyright-case-google-books-is-here-to-stay/.

Written by

November 24th, 2013 at 12:09 pm

Nortel Patent Failure Returns to Haunt Google

leave a comment

Last week on October 31st, a nightmare scenario that Google hoped to avoid came to pass. Attorneys for Rockstar Consortium filed suit in the Eastern District of Texas against Google and seven handheld device makers that employ Google's Android operating system on their devices. The suit alleges infringement of seven patents all titled “Associative Search Engine.” The patents, 6,098,065; 7,236,969; 7,469,245; 7,672,970; 7,895,178; 7,895,183; and 7,933,883, were filed from 1997 to 2007. Rockstar Consortium was founded in 2011 and is jointly owned by Apple, Microsoft, Blackberry, Sony, and Ericsson. The consortium was founded to bid on the patent portfolio of Canadian telecom company Nortel, which was liquidated at auction in 2011 when the company went bankrupt. At the time, Google attempted to purchase the patents, likely to avoid just such a lawsuit, but their top bid of $4.4 billion was exceeded by Rockstar, which purchased the patents for $4.5 billion. Google’s failure to land the patents may now be costly for them as well as Android device makers. Rockstar is part of an emerging new trend in the “patent troll” movement where large corporations assign or give their patents to small companies, for the purpose of reverse engineering existing products and for extracting licensing fees and damages from alleged patent infringers. This model allows a company with few employees–Rockstar has only about two dozen employees, including ten reverse engineering experts–to obtain license fees from potentially hundreds of tech companies. A small consortium like Rockstar has another advantage in a fight against a tech company like Google, they have no products or business of their own. They cannot be counter sued for infringement because they have no business that would infringe. The crux of the situation is that companies like Apple and Microsoft can inject capital into a Rockstar type partnership, which will then purchase patents and use them to attack Apple and Microsoft competitors while leaving Microsoft and Apple above the fray. The companies backing Rockstar are likely seeking to put a damper on the rabid growth of the Android platform. However, with the talk of legislation to control patent trolls, the Obama administration’s concern over standards essential patents, and the Justice Department’s comments on Rockstar committing to fair terms for standards essential patent licenses, it will be difficult to predict the outcome of this suit. If Rockstar sees success here, this may become the new battlefront between tech companies in the aftermath of the monstrously expensive Apple v. Samsung case.

Written by

November 8th, 2013 at 2:25 pm

Composers of Hit Song File Declaratory Judgment Action

leave a comment

Faced with the prospect of copyright infringement lawsuits from Bridgeport Music, Inc. (“Bridgeport”) and Marvin Gaye’s heirs (the “Heirs”), the composers of the multinational hit song “Blurred Lines” filed a declaratory judgment action against Bridgeport and the Heirs in the United States District Court for the Central District of California on August 15, 2013.  Through this action, the composers, namely Pharrell Williams, Robin Thicke, and Clifford Harris, Jr., request that the court declare that “Blurred Lines” does not infringe Bridgeport’s composition “Sexy Ways” or Gaye’s composition “Got to Give It Up.” The lawsuit alleges that Bridgeport and the Heirs have continually insisted that “Blurred Lines” infringes their respective compositions and have stated an intention to file a lawsuit for copyright infringement if not compensated.   The composers, however, claim that “[t]here are no similarities between plaintiffs’ composition and those the claimants allege they own, other than commonplace musical elements.”  Instead, according to the suit, the composers “created a hit and did it without copying anyone else’s composition.” Generally, to establish a claim for copyright infringement a plaintiff must establish:  (1) copying of a prior copyrighted work; and (2) a substantial similarity to the prior copyrighted work sufficient to constitute unlawful appropriation.  A plaintiff can generally demonstrate the first element based upon evidence of access to the copyrighted work and similarity.  Here, it does not seem to be disputed that the composers had access to “Sexy Ways” or “Got to Give It Up.”  Indeed, according to the suit, the “intent in producing ‘Blurred Lines’ was to evoke an era.”  The question remains, however, whether the similarities between “Blurred Lines” and the prior works are sufficient to demonstrate “copying” and “substantial similarity.” To date, neither Bridgeport nor the Heirs have filed an answer to the composers’ complaint.

Written by

September 29th, 2013 at 10:47 am

Bayer Cropsciences v Dow Agrochemicals: Mistaken Identity as a Limit to Functional Claiming in Biotechnology

leave a comment

In 1989, Bayer Cropsciences filed the application that matured into US Patent #6,153,401, covering “[A] polypeptide having the biological activity of 2,4-D monooxygenase.” The enzyme they had discovered was capable of cleaving the popular herbicide 2,4-D into harmless chemical byproducts, potentially enhancing the resistance of crop plants containing the gene to herbicide application. Based on widespread scientific assumptions at the time (but in the absence of actual data) they described their enzyme as a 2,4-D monooxygenase, an enzyme that removes a key part of the 2,4-D molecule in part by utilizing an oxygen molecule, O2. The monooxygenase reaction incorporates one oxygen atom into the breakdown products of the 2,4-D cleavage, releasing the other oxygen to become part of a water molecule. Shortly after the filing of the patent application (and seven years before the issuance of the patent), it was discovered that the enzyme was in fact a dioxygenase, acting by a chemically different mechanism than the monooxygenase activity claimed (dioxygenase activity involves, unsurprisingly, the incorporation of both oxygen atoms into the reaction products, instead of just one). Despite this knowledge, Bayer did not amend their claims to remove the term monoxygenase, relying instead on their interpretation of “2,4-D monooxygenase” as simply being an enzyme that cleaves the sidechain of 2,4-D, rendering it nontoxic to plants. Recently, in affirming a decision of the Delaware District Court (finding noninfringement by a competing Dow Agrosciences product), the Federal Circuit described the flaws in Bayer’s method. It found that, although the inventor is entitled to act as his own lexicographer, he is not entitled to change the meanings of terms that have well established, well known, and precise meanings within the art. Specifically, in the world of biochemistry, the term “monooxygenase” refers to an enzyme with an explicit monooxygenase activity, with specific requirements as to the disposition of oxygen atoms during the chemical reaction. Where Bayer had argued that they could define the language to cover any enzyme that cleaved 2,4-D, by whatever mechanism, the court ruled that their use of a highly specific and well defined chemical term precluded this stretch of terminology. The fact that the asserted chemical terminology was incorrect was found to be sufficient to preclude patenting of Bayer’s enzyme. Perhaps adding insult to injury, the court further discussed of the likelihood that by simply claiming 2,4-D-cleaving enzymes that were discovered by the disclosed method of screening soil bacteria would run afoul of the disclosure requirements of 35 U.S.C §112. Though they did not close the door entirely, the court did leave the strong impression that, had the claims been amended to remove the reference to the monooxygenase activity, the remaining disclosure would likely have been overbroad and thus still unenforceable. So what could Bayer have done? A savvy claims drafter could, no doubt, have written claims that would support the broad genus that Bayer wanted to control. By the same token, careful amendment after the discovery of the biochemical truth may have brought some protection (though the court listed some of the pitfalls in this approach). Ultimately, though, the best thing they could have done is to draft claims that didn’t get ahead of their actual knowledge. In biotech, there is no substitute for having your science straight.

Written by

September 25th, 2013 at 9:47 am

Welcoming Social Media Evidence into Family Law Cases

leave a comment

Family law is an area of law that is not typically mentioned in the same breath as technology. However, as internet use becomes increasingly pervasive, the separation between family law and technology is rapidly shrinking. Internet use, and social media use more specifically, is now frequently being introduced as evidence in family law cases. Unfortunately, judges presiding over family law matters—particularly custody disputes—have been inconsistent in their review of social media evidence. In cases regarding custody and parental rights, trial courts have broad discretion to determine best interests of the child. In all states, there are various factors to be looked at to determine make a best interest determination. It has become apparent that evidence from social media sites like Facebook can be persuasive in the consideration of many different factors. In Lalonde v. Lalonde, a Kentucky Court of Appealsallowed the admission into evidence of Facebook photos of the mother in a custody dispute consuming alcohol. The judge held that the fact that the photos were uploaded by a friend of the mother’s and then tagged—versus being uploaded by the party herself—did not effect the photos admissibility. Further complicating matters is the fact that the child’s use of social media in custody cases can have an effect on the judgment. Trial courts have held that both parents must be allowed a weekly review of a teenage child’s Facebook and that simply creating a social media profile for a child is not a reason to modify a custody award. The growing importance of social media evidence is quickly becoming apparent to family law attorneys. Practitioners are now advising their clients to curtail their use of these sites so as not to provide courtroom fodder. In addition to providing practical advice to clients, attorneys will need to understand how social media evidence is being used in order to provide comprehensive representation.  

Written by

April 5th, 2013 at 2:52 pm

Posted in Cases,Legal/Tech News

Tagged with ,

Jury Awards $70 Million to Kalamazoo-Based Stryker Corp.

leave a comment

A mere four days after U.S. District Judge Robert Jonker issued a claim construction memorandum and order in the case of Stryker Corp. v. Zimmer Inc., Zimmer Holdings was told to pay $70 million to Stryker Corp. for infringing patents related to a device that removes damaged tissue and cleans bones during joint-replacement surgery. Stryker sued Zimmer in December 2010, claiming its patents were infringed by Zimmer’s Pulsavac Plus wound debridement system. Zimmer’s Pulsavac Plus and Stryker’s competing Surgilav and InterPulse machines are devices that use pulsing liquid to loosen debris from a surgical site and remove it by suction. The process allows doctors to see better during orthopedic surgery. Yesterday, a federal jury in Stryker’s hometown of Kalamazoo, Michigan, said Zimmer willfully infringed three of Stryker’s patents. The jury also found that a 25 percent royalty rate should apply to sales of infringing Zimmer products. In light of the jury’s finding that Zimmer’s infringement was willful, Judge Jonker can increase the award. A spokesman for Zimmer, Garry Clark, said that “Zimmer is disappointed with the verdict and plans to pursue all available post-trial relief including an appeal in due course.”

Written by

February 11th, 2013 at 9:19 pm

Fair Use in an Educational Setting

leave a comment

The University of Michigan just recently won a lawsuit in which the University was alleged of copyright infringement in its effort to digitize its library contents. On September 12, 2011, the Authors Guild, the Australian Society of Authors, the Union Des Écrivaines et des Écrivains Québécois (UNEQ), and eight individual authors filed a lawsuit against HathiTrust, the University of Michigan, the University of California, the University of Wisconsin, Indiana University, and Cornell University for copyright infringement. On October 10, 2012, a Federal District Court in the Southern District of New York dismissed the suit finding that the University of Michigan’s use of books fit within "fair use" of the Copyright Act. HathiTrust was created through a collaboration of universities in order to establish a repository for those universities to archive and share their digitized collections. The Authors Guild argued that the access HathiTrust provided to the scanned materials was in violation of their members’ copyrights, claiming that the universities had pooled the unauthorized scans of an estimated 7 million copyright-protected books. The Authors Guild also claimed that while many U.S. universities had allowed the scanning of books that were in the public domain, only the defendant universities had allowed copyright-protected books to be scanned. One of the major issues with the HathiTrust digitalization plan was a project called Orphan Works. Orphan Works are books that are subject to copyright but whose copyright holders cannot be identified or located. As a consequence, users cannot seek permission to use these works in ways that might involve copying or distributing the work. The Authors Guild claimed that the procedures for determining whether a work should be deemed an “orphan” were deficient, as “within days of the suit’s filing on September 12th, the Authors Guild, its members, and others commenting on its blog had developed strong leads to dozens of authors and estates,” while in other cases “simple Google searches turned up most of the leads in minutes." HathiTrust has repeatedly claimed that the primary motive driving the digitalization effort was preservation for a scholarly purpose, as the sharing was limited to online reading by faculty and students of participating universities. The scholarly purpose of the digitalization would make the sharing legal under Section 107 of U.S. copyright law, which allows for fair use of a copyrighted work without infringing the copyright. HathiTrust argued that educational, non-profit uses of copyrighted works, falls within previous interpretations of what qualifies as “fair use." Federal District Judge Harold Baer Jr. of the Southern District of New York ruled in favor of HathiTrust, stating, “Although I recognize that the facts here may on some levels be without precedent, I am convinced that they fall safely within the protection of fair use … I cannot imagine a definition of fair use that would not encompass the transformative uses made by Defendants’ [Mass Digitalization Project] and would require that I terminate this invaluable contribution to the progress of science and cultivation of the arts.” With this ruling, Judge Baer has “reaffirmed the role of libraries as promoting knowledge creation and equality of access."

Written by

February 4th, 2013 at 12:00 am

Got a negative review on Yelp? Seems like you’re out of luck!

leave a comment

Certainly, most of you are familiar with Yelp, a website that provides user reviews on various companies, organizations, etc. I, for one, use this website religiously as a guidance for which restaurants to try out and which to avoid (since I am a student on a tight budget with a love for new foods, I don’t want to waste time or money on restaurants that a large majority of my peers would disapprove of or dislike). Obviously, those rating a company or group with five stars are not going to get into trouble with that company or group for doing so (who would actually complain about getting too much praise, right?). But what happens to those who don’t write happy reviews or don’t give five stars? What exactly happens to those who write unfavorable reviews? Perhaps even pushing the envelope and giving only one star? The questions are answered in Dietz Development, LLC and Christopher Dietz v. Jane Perez. Last October, a contractor filed a complaint against a former customer who wrote a negative review about him and his company on Yelp, alleging, among other things, defamation. In December, the trial court ruled that the defendant, a homeowner who used the plaintiff’s services, had to revise her unfavorable comments against the plaintiff on Yelp. Shortly thereafter, however, the plaintiff, along with the American Civil Liberties Union and Public Citizen, filed a petition for review to the Supreme Court of Virginia, and had the preliminary injunction overturned a few days later. What a victory for free speech! Now I can read reviews (assuming it’s not breaking Yelp’s user agreement) for my next restaurant-to-try without having to worry about reading a bunch of sugarcoated posts. Seems to be a win-win for all, except for the plaintiff in the abovementioned case, right? Well, not necessarily. As always, the answer is: it depends. As reminded in the Washington Post, not all reviews on Yelp are accurate and, unfortunately for those entities affected with such false reviews, such companies can have their reputation destroyed. My take-home point: always remember that there are two sides of a story! Relevant articles: http://arstechnica.com/tech-policy/2013/01/judge-cant-order-yelp-user-to-edit-negative-review/ http://www.washingtonpost.com/blogs/crime-scene/post/aclu-public-citizen-to-fight-lawsuit-over-negative-yelp-review/2012/12/20/9242b430-4ab8-11e2-b709-667035ff9029_blog.html http://blogs.wsj.com/law/2013/01/03/court-negative-yelp-reviews-shouldnt-be-censored/ http://www.citizen.org/litigation/forms/cases/getlinkforcase.cfm?cID=794 http://www.yelp.com/filtered_reviews/8tCNUqQyCV3ePikYsWIqwQ/

Written by

January 8th, 2013 at 5:00 pm

Search the Blog