Northwest Business Litigation

Congress to consider dialing back federal pleading standards

In the past two years, the U.S. Supreme Court has made it harder for plaintiffs to state a claim in federal court.  While FRCP 8 requires that a complaint must contain only a "short and plain statement of the claim showing that the pleader is entitled to relief," the recent opinions in Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal raised the bar, requiring the pleading of facts showing a plausible claim.  As a result, plaintiffs can no longer rely on an assertion of legal conclusions to get a foothold in court.

Senator Arlen Specter of Pennsylvania on Wednesday introduced legislation that would toss out these new developments and return to the pleading standards articulated in the 1957 case of Conley v. Gibson.  See this report on the proposed legislation, and our eariler coverage of the Twombly and Iqbal decisions.

Federal minimum wage increases to $7.25

Effective July 24, 2009, the federal minimum wage increases to $7.25 per hour.  This is the last of three wage increases imposed under the Fair Minimum Wage Act of 2007.  The federal minimum wage has not caught up to Oregon, where the minimum wage is $8.40 per hour.  Employers that are subject to both Oregon and federal law must pay the the higher minimum wage to Oregon employees.

Employers subject to the federal wage law (the Fair Labor Standards Act, or FLSA) must post a notice explaining the FLSA in a conspicuous place.  You can download a free copy of the new federal minimum wage poster here.

Ninth Circuit approves preemptive motion to deny class certification

In a case of first impression, the Ninth Circuit ruled earlier this month in Vinole v. Countrywide Home Loans, Inc., CV-07-00127-DMS, that a defendant may file a preemptive motion to deny class certification before plaintiffs file a motion to certify a class.  While it is standard practice for the putative class representative to bring the issue of class certification before the court, nothing in FRCP 23 requires the defendant to wait for such a motion before asking the court to deny certification. 

In Vinole, the plaintiffs filed a class action complaint alleging that defendant misclassified a group of employees as “exempt,” and, consequently, did not pay all overtime and related wages owed to them.  Before the pretrial motion deadline and discovery cutoff, and before plaintiffs filed a motion for class certification, defendant filed a motion to deny class certification on the ground that individual issues predominated over common issues.  See FRCP 23(b)(3).

Plaintiffs claimed that it was improper to file a preemptive motion to deny class certification at that stage in the litigation.  The district court rejected the contention and denied class certification. 

Plaintiffs then appealed to the Ninth Circuit, claiming the district court abused its discretion in considering the motion.  The appellate court examined Rule 23(c)(1)(A) concerning the timing of a class certification determination, and found that nothing there gives plaintiffs the privilege to move for class certification before the defendant moves to deny certification.  The court also distinguished cases in which a motion to deny class certification was found to be premature because plaintiffs lacked sufficient time to complete discovery.  Here the plaintiffs had conducted discovery for 10 months and advised the district court that no more discovery would occur before their filing of a motion for class certification. 

The Ninth Circuit ruled that a defendant’s preemptive motion to deny class certification may be filed before the discovery and pretrial motion deadlines absent a showing of procedural prejudice to the plaintiffs. 

The court also affirmed the district court’s denial of class certification on the grounds that individual issues concerning the time individual plaintiffs spend in or out of the office and how each plaintiff performed his or her job predominated over common issues.

The Northwest Business Litigation blog is a resource for in-house counsel, business executives, human resource managers and others who monitor litigation and legal issues affecting Northwest businesses. The litigation group of Ater Wynne LLP hosts the blog.  Go to Ater Wynne LLP's Website.

This site is provided for informational purposes only and does not constitute legal advice, nor does it form the basis for an attorney-client relationship.

Ninth Circuit limits recall remedy in trademark case

In a trademark infringement case, a product recall may be available as a remedy when defendant has sold products improperly displaying plaintiff's trademark.  Last week the Ninth Circuit Court of Appeals held that a court may order a product recall as part of a preliminary injunction only if the infringing product poses a substantial risk of danger to the public.

In Marlyn Nutraceuticals v. Mucos Pharma, plaintiff claimed defendant sold a dietary supplement that improperly showed plaintiff's trademark on the label.  The District Court judge issued a preliminary injunction ordering defendant to stop selling the product, and to recall the product it had already sold.  Defendant appealed the scope of the preliminary injunction, contending that it was error to require a recall of the supplements with the infringing mark. 

Adopting a test used in the Third Circuit, the Ninth Circuit held that defendant should not be required to incur the cost of a recall unless plaintiff can show the court granting the preliminary injunction that (1) the infringement was willful or intentional, (2) the risk of injury to the trademark holder is greater than the burden of the recall to defendant, and (3) the infringing activity creates a substantial risk of danger to the public.

In Marlyn, because there was insufficient evidence of a public health risk from allowing the product to remain in the hands of consumers, the District Court erroneously ordered a recall as part of the preliminary injunction.

Business method patents ride Bilski to the Supreme Court

In 1998, the Court of Appeals for the Federal Circuit (CAFC), affirmed the patentability of business methods in State Street Bank v. Signature Financial Group,  prompting a flood of business method applications into the U.S. Patent and Trademark Office.  However, in 2008, an en banc CAFC emphatically (9-3) proclaimed, 'Enough!'  Bernard Bilski and Randall Warsaw's claimed method for hedging risks in commodities trading was found unpatentable.  With certiorari recently granted, questions regarding the scope of patentable business methods now move to the Supreme Court.
 
In State Street, the CAFC required only that a claimed invention provide a ‘useful, concrete and tangible result’.  True, "a...process is surely patent-eligible under § 101 if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing."  In Bilski however, the CAFC for the first time stated these two alternatives not as indicators, but as the exclusive 'machine-or-transformation' requirements for business method patentability.
 
Almost immediately, the U.S. Patent and Trademark Office (USPTO) began rejecting, based on Bilski, numerous computer-implemented processes that are not 'business methods'.  Why?  Apparently, in the eyes of the USPTO, a 'particular machine or apparatus' does not include general purpose machines (e.g. computers and processors) if they are not specially configured for the claimed process.
 
Until the Supreme Court rules, business method patents remain vulnerable to invalidity challenges, and many pending process patents face a new and formidable obstacle to allowance.  Key questions remain.  How much 'transformation' is sufficient?  What constitutes a 'particular machine'?  For now, to avoid losing rights due to the holdings in Bilski and their implementation by the USPTO, applicants must pay to keep their applications alive pending Supreme Court action. 
 
Our predictions?  The Supreme Court will reject the rigid and exclusive new 'machine-or-transformation' rule, while reciting and renewing precedent already fat with patentability indicators.  Bilski will be remanded to the CAFC, where the applicants will ultimately lose as they should have, for claiming an overly broad and abstract idea.  Ultimately, we believe the validity of already granted business method patents will be left to case-by-case evaluation through litigation, with the apple cart remaining happily upright and rolling down a well trodden road.