New Damages Trial for Apple and Samsung, Questions Still Left Unanswered

Picture1By Alex Hagel

Apple and Samsung are back! A new chapter in the Apple v. Samsung saga is set to begin in May.

A federal judge in California has scheduled a third trial since Apple’s initial suit in 2011. The suit alleges Samsung illegally copied several Apple design patents when designing its own phone. The new trial for the two tech giants follows the Supreme Court’s decision last year, which resulted in a (narrow) victory for Samsung.

This round of Apple v. Samsung involves three Apple design patents related to the front cover of its iPhones. Patent D618,577 covers “a black rectangular front face with rounded corners;” patent D593,087 covers “a rectangular front face with rounded corners and a raised rim;” and patent D604,305 covers “a grid of 16 colorful icons on a black screen.” WJLTA previously wrote about the peculiarities of design patents, and its distinction from the far more common utility patents.

Apple received a $1 billion verdict in 2012 after a jury found Samsung illegally used Apple’s design patents, and awarded Apple the entirety of Samsung’s profits from the sale of the infringing phones. Subsequent appeals affirmed the district court’s decision to award the full value of the phones, but that value was later recalculated to about $399 million.

On appeal to the Supreme Court, Samsung argued Apple was only entitled to the value of the relevant “article of manufacture,” rather than the value of the entire phone. During oral arguments, the parties struggled to articulate how and when an “article of manufacture” should be distinct from the entire product. The United States, as amicus, argued four factors should be considered:

  • the scope of the design claimed in the plaintiff’s patent, including the drawing and written description;
  • the relative prominence of the design within the product as a whole;
  • whether the design is conceptually distinct from the product as a whole; and
  • the physical relationship between the patented design and the rest of the product.

The unanimous opinion refused to adopt a specific test for determining what constitutes an article of manufacture, instead ruling “the term ‘article of manufacture’ is broad enough to encompass both a product sold to a consumer [i.e. an iPhone] as well as a component of that product [i.e. the front casing of an iPhone].”

Which brings us back to the new trial. In her order granting a new trial, the district court judge directed the parties to argue using the above factors articulated by the United States. Samsung will likely argue the front casing is an article of manufacture and thus distinct from the iPhone as a product, because (1) the design claimed in the plaintiff’s patent is limited to the front casing, rather than the entire phone, (2) the prominence of the front design is overshadowed by the capabilities of the iPhone as a “smartphone” (3) the product [a smartphone] is conceptually distinct from the patented “black rectangular front face with rounded corners” and (4) the front cover is separable from the rest of the phone.

This new trial will not likely be the end of the story. If the court accepts Samsung’s argument that the front casing is a distinct “article of manufacture,” any damages the court awards will likely only produce more litigation because there is no clear standard on how to value that “article of manufacture.”

Although valuing an article of manufacture was discussed during oral arguments at the Supreme Court, the justices did not decide the issue, and the district court judge has not offered guidance. The likely candidate, embraced by the government and Samsung at oral arguments, requires companies to use consumer surveys and data to deduce “to what extent people who bought the product did so because of the particular article of manufacture.” In the alternative, the court might adopt a test looking at the relative cost of developing a part and awarding damages in proportion. The court was hesitant to embrace this approach because of the potential for a “eureka!” moment, where an important component of the product is produced in a flash of genius, rather than through extensive research and development. This approach would necessarily value that important component much lower because of the low cost of production.

With this open question hanging over the court, this well-known saga is unlikely to end anytime soon.

What To Do About Russian Facebook Trolls?

Picture1By Hugo Fraga

Once again, Facebook is being prodded by state officials—this time from across the pond. Just one month after revealing to Congress that Russian-linked accounts purchased $150,000 worth of political ads during the US election, Facebook is being asked to provide British lawmakers with information on ads purchased by Russian-linked Facebook accounts during last year’s Brexit referendum and during this year’s general election.

Law makers in both the United States and Britain worry that the social media giant is providing a platform for foreign governments to interfere with the democratic process. Up until now, Facebook has not provided enough information to Congress to assuage this worry. For that reason, Congress—and from the looks of it, Parliament as well —is considering a bill that would require political advertisements on social media platforms to disclose who is paying for the advertisement.

This kind of regulation—at least in the U.S.—isn’t new. The Federal Election Commission is charged with ensuring that political advertisements on television and radio reveal the source of their funds and has a similar regulation for radio and television ads. But as it stands now, political advertisers on social media platforms, like Facebook, escape the FEC’s requirement to disclose the source of their funds because such advertisements are considered merely “small items,” and thus are in the same group as, say, buttons and bumper stickers.

However, Congress has introduced a bill entitled “The Honest Ads Act” that could change that. The Honest Ads Act would require social media companies with more than 50 million monthly users to make public detailed information about any political advertiser who spends over $500 on their platforms. Furthermore, it would require social media platforms to take “reasonable efforts” to ensure that any political advertisements or content they display were not purchased by a foreign national.

But some argue that this isn’t enough. Brendan Fischer, director of the Federal Election Commission reform at the Campaign Legal Center, told Wired Magazine that the kinds of advertisements purchased by Russian-linked accounts wouldn’t fall under campaign finance law because none of them included “expressed advocacy”—i.e., a prompt to vote for this or that candidate. And even if Congress expanded the meaning of a bill to include the kind of ads purchased by Russian-linked accounts, there would still be ways around it, like forming a “fake news” website and then posting the ad as an article instead.

Nonetheless, Congress likely realizes that a single bill won’t fix this problem and that there will be ways around any proposed solutions. However, many members of Congress see this bill more as an attempt to regulate what has seemed impossible to regulate: Facebook. And the advantage of that is that people won’t have to rely on Facebook’s internal efforts to solve the problem. After all, when has a company’s self-legislated efforts ever been in favor of the people.

“Errant text messages cost the Buffalo Bills millions”—the Rise of TCPA Litigation

Blog- Phone ImageBy Craig Dammeier

In April of 2014, the Buffalo Bills settled a two-year federal court case in Florida for a cool $3 million dollars. Their mistake? Sending three more text messages over a 14-day period than a fan had agreed to. Mr. Jerry Wojcik visited the Bills’ website in 2012 and opted-in to receiving promotional text messages limited to “…three to five messages per week for a total of 10 to 12 weeks.” Instead, Mr. Wojcik received six text messages the first week and seven the second week. He subsequently filed a class action suit against the sports franchise alleging violations of the Telephone Consumer Protection Act (TCPA). The settlement agreement was as follows: each eligible class member was entitled to a share of $2.5 million worth of debit cards (only redeemable on the Bills’ website, a “win” for the franchise) and $500,000 in attorney’s fees. And it’s not just the Bills (nor the NFL) that faces this menace. The Tampa Bay Buccaneers and the LA-based Chargers, Clippers, and Lakers have all fallen victim to the heartless TCPA. These teams are being mercilessly-abused over a few extra promotional emails or texts—who will help them survive the night?

The TCPA, passed by the Federal Communications Commission in 1991, was originally intended to protect individuals against unsolicited calls and texts sent to wireless devices (and home phones) by “auto-dialers.” Auto-dialers are automatic telephone dialing systems that use prerecorded or artificial voice messages. The 1991 statute arose over complaints regarding the increased use of auto-dialers, specifically because the called parties could incur significant phone bills as a result of the unsolicited calls. In response, the TCPA provides statutory damages of $500 (for an “innocent” violation) and $1,500 for a willful violation of the statute.

In 2012, a subsequent amendment to the TCPA included text messages and other modern technologies into the statute and further precluded companies from making any call without the prior express consent of the consumer. It also required the companies provide an automated, interactive “opt-out” mechanism which would allow the consumer to stop all future messages. It is under this 2012 amendment that TCPA litigation has seen a historic rise in the court system.

While the statute was originally passed to protect consumer privacy and restrict companies from engaging in unwanted telemarketing communication practices, it has quickly become a favorite weapon of plaintiff’s firms as it creates liability for every company from startups to international banks (not just sports franchises). Furthermore, the Act enables mistreated consumers and their lawyers to collect massive class action settlements. Bank of America settled its TCPA class action for $32 million (the culmination of six pending TCPA litigation matters), HSBC was granted judicial approval of a $40 million settlement in 2015, and Western Union agreed to pay $8.5 million the same year. The potential payout has created a frenzy amongst plaintiff’s firms, with several creating sub-groups that specifically handle TCPA class actions. The rise in TCPA litigation has not gone un-noticed by the Judiciary either: “This is the second multi-million-dollar class action settlement this court has reviewed and addressed in the last three weeks in which the plaintiff class has sued credit card companies for violations of the Telephone Consumer Protection Act.”

In short, the sharks are circling and each bite provides larger and larger settlements for Americans whose consumer rights have been violated (along with attorney’s fees, of course).

Antitrust Implications of Amazon’s Purported New Delivery Service

Amazon-Shopping-in-KenyaBy Gardner Reed

Amazon’s recent acquisition of Whole Foods has renewed the debate surrounding the proper role of antitrust regulation. The traditional approach to antitrust law aims to protect consumers by keeping prices down and quality up. The Whole Foods acquisition, along with the growing dominance of large tech firms such as Google, has helped popularize a new approach to antitrust: “hipster antitrust.” Hipster antitrust widens the objectives of traditional antitrust regulation, not only protecting consumers through fostering competition, but also using antitrust enforcement to attack problems such as economic inequality and environmental degradation. While the Federal Trade Commission promptly approved the Whole Foods acquisition, recent reports that Amazon is developing a delivery service to rival FedEX and UPS may raise a new round of competitive questions and continue the debate surrounding the proper role of antitrust regulation.

To begin, it is important to understand why Amazon’s acquisition of Whole Foods was not an antitrust violation. First, Amazon itself only sells a small amount of groceries and Whole Foods only accounts for two percent of the American grocery market. Second, the grocery market contains far larger and more entrenched competitors, such as Walmart with a twenty percent market share and Kroger with a seven percent share. Third, antitrust regulators, applying the traditional approach to antitrust, believe that fostering competition is the best way to promote low prices and high quality. Because this merger accounted for only a small share of the grocery market, consumers were left with plenty of competitive alternatives whether or not it led to lower prices or higher quality services.

However, recent reports indicate that Amazon is planning to launch a new delivery service similar to FedEX and UPS. According to Bloomberg, project “Seller Flex” began a trial run on the West Coast in 2017 with an expansion planned for 2018. The purpose of the system is to decrease the crowding in Amazon’s warehouses and increase the number of products available through two-day delivery. Under this new system, Amazon will directly oversee the pickup and delivery of packages from the warehouses of third-party merchants who market their items on Amazon.com. Traditionally, when delivering to end consumers, merchants had the choice to ship their products directly through Amazon or to use third-party carriers such as FedEX and UPS. Amazon may still elect to use FedEX and UPS to make deliveries, but merchants will no longer be able to make the decision on their own. Amazon expects that its increased control of the shipping process will allow it to save money through volume discounts, avoiding congestion, and increasing its flexibility.

By drawing comparisons with Amazon’s acquisition of Whole Foods it is possible to identify potential competitive concerns implicated by the new delivery system. The key difference is the amount of competitive power Amazon wields in each market. In the grocery market, Amazon is not an antitrust risk because it is a small player with only a two percent market share, which gives it essentially no ability to affect its competitors’ businesses or the market as a whole. In the e-commerce market, however, Amazon provides an essential platform and acts as a gateway for businesses to reach consumers across the United States. In the past, merchants could participate on Amazon’s platform, but retained the option to select their preference of delivery service. By requiring the use of its own delivery service, however, Amazon will be depriving its merchants of choice. Given Amazon’s power in the e-commerce market, merchants have limited alternatives to Amazon’s platform and thus may have no other realistic option outside of using Amazon’s in-house delivery service. This lack of competition in delivery methods could potentially raise end prices for consumers.

Ultimately, it is too early to predict the competitive effects of Amazon’s delivery service, but different schools of antitrust may reach different conclusions. Consistent with its track record, it is likely that Amazon will do everything in its power to lower prices and offer a better service by integrating delivery into its e-commerce platform. Under these circumstances, a traditional antitrust review would not likely find a problem. A review under “hipster antitrust”, however, may find a problem regardless of the cost or quality outcome. As part of a larger policy matter, such as protecting small businesses, Amazon’s acquisition of more power and the reduction of choice for its merchants may simply be unacceptable. Regardless of the outcome, Amazon’s continued expansion of its operations has all but guaranteed that it will remain a focus of antitrust discussions for the foreseeable future.

Sharing Is Not Always Easy – An Analysis of Sharing Data Between the Public and Private Sectors

Picture1By Isaac Prevost

Traffic data plays an important role for public agencies concerned with traffic management and infrastructure. We’re seeing private companies collect more and more of this data, occasionally resulting in partnerships between governments and those private companies. However, whether these partnerships will stave off an increased interest in regulatory requirements of private data disclosure remains to be seen.

Federal, state, and local governments collect significant traffic data about traffic patterns and use of roadway system. The collection methods used by governmental entities range from interconnected sensors along the road to government employees manually tallying vehicle occupancies. This information is then used to analyze infrastructure needs, improve public transportation routes, and provide real-time traffic information to the public. In recent years however, there has also been a substantial uptick in the amount of traffic data collected by private companies. This is occurring with the prevalence of ride-sharing companies, increasingly-automated cars, and mapping applications such as Google Maps.

So, just how are public transportation agencies utilizing these new sources of data? Waze, a GPS navigation software owned by Google, launched the Connected Citizens Program in 2014 that shares traffic and road information with public entities for free. Agencies that partner with them participate in a two-way exchange of traffic data, giving Waze information on road closures and incidents. This private data supplements the government’s data, providing better information on functions such as the timing of traffic signals or the dispatch of emergency vehicles.

An alternative example of these partnerships can be found between Strava Metro and public agencies, where the agency pays for access to the data. Strava, a popular application for runners and cyclists, gives the public entities access to the their users’ running and cycling routes.  The Oregon Department of Transportation pays $20,000 per year for access to the data. Information from Strava Metro was a factor in the decision to restrict cars from Portland’s Tilikum Crossing bridge. These types of collaborations are just a small sample of how private data is increasingly being used in public planning.

However, even though the voluntary sharing of private data with public entities has become more common, it has not happened without its hurdles. While governments may be eager to use the data that companies like Waze or Strava are willing to share or sell, tensions have arisen when a company like Uber is reluctant to turn over data or withholds certain customer information. A partnership between Uber and the City of Boston in 2015 resulted in underwhelming results because Uber only disclosed the zip codes for the start and end location of an Uber user’s ride. A city official explained that the location information was not specific enough to be useful for urban planning.

Instead of pursuing partnerships, some cities have required data information from ridesharing companies in exchange for their license to operate in the area. In January 2017, the New York City Taxi and Limousine Commission requested all passenger pick-up and drop-off information from ride-sharing companies such as Uber and Lyft. Uber publicly objected to the proposal, citing the privacy of their drivers, but the Commission kept the requirement. The City expressed interest in the value of Uber’s data for traffic planning and analysis, as well as a tool for preventing drivers from working beyond their permitted total of work.

Possibly in an effort to appease regulators, Uber launched Uber Movement this year, which aggregates and anonymizes Uber’s ride data to show the traffic flows of various cities. In their FAQs section, Uber Movement states that the launch of the site was partially due to feedback from government agencies that “aggregated data will inform decisions about how to adapt existing infrastructure and invest in future solutions to make our cities more efficient.” One of their pilot reports tracked how a metro shutdown in Washington D.C. affected travel times in the city. The New York Times labeled this website “an olive branch to local governments.”

Uber Movement formally launched in August. As it gains more and more data on various cities, it could provide an interesting case study: what amount and type of private traffic data are governmental entities hoping to access? Will the availability of this data stave off further local and state regulations? Partnerships between governments and private companies are becoming more and more common, but the success or failure of Uber Movement may provide some insight into what lies ahead for these types of partnerships.

 

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Online Education and Federal Funding: When Is a Class Actually a Correspondence Course?

Picture1By Brittany Taylor

On September 21st, 2017, the Inspector General for the Department of Education released an audit of Western Governors University (WGU), a non-profit, primarily online university that has been using technology to further higher education for twenty years. The Inspector General’s findings indicated that WGU does not provide the “regular and substantive contact” between students and teachers required by The Higher Education Act, making its classes what are called “correspondence courses,” which are ineligible for federal funding. Moreover, the inspector general has recommended that WGU repay all funding received over the last several years, which would total over $712 million. Western Governors University contests these findings vehemently, and supporters of the school have come out of the woodwork to praise the WGU’s unique educational model as well as the above average outcomes its students enjoy.

Online education has been a rapidly changing and growing field, both in high schools and on college campuses. The Higher Education Act, enacted in 1965, has not been updated to account for technological changes in education technology. It also applies outdated rules to modern programs, despite making other updates during reauthorization periods. In the case of WGU, students who (1) watch lectures digitally (sometimes in real time), (2) complete the same assignments as students in a brick-and-mortar classroom, and (3) communicate with professors by phone, email, and assignment feedback, have been found ineligible for federal funding under the same rules that made mail-in correspondence courses of the 1960’s ineligible. Specifically, these types of contacts were not considered “regular and substantive” enough to meet Title IV requirements to receive federal funding for the school. However, the Department of Education has not issued guidelines to assist schools in meeting the “regular and substantive contact” with teachers requirement, according to Jamie Merisotis, director of the Lumina Foundation, leaving institutions like WGU to use their best judgement in attempting to meet it.

One response to these findings is a movement to update the language in the Higher Education Act to better adapt and account for current technology and research regarding what types of education are effective. A house bill has been proposed to help update the statutory and regulatory framework behind online learning. The Advancing Competency-Based Education Act of 2017, HR 2589, is currently receiving bipartisan support and will, if passed, update the Higher Education Act of 1965 language to be more accommodating of modern technology and educational models like WGU’s.

Meanwhile, WGU is awaiting the Department of Education determination regarding these findings. It is entirely possible for the Department of Education to decline to act upon the results of the audit, effectively punting the question to some later date. Even if the audit is not acted upon, though, the findings send a chill through innovative education models that rely upon government funding.

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EU Antitrust Policy: Favoring Innovation over the Googles’ of the World

Picture1By Amela Zukic

As many of us have heard, the European Commission recently slapped Google with a 2.7-billon dollar antitrust fine for allegedly favoring its own comparison-shopping service, an illegal practice in the EU. Google now has 90 days to cease this practice or it could face a fine of up to 5% of the average daily worldwide turnover of its parent company, Alphabet. While many in the U.S. may reject this decision, the EU’s ruling reflects its underlying goal of fostering innovation and should not be quickly dismissed. Continue reading “EU Antitrust Policy: Favoring Innovation over the Googles’ of the World”

Spotify Proposes $43 Million Settlement Class Action Lawsuit for Unlawful Distribution of Copyrighted Music

Picture1By: Adam Roberts

Popular music streaming service Spotify has agreed to pay $43.45 million to settle a class action lawsuit brought by a collection of songwriters and music copyright holders.  The class plaintiffs allege that Spotify unlawfully distributed their music to consumers without paying what are known as ‘mechanical royalties.’  Mechanical royalties are the payments made to a songwriter which gives one the legal right to reproduce a piece of music.  Under Section 115 of the Copyright Act, services like Spotify must pay mechanical royalties for all songs streamed on their web service.  Although the class action has reached a proposed resolution, there may still be legal issues in seeking court approval of the settlement.  Continue reading “Spotify Proposes $43 Million Settlement Class Action Lawsuit for Unlawful Distribution of Copyrighted Music”

Texting Too Far

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By Ari Robbins

On Friday, June 16th, a Massachusetts Juvenile Court Judge found twenty-year old Michelle Carter guilty of the involuntary manslaughter of Conrad Roy III. Carter was found guilty of recklessly causing Roy III’s death. However, when eighteen-year old Roy III took his own life in 2014, he was alone. Roy closed himself in his truck in a Walmart parking lot and allowed a generator to fill his truck cab with carbon monoxide until he died. When he killed himself, Roy hadn’t spoken to Carter in person for over a year. The two maintained a close relationship entirely through text and e-mail. Continue reading “Texting Too Far”

Regulatory Landscape Remains Unclear for Mobile Health App Developers

8585047526_37a5bed3ff_bBy Mariko Kageyama

The digital health field has been growing exponentially and is now expanding rapidly into emerging markets. As a result, mobile health apps, or “mHealth apps,” have exploded in popularity. If you search for “health” on online app stores such as Apple’s App Store or Google Play, you will have no problem finding countless apps with various health-related purposes. One survey reports that nearly 260,000 mHealth apps were available worldwide by 2016.

However, what mHealth app developers and consumers may not realize is that these new technologies are becoming the target of increasingly tight regulations by both federal and state laws in the United States.

At the federal level, mobile health apps may be scrutinized under the following federal agency laws:

  • Health Insurance Portability and Accountability Act (HIPAA) and HITECH Act – These acts regulate data privacy and security of health information. They are enforced by the U.S. Department of Health & Human Services’ Office for Civil Rights (OCR) and Office of the National Coordinator for Health Information Technology (ONC);
  • Food, Drug, and Cosmetic Act (FDCA) – This act allows the Food and Drug Administration (FDA) to regulate the safety and effectiveness of “medical devices;” and
  • Federal Trade Commission Act (FTC Act) – This act both creates the FTC and allows it to enforce and penalize deceptive or unfair business practices including false or misleading claims about apps’ performance.

Among these major agency players, the FDA has struggled the most with trying to adapt its existing regulatory framework to include and regulate mHealth apps.

For instance, the FDA can regulate “medical devices,” but what qualifies as a “medical device” under FDA law? According to its 2015 Guidanace, the FDA does not want to regulate every single smartphone app that tangentially relates to fitness or wellness. Instead, the FDA only wants to keep an eye on a small subset of apps called “mobile medical apps” that may pose moderate to high risks to a patient’s safety if the apps fail to work as intended. “Mobile medical apps” can either be those connected to existing medical devices already regulated by FDA, or those that “transform” mobile platforms into an FDA-regulated device.

The FDA explains that a mobile app “transforms” into a medical device when it uses attachments, display screens, or sensors, or when it uses a mobile platform’s built-in features such as light, vibrations, and camera to create functionalities similar to those of currently regulated devices. But the exact actions that constitute a “transformation” are not yet known and remain open to significant agency discretion.

Therefore, if you were to create a new mHealth app that “transforms” a mobile device, you may need to seek FDA approval for a specific medical device classification based on the level of safety risks it poses. The classes are ranked I, II, or III and any class of device can be subject to what is known as Premarket Notification 510(k).

In anticipation of ambiguities in this field, multiple federal agencies collaborated in 2016 to create the Mobile Health Apps Interactive Tool. What is unique about this user-friendly educational website is that it is clearly intended for IT developers, not healthcare professionals or general consumers.

State laws have also come into play. Earlier in 2017, the New York Attorney General settled with three mHealth app developers for state law violations over their misleading marketing and privacy practices. Those mHealth apps are: My Baby’s Beat–Prenatal Listener; Heart Rate Monitor & Pulse Tracker; and Cardiio-Heart Rate Monitor + 7 Minute Workout. As illustrated in the settlement documents, these apps do not look any more sophisticated than other similar apps, but the New York AG maintained that these cardiac rate monitors probably fall under FDA Class II medical devices. Such a classification means that these are higher risk devices than Class I and thus subject to greater regulatory controls. Although the investigation did not go further, these state cases show that mHealth app developers and manufacturers can be exposing themselves to large amounts of liability at the state level as well as the federal level.

Despite this heightened oversight, the current FDA Guidance is clearly nothing more than a temporary fix when much more is needed to address these issues in such a rapidly growing and changing field. Because Congress has a less-than-great track record of quickly enacting laws, the FDA and other relevant agencies should act swiftly to reevaluate these regulations in order to ensure consumer health and safety while simultaneously fostering innovation in this massively beneficial field.

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