After a four-day trial, a jury found in favor of Plaintiff Huang on his False Claims Act retaliation claim and awarded $159,915 in lost wages and $500,000 in compensatory damages. The only evidence introduced by Plaintiff in support of compensatory damages was his own testimony of the effects of the retaliation by Defendants. Plaintiff testified that the retaliation ended his academic career at the University, caused the loss of his research grant, limited his ability to obtain subsequent employment, caused a significant fifty pound weight loss and sleep issues, and put a strain on his marriage. But, he did not present any evidence of medical treatment, counseling, medications, physical injuries, etc.

In reducing the jury award in Huang, the Fourth Circuit considered the succession of case decisions involving emotional damage awards. The Court rejected the implication that there is a bright-line rule in the Fourth Circuit that six-figure awards are excessive in the absence of medical evidence. But, the case awards examined all had been significantly reduced by the Court. Three cases ultimately resulted in awards no greater than $15,000 and another jury award was reduced to $50,000. In another case, the Fourth Circuit found that the plaintiff had presented “considerable objective verification of her emotional distress,” but the award was still reduced from $245,000 to $150,000.

The Fourth Circuit noted that certain factors were helpful in determining what evidence of emotional distress had been offered, such as whether the plaintiff had received medical attention or psychological treatment, or had physical injuries or loss of income. In addition, the Court noted that corroborating testimony of plaintiff’s distress was a factor to consider when deciding whether to reduce an award. Given the specific description of the emotional distress offered by the Plaintiff in Huang, the Court determined he had provided a solid basis for a significant award of compensatory damages. But given the lack of objective verification evidence, the award was reduced from $500,000 to $100,000.

In assessing the potential damages in a case, the above decision provides further assistance in placing a dollar value on emotional injuries.  For injuries that defy a fixed rule of quantification, this legal authority is a helpful guide for the assessment of the degree of harm allegedly suffered.

© Copyright, PCT Law Group 2013, all rights reserved.
 

In the case of Cyberlock Consulting, Inc. v. Information Experts, Inc. (2013), the United States District Court for the Eastern District of Virginia said “No” to Plaintiff subcontractor’s breach of contract claim and held that the Teaming Agreement in that case was an agreement to agree and thus unenforceable under Virginia law. Cyberlock Consulting, Inc. (“Cyberlock” or “Plaintiff”) entered into two Teaming Agreements with Information Experts, Inc. (“IE” or “Defendant”) for the purpose of assisting IE with work it hoped to get in response to RFPs from the U.S. Office of Personnel Management (“OPM”). The first Teaming Agreement had attached to it a Statement of Work setting forth in detail the work that Cyberlock would perform for IE, the period of performance, place of performance, and project management requirements for the work. The first Teaming Agreement also had attached to it as an exhibit the actual subcontract that the parties agreed they would enter into upon award of the prime contract to IE. IE was in fact awarded the prime contract by OPM and obligations under the first Teaming Agreement were satisfied.

Subsequently, OPM revealed that it would seek bids for a new project and the parties negotiated and entered into a second Teaming Agreement. While the second Teaming Agreement set forth general provisions of the parties’ responsibilities if IE was awarded the prime contract, and even included a Scope of Work document as an exhibit which stated that Cyberlock would perform 49% of the work awarded to IE under a prime contract, [according to the Court] the second Agreement did not specifically set out in detail what work Cyberlock would perform. In addition, unlike the first Teaming Agreement, there was no subcontract attached to the second Teaming Agreement that the parties agreed to sign in the event that IE was awarded the prime contract. As it turns out, IE was awarded the second prime contract. However, after a month of negotiations and several drafts of a proposed subcontract exchanged between the parties, IE terminated the negotiations. Cyberlock sued to enforce the second Teaming Agreement and claimed that it was entitled to 49% of the work awarded to IE in the prime contract.

The Court disagreed, and stated that although there was language in the second Teaming Agreement which indicated the parties’ intent to enter into a subcontract if IE was awarded the work by OPM, there was no specific subcontract that had been negotiated and to whose terms the parties’ had agreed. The Court held that the post-award obligations in the second Teaming Agreement were, at most, an agreement to agree to enter into a yet agreed upon (future) subcontract agreement, and therefore the second Teaming Agreement was unenforceable as a matter of law since agreement to agree contracts are unenforceable under Virginia law.

© Copyright, PCT Law Group 2013, all rights reserved.
 

In Nguyen v. Biondo, the plaintiffs own and operate an upscale hair and nail salon that serves specialty cocktails and wine to customers. The plaintiff created a mark with the word “tipsy” in it to advertise this unique service, and registered the trademark with the United States Patent and Trademark Office. While the application for the mark was pending, the plaintiffs agreed to sell part of the spa business to defendant. However, after acquiring the mark, the business relationship between the plaintiffs and defendant fell out and the plaintiffs sold all ownership rights in the spa to defendant.

The sales agreement was central to this case decision. As part of the sales agreement, defendant was allowed to continue operating the spa business using the name “tipsy” until a certain date. The agreement specifically provided that defendant was not acquiring the rights to the mark “tipsy.” Despite the agreement provisions, defendant continued to use “tipsy” as part of the spa’s name after the date had passed and violated his payment obligations to plaintiffs.

Plaintiffs sued defendant for, among other things, breach of contract and trademark infringement under the Lanham Act. Defendant responded by asserting that plaintiffs’ conduct preceding the sales agreement demonstrated a lack of supervision and control over the mark “tipsy,” and thus defended that the mark had been abandoned. The Eleventh Circuit refused to consider the defendant’s “naked licensing” defense because the facts underlying it occurred before the sale and licensing agreement was signed by the parties. By signing the agreement, the Court held that defendant “expressly recognized that [plaintiff] owned the mark.”

Although the “naked licensing” defense was unsuccessful in this action, companies should ensure that written agreements to license marks contain robust quality control provisions to prevent consumer confusion as to the source of the goods and services sold under the mark. Moreover, businesses must monitor quality through inspections and other activities to avoid this harsh litigation trap.

Changes to the form have made the I-9 more user-friendly and easier to read. Employees must complete the first page with their personal information, and the revised form now gives room for employees to provide their email address and phone number (however, it is optional). Businesses must retain an I-9 for all employees for three years after the date of hire or one year after the date employment ends, whichever is later.

Employers need to be attentive when completing these forms. Recent developments under the Obama Administration show that both the U.S. Department of Labor and Homeland Security have increased their budgets for worksite enforcement – indicating the Federal Government is stepping up their efforts in audits of I-9s. Businesses face an array of punishments (from fines to significant civil and criminal penalties) for any violations.

Employers can retrieve the new I-9 Form by visiting USCIS's website.

In the case of Balas v. Huntington Ingalls Industries, Inc. (2013), the United States Fourth Circuit Court of Appeals affirmed a ruling from the Eastern District of Virginia that the Plaintiff, Karen Balas, could not maintain claims which were solely asserted in her EEOC questionnaire and in letters to the EEOC. The Court ruled that an administrative charge serves a vital function in the process of [potentially] remedying unlawful employment practices because it serves to alert the employer of the alleged wrongs committed; allows for an investigation into the alleged wrongful activity by the employer and the EEOC; and allows for the EEOC to seek conciliation between the parties if it finds merit to the charges. The Court reasoned that since a plaintiff’s employer is not put on notice as to the claims and facts alleged in the EEOC questionnaire or in letters privately written by a plaintiff to the EEOC, only those claims formally made part of the EEOC Charge were allowed to move forward in a lawsuit against an employer.

The Fourth Circuit concluded that the district court was correct in its refusal to consider any of Ms. Balas’ Title VII claims that were not included in her EEOC Charge; and that the Court had no jurisdiction to hear such claims because the Plaintiff had failed to administratively exhaust her remedies before filing such claims in federal court.

© Copyright, PCT Law Group 2013, all rights reserved.
 

In the case of Hill v. Commonwealth of Virginia Department of Transportation (“VDOT”) (2013), a Virginia Federal District Court held that the employer’s stated reason for passing over the Plaintiff was not enough to grant summary judgment in favor of the employer. Plaintiff, Pamela Hill, applied for the position of assistant district administrator for construction and preliminary engineering. She, along with eight other candidates, interviewed for the position. Ultimately, a male colleague, Christopher Blevins, was chosen for the promotion. Hill alleged gender discrimination under Title VII of the Civil Rights Act of 1964 for being passed over for the position. Hill alleged that she was more qualified than Blevins and cited to her seventeen years of experience working for VDOT, prior promotions, supervisory experience, and her Bachelor’s Degree in Mining Engineering (Blevins did not have a college degree). At summary judgment, VDOT apparently did not argue that Blevins was more qualified than Hill. Instead, VDOT relied solely on its assertion that Blevins provided better answers to the interview questions than Hill.

In denying VDOT’s summary judgment motion, the Court held that Defendant’s nondiscriminatory reason for denying Hill the job promotion – a few lines of interview notes from the candidate interviews – was “entirely subjective and meagerly explained.” While the Court readily acknowledged that prior cases within the Fourth Circuit have upheld subjective employment decisions based (at least in part) upon interviews, it noted that those cases also included some objective criteria upon which the employer based its employment decision. Ultimately, the court held that VDOT’s reliance solely upon a few lines of interview notes was not enough to meet its burden at the summary judgment stage, and the case was allowed to proceed to a jury trial on the merits.

While it is fine to make a promotion based upon performance during an interview, this court decision is a reminder to employers that additional and objective promotion criteria should be utilized and documented in order to provide a clear non-discriminatory reason for the promotion decision.

© Copyright, PCT Law Group 2013, all rights reserved.
 

In the case of Geographic Services, Inc. v. Collelo, et al. (2012), the Virginia Supreme Court held that once an employer establishes the existence of a trade secret, all that they are then required to show is that the trade secret was misappropriated as that term is defined under the Trade Secrets Act. The entity from which the trade secret was misappropriated does not have to show that defendants used the trade secret in order to establish a claim under the VUTSA and recover damages. Disclosure of the trade secret is sufficient where it can be shown that the new employer and/or person to whom the trade secret was disclosed knew, or had reason to know, that the trade secret was acquired by improper means. In such cases, where the plaintiff cannot readily prove measurable damages, then the VUTSA provides that the court can impose a reasonable royalty upon the wrongdoers for the unauthorized disclosure of the trade secret.

This decision by Virginia’s highest court provides a cautionary note for Virginia employers: if you know, or should have known, that an employee has obtained proprietary information from its prior employer without its knowledge, you could be on the hook for damages if the employee discloses the information to your company – even if your company never uses the information. The disclosure, in and of itself, will be enough to expose companies to monetary damages. Conversely, companies in which an employee has taken proprietary information can seek legal redress and possibly obtain damages even if the employee and its new company did not use the information.

© Copyright, PCT Law Group 2013, all rights reserved.
 

In the case of Gerner v. City of Chesterfield, Virginia (2012), the United States Court of Appeals for the Fourth Circuit reversed a lower court ruling from the Eastern District of Virginia and found that although a severance agreement is offered upon employment termination and is not a contractual right, it is nevertheless an employment benefit upon which a discrimination claim may lie. Finding that the district court judge (Hudson, J.) erred in his analysis of the legal standard, the appellate court held Title VII protects current and former employees from discrimination, as well as those who have not been hired and have been discriminated against in the hiring process. Further, the Court found that Ms. Gerner's allegations that she was offered a less favorable severance package than her male counter-parts under the City’s reduction-in-force plan, were sufficient to allege an adverse employment action for a gender discrimination claim. In making its ruling, the Court relied upon U.S. Supreme Court precedent and decisions from other Circuit Courts.

This decision by the Fourth Circuit, which is the highest federal appellate court for Virginia, Maryland, West Virginia, and the Carolinas, is a reminder to employers that they must be vigilant in making sure that employment benefits (even severance packages which are often viewed as “voluntary” or “discretionary”) are provided on an equitable basis. Alternatively, employers must make sure that they have a strong, non-discriminatory, reason for any difference in the provision of such benefits among similarly situated employees.

© Copyright, PCT Law Group 2012, all rights reserved.
 

The above then begs the question: How can SMBs save money in hiring and engaging IP legal counsel? Well, the answer to this question contains many variables related to the specific IP attorney being hired. Such variables include the region where the IP attorney works, the size of law firm in which they practice, their level of experience, the complexity of the IP involved, etc.

The above variables aside, there is one constant in the price equation that I consistently advise SMBs to pay attention to – the preparation of their disclosure materials BEFORE meeting with any newly-engaged IP counsel. That is, SMBs (and individual entrepreneurs) can directly and significantly control their IP legal cost through careful preparation of their disclosure materials. I have seen $5000 legal bills turned into $15000 legal bills through the needless “back and forth” between an IP attorney who is “on the clock” and a client who has prematurely engaged such IP attorney. So, what do I mean by disclosure materials and how should an SMB prepare them? Well, I answer in two parts:

With respect to an invention needing a patent application, disclosure materials means an SMB gathering and organizing all relevant papers, sketches, drawings, notes, software code, formulations, etc. that provide the IP attorney with the following information:

• Title of the invention
• The full legal names, addresses and citizenship of all inventors
• The full name, address and state of incorporation of the company who will own the patent (if any)
• A description of the problem solved by the invention
• A description of how long the problem has been around and how have others tried to solve the problem
• A description of how the invention solves the problem differently than past solutions or attempted solutions
• System diagrams showing all hardware/software components of the invention
• Flowcharts illustrating the steps of the invention
• A list any known websites, publications, patents, products, services, etc. that are relevant to the subject matter of the invention
• A description of how the invention relates to the launch of a new product or service
• Dates the invention was (or will be): first conceived; implemented as a pilot or otherwise used in the public domain; reduced to actual practice; the subject of a publication or public disclosure; sold or offered for sale; and/or internally exploited

With respect to a mark or logo needing a trademark application, disclosure materials means an SMB gathering and organizing the following information to provide to the IP attorney:

• A description of the mark
• The full name, address and state of incorporation of the entity who will own the trademark
• A description of all the types of products and/or services with which the mark is actually used or will be used
• Date of any first sale of goods bearing the mark in interstate commerce
• Copies of any specimens showing the mark as it is currently (or will be) used on or in connection with the goods or services
• A description of how the mark is actually used or intended to be used

A prepared and organized client is one who receives efficient IP legal services and a reasonable legal bill from their IP attorney, and is consequently glad to pay that reasonable bill! 

Consistent with prior court opinions, a Virginia Beach Circuit Court recently invalidated a non-compete provision which prohibited a former employee from, inter alia, being an owner or shareholder in a competing business. The case, Patient First Richmond Medical Group, LLC v. Ameanthea Rica Blanco (Virginia Beach Circuit Court, Feb. 15, 2011), involved Defendant Blanco, a family nurse practitioner who was employed by Plaintiff Patient First. According to the allegations in the case, Blanco, while still working at Patient First, began formation of a competing healthcare practice which was to provide primary and urgent care treatment at reasonable or fixed fees during extended weekday and weekend hours without the need for an appointment.

Blanco also solicited two doctors from Patient First to come work with her at the new medical practice. After she resigned her position with Patient First, Blanco opened up the competing business within seven miles of her former place of employment. Patient First brought suit alleging that Blanco violated her employment agreement which contained non-competition and non-solicitation provisions.

The covenant not to compete prohibited Blanco from performing medical services of the type performed for Patient First (though the term “medical services” was not defined) for two years after her employment and within a seven-mile radius as an “agent, officer, director, member, partner, shareholder, independent contractor, owner, or employee” of the competing business. The Court found that the non-compete provision was overbroad because its provisions went beyond occupations and businesses that were in competition with Patient First. The Court reasoned that by barring Blanco from being a shareholder in a competing business, she would be barred from merely owning stock in a publically traded company, even if she were not providing medical services for the company and thus not competing with Patient First.

The Court also held that a number of the terms in the provision were not defined and left too much uncertainty as to which activities of the former employee would, or would not, be in violation of the covenant. Therefore, an employee would essentially have to guess at which conduct was prohibited. The Court held that in such cases, the non-compete was unenforceable as offending sound public policy, and sustained Blanco’s demurrer without leave for Patient First to amend.

In Virginia, courts regard veil-piercing as an extraordinary remedy. Generally, each corporation is a separate legal entity with its own debts/liabilities and assets. However, under Virginia law, a court may pierce the corporate veil to find that an individual owner is the alter ego of a corporation where it finds (1) a unity of interest and ownership between the individual and the corporation, and (2) that the individual used the corporation to evade a personal obligation, to perpetrate fraud or a crime, to commit an injustice, or to gain an unfair advantage.

When deciding whether to pierce the corporate veil, courts consider a variety of factors, including the intermingling of assets of the corporation and of the shareholder; the absence or inaccuracy of company records; and significant undercapitalization of the business entity. Virginia businesses must be cognizant of such corporate formalities and protocols in order to protect the personal assets of owners from potential liability.
 

A Virginia court will enforce a non-compete clause between an employer and an employee if it is: sufficiently narrowly drawn to protect the employer’s legitimate business interest; not unduly burdensome on the employee’s ability to earn a living; and, not against public policy. As restrictive covenants are generally disfavored in Virginia (as they restrain free trade), the employer bears the burden of proof and any ambiguities in the contract are construed in favor of the employee.

In this case, the court concluded that the covenant not-to-compete at issue was enforceable because it only prevented the subcontractor from working for two companies; it proscribed competition for only a year; and, it was specific as to the type of work that was prohibited under the agreement between the parties.

The damages awarded by the court to the plaintiff government contractor were based on the lost profits that the non-compete clause was supposed to prevent. As the court noted, “[a]warding damages on the breach of the agreement protects plaintiff’s legitimate business interest by compensating it for the breach.”

Preferred Systems Solutions, Inc. v. GP Consulting LLC, Circuit Court for Fairfax County, Virginia (July 28, 2011)

In analyzing the injunction standard under the Patent Act, Judge Raymond A. Jackson of the Eastern District of Virginia relied heavily upon the four-part test set forth by the United States Supreme Court in the case of ebay, Inc. v. MercExchange, L.L.C. The District Court found in favor of ActiveVideo regarding all four prongs finding that: 1) ActiveVideo had been, and would continue to be, irreparably harmed by Verizon’s unauthorized use of its technology; 2) ActiveVideo did not have an adequate monetary remedy at law because the continuing harm associated with loss of market share and brand recognition of the VOD service were difficult to quantify; 3) the balance of hardships favored ActiveVideo because, as a small company, it relied heavily upon the patents infringed upon by Verizon, while Verizon offered numerous services and would be less affected by having to cease use and/or find alternatives to offering the VOD service; and 4) public interests and public policy were served by protecting patent rights. Regarding this last prong, the Court specifically noted that, “[t]hough Verizon does add other components to be able to offer the completed product, Verizon’s FiOS system, and more specifically the VOD aspect of the FiOS system, could not function without the use of ActiveVideo’s technology.” Mem. Op. at 17.

Nevertheless, have no fear Verizon VOD users. The Court granted Verizon a six-month “sunset” window of time to come up with a non-infringing alternative to its current VOD system, and Verizon claims it has already been diligently working to come up with an alternative system. Therefore, before the time is up, it is likely Verizon will have embarked upon an alternative method to provide the popular VOD service to its customers – thus, enabling it to keep sending out those monthly Verizon bills to its subscribers at a brisk and healthy pace.

© Copyright, PCT Law Group 2011. All rights reserved.
 

For its part, the City contended (and apparently the lower court agreed) that Stewart’s conduct was sporadic and infrequent and did not rise to the level of a hostile work environment. Further, the City argued that Okoli’s work had deficiencies, and that she was going to be fired even before she wrote the letter complaining of Stewart’s behavior. Additionally, the City argued, Okoli’s letter was non-specific and did not state that she was being “sexually” harassed by Stewart, only “harassed.” Therefore, they argued, Okoli did not engage in protected activity under Title VII to warrant a retaliation claim against the City.

The Appellate Court disagreed and held that the statements attributed to Stewart were both severe and pervasive. In addition, the Court held that a plaintiff need not mention the “magic words” of “sex” or “sexual” to effectively advance a sexual harassment complaint. Citing decisions from other circuit courts, the Court held that the complainant only need put the employer on notice that unlawful behavior is afoot. Okoli’s use of the words “unethical,” “degrading and dehumanizing” in her letter complaining about Stewart’s behavior were enough to raise a sexual harassment complaint. Finally, the Court determined that the district court erred in concluding that simply because Stewart had a document on his computer that pre-dated Okoli’s letter, such document was a termination letter. Stewart modified the computer document three times before delivering it to Okoli as a termination letter just hours after her sexual harassment complaint reached the mayor’s office. Under those facts, the Court concluded that there was sufficient evidence to infer that Stewart did not intend to fire Okoli prior to receiving word that she complained about his behavior to the mayor and his staff.

The Fourth Circuit Court of Appeals hears appeals involving Virginia employment cases.

© Copyright, PCT Law Group 2011. All rights reserved.
 

Plaintiff Patricia Weth, formerly a deputy treasurer for litigation in the Arlington County Treasurer’s Office, took leave under the Family and Medical Leave Act (“FMLA”) for several weeks during December of 2009 until mid-February of 2010 to have medically necessary surgery performed. On the same day that she returned to work from her medical leave, Weth was told by her boss, Arlington County Treasurer Francis O’Leary, that he wanted her to find a new job and that her main focus should be finding a new job. O’Leary promptly stripped Weth of almost all of her job duties, and told her she was no longer to perform other job duties with the exception of one project and the duty of finding a new job. Predictably, under such facts, Weth filed claims of FMLA interference for the County’s failure to place her in the same or similar position after her FMLA leave as she had prior to the leave; and a claim of FMLA retaliation for her demotion and discharge after returning from FMLA leave. However, Weth’s lawsuit ran into a stumbling block concerning the appropriate defendant(s) to sue.

In the case of Weth v. Francis X. O’Leary, Plaintiff initially filed suit against Arlington County, the County Treasurer’s Office, and Defendant O’Leary. However, since County Treasurers such as O’Leary are deemed independent constitutional officers under the Virginia Constitution, the Court dismissed the case against the County and the Treasurer’s office as they were improper Defendants. Weth then filed an Amended Complaint against O’Leary in his official and individual capacity. On summary judgment, after dismissing the case against O’Leary in his official capacity based upon sovereign immunity, one of the main issues revolved around whether O’Leary, as a County official, could be sued under the FMLA in his individual capacity as an “employer”. Acknowledging that the issue remains an open question in the Fourth Circuit, and that there is a split on the issue within the federal courts, the Court looked to the text of the FMLA and the holding of a majority of the district courts that have ruled on the issue. In particular, the Court looked to the Fifth and Eight Circuits, which (relying upon the text of the FMLA) have held that public agency officials, including state officials, can be sued in their individual capacities if they act directly or indirectly on behalf of the employer. A prominent example of such authority being the hiring and firing of employees.

In this case, since O’Leary clearly had the authority to hire and fire employees such as Plaintiff Weth, the Court held that he could be sued in his individual capacity under the FMLA. The Court concluded that to rule otherwise would run contrary to the very text of the FMLA, which, in addition to including those with such authority as O’Leary in the definition of an employer, also states that “public agencies” are included within the definition of employer. Therefore, the Court ruled that Plaintiff Weth will be allowed to pursue her claims against Defendant O’Leary in his individual capacity at trial.

© Copyright, PCT Law Group 2011. All rights reserved.
 

The first thing to know is that the U.S. Patent Laws allow patent owners to give notice to the public by affixing a notice to the patented product (or its packaging if marking the product is not practical or possible) such as “Protected by U.S. Patent No. 3,141,592”  See 35 U.S.C. § 287(a).  This is colloquially known as the “patent marking” statute.  Absent such a marking, in most cases, a patent owner cannot recover damages for patent infringement unless they can prove the infringer was notified of the infringement.

Second, we know that affixing a patent notice to a product (or its packaging) not only acts as a deterrent to competitors by putting them on notice, but it also has some marketing cache!  Thus, that is why it is common to see not only actual patent number notices, but also notices of “patent pending” on many products.

Third, there is also what is known as the “false marking” statute which prohibits anyone from marking a product (or its packaging) with:

• an expired patent number
• a false patent number
  
• with the words “patent applied for” or “patent pending” when no application for patent has been made or is no longer pending, respectively.
  

See 35 U.S.C. § 292.  Each of these three false marking offenses, however, must be shown to have been done “for the purpose of deceiving the public,” and not merely done as a result a good faith mistake.

What makes the false marking statute interesting is that it contains a whistleblower-type provision.  That is, any private citizen can sue the manufacturer of a product they believe has been falsely marked to recover “not more than $500 for every such offense.”  Thus, one can imagine that if a company produces 1,000,000 units of a product that in some way was falsely marked, a $500M lawsuit becomes very attractive for anyone with the time and the right contingency law firm behind them.  See Forest Group, Inc. v. Bon Tool Co., 590 F.3d 1295 (Fed. Cir. 2009).  In fact, over 150 of these types of lawsuits have been filed in the last several months alone!  The only drawback is that 50% of any recovery must go to the federal government.  (Thus, the private citizen in my example can keep only $250M of the possible recoveries – still not too shabby!)

On June 10, 2010, a federal court of appeals, interpreting the false marking statute, ruled that “the combination of a false [patent marking] and knowledge that the [patent marking] was false creates a rebuttable presumption of intent to deceive the public.”  See Pequignot v. Solo Cup Co., Case No. 2009-1547 (Fed. Cir.).  A defendant in one of these false marking suits can successfully defend itself by showing via “a clear preponderance of the evidence that it did not have the requisite purpose to deceive.”  For example, the defendant in the Solo Cup case successfully obtained a dismissal of the suit by explaining that they knew the patent number on their products had expired but it was prohibitively expensive and disruptive to the business to prematurely replace the manufacturing molds which contained the now-expired patent numbers.

So, what should SMEs glean from all this hoopla?  Well, four things:

1. If your enterprise manufactures no products covered by U.S. patents, ignore it;
2. If your company has no patents that cover a specific product, do not “fake it until you make it” by marking it with one or more non-existent patent numbers;
3. If your company has not applied for any patents that cover a specific product, do not use the words “patent pending” in an attempt to obtain marketing cache for such product; and
4. If any of your competitors are manufacturing products which you suspect are falsely marked with an intent to deceive the public, consult a plaintiff’s lawyer!

To establish a case under the Equal Pay Act, an employee must establish that:

• different wages are paid to employees of the opposite sex;
• the employees perform substantially equal work on jobs requiring equal skill, effort and responsibility; and
• the jobs are performed under similar working conditions.

However, an employee who proves all the above elements may still not prevail. A business may avoid liability if it establishes that such payment was made pursuant to a seniority system, a merit system, a system which measures earnings by quantity or quality of production, or a differential based on any other factor other than gender.

In the Virginia Tech cases, the two women claimed their starting salaries were lower than the men who did the same work. In its defense, Virginia Tech countered that the men had more experience when hired.

Both sides presented extensive statistical evidence. According to the plaintiff’s economist, men’s salaries involved with Virginia Tech’s fundraising were an average of 15% higher. Virginia Tech’s expert analyzed the experience and duties of the employees, and determined there was only an 8% difference.  Tech's expert concluded that this difference could be linked to gender, but opined that there was a chance it occurred randomly since the disparity was not statistically significant.

Notably, one of the women testified that when she inquired about the pay differential between her and her male predecessor, the senior regional director of major gifts replied that her predecessor had a family to support.  In addition, the Judge identified other statements that tend to show Virginia Tech's animus toward the women when he previously denied Virginia Tech's motion for summary judgment.

How does your company prevent potential liability under the Equal Pay Act? Businesses should evaluate its pay structure, including policies regarding seniority systems, merit systems and incentive systems in light of the prohibition of gender pay disparity. An effective way to prevent managers and supervisors from making compensation decisions based on a protected category under the discrimination laws is to establish and implement a comprehensive job evaluation system.  As the lawyers for the women argued during the trial in this matter - if Virginia Tech "had good policies, we wouldn't be here."  

The U.S. Department of Labor’s Wage and Hour Division outlined a list of criteria to determine whether a trainee or intern is an “employee” under the FLSA, and thus, must comply with Federal wage laws.

The following criteria provide guidance in evaluating internship programs for for-profit organizations, but it is important to note that each program is unique and must be carefully examined:

• the training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school;
• the training is for the benefit of the trainee;
• the trainees do not displace regular employees, but work under close observation;
• that the employer that provides the training derives no immediate advantage from the activities of the trainees and on occasion the employer’s operations may actually be impeded;
• the trainees are not necessarily entitled to a job at the completion of the training period; and
• the employer and the trainee understand that the trainees are not entitled to wages for the time spent in training.

If your company’s internship program does not satisfy all of the above criteria, your interns may be considered “employees” under the FLSA. Hiring an intern, which qualifies as an “employee” may cost your company thousands in unpaid wages and legal fines!

So, how do you ensure compliance? Establish a written internship program outlining the terms and structure of the relationship in a way that the intern is receiving the full benefit of the learning experience, and ensure that your managers and other employees properly implement it.

Given this setting, who then owns the IP created by someone within a university community? Intuitively, the answer seems simple in the case of a tenured, research professor who develops IP related to their university research duties – the university owns it! But how about the case of an undergraduate student who creates IP totally unrelated to any of her coursework!? The student? How about certain university community citizens, such as university executives, administrators, (exempt or nonexempt) staff, graduate students, postdoctoral fellows, wage payroll employees, adjunct faculty, emeritus or retired faculty, visiting scholars and others? The analysis for those university community citizens is often a fact-intensive endeavor.

In general, under varying applicable state and federal laws where the university employs the individual in question, there is a presumption that the employee owns the rights to their IP, even though it may have been created during the course of their employment. This general rule, however, has two exceptions and one limitation.

•  First Exception: If the employee has an express employment agreement, stating the contrary (i.e., an employee agreement assigning all IP to the employer/university), then the general rule does not apply.
• Second Exception: If the employee was specifically “hired to invent,” later directed to solve a specific problem, or his employment requires that he exercise his “inventive faculties,” then the above-stated general rule also does not apply.
• Limitation: Even when none of the two exceptions to the above-stated general rule apply, the employer – in the case of patented inventions – may have a non-exclusive, non-transferable, royalty-free license to practice the employee’s patented invention if it was made using the resources of the employer. This is known as an employer’s “shop right.”

An overwhelming majority of universities have an “official intellectual property policy” that requires employees, as a condition to employment, to assign their IP rights under certain circumstances (e.g., when university funds or facilities are involved in the creation of the IP). Thus, most situations fall under the above-stated first exception even though many professors and postdoctoral fellows fail to read such policies when they sign their employment agreements!

So what about the case of the undergraduate student who created IP totally unrelated to any of her coursework? What if that IP was created without a professor’s help? Well, in a recent reported case having those exact facts, a university’s lawyers demanded a 25% ownership stake and two-thirds of any profits from four undergraduate students who created a popular iPhone® application in their dorm room! Although the university eventually backed down, one campus technology transfer expert has observed that many universities “generally seek to retain ownership, or at least have a formalized mechanism for assessing ownership of a student’s work in much the same way they would regarding a faculty member’s work.”

In sum, those working/learning/creating within a university community should become familiar with their university’s intellectual property policy at the start of their affiliation, and pay attention to the agreements they sign as a part of the new university employee “on-boarding” process. And, when potentially valuable new IP is created, be vigilant about asserting their rights in such IP.

 [1] Association of University Technology Managers, AUTM U.S. Licensing Activity Survey, FY2008: Survey Summary.