In an unusual decision, the Federal Communications Commission has essentially waived the statutory thirty-day period for filing petitions for reconsideration and will conduct a de novo review of a June 30, 2005 effective competition finding. Section 405 of the Communications Act governs petitions for reconsideration of Commission actions. The statute specifically requires that any "petition for reconsideration must be filed within 30-days from the date upon which public notice is given of the order, decision, report or action complained of."
The Commission has no authority – at least under the terms of the Communications Act -- to waive statutory timelines. Indeed, in a recent ruling in Reuters Limited v. FCC, the D.C. Circuit Court of Appeals held that the FCC exceeded its authority in acting on a late-filed petition for reconsideration. As a result, in virtually all instances in which the Commission considers an untimely filed petition for reconsideration, it denies the petition as untimely filed. Here, though, the Commission relied on an older Court of Appeals case -- Gardner v. FCC -- holding that the statutory limit does not prevent the Commission from considering late-filed petitions under extraordinary conditions.
Background
Mediacom Southeast, LLC originally filed its petition seeking an effective competition decision as to its Fairhope, Alabama system on April 4, 2005. For reasons that remain unexplained, Fairhope’s opposition, as well as a number of other related pleadings, were not placed in the Commission’s file. Mediacom’s request was treated as unopposed and granted along with sixteen other unopposed effective competition petitions.
The decision was publicly released on July 6, 2005. In order to be considered timely, a petition for reconsideration would have had to have been filed on or before August 7, 2005. The City of Fairhope, however, did not file for reconsideration until August 25, 2005.
The Petition for Reconsideration
Fairhope argued that it was unaware of the grant because the Commission failed to provide either it or its counsel with a copy of the decision. It further asserted that it only learned of the decision on August 22, 2005 when it received a copy attached to a Mediacom submission to the Commission relevant to the case.
Notwithstanding that Fairhope at least should have known of the decision because of its public release – note that the time for seeking for reconsideration does not run from notice by mail but from the release date – the Commission found sufficient extraordinary conditions to warrant review:
* First, Fairhope had timely filed an opposition to Mediacom’s effective competition request;
* Second, "t was the Commission’s error which substantially contributed to" Fairhope's failure to timely seek reconsideration; and
* Third, Fairhope acted quickly after discovering the grant.
his is a rare decision as the Commission virtually always follows the Reuters holding, denying untimely reconsideration petitions on the grounds that it has no authority to waive the statutory thirty-day filing deadline.
Having decided to grant reconsideration, the Commission will now conduct a de novo review, fully considering the arguments raised in response to the effective competition petition. It has further directed the parties to update the record requiring that "the updated information should reflect the best possible data available and accurately reflect the current state of competition in Fairhope." It indicated that a decision will be issued "expeditiously" following completion of the pleading cycle.
However, the Commission denied Fairhope's request that the Commission modify the ex parte status of the proceeding from "restricted" to "permit but disclose," which would have permitted other interested parties to address the Commission's continued use of 2000 Census occupied household data for purposes of determining DBS penetration and other related issues. The Commission held such issues were "of general concern that exceed the limits of its Petition for Reconsideration" that there was an existing forum for the discussion of such matters.
Please contact Mark Palchick (202/857-4411) or Howard Barr (202/857-4506) if you have any questions regarding this advisory.
http://www.wcsr.com/default.asp?id=114&objId=227
Saturday, June 2, 2007
The Upswing Is In Lawsuits
As the housing market slows, buyers & sellers are increasingly at odds.
This article is reprinted with permission from Legal Times.
It's no secret that the housing market has slowed in recent months. According to the National Association of Realtors, new home sales in 2006 were estimated at 1.06 million, the fourth highest annual total on record. In contrast, experts predict that new home sales will decline to 961,000 in 2007 and then rise only slightly to 971,000 in 2008.
This downturn in the housing cycle is not just making things difficult for sellers. It’s also creating an environment of increased adversity between buyers and sellers of residential development projects and spawning a flurry of litigation.
In recent years, when the housing market was on a consistent upswing, residential home developers were clamoring to snatch up property to add to their inventory. When residential developers entered into contracts to purchase land for development, they were willing to conduct the required due diligence in as few as 30 to 90 days. And even if issues turned up that could increase the development costs, purchasers then had more flexibility in their anticipated profit margins to overlook the problems.
They were willing to take these risks on the assumption that the accelerating sale prices of the homes to be built on the property would be more than enough to absorb any unexpected increases in development costs. Residential developers were also willing to expedite their land acquisitions by waiving conditions to closing so as not to delay the time line for construction of the new homes that were then so highly in demand. Trying to hold on to their real-estate contracts, purchasers were quick to file suit to force the sale if they heard of any attempts by a seller to break a deal and sell instead to a competing bidder.
NOT SO FAST
However, since the housing market entered its cyclical downturn, the buyers of residential development projects are no longer analyzing deals under fast and furious trajectories of increased new home prices. Profit margins have tightened, and developers’ flexibility to take on the risk of increased development costs has correspondingly declined.
In this environment, residential developers can no longer assume that issues affecting their development costs will not financially strain a project. They now expect sellers, who are typically sophisticated parties in these types of transactions, to share more in the financial risks. Many residential home developers have also found themselves holding excess inventory—and their interests have shifted from acquiring property to depleting the supply that they hold. Sellers, on the other hand, no longer have a line of back-up bidders knocking at their doors and have lost much of the leverage they previously held over their buyers.
In short, as the housing market has slowed, tensions between purchasers and sellers with diverging interests have mounted, and a new wave of litigation is spinning off from residential land development deals gone sour. So what is all the fighting about?
The crucial fact is that the typical land acquisition deal for the construction of new homes involves a due-diligence period during which the purchaser studies the feasibility of the project. At the conclusion of the due-diligence period, the buyer typically decides if it wants to go forward with the contract or to exercise an option to walk away from the deal. Once the purchaser (the developer) commits to the project, the seller is usually obligated to complete the process of subdividing the land into buildable lots, with all required governmental approvals, before the purchaser has an obligation to close. These two periods—due diligence and the subdivision development process—are breeding grounds for disputes.
In today’s market, disagreements between buyers and sellers are arising as early as the due-diligence period. Developers are now taking more time with their due diligence than they did when new home sales were burgeoning and are more closely scrutinizing the economics of a project before committing to it.
The discovery of issues that can affect the costs, complexity,and time line for the intended development is causing developers with narrower profit margins to proceed with caution. For example, if a developer discovers the presence of a hazardous material that requires remediation on the site, it may seek an extension of the due-diligence period to see whether the hazardous material might lead to increased costs or delay. A developer may try to renegotiate the deal for a reduced purchase price reflecting the increased risk or may demand that the seller share the risk by bearing some or all of the remediation costs. Such demands to rewrite a deal or share costs tend not to sit well with sellers, who are anxious to close their deals as quickly as possible to convert their asset to cash.
Other tensions related to due diligence arise out of the sellers’ obligations to disclose information known to them about the property. While buyers expect sellers to fully disclose information about conditions on the property that might affect its development, sellers also have a disincentive to come forward with information that may have an adverse impact on the buyers’ willingness to purchase the property. In fact, sellers may delay making their disclosures until late in the study period to diminish the amount of time the buyer has to consider the information. But that can lead to further problems: Once the buyer is committed to the contract but may still want to get out of the deal, the buyer may look to the seller’s nondisclosure of any important information as a means for declaring the seller in default.
THE GREAT DIVIDE
The subdivision process is the next phase in the development process place where disputes are on the rise. The contracts typically require the seller to apply for and obtain approval of the planned development from the required governmental authorities. This process often means the seller must submit plans for the new residential development to the locality’s land-use or planning commission. It may also mean that the seller must apply to rezone the property to maximize the allowable density of lots, thereby increasing the number of lots the seller can sell and the number of new homes the purchaser can build.
The sellers are also typically responsible for coordinating the provision of water, sewer, utilities, and roadway access to the site, responding to the locality’s comments and conditions to approval for the project, working with transportation departments on roadway approvals, and working with environmental, wetlands, engineering, or archaeological consultants to analyze and address factors that can affect the development of the land.
These activities can give rise to countless obstacles. It’s these obstacles that are giving rise to disputes. For example, the presence of wetlands or environmentally protected areas may limit exactly where residential lots will be permitted on the property. And with a reduced area of usable land, the number of buildable lots the property will yield might be cut to an amount less than the minimum number of lots required by the contract. In circumstances like this, if buyers cannot negotiate a sharing of the risk or resolution of the issue, they often seek to get out of the deal. Sellers, on the other hand, may attempt to avoid this obstacle and simply allow time to pass in hopes that the purchaser will become more willing to rework the project once the market bounces back. As the economics of a project start to fail, the developers are not hesitating to immediately hold sellers in default and terminate deals. Sellers resist, and litigation is under way.
ONE MORE STEP
The final place where disputes are arising is the closing phase of the deals. In the closing phase, a series of conditions usually must be satisfied before the buyer is obligated to tender the purchase price on the property. For example, contracts tend to require the seller to be able to deliver a clear and marketable title free of any liens at closing. But if the seller has run short on cash and failed to pay the contractors it hired to construct the roadways and if the contractors have filed for a lien against the property, a buyer is now more likely to delay closing and demand that the seller resolve the issue on its own, rather than waive the condition or assist the seller in satisfying the obligation. Buyers who used to be willing to tie up these kinds of loose ends are now, instead, holding the sellers strictly to their obligations.
Residential developers’ increased scrutiny of the conditions to closing and decreased flexibility to take on extra economic risk are also leading to disagreements over the quality of a seller’s satisfaction of conditions. For example, the buyer who learns that a seller failed to disclose certain information about the property that will increase development costs is now more willing to declare the seller in default and refuse to close on the deal. Then, what often happens is that the seller contests knowledge of the condition, argues that the purchaser knew of the condition all along, and demands that the purchaser close. When buyers terminate or refuse to close, which they are increasingly willing to do, litigation over the deposit, at a minimum, is almost certain to follow.
We expect disputes and litigation between purchasers and sellers of land for new home development to continue until the housing market for new homes picks up again. In the meantime, residential real estate developers will probably spend a little more time with their litigation counsel than they did in past years.
http://www.wcsr.com/default.asp?id=114&objId=230
This article is reprinted with permission from Legal Times.
It's no secret that the housing market has slowed in recent months. According to the National Association of Realtors, new home sales in 2006 were estimated at 1.06 million, the fourth highest annual total on record. In contrast, experts predict that new home sales will decline to 961,000 in 2007 and then rise only slightly to 971,000 in 2008.
This downturn in the housing cycle is not just making things difficult for sellers. It’s also creating an environment of increased adversity between buyers and sellers of residential development projects and spawning a flurry of litigation.
In recent years, when the housing market was on a consistent upswing, residential home developers were clamoring to snatch up property to add to their inventory. When residential developers entered into contracts to purchase land for development, they were willing to conduct the required due diligence in as few as 30 to 90 days. And even if issues turned up that could increase the development costs, purchasers then had more flexibility in their anticipated profit margins to overlook the problems.
They were willing to take these risks on the assumption that the accelerating sale prices of the homes to be built on the property would be more than enough to absorb any unexpected increases in development costs. Residential developers were also willing to expedite their land acquisitions by waiving conditions to closing so as not to delay the time line for construction of the new homes that were then so highly in demand. Trying to hold on to their real-estate contracts, purchasers were quick to file suit to force the sale if they heard of any attempts by a seller to break a deal and sell instead to a competing bidder.
NOT SO FAST
However, since the housing market entered its cyclical downturn, the buyers of residential development projects are no longer analyzing deals under fast and furious trajectories of increased new home prices. Profit margins have tightened, and developers’ flexibility to take on the risk of increased development costs has correspondingly declined.
In this environment, residential developers can no longer assume that issues affecting their development costs will not financially strain a project. They now expect sellers, who are typically sophisticated parties in these types of transactions, to share more in the financial risks. Many residential home developers have also found themselves holding excess inventory—and their interests have shifted from acquiring property to depleting the supply that they hold. Sellers, on the other hand, no longer have a line of back-up bidders knocking at their doors and have lost much of the leverage they previously held over their buyers.
In short, as the housing market has slowed, tensions between purchasers and sellers with diverging interests have mounted, and a new wave of litigation is spinning off from residential land development deals gone sour. So what is all the fighting about?
The crucial fact is that the typical land acquisition deal for the construction of new homes involves a due-diligence period during which the purchaser studies the feasibility of the project. At the conclusion of the due-diligence period, the buyer typically decides if it wants to go forward with the contract or to exercise an option to walk away from the deal. Once the purchaser (the developer) commits to the project, the seller is usually obligated to complete the process of subdividing the land into buildable lots, with all required governmental approvals, before the purchaser has an obligation to close. These two periods—due diligence and the subdivision development process—are breeding grounds for disputes.
In today’s market, disagreements between buyers and sellers are arising as early as the due-diligence period. Developers are now taking more time with their due diligence than they did when new home sales were burgeoning and are more closely scrutinizing the economics of a project before committing to it.
The discovery of issues that can affect the costs, complexity,and time line for the intended development is causing developers with narrower profit margins to proceed with caution. For example, if a developer discovers the presence of a hazardous material that requires remediation on the site, it may seek an extension of the due-diligence period to see whether the hazardous material might lead to increased costs or delay. A developer may try to renegotiate the deal for a reduced purchase price reflecting the increased risk or may demand that the seller share the risk by bearing some or all of the remediation costs. Such demands to rewrite a deal or share costs tend not to sit well with sellers, who are anxious to close their deals as quickly as possible to convert their asset to cash.
Other tensions related to due diligence arise out of the sellers’ obligations to disclose information known to them about the property. While buyers expect sellers to fully disclose information about conditions on the property that might affect its development, sellers also have a disincentive to come forward with information that may have an adverse impact on the buyers’ willingness to purchase the property. In fact, sellers may delay making their disclosures until late in the study period to diminish the amount of time the buyer has to consider the information. But that can lead to further problems: Once the buyer is committed to the contract but may still want to get out of the deal, the buyer may look to the seller’s nondisclosure of any important information as a means for declaring the seller in default.
THE GREAT DIVIDE
The subdivision process is the next phase in the development process place where disputes are on the rise. The contracts typically require the seller to apply for and obtain approval of the planned development from the required governmental authorities. This process often means the seller must submit plans for the new residential development to the locality’s land-use or planning commission. It may also mean that the seller must apply to rezone the property to maximize the allowable density of lots, thereby increasing the number of lots the seller can sell and the number of new homes the purchaser can build.
The sellers are also typically responsible for coordinating the provision of water, sewer, utilities, and roadway access to the site, responding to the locality’s comments and conditions to approval for the project, working with transportation departments on roadway approvals, and working with environmental, wetlands, engineering, or archaeological consultants to analyze and address factors that can affect the development of the land.
These activities can give rise to countless obstacles. It’s these obstacles that are giving rise to disputes. For example, the presence of wetlands or environmentally protected areas may limit exactly where residential lots will be permitted on the property. And with a reduced area of usable land, the number of buildable lots the property will yield might be cut to an amount less than the minimum number of lots required by the contract. In circumstances like this, if buyers cannot negotiate a sharing of the risk or resolution of the issue, they often seek to get out of the deal. Sellers, on the other hand, may attempt to avoid this obstacle and simply allow time to pass in hopes that the purchaser will become more willing to rework the project once the market bounces back. As the economics of a project start to fail, the developers are not hesitating to immediately hold sellers in default and terminate deals. Sellers resist, and litigation is under way.
ONE MORE STEP
The final place where disputes are arising is the closing phase of the deals. In the closing phase, a series of conditions usually must be satisfied before the buyer is obligated to tender the purchase price on the property. For example, contracts tend to require the seller to be able to deliver a clear and marketable title free of any liens at closing. But if the seller has run short on cash and failed to pay the contractors it hired to construct the roadways and if the contractors have filed for a lien against the property, a buyer is now more likely to delay closing and demand that the seller resolve the issue on its own, rather than waive the condition or assist the seller in satisfying the obligation. Buyers who used to be willing to tie up these kinds of loose ends are now, instead, holding the sellers strictly to their obligations.
Residential developers’ increased scrutiny of the conditions to closing and decreased flexibility to take on extra economic risk are also leading to disagreements over the quality of a seller’s satisfaction of conditions. For example, the buyer who learns that a seller failed to disclose certain information about the property that will increase development costs is now more willing to declare the seller in default and refuse to close on the deal. Then, what often happens is that the seller contests knowledge of the condition, argues that the purchaser knew of the condition all along, and demands that the purchaser close. When buyers terminate or refuse to close, which they are increasingly willing to do, litigation over the deposit, at a minimum, is almost certain to follow.
We expect disputes and litigation between purchasers and sellers of land for new home development to continue until the housing market for new homes picks up again. In the meantime, residential real estate developers will probably spend a little more time with their litigation counsel than they did in past years.
http://www.wcsr.com/default.asp?id=114&objId=230
Friday, June 1, 2007
FCC Consent Decrees: Payola Guidance
The Federal Communications Commission has released the details of consent decrees with four major broadcast groups. In exchange for terminating the FCC's investigation of payola allegations, CBS Radio, Citadel Broadcasting, Clear Channel and Entercom are to make "voluntary contributions" to the US Treasury of between $2 million and $4 million and agreed to adhere to a set of Business Reforms for the next three years.
Aside from the amounts of the contributions, the terms of the consent decrees and the associated Business Reforms are the same and may be considered as providing guidance to the industry as to the Commission’s current view of acceptable promotional practices by record labels and radio stations.
The Business Reforms begin by restating the traditional payola ban on soliciting, receiving or accepting cash or other items of value from a record label or its representatives in exchange for providing or increasing airplay of music from the record label or any of its artists.
The Commission now has further provided that no item of value may be accepted from an independent music promoter unless the promoter certifies in writing that it has not been compensated by the record label based upon airplay.
This general prohibition is subject to a major exception for permitted activity surrounding contests, promotions or giveaways. According to the consent orders, stations and their employees may solicit, receive and accept items of value to give away on the air, at station events or promotions, or for the benefit of charities. Such materials may include promotional items, gift cards, CDs, gift certificates, concert tickets, airfare, hotel rooms, vouchers and cash. However, they cannot be given to company employees or members of their immediate families or households. Moreover, if used in a contest, the rules and on-air announcements for the contest must clearly indicate the value of the prizes and identify the record label as the provider.
The Commission further clarified that stations and their employees may accept payment (whether cash or other items of value) from record labels for on-air advertising, provided that proper sponsorship identification announcements are made. In addition artists may appear at events or interviews for which their record label has subsidized "reasonable" costs, so long as onair announcements identify the record label as a sponsor. Beyond the restrictions that apply to all on-air advertising and promotion, stations and labels may enter into commercial transactions by which a station agrees to license, sell, distribute or promote a label’s artists, songs or records.
The Commission has also defined several categories of "nominal consideration" which stations and their employees may solicit, receive and accept from record labels for use by the station without running afoul of the payola policies. These include:
* Electronic copies of songs and up to 20 copies of a CD for the purpose of familiarizing station employees with the recordings.
* Electronic copies of recordings for posting on station websites to familiarize visitors with the recordings.
* Promotional items such as t-shirts, key chains, coffee mugs, baseball hats, posters, pens and bumper stickers, intended for the personal use of station employees and having an individual value of $25 or less.
* Up to 20 concert tickets (including associated backstage or "VIP"-type passes) to be used by station employees (plus additional tickets for employees who are working at the concert).
* Gifts of up to $150 to commemorate an employee's life events, professional achievements and holidays (such as for a birthday, wedding, birth of a child, job promotion or winning a music industry award).
* Meals and entertainment having a value of up to $150 per person (including an accompanying spouse or significant other) for an event attended by a record label employee and having a legitimate business purpose. Meals and entertainment exceeding $150 per person may be accepted if approved in writing by a station's compliance officer consistent with the terms of a company-wide compliance plan that the consent decrees require each company to adopt.
* Reasonable travel and lodging expenses to attend live performances and appearances by record label artists for the purpose of familiarizing station employees with the artists, subject to a limit of 20 such trips annually to be allocated among all company employees.
The Commission notes that there may be a natural increase in airplay of an artist's music during the period surrounding the artist's appearance at an event, contest or giveaway promoting the artist. However, if the increase in airplay results from an agreement or understanding with the record label or the artist, then the increased airplay is considered to have been sponsored by the label or artist and must be identified as such.
The Commission has also imposed documentation requirements – a database record of: each item of value received from a record label; the disposition and identification of contestwinners of prizes valued at more than $25; the addresses of recipients of prizes that exceed the monetary reporting threshold of the Internal Revenue Service (currently $600); and written agreements for all advertising by record labels.
Finally, the Commission required each of the four settling companies to engage in training to familiarize personnel with the requirements of the Business Reforms, to appoint a compliance officer, to designate a compliance contact in each market, to establish a hotline for employees to obtain advice on compliance and report violations, and to insert into all personnel contracts a clause relating to compliance with the sponsorship identification laws.
Enforcement of potential violations of these requirements is to be strict: upon issuance of a future Notice of Apparent Liability to any of the four companies alleging violation of the Commission's sponsorship identification laws, any accused employee is to be suspended, immediately investigated and required to undergo remedial training. If a violation is found, the employee is to be subject to further disciplinary action, including termination. While the Commission’s new guidelines only apply directly to the four settling parties, they comprise the Commission's most current thoughts about payola. Consequently, while not necessarily a safe harbor, they would seem to provide reasonable standards for stations' vigilance in this often gray area of policy.
If there is a common theme to the Commission’s consent decrees and their associated Business Reforms, it seems to be that the closest scrutiny will be directed toward consideration having an on-air component, whether music exposure, publicity or contest prizes. The Commission seems to be taking a more indulgent view toward consideration that merely has the potential to influence broadcast content, such as promotional items for employee use, personal gifts, and attendance at concerts and artist appearances. The key, which has remained relatively constant over the last four decades, is disclosure of situations which an outsider might construe as conferring an unfair advantage to the provider in crafting a station's on-air product.
http://www.wcsr.com/default.asp?id=114&objId=235
Aside from the amounts of the contributions, the terms of the consent decrees and the associated Business Reforms are the same and may be considered as providing guidance to the industry as to the Commission’s current view of acceptable promotional practices by record labels and radio stations.
The Business Reforms begin by restating the traditional payola ban on soliciting, receiving or accepting cash or other items of value from a record label or its representatives in exchange for providing or increasing airplay of music from the record label or any of its artists.
The Commission now has further provided that no item of value may be accepted from an independent music promoter unless the promoter certifies in writing that it has not been compensated by the record label based upon airplay.
This general prohibition is subject to a major exception for permitted activity surrounding contests, promotions or giveaways. According to the consent orders, stations and their employees may solicit, receive and accept items of value to give away on the air, at station events or promotions, or for the benefit of charities. Such materials may include promotional items, gift cards, CDs, gift certificates, concert tickets, airfare, hotel rooms, vouchers and cash. However, they cannot be given to company employees or members of their immediate families or households. Moreover, if used in a contest, the rules and on-air announcements for the contest must clearly indicate the value of the prizes and identify the record label as the provider.
The Commission further clarified that stations and their employees may accept payment (whether cash or other items of value) from record labels for on-air advertising, provided that proper sponsorship identification announcements are made. In addition artists may appear at events or interviews for which their record label has subsidized "reasonable" costs, so long as onair announcements identify the record label as a sponsor. Beyond the restrictions that apply to all on-air advertising and promotion, stations and labels may enter into commercial transactions by which a station agrees to license, sell, distribute or promote a label’s artists, songs or records.
The Commission has also defined several categories of "nominal consideration" which stations and their employees may solicit, receive and accept from record labels for use by the station without running afoul of the payola policies. These include:
* Electronic copies of songs and up to 20 copies of a CD for the purpose of familiarizing station employees with the recordings.
* Electronic copies of recordings for posting on station websites to familiarize visitors with the recordings.
* Promotional items such as t-shirts, key chains, coffee mugs, baseball hats, posters, pens and bumper stickers, intended for the personal use of station employees and having an individual value of $25 or less.
* Up to 20 concert tickets (including associated backstage or "VIP"-type passes) to be used by station employees (plus additional tickets for employees who are working at the concert).
* Gifts of up to $150 to commemorate an employee's life events, professional achievements and holidays (such as for a birthday, wedding, birth of a child, job promotion or winning a music industry award).
* Meals and entertainment having a value of up to $150 per person (including an accompanying spouse or significant other) for an event attended by a record label employee and having a legitimate business purpose. Meals and entertainment exceeding $150 per person may be accepted if approved in writing by a station's compliance officer consistent with the terms of a company-wide compliance plan that the consent decrees require each company to adopt.
* Reasonable travel and lodging expenses to attend live performances and appearances by record label artists for the purpose of familiarizing station employees with the artists, subject to a limit of 20 such trips annually to be allocated among all company employees.
The Commission notes that there may be a natural increase in airplay of an artist's music during the period surrounding the artist's appearance at an event, contest or giveaway promoting the artist. However, if the increase in airplay results from an agreement or understanding with the record label or the artist, then the increased airplay is considered to have been sponsored by the label or artist and must be identified as such.
The Commission has also imposed documentation requirements – a database record of: each item of value received from a record label; the disposition and identification of contestwinners of prizes valued at more than $25; the addresses of recipients of prizes that exceed the monetary reporting threshold of the Internal Revenue Service (currently $600); and written agreements for all advertising by record labels.
Finally, the Commission required each of the four settling companies to engage in training to familiarize personnel with the requirements of the Business Reforms, to appoint a compliance officer, to designate a compliance contact in each market, to establish a hotline for employees to obtain advice on compliance and report violations, and to insert into all personnel contracts a clause relating to compliance with the sponsorship identification laws.
Enforcement of potential violations of these requirements is to be strict: upon issuance of a future Notice of Apparent Liability to any of the four companies alleging violation of the Commission's sponsorship identification laws, any accused employee is to be suspended, immediately investigated and required to undergo remedial training. If a violation is found, the employee is to be subject to further disciplinary action, including termination. While the Commission’s new guidelines only apply directly to the four settling parties, they comprise the Commission's most current thoughts about payola. Consequently, while not necessarily a safe harbor, they would seem to provide reasonable standards for stations' vigilance in this often gray area of policy.
If there is a common theme to the Commission’s consent decrees and their associated Business Reforms, it seems to be that the closest scrutiny will be directed toward consideration having an on-air component, whether music exposure, publicity or contest prizes. The Commission seems to be taking a more indulgent view toward consideration that merely has the potential to influence broadcast content, such as promotional items for employee use, personal gifts, and attendance at concerts and artist appearances. The key, which has remained relatively constant over the last four decades, is disclosure of situations which an outsider might construe as conferring an unfair advantage to the provider in crafting a station's on-air product.
http://www.wcsr.com/default.asp?id=114&objId=235
Supreme Court Issues Unanimous Decision Broadening the Obviousness Test for Determining Patent Invalidity
Suppreme Court Patent Decision: KSR Int'l Co. Vs. Teleflex Inc.
On April 30, 2007, the Supreme Court issued a unanimous decision in KSR Int’l Co. v. Teleflex Inc. that revised existing patent law on the issue of obviousness, making it easier for companies to challenge patents on the grounds that they cover products that are obvious combinations of existing technology. The Court decided that a patent claim reciting a combination of existing inventions and technologies for adjustable gas pedals was invalid for obviousness, reversing a decision by the U.S. Court of Appeals for the Federal Circuit. The Federal Circuit’s decision was based on a test known as the "teaching, suggestion, or motivation" (TSM) test. Under the TSM test, when a patent is based on the combination of multiple prior art references, a patent challenger must establish some suggestion, teaching, or motivation that would have led a person of ordinary skill in the art to combine "prior art" (public domain) teachings in the manner claimed in the patent. The Supreme Court criticized the Federal Circuit’s application of the TSM test as too rigid and too narrow.
Key Conclusions of KSR
* A patent claim reciting a combination of elements that can each be found in the prior art will likely be obvious when that combination yields "predictable" results.
* Courts and patent examiners should not focus solely on the problem the patent holder was trying to solve when determining obviousness. Rather, any need or problem known in the field at the time of the invention and addressed in the patent can provide a reason for the combination, thereby leading to obviousness.
* A patent claim can be invalidated by a showing that the combination of elements was "obvious to try." According to the Court, the influence of design or market trends upon the development of a claimed invention may make it obvious.
* KSR significantly broadens the universe of information that a Court may consider in determining whether there exists a teaching, suggestion, or motivation to combine prior art references so as to render a patent claim obvious.
Consequences of KSR
* Vulnerability of Inventions Comprising Combinations of Old Elements- Previously, a patentee could take comfort in Federal Circuit law holding that combinations based on entirely new, partly new, or all old elements could be patentable and that an accused infringer's attempts to merely cite the existence in the prior art of each claim limitation, without more, were not helpful to the invalidity defense. Now, although merely citing the existence of each claim limitation in the prior art may still not be enough to render a claim obvious, it does bring the accused infringer one step closer to invalidating the claim. This broadened obviousness analysis will most highly impact inventions in the mechanical and electrical areas, where predictability of results is more common than with such fields as microbiology.
* Presumption of Validity Opened to Attack in Certain Cases - Under Federal Circuit precedent, the burden to overcome the presumption of validity with clear and convincing evidence is more easily carried when the patent challenger cites prior art that was not considered by the U.S.P.T.O. examiner during prosecution of the patent application. In KSR, a key prior art patent had not been considered during prosecution, and the Court remarked: "We...think it appropriate to note that the rationale underlying the presumption – that the PTO, in its expertise, has approved the claim – seems much diminished here." This statement may open the door to more direct attacks on the presumption of validity in future cases where the patent challenger relies on previously-uncited prior art.
* Potential for Greater Use of Summary Judgment to Declare Invalidity- Reiterating that obviousness is ultimately a legal question for a district court judge to decide, the Supreme Court found that the case was ripe for resolution of obviousness on summary judgment because there was no genuine dispute of material fact as to the level of skill in the art, the content of the prior art, and the scope of the patent claim. While this treatment does not represent a change in the law, the Supreme Court’s approval of summary judgment in KSR may encourage district courts to more seriously consider disposing of patent cases before trial based upon obviousness defenses.
* Reaction by USPTO – On May 3, 2007, the Deputy Commissioner of Patents issued an internal Memorandum to examining group directors, indicating that the PTO would issue guidelines to its patent examiners on how to apply KSR to patent applications, but that in the meantime, the directors should note that the Supreme Court did not reject the TSM test and required explicit reasons for combining the teachings of prior art patents to render a claim obvious. The Memorandum concluded that it "remains necessary" to identify the reason supporting a proposed combination of prior art references.
Adapting to Change in Law Wrought by KSR
* Patent Applicants facing an obviousness rejection should ensure that the examiner followed the PTO's guidelines regarding KSR. Rejections not following the guidelines are subject to being withdrawn or overruled on appeal.
* Current patent litigants should reevaluate the likelihood of success of any obviousness defense asserted in the litigation, in light of KSR. If the claimed invention is in the mechanical or electrical area, then the litigants should explore whether any viable basis exists for classifying the results of the invention as "unpredictable." The likelihood of summary judgment resolution should also be considered. In this manner, patentees can reassess the invalidity risks of continuing with the litigation, and accused infringers can reassess how likely they are to end the litigation favorably, and at the very least, whether they have acquired any leverage with which to force a settlement of the case.
* Potential patent litigants - Patentees considering a lawsuit, as well as potential infringers facing a threat of litigation against them, should perform the same KSR analysis described above. The results of that analysis may impact the decision on whether the patentee should initiate litigation in the first place. If the patentee has threatened legal action, or even just offered a license, then the accused infringer may have grounds to initiate a declaratory judgment action against the patentee, and the KSR analysis can determine whether the infringer stands a substantial chance of prevailing in that action on obviousness invalidity grounds.
Ms. Sperry is an Associate, and Mr. Cicero is a Member, at Womble Carlyle Sandridge & Rice, PLLC ("Womble Carlyle"), where they both concentrate their practices on intellectual property litigation. The views herein expressed are solely those of the authors and are not necessarily the views of Womble Carlyle or its clients, are set forth only for purposes of discussion of the state of the law as of the date of this article, and should not be construed as legal advice. Any questions concerning the application of legal principles to particular facts should be presented in confidence to appropriate legal counsel.
http://www.wcsr.com/default.asp?id=114&objId=238
On April 30, 2007, the Supreme Court issued a unanimous decision in KSR Int’l Co. v. Teleflex Inc. that revised existing patent law on the issue of obviousness, making it easier for companies to challenge patents on the grounds that they cover products that are obvious combinations of existing technology. The Court decided that a patent claim reciting a combination of existing inventions and technologies for adjustable gas pedals was invalid for obviousness, reversing a decision by the U.S. Court of Appeals for the Federal Circuit. The Federal Circuit’s decision was based on a test known as the "teaching, suggestion, or motivation" (TSM) test. Under the TSM test, when a patent is based on the combination of multiple prior art references, a patent challenger must establish some suggestion, teaching, or motivation that would have led a person of ordinary skill in the art to combine "prior art" (public domain) teachings in the manner claimed in the patent. The Supreme Court criticized the Federal Circuit’s application of the TSM test as too rigid and too narrow.
Key Conclusions of KSR
* A patent claim reciting a combination of elements that can each be found in the prior art will likely be obvious when that combination yields "predictable" results.
* Courts and patent examiners should not focus solely on the problem the patent holder was trying to solve when determining obviousness. Rather, any need or problem known in the field at the time of the invention and addressed in the patent can provide a reason for the combination, thereby leading to obviousness.
* A patent claim can be invalidated by a showing that the combination of elements was "obvious to try." According to the Court, the influence of design or market trends upon the development of a claimed invention may make it obvious.
* KSR significantly broadens the universe of information that a Court may consider in determining whether there exists a teaching, suggestion, or motivation to combine prior art references so as to render a patent claim obvious.
Consequences of KSR
* Vulnerability of Inventions Comprising Combinations of Old Elements- Previously, a patentee could take comfort in Federal Circuit law holding that combinations based on entirely new, partly new, or all old elements could be patentable and that an accused infringer's attempts to merely cite the existence in the prior art of each claim limitation, without more, were not helpful to the invalidity defense. Now, although merely citing the existence of each claim limitation in the prior art may still not be enough to render a claim obvious, it does bring the accused infringer one step closer to invalidating the claim. This broadened obviousness analysis will most highly impact inventions in the mechanical and electrical areas, where predictability of results is more common than with such fields as microbiology.
* Presumption of Validity Opened to Attack in Certain Cases - Under Federal Circuit precedent, the burden to overcome the presumption of validity with clear and convincing evidence is more easily carried when the patent challenger cites prior art that was not considered by the U.S.P.T.O. examiner during prosecution of the patent application. In KSR, a key prior art patent had not been considered during prosecution, and the Court remarked: "We...think it appropriate to note that the rationale underlying the presumption – that the PTO, in its expertise, has approved the claim – seems much diminished here." This statement may open the door to more direct attacks on the presumption of validity in future cases where the patent challenger relies on previously-uncited prior art.
* Potential for Greater Use of Summary Judgment to Declare Invalidity- Reiterating that obviousness is ultimately a legal question for a district court judge to decide, the Supreme Court found that the case was ripe for resolution of obviousness on summary judgment because there was no genuine dispute of material fact as to the level of skill in the art, the content of the prior art, and the scope of the patent claim. While this treatment does not represent a change in the law, the Supreme Court’s approval of summary judgment in KSR may encourage district courts to more seriously consider disposing of patent cases before trial based upon obviousness defenses.
* Reaction by USPTO – On May 3, 2007, the Deputy Commissioner of Patents issued an internal Memorandum to examining group directors, indicating that the PTO would issue guidelines to its patent examiners on how to apply KSR to patent applications, but that in the meantime, the directors should note that the Supreme Court did not reject the TSM test and required explicit reasons for combining the teachings of prior art patents to render a claim obvious. The Memorandum concluded that it "remains necessary" to identify the reason supporting a proposed combination of prior art references.
Adapting to Change in Law Wrought by KSR
* Patent Applicants facing an obviousness rejection should ensure that the examiner followed the PTO's guidelines regarding KSR. Rejections not following the guidelines are subject to being withdrawn or overruled on appeal.
* Current patent litigants should reevaluate the likelihood of success of any obviousness defense asserted in the litigation, in light of KSR. If the claimed invention is in the mechanical or electrical area, then the litigants should explore whether any viable basis exists for classifying the results of the invention as "unpredictable." The likelihood of summary judgment resolution should also be considered. In this manner, patentees can reassess the invalidity risks of continuing with the litigation, and accused infringers can reassess how likely they are to end the litigation favorably, and at the very least, whether they have acquired any leverage with which to force a settlement of the case.
* Potential patent litigants - Patentees considering a lawsuit, as well as potential infringers facing a threat of litigation against them, should perform the same KSR analysis described above. The results of that analysis may impact the decision on whether the patentee should initiate litigation in the first place. If the patentee has threatened legal action, or even just offered a license, then the accused infringer may have grounds to initiate a declaratory judgment action against the patentee, and the KSR analysis can determine whether the infringer stands a substantial chance of prevailing in that action on obviousness invalidity grounds.
Ms. Sperry is an Associate, and Mr. Cicero is a Member, at Womble Carlyle Sandridge & Rice, PLLC ("Womble Carlyle"), where they both concentrate their practices on intellectual property litigation. The views herein expressed are solely those of the authors and are not necessarily the views of Womble Carlyle or its clients, are set forth only for purposes of discussion of the state of the law as of the date of this article, and should not be construed as legal advice. Any questions concerning the application of legal principles to particular facts should be presented in confidence to appropriate legal counsel.
http://www.wcsr.com/default.asp?id=114&objId=238
Supreme Court Limits Foreign Reach of U.S. Software Patents
Supreme Court Limits Foreign Reach of U.S. Software Patents
On April 30, 2007, the Supreme Court, in a 7-1 decision, issued its opinion in Microsoft Corp. v. AT & T Corp., which held that Microsoft was not liable for infringement of AT & T's patent, to the extent of foreign sales of computers loaded with Windows software. In so doing, the Court acknowledged a "loophole" in a key statute, but indicated that it was a matter for Congress, not the Court, to address. As a result, absent Congressional revision of the statute, software manufacturers selling their works overseas should be able to easily avoid liability for foreign sales under that statute, and software patent holders must place increased reliance on foreign patents.
In the litigation, Microsoft admitted liability for infringement as to computers sold and licensed domestically, but denied that AT & T could recover any infringement damages as to Microsoft’s foreign sales of Windows-loaded computers. Microsoft provided a master version of Windows software to foreign computer manufacturers, who made copies from that master version abroad and who then sold computers, loaded with the installed Windows copies (but not with the master version), to foreign users.
AT&T contended that Microsoft was liable as to foreign sales under 35 U.S.C.
§ 271(f), which is an "exception" to the "general rule . . . that no infringement occurs when a patented product is made and sold in another country." Generally, under § 271(f), infringement liability attaches to whomever without authority "supplies or causes to be supplied from the United States" either a "substantial portion of the components" of the patented invention, or any component thereof "especially made for use in the invention," with knowledge that the assembly of such components outside the U.S. would infringe the patent. 35 U.S.C. § 271(f)(1) & (f)(2).
The Supreme Court sided with Microsoft, finding that its master version of Windows sent abroad was not a "component" within the meaning of the statute, and that the act of copying that version abroad did not cause the copies to be "supplied from the United States."
Key Conclusions of Microsoft
* "Abstract software code is an idea without physical embodiment, and as such, it does not match § 271(f)’s categorization: ‘components’ amenable to 'combination.'" "In sum, a copy of Windows, not Windows in the abstract, qualifies as a ‘component’ under § 271(f)."
* "The presumption that United States law governs domestically but does not rule the world applies with particular force in patent law." AT&T's recourse as to foreign sales is to obtain and enforce foreign patents against Microsoft.
* AT & T asserted that adopting Microsoft’s position would create a "loophole" through which a software manufacturer could easily circumvent § 271(f), by supplying a master to foreign manufacturers, rather than making installation copies in the U.S. The Supreme Court, however, observed that the "loophole" described by AT & T was a matter for Congress, not the Court, to consider.
Consequences of Microsoft
* Software manufacturers selling their works in foreign countries can avoid application of § 271(f) to foreign sales by exploiting the "loophole" described by AT & T, e.g., sending masters, rather than installation copies, overseas.
* Software patentees will need to place greater reliance on foreign patents to recover damages for sales of infringing software overseas. Consideration of the need for foreign patents should be done as early as possible, since some foreign countries have an "absolute novelty" requirement that bars seeking a patent in those countries, where the patent applicant already engaged in commercial activity involving the invention anywhere. Consultation with a patent attorney or agent would be recommended to address foreign patenting questions.
Mr. Cicero is a Member, at Womble Carlyle Sandridge & Rice, PLLC ("Womble Carlyle"), where he concentrates his practice on intellectual property litigation. The views herein expressed are solely those of the author and are not necessarily the views of Womble Carlyle or its clients, are set forth only for purposes of discussion of the state of the law as of the date of this article, and should not be construed as legal advice. Any questions concerning the application of legal principles to particular facts should be presented in confidence to appropriate legal counsel.
http://www.wcsr.com/default.asp?id=114&objId=238
On April 30, 2007, the Supreme Court, in a 7-1 decision, issued its opinion in Microsoft Corp. v. AT & T Corp., which held that Microsoft was not liable for infringement of AT & T's patent, to the extent of foreign sales of computers loaded with Windows software. In so doing, the Court acknowledged a "loophole" in a key statute, but indicated that it was a matter for Congress, not the Court, to address. As a result, absent Congressional revision of the statute, software manufacturers selling their works overseas should be able to easily avoid liability for foreign sales under that statute, and software patent holders must place increased reliance on foreign patents.
In the litigation, Microsoft admitted liability for infringement as to computers sold and licensed domestically, but denied that AT & T could recover any infringement damages as to Microsoft’s foreign sales of Windows-loaded computers. Microsoft provided a master version of Windows software to foreign computer manufacturers, who made copies from that master version abroad and who then sold computers, loaded with the installed Windows copies (but not with the master version), to foreign users.
AT&T contended that Microsoft was liable as to foreign sales under 35 U.S.C.
§ 271(f), which is an "exception" to the "general rule . . . that no infringement occurs when a patented product is made and sold in another country." Generally, under § 271(f), infringement liability attaches to whomever without authority "supplies or causes to be supplied from the United States" either a "substantial portion of the components" of the patented invention, or any component thereof "especially made for use in the invention," with knowledge that the assembly of such components outside the U.S. would infringe the patent. 35 U.S.C. § 271(f)(1) & (f)(2).
The Supreme Court sided with Microsoft, finding that its master version of Windows sent abroad was not a "component" within the meaning of the statute, and that the act of copying that version abroad did not cause the copies to be "supplied from the United States."
Key Conclusions of Microsoft
* "Abstract software code is an idea without physical embodiment, and as such, it does not match § 271(f)’s categorization: ‘components’ amenable to 'combination.'" "In sum, a copy of Windows, not Windows in the abstract, qualifies as a ‘component’ under § 271(f)."
* "The presumption that United States law governs domestically but does not rule the world applies with particular force in patent law." AT&T's recourse as to foreign sales is to obtain and enforce foreign patents against Microsoft.
* AT & T asserted that adopting Microsoft’s position would create a "loophole" through which a software manufacturer could easily circumvent § 271(f), by supplying a master to foreign manufacturers, rather than making installation copies in the U.S. The Supreme Court, however, observed that the "loophole" described by AT & T was a matter for Congress, not the Court, to consider.
Consequences of Microsoft
* Software manufacturers selling their works in foreign countries can avoid application of § 271(f) to foreign sales by exploiting the "loophole" described by AT & T, e.g., sending masters, rather than installation copies, overseas.
* Software patentees will need to place greater reliance on foreign patents to recover damages for sales of infringing software overseas. Consideration of the need for foreign patents should be done as early as possible, since some foreign countries have an "absolute novelty" requirement that bars seeking a patent in those countries, where the patent applicant already engaged in commercial activity involving the invention anywhere. Consultation with a patent attorney or agent would be recommended to address foreign patenting questions.
Mr. Cicero is a Member, at Womble Carlyle Sandridge & Rice, PLLC ("Womble Carlyle"), where he concentrates his practice on intellectual property litigation. The views herein expressed are solely those of the author and are not necessarily the views of Womble Carlyle or its clients, are set forth only for purposes of discussion of the state of the law as of the date of this article, and should not be construed as legal advice. Any questions concerning the application of legal principles to particular facts should be presented in confidence to appropriate legal counsel.
http://www.wcsr.com/default.asp?id=114&objId=238
Supreme Court's KSR v. Teleflex Decision
I. SUMMARY
In KSR v. Teleflex, the Supreme Court reversed the Federal Circuit because the Federal Circuit’s approach in determining obviousness was too rigid and inflexible. The Federal Circuit applied its traditional “teaching, suggestion, motivation” (TSR) test in reversing the district court’s grant of summary judgment of obviousness. In reversing the Federal Circuit and re-affirming the district court, the Supreme Court stated "[t]hroughout this Court's engagement with the question of obviousness, our cases have set forth an expansive and flexible approach inconsistent with the way the Court of Appeals applied its TSM test here." The Supreme Court then reverted back to half-century old obviousness doctrine stemming from Graham v. John Deere Co., 383 U.S. 1 (1966) in formulating the current obviousness test.
Under the Supreme Court's current obviousness test, a patent claiming the combination of prior art elements is obvious if the claimed improvement is no more than the predictable use of prior art elements according to their established functions. The reason to combine known elements in the claimed fashion may stem from the interrelated teachings of multiple patents, the effects of market or community demands, and background knowledge possessed by a person of skill in the art.
In rejecting the TSR test as too rigid, the Court stated that:
[t]he diversity of inventive pursuits and of modern technology counsels against limiting the analysis in this way. In many fields it may be that there is little discussion of obvious techniques or combinations, and it often may be the case that market demand, rather than scientific literature, will derive design trends. Granting patent protection to advances that would occur in the ordinary course without real innovation retards progress and may, in the case of patents combining previously known elements, deprive prior inventions of their value or utility.
The Court continued its analysis by undercutting the "obvious to try" doctrine.
When there is a design need or market pressure to solve a problem and there are a finite number of identified, predictable solutions, a person of ordinary skill has good reason to pursue the known options within his or her technical grasp. If this leads to the anticipated success, it is likely the product not of innovation but of ordinary skill and common sense. In that instance, the fact that a combination was obvious to try might show that it was obvious under § 103.
II. POTENTIAL OUTCOME ON FUTURE LITIGATION AND PROSECUTION
The Supreme Court made it explicitly clear that the TSR test was too rigid and not in accord with Graham and its progeny. By adopting a more flexible approach, the Supreme Court opened the doors to more findings of obviousness, especially when the patent claims combinations of known prior art elements.
The effect on litigation will vary depending on the technology at issue. In mechanical cases, there may be more obvious findings on summary judgment because the claimed technology is easier to understand and usually involves combinations of known prior art elements. In chemical, electrical, and biotechnology cases, a more in depth obviousness analysis may be needed since predictability of results may not be easily apparent, the function of known prior art elements usually changes when chemically combined, and the background knowledge of a person of ordinary skill in the art may span several disciplines. Overall, no matter what technology is at issue, the Supreme Court made it easier for a defendant to prove obviousness under the clear and convincing burden of proof.
As above, the effect on prosecution will vary depending on the technology at issue. Unlike prior obvious rejections, however, the examiner no longer has to show a “teaching, suggestion, or motivation” to combine. Now, the examiner can show a prima facie case of obviousness by finding all the claimed elements in several prior art references and state that the claimed technology would have been “predicted” by combining these references because the established function of the elements remains unchanged. To overcome these rejections, the applicant will have to show either a “teaching away” or rely on declarations from the inventor or a person of ordinary skill in the art. The declarations will have to articulate why there was no reason to combine the references or that the function of the known prior art elements changes when combined.
A litigant or applicant, however, may still rebut a showing of obviousness by pointing to a "teaching away" in one of the references since this undercuts the "predictability" analysis the Court articulated.
In sum, issued patents that were initially rejected on obviousness grounds may now be found obvious under the same combination of prior art references. Furthermore, pending applications will now get closer scrutiny, and examiners may revisit reference combinations already asserted.
http://www.wcsr.com/default.asp?id=114&objId=241
In KSR v. Teleflex, the Supreme Court reversed the Federal Circuit because the Federal Circuit’s approach in determining obviousness was too rigid and inflexible. The Federal Circuit applied its traditional “teaching, suggestion, motivation” (TSR) test in reversing the district court’s grant of summary judgment of obviousness. In reversing the Federal Circuit and re-affirming the district court, the Supreme Court stated "[t]hroughout this Court's engagement with the question of obviousness, our cases have set forth an expansive and flexible approach inconsistent with the way the Court of Appeals applied its TSM test here." The Supreme Court then reverted back to half-century old obviousness doctrine stemming from Graham v. John Deere Co., 383 U.S. 1 (1966) in formulating the current obviousness test.
Under the Supreme Court's current obviousness test, a patent claiming the combination of prior art elements is obvious if the claimed improvement is no more than the predictable use of prior art elements according to their established functions. The reason to combine known elements in the claimed fashion may stem from the interrelated teachings of multiple patents, the effects of market or community demands, and background knowledge possessed by a person of skill in the art.
In rejecting the TSR test as too rigid, the Court stated that:
[t]he diversity of inventive pursuits and of modern technology counsels against limiting the analysis in this way. In many fields it may be that there is little discussion of obvious techniques or combinations, and it often may be the case that market demand, rather than scientific literature, will derive design trends. Granting patent protection to advances that would occur in the ordinary course without real innovation retards progress and may, in the case of patents combining previously known elements, deprive prior inventions of their value or utility.
The Court continued its analysis by undercutting the "obvious to try" doctrine.
When there is a design need or market pressure to solve a problem and there are a finite number of identified, predictable solutions, a person of ordinary skill has good reason to pursue the known options within his or her technical grasp. If this leads to the anticipated success, it is likely the product not of innovation but of ordinary skill and common sense. In that instance, the fact that a combination was obvious to try might show that it was obvious under § 103.
II. POTENTIAL OUTCOME ON FUTURE LITIGATION AND PROSECUTION
The Supreme Court made it explicitly clear that the TSR test was too rigid and not in accord with Graham and its progeny. By adopting a more flexible approach, the Supreme Court opened the doors to more findings of obviousness, especially when the patent claims combinations of known prior art elements.
The effect on litigation will vary depending on the technology at issue. In mechanical cases, there may be more obvious findings on summary judgment because the claimed technology is easier to understand and usually involves combinations of known prior art elements. In chemical, electrical, and biotechnology cases, a more in depth obviousness analysis may be needed since predictability of results may not be easily apparent, the function of known prior art elements usually changes when chemically combined, and the background knowledge of a person of ordinary skill in the art may span several disciplines. Overall, no matter what technology is at issue, the Supreme Court made it easier for a defendant to prove obviousness under the clear and convincing burden of proof.
As above, the effect on prosecution will vary depending on the technology at issue. Unlike prior obvious rejections, however, the examiner no longer has to show a “teaching, suggestion, or motivation” to combine. Now, the examiner can show a prima facie case of obviousness by finding all the claimed elements in several prior art references and state that the claimed technology would have been “predicted” by combining these references because the established function of the elements remains unchanged. To overcome these rejections, the applicant will have to show either a “teaching away” or rely on declarations from the inventor or a person of ordinary skill in the art. The declarations will have to articulate why there was no reason to combine the references or that the function of the known prior art elements changes when combined.
A litigant or applicant, however, may still rebut a showing of obviousness by pointing to a "teaching away" in one of the references since this undercuts the "predictability" analysis the Court articulated.
In sum, issued patents that were initially rejected on obviousness grounds may now be found obvious under the same combination of prior art references. Furthermore, pending applications will now get closer scrutiny, and examiners may revisit reference combinations already asserted.
http://www.wcsr.com/default.asp?id=114&objId=241
Thursday, May 31, 2007
How to Groom Better Lawyers and Better Judges
The central importance of the Judge in our society underscores the importance of understanding the ways in which prospective Judges are selected and trained and of knowing the groups or individuals most deeply involved in that process. The training and reasons for selection determine, in part, the type of judiciary we will have. The role that the judiciary has played in different historical eras had depended as much on the type of men who became Judges as it has on constitutional rules that appear to set the outer limits of judicial action. Howsoever good the law is, if a person who ought not to have been made a Judge is appointed, then everything goes wrong. A poor appointee can be a blot on the bench for may years.
It would appear that the Judges are drawn from a narrow social background. Though the social climate has turned more democratic due to the efficiency of communication, there can be no doubt that social background of may Judges and the attitude of detachment to which they are conditioned during their formative years at the Bar, can produce difficulties of communication and understanding between them and people or lesser privilege and education who appear before them. The Judges with their background are less acquainted with the problems of poverty or of different pressures, loyalties and social values operating in different strata of the society. A Judge who fails to understand the behaviour of a person in the correct perspective tends to expect unrealistic standards of common sense and behaviour particularly from witnesses whose social background differs from his own. For making a good Judge it is desirable that those who aspire to become Judges should, during the course of their training and careers, have enjoyed opportunities of learning at close quarters something about the motives and pressures which have impact on the attitudes of the members of the community. For this, a Judge should have the power of imagination that can enable him to put himself in the place of the man standing before him. With such outlook he can use his knowledge more effectively.
Many appointees, when appointed have been subject specialists while at the Bar. On appointment they become jack-of-all trades. Those who have practiced essentially in criminal law are required to attend to civil law work and vice versa. Though these Judges have the ability to grasp the new subjects very quickly, it seems a little hard on the litigants in the initial cases they try, and there is wrong use of their talents, inasmuch as they are not either employed within their specialized fields, or given time and opportunity to acquire a more general knowledge of the law. Though there has been no provision for training before appointment there is a positive move now to ensure that the new Judges receive a modicum of training afterwards. There is a need to extend training and the Judges should be encouraged and be given the time to keep pace with the advances in learning particularly in the ac tuarial, sociological and psychological fields to bring about familiarity with the basic concepts, coupled with knowledge of trends in these subjects which would tend to induce in them a more sympathetic approach to their exponents.
The Judges themselves could be expected to know the areas in which they are most deficient. Therefore, during his training period which should be for three to six months, the Judge should be free to go into any Court he wished and to observe the trial procedures and techniques. He should have an opportunity to consult with criminologists, actuaries, social welfare experts, ecologists and other specialists during his training period. Regular refresher courses should be available to all Judges to enable them to keep abreast of developments in sociology, psychology, economics, medicine, etc. There is a considerable need for a Judicial college or an Institution of Judicial Administration to ensure high standards in the decision making process.
It is extremely difficult to prophesy how good a particular appointee will shape as a Judge. Behavioural defects may develop after the appointment and some Judges may abuse their position in a variety of ways. The values and standards which were normally existent ensuring the purity of judicial administration are now required to be enforced wherever laxity is detected. The very honour of the judicial system lies in the honesty of its constituents. The experience gives an indication that some kind of procedure of receiving and dealing with complaints would enhance public confidence in judiciary, lead to improved standards of judicial behaviour and may even provide a remedy in specific cases of injustice.
Independence of the judiciary has been a highly-prized feature of our Constitution. However, inviolability from informed criticism or investigation may ten to decrease confidence in the judiciary. There would be no fear of interference with the independence of judiciary if the scrutiny and investigation is done by the appellate or superior court. Care should however be taken to ensure that the disgruntled elements or unscrupulous litigants do not succeed in their design of disreputing a good Judge by hurling false and motivated pseudonymous or anonymous complaints which if countenanced would sound a death-knell of strong, forthright and independent Judges making them tense, apprehensive and indecisive. The complaints against Judges should therefore be carefully and delicately handled and if the higher judicial disciplinary authority finds, after appropriate departmental proceedings, that the incumbent is wanting in the basic qualities of a Judge there should be given no more opportunity to him to tarnish the image of this noble institution. The black sheep when they know that they are detected sometimes prefer to walk away.
The tendency of some lawyers to browbeat the subordinate Judges by threatening them on the basis of their acquaintances and easy approach to the Judges of the higher Courts having administrative control over them should be severely curbed. No subordinate Judge should countenance such threats or pressure and should bring such instances to the notice of their administrative heads since they amount to interference with the course of justice.
There should be brought about conditions so that the members of subordinate judiciary have ample opportunity to emulate the standards followed by their senior brethren. Just as a child imbibes in himself the virtues of his parents, the judicial officers will follow the high traditions of their torch-bearers. There should be no situation where they can raise a mocking eyebrow when exhorted to follow certain value standards of aloofness impartiality and integrity. It should be clear to them that the only way of fulfilling their career ambitions is to work with sincerity and honesty and not by intrigues, approaches, favours or spending in any manner on pomp and show to please their superiors whether on local visits or otherwise. They should know that they are trustees of the power constitutionally reposed in them and there should never be any abuse of that power. They must avoid favours direct or subtle and strive to ensure that no one even secretly dares to approach them in connection with their judicial work. The glorious traditions which the Judges or our superior courts have been so zealously guarding and preserving must be handed down to them during their training and in personal meetings.
The quality of Judges at various levels and their receptivity for a good grooming almost solely depends upon the principal source of their appointment namely the Bar. A vibrant, efficient and principled Bar will send judges with an acceptable outlook and standards. To foster understanding, respect and support of our courts is one of the most solemn duties of the organized Bar. It can have no greater interest than the judicial system of the country, no more pressing activity than the work and well-being of the bench and participation in the selection process by suggesting the names of its willing and worthy members. The leaders of the Bar Association can suggest panels of such names to the Chief Justice, who can consider them for selecting the right persons on merits.
For providing a useful source to fill up the high judicial offices the willing lawyers should be identified. If a lawyer who may be willing does not indicate his intention or gives contrary indication in public, he is likely to remain a private citizen. The offer to a high judicial post should be taken by them to be a public honour and ordinarily it should not be turned down. It is very essential that the knowledgeable, experienced and sincere lawyer must be attracted to these posts so that they do not get distributed amongst others under the guise of non-availability of proper incumbents. The Advocate General and the organized Bar must therefore make conscious efforts to ascertain in confidence, the willingness of the worthy lawyers who have sufficient knowledge and experience and they should periodically forward the panel of such lawyers for selection and eventual appointment.
The younger lot who aspire to join judiciary at an earlier stage must try to gain as much court experience as possible, form study groups to discuss the points of law arising in various cases and to solve the points confronting them in the matters they conduct. The deserving young lawyers should be given sufficient incentive to remain in the profession. The Bar Associations can organize training and refresher courses for its members and expose them to the standards of behaviour expected from them.
The members of the Bar are the backbone of the judicial system. They are naturally aware of the role expected of them in the court proceedings. They should resolve to see that each brief they handle is prepared by them on facts and in law. They also should ensure that the courts work full time and that their matters are taken up in their turn for hearing and not unnecessarily adjourned. They would be justified in expecting punctuality in the working of the courts. Both the Judges and lawyers must respect the timings appointed for court work. Waste of even fifteen minutes in each working session either due to non-availability of the Judge or a lawyer works out to a loss of atleast two full working days in a month. If this happens in ten courts the loss would be twenty working days of one court which means the effective Judge strength of the courts is reduced by at least one Judge, if all thes e were single Judge benches. All this at whose cost ? Lawyers and Judges should therefore conduct the work keeping foremost the interest of those who await the outcome of process and who have no say in their grooming. Mere appreciation of each other that has no relation to the actual functioning of the court will not be enough. Good grooming is relevant only in the context of the quality of the output of work. There has therefore to be a concerted effort of correcting each other to bring about a work culture where the Judges feel obliged to take up causes and ensure that public time is not unnecessarily wasted and the lawyers co-operate in the proceedings by their active and effective participation, by avoiding adjournments, by guiding the Judge on facts and in law so that he can reach a just and correct conclusion.
There should be no place for mistrust or suspicion in the judicial functioning. The Judges and lawyers belong to the same fraternity and cannot be expected to behave like total strangers in the society. However, socialization should not degenerate into any private discussion on the facts of any pending or likely case, or any personal favours, direct or indirect, or a political or social pressure calculated to prejudice the outcome of any judicial proceeding.
Ultimately the moral fiber of these two important constituents of the judicial system, their conscious effort to treat the functioning of the court as a constitutional trustee of the society can groom them to be good lawyers and better judges.
http://gujarathighcourt.nic.in/Articles/grooming.htm
It would appear that the Judges are drawn from a narrow social background. Though the social climate has turned more democratic due to the efficiency of communication, there can be no doubt that social background of may Judges and the attitude of detachment to which they are conditioned during their formative years at the Bar, can produce difficulties of communication and understanding between them and people or lesser privilege and education who appear before them. The Judges with their background are less acquainted with the problems of poverty or of different pressures, loyalties and social values operating in different strata of the society. A Judge who fails to understand the behaviour of a person in the correct perspective tends to expect unrealistic standards of common sense and behaviour particularly from witnesses whose social background differs from his own. For making a good Judge it is desirable that those who aspire to become Judges should, during the course of their training and careers, have enjoyed opportunities of learning at close quarters something about the motives and pressures which have impact on the attitudes of the members of the community. For this, a Judge should have the power of imagination that can enable him to put himself in the place of the man standing before him. With such outlook he can use his knowledge more effectively.
Many appointees, when appointed have been subject specialists while at the Bar. On appointment they become jack-of-all trades. Those who have practiced essentially in criminal law are required to attend to civil law work and vice versa. Though these Judges have the ability to grasp the new subjects very quickly, it seems a little hard on the litigants in the initial cases they try, and there is wrong use of their talents, inasmuch as they are not either employed within their specialized fields, or given time and opportunity to acquire a more general knowledge of the law. Though there has been no provision for training before appointment there is a positive move now to ensure that the new Judges receive a modicum of training afterwards. There is a need to extend training and the Judges should be encouraged and be given the time to keep pace with the advances in learning particularly in the ac tuarial, sociological and psychological fields to bring about familiarity with the basic concepts, coupled with knowledge of trends in these subjects which would tend to induce in them a more sympathetic approach to their exponents.
The Judges themselves could be expected to know the areas in which they are most deficient. Therefore, during his training period which should be for three to six months, the Judge should be free to go into any Court he wished and to observe the trial procedures and techniques. He should have an opportunity to consult with criminologists, actuaries, social welfare experts, ecologists and other specialists during his training period. Regular refresher courses should be available to all Judges to enable them to keep abreast of developments in sociology, psychology, economics, medicine, etc. There is a considerable need for a Judicial college or an Institution of Judicial Administration to ensure high standards in the decision making process.
It is extremely difficult to prophesy how good a particular appointee will shape as a Judge. Behavioural defects may develop after the appointment and some Judges may abuse their position in a variety of ways. The values and standards which were normally existent ensuring the purity of judicial administration are now required to be enforced wherever laxity is detected. The very honour of the judicial system lies in the honesty of its constituents. The experience gives an indication that some kind of procedure of receiving and dealing with complaints would enhance public confidence in judiciary, lead to improved standards of judicial behaviour and may even provide a remedy in specific cases of injustice.
Independence of the judiciary has been a highly-prized feature of our Constitution. However, inviolability from informed criticism or investigation may ten to decrease confidence in the judiciary. There would be no fear of interference with the independence of judiciary if the scrutiny and investigation is done by the appellate or superior court. Care should however be taken to ensure that the disgruntled elements or unscrupulous litigants do not succeed in their design of disreputing a good Judge by hurling false and motivated pseudonymous or anonymous complaints which if countenanced would sound a death-knell of strong, forthright and independent Judges making them tense, apprehensive and indecisive. The complaints against Judges should therefore be carefully and delicately handled and if the higher judicial disciplinary authority finds, after appropriate departmental proceedings, that the incumbent is wanting in the basic qualities of a Judge there should be given no more opportunity to him to tarnish the image of this noble institution. The black sheep when they know that they are detected sometimes prefer to walk away.
The tendency of some lawyers to browbeat the subordinate Judges by threatening them on the basis of their acquaintances and easy approach to the Judges of the higher Courts having administrative control over them should be severely curbed. No subordinate Judge should countenance such threats or pressure and should bring such instances to the notice of their administrative heads since they amount to interference with the course of justice.
There should be brought about conditions so that the members of subordinate judiciary have ample opportunity to emulate the standards followed by their senior brethren. Just as a child imbibes in himself the virtues of his parents, the judicial officers will follow the high traditions of their torch-bearers. There should be no situation where they can raise a mocking eyebrow when exhorted to follow certain value standards of aloofness impartiality and integrity. It should be clear to them that the only way of fulfilling their career ambitions is to work with sincerity and honesty and not by intrigues, approaches, favours or spending in any manner on pomp and show to please their superiors whether on local visits or otherwise. They should know that they are trustees of the power constitutionally reposed in them and there should never be any abuse of that power. They must avoid favours direct or subtle and strive to ensure that no one even secretly dares to approach them in connection with their judicial work. The glorious traditions which the Judges or our superior courts have been so zealously guarding and preserving must be handed down to them during their training and in personal meetings.
The quality of Judges at various levels and their receptivity for a good grooming almost solely depends upon the principal source of their appointment namely the Bar. A vibrant, efficient and principled Bar will send judges with an acceptable outlook and standards. To foster understanding, respect and support of our courts is one of the most solemn duties of the organized Bar. It can have no greater interest than the judicial system of the country, no more pressing activity than the work and well-being of the bench and participation in the selection process by suggesting the names of its willing and worthy members. The leaders of the Bar Association can suggest panels of such names to the Chief Justice, who can consider them for selecting the right persons on merits.
For providing a useful source to fill up the high judicial offices the willing lawyers should be identified. If a lawyer who may be willing does not indicate his intention or gives contrary indication in public, he is likely to remain a private citizen. The offer to a high judicial post should be taken by them to be a public honour and ordinarily it should not be turned down. It is very essential that the knowledgeable, experienced and sincere lawyer must be attracted to these posts so that they do not get distributed amongst others under the guise of non-availability of proper incumbents. The Advocate General and the organized Bar must therefore make conscious efforts to ascertain in confidence, the willingness of the worthy lawyers who have sufficient knowledge and experience and they should periodically forward the panel of such lawyers for selection and eventual appointment.
The younger lot who aspire to join judiciary at an earlier stage must try to gain as much court experience as possible, form study groups to discuss the points of law arising in various cases and to solve the points confronting them in the matters they conduct. The deserving young lawyers should be given sufficient incentive to remain in the profession. The Bar Associations can organize training and refresher courses for its members and expose them to the standards of behaviour expected from them.
The members of the Bar are the backbone of the judicial system. They are naturally aware of the role expected of them in the court proceedings. They should resolve to see that each brief they handle is prepared by them on facts and in law. They also should ensure that the courts work full time and that their matters are taken up in their turn for hearing and not unnecessarily adjourned. They would be justified in expecting punctuality in the working of the courts. Both the Judges and lawyers must respect the timings appointed for court work. Waste of even fifteen minutes in each working session either due to non-availability of the Judge or a lawyer works out to a loss of atleast two full working days in a month. If this happens in ten courts the loss would be twenty working days of one court which means the effective Judge strength of the courts is reduced by at least one Judge, if all thes e were single Judge benches. All this at whose cost ? Lawyers and Judges should therefore conduct the work keeping foremost the interest of those who await the outcome of process and who have no say in their grooming. Mere appreciation of each other that has no relation to the actual functioning of the court will not be enough. Good grooming is relevant only in the context of the quality of the output of work. There has therefore to be a concerted effort of correcting each other to bring about a work culture where the Judges feel obliged to take up causes and ensure that public time is not unnecessarily wasted and the lawyers co-operate in the proceedings by their active and effective participation, by avoiding adjournments, by guiding the Judge on facts and in law so that he can reach a just and correct conclusion.
There should be no place for mistrust or suspicion in the judicial functioning. The Judges and lawyers belong to the same fraternity and cannot be expected to behave like total strangers in the society. However, socialization should not degenerate into any private discussion on the facts of any pending or likely case, or any personal favours, direct or indirect, or a political or social pressure calculated to prejudice the outcome of any judicial proceeding.
Ultimately the moral fiber of these two important constituents of the judicial system, their conscious effort to treat the functioning of the court as a constitutional trustee of the society can groom them to be good lawyers and better judges.
http://gujarathighcourt.nic.in/Articles/grooming.htm
Subscribe to:
Posts (Atom)