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FMG Law Blog Line

Archive for October, 2016

How Can Bosch Release a Saw Given the Current Lawsuit?

Posted on: October 20th, 2016

By: Daniel A Nicholson

Bosch announced in April that it will release its Reaxx table saw despite an ongoing patent dispute with SawStop. News of the June 1st delivery date was accompanied by a press release highlighting the safety features of the product, indicating that Bosch may be feeling confident of a legal victory, or that their legal team is employing some other strategy.

SawStop and Bosch have been engaged in a patent infringement case since 2015 over the implementation of flesh-detecting injury mitigation technology found on the Reaxx table saw. The technology allows the saw to “sense” when flesh contacts the saw blade, triggering a mechanism that stops the blade from severely injuring the user. SawStop first developed flesh-detecting technology, and after being rebuked by major manufacturers, began producing their own version in 2004. SawStop brought Bosch to trial in order to prevent the Reaxx table saws from reaching U.S. shores.[1]

In patent infringement litigation it is common for the plaintiff to file a preliminary injunction: a type of restraining order that prevents the defendant from selling the contested product while the case is pending. In the present case SawStop has yet to file for one, which means legally Bosch is within its rights to produce and sell the Reaxx table saws on the open market. Preliminary injunctions are especially important in cases that deal with monetary damages – for example a plaintiff suing a defendant to recover the profits of the sale of an infringing product. SawStop’s complaint against Bosch was more concerned with preventing the Reaxx table saw from being sold in U.S. markets at all, which makes sense considering it had not been released yet, and less concerned with recovering monetary damages.[2] The June 1st release date complicates the issue, and may require SawStop intervention to prevent the Reaxx from taking up valuable market share.

An announcement like this could be a show of confidence by the defendant that the law is on their side, but it could also be a sign that they are pursuing a different strategy. Companies facing an uphill patent litigation battle will sometimes release a contentious product in order to recover the costs in developing, selling and litigating the product. It’s difficult to tell exactly what Bosch’s strategy may be considering the procedural loss they suffered at their Markman Hearings.

A company that tries to push the product out as fast as possible before an adverse ruling can open themselves up to the legal phenomenon known as “treble damages.” In some courts this type of maneuver can be construed as acting in bad faith, allowing the plaintiff to motion for treble damages – triple the amount of the actual damages – in order to punish the offending company. If SawStop alleges monetary damages, and wins a preliminary injunction over Bosch, it could sway the court in favor of SawStop. While this is just hypothetical, it is something that Bosch’s legal team would have considered prior to allowing the company to release the product.

It will be interesting to see how SawStop reacts to the news of the Reaxx release date. It is entirely possible that SawStop, considering its complaint, is unconcerned with punishing Bosch monetarily and is focused instead on protecting its full access to the U.S. markets. However, if the company thinks triple damages are now in play we may see a lot more legal maneuvering from both sides in the coming months.

[1]  Litigation Could Force Flesh-Detection Injury Mitigation Technology Into All Tablesaws

[2] Certain Table Saws Incorporating Active Injury Mitigation Technology and Components Thereof., 2015 Amended Complaint (U.S.Intern.Trade Com’n) accessed here.

Click here to view the online article

New York Becomes the First State to Propose Mandatory Cybersecurity Regulations for Private Financial Institutions

Posted on: October 19th, 2016

By: Kacie L. Manisco 

The New York State Department of Financial Services (“DFS”) recently announced proposed regulations that would require banks, insurance companies and other financial institutions to establish programs and policies for responding to cyberattacks and data breaches. The regulations are sweeping and would not only affect New York-based companies, but also financial institutions that conduct business in New York or that have customers who are residents of New York. This is reportedly the first time that a state or federal regulatory agency is seeking to implement mandatory cybersecurity rules for private institutions.

Among other detailed requirements, the new regulations would mandate that financial services entities implement a comprehensive cyber security program and a written cybersecurity policy. Companies will also be obligated to expand their C-level officers to include a Chief Privacy Officer. The rules additionally outline extensive requirements for the hiring and oversight of third-party vendors. Financial services institutions that enable their vendors to access nonpublic information will now have to establish minimum cybersecurity practices for vendors, engage in risk assessment, and conduct periodic assessment of vendors to verify that their cybersecurity practices are adequate.

The regulations further mandate that covered entities notify the DFS of any cybersecurity event that “has a reasonable likelihood” of impacting the entity’s “normal operation” or any nonpublic information within 72 hours of the breach.  Companies must also annually certify compliance with the regulations, and “maintain for examination . . . all records, scheduling and data supporting” the certification.

The proposal is nearing the end of a 45-day public comment period, and the new regulations could take effect as soon as January 1, 2017. While larger financial institutions presumably already have similar policies in place, these regulations could pose a challenge for smaller companies that are less equipped to implement detailed and extensive cybersecurity programs in such a short period of time. If your company falls under the mandates of these new regulations, please contact one of our Cyber Liability, Data Security & Privacy practice group attorneys for more information about developing a compliant plan.

Insurance Claims “Arising Out Of” Halloween Festivities

Posted on: October 19th, 2016

By: Jessica Samford

As the witching hours of Halloween draw nearer, the time has come for the next installment of the FMG insurance coverage blog’s glossary of insurance terms. While the thought of interpreting a lengthy insurance policy may seem frightening to some, let’s take a quick look at one commonly utilized phrase in all types of insurance policies—“arising out of”—using the spirited theme of Halloween as inspiration.

Imagine a costumed homeowner is giving out candy to a group of rambunctious trick-or-treaters on her porch when all of a sudden her dog gets spooked and darts out of the door, knocking one unlucky ghoul down the steps. Such an occurrence is likely to fall within the liability coverage provided by a homeowner policy, which typically has language covering liability resulting from bodily injury “arising out of” the ownership, maintenance, or use of real or personal property.

Now conjure up a vision of that same homeowner on her porch collecting $5 admission fees from her neighbors as they enter her homemade haunted house attraction, of which her costumed dog is the feature creature. If a neighbor is cursed with a dog bite in this spooky scenario, the “arising out of” phrase may come up a second time when analyzing applicable coverage exclusions.  This is because most homeowner policies contain some sort of business activity exclusion, which typically provides that coverage is excluded for bodily injury “arising out of” business pursuits of an insured.

Interestingly, courts are likely to interpret the phrase differently within the same policy. Generally, courts construe “arising out of” quite broadly when used in the grant of coverage, frequently finding that almost any causal connection triggers the phrase.  At the same time, courts have construed “arising out of” narrowly in determining whether an exclusion applies, traditionally applying a “but-for” standard of causation: but for the insured’s new Halloween business venture, would the neighbor have been  bitten?  It would seem unlikely under these fictional facts.  No matter what arises this Halloween, don’t be bewitched by these divergent interpretations of “arising out of” and stay tuned for more spellbinding installments of FMG’s insurance blog.

Challenge to H-1B Lottery Keeps an Eye on the Jackpot

Posted on: October 14th, 2016

By: Agne Krutules

On September 22, 2016, an Oregon federal judge denied United States Citizenship and Immigrations Services’ (USCIS) jurisdictional challenge to a proposed class action lawsuit brought by two small US businesses and their foreign would-be employees in Tenrec, Inc. v. USCIS, allowing the case to go forward.

The Plaintiffs’ complaint alleges that the USCIS administers its H-1B specialty occupation nonimmigrant visa worker program in violation of federal law. Specifically, under 8 U.S.C. § 1184(g)(3), H-1B visas will be issued “in the order in which petitions are filed for such status or visas.” (emphasis added).  However, in 2008, the USCIS adopted a new procedure for selecting H-1B “cap” petitions for review that the Plaintiffs challenge.  Pursuant to 8 C.F.R. § 214.2(4)(8)(ii)(B), all the applications received within the required five business day window, which opens on April 1, are subject to a random computer selection.  The petitions not selected in this lottery stage are returned to the applicants without any further review. Over the past four years, USCIS has rejected approximately 425,500 filings after conducting a random lottery process without assigning any of these rejected petitions a priority date representing the order in which it was filed.

The lawsuit alleges that there is no legal justification to support the H-1B lottery system and the USCIS’s random selection procedure is arbitrary and capricious. The Plaintiffs believe the statute implementing H-1B requires a system which issues H-1B visa numbers in the order in which H-1B petitions are submitted. The lawsuit seeks class action status, and demands that the current annual five-day filing window be replaced with year-round filing.

This lawsuit could have a dramatic effect on the H-1B process. While the demand for H-1B visas is always extremely high, there is currently a statutory cap on the number of new H-1B visas that may be issued each fiscal year. Currently, only 65,000 new H-1B visas are available each year. There are an additional 20,000 H-1B visas available for foreign nationals with a master’s degree (or higher) from a United States university. In 2016, USCIS received a record 236,000 petitions for 85,000 available H-1B visas.

Amendments to Labor Code Section 226 Clarify Itemized Wage Statement Requirements Welcome Relief to California’s High Tech Industry and Other Responsible Employers

Posted on: October 14th, 2016

 

On July 22, 2016, Governor Brown approved Assembly Bill 2535 (AB 2535) to amend California Labor Code section 226. The amendment incorporates a much-needed clarification regarding the statute’s current requirement that an employer include hours worked on itemized wage statements for all employees except “any employee whose compensation is solely based on salary and who is exempt from payment of overtime…”

A strict reading of LC section 226, as currently written, requires all exempt California employees earning a commission or a bonus to keep track of their time.  Unfortunately – nothing new in the clash between employers and many overbroad employment laws they endure in California – this not track with the reality of the common and fair practices of a majority of California employers. The long-standing practice of California employers has been to track  hours of only non-exempt employees paid on an hourly basis – not exempt employees paid on a salary basis.  However, prior to AB2535, the wording of Labor Code section 226 left employers exposed to liability for penalties if a salaried-exempt employee received so much as a holiday bonus and the employee’s itemized wage statement did not reflect hours worked.

Under the new amendment only nonexempt employees and others who are paid according to hours worked are required to have their hours logged on their wage statements . AB 2535 amends Labor Code section 226 by adding section (j) which reads, in part:

(j) An itemized wage statement furnished by an employer pursuant to subdivision (a) shall not be required to show total hours worked by the employee if any of the following apply:

(1) The employee’s compensation is solely based on salary and the employee is exempt from payment of overtime under subdivision (a) of Section 515 or any applicable order of the Industrial Welfare Commission.

(2) The employee is exempt from the payment of minimum wage and overtime under any of the following:

(A) The exemption for persons employed in an executive, administrative, or professional capacity provided in any applicable order of the Industrial Welfare Commission.

(B) The exemption for outside salespersons provided in any applicable order of the Industrial Welfare Commission.

(C) The overtime exemption for computer software professionals paid on a salaried basis provided in Section 515.5.

The amendment also includes four other applicable situations to expand the scope of the new law, but suffice is to say here AB 2535 has cast a wide net to adequately protect the already equitable practices of most business in California, especially by recognizing the volume of properly exempt outside salespersons and computer software professionals toiling in the Golden State for responsible employers.  As such, this amendment, which takes effect January 1, 2017, should prevent unnecessary and costly litigation and bogging down of the already impacted California Division of Labor  Standards Enforcement (DLSE) by clarifying  ambiguities in the statute and aligning the law with otherwise just and actual business practices in California.