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Legal News Report 2-5-2016
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Apple walloped with $625.6M in damages from FaceTime lawsuit
Feb 4, 2016 | CNET
By Ben Fox Rubin
The Cupertino, California, tech giant was dealt a legal blow Wednesday when a Texas jury awarded patent-holding company VirnetX $625.6 million in damages after ruling that Apple illegally used VirnetX's technology in its popular FaceTime video chat service and virtual private networks. -
Judge to hear New Orleans cabbies v. Uber drivers lawsuit Friday
Feb 5, 2016 | NOLA.com | The Times-Picayune
By Katherine Sayre
More than two dozen cab drivers will make a plea before a New Orleans judge Friday (Feb. 5) to block UberX drivers from picking up passengers, a decision that could have an impact on the big Mardi Gras weekend and beyond. -
McDonald's facing lawsuit over alleged not-so-cheesy mozzarella sticks
Feb 5, 2016 | Cleveland.com
By Joey Morona
The Golden Arches' much-maligned mozzarella sticks are at the heart of the $5 million lawsuit filed by a California man along with 40 other customers. They claim the cheesy snacks aren't made with 100-percent real cheese, as McDonald's advertises, but instead with a filling that's part starch. -
Yahoo Ex-Employee Files Suit Alleging Problems With Performance Reviews
Feb 1, 2016 | Wall Street Journal
By Rachel Feintzeig
A former Yahoo Inc. employee filed a lawsuit Monday saying that the Internet company used performance reviews to terminate workers without proper warning. -
Judge Rejects Request for Bankruptcy Trustee to Oversee KaloBios
Feb 4, 2016 | Wall Street Journal
By Peg Brickley
KaloBios Pharmaceuticals, the struggling drug company Martin Shkreli took over in November, may survive bankruptcy and its brush with Mr. Shkreli, who was ousted as chief executive after his arrest on securities fraud charges. Judge Laurie Selber Silverstein rejected a request to have a trustee appointed to oversee KaloBios’s affairs, after warnings that displacing the leadership team that came on board after Mr. Shkreli left would upset the prospective deal. -
Lawsuit by soldier's widow tests Tennessee's malpractice law
Feb 4, 2016 | The Associated Press
A recent federal appeals court opinion could aid a military widow's efforts to hold the federal government responsible for her husband's suicide. The 6th Circuit U.S. Court of Appeals has sent a case involving Scott Walter Eiswert back to a lower court, saying there is legal precedent that could be used to favor Tracy Eiswert's contention that the government is at fault, the Knoxville News Sentinel reported Thursday.
Legal News
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Apple walloped with $625.6M in damages from FaceTime lawsuit
Feb 4, 2016 | CNET
By Ben Fox Rubin
Those monthly video chats with your mom on her iPad are starting to get expensive.
Only Apple is the one that has to pay.
The Cupertino, California, tech giant was dealt a legal blow Wednesday when a Texas jury awarded patent-holding company VirnetX $625.6 million in damages after ruling that Apple illegally used VirnetX's technology in its popular FaceTime video chat service and virtual private networks.
Apple said it plans to appeal the decision.
"Our employees independently designed this technology over many years, and we received patents to protect this intellectual property," an Apple spokeswoman said in an emailed statement. "Cases like this simply reinforce the desperate need for patent reform."
It's just the latest legal squabble involving Apple, which isn't a stranger to patent infringement cases itself. But while Apple has sued to protect what it believes are the unique features of its products, companies like VirnetX don't make products and primarily make their money through lawsuits, and are derisively known as patent trolls.
There's wide agreement that the US patent system is sorely in need of changes. The White House, Congress and several state attorneys general have fought to curb the mountain of patent lawsuits clogging the judicial system. The problem is especially bad in the tech industry, where both tech giants and patent trolls have traded barbs in suits for years. Many government agencies see this rash of patent suits as hurting innovation, especially for small companies that don't have the money to fight drawn-out patent suits.
There have been a lot of efforts to cut down on patent suits, including Congress' 2011 America Invents Act, the first reform of patent laws in decades. Also, in 2014 the Supreme Court struck down a software patent in the case Alice Corp. v. CLS Bank. Since that ruling, many lower courts have thrown out other software patents, making it harder for patent trolls to go after bigger companies.
Still, the number of cases by patent trolls went up last year to 3,604, from 2,891 in 2014, according to a January report by patent services company RPX. The number was down from 3,733 in 2013. The most popular location by far to file these suits has been the Eastern District of Texas, which has long been considered the most plaintiff-friendly place for this kind of litigation. The Apple award on Wednesday was in the same district.
The Apple suit, meanwhile, is a do-over of a 2012 jury trial between the two companies, in which VirnetX won $368 million. An appeals court overturned the decision and ordered a new trial. VirnetX has also sued Microsoft, Cisco, Avaya and others over its patent portfolio.
VirnetX shares jumped 50 percent Thursday on the Apple decision, since the damages were worth more than the small company. Apple shares were flat.
The huge Apple award may mean the government has a long way to go before it kills off, or at least injures, patent trolls.
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Judge to hear New Orleans cabbies v. Uber drivers lawsuit Friday
Feb 5, 2016 | NOLA.com | The Times-Picayune
By Katherine Sayre
More than two dozen cab drivers will make a plea before a New Orleans judge Friday (Feb. 5) to block UberX drivers from picking up passengers, a decision that could have an impact on the big Mardi Gras weekend and beyond.
The cabbies filed a lawsuit Jan. 26 in Orleans Civil District Court against 10 drivers for UberX -- the ride-hailing app's lower-cost service -- who cabbies say are violating state law by taking fares without having a commercial or chauffeur driver's license, which amounts to unfair competition.
"The majority of UberX drivers do not possess the proper license required by law and ... the requirement to hold such a license is not being enforced by the City of New Orleans against UberX drivers," the lawsuit says.
Taxicab drivers are routinely checked for the appropriate permits and service owners can lose their city operator's license for violating the requirements, which include background checks, drug testing, and installing cameras inside their cars.
Orleans Civil District Judge Piper Griffin will hold a hearing Friday at 10 .m. on the taxicab drivers' request for a preliminary injunction keeping their competitors from picking up passengers.
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McDonald's facing lawsuit over alleged not-so-cheesy mozzarella sticks
Feb 5, 2016 | Cleveland.com
By Joey Morona
McDonald's has been named in a class-action lawsuit that has plaintiffs asking "Where's the cheese?"
The Golden Arches' much-maligned mozzarella sticks are at the heart of the $5 million lawsuit filed by a California man along with 40 other customers. They claim the cheesy snacks aren't made with 100-percent real cheese, as McDonald's advertises, but instead with a filling that's part starch.
The main plaintiff, Chris Howe, claims that would be a violation of FDA guidelines prohibiting the use of starch in products labeled as "mozzarella cheese," MSN reports.
McDonald's denied the allegations. "Our mozzarella cheese sticks are made with 100 percent low-moisture part-skim mozzarella cheese," a spokesperson toldLaw360. "We intend to defend ourselves vigorously against these allegations."
This has been a rough launch for the mozzarella sticks, which debuted recently as part of the chain's McPick 2 menu. Photos of angry customers' empty mozzarella sticks popped up on Twitter a couple weeks ago with the hashtag#wheresthecheese.
It was enough of a social media firestorm for McDonald's to respond and blame the issue on the cooking process.
"We are aware of a low volume of guest concerns about our Mozzarella Cheese Sticks," a spokesperson said in a statement to the Chicago Tribune. "In these instances, we believe the cheese melted out during the baking process in our kitchens and shouldn't have been served. We apologize to any customers who may have been affected. We are working to fix this in our restaurants."
The company apparently did as the number of photos of the not-so-mozzarella sticks have since decreased on social media.
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Yahoo Ex-Employee Files Suit Alleging Problems With Performance Reviews
Feb 1, 2016 | Wall Street Journal
By Rachel Feintzeig
A former Yahoo Inc. employee filed a lawsuit Monday saying that the Internet company used performance reviews to terminate workers without proper warning.
In the complaint, filed with U.S. District Court in San Jose, Calif.,Gregory Anderson, a onetime editorial director who worked on Yahoo auto and travel content, said the company’s employee rating system—which he alleges required that a certain percentage of staff be designated as low performers—was swayed by political manipulations, prompted competition so fierce it sparked a bribery attempt and violated employment laws.
“The [quarterly performance reviews] process was opaque and the employees did not know who was making the final decisions, what numbers were being assigned by whom along the way, or why those numbers were being changed,” the filing said.
News of the suit was reported earlier in the New York Times.
Yahoo said its review process is rooted in fairness. “Our performance review process also allows for high performers to engage in increasingly larger opportunities at our company, as well as for low performers to be transitioned out,” said a company spokeswoman.
Mr. Anderson was terminated in November 2014 while on leave and attending a journalism fellowship at the University of Michigan. He said he had earned “a promotion, raise and compliments” at Yahoo but was told at the time of the firing that he ranked among the lowest 5% of employees and that his dismissal was a result of the quarterly review process, according to the lawsuit.
The performance management approach, introduced by Yahoo Chief Executive Officer Marissa Mayer in August 2012, was similar to the controversial “forced ranking” or “stack ranking” systems previously used by General Electric Co., according to the lawsuit.
Microsoft Corp. and other big companies have moved away from stack-ranking systems in recent years, favoring more frequent feedback that doesn’t rate workers with a number.
Yahoo employees received ratings from 0 to 5, numbers that paired with buckets ranging from “greatly exceeds” to “misses” expectations, according to the lawsuit. Managers had to assign a certain percentage of workers to each bucket, Mr. Anderson alleged. In so-called calibration sessions, higher-level managers were able to adjust the ratings of employees they didn’t personally know up or down, he added in the suit.
Mr. Anderson alleged that the process let in managers’ “personal biases and stereotyping” and encouraged gender discrimination. He also said that the company didn’t comply with state and federal rules that require companies to give advance notice before big layoffs.
He said he suffered from “severe emotional distress” after the firing and is entitled to lost wages, benefits, bonuses and stock rights.
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Judge Rejects Request for Bankruptcy Trustee to Oversee KaloBios
Feb 4, 2016 | Wall Street Journal
By Peg Brickley
KaloBios Pharmaceuticals, the struggling drug company Martin Shkreli took over in November, may survive bankruptcy and its brush with Mr. Shkreli, who was ousted as chief executive after his arrest on securities fraud charges.
Judge Laurie Selber Silverstein rejected a request to have a trustee appointed to oversee KaloBios’s affairs, after warnings that displacing the leadership team that came on board after Mr. Shkreli left would upset the prospective deal.
Revived hope of a deal for a potentially lucrative drug, benznidazole, could pull KaloBios out of chapter 11 bankruptcy, the company’s lawyers told Judge Silverstein at a hearing Thursday.
KaloBios is lining up financing to move ahead on a restructuring built around benznidazole, a treatment for Chagas' disease.
The affliction is on an FDA list of ailments that could earn a ticket for fast-track regulatory treatment known as a priority review voucher. Priority review vouchers have sold for hundreds of millions of dollars, as Mr. Shkreli told investors in December, when he was trumpeting the commercial outlook for benznidazole.
The trustee request came from federal bankruptcy monitors, who said Thursday they are worried KaloBios is pursuing a chancy drug development deal, and depleting funds in the process.
“They seem to have a lot of ifs,” Hannah McCollum, trial lawyer for the Office of the U.S. Trustee said, noting “significant contingencies” on the deal that is under discussion. KaloBios wants to “bet” its remaining cash “on the promise, on the maybe” of a deal that may not pay off, she said.
“Exponentially, iffy is a terrible basis for continuing a case in chapter 11,” said Mark Kenney, another trial lawyer for the U.S. Trustee.
Jeffrey Prol, a lawyer for a major creditor of the pharmaceutical company, also argued against allowing KaloBios to risk its cash on a speculative deal.
Mr. Shkreli took control of KaloBios in November, with a $3.2 million investment in the ailing biotech, which was close to being shut down. Announcement of the benznidazole deal followed within weeks.
Mr. Shkreli’s acquisition of benznidazole never closed, but renewed talks that gave KaloBios a shot at recapturing the opportunity to cut a deal with Savant Neglected Diseases LLC, the Bay Area company that owns the rights to the drug.
In court Thursday, witnesses for KaloBios and Savant declined to provide estimates of how much time and money it will take to turn a profit from benznidazole, if a deal can be struck.
Benznidazole’s been used in Latin America for years to treat Chagas' disease, which can lead to serious, sometimes fatal, heart problems.
KaloBios laid out its prospects for a deal with Savant in the face of a bid by the U.S. Trustee to put the company into the hands of an independent trustee.
The fraud charges, which Mr. Shkreli denies, don’t relate to his brief tenure at KaloBios. They date back to his days as a hedge-fund manager.
Mr. Shkreli’s still a major shareholder, although his ownership stake is now below 50%. Those who took charge of KaloBios after his departure says safeguards are in place to prevent Mr. Shkreli from playing a role in the company’s affairs.
Mr. Shkreli was in Washington, D.C. Thursday, where he declined to testify before a House committee probing escalating drug costs. He didn’t respond to requests for comment on KaloBios.
KaloBios says it has potential buyers for other drug candidates, which are in the early preclinical stage, as well as a chance to get to a deal with Savant.
Advocates for people with neglected diseases, such as Chagas, have been watching the ups-and-downs of the benznidazole dealings closely. Mr. Shkreli gained notoriety for raising the price of a vital drug, Daraprim, from $13.50 per tablet to $750 per tablet, while at Turing Pharmaceuticals.
On a conference call about benznidazole in December, Mr. Shkreli indicated benznidazole was in for a similar price hike, once it cleared the FDA.
That set off alarm bells at groups like the Drugs for Neglected Diseases Initiative. Advocates for people with Chagas' disease have been “eagerly awaiting” action to get benznidazole to market, but wary of the profit motive driving the action, the agency’s regional executive director Rachel Cohen said In a recent interview. “We are still highly concerned that these companies are more interested in securing a lucrative priority review voucher than they are in making the drug available,” Ms. Cohen said.
The estimated 300,000 people in the U.S. who suffer from Chagas' disease can obtain benznidazole, but only from the Centers for Disease Control and Prevention, through a process that is bound up with red tape. Savant says it has had inquiries from multiple parties interested in moving benznidazole through the FDA process. KaloBios, however, has exclusive rights to attempt to get to a deal until Feb. 29, according to a KaloBios adviser.
Talks between Savant and Mr. Shkreli’s team about acquiring the benznidazole rights began before Mr. Shkreli invested in KaloBios, as a potential collaboration with Turing, Stephen Hurst of Savant testified Thursday.
Once Mr. Shkreli took charge at KaloBios, new money came in through an $8.2 million private placement, and Savant continued deal talks with Mr. Shkreli’s team at KaloBios.
In court papers, KaloBios director Cameron Durrant said that on Monday, Mr. Hurst emailed KaloBios with proposed terms for a binding letter of intent and a proposed project budget for getting benznidazole to market.
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Lawsuit by soldier's widow tests Tennessee's malpractice law
Feb 4, 2016 | The Associated Press
A recent federal appeals court opinion could aid a military widow's efforts to hold the federal government responsible for her husband's suicide.
The 6th Circuit U.S. Court of Appeals has sent a case involving Scott Walter Eiswert back to a lower court, saying there is legal precedent that could be used to favor Tracy Eiswert's contention that the government is at fault, the Knoxville News Sentinel reported Thursday.
U.S. District Judge Ronnie Greer said he was forced to dismiss the widow's lawsuit in 2013 due to "procedural hurdles" the Tennessee legislature created when it made it harder for people to sue doctors and hospitals.
But in its decision last week, the appeals court cited several cases that were decided after the widow's lawsuit was dismissed. Those decisions have cast doubt on the "strict compliance" requirements of the state's medical malpractice law, the court said.
Eiswert, 31, of Greeneville, served in Iraq with the Tennessee National Guard for two years in 2003 before being honorably discharged in 2005. He committed suicide in 2008.
Before he died, Eiswert reported that he and his fellow soldiers were under constant threat from roadside or car bombs in Iraq, and that he was on the phone with a soldier friend when an explosion killed the friend. He also said he witnessed a blast that killed 93 civilians, many of them children. He suffered from insomnia, agitation, anger and other symptoms but was diagnosed with depression instead of PTSD, according to the initial lawsuit.
The U.S. Veterans Administration and the James H. Quillen Veterans Administration Medical Center in Mountain Home, Tennessee, have conceded that Scott Eiswert was not properly diagnosed with post-traumatic stress disorder.
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