The upcoming U.S. Supreme Court term promises to be a big one, featuring a patent case that could be a game changer for many clients and a host of other cases that may affect how tech and life sciences companies deal with personal data, how they treat internal “whistleblowers” and whether they can enforce arbitration in employee disputes. As the high court gears up for its new term on Oct. 2, we prepared a list of the most important cases that we think you should know about.
With Justice Neil Gorsuch—who shares the conservative legal philosophy of his judicial predecessor, Justice Antonin Scalia—the Court is back up to its full membership and preparing to tackle some blockbuster cases. Gorsuch’s track record as a judge on the 10th Circuit Court of Appeals underscores his tendency to favor business interests in his decisions. Although Gorsuch hasn't handled many high-profile tech cases, he has made a few decisions that have tech implications (Dudnikov v. Chalk & Vermilion Fine Arts and Meshworks v. Toyota Motor Sales). It remains to be seen how he will affect the Court’s approach to the complex issues raised by technology.
Here are the key business-related cases we are keeping a close eye on.
Name of case: Oil States Energy Services v. Greene’s Energy Group, No. 16-712.
Issue: Whether inter partes review (IPR), an adversarial process to challenge the validity of existing patents before the U.S. Patent and Trademark Office, violates the Constitution by extinguishing private property rights through an administrative forum without a jury. The appeal arises from an IPR conducted by the Patent Trial and Appeal Board, which invalided Petitioner Oil States Energy Services’ patent. The key issue on the appeal is expected to be whether the patent rights in question are “private” rights, which historically cannot be taken away without access to a jury, or “public” rights, which may be governed through administrative procedures.
Significance: The potential impact of the Oil States case is substantial. Since Congress made the IPR procedure available several years ago, IPRs have become a major weapon in the defensive arsenals of accused patent infringers, and defense lawyers routinely consider filing an IPR petition as part of the response to an infringement lawsuit. If the Supreme Court were to find the procedure unconstitutional, accused patent infringers could raise invalidity defenses only in the courts, where they must satisfy a higher burden of proof—“clear and convincing evidence” rather than “preponderance of the evidence”—and would also lose the opportunity to ask courts to stay the litigation while the IPR is pending. Such an outcome would be anticipated to increase litigation risk and expense for accused infringers, and to lead to higher settlement expectations on behalf of some patent owners. Contact Fenwick’s patent litigation chair Mike Sacksteder for more information.
Name of case: SAS Institute v. Matal (previously SAS Institute v. Lee), No. 16-969.
Issue: Is the Patent Trial and Appeal Board in an inter partes review (IPR) required to issue a final written decision as to every claim challenged by the petitioner under 35 U.S.C. § 318(a), which provides that it "shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner," or may the PTAB issue a final written decision deciding the patentability of only some of the patent claims challenged by the petitioner, as the Federal Circuit held?
Significance: A reversal by the Supreme Court could impact the PTAB and participants in trials before it. For patent owners and petitioners, a reversal could increase the impact of a PTAB trial. Under current practice when there is parallel litigation between the patent owner and petitioner(s), a final decision on fewer than all challenged claims leaves the validity of the unadjudicated claims for the litigation. This subjects a petitioner to the additional costs of that litigation (and the other consequences of a likely jury trial). Further, requiring a final written decision on all challenged claims could provide petitioners an additional opportunity for appellate review, as currently review for non-instituted claims is quite limited. Patent owners under current practice who have the validity of claims confirmed by the PTAB are subject to serial challenges, likely delaying obtaining a remedy for infringement of valid claims. Additionally, requiring a final written decision on all challenged claims likely would reduce the uncertainties on the scope of statutory estoppel in PTAB trials that exist, in practice, under current law. For the PTAB, requiring it to decide the patentability of all challenged claims would increase judges’ workloads (absent changes in PTAB procedures) as currently a meaningful portion of all IPR proceedings instituted have been “partial” institutions. The PTAB could respond to such a change in a number of ways that would impact America Invents Act trial practice. Finally, the case provides an opportunity for the Court to comment on the deference given to the PTAB’s interpretation of § 318(a) under Chevron, which could have implications beyond the PTAB. Contact Fenwick litigation partners Charlene Morrow or Darren Donnelly for more information.
PRIVACY | 4TH AMENDMENT
Name of case: Carpenter v. U.S., No. 16-402.
Issue: Whether law enforcement’s warrantless search and seizure of historical cell-site location data from a mobile phone carrier pursuant to a court order that revealed the location and movements of a cell-phone user over the course of 127 days is permitted by the Fourth Amendment.
Significance: The appeal arises from law enforcement’s use of court orders issued under the Stored Communications Act, rather than warrants issued upon a showing of probable cause, to obtain historical cell-site location information from mobile phone carriers. CSLI can be used by law enforcement to show a suspect’s movements over time. A circuit split has emerged on whether mobile phone subscribers have a reasonable expectation of privacy in CSLI in light of the fact that the data is collected and held by third parties. The case will test the limits of the “third party doctrine” and may have important implications for consumers’ privacy interests in the types of information collected by companies. The case could be particularly significant in light of the explosive growth of “the internet of things,” where every day devices will constantly collect, generate and share data about consumers with little or no volition on the consumer’s part. Contact Fenwick’s co-chair of the privacy and cybersecurity group Tyler Newby or privacy and data security litigator Hanley Chew for more information.
Name of case: Digital Realty Trust v. Somers, No. 16-1276
Issue: Whether the anti-retaliation provision for “whistleblowers” in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 extends to individuals who report alleged misconduct internally but not to the U.S. Securities and Exchange Commission, and thus fall outside one part of the act’s definition of “whistleblower.”
Significance: Lawsuits claiming retaliation by self-identified “whistleblowers” against former and current employers are increasing. One pillar of such suits typically is a claim that the employer violated the broad anti-retaliation provisions of Section 21F of Dodd Frank. Now, the Court will be resolving a circuit split over whether Section 21F protects employees who only report alleged misconduct internally and not to the SEC. The SEC’s interpretation of the statute is that, notwithstanding the plain wording, Section 21F extends to all employees reporting misconduct, including those who report only internally. If the Court disagrees, whistleblowers who do not report their concerns to the SEC will be required to file suit against employers on other grounds, or drop retaliation claims altogether. In addition, and more broadly, this case could see the Court providing new guidance on the doctrine known as Chevron deference—how much deference courts should accord federal agency interpretations of statutes within the agency’s area of expertise. Contact Fenwick’s securities enforcement co-chair Mike Dicke for more information.
Name of case: Masterpiece Cakeshop v. Colorado Civil Rights Commission, No. 16-111
Issue: Whether applying Colorado's public accommodations law to compel the petitioner to create expression that violates his sincerely held religious beliefs about marriage violates the free speech or free exercise clauses of the First Amendment.
Significance: On its face, this case presents a potential conflict between the obligations of a business not to discriminate as to whom it serves and the deeply held religious beliefs of its proprietor under the Free Exercise Clause of the First Amendment. But the free expression dimension of Masterpiece Cakeshop tackles a much more basic question: When does the provision of a service stop being conduct (which the government may regulate) and become speech (which the government as a general matter may not)? Depending on how the Supreme Court resolves this issue, and the role that free speech rights play in the analysis, Masterpiece Cakeshop may open the door to arguments from businesses that seek to claim a safe harbor from commercial regulations that they believe require them to express messages with which they disagree. That may be particularly true where a law or governmental entity arguably compels speech (for instance, if the government demands that a technology company develop particular software). Though the actual rationale the Court adopts remains to be seen, Masterpiece Cakeshop may hold implications for businesses far beyond what its factual context suggests. Contact Fenwick’s co-chair of the copyright litigation group Andrew Bridges or litigation associate Armen Nercessian for more information.
CLASS ACTION | ARBITRATION
Name of consolidated cases: Epic Systems Corp. v. Lewis, No. 16-285 and Ernst & Young v. Morris, No. 16-300, National Labor Relations Board v. Murphy Oil USA No. 16-307, set for oral argument on October 2, 2017.
Issues: Whether an agreement that requires an employer and an employee to resolve employment-related disputes through individual arbitration, and waive class and collective proceedings, is enforceable under the Federal Arbitration Act, notwithstanding the provisions of the National Labor Relations Act.
Significance: These cases will require the Supreme Court to address the interaction between the FAA and the NLRA. The FAA provides that any arbitration agreement “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” The NLRA, on the other hand, gives employees the right to engage in “concerted activities” for the purpose of “mutual aid or protection.” The employees in these cases joined to sue their employers for wage and overtime violations of the Fair Labor Standards Act, which expressly authorizes an employee to bring a collective action. The employers moved to compel individual arbitration of each worker’s claim pursuant to agreements entered as a condition of employment. The employers rely on decisions holding that a federal statute precludes enforcement of arbitration agreements only when there is a congressional command to that effect; statutes that authorize collective actions to enforce substantive rights do not preclude individuals from agreeing to resolve disputes through individual arbitration. The NLRB and employees counter that an arbitration agreement that prospectively waives NLRA rights to “concerted activities” is illegal and therefore unenforceable under the FAA. The Supreme Court’s decision in these cases will resolve a circuit split and have important implications for the continued vitality of class action waivers—all the more so since recent Supreme Court decisions regarding class action waivers have been decided by 5-4 and 5-3 votes and authored by the late-Justice Antonin Scalia. These will be the first class-action waiver cases to be decided by the newly constituted court with Justice Gorsuch.