While starting from the premise that a trial court has wide latitude in controlling discovery, the Ninth Circuit Court “suggested” that the nature of the speech in question should be a driving force in choosing a standard by which to balance the rights of anonymous speakers in discovery disputes: commercial anonymous internet speech should receive less protection than religious, political or literary anonymous internet speech.  The specific circumstances surrounding the speech serve to give context to the balancing exercise.

In commercial anonymous online speech cases, a number of courts have required plaintiffs to make at least a prima facie showing of the claim for which the plaintiff seeks the disclosure of the anonymous speaker’s identity.

 A few courts have relied on a standard that falls somewhere between the motion to dismiss and the prima facie standards. In Doe v. 2TheMart.com, a Washington State court recognized that a higher standard should apply when a subpoena seeks the identity of an anonymous Internet user who is not a party to the underlying litigation.

 The district court in the 9th Circuit matter on appeal applied the most exacting standard, established by the Delaware Supreme Court in Doe v. Cahill (Del.2005).The Cahill standard requires plaintiffs to be able to survive a hypothetical motion for summary judgment and give, or attempt to give, notice to the speaker before discovering the anonymous speaker’s identity.  The court in Cahill therefore required that the city councilman plaintiff “ ‘submit sufficient evidence to establish a prima facie case for each essential element’ ” of his defamation claim. The court pointed to its “concern[ ] that setting the standard too low will chill potential posters from exercising their First Amendment right to speak anonymously,” id. at 457, and reasoned that “the summary judgment standard more appropriately balances a defamation plaintiff’s right to protect his reputation and a defendant’s right to speak anonymously.”

 In each of these commercial cases, the initial burden rests on the party seeking discovery and requires varying degrees of proof of the underlying claim. 

Even though it affirmed for other reasons, the district court’s application of the “exacting standard” of Doe v. Cahill in ruling on discovery of the anynomous speakers, the Ninth Circuit Court gave guidance to future courts that this test was too harsh.  The Ninth Circuit referred favorably to a Fourth Circuit case,  Lefkoe v. Jos. A. Bank Clothiers, Inc., for the proposition that commercial speech enjoys only limited First Amendment protection. 

The Lefkoe Court ruled that “the Doe Client’s claimed First Amendment right to anonymity [wa]s subject to a substantial governmental interest in disclosure so long as disclosure advance[d] that interest and [went] no further than reasonably necessary.” Id. at 248-49. The court highlighted the balance between discovery under Federal Rule of Civil Procedure Rule 26 and protection of anonymous speech: “the substantial governmental interest in providing Jos. A. Bank a fair opportunity to defend itself in court isserved by requiring the Doe Client to reveal its identity and provide the relevant information. Rule 26 explicitly expresses this interest.”

This standard expressed in Lefkoe seems to be the standard favored by the Ninth Circuit Court.  The idea is that because commercial speech receives less protection under the First Amendment than, e.g., political, religious or literary speech, the degree of protection afforded the identity of an anonymous speaker should be given correspondingly less protection in the discovery process.

 The defendant was a law firm who advertised for clients—people who had bought wood patio decks from the plaintiff.   The plaintiff’s advertisement was this:

Plaintiff, one of the companies named in the advertisement, sued for defamation and other business torts.  The law firm countered with an anti-SLAPP motion under CCP §415.16.  But plaintiff argued that the advertisement was “commercial” and therefore fell under the “commercial exemption” of the anti-SLAPP statute.

 The Cal. Supreme Court ruled the advertisement did not fit within the commercial exemption of the anti-SLAPP statute.  Therefore, the anti-SLAPP motion was granted; and the case was dismissed.

 The commercial exemption arises when: (1) the underlying cause of action (usually for defamation or unfair competition) is against a person engaged in selling or leasing goods or services; (2) the cause of action arises when that person represents facts about his or her business, or a competitor’s business; (3) the statement was made to promote his or her business; and (4) the intended audience for the statement or conduct meets the definition set forth in section 425.17(c)(2).

 The Cal. Supreme Court rejected the “commercial exemption” argument because (a) the law firm’s advertisement was not directed to a competitor; i.e., the plaintiff manufacturing company was in the business of selling wood decks and hardware, while the defendant was in the different business of practicing law; and (b) the advertisement did not actually make statements about the “products or services”—but rather just solicited clients who had used those products.

 In reaching this decision, the California Supreme Court affirmed that the burden of proof of showing the “commercial exemption” was on the plaintiff—the party trying to take advantage of the exemption.  The Court also explained that the exemption was to be narrowly construed.

 The Court saw the lawsuit as a “meritless suit brought primarily to chill the exercise of free speech or petition rights by the threat of severe economic sanctions against the defendant, and not to vindicate a legally cognizable right.”

 The Court also noted that, at the time the advertisement ran, the district attorney’s office was conducting an investigation into the risk posed by galvanized fasteners and connectors when used with these types of pressure-treated wood. The office ultimately issued a “Consumer Alert” warning of the corrosive effect of the new pressure-treated wood products “on the metal connector brackets typically used in construction.”

Prevailing counsel wasThomas R. Burke of Davis Wright Tremaine, San Francisco.

Therefore–please return your Limited Power of Attorney document VIA US Mail or Federal Express:

Kevin  McBride

McBride Law, PC

609 Deep Valley Drive Suite 200

Rolling Hills Estates, CA  90274

If you want to send a second way in addition to US Mail, a pdf document can also be send to km@mcbride-law.com.

Thank you.

My work for airline pilots was fairly extensive in the 1990’s, as the effects of deregulation rippled through the industry.  I was initially involved in matters for Frontier and Eastern pilots as those bankruptcies wound down.  I was then hired by a group of UPS pilots who wanted to leave the Teamster’s Airline Division to form an independent union.  A year’s work in union organizing was concluded successfully with the formation of the Independent Pilots Association that represents all UPS pilots. 

 During that time I became friends with (now deceased) labor attorney Marty Seeham who gave me great advice during those challenging days fighting the Teamsters.  I also worked a little with Lee Seeham, Marty’s son.  Lee, of course, is currently representing USAir pilots in contentious litigation and organizing efforts for an independent union for USAir / America West pilots. 

 I was then hired by a group of UAL pilots led by Jerry Summers to advise on UAL ESOP purchase strategies.  We worked independently to improve the ESOP deal for UAL line pilots.  One of the steering committee members of those days, Woody Eppelsheimer, is now a director of the United Pilots for Justice.  In the past few years I have worked behind the scenes on various UAL bankruptcy questions. 

 In the past 12 years I have spent most of my time working on intellectual property litigation and general business litigation, mostly in federal courts.  However, the comings and goings of UAL and its pilot groups have never been far from mind.

 The initial plan of United Pilots for Justice was to hire a large Washington DC law firm to represent it in PBGC appeals and related litigation.  However, the cost associated with such a thing cannot be justified by the current UPFJ support base.  I therefore stepped up to offer a much lower-cost appeal and litigation alternative.  My small office has developed a significant technology advantage over most law firms that allow us to compete head to head with big organizations and firms.  By emphasizing efficient use of technology and a unique strategic methodology, we expect to get positive results in this initiative.  In addition, we will bring in ERISA expert counsel to advise at appropriate steps along the way, much as I have done in other cases in the past.

I personally appreciate the many relationships I have developed with UAL pilots over the years.   Those of you who who know me understand this–I will do everything in my power to help better your pension positions.

 We are currently evaluating all available options for recovery.  More detailed objectives will be posted on the UPFJ website in the days ahead as the best-available options are evaluated and decided upon by the UPFJ Board.

 The beginning point for answering these questions is the Lanham Act, and particularly 15 USC §1127.  A mark is deemed “abandoned” when “[i]ts use has been discontinued with intent not to resume such use.”

 The landmark case re: trademark abandonment is Saxlehner v. Eisner Mendelson Co., decided by the US Supreme Court in 1900.  US Trademark laws of abandonment, codified in 1987 in the above-referenced statute (15 USC §1127) largely adopted rules of the Saxlehner decision.

 What establishes discontinuation with “an intent not to resume use?

 For the purposes of abandonment, the Lanham Act defines “use” as “the bona fide use of such mark made in the ordinary course of trade, and not made merely to reserve a right in a mark.”

 The Lanham Act directs that “[i]ntent not to resume [use] may be inferred from circumstances.” Id. Such an intent cannot be far-flung or indefinite; rather there must be an intent “to resume use within the reasonably foreseeable future,”  Note, however, the 9^th Circuit case Grocery Outlet, Inc. v. Albertson’s, Inc. (["i]ntent to resume use of the … mark within the reasonably foreseeable future during the short period of alleged nonuse” prevented the mark from being abandoned. “)

 Under the Lanham Act, nonuse of a mark for 3 consecutive years shall be prima facie evidence of abandonment.  Nonuse for 3 consecutive years creates a rebuttable presumption of intent not to resume use.   See, e.g., a 2008 case from the 11^th Circuit Court of Appeals, Natural Answers, Inc. v. SmithKline Beecham Corp. 

 In Natural Answers, the trademark defendant had not used its mark in commerce for well over three years and, thus, SmithKline had the benefit of the rebuttable presumption that Natural Answers did not have intent to resume its use. The burden of production, although not the ultimate burden of persuasion, then shifted to Natural Answers “to produce evidence that [it] either used the mark during the statutory period or intended to resume use.”  

 In today’s Internet age, use or non-use of an Internet website can be powerful evidence of use in commerce, or the lack thereof. 

 What happens when two competitors attempt to use an abandoned mark—who has priority?

 This question was addressed by the 9^th Circuit Court in a 1984 case, California Cedar Products v. Pine Mountain Corp.  The 9^th Circuit Court found the question of competing claims to an abandoned trademark easy to answer: which company first used the abandoned mark in commerce?

 The 9^th Circuit Court explained (with concurrence of both parties): “the first party to use an abandoned trademark in a commercially meaningful way after its abandonment is entitled to exclusive ownership and use of that trademark and trade dress.

 The “first party to use” an abandoned trademark is an issue of fact determined in the same way that first commercial use is established in the trademark application process.

 Abandoned marks present an opportunity for companies still in business—and a challenge for their counsel to navigate the abandonment issues carefully and accurately.

To address this area, I asked permission from Tim Negris to republish an excellent article he wrote on the subject.  Tim has a deep knowledge of the IT industry, having been (among other things) VP, Server Marketing at Oracle and VP, Software Sales and Marketing at IBM.  Tim is one of the best strategic thinkers I know, and gives great insight into the nuances of brands and branding.

Here is Tim’s Article, in full, as it appeared on the website: America’s Best Business Practices:

Brands and Branding Are Not the Same

Even if a business, big or small, has great branding – effective name, slogan, color scheme, etc. – they still might not have a great brand. In the language of marketing, branding is syntax (structure) and brand is semantics (meaning). A company’s “meaning” is its place in the marketplace and the customer’s business or life.

Ideally, a company should have a strong brand that is supported by strong branding, but many wildly successful companies have goofy names, ugly colors, and tortuous slogans, but they have great brands. That is, they do a great job of communicating their meaning – best quality, trend setter, most innovative, longest history, most locations, caring people, etc. In music, it is called a “hook”.

Small business start-ups especially need to think not just about who they are, what they look like, and what they do, but also what they want to mean to their customers, what is their hook. If they have a strong brand, the branding will often follow easily.When the 7-11 convenience store chain was just starting out, they were competing with suburban supermarkets and urban corner stores, both of which were typically open for the about the same hours as most people worked, 9-5. Their “hook” was the customer convenience of longer hours, 7am to 11pm, and that drove their branding. The name said it all. They didn’t need a slogan, the logo was the name, and the logo and colors were clear on a small lighted sign – a necessity before daylight and after dark.

When the other stores realized the power of convenience over selection, quality and other brand promises, and started keeping longer hours, so 7-11 went one better and commenced round the clock operation in most locations. Note, they did not change their name to 24-7; they didn’t need to because they already owned the convenience brand and everybody would quickly learn that they never closed. Then the other stores went to always open. The corner store was largely dead by then and the supermarkets asserted the “low price and selection at any time” brands. 7-11 countered this by actually promoting their smaller physical size in redefining convenience as “fast in and out”. This was especially effective once the supermarkets had to start competing with big box retailers by getting even bigger.

7-11′s success spawned myriad directly competitive imitators who echoed every one of 7-11′s brand promise, plus offered gasoline, which 7-11 was not yet selling. But, 7-11′s massive global reach and superior logistics enabled them to easily add gasoline to their product mix, to lower their prices and to offer fresh snacks and sandwich meals. The latter also allowed them to then compete with fast food take-out places and strengthen their brand by broadening the meaning of convenience to include faster, cheaper breakfast and lunch.

7-11 started out with strong branding. Their name/logo was easy to say, remember, and see on a small lighted sign, and their red and green color scheme carried the strong subliminal message of “stop and go”. But, they became and remain successful through strong branding, by staying current with the meaning of consumer convenience – always there, everywhere, low prices, known quality, fast, and thorough coverage of common urgent needs (gas, drinks, snacks, aspirin, tampons, etc.)

The lesson this should teach the start-up is to know and communicate what you want to mean to your customers. What it should teach established companies of all sizes is to learn and know how to change and extend your meaning to anticipate your customers’ changing needs and to stay ahead of the competition.

Good branding – valuable. Great brand – priceless.

In addition to the above article by Tim Negris, an excellent article on the subject by Mike Clough, also on the site America’s Best Business Practices, can be found here: “Branding is the Key to Differentiation.”

For lawyers who protect a client’s intellectual property, it is important to understand “branding” from the point of view of business people–our clients.

The case involved a trademark issued to Falls Media, entitled: “WOULD YOU RATHER…?”  Based on the issued trademark, Falls Media sued Zombonodo for trademark violation and related claims arising from Zombonondo’s popular board games that included the mark “WOULD YOU RATHER…?”

The Central District of California, Chief Judge Audrey B. Collins, ruled that (despite the statutory presumption of validity) the mark was “merely descriptive.”  Chief Judge Collins entered summary judgment, cancelling the mark from the federal trademark registry.

The Ninth Circuit Court of Appeals reversed and remanded for trial.  In its step-by-step analysis of trademark registration law, the Court started by explaining the following:

Five Categories of Marks

Marks are generally classified in one of five categories of increasing distinctiveness:

(1) generic, (2) descriptive, (3) suggestive, (4) arbitrary or (5) fanciful. Which category a mark belongs in is a question of fact.

Suggestive, arbitrary, and fanciful marks are considered “inherently distinctive” and are automatically entitled to federal trademark protection because “their intrinsic nature serves to identify a particular source of a product.”  

Generic marks are not eligible for trademark protection. 

Merely descriptive marks are somewhere in-between; although they are not inherently distinctive and are therefore not entitled to automatic trademark protection, a merely descriptive mark can become protectable if it has acquired distinctiveness “as used on or in connection with the applicant’s goods in commerce.”  This acquired distinctiveness is referred to as “secondary meaning.”

Is the Mark “Suggestive” or “Descriptive”

The dividing line between marks that are protected and those that are not protected is drawn between “suggestive marks” (protected) and “descriptive marks” (not protected, without proof of secondary meaning).

A suggestive mark is one for which “a consumer must use imagination or any type of multistage reasoning to understand the mark’s significance . . . the mark does not describe the product’s features, but suggests them.”  

By contrast, a merely descriptive mark describes the qualities or characteristics of a good or service.  It “define[s] qualities or characteristics of a product in a straightforward way that requires no exercise of the imagination to be understood.”

In distinguishing between suggestive and descriptive marks, “[d]eciding whether a mark is distinctive or merely descriptive is far from an exact science and is a tricky business at best.”

The Ninth Circuit Court has generally applied one or two “tests” to differentiate between suggestive and merely descriptive marks:

The “Imagination Test” for a Suggestive Mark

The first test (clearly the most-used) is known as the imagination test, which asks whether “imagination or a mental leap is required in order to reach a conclusion as to the nature of the product being referenced.”

The imagination test does not ask what information about the product could be derived from a mark, but rather whether “a mental leap is required“ to understand the mark’s relationship to the product.

For example, the mark “ENTREPRENEUR” as applied to a magazine was descriptive, not suggestive, because “an entirely unimaginative, literal-minded person would understand the significance of the reference.”  The “imagination test” is the Ninth Circuit’s primary criterion for evaluating distinctiveness.

The “Competitors’ Needs Test for a Suggestive Mark

The second test, known as the competitors’ needs test, focuses on the extent to which a mark is actually needed by competitors to identify their goods or services. 

If competitors have a great need to use a mark, the mark is probably descriptive; on the other hand, if “the suggestion made by the mark is so remote and subtle that it is really not likely to be needed by competitive sellers to describe their goods or services, this tends to indicate that the mark is merely suggestive.”

The competitors’ needs test is related to the imagination test, “because the more imagination that is required to associate a mark with a product or service, the less likely the words used will be needed by competitors to describe their products or services.”

Burden of Proof

Although the plaintiff in a trademark action bears the ultimate burden of proof that his or her mark is valid, federal registration provides “prima facie evidence” of the mark’s validity and entitles the plaintiff to a “strong presumption” that the mark is a protectable mark. Where the PTO issues a registration without requiring proof of secondary meaning, the presumption is that the mark is inherently distinctive.

If the plaintiff establishes that a mark has been properly registered, the burden shifts to the defendant to show by a preponderance of the evidence that the mark is not protectable.

With respect to a registered mark, the defendant’s burden is not simply to show that the mark describes a feature of the trademark holder’s product; rather, it must show that consumers regard the mark as merely descriptive of that product.”

Summary

A mark may be registered if it is fanciful, arbitrary or suggestive.   A mark may not be registered if it is generic.   In order for a descriptive mark to be registered, it must have acquired a secondary meaning in commerce. 

Evaluation of whether a mark is suggestive or descriptive is done under two tests: the “imagination test” (is the imagination or a mental leap required order to reach a conclusion as to the nature of the product) and the “competitors’ needs test” (the extent to which a mark is actually needed by competitors to identify their goods or services).

Prevailing Counsel in this case was Bobby A. Ghajar, Howery LLP, Los Angeles.

The Ninth Circuit panel included: Judge Ronald M. Gould, Judge Sandra S. Ikuta and Judge N. Randy Smith. 

The excellent and instructive opinion was authored by Judge Gould.

PhotoMedex, Inc. is a medical device manufacturer.  It competes against RA Medical Systems, Inc. 

 PhotoMedex had finished a new laser device for dermatological treatment.  Its competitor, RA Medical Systems, was also working on a completing product, but was late to market.  RA Medical Systems told its clients that its new laser device would be ready “in a few months.”  In fact, the laser device was not available for about 18 months.

 PhotoMedex brought Lanham Act claims against RA Systems for making “false and deceptive statements in a commercial advertisement” about the market readiness of its laser product.  RA Systems defended by claiming that its statements about the future readiness of the laser device was a matter of opinion, not reachable by Lanham Act claims.

The Southern District of California, Judge Janis Sammartino, agreed and issued summary judgment in favor of defendant.  The Ninth Circuit Court reversed, explaining that a statement of opinion may be actionable “if the speaker knew at the time the statement was made that it was false or did not have a good faith belief in the truth of what was said.”

On a related issue, the Ninth Circuit Court also held that the commercial depiction of a well-known device inventor, Mr. Irwin, as inventor of RA Systems’ laser was also actionable if misrepresented Mr. Irwin’s actual contribution to the invention.

PhotoMedex argued that Defendants knowingly misrepresented in March 2003 that the “Pharos” laser would be available that summer, within just a few months. Defendants admit they did not ship the first Pharos until September 2004, more than a year later, but argue that they were delayed in part by having to defend against PhotoMedex’s multiple lawsuits.

The district court interpreted the predictions of the Pharos’s release date to be mere statements of opinion regarding future events, which are generally not actionable. There is, however, a well-established exception — if “the speaker has knowledge of facts not warranting the opinion.”  

An honest or sincere statement of belief about a future event is not actionable, but a statement known at that time by the speaker to be false, or a statement by a speaker who lacks a good faith belief in the truth of the statement, may constitute an actionable misrepresentation.

PhotoMedex provided expert testimony that moving a medical laser from the beginning of design to production would typically require 12 to 18 months. The Ninth Circuit panel concluded that the expert evidence raised a genuine issue of material fact as to whether defendants intentionally misrepresented the Pharos’s release date. 

The potential motivation for and harm from such a misrepresentation was obvious: by telling prospective purchasers that the Pharos would be available soon, defendants might have persuaded them not to buy PhotoMedex’s device, which was already available, leaving them open to consider and possibly purchase defendants’ competing product later.

Defendants’ commercial depiction of Irwin as “inventor” of the system is actionable to the extent it misled consumers into believing that Irwin was the sole inventor or made more than his actual share of inventive contributions.

In an expansive reading of the Lanham Act, the Ninth Circuit Court explained: “a false advertising cause of action under the [Lanham] Act is not limited to literal falsehoods; it extends to false representations made by implication or innuendo.”

Prevailing lead counsel in the case was Thomas D. Warren, Baker & Hostetler, Cleveland.

The Ninth Circuit panel included: William A. Fletcher, Richard R. Clifton and Milan D. Smith, Jr., Circuit Judges.

Biliski involved a patent claim for hedging the risk of price fluctuations in the economy.  The patent examiner rejected the patent application, explaining it “‘is not implemented on a specific apparatus and merely manipulates [an] abstract idea and solves a purely mathematical problem without any limitation to a practical application, therefore, the invention is not directed to the technological arts.”

The examiner’s rejection was affirmed by the Board of Patent Appeals and by the Federal Circuit Court.  However, in its en banc decision (that produced 5 separate opinions), the Federal Circuit took the additional step of declaring that a method was only patent eligible if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a differentstate or thing.  This test is known as the “machine-or-transformation test.”

Because the vast majority of software applications are designed only for a “general purpose” computing machine, the question remained after the Federal Circuit’s Biliski opinion as to whether software patents were patentable at all.

The US Supreme Court affirmed the examiner’s rejection of this particular patent application, but rejected the “machine-or-transformation” test imposed by the Federal Circuit and, in its final opinion of the October, 2009 term, restored a degree of normalcy to patent practice in the United States.

The signature of this Supreme Court in the past 12 years of patent decisions has been to end the various “bright-line” tests for patentability established by the Federal Circuit Court of Appeals, in favor of “functional” tests that can only be determined in a courtroom, after input from expert witnesses on both sides of the patentability test.

This approach to patent law was continued in Biliski v. Kappos.  The majority opinion, authored by Justice Kennedy, used traditional rules of statutory construction to reach its opinion that the “machine-or-transformation” test was just one method for determining patentability of a business method patent–not the only method.

The majority reasoned that 35 U. S. C. §273(b)(1), in an infringement action, creates a prior-use defense against “a method in [a] patent;”  ipso facto §273 implies a broad definition of the statutory term “method.”  The Court explained:

For purposes of this defense alone, “method” is defined as “a method of doing or conducting business.” In other words, by allowing this defense the statute itself acknowledges that there may be business method patents. Section 273’s definition of “method,” to be sure, cannot change the meaning of a prior-enacted statute. But what §273 does is clarify the understanding that a business method is simply one kind of “method” that is, at least in some circumstances, eligible for patenting under §101.

The majority opinion reasoned that if business methods are not patentable in any circumstances, §273 would be rendered meaningless.  “This would violate the canon against interpreting any statutory provision in a manner that would render another provision superfluous.”

Thus, rather than adopting categorical rules that “might have wide-ranging and unforeseen impacts,” the Court resolved Biliski narrowly: (1) on the basis of standard statutory construction, and (2) on the basis of previous decisions (Parker v. Flook and Diamond v. Diehr) which show that petitioners’ claims are not patentable processes because they are attempts to patent abstract ideas.

In a separate opinion concurring in the result, Justice Stevens (in his last written opinion on the Court) rejected the majority’s approach to statutory construction in patent cases.  A long-time opponent of software patents, Justice Stevens argued that:

[T]he Court at points appears to reject the well-settled proposition that the term“process” in §101 is not a “‘process’ in the ordinary sense of the word,” Flook, 437 U. S., at 588. Instead, the Court posits that the word “process” must be understood in light of its “ordinary, contemporary, common meaning.”  Although this is a fine approach to statutory interpretation in general, it is a deeply flawed approach to a statute that relies on complex terms of art developed against a particular historical background. [Emphasis added.]

While there are many possibile interpretations of the Court’s opinion, I believe this focus is possibly the most instrucive to clients and counsel anticipating patent litigation: the Court will continue to decide patent cases according to standard rules of construction, while ignoring (for the most part) the complex terms of art developed against a particular historical background. Indeed, this has been the pattern of Court decisions for at least the past 12 years. See, The End of Bright-Line Tests in Patent Litigation.

General commercial litigation typically involves the standard rules of statutory construction applied by the US Supreme Court in Biliski.  However, historicially patent litigators have generally dealt with more constrained, concrete and predicatible rules of construction–more in keeping with the predicability desired by scientists and mathmeticians involved in the world of patenting. 

If there is an overriding lesson to take away from Biliski, I believe it is this: bright-line tests in patent litigation no longer exist (for the foreseeable future).  Going forward, patent litigation will require nuanced argument, with expert interpretation, similar to practice in general commercial litigation.  This will exponentially increase the cost burden associated with patent litigation.

The majority opinion was authored by Justice Anthony Kennedy; joined (except for sec. II) by Justice Scalia, and by the remainder of the conservative wing of the Court: Justice Thomas, Chief Justice Roberts and Justice Alito.   The makeup of this majority reflects the statutory-construction basis for the decision.

Mr. Justice Stevens’ concurring opinion was joined by the liberal wing of the Court: Justice Sotomayor, Justice Ginsberg and Justice Breyer.

 Background

 In the airline business, pilots start their careers flying small aircraft (at low wages) and gradually move to larger aircraft (and high wages) as union seniority increases.   Therefore, a pilot’s position on the union’s “seniority list” is a very valuable asset to him or her.  Seniority accounts for a difference of many thousands of dollars in income over the course of a pilot’s career.   But in spite of best-laid career plans, a problem can arise when one airline buys another—and the respective seniority lists of each airline’s pilots are merged.  

“Date of hire” is typically the beginning point for merging seniority lists, but other factors can play in important role as well.  Airline mergers usually happen when a financially stronger airline can buy a financially weaker airline.  In such cases, pilots from the stronger airline can jockey for higher seniority position based, in part, on the relative financial strength of the airline that employs them.

Against that background, US Airways bought America West Airlines in 2005.  The respective pilot seniority lists were then merged into a single, consolidated seniority list pursuant to arbitration sponsored by the union then representing pilots’ from both airlines—the Air Line Pilots Association (“ALPA”).   

In a twist of economic fates, the acquired airline, America West, was financially stronger than the acquiring airline—US Air.  The ALPA arbitration therefore merged the pilots’ seniority lists in a way that favored the 1,900 America West pilots over the 5,100 US Air pilots, based partly on the relative financial strength of America West airlines. 

 US Air Pilots’ Strategic Success

Unwilling to accept the ALPA arbitration results, US Air pilots reached for a novel legal strategy: decertify the union that had sponsored the arbitration before the new seniority list could be implemented.  According to the thinking of this strategy, if the pilots union (ALPA) no longer existed, the merged seniority list could never be implemented.

Because the US Air pilots outnumbered America West pilots by more than half, the US Air pilots successfully decertified ALPA as the collective bargaining agent for all pilots from both airlines.

After decertifying ALPA as the pilots’ union, US Air pilots then formed a new, independent union, with a new union constitution that mandated merger of the seniority lists based on date of hire.  The new union re-merged the seniority lists, with the result that US Air pilots would be favored over the America West pilots.

America West Pilots’ Strategic Mistake

Before the new consolidated seniority list was presented to the employer, US Airlines, the America West pilots sued the new union in federal court, alleging breach of the duty of fair representation (DFR) under federal labor law.  A jury trial was held in Arizona Federal District Court.  The jury held for the America West pilots and against the new union.  Notwithstanding the jury trial and verdict, the Ninth Circuit dismissed for lack of ripeness holding, in effect, that the case was premature.

A case is “ripe” for decision: (1) when the case can be decided without considering “contingent future events that may or may not occur; and (2) when direct and immediate” hardship” will occur if a decision is not rendered—and the hardship entails more than ”possible” financial loss.

Because the DFR suit was filed before the seniority list was implemented, the Ninth Circuit Court ruled that the America West pilots’ claims were contingent on actual implementation by US Air, and that the alleged financial loss of America West pilots was still theoretical, not actual, and therefore no actual “hardship” had been proven.

Thus, America West pilots’ counsel made a strategy mistake by not patiently playing out the merger process before filing suit, resulting in the Ninth Circuit’s ruling that the matter was still contingent, without actual hardship, and therefore not yet ripe for decision.  As a result, the case was returned to the district court with orders to dismiss.

This case underlies the fact that the proper legal strategy is critical to any litigation effort.  US Air pilots were represented by top-flight labor lawyer, Lee Seeham.  Lee undoubtedly learned many nuances of legal strategy from his father, the legendary labor lawyer Marty Seeham (now deceased). 

The lesson here is important: complex legal strategy is a chess game.  Diverse pieces are available on the chess board, only some of which involve litigation.  A reactionary rush to the courthouse is almost never the right first step in any legal dispute.

The Ninth Circuit opinion was authored by Judge A. Wallace Tashima, and joined by Judge Susan P. Graber.  A dissenting opinion was authored by Judge Jay S. Bybee.