In this issue
• The 7th Circuit considers the Immigration Nursing Relief Act
• Comparison of patent litigation in the United States, Germany, and Japan
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August 2008, vol. 46, no. 2
Disclaimer: This newsletter is for subscribers’ personal use only; redistribution is prohibited. Copyright Illinois State Bar Association. Statements or expressions of opinion appearing herein are those of the authors and not necessarily those of the Association or Editors, and likewise the publication of any advertisement is not to be construed as an endorsement of the product or service offered unless it is specifically stated in the ad that there is such approval or endorsement. In this issue • The 7th Circuit considers the Immigration Nursing Relief Act • Comparison of patent litigation in the United States, Germany, and Japan Each of you, as a member of the International and Immigration Law Section, has a lot to be proud of concerning the high level of activity you have been and continue to be accomplishing. This is especially true of the enthusiastic work and creative ideas of the current and past members of the Section Council. This past year, the Section Council organized a continuing legal education program, “Intellectual Property and International Law Issues in Representing a Globally Expanding Company.” The organizers were very gratified by the excellent turn out and the quality of the speakers and the material distributed. One of the topics, “Comparison of Patent Litigation in the United States, Germany, and Japan” was made by Gary M. Ropski and Thomas C. Burton. Their outline is included in this issue. The material from other speakers will be provided in future issues of The Globe. There is additional reference to the CLE program in “Message from the Chair” by Pradip Sahu, in this issue. New Section Council member, Anne Marie Skallerup provided the case note, “Alden Management Services, Inc. v. Elaine Chao, Secretary of Labor.” Paul J. Carrier, who is the Director of the Toronto Foreign Study Program at The Thomas M. Cooley Law School has provided “Recent Canadian Legal Pronouncements on Investor Protections and Disclosure Duties for Publicly Traded Companies in the Wake of Bill 198.” As frequently mentioned, Chicago and Illinois has a wealth of organizations and professionals that are ready to assist anyone interested in international trade and transactions. This issue has a brief presentation on the U.S. Trade World Illinois, which is issued by the Chicago office the U.S. Department of Commerce. Cindy Buys, Scott Pollock, and other members of the Section Council have continually brought before the Section and the ISBA, the concern relative to the requirements under The Vienna Convention for consular notification. In the past, Cindy Buys has contributed articles concerning the police and judges role in notifying consulates when a foreign national is arrested. In the April 2007 issue of The Globe, Cindy presented the proposed Illinois Supreme Court Rule 404 on consular notification for foreign nationals. The Section’s interest in this issue took a giant step forward in April. Section Council member, Scott Pollock arranged with the Consul General of Mexico, the Honorable Manuel Rodríguez Arriaga, for the Mexican Consulate to host the first meeting on consular notification issues. The Section Council invited selected consulates to send representatives. In this issue are the minutes from the meeting, and the discussion with the consulate representatives, as taken by Cindy Buys, then Section Secretary and now Section Vice-Chair. It is anticipated that the Section Council will continue this activity by meeting on a regular basis with members of the Consular Corp in Chicago. I appreciate the work of members of the Section Council, the Section, and other friends who contribute to our ability to produce an impressive number and quality of issues of The Globe each year. Through the work of all of you, I received recognition and a plaque at the ISBA Annual Meeting in June for 10 years of service as editor of The Globe. During that time, the multitude of contributing authors has allowed us to produce 57 issues of The Globe, containing more than 330 articles or columns. This represented the contribution, time and effort of approximately 140 different authors. Thank you to the contributors of this issue, for those who have contributed in the past, and for those of you who will contribute in the future. Thank you to all our contributors. Lewis F. Matuszewich It has been only a few weeks since our organizational meeting in St. Louis, and our section council is already off to a great start. We will be continuing our efforts to promote the Illinois State Bar Association as well as to advance the awareness of international and immigration law issues throughout Illinois. To that end, the Canadian Consulate in Chicago has graciously offered to host our next section council meeting on September 12th to discuss, among other things, the Vienna Convention on Consular Relations. We have invited personnel from numerous other consulates in the Chicago area to attend, and we hope to increase their awareness regarding this important issue that affects many of their constituents. In addition to our efforts with regard to consular notification, we are pleased to report on the success of the continuing legal education program that our section sponsored in June regarding intellectual property and international law issues in representing a globally expanding organization. We are happy that we had a great turnout, and we received wonderful feedback from those attending the program as well as those presenting. Many of the attendees stated that they would love for our section to sponsor similar programs that focus on commercial issues in the international context, and they suggested some great topics. With this in mind, we are working on putting together another such program and hope to report details after our next section council meeting. As I mentioned in my column in our last newsletter, I ask that you please feel free to e-mail me at Pradip@Sahu.com with any suggestions that you may have so that we can help bring awareness to matters of interest to our section’s membership. Suggestions regarding, for example, topics for CLE programs and proposed legislation are especially welcome. We also encourage you to send us articles that relate to any legal topic involving international or immigration law for publication in our newsletter. With your help, we can make this another great year for our section and for the ISBA. Pradip K. Sahu Recent Canadian legal pronouncements on investor protections and disclosure duties for publicly traded companies in the wake of Bill 198 On October 1, 2003, Bill 198 took effect in the Province of Ontario.1 Among other things, this omnibus bill, passed in the wake of the WorldCom, Enron, Tyco International, Adelphia and Peregrine systems scandals as the Canadian counterpart to the U.S. Sarbanes-Oxley Act,2 amended the Ontario Securities Act3 to provide further protections in the form of disclosure duties4 and to bolster civil liability of responsible company principals for misrepresentations.5 In light of the fact that the Securities Act generally calls for assessment of alleged violations on a case-by-case basis with a mixed analysis of fact and of law,6 the corporate sector in Canada has been clamoring for clarifications by the courts in order to better understand the judicial and political consensus on alleged corporate misconduct. In a trio of recent decisions by the Ontario Securities Commission and the Supreme Court of Canada, including what appears to be a ruling on the largest merger and acquisition case decided to date anywhere,7 the appellate courts of Canada have begun to wrestle with the nature of disclosure requirements to government bodies, as well as to shareholders and other investors, of publicly traded companies listed or to be listed on the Ontario Stock Exchange. In Kerr v. Danier Leather Inc.,8 an internal market study of quarterly performance demonstrated lower market performance than had been forecast in the prospectus for an initial public offering on the Ontario Stock Exchange. The argument appears to have been that a soon-to-be traded public company has a duty to disclose new facts such as lower projections of market performance between the time of the filing of the prospectus and the time of closing of the public offer. Thus, the question involved the timing and extent of statutory notification duties set forth in Section. 1, Section 57(1) (and Section 75 of the Securities Act, see below), and whether they would be impacted by the now more liberal civil liability provisions for misrepresentation found in Section 130. Section 1(1) defines the term “material change” for which statutory disclosure duties vest as follows: (i) a change in the business, operations or capital of the issuer that would reasonably be expected to have a significant effect on the market price or value of any of the securities of the issuer, or (ii) a decision to implement a change referred to in subclause (i) made by the board of directors or other persons acting in a similar capacity or by senior management of the issuer who believe that confirmation of the decision by the board of directors or such other persons acting in a similar capacity is probable ….9 Section 57(1) requires the appropriate principals to amend a prospectus in the case of a “material change.”10 In contradistinction, Section 130’s recognition of civil liability for a misrepresentation indicates that it relates to a “material fact” rather than a “material change.”11 In essence, a group of share purchasers were attempting to impose the “material fact” standard during the post-filing, but pre-closing, period of a public offer, which would have had the effect of replacing the statutory disclosure standard of reporting duty with that for civil liability. The Supreme Court per curiam denied the shareholders’ appeal. In a special opinion, Justice Binnie noted that it was not appropriate to replace the legislature’s pronouncement on reporting standards for statutory disclosures with factual inquiries centering on alleged misrepresentation, which would permit the replacement of legislative will by a decision by the courts.12 In Re: AiT Advanced Information Technologies Corp., 31 O.S.C.B. 712 (January 14, 2008), a panel of the Ontario Securities Commission also considered the extent of a duty to notify shareholders of a pending merger between a small company and a major international conglomerate in the due diligence/letter of intent phase of potential merger. Similar to Section 57(1), Section 75(1) on continuous disclosures also requires the responsible parties to report “material changes.”13 In the AiT case, the panel rejected the request that it adopt a bright-line test of “material change.” More specifically, the panel was asked to determine whether a decision by the principals of the company to be acquired favoring merger was a “material change” when the ‘acquiring’ company had not finalized due diligence, nor settled on a final price or negotiated final documentation on matters such as the covenants and warranties and voting and stock options agreements, although it had entered into a binding letter of intent on exclusive negotiations. The AiT panel pointed out the difference between the U.S. concept of using a probability/magnitude test and Canadian standards,14 ultimately rejecting its use for purposes of determining whether a material change had occurred. Ultimately, the panel recognized that changes in material fact could be used as evidence of a material change only, again recognizing the important distinction between disclosure duties in the statutes on continuous disclosures from those over civil liability.15 This mirrors the reasoning in Justice Binnie’s opinion in the Kerr case over disclosure duties for initial public offerings in the post-filing but pre-closing phase. The final case of the triumvirate is BCE Inc. which was decided June 20, 2008.16 The Supreme Court of Canada ruled per curiam to reverse the ruling of the Court of Appeals of Quebec (Montreal)17 recognizing the right of debenture holders to assert a claim of oppressive behavior under provisions of the Canada Business Corporation Act (“CBCA”) for BCE’s decision to accept a leveraged buyout without special consideration of the interests of the holders of debentures. For example, Section 241 of the CBCA permits recovery for an “oppressed” party with standing that has been unfairly prejudiced or disregarded by a corporation, its directors or its shareholders to apply for redress. While debenture holders are considered as a class of creditors who in fact hold securities of a public corporation pursuant to Section 238(a) of the CBA, the Supreme Court has concluded that there is a distinction between shareholder and debenture holders permitting a distinct consideration of shareholder value, such that value to shareholders is maximized where that of debenture holders may not be. Clearly there are responsibilities to debenture holders over preserving the value of the security behind the debentures, but these are now subsidiary to returns on more risky forms of shareholding. The judgment was, however, rendered without any reasoning, although it notes that the reasoning is to follow. In sum, none of these pronouncements provides a particularly clear legal precedent with regard to the exact nature of disclosure obligations of publicly traded companies or the exact nature of consideration to be afforded certain classes of subordinated interests in the making of major corporate decisions. What is clear, however, is that those tribunals of Canada that have recently made pronouncements in such areas have been careful to distinguish statutory disclosure duties from those owed to purchasers and shareholders, as well as to distinguish between the nature of a risk-bearing share and a less risky debenture. In light of the ad hoc nature of reviewing shareholder and debenture holder challenges to corporate actions, as required by the Securities Act’s policy statement in its Section 2,18 and court deference to policies and decisions of the Ontario Securities Commission,19 prediction of long-term legislative and judicial policy on duties of corporate authorities to disclose is not possible. While this does not provide the kind of certitude sought by investors, in the least it may be said that the current climate over such matters in Canada favors corporate freedom to exercise its business judgment over curtailment, at least to some degree, of such exercise caused by the threat of wholesale investors’ misrepresentation lawsuits. __________ In pursuing the purposes of this Act, the Commission shall have regard to the following fundamental principles: 1. Balancing the importance to be given to each of the purposes of this Act may be required in specific cases. 2. The primary means for achieving the purposes of this Act are, i. requirements for timely, accurate and efficient disclosure of information, ii. restrictions on fraudulent and unfair market practices and procedures, and iii. requirements for the maintenance of high standards of fitness and business conduct to ensure honest and responsible conduct by market participants. 6. Business and regulatory costs and other restrictions on the business and investment activities of market participants should be proportionate to the significance of the regulatory objectives sought to be realized. (Emphasis added). Securities Act, supra n. 3. Alden Management Services, Inc. v. Elaine Chao, Secretary of Labor, Nos. 07-3828, 2008 U.S. App. LEXIS 13356 (7th Cir. June 25, 2008) The Court of Appeals in the Seventh Circuit affirmed the district court’s holding that a private complaint is not necessary for the Secretary of Labor to initiate an investigation under the Immigration Nursing Relief Act, and that if foreign nurses are not paid the same wage as domestic registered nurses similarly employed in a facility, then they are entitled to back pay for their entire H-1A visa work period. I. Statutory Scheme of the Immigration Nursing Relief Act The Alden case concerns the Immigration Nursing Relief Act of 1989 (1NRA), 8 U.S.C. § 1101 et seq., which was enacted as an amendment to the Immigration and Nationality Act. The IINRA established a program called the H-IA program. This program allows qualified registered nurses from foreign countries to work in the United States as non-immigrant aliens for a period of up to five years, as long as certain ‘attestation’ conditions are met.1 Among the conditions required to be attested to under the INRA, and relevant to this case, are: 1) that the wages and working conditions of registered nurses already employed at the facility would not be adversely affected by the employment of alien nurses; and 2) that the facility would pay the alien nurse the wage rate for registered nurses similarly employed by the facility.2 The Department of Labor is authorized to promulgate regulations to carry out NRA.3 II. Facts Alden Management Services, Inc., is an Illinois corporation providing health-care management services to nursing homes in Illinois, including seven in the Chicago area. Alden, among other services, provides financial services, regulatory support and assistance in employment matters to nursing homes. Pursuant to the INIRA, Alden filed ‘attestations’ with appropriate authorities from the time period of 1992 - 1995 to hire foreign nationals from the Philippines to work as registered nurses at affiliated nursing homes. Seven Alden affiliated nursing homes employed 119 nurses from the Philippines, whom they employed as certified nurse aids and registered nurses license pending and paid them at a lower wage than a registered nurse. In April 1995, the United State Department of State sent the Department of Labor (DOL) a telegram that an alleged agent of Alden had offered a potentially improper payment to a consular official in the Philippines. The Department of State also made three further allegations. It alleged that: 1) one of the nurses had entered the United State pursuant to Alden’s attestation, but once she arrived to the United States, she learned that there was no position available for her; 2) the consular official had learned that there were no nursing shortages at Alden’s affiliated facilities at the time of the consular’s phone call to inquire into a possible shortage; and 3) nurses were paid less for less than full time employment by certain nursing registries that may have filed attestations. The State Department also stated that the wording of Alden contracts had been vague and non-specific. Thereafter the DOL began an investigation to determine whether or not Alden had paid the 119 foreign national nurses appropriate wages as prescribed by the INRA. III. Procedural History In April 1996, after an investigation, the DOL issued a Determination Letter concluding that Alden’s hiring, employment, and compensation of non-immigrant nurses under the H-1A program violated the INRA and ordered Alden to make up the compensation shortfall for the entire period that the nurses had been employed under the H-1A program. Alden then requested a hearing before an Administrative Law Judge (ALJ). In November of 1999, the AU affirmed the findings that Alden had violated the NRA, but reduced the damages, concluding that back pay should be limited to one year. Both Alden and the DOL petitioned the DOL’s Administrative Review Board (ARB) to review the ALJ’s decision. ARB affirmed the ALJ’s conclusion on liability, but reversed the ALJ’s conclusion regarding the period to be used for calculating back pay in August of 2002. The ARB held that the entirety of the period during which the 119 nurses worked at Alden was the correct time period for determining the back pay for which Alden was liable: The case was then remanded to the ALJ to recalculate the back pay. The ALJ ordered the amount of back pay and civil penalty to be paid by Alden in December of 2005. After the AU issued its decision on remand, Alden filed a complaint in the District Court for the Northern District of Illinois seeking review of the DOL’s decision and filed a Motion for Summary Judgment. The DOL cross Motioned for a Summary Judgment. Alden contended that the DOL’s telegram of April 1995 did not provide the DOL with jurisdiction to investigate Alden’s activities. Alden contended that: 1) Alden is not a ‘facility’ under the INRA; 2) the Department of State is not an ‘aggrieved party or organization’ under the INRA; 3) the Department of State telegram did not provide reasonable cause to investigate; and 4) even if the telegram was a proper complaint, the DOL’s investigation improperly exceeded the scope of the allegations in the complaint. Alden also challenged the ARB’s holding that the INRA authorizes the DOL to conduct investigations in absence of a complaint pursuant to DOL regulation.4 Alden also argued that it was not required to compensate the alien nurses for back pay because although it attested that it would pay alien nurses the wage rates for registered nurses, the alien nurses never performed registered nursing duties, and alternatively, should Alden be required to compensate for back pay, such back pay should be limited to either one or two years. District Court denied Alden’s Motion and granted the DOL’s Motion finding that: I) Alden qualified as a ‘facility’ under INRA; 2) that nothing in the statutory framework precluded the Department of State from qualifying as an ‘aggrieved party or organization’; 3) that the allegations in the Department of State’s telegram provided reasonable cause for the DOL to investigate Alden’s activities; 4) that the investigation did not exceed the scope of the telegram; 5) that the ARB’s ruling that the DOU may investigate INRA abuses in absence of a claim is supported by both the legislative history of the INRA and furthers the purpose of the INRA statutory scheme, and; 6) that the statute supported the ARB’s holding that Alden must compensate for back pay for the entire period of the nurses’ employment under the H-lA program.5 Alden appealed to the Seventh Circuit and the appellate court affirmed. IV. A private complaint is not necessary for the DOL to take action under the INRA The Seventh Circuit affirmed that a private complaint was not necessary to begin an investigation under the DOL’s regulations.6 Section of 8 U.S.C. §1 182(m)(2)(E)(ii) of the INRA provides: The Secretary of Labor shall establish a process...for the receipt, investigation, and disposition of complaints respecting a facility’s failure to meet conditions attested to or a facility’s misrepresentation of a material fact in an attestation. Complaints may be filed by any aggrieved person or organization (including bargaining representatives, associations deemed appropriate by the Secretary, and other aggrieved parties as determined under the regulations of the Secretary). The Secretary shall conduct an investigation under this clause if there is reasonable cause to believe that a facility fails to meet conditions attested to.... The court held that it was not necessary to determine whether or not the Department of State was an ‘aggrieved organization’ under the NRA. The court held that the above Section gives an ‘aggrieved person or organization’ a legal entitlement to administrative action, but that it does not restrict the Secretary of the DOU from acting. The court wrote, “Alden leaps from ‘if an aggrieved person complains, then the Secretary must act’ to ‘the Secretary may act only if an aggrieved person complains.’ The statute says the former, but not the latter.7 This Section establishes that an aggrieved party’s complaint is sufficient to require an investigation by the DOU, but not necessary. The Secretary may act independently to ensure providing that a private complaint was not necessary to begin an investigation did not contradict any part of the INRA.8 Thus, it did not matter whether or not the Department of State was an ‘aggrieved organization’ under the INRA because a private complaint is not needed in order for the DOU to initiate action against an employer suspected to be violating the NRA. V. Foreign nurses are entitled to back pay for the entire period for which they did not receive proper wages while on a 11-lA visa The Seventh Circuit also affirmed that the ARB’s finding that the foreign nurses were entitled to back pay for the entire length of their work under the H-1A visas. Section 1182(m)(2)(E)(v) of the NRA provides: ...if the Secretary of Labor finds, after notice and opportunity for a hearing, that a facility has violated the condition attested to under subparagraph (A)(iii) (relating to payment of registered nurses at the prevailing wage rate), the Secretary shall order the facility to provide for payment of such amounts of back pay as may be required to comply with such condition. Subparagraph (A)(iii) states that, “the alien employed by the facility will be paid the wage rate for registered nurses similarly employed by the facility.9 The court affirmed the district court’s finding that there is nothing in the express language of statute, the legislative history or purpose of the statute, or the DOL regulations and decisions which imposes a limitation on the back pay recovery period, ‘to anything short of what would make the alien nurses whole.10 VI. The INRA does not establish a period of limitations for the Secretary’s proceedings under the INRA Furthermore, the court reasoned that nothing in the NRA establishes a period of limitations for the Secretary’s proceedings and, that unless a federal statute directly sets a time limit, there is not a period of limitations for administrative enforcement actions.11 The court also refused to borrow a limit from another law, holding that the borrowing approach does not apply to administrative proceedings initiated by the national government, as was the case here.12 VII. Alden had ample opportunity to present facts effecting its back pay period Alden also contended that the DOU had violated the due process clause of the Fifth Amendment by adopting and abandoning many different and incompatible views about the appropriate back pay period. The Seventh Circuit held that it is constitutional, and in fact, parties should correct its mistaken legal views. The court held that a shift in legal position could justify relief under the Administrative Procedure Act—which entitles private parties to fair hearings—if the shift prevents a party from introducing facts that are material under the agency’s new view but not it’s old one, which was not the case here.13 Here, even though the AU was bound by the appellate decision of the ARB on remand—which established the legal principle that foreign nurses are entitled to back pay for the entire length of their H-1A visa work period - Alden had ample opportunity to adduce facts that affected its back pay at the at each AU hearing.14 __________ Comparison of patent litigation in the United States, Germany, and Japan Earlier this year, the International and Immigration Law Section Council held a continuing legal educations program entitled, “Intellectual Property and International Law Issues in Representing a Globally Expanding Company.” Gary Ropski and Thomas Burton, with the firm of Brinks, Hofer, Gilson, and Lione presented “A Comparison of Patent Litigation in the United States, Germany, and Japan” as part of the CLE program. Below is the outline that they presented at the CLE program. Patent Litigation • Pre-litigation considerations • Preliminary or interlocutory relief • Discovery procedures • Presentation of evidence • Monetary relief Pre-litigation Considerations • Court • Personnel who can participate • Commencement of litigation • Venue/personal jurisdiction Court—U.S. • Federal system only for patents • Can bring claims for both infringement and nullification of patents (invalidity) • District court (court of first instance): • No specialist court • Few sitting patent attorneys as judges • Jury trial permitted if: • Ask for damages • Between 6 or 12 jurors • Court of appeals: • Court of appeals for the federal circuit • Not all judges are patent attorneys • Supreme court: • Rarely argued (traditionally) Court—U.S. Supreme Court • Court has been more active in taking patent cases: • Quanta Computer Inc. v. LG Electronics, Inc., No. 06-937 (U.S. June 9, 2008) • KSR Intern. Co. v. Teleflex Inc., 127 S.Ct. 1727 (2007) • Microsoft Corp. v. AT&T Corp, 127 S.Ct. 1746 (2007) • MedImmune, Inc. v. Genentech, Inc., 127 S.Ct. 764 (2007) • Laboratory Corp. of America Holdings v. Metabolite Laboratories Inc., 548 U.S. 124 (2006) • eBay Inc. v. Merc Exchange, L.L.C., 547 U.S. 388 (2006) • Merck KGaA v. Integra Lifesciences I, Ltd., 545 U.S. 193 (2005) Court—U.S. Supreme Court • The court has also recently heard two other cases that were loosely related to patent law: • Illinois Tool Works Inc. v. Independent Ink, Inc., 547 U.S. 28 (2006) • Anti-trust case involving contract that forced customers to purchase unpatented ink cartridges from the manufacturer of a patented print head system • Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913 (2005) • Primarily copyright case, but court discussed various provisions of the Patent Act Court—U.S. Patent and Trademark Office (PTO) • Validity: • Reexamination • Reissue only if amendment is offered Court—Germany • Completely separate proceedings for infringement and nullifying patents • Infringement: • Court of First Instance: • Landgericht (10 locations) • Court of Second Instance: • Oberlandesgericht • 3 judges having patent infringement experience • Court of Third Instance: • Bundesgerichtshof (Federal Supreme Court) • Roughly 30% of infringement cases accepted Court—Japan • Infringement Action: • Under new rules, invalidity can be raised as an affirmative defense • Court of First Instance: • District Court • Specialized IP divisions in Tokyo, Osaka, Nagoya • Court of Second Instance: • High Court • IP cases divided into technical/non-technical categories • Specialized IP division in Tokyo and Osaka • Technical (Patent) cases only heard by Tokyo High Court • Court of Third Instance: • Supreme Court- infringement cases rarely heard Court—Germany and Japan • Nullification/Invalidity Action: • Germany: • Nullity Proceeding- Bundespatentgericht (Federal Patent Court) in first instance • Opposition Proceeding – EPO or German PTO • Infringement action suspended if Court determines the patent is likely to be nullified or revoked • Japan: Invalidation Appeal—Japanese Patent Office • Action filed in JPO may result in stay of infringement lawsuit • No reissue or re-examination procedure • Inter-partes invalidation appeal Who Can Participate? U.S. • Patent attorneys • Patent agents, but cannot go before court • General attorneys Who Can Participate (in court)? Germany and Japan • Lawyer (general) must participate • Rechtsanwalt only needed for infringement proceeding in Landgericht, Oberlandesgericht or Bundesgerichtshof • Bengoshi • Patent Attorney may participate in infringement proceeding, but not without general lawyer • Patentanwalt • Benrishi** **Under new law, Benrishi may go before court with Bengoshi if he/she has passed Civil Procedure Test • Patentanwalt can handle nullity proceeding in Bundespatentgericht without Rechtsanwalt Who Can Participate (in the Patent Office)? • US • Patent attorney • Patent agent • Germany • Patentanwalt • Japan • Benrishi Commencement of Litigation—U.S. • Can bring suit only after patent issues • Venue: • Where defendant resides • Where defendant has: • Regular and established place of business • Committed act of infringement • Aliens can be sued in any district Commencement of Litigation—U.S. • Rule 11 for filings: • Signature of attorney or party is certificate that: • He/she has read the paper • It is well grounded in fact • It is warranted by the existing law • A) or a good faith argument for the extension, modification, or reversal of the existing law • It is not interposed for any improper purpose • Such as to harass, cause unnecessary delay, or needless increase in the cost of litigation • No warning letter necessary Commencement of Litigation Germany: • Only after patent issues or after utility model is registered based on a pending patent application • Warning letter not required Japan: • Only after patent issues • Liability may accrue after patent is “laid open” (published) • No warning letter required • But warning letter fulfills “knowledge” requirement Personal Jurisdiction—U.S. • Long-arm jurisdiction • Ability of a court to require a defendant to travel to defend himself in a jurisdiction in which he does not reside, if his contacts with that jurisdiction are sufficient, such as by: • Commission of tort • Transaction of business Long-arm Jurisdiction • Commission of a tort: • “The defendant’s conduct and connection with the forum state are such that he should reasonably anticipate being hailed into court there.” • World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). • Putting a product into the stream of commerce does not automatically subject the manufacturer to jurisdiction in any place that the item should travel. • The defendant must have purposefully directed some action toward the forum state. • Asashi Metal Industry Co. v. Superior Court of CA, 107 S.Ct. 1026 (1987). Long-arm Jurisdiction • Transaction of business: • Defendant must “purposefully avail itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protection of its laws.” Hanson v. Denckla, 357 U.S. 235, 252 (1958) • Special patent statute: • 35 U.S.C. 293: • Every patent owner may be sued in the United States District Court for the District of Columbia, unless he designates some particular person in another jurisdiction to receive service of process on his behalf • Permits an alleged infringer to bring a declaratory judgment action on the issues of validity or infringement of the patent • Aggregation: • Courts will usually not aggregate contacts across the U.S. to determine if there are minimum “nationwide” contacts if there are not sufficient contacts in one particular jurisdiction Personal Jurisdiction & Venue Germany: • Actions can only be brought in: • Landgericht of place of permanent residence (individuals), or head office (corporations) • Landgericht of place the infringement occurred or where a risk of infringement exists Japan: • Actions should be brought in: • District court having jurisdiction over defendant’s place of business • District court having jurisdiction over plaintiff (if damages sought) • Can stipulate to jurisdiction of specialized IP courts Preliminary or Interlocutory Relief—U.S. Preliminary injunctions • Reasonable likelihood of success on the merits • May have to make a “clear showing” of likelihood of success on the merits if the patent owner cannot independently convince the court that irreparable harm will occur • Validity: • Presumption of validity (but not always sufficient for preliminary injunction) • The court may exercise its discretion in deciding what weight to give a prior adjudication of validity • Prior litigation • Reissue proceeding • Reexamination proceeding • Acquiescence of the industry in licensing may establish validity • May introduce direct evidence of validity Preliminary or Interlocutory Relief—U.S. • Infringement: • Reasonable likelihood of success on infringement issue • The patent owner will generally not be held to prior positions taken in previous cases unless the party opposing the preliminary injunction can show either: • Personal reliance on the previous decision, • Prejudice to its litigation of the issues in the present lawsuit by reason of the prior decision, or • Misuse of the court proceedings by the patent owner Preliminary Injunctions—U.S. Contd. • Irreparable harm • Strong showing of validity and infringement gives rise to a presumption of irreparable injury • Overcoming the argument: • Defendant is financially solvent • Patentee no longer using the invention • Patentee has licensed to many licensees • Infringing device does not compete with the patentee’s product, either in the geographic or product area • Delay of the patent owner will not necessarily mean that there is no irreparable harm Preliminary Injunctions—U.S. • Balancing of equities in favor of patent owner • Infringer may argue loss of jobs in a substantial manufacturing facility if injunction issues • Infringer may have to change design • Infringer merely uses the patented device and does not manufacture or sell • Court may grant injunction even though balance of harms is not in favor of patent owner • No overriding public interest that would prevent injunction • Will critical public interest be injured by the grant of preliminary relief? • Usually does not help infringer Preliminary Injunctions—Germany • Availability of interlocutory relief dependent upon court • Must demonstrate act in question is a clear infringement and that urgent relief is needed • Urgency= generally patentee has to act within one month after knowledge of infringement • Must show patent is valid beyond reasonable doubt • Relief can be very quick, even as rapid as a single day • Relief may be granted ex parte Preliminary Injunctions—Japan Japan: • Preliminary injunction proceeding separate from infringement lawsuit • If successful, must negotiate settlement • If no settlement reached, must file infringement lawsuit • Must make prima facie showing of irreparable harm • Must make prima facie showing of infringement Discovery Procedures—U.S. • General points • Very broad (all relevant information, or information that may lead to the discovery of admissible evidence) • No withholding of documents permitted • Exceptions: • Privileged documents • Attorney/client • Attorney work product Discovery Procedures—U.S. • Interrogatories • Document Requests • Requests for Admission Discovery Procedures—U.S. • Depositions • Named or designated persons • Foreign deponents: • Hague Evidence Convention of 1970 • Only relevant information discoverable • Pretrial discovery of documents is not available • Deposition testimony may be obtained regarding the contents of the documents • Depositions will be taken subject to the supervision and control of judges or authorized agents of the foreign country • (e.g., diplomatic officers, consular agents, or commissioners) Discovery Procedures—Germany and Japan • Virtually no discovery • Must collect virtually all information/documentation prior to filing suit • Burden of proving infringement lies solely on plaintiff • Exceptions: • Germany: • Section 485 of the Code of Civil Procedure (ZPO) , Section 809 of the Civil Code (BGB): Besichtigungsanspruch • Reversal of burden of proof in certain cases: • Products manufactured with a patent protected process • Patents covering an industry standard • Japan: • Procedure for preservation of evidence Discovery Procedures—Germany Besichtigungsanspruch (request to inspect premises) • Special proceedings in Düsseldorf Court to become generally available on implementation of the European Enforcement Directive • Ex parte injunction allowing Court appointed expert and patentee’s counsel to inspect equipment, obtain limited evidence (e.g., manuals and source code) from potential infringers • Must make out prima facie case of infringement Presentation of Evidence (Trial)—U.S. • Typically lasts two weeks or more • May last all day long or half-day • Primarily questioning by lawyers • Almost no judges with technical background • Neutral experts may be used: • But usually a battle of parties’ experts • Experts are usually technical or damage experts • Patent procedure experts are sometimes used Presentation of Evidence (Trial)—U.S. • Order of presentation: • Opening statements by the parties • Plaintiff’s evidence • Defendant’s evidence • Plaintiff’s rebuttal • Closing argument (jury trial) • Decision • Jury trial is a matter of days • Jurors must continue to deliberate until decision rendered • Bench trial • Decision may take from several months to several years Presentation of Evidence—Germany Die Beweisführung—Substantive hearing • Typically lasts 1-2 hours • Decision based primarily on content of the briefs filed before hearing • Evidence must be taken before trial court • Inspection by court • Testimony of witnesses • Experts • Documents • Interrogation of a party • Mostly consists of judge questioning parties on points not yet clarified by the briefs filed with the Court • Trial court may request or appoint expert witness Presentation of Evidence—Japan • Hearing: • Typically lasts 5-10 minutes • Parties typically alternate filing of briefs/counter-arguments • Hearing dates scheduled every 1-2 months • Parties arguments submitted by brief in advance of hearing • Court makes determinations primarily based on briefs • Substantial arguments made only in writing • Parties should agree on and stipulate to structure/steps of accused product/process • If no agreement, plaintiff must prove its asserted construction • Testimony of expert witnesses and fact witnesses may be heard (not typical) • Written testimony is preferred over live testimony • Court may employ its own expert Monetary Relief—U.S. • Large awards typical • Primary damages: • Lost profits by the patent owner • Not profits received by the infringer • Reasonable royalty • No criminal sanctions • Increased damages • Prejudgment interest • Attorney fees Lost Profits—U.S. • Generally: • Definition- “the profits that the patent owner would have made from the sales the infringer made, or from charging higher prices or incurring lower expenses if the patentee did not have to compete with the infringer” • Must establish: • Causation • Amount of lost profits Lost Profits—U.S. • Causation: • “But for” test, i.e., “the patent owner would have made the sales the defendant made, or charged higher prices or incurred lower expenses, BUT FOR the defendant’s infringement.” • Must establish: • Demand for patented product in the relevant market during the period in question • No suitable non-infringing alternatives to the patented product • need to show that the patented features were essential in the marketplace for the sale of a competitive product • Patentee had the manufacturing and marketing capability to sell the number of patented products it claims Amount of Lost Profits—U.S. • Cannot be speculative • But may be approximate • Entire market value rule: • When owner would normally anticipate the sale of the non-patented parts together with the patented parts, the court will apply the “entire market value rule” and refuse to apportion the profits between the value of the patented and unpatented parts Monetary Relief—U.S. Contd. • Infringer’s profits: • Only available in design patent cases • Not available for utility patents • Royalties: • Reasonable royalty guaranteed by statute • Amount that a person, desiring to manufacture, use or sell a patented article, as a business proposition, would be willing to pay as a royalty and yet be able to make, use, or sell the patented article, in the market, at a reasonable profit • Hypothetical negotiations take place a the time infringement began • Established royalty as a reasonable royalty • An offer to license is insufficient Reasonable Royalty—U.S. • Rule of thumb • In determining the appropriate amount, usually start with approximately 25% of profit infringer would have made • Important points to consider: • Whether patentee will license at all • Other licensed royalty rates (exclusive and non-exclusive) • The amount of the patented lifetime left • Convoyed sales • The effect of sales of the patented item upon sales of non-patented items • Profitability of the product to be licensed Increased Damages—U.S. • Up to three times the actual damages awarded • Factors: • Did the infringer deliberately copy? • Did infringer form a good faith belief that the patent was not infringed or was invalid? • How did infringer conduct the litigation? • Did infringer continue infringing during an injunction, even where a stay had been granted? • Did infringement continue after notice and commencement of the lawsuit? Attorney Fees—U.S. • Awarded only to the prevailing party • Granted in “exceptional circumstances” • Bad faith • Litigation misconduct • Examples: • Frivolous lawsuits (no basis in fact or law) • Suit continued in bad faith • Misconduct during trial • e.g. overly complicating the litigation to harass opposition • Inequitable conduct during the prosecution of a patent • e.g. hiding or not disclosing pertinent patent references Prejudgment Interest—U.S. • Interest to the patentee from the time the infringement began until the time of the award of damages • Not applicable to increased damages • Rate bears relation to what the patent owner would have done with the money • Average rate on investments actually made by the patentee during the time in question • Prime rate • U.S. treasury bill rate • Differs from post-judgment interest that is mandated by statute after the award has been granted at the conclusion of the trial • Ordinarily awarded absent some justification for withholding the award Monetary Relief—Germany • Recovery based on culpability: • Actions must be minimally negligent • Presumption of liability for companies and their statutory representatives • Opinion from patent attorney denying infringement still may permit infringement to be negligent • Willfullness or gross negligence permits damages, but not trebling • Patentee must choose between its own lost profits, reasonable royalty and infringer’s profit • Lost profits: • Difference between patentee’s actual income and the income the patentee would have made if infringement had not occurred • Typically= lost sales • Must prove exact facts on which profit estimations are based • Must prove causal link between patent infringement and lost profit • Rarely awarded due to difficulty of proving causal link between infringement and lost profit Monetary Relief—Germany Contd. • Reasonable royalty: • Definition: • What reasonable parties would have agreed upon at the time the infringement began • Must not treat infringer worse than contractual licensee Monetary Relief—Germany Contd. • Infringer’s profit: • Infringer’s profit ~ gross margin • Patentee may recover only the part of the infringer’s profit which was caused by the infringement (availability of alternative designs outside the patent?) • Infringer must have made profit through illegal use of patented product, device, or process • Increased damages: • Not available • Interest: • Typically available • Attorney fees: • Usually awarded to the winner Monetary Relief—Japan • Generally: • Profits of infringer are presumed to be equivalent to the damage patent owner suffered due to infringement • No causation need be shown • At a minimum, reasonable royalty awarded • Lost profits possible Lost Profits—Japan • Definition: • Difference between patentee’s pecuniary condition after infringement and condition if infringement never occurred • Generally calculated by multiplying diverted sales by patentee’s profit margin • Patentee must prove causation to a reasonable certainty using circumstantial evidence • Potential infringers must exercise due care: • Opinion of counsel may be inadequate • Negligence is presumed • Nearly impossible to rebut presumption of negligence Reasonable Royalty—Japan • Definition: • Amount non-exclusive licensee would pay as a royalty for using the patent • Typically calculated by multiplying infringer’s sales revenue from infringement by a reasonable royalty rate • Established royalties/industry standards may be used Attorney Fees—Japan • May be recoverable only by a prevailing patentee • Bad faith/willfullness irrelevant • Court determines amount to award based on complexity of the case, not on actual fees incurred (discretionary) Monetary Relief—Japan, Contd. • Interest • Fixed rate of 5% is added to award • Calculated from date of first infringement • Criminal sanctions • Possible for willful infringement, but very rare • Statute of limitations: • 3-years for “damages” (lost profits) • 10-years for “unjust enrichment” (reasonable royalty) __________ Any attorney who advises clients, or even hopes to advise clients in the future concerning matters of international business issues, should consider subscribing to USA Trade World Illinois, issued by the U.S. Department of Commerce. You can log onto <www.buyusa.gov/Illinois> for further information. USA Trade World Illinois Summer 2008 issue included a wide range of trade related topics. Under a headline of “What’s New in Exporting E-Mail Updates Available,” the newsletter explained that the U.S. Government Export Portal now offers an online subscription for Export.gov email updates. This allows subscribers to select multiple topics on which to receive updates, including industry specific updates. The topics range from Agribusiness, to Paper, Printing and Graphic Arts, to “What’s New in Exporting,” to Environmental Technologies. To sign up for this free service from the U.S. Department of Commerce, visit <www.export.gov> and select “Sign up for Export.gov E-mail Updates.” The same issue of USA Trade World Illinois described various new market research programs that are available as a free service from the U.S. Commercial Service offices outside the United States. The topics of new studies include: Belgium: The Renewable Energy Market-May 2008; Canada: Management Consulting-May 2008; China: Demand for English Training in Southern China-May 2008; Malaysia: Medical Equipment-April 2008; and Panama: Building Material-April 2008. Each of these studies is free and may be requested by calling (312) 353-8040. The same Summer issue of USA Trade World Illinois carried a brief explanation of mandatory electronic filing for all export shipments requiring SED. The article mentioned that effective July 2, 2008, the U.S. Census Bureau has issued its final rule, which is requiring mandatory filing of export information through the automated export system or through the AES Direct for all shipments where a shipper’s export declaration is required. There will be a 90-day implementation period, which ends September 30, 2008. After that, filing electronically is required. Each issue describes upcoming international trade shows and missions and upcoming international trade events to be held in Illinois. The International Trade shows, including in September the GlobalTRONICS Show in Singapore, African Aerospace and Defense Show in Cape Town, South Africa, the U.S. Department of Commerce Trade Mission to Costa Rica, the Dominican Republic, and Nicaragua and September and October, EXPO COMM China 2008, where the U.S. Embassy in Beijing is inviting American firms to participate in the U.S. Pavilion at EXPO COMM China. This event promotes American telecom and IT products and services. In October there is a Caribbean American Franchise Forum, being held in the Dominican Republic, and in November, a Certified Trade Mission to India. In terms of events in Illinois, USA Trade World Illinois emphasizes the International Manufacturing Technology Show to be held in Chicago September 8th through 13th. The IMTS is the largest manufacturing and technology show in North America. U.S. Commercial Service will have a booth in the International Business Center of the show at McCormick Place. Commercial Service overseas offices will recruit international buyer delegations from around the world to attend. The Commercial Service Chicago office can help Show exhibitors and attendees meet members of the foreign delegations. For more information on the IMTS show, see <www.imts.com>. In parallel with the Show, on September 9th will be held the Clean Technologies and Sustainability: Global Perspective and Opportunities Conference. This one day forum is being hosted at The Federal Reserve Bank in Chicago and the conference will bring together local Midwest and international entrepreneurs, practitioners, policy makers to share best practices and to discover new ideas for cooperation and commercialization. Topics for panel and one-on-one discussions include sustainable water and land management, solid waste and recycling, architecture and design, renewable energy, and biomaterials and green manufacturing. The Conference is sponsored by The Federal Reserve Bank of Chicago, Illinois Global Partnership, the U.S. Commercial Services, the Economic Development Council, and others. For more information please visit <www.ChicagoCleanTech2008.com>, or contact John Stutts at (312) 423-9008. The USA Trade World Illinois also provides information on the individuals involved in the U.S. Commercial Service office at 200 West Adams, Chicago, Illinois. In this issue, they describe that Senior Trade Specialist, Debra Rogers traveled to Dubai, Abu Dhabi and Kuwait City in February. Working with the Commercial Service offices in those cities she promoted Illinois education by organizing a literature display booth for Illinois schools, on behalf of the Study Illinois International Education Consortium. The article continued to explain that Trade Specialist Shari Stout of the Peoria office traveled to Jordan, to participate in a conference entitled, “How to Maximize the U.S.-Jordan Free Trade Agreement for Importers and Exporters.” They also mention that Trade Specialist Thelma Young spent ten days during July in South Africa to help cover a staffing gap in the Department of Commerce office there and to support specifically patent and trademark events. __________ For the past few years, the International and Immigration Law Section Council has been specifically looking at the issues related to the requirement under the Vienna Convention that if a foreign national is arrested, or otherwise detained, their consulate should be notified. This has been referred to as “consular notification.” The International and Immigration Law Section of the Illinois State Bar Association invited representatives of some of the consulates located in Chicago to a meeting to discuss their experience with consular notification. The program was arranged, with the cooperation of, and hosted by the Consulate General of Mexico and their staff. Following are the minutes of the meeting and discussion, as taken by Cindy Buys, then Secretary and now Vice-Chair of the International and Immigration Law Section Council: ISBA Members Present: • Lew Matuszewich, Chair, International and Immigration Law Section Council • Cindy Buys, Secretary, International and Immigration Law Section Council • Mark Wojcik, Board Liaison • Scott Pollock • Shannon Shepherd • David Austin Guests: • James P. Kelly • Maryann Bullion • Sylvia Swirsky • Marta Delgado Members of the Consular Corps: Mexico: • Ioana Navarrete Pellicer, Consul de Proteccion • Jacobo Tellez-Ocampo, Viceconsul • Georgina Velaquez, Departamento de Proteccion • Jasiel Curiel, Agente Consular • Luis Benjamin Penaflor, Agente Consular Poland: • Joanna Michalec, Vice Consul South Korea: • Jung-il Han, Consul Canada: • Anthony (Tony) Brown, Agent principal du programme consulaire Turkey: • Umut Aydin, Vice Consul I. Ioana Navarrete Pellicer welcomed everyone on behalf of the Mexican Consulate. II. Lew Matuszewich also welcomed everyone on behalf of the ISBA Section Council on International and Immigration Law and explained that we had requested this meeting to discuss issues of mutual concern relating to consular notification. III. Mark Wojcik added his welcome on behalf of the President, Officers and Board of Governors of the ISBA. IV. Cindy Buys provided some background information regarding consular notification litigation, including the recent U.S. Supreme Court decision in Medellin v. Texas. She also distributed a handout listing cases in Illinois courts during the last 10 years in which consular notification claims under Article 36 of the Vienna Convention on Consular Relations were raised (copy attached). She explained Proposed Rule 404, which is pending before the Illinois Supreme Court (copy attached). Mark Wojcik also added commentary on the Medellin case. V. Each of the consular officers were then invited to share their concerns or problems with consular notification. Several of the consular officers stated that they have tried to develop good relations with local law enforcement officers and judges and to educate them about the importance of consular notification. Compliance with consular notification requirements by criminal law enforcement authorities varies by city or county. In general, the consular officers seemed to have good experiences with the Chicago police. The consulates have more problems with smaller police departments outside Chicago. They rarely hear from law enforcement officers from states outside Illinois, despite the fact that each consulate covers anywhere from three to 13 states. Some foreign nationals do not want to contact the consulate. The consular officers were not sure why, but believe their foreign nationals may be afraid and may not understand what kind of assistance the consulate could provide. Some of the consular officers commented that although the foreign nationals often do not call immediately, they almost always call later for help. Several consular officers commented that the U.S. immigration authorities are good at providing notice once a foreign national is taken into immigration detention. However, immigration authorities are keeping foreign nationals at the airport for a day or two without notifying the consulates. The consulates only learn of their detention if a family member or friend contacts the consulate. Some of the consular officers commented that they do not receive notice from the Illinois Department of Children and Family Services (DCFS) on a regular basis when DCFS has a foreign national minor in custody. One consular officer commented that when the consulate has contacted DCFS for information about a child in custody, they have not found DCFS to be very responsive or helpful. The Canadian consulate hosted a meeting five to six years ago on consular notification and a series of follow-up meetings. After those discussions, signs regarding the right of consular notification were created in different languages and posted in the local jails. They also tried to incorporate consular notification issues in training for Chicago police officers. This led to some improvement in consular notification for a period of time after the meetings. One consular officer commented that there seems to be some confusion on the part of the police between mandatory notification (under bilateral conventions) and more general consular notification obligations under the Vienna Convention. One consular officer has heard police officers say that they do not have to provide consular notification unless the United States as an agreement with the foreign national’s country that makes notification mandatory. It was also noted that Chicago is a “sanctuary” city, which some police have interpreted to mean that they cannot ask the nationality of a person taken into custody and, therefore, cannot provide consular notification. In general, the consular officers expressed support for Proposed Rule 404 because it advances the spirit of the Vienna Convention. However, it was stressed that it is most important to get consular notification at the time of arrest. There was general agreement that more education regarding consular notification is needed. There are also ambiguities that should be resolved, such as the meaning of “without delay” in the Vienna Convention. Cook County authorities sometimes put the notice in regular mail so that it is often a week before the consulate receives the notice. Immigration authorities fax the notice and are more prompt. Also, it is often not clear which law enforcement officer is responsible for giving the notice. Immigration authorities at the airport claim that because they are not “arresting” foreign nationals, they do not have to give the notice. However, the treaty requires notice to be given upon arrest or detention and the airport authorities are clearly detaining people. Sometimes, when police are “interviewing” a person about a crime, they do not want to interrupt the interview to give the consular notification. They often give the notice after the interview, but often it’s too late because the interviewee already has provided too much incriminating information. Even though the suspect is given Miranda warnings, it is not enough. Foreign nationals in this situation may not be well educated, they usually don’t speak English well, they don’t understand their rights and they are too afraid to take advantage of their rights. Furthermore, they are often told by police that it will help them if they cooperate. Most of the consulates seemed to have a person on duty and available to receive consular notice 24 hours a day, seven days a week. Appropriate phone numbers can be found on the consulates’ Web sites, through the Chicago 911 center and through the Office of Foreign Missions. The consulates stated that they give their contact information to the local police and try to keep it up to date. It was suggested that if Rule 404 were adopted, the consulates could create a database of contact information for the courts. There was some discussion of the problem of lack of resources. While the consulates want to serve all their foreign nationals who desire assistance, they are not sure they have sufficient staff to do so. The Mexican consulate in Chicago covers Illinois, Wisconsin, and Indiana. The Polish consulate in Chicago covers 13 states (approximately 3 million Polish nationals). The South Korean consulate likewise covers 13 states (about 100,000 persons). Turkey covers about 4,000 persons, mostly students in Illinois. David Austin suggested that the ISBA and the consulates work together to create something in writing that judges could hand out that explains why foreign nationals would want to contact their consulates. VI. The meeting was adjourned at approximately 5:20 pm. Submitted by Cindy G. Buys, Secretary.
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