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Seventh Circuit Court of Appeals Judge Richard Posner made quick work of a recent class action suit brought by glaucoma patients who alleged that Allergan, Inc., and other drugmakers manufactured prescription eyedrops that were too large in order to increase their profits (Eike, et al., v. Allergan, Inc., et al., No. 16-3334, 7th Cir. (2017)). The case was on appeal from a district court ruling certifying eight classes of plaintiffs consisting of Illinois and Missouri residents who alleged that Allergan and six other pharmaceutical companies made eye drops that were unnecessarily large, in violation of the Illinois Consumer Fraud Act and Missouri Merchandising Practices Act.

Each eyedrop exceeded 16 microliters, beyond the optimal size the plaintiffs contended was necessary for treatment of glaucoma and therefore wasteful because the additional microliters added no therapeutic value, instead serving only to pad the companies’ profits. The plaintiffs sought damages amounting to the difference between the price per drop of the eye drops at their present size and the presumably lower price of smaller drops, multiplied by the number of drops purchased by the class members.  Continue reading ›

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With the economy still unsteady after the recession, more and more people are attracted to the idea of starting their own business. But one of the biggest challenges when doing that is making sure you have something unique to offer the market.

For people who have spent most of their career working at one company, that’s often all they know. If they’re going to try to branch off on their own, they’d better make sure their new operation is significantly different from their employer’s, or at least has a new approach to the industry. Either way, it’s important to note that just copying and pasting your employer’s business is not only unethical – it’s illegal.

According to officials, David Newman, a 34-year-old trader who worked in Chicago, stole more than 400,000 electronic files from his employer. Those files contained all of WH Trading LLC’s proprietary computer code and trading software. Continue reading ›

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Getting taken to the cleaners by a dishonest employee or contractor is headache enough for any business, but having  no fraud coverage insurance coverage is a world of hurt.  Businesses are well advised to analyze their policies carefully to make sure they have proper coverage.

In the case of an Indiana telecom company called Telamon, its two different insurance policies provided no relief, according to the Seventh Circuit Court of Appeals (Telamon Corp. v. Charter Oak, No. 16-1205, 7th Cir. (2017)). Telamon engaged independent consultant Juanita B. to provide services, and her role eventually expanded well beyond the original agreement. She was named vice president of major accounts and became senior manager for the company’s business in New York and New Jersey. In that capacity, she oversaw the removal of old telecommunications equipment from AT&T sites to sell to salvagers. Juanita pocketed the profits, for a total of $5.2 million in losses for the company by the time it discovered her scheme.   Continue reading ›

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In Silicon Valley, the heart of the technology industry, a company’s greatest asset is its talent. Their brains and the information they have access to are priceless, which is why, for many tech companies, it is imperative for them not to allow their employees to take such invaluable information directly to a competitor. It’s also why Waymo, Google’s self-driving car company, is suing Uber and one of Google’s former employees for allegedly stealing trade secrets.

According to Waymo, Anthony Levandowski, who was working on Google’s self-driving vehicle technology, left the company last year after allegedly stealing 14,000 documents containing trade secrets. Levandowski then started his own self-driving truck company, called Otto, which he sold to Uber earlier this year. Levandowski is now working as the head of Uber’s self-driving department, although Uber and Levandowski claim their technology bears no resemblance to Waymo’s self-driving technology. Continue reading ›

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Stock options exercised by railroad employees are a form of monetary compensation taxable to the employer and employee under the Railroad Retirement Tax Act, according to the Seventh Circuit Court of Appeals (Wisconsin Central Ltd., et al. v. United States, No. 16‐3300 (7th Cir. 2017)).

In 1996, three Midwestern railroad subsidiaries of the Canadian National Railway Company began including stock options in their employees’ compensation plans. In its appeal from a district court ruling, the railway argued that income from the exercise of stock options that a railroad gives its employees is not a form of “money remuneration” to them and is therefore not taxable to the railway under the Act, which defines “compensation” as “any form of money remuneration paid to an individual for services rendered as an employee… .”

The Railroad Retirement Tax Act of 1937 is the railroad industry’s version of the Social Security Act; it imposes a payroll tax on both employer and employee to pay for pensions and other benefits.

The question before the Seventh Circuit was whether the tax should be levied on the value of stock options exercised by employees when the market price reaches a certain level. The Internal Revenue Service argued that it should, and in a 2-1 decision, the court agreed.

Writing for the majority, Judge Richard Posner stated: “Stock has so well‐defined a monetary value in our society that there is no significant economic difference between receiving a $1,000 salary bonus and a share or shares of stock having a market value of $1,000.” Continue reading ›

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If a patent holder is allowed to control what happens to their patented products after the first sale, where would it end? Would they be able to take a cut from thrift shops? Garage sales?

Lexmark International, a technology company that makes printers and ink cartridges for those printers, has been selling its ink cartridges on the condition that they could not be refilled and resold after the initial sale. Despite that contingency, Impression Products, a small company based in West Virginia, was buying Lexmark’s ink cartridges (in the U.S. as well as abroad), refilling and refurbishing them, and reselling them at a reduced price.

Lexmark responded by suing Impression Products, claiming the company’s refusal to abide by the limitations Lexmark provided constituted trademark infringement. The case went before the U.S. Court of Appeals for the Federal Circuit, which is located in Washington. That court supported both of Lexmark’s claims concerning the resale of patented items that were initially purchased both in America, as well as those bought in other countries.

The appeals court agreed that, in most cases, anyone who bought a patented product was free to use it however they saw fit once they had paid for it, but that the conditions Lexmark had placed upon the sale of its ink cartridges was valid. Continue reading ›

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As our economy continues to expand all over the country and the globe, it forces us to reconsider some of the ways in which we do business.

For example, when companies started including non-compete agreements in their contracts with their employees, the federal and state governments allowed it – as long as the non-compete agreements met certain requirements. Chief among those requirements was a time limit and a geographical limit. Ideally, non-compete agreements should protect the legitimate business interests of the company (by making sure employees don’t go to a direct competitor with trade secrets), without severely restricting further employment opportunities for the worker.

But as companies continue to grow and expand into national and international markets, their competitors can reasonably be considered to be operating just about everywhere. That’s the case Horizon Health Corp. is making in its lawsuit against Acadia Healthcare Co. Inc. and the individual Acadia employees who were allegedly bound by a non-compete agreement when they were working for Horizon.

The contract prohibited the employees from going to work for another “psychiatric management company,” for one year after termination of their employment with Horizon, but there was no geographic limit to the non-compete agreement. Continue reading ›

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The First Amendment of the U.S. Constitution gives everyone the right to speak freely about virtually everything and everyone, so long as what they say is not false or doesn’t infringe on intellectual property rights. People are free to voice opinions that do not contain factually false information. This protection includes negative reviews of companies providing products and services, but many legislators currently feel that consumers are in need of an extra layer of protection.

The internet and review sites like Yelp have made it easier than ever for customers to post public reviews of companies as soon as the transaction has been completed. While that may not sound threatening, a few bad reviews can significantly decrease a company’s overall rating and hinder future business, even when the subject of the complaint is insignificant and arbitrary.

So businesses have started retaliating by including clauses in their consumer contracts that forbid their customers from posting negative online reviews. Some companies have even acted on their threats by taking legal action against consumers who post negative reviews, usually for unreasonably large amounts of money when compared the transaction in question. For example, one hotel in New York charged $500 per negative review posted to Yelp, while another company sued a couple in Utah for thousands of dollars over a negative review pertaining to a small purchase. Continue reading ›

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When tragedy strikes, we are generally told not to blame the victim. Unfortunately, it’s human nature to do so, especially when the victims are women who have been sexually assaulted.

Ten different women filing similar allegations against Baylor University in Texas allege their rights were denied and/or violated under federal law. All the women allege they were sexually assaulted, either on school grounds and/or by other students, including at least one football player.

When the women reported the assaults to Baylor University officials, they’re reports were allegedly ignored and treated with indifference. Now the women have filed a total of six lawsuits against the school for allegedly violating their Title IX rights.

Baylor submitted requests for the first four lawsuits to be dismissed. It has not yet asked the court to dismiss the two lawsuits that were most recently filed, but it may still do so in the future. According to Baylor, the allegations submitted by the ten different women did not bear enough similarities to be filed jointly. Since they involved different places, victims, contexts, and alleged attackers, Baylor argued the combined cases should be dismissed and filed individually.

U.S. District Judge Robert Pitman disagreed, refusing all four of Baylor’s motions to dismiss. In his written decision, Pitman noted the similarities in claims brought by all the plaintiffs, namely their alleged mistreatment by Baylor officials, which allegedly resulted in deprivation of educational opportunities, either as a direct or indirect result of the trauma they suffered and the school’s refusal to properly handle the situation. Continue reading ›

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What’s in a name? While some claim it’s nothing more than a word (or combination of words), some people work really hard to maintain their good name. So when something comes along that might threaten that good name, they’ll do whatever it takes to put a stop to the potential harm before it gets out of hand.

Christopher Bray said he was aware of Ariel Investments at the time he created his own firm, Ariel Capital, in early 2014. But Bray claims Ariel Investments had nothing to do with the naming of his own company. Instead, he claims he drew his inspiration for his company’s name from the Bible and his daughter, who is also named Ariel.

Although a federal judge found Bray’s reasoning credible, he said it didn’t change the fact that the name of Bray’s company could cause confusion for consumers, especially given the fact that both firms are operating in the same industry. Continue reading ›

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