Tuesday, March 19, 2019

Air & Liquid Systems Corp. v. DeVries, Docket 17-1104

Tort Law
Maritime Tort Case
Maritime Law
Navy Veterans
Common-Law Court
Product Manufacturer
Duty to Warn
Liability for Harms Caused by Later-Added Third-Party Parts

Summary: In the maritime tort context, a product manufacturer has a duty to warn when its product requires incorporation of a part, the manu­facturer knows or has reason to know that the integrated product is likely to be dangerous for its intended uses, and the manufacturer has no reason to believe that the product’s users will realize that danger.

In maritime tort cases, we act as a common-law court, subject to any controlling statutes enacted by Congress. See Exxon Shipping Co. v. Baker, 554 U. S. 471, 507–508 (2008).

Three approaches have emerged on how to apply that “duty to warn” principle when a manufacturer’s product requires later incorporation of a dangerous part in order for the integrated product to function as intended. The first—the foreseeability rule—provides that a manu­facturer may be liable when it was foreseeable that its product would be used with another product or part, even if the manufacturer’s product did not require use or incorporation of that other product or part. The second—the bare-metal defense—provides that if a manu­facturer did not itself make, sell, or distribute the part or incorporate the part into the product, the manufacturer is not liable for harm caused by the integrated product—even if the product required incor­poration of the part and the manufacturer knew that the integrated product was likely to be dangerous for its intended uses. A third ap­proach, falling between those two, imposes on the manufacturer a duty to warn when its product requires incorporation of a part and the manufacturer knows or has reason to know that the integrated prod­uct is likely to be dangerous for its intended uses.

The third approach is most appropriate for this maritime context.

Requiring the product manufacturer to warn when its product requires incorpora­tion of a part that makes the integrated product dangerous for its in­tended uses is especially appropriate in the context of maritime law, which has always recognized a “special solicitude for the welfare” of sailors. American Export Lines, Inc. v. Alvez, 446 U. S. 274, 285.

The maritime tort rule adopted here encompasses all of the fol­lowing circumstances, so long as the manufacturer knows or has rea­son to know that the integrated product is likely to be dangerous for its intended uses, and the manufacturer has no reason to believe that the product’s users will realize that danger: (i) a manufacturer di­rects that the part be incorporated; (ii) a manufacturer itself makes the product with a part that the manufacturer knows will require re­placement with a similar part; or (iii) a product would be useless without the part.

(U.S. Supreme Court, March 19, 2019, Air & Liquid Systems Corp. v. DeVries, Docket 17-1104, J. Kavanaugh)

Monday, March 4, 2019

U.S. Supreme Court, Fourth Estate Pub. Benefit Corp. v. Wall-Street.com, Docket No. 17-571, J. Ginsburg, unanimous

Copyright Infringement
License Agreement
Application to Register
No Civil Action for Infringement of the Copyright shall be Instituted until . . . Registration of the Copyright Claim has been Made
Expedited Processing of a Claim for an Additional $800 Fee
Statute of Limitations
Foreign Works
Berne Convention for the Protec­tion of Literary and Artistic Works’ bar on Copyright For­malities for such Works

Title 17 U. S. C. §411(a) states that “no civil action for infringement of the copyright in any United States work shall be instituted until . . . registration of the copyright claim has been made in accordance with this title.”

(…) Section 411(a) provides, in principal part: “No civil action for in­fringement of the copyright in any United States work shall be insti­tuted until preregistration or registration of the copyright claim has been made in accordance with this title. In any case, however, where the deposit, application, and fee required for registration have been deliv­ered to the Copyright Office in proper form and registration has been refused, the applicant is entitled to institute a civil action for infringe­ment (…)”.

Registration occurs, and a copyright claimant may commence an infringement suit, when the Copyright Office registers a copyright. Upon registration of the copyright, however, a copyright owner can recover for infringement that occurred both before and after registra­tion.

Under the Copyright Act of 1976, as amended, a copyright au­thor gains “exclusive rights” in her work immediately upon the work’s creation. 17 U. S. C. §106. A copyright owner may institute a civil action for infringement of those exclusive rights, §501(b), but generally only after complying with §411(a)’s requirement that “reg­istration . . . has been made.” Registration is thus akin to an admin­istrative exhaustion requirement that the owner must satisfy before suing to enforce ownership rights.

True, registration processing times have in­creased from one to two weeks in 1956 to many months today. De­lays, in large part, are the result of Copyright Office staffing and budgetary shortages that Congress can alleviate, but courts cannot cure.

Unfortunate as the current administrative lag may be, that factor does not allow this Court to revise §411(a)’s congressionally composed text.

(The Register of Copyrights is the “director of the Copyright Office of the Library of Congress” and is appointed by the Librarian of Congress. 17 U. S. C. §701(a). The Copyright Act delegates to the Register “all administrative functions and duties under [Title 17].”)

In limited circumstances, copyright owners may file an infringement suit before undertaking registration. If a copyright owner is preparing to distribute a work of a type vulnerable to predistribution infringement—notably, a movie or musical composition—the owner may apply for preregistration. §408(f)(2); 37 CFR §202.16(b)(1) (2018). The Copyright Office will “conduct a limited review” of the application and notify the claimant “upon completion of the preregistration.” §202.16(c)(7), (c)(10). Once “prereg­istration . . . has been made,” the copyright claimant may institute a suit for infringement. 17 U. S. C. §411(a). Preregistration, however, serves only as “a preliminary step prior to a full registration.” Preregistration of Cer­tain Unpublished Copyright Claims, 70 Fed. Reg. 42286(2005). An infringement suit brought in reliance on pre­registration risks dismissal unless the copyright owner applies for registration promptly after the preregistered work’s publication or infringement. §408(f)(3)–(4). A copyright owner may also sue for infringement of a live broadcast before “registration . . . has been made,” but faces dismissal of her suit if she fails to “make registration for the work” within three months of its first transmission. §411(c). Even in these exceptional scenarios, then, the copyright owner must eventually pursue registration in order to maintain a suit for infringement.

(…) Noteworthy, too, in years following the 1976 revisions, Congress resisted efforts to eliminate §411(a) and the registration requirement embedded in it. In 1988, Con­gress removed foreign works from §411(a)’s dominion in order to comply with the Berne Convention for the Protec­tion of Literary and Artistic Works’ bar on copyright for­malities for such works. See §9(b)(1), 102 Stat. 2859. Despite proposals to repeal §411(a)’s registration require­ment entirely, however, see S. Rep. No. 100‒352, p. 36 (1988), Congress maintained the requirement for domestic works, see §411(a). Subsequently, in 1993, Congress considered, but declined to adopt, a proposal to allow suit immediately upon submission of a registration application. See H. R. Rep. No. 103–338, p. 4 (1993). And in 2005, Congress made a preregistration option available for works vulnerable to predistribution infringement. See Artists’ Rights and Theft Prevention Act of 2005, §104, 119 Stat. 221.

(…) Fourth Estate raises the specter that a copyright owner may lose the ability to enforce her rights if the Copyright Act’s three-year statute of limitations runs out before the Copyright Office acts on her application for registration (…). Fourth Estate’s fear is overstated, as the average processing time for registration applications is currently seven months, leaving ample time to sue after the Register’s decision, even for infringement that began before submission of an application. See U. S. Copyright Office, Registration Processing Times (Oct. 2, 2018) (Regis­tration Processing Times), https://www.copyright.gov/registration/docs/processing-times-faqs.pdf

Further, in addition to the Act’s provisions for preregistration suit, the Copyright Office allows copyright claimants to seek expedited processing of a claim for an additional $800 fee. See U. S. Copyright Office, Special Handling: Circular No. 10, pp. 1–2 (2017). The Copy­right Office grants requests for special handling in situations involving, inter alia, “pending or prospective litigation,” and “makes every attempt to examine the application . . . within five working days.” Compendium of U. S. Copyright Practices §623.2, 623.4 (3d ed. 2017).

(U.S. Supreme Court, March 4, 2019, Fourth Estate Pub. Benefit Corp. v. Wall-Street.com, Docket No. 17-571, J. Ginsburg, unanimous)

Monday, February 4, 2019

U.S. Court of Appeals for the Forth Circuit, BOOKING.COM B.V. v. USPTO, Docket No. 17-2458 and 17-2459, Published Opinion

Generic Terms
Descriptive Terms
Secondary Meaning
Domain Name
Generic + .com = Nongeneric?
“Advertising” = generic; “.com” = generic; but “advertising.com”, valid and protectable mark?
Fourth Circuit

Protectability of the proposed trademark BOOKING.COM
The USPTO examiner rejected Booking.com’s applications, finding that the marks were not protectable because BOOKING.COM was generic as applied to the relevant services.
Booking.com appealed to the Trademark Trial and Appeal Board (the “TTAB”).
Booking.com appealed the TTAB’s decisions by filing this civil action under 15 U.S.C. § 1071(b) against the USPTO and the USPTO’s director in the Eastern District of Virginia.
Booking.com could have appealed to the Federal Circuit but declined to do so.

In order to be protectable, marks must be “distinctive.” To determine whether a proposed mark is protectable, courts ascertain the strength of the mark by placing it into one of four categories of distinctiveness, in ascending order: (1) generic, (2) descriptive, (3) suggestive, or (4) arbitrary or fanciful. George & Co. v. Imagination Entm’t Ltd., 575 F.3d 383, 393–94 (4th Cir. 2009). Marks falling into the latter two categories are deemed inherently distinctive and are entitled to protection because their intrinsic nature serves to identify the particular source of a product. In contrast, descriptive terms may be distinctive only upon certain showings, and generic terms are never distinctive.
This dispute concerns only the first two of these four categories, with Booking.com arguing the mark is descriptive and the USPTO arguing it is generic. 
A term is generic if it is the “common name of a product” or “the genus of which the particular product is a species,” such as LITE BEER for light beer, or CONVENIENT STORE for convenience stores. OBX-Stock, Inc., 558 F.3d at 340. Generic terms do not contain source-identifying significance--they do not distinguish the particular product or service from other products or services on the market. George & Co., 575 F.3d at 394. Accordingly, generic terms can never obtain trademark protection, as trademarking a generic term effectively grants the owner a monopoly over a term in common coinage. If protection were allowed, a competitor could not describe his goods or services as what they are. CES Publ’g Corp. v. St. Regis Publ’ns, Inc., 531 F.2d 11, 13 (2d Cir. 1975). 

In contrast, descriptive terms, which may be protectable, describe a “function, use, characteristic, size, or intended purpose of the product,” such as 5 MINUTE GLUE or KING SIZE MEN’S CLOTHING. Sara Lee Corp. v. Kayser-Roth Corp., 81 F.3d 455, 464 (4th Cir. 1996). In order to be protected, a descriptive term must have acquired secondary meaning. Hunt Masters, Inc. v. Landry’s Seafood Rest., Inc., 240 F.3d 251, 254 (4th Cir. 2001). Secondary meaning indicates that a term has become sufficiently distinctive to establish a mental association in the relevant public’s minds between the proposed mark and the source of the product or service. George & Co., 575 F.3d at 394.

(…) The question of whether a proposed mark is generic is a question of fact that is subject to deferential review. See Swatch AG v. Beehive Wholesale, LLC, 739 F.3d 150, 155 (4th Cir. 2014).

(…) The Federal Circuit has long held, and we agree, that in registration proceedings, the USPTO “always bears the burden” of establishing that a proposed mark is generic. In re Cordua Rests., Inc., 823 F.3d 594, 600 (Fed. Cir. 2016); see In re Merrill Lynch, Pierce, Fenner, and Smith, Inc., 828 F.2d 1567, 1571 (Fed. Cir. 1987) (explaining that the burden of proving genericness “remains with” the PTO). This is so because finding a mark to be generic carries significant consequence, as it forecloses an applicant from any rights over the mark--once a mark is determined to be generic, it can never receive trademark protection. See 2 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition, § 12:12 (5th ed. 2018) (explaining that finding a mark to be generic is a “fateful step” as it may result in the “loss of rights which could be valuable intellectual property”). 

(…) Where a mark is not registered, however, and the alleged infringer asserts genericness as a defense, the plaintiff bears the burden of proving that the mark is not generic. See Ale House Mgmt. Inc. v. Raleigh Ale House, Inc., 205 F.3d 137, 140 (4th Cir. 2000).

(…) Generic terms are the “common name of a product or service itself.” Sara Lee, 81 F.3d at 464. To determine whether a term is generic, we follow a three-step test: (1) identify the class of product or service to which use of the mark is relevant; (2) identify the relevant consuming public; and (3) determine whether the primary significance of the mark to the relevant public is as an indication of the nature of the class of the product or services to which the mark relates, which suggests that it is generic, or an indication of the source or brand, which suggests that it is not generic. Glover v. Ampak, Inc., 74 F.3d 57, 59 (4th Cir. 1996).

(…) If a term is deemed generic, subsequent consumer recognition of the term as brand-specific cannot change that determination. See Retail Servs., Inc., 364 F.3d at 547. Indeed, courts have explained that “no matter how much money and effort the user of a generic term has poured into promoting the sale of its merchandise and what success it has achieved in securing public identification,” that user cannot claim the exclusive right through trademark protection to call the product or service by its common name. Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 9 (2d Cir. 1976). 

(…) We reject the USPTO’s contention that adding the top-level domain (a “TLD”) .com to a generic second-level domain (an “SLD”) like booking can never yield a non-generic mark.

(…) The USPTO relies on an 1888 Supreme Court case to argue that, as a matter of law, adding .com to a generic SLD like booking can never be nongeneric. In Goodyear’s Rubber Mfg. Co. v. Goodyear Rubber Co., 128 U.S. 598, 602–03 (1888), the Court held that the addition of commercial indicators such as “Company” to terms that merely describe classes of goods could not be trademarked, like “Grain Company” or, as the Dissent provides, “The Grocery Store.” According to the USPTO, “.com” is analytically indistinct from “company,” as it is a generic identifier for an entity operating a commercial website, and therefore its addition to a generic term can never be protected. However, Goodyear was decided almost sixty years before the Lanham Act and, crucially, did not apply the primary significance test. No circuit has adopted the bright line rule for which the USPTO advocates--indeed, sister circuits have found that when “.com” is added to a generic TLD, the mark may be protectable upon a sufficient showing of the public’s understanding through consumer surveys or other evidence. See, e.g., Advertise.com, Inc., 616 F.3d at 982; In re Hotels.com, 573 F.3d at 1304–05. We similarly decline to do so here. 

(…) This approach comports with that taken by our sister circuits, who have similarly declined to adopt a per se rule against protecting domain names, even where they are formed by combining generic terms with TLDs. See, e.g., Advertise.com Inc., 616 F.3d at 978–79; In re Steelbuilding.com, 415 F.3d 1293, 1299 (Fed. Cir. 2005). These courts have left open the possibility that in “rare circumstances” a TLD may render a term sufficiently distinctive to be protected as a trademark. See In re Steelbuilding.com, 415 F.3d at 1299. 

(…) Tellingly, even where courts have found that the individual components of a domain name mark are independently generic, and that when added together the resulting composite merely describes the genus of the service provided, courts still considered other evidence such as consumer surveys in determining whether the mark was generic. For instance, in determining whether ADVERTISING.COM was generic, the Ninth Circuit explained that even though both “advertising” and “.com” were generic, and that ADVERTISING.COM conveyed only the genus of the services offered, it was possible “that consumer surveys or other evidence might ultimately demonstrate that the mark is valid and protectable.” Advertise.com, Inc., 616 F.3d at 982; see In re Hotels.com, 573 F.3d at 1304–05 (considering a consumer survey regarding the public’s understanding of HOTELS.COM even though it determined that “hotels” and “.com” were independently generic and that the combination did not produce new meaning).

(…) As the district court noted, WORKOUT.COM, ENTERTAINMENT.COM, and WEATHER.COM are registered marks that have not precluded domain names such as MIRACLEWORKOUT.COM, WWW.GOLIVE-ENTERTAINMENT.COM, and CAMPERSWEATHER.COM. Booking.com B.V., 278 F. Supp. 3d at 911 & n.6 (taking judicial notice of such marks in the public record). 

Secondary sources: J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition, § 12:12 (5th ed. 2018).

(U.S. Court of Appeals for the Forth Circuit, BOOKING.COM B.V. v. USPTO, February 4, 2019, Docket No. 17-2458 and 17-2459, Circuit Judge Duncan, Published Opinion)

Tuesday, January 29, 2019

Supreme Court of the State of Idaho, Scout LLC v. Truck Insurance Exchange, Docket No. 45349

Insurance Law
Advertising Injury
Trademark Infringement
Prior Publication Exclusion
Fresh Wrongs
Facebook Post
Duty to Defend
Duty to Indemnify
Idaho Law
California Law (for a “Fresh Wrong” Example)
Business Name, State Registration

This case stems from Truck Insurance’s refusal to defend its insured, Scout, LLC, in a trademark infringement action brought over Scout’s use of the trademark ROGUE in the advertisement of its restaurant, Gone Rogue Pub. Scout claims that its use of ROGUE constituted an advertising injury that was covered by the insurance it purchased from Truck Insurance. Truck Insurance does not dispute that ordinarily Scout’s advertising injury would be covered and it would accordingly have a duty to defend, but contends that in this situation coverage was properly declined based on a prior publication exclusion found in the policy. The district court granted summary judgment to Truck Insurance after determining that a Facebook post of Scout’s Gone Rogue Pub logo before insurance coverage began triggered the prior publication exclusion, thereby relieving Truck Insurance of the duty to defend Scout. Scout appeals the district court’s decision granting Truck Insurance summary judgment. We affirm the judgment of the district court.

(…) On October 10, Scout posted a public picture of the Gone Rogue logo on Facebook, accompanied by the words, “Here is our new logo! Signs are going up today and tomorrow! Hope everyone likes it! Let us know what you guys think!” In the same month, Scout registered Gone Rogue Pub as an assumed business name with the Idaho Secretary of State.
(…) All was well with Gone Rogue Pub until the Oregon Brewing Company (OBC) noticed Gone Rogue’s similarity to its federally registered ROGUE trademarks.
(…) OBC asserted six different claims against Scout: (1) trademark counterfeiting under the Lanham Act; (2) trademark infringement; (3) unfair competition and false designation of origin under the Lanham Act; (4) cybersquatting under the Lanham Act; (5) unfair business practices under Idaho law; and, (5) common law trademark infringement (…) OBC sought injunctive relief, attorney fees and costs, and treble damages.
(…) A suit was thereafter brought by Scout against Truck Insurance alleging breach of contract, breach of the covenant of good faith and fair dealing, and bad faith failure to defend.
(…) “The duty to defend and duty to indemnify are separate, independent duties.” Deluna v. State Farm Fire and Cas. Co., 149 Idaho 81, 85, 233 P.3d 12, 16 (2008). The duty of an insurer to defend its insured is much broader than its duty to indemnify and “arises upon the filing of a complaint whose allegations, in whole or in part, read broadly, reveal a potential for liability that would be covered by the insured’s policy.” Hoyle v. Utica Mut. Ins. Co., 137 Idaho 367, 371– 72, 48 P.3d 1256, 1260–61 (2002). “Where there is doubt as to whether a theory of recovery within the policy coverage has been pled in the underlying complaint, the insurer must defend regardless of possible defenses arising under the policy or potential defenses arising under substantive law governing the claim against the insured.” Construction Mgmt. Sys., Inc. v. Assurance Co. of America, 135 Idaho 680, 682–83, 23 P.3d 142, 144–45 (2001). So long as there exists a genuine dispute over facts bearing on coverage under the policy or over the application of the policy’s language to the facts, the insurer has a duty to defend. Id. at 683, 23 P.3d at 145.
(…) In this case, Scout published a Gone Rogue logo on its Facebook page a month before purchasing business liability coverage. The screenshot, found in the exhibits of the OBC complaint, features the Facebook page “Gone Rogue Pub.” However, Scout claims that the page was entitled Casa del Sol until it was changed to Gone Rogue Pub after purchasing liability insurance. The logo in the October-posting only features the words GONE ROGUE, and does not contain the additional word PUB as all Scout’s other logos feature after purchasing insurance. The posting is accompanied by Scout stating that it is “our new logo,” and a user comment states, “all you need is your very own ‘Gone Rogue’ house brew.”
(…) Various courts have held that post-coverage advertisements that are sufficiently distinct from pre-coverage advertisements constitute “fresh wrongs” that trigger an insurer’s duty to defend, regardless of other advertisements excluded under a prior publication exclusion. An example of an application of the fresh wrong approach is found in Street Surfing, LLC, v. Great American E & S Ins. Co.. 776 F.3d 603 (9th Cir. 2014) (applying California law). The company Street Surfing began selling skateboards using its company name in violation of the owner’s registered trademark “Streetsurfer.” Id. at 605–06. After obtaining a business liability policy, Street Surfing began also selling skateboard accessories with its company name. Id. After the inevitable trademark infringement action was brought, Street Surfer’s insurer refused to defend the suit because of a prior publication exclusion found in its policy. Id. at 606–07. Street Surfer sued its insurer, arguing that even if the initial infringement actions were excluded under the prior publication exclusion, the trademark infringement allegations arising from the sale of skateboard accessories were fresh wrongs that triggered the insurer’s duty to defend. Id. at 612. The court held that the difference in products was not material in determining a fresh wrong (i.e., skateboards v. skateboard accessories), “because the alleged wrong arose out of each term’s similarity” to the advertising idea. Id. at 614. Therefore, to assess substantial similarity, courts should not consider all differences between pre- and post-coverage publications, but should instead focus on the relationship between the alleged wrongful acts manifested by the publications. Id. at 613–14.
(…) We repeat that the duty to defend is determined by what is charged in the complaint. The marketer’s complaint charges the misappropriation of the subordinate ideas as separate torts, and those torts occurred during the period covered by the insurer’s policy. Fresh wrongs were found in the Taco Bell case because of allegations present in the complaint alleging the taking of additional material from the marketer and using it in commercials after the insurer’s policy was in effect. Thus, allegations found within the four corners of a complaint alleging new injuries independent of prior injuries will trigger an insurer’s duty to defend, regardless of other allegations in a complaint being excluded under a prior publication exclusion.
(…) The third factor, whether a common theme is present, demonstrates the absence of fresh wrongs. It is true that Scout was not alleged to yet be violating the ROGUE trademark in connection with glassware or clothing when it posted its October Facebook logo, but it was the use of the ROGUE mark that was alleged to be the common infringement across all products. Much like in Street Surfer, where placing a mark on different products post-coverage did not produce fresh wrongs, Scout placing the ROGUE mark on other products or on its Facebook page does not make the post-coverage wrongs “fresh.” Advertising a logo featuring the word ROGUE in connection with a restaurant about to open and thereafter placing an almost identical logo featuring the word ROGUE on glassware, clothing, beer and ale, and Facebook creates substantially similar wrongs. Thus, the OBC complaint did not allege any fresh wrongs that triggered Truck Insurance’s duty to defend.

Secondary authorities: COUCH ON INS. § 101:52 (3rd ed. 2018).

(Supreme Court of the State of Idaho, January 29, 2019, Scout LLC v. Truck Insurance Exchange, Docket No. 45349, Justice Brody)

Friday, January 25, 2019

U.S. Court of Appeals for the Sixth Circuit, Dimond Rigging Company, LLC v. BDP International, Inc.; Logitrans International, LLC, Docket No. 18-3615, Boggs, Circuit Judge, recommended for full-text publication

Maritime Law
Maritime Contract
Bill of Lading
Carriage of Goods by Sea Act
Contract of Carriage
Ship’s Manager
Freight Forwarder
Himalaya Clause
Statute of Limitations
Licensing Requirements
FMC Regulations
Non-Vessel Operating Common Carrier (“NVOCC”)
Lloyd’s List
J. Mar. L. & Com.

(…) Dimond hired BDP to ship the Equipment. Dimond asserted that BDP did not disclose that it was not a licensed Ocean Transport Intermediary (“OTI”) by the Federal Maritime Commission.

(…) Dimond asserted that BDP had “without Dimond’s knowledge, consent or approval” hired Logitrans to “perform some, or all of BDP’s freight forwarding duties including locating/booking or providing a ship; acting in the capacity as the NVOCC carrier for the shipment . . . and negotiating loading services . . . .” Dimond alleged that BDP misrepresented that Logitrans was a Non-Vessel Operating Common Carrier (“NVOCC”).

(…) A non-vessel operating common carrier “consolidates cargo from numerous shippers into larger groups for shipment by an ocean carrier.” Prima U.S. Inc. v. Panalpina, Inc., 223 F.3d 126, 129 (2d Cir. 2000). The NVOCC, rather than the ship that transports the cargo, “issues a bill of lading to each shipper.”

(…) The following terms in the Bill of Lading are of particular relevance.
(a)In case the Contract evidenced by this Bill of Lading is subject to the Carriage of Goods by Sea Act of the United States of America, 1936 (“U.S. COGSA”), then the provisions stated in said Act shall govern before loading and after discharge and throughout the entire time the cargo is in the Carrier’s custody and in which event freight shall be payable on the cargo coming into the Carrier’s custody.
The Bill of Lading also contained a “Himalaya Clause.”

(a) It is hereby expressly agreed that no servant or agent of the Carrier (which for the purpose of this Clause includes every independent contractor from time to time employed by the Carrier) shall in any circumstances whatsoever be under any liability whatsoever to the Merchant under this contract of carriage for any loss, damage or delay of whatsoever kind arising or resulting directly or indirectly from any act, neglect or default on his part while acting in the course of or in connection with his employment.

(…) A bill of lading is a contract for the transportation of goods. It “records that a carrier has received goods from the party that wishes to ship them, states the terms of carriage, and serves as evidence of the contract for carriage.” Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14, 18–19 (2004).

(…) A “Himalaya Clause” is a clause that imposes liability limitations. See Kirby, 543 U.S. at 20 & n.2. The name originates from an English case, Adler v. Dickinson (The Himalaya), [1955] 1 Q.B. 158, [1954] 2 Lloyd’s List L. Rep. 267, in which personal-injury claims were brought against the master and boatswain of the Himalaya. The Himalaya’s owners had included “customary exculpatory clauses” protecting them from liability for negligent injury to passengers. See Joseph C. Sweeney, Crossing the Himalayas: Exculpatory Clauses in Global Transport. Norfolk Southern Railway Co. v. James N. Kirby, Pty Ltd., 125 S. Ct. 385, 2004 AMC 2705 (2004), 36 J. Mar. L. & Com. 155, 161 (2005).

(…) The district court granted the Motions to Dismiss. It explained that, because bills of lading are “maritime contracts, governed by federal maritime law,” COGSA governed Dimond’s claims. Dimond Rigging, 320 F. Supp. 3d at 952–53. Because COGSA has a one-year statute of limitations for cargo claims in contract or tort that begins to run after the goods have been delivered, or on the date the goods should have been delivered, the district court concluded that Dimond should have filed its claims in May 2013, one year after the goods were released to Dimond’s customer. Because it did not, the district court concluded that Dimond’s claims were outside the statute of limitations. Id. at 953.

(…) The district court also rejected Dimond’s arguments that BDP and Logitrans should be estopped from benefiting from COGSA’s one-year statute of limitations because they allegedly did not comply with certain licensing requirements. The district court explained that, because COGSA does not include licensure requirements, Dimond failed to sufficiently allege that BDP and Logitrans were in violation of COGSA. Id. at 953–54.

(…) The primary issues in this case are whether COGSA controls, and whether BDP and Logitrans are “carriers” within the meaning of COGSA. If so, then Dimond should have filed its claim within one year after delivery, or the date when the goods should have been delivered. See 46 U.S.C. § 30701 (Notes § 3(6)) (…) Dimond argues that this is not a maritime dispute, but instead is about “breaches of contractual agreements, breaches of fiduciary duties, and outright fraud,” which do not create maritime jurisdiction. In determining whether this is a maritime dispute, the “answer ‘depends upon . . . the nature and character of the contract’ and the true criterion is whether it has ‘reference to maritime service or maritime transactions.’” Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14, 24 (2004) (quoting North Pac. S.S. Co. v. Hall Bros. Marine Ry. & Shipbuilding Co., 249 U.S. 119, 125 (1919)). This case arises from a contract to transport used manufacturing equipment by sea from the United States to China. It is plainly a maritime transaction (…) Dimond’s argument is without basis. “When a contract is a maritime one, and the dispute is not inherently local, federal law controls the contract interpretation.”

(…) Dimond argues that it “was not a party to the contract of carriage with the ship/carrier directly, or via any authorized agent . . . .” The district court rejected this argument because Dimond is listed as a party on the bill of lading. Dimond Rigging Co., LLC v. BDP Int’l, Inc., 320 F. Supp. 3d 947, 952 n.1 (N.D. Ohio 2018). Dimond signed the Bill of Lading. We agree with the district court.

(…) COGSA applies “to all contracts for carriage of goods by sea to or from ports of the United States in foreign trade.” 46 U.S.C. § 30701 (Notes § 13); see Fortis Corp. Ins., S.A. v. Viken Ship Mgmt. AS, 597 F.3d 784, 787 (6th Cir. 2010). “Every bill of lading or similar document of title which is evidence of a contract for the carriage of goods by sea from ports of the United States, in foreign trade, shall contain a statement that it shall have effect subject to the provisions of this Act.” 46 U.S.C. § 30701 (Notes § 13).

(…) Even if Dimond were to have made arrangements with BDP to cover the overland transportation, we observe that in Kirby, 543 U.S. at 27, the Supreme Court resolved the question of how federal courts must determine whether a contract for maritime and land transport is a maritime contract. The Court explained that “so long as a bill of lading requires substantial carriage of goods by sea, its purpose is to effectuate maritime commerce—and thus it is a maritime contract.” Ibid. Even if it provides for some overland transport, it is still a maritime contract as long as the case is not inherently local. Ibid. The Bill of Lading requires transport from the port of Cleveland to Xingang. It does not refer to any other ground transportation. We have already concluded that, contrary to Dimond’s assertions, this is obviously a maritime dispute.

(…) COGSA permits the use of Himalaya Clauses to limit parties’ liability. Ibid. But merely because a Bill of Lading contains a Himalaya Clause does not mean that the Clause covers every entity or individual involved in a transaction (p. 10).

(…) We first consider whether Logitrans and BDP are carriers within the meaning of COGSA. See Sabah Shipyard v. M/V Harbel Tapper, 178 F.3d 400, 404 (5th Cir. 1999) (explaining that COGSA liability limits only apply to carriers); Shonac Corp. v. Maersk, Inc., 159 F. Supp. 2d 1020, 1025 (S.D. Ohio 2001) (discussing carriers). A “carrier” under COGSA means “the owner, manager, charterer, agent, or master of a vessel.” 46 U.S.C. § 30701; see also id. (Notes § 1(a)) (“The term ‘carrier’ includes the owner or the charterer who enters into a contract of carriage with a shipper.”). “COGSA provides that ‘carriers’ are subject to certain statutory ‘responsibilities and liabilities,’ and in turn they are provided with certain ‘rights and immunities,’ such as a one-year statute of limitations . . . .” Fortis Corp., 597 F.3d at 787. An NVOCC, consolidates cargo from various shippers and issues a bill of lading. Prima U.S. Inc. v. Panalpina, Inc., 223 F.3d 126, 129 (2d Cir. 2000) (explaining that NVOCCs are carriers under COGSA). A freight forwarder “facilitates the movement of cargo to the ocean vessel.” Ibid. “Freight forwarders generally make arrangements for the movement of cargo at the request of clients . . . . a freight forwarder does not issue a bill of lading, and is therefore not liable to a shipper for anything that occurs to the goods being shipped.” Ibid. (citing United States v. Am. Union Trans., 327 U.S. 437, 442–43 (1946)).

(…) In Fortis Corp., 597 F.3d at 789, we considered whether a ship’s manager was a carrier under COGSA. We focused on the plain language of COGSA in concluding that the manager was not a carrier. Id. at 789–92. See also Shonac Corp., 159 F. Supp. 2d at 1026 (discussing the “plain language” approach for assessing whether a party is a carrier). Under this approach, a court considers whether a party satisfies the statutory definition. See Sabah Shipyard, 178 F.3d at 405. This is an assessment of function, rather than form. Prima U.S. Inc., 223 F.3d at 130 n.1 (explaining that a party calling itself a freight forwarder that performed carrier functions would be a carrier). The key inquiry is what the party did. If it issued a bill of lading, then it is usually a “carrier” under COGSA. See id. at 129; Sabah Shipyard, 178 F.3d at 405; Shonac Corp., 159 F. Supp. 2d at 1026. It is not dispositive that the party hired a third party to actually carry the goods. See Sabah Shipyard, 178 F.3d at 405; Shonac Corp., 159 F. Supp. 2d at 1026.

(…) Sabah Shipyard is illustrative in resolving whether BDP and Logitrans are “carriers” under COGSA. In that case, Sabah had to ship some equipment to Malaysia. 178 F.3d at 403. IMB won the bid to transport the equipment. IMB’s agent, Intermarine, issued a bill of lading. After some of the equipment slid into the Singapore harbor, Sabah filed suit seeking damages under COGSA. The district court found that the defendants were liable for negligence but did not apply a COGSA limit on liability because it held that IMB and Intermarine were forwarders, not carriers. Ibid. The Fifth Circuit concluded that the district court erred when it determined that IMB and Intermarine were not carriers within the meaning of COGSA. Id. at 406. The Fifth Circuit explained that “to determine whether a party is a COGSA carrier, we have followed COGSA’s plain language, focusing on whether the party entered into a contract of carriage with a shipper.” Id. at 405. Because IMB and Intermarine entered into a contract of carriage—namely, they “agreed to carry Sabah’s goods by sea, and they issued a bill of lading,” they were carriers. Ibid.

BDP entered into a contract of carriage with Dimond because it took on the responsibility of transporting the Equipment by sea. BDP issued the Bill of Lading. Dimond Rigging, 320 F. Supp. 3d at 949. BDP is a carrier. See Sabah Shipyard, 178 F.3d at 405; Bunge Edible Oil Corp. v. M/Vs Torm Rask & Fort Steele, 949 F.2d 786, 788–89 (5th Cir. 1992) (explaining that charterer of vessel who enters into contract of carriage with shipper is a carrier); Nitram, Inc. v. Cretan Life, 599 F.2d 1359, 1370 (5th Cir. 1979) (concluding that party that entered into a contract of carriage covered by a bill of lading is a carrier within COGSA’s definition). Logitrans also entered into a contract of carriage with Dimond. It signed the Bill of Lading and is identified as the “carrier.” Accordingly, Logitrans is also a carrier. See Bunge Edible Oil Corp., 949 F.2d at 788; Nitram, Inc., 599 F.2d at 1370. Because we conclude that BDP and Logitrans are “carriers” within the meaning of COGSA, there is no need to address the Himalaya Clause.

(…) The district court ruled that there was no basis to apply equitable estoppel because COGSA does not include licensure provisions. Dimond Rigging, 320 F. Supp. 3d at 953–54. To be sure, COGSA does not supersede rights and obligations set forth in other federal statutes. See 46 U.S.C. § 30701 (Notes §§ 8, 12). COGSA establishes “particularized duties and obligations upon, and grants stated immunities” to carriers. Robert C. Herd & Co. v. Krawill Mach. Corp., 359 U.S. 297, 301 (1959). We explained in Fortis Corp., 597 F.3d at 789, that COGSA “was drafted to address the belief that carriers used their superior bargaining power against shippers when contracting for the carriage of goods, and could often dictate the terms of bills of lading to exempt themselves from any liability.” Nonetheless, the district court was quite correct that COGSA does not concern itself with licensing.

(…) FMC regulations concerning licensing, particularly 46 C.F.R. § 515.3, which provides: “Except as otherwise provided in this part, no person in the United States may act as an ocean transport intermediary unless that person holds a valid license issued by the Commission.”

(…) Hague-Visby refers to the 1924 International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading, which was subsequently modified by the Hague-Visby Amendments of 1968. See Royal Ins. Co. of Am. v. Orient Overseas Container Line Ltd., 525 F.3d 409, 413 (6th Cir. 2008).

(U.S. Court of Appeals for the Sixth Circuit, January 25, 2019, Dimond Rigging Company, LLC v. BDP International, Inc.; Logitrans International, LLC, Docket No. 18-3615, Boggs, Circuit Judge, recommended for full-text publication)

Tuesday, January 22, 2019

Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., Docket No. 17-1229

License Agreement
Supply and Purchase Agreement
Form 8–K Filing with the Securities and Exchange Com­mission
Prior Art

AIA bars a person from receiving a patent on an invention that was in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.
The sale of an invention to a third party who is contractually obligated to keep the invention confidential places the invention “on sale” within the meaning of §102(a).

We granted certiorari to determine whether, under the AIA, an inventor’s sale of an invention to a third party who is obligated to keep the invention confidential quali­fies as prior art for purposes of determining the patentability of the invention. 585 U. S. ___ (2018). We conclude that such a sale can qualify as prior art.

The Leahy-Smith America Invents Act (AIA) bars a person from receiving a patent on an invention that was “in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.” 35 U. S. C. §102(a)(1). This case requires us to decide whether the sale of an invention to a third party who is contractually obligated to keep the invention confidential places the invention “on sale” within the meaning of §102(a).
(…) Accordingly, a commercial sale to a third party who is required to keep the invention confidential may place the invention “on sale” under the AIA.
Petitioner Helsinn Healthcare S. A. (Helsinn) is a Swiss pharmaceutical company that makes Aloxi, a drug that treats chemotherapy-induced nausea and vomiting. Hel­sinn acquired the right to develop palonosetron, the active ingredient in Aloxi, in 1998 (…)
In September 2000, Helsinn announced that it was beginning Phase III clinical trials and was seeking marketing partners for its palonosetron product.
Helsinn found its marketing partner in MGI Pharma, Inc. (MGI), a Minnesota pharmaceutical company that markets and distributes drugs in the United States. Helsinn and MGI entered into two agreements: a license agreement and a supply and purchase agreement. The license agreement granted MGI the right to distribute, promote, market, and sell the 0.25 mg and 0.75 mg doses of palonosetron in the United States. In return, MGI agreed to make upfront payments to Helsinn and to pay future royalties on distribution of those doses. Under the supply and purchase agreement, MGI agreed to purchase exclusively from Helsinn any palonosetron product ap­proved by the FDA. Helsinn in turn agreed to supply MGI however much of the approved doses it required. Both agreements included dosage information and required MGI to keep confidential any proprietary information received under the agreements.
Helsinn and MGI announced the agreements in a joint press release, and MGI also reported the agreements in its Form 8–K filing with the Securities and Exchange Com­mission. Although the 8–K filing included redacted copies of the agreements, neither the 8–K filing nor the press releases disclosed the specific dosage formulations covered by the agreements.
Helsinn filed its fourth patent application—the one relevant here—in May 2013, and it issued as U. S. Patent No. 8,598,219 (‘219 patent). The ’219 patent covers a fixed dose of 0.25 mg of palonosetron in a 5 ml solution. By virtue of its effective date, the ’219 patent is governed by the AIA. See §101(i).
(…) In 2011, Teva sought approval from the FDA to market a generic 0.25 mg palonosetron prod­uct. Helsinn then sued Teva for infringing its patents, including the ’219 patent. In defense, Teva asserted that the ’219 patent was invalid because the 0.25 mg dose was “on sale” more than one year before Helsinn filed the provisional patent application covering that dose in Janu­ary 2003.

(U.S. Supreme Court, Jan. 22, 2019, Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., Docket No. 17-1229, J. Thomas, unanimous)

Tuesday, January 15, 2019

New Prime Inc. v. Oliveira, Docket 17-340

Employment Agreements
Labor Law
Contract of employment - Definition
Transportation Workers (Seamen, Railroad Employees, or any other Class of Work­ers Engaged in Foreign or Interstate Commerce)

The Federal Arbitration Act requires courts to enforce private arbitration agreements. But like most laws, this one bears its qualifications. Among other things, §1 says that “nothing herein” may be used to compel arbitration in dis­putes involving the “contracts of employment” of certain transportation workers. 9 U. S. C. §1.

A court should determine whether a §1 exclusion applies before ordering arbitration. A court’s authority to compel arbitration under the Act does not extend to all private contracts, no matter how em­phatically they may express a preference for arbitration. Instead, an­tecedent statutory provisions limit the scope of a court’s §§3 and 4 powers to stay litigation and compel arbitration “according to the terms” of the parties’ agreement. Section 2 provides that the Act ap­plies only when the agreement is set forth as “a written provision in any maritime transaction or a contract evidencing a transaction in­volving commerce.” And §1 helps define §2’s terms, warning, as rele­vant here, that “nothing” in the Act “shall apply” to “contracts of em­ployment of seamen, railroad employees, or any other class of work­ers engaged in foreign or interstate commerce.” For a court to invoke its statutory authority under §§3 and 4, it must first know if the par­ties’ agreement is excluded from the Act’s coverage by the terms of §§1 and 2. This sequencing is significant.

Petitioner New Prime Inc. is an interstate trucking company, and re­spondent Dominic Oliveira is one of its drivers. Mr. Oliveira works under an operating agreement that calls him an independent con­tractor and contains a mandatory arbitration provision.

Because the Act’s term “contract of employment” refers to any agreement to perform work, Mr. Oliveira’s agreement with New Prime falls within §1’s exception.

At the time of the Act’s adoption in 1925, the phrase “contract of employment” was not a term of art, and dictionaries tended to treat “employment” more or less as a synonym for “work.” Contemporaneous legal authorities provide no evidence that a “contract of employment” necessarily sig­naled a formal employer-employee relationship. Evidence that Con­gress used the term “contracts of employment” broadly can be found in its choice of the neighboring term “workers,” a term that easily embraces independent contractors.

Secondary authorities: N. Singer & J. Singer, Suth­erland on Statutes and Statutory Construction §56A:3 (rev. 7th ed. 2012).

(U.S. Supreme Court, Jan. 15, 2019, New Prime Inc. v. Oliveira, Docket 17-340, J. Gorsuch)