E-Discovery: Employer Not Subject to Discovery Sanction for Failure to Produce Documents in "Native Format"

Posted on August 26, 2010 by David Freedman

 In 2006, the Federal Rules of Civil Procedure were amended to provide specific rules about the discovery of electronically stored information (“ESI”). Among other things, the amendments established rules governing the ESI production format. Discovery in employment discrimination cases frequently becomes bogged down in disputes over whether, and how, ESI will be produced. Attorneys representing employees often seek production of documents in “native format”—i.e. the electronic format in which the document was created. Native format production permits access to a file’s “metadata,” which can sometimes show changes made to a document or file. Employees’ attorneys believe that metadata will reveal “smoking gun” evidence of discriminatory intent. In contrast, employers—even those with nothing to hide—avoid native format production because of the associated expense and hassle. 

In Chapman v. General Board of Pension & Health Benefits of United Methodist Church, a magistrate judge from the U.S. District Court for the Northern District of Illinois explained under what circumstances a party must produce ESI in native format. In that case, Chapman sued her employer when her job was eliminated, claiming disability discrimination under the Americans with Disabilities Act. At the litigation’s outset, Chapman served the employer with discovery requests, but the requests did not indicate in what form responsive documents should be produced. The employer provided responsive documents in paper form, and Chapman did not initially object. 

Chapman, however, hired new counsel, who demanded re-production all of the previously-produced paper records, this time in native electronic format. Although the employer ended up re-producing almost all relevant documents, Chapman took issue with the time and negotiations required. Chapman’s attorneys filed a motion for sanctions accusing the employer of “gamesmanship, bad faith, and sharp practices,” mainly because of the initial refusal to re-produce all previously-produced documents. 

United States Magistrate Judge Jeffrey Cole, however, denied that motion, holding that parties seeking native format production must explicitly demand that in their discovery requests. Because Chapman did not originally demand native format production (or even object to the paper production), she waived her right to native format production. According to Judge Cole, that the employer ultimately agreed to re-produce some documents in native format, even though it was not obligated to, “is the occasion not for sanctions but for some measure of commendation.”

As the Chapman case demonstrates, if a party wants access to native format documents, it must specify as much in its discovery requests. Otherwise, the responding party is under no obligation to produce documents in native format and will not be subject to sanctions for refusing to provide a second, native-format production.   

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Intellectual Property and Economic Policy: Part IV

Posted on August 25, 2010 by Joseph Falcon

 

Agreements Controlling Intellectual Property Rights

Once a business identifies that it has acquired intellectual property, business policies and conduct can make certain that ownership is retained. Executing employee contracts and policies (i.e. employee handbooks) may require that the employee assign his right to the intellectual property back to the business, or in certain cases that the employee keep any proprietary information confidential and and/or  disclose all creative ideas made during employment.

Some businesses fail to educate their employees about intellectual property. Even worse, some do not even establish contractual relationships with their employees or even inform them on company policies affecting the same. Ownership questions occur, and employees may even be able to assert ownership of the intellect property. Though the business may have a shop right, it is better to avert a situation of uncertain ownership. Even with contacts in place, a business should establish and explain its intellectual property policies to its employees.

1. Assignment Provision

For patents, an inventor owns all rights to an invention. However, if the inventor is an employee, an employer may lay claim to the invention under certain circumstances. For instance, if an employee is hired to invent and the employer can demonstrate that this was clearly spelled out for the employee, the employer will be deemed the owner of any invention within the scope of the employee’s employment. The mere existence of an employer-employee relationship does not of itself entitle the employer to an assignment of any inventions which the employee devises during the employment. The employee may not have to assign rights over to the business, but rather control the right under self-ownership. Therefore, it is important that any business provide an employment handbooks and/or agreements with assignment provisions, in order to avert unintentional ownership issues.

2. Nondisclosure Agreements

A nondisclosure agreement is a contract in which the contractual parties promise to protect the confidentiality of secret information or company know-how that is disclosed. This type of agreement may be made between two parties during a business transaction, or between an employer and employee. These agreements can be mutual agreements (two-way), where both parties are obligated to maintain secrecy (i.e business negotiations), or they can be unilateral agreements (one-way), where only the receiving party becomes obligated to maintain secrecy (i.e. employee contract). A nondisclosure agreement can be used to protect any type of information that is not generally known, and probably one of the best ways to maintain proprietary, confidential information.

3. Non-compete Agreements

Non-compete agreements can protect a business from losing valuable trade secrets and employees who develop intellectual property. The agreements act as a written promise by an employee not to compete with the employer, or take employment to a competing business. AA non-compete agreement is either a separate agreement or clause in an employment contract, and applies to confidential information related to the business of the employer.

Although non-compete agreement can sometimes be difficult to enforce, since they may be viewed as restraining an individual’s right to employment, a properly structured agreement that imposes reasonable time and geographic restrictions, averts the possibility of losing confidential information. 

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Intellectual Property and Economic Policy: Part III

Posted on August 18, 2010 by Joseph Falcon

 

Intellectual Property is Still Property

Intellectual property, like real property, can be bought, sold, licensed, exchanged, or given away like other forms of property.   Proficient management of intellectual property rights becomes profitable if strategic techniques are utilized. The owner of intellectual property rights has the right to prevent the unauthorized use or sale of that property. As a result, it may strategic to assign or license these rights to exploit business profits.

There are essentially two ways to convey intellectual property rights: through assignment or license.  In relation to real property, assignments and licenses are the functional equivalent of a "sale" and "lease", respectively. 

Assignments

Law allows a transfer or sale of intellectual property rights, which may be partial or entire interests in the intellectual property.  An assignment of a patent, for example, is a transfer of sufficient rights so that the recipient has title to the patent. The assignee, when the rights are assigned to him or her, becomes the owner of the rights and has the same rights that the original owner. A business may never want to use a certain intellectual property rights (i.e. uncommon marketplace, little capital). However, that business may strategically exploit the intellectual property right through an assignment. Once the business transfers the rights to a third party, all rights are then reserved with the third party and exhausted within the assignor. 

Licensing

A license is written authorization to use owned intellectual property rights. Typically, a business will make arrangements to license its intellectual property rights, authorizing a third party to use those rights in exchange for valuable consideration. However, unlike assignments, the owner retains the ownership of those rights, and can contract for a running rate of payments.

The license allows another to use an intellectual property right within a defined time, context, market line, or territory. A license may be exclusive or non-exclusive, and run longer or shorter than the duration of the intellectual property protection, prescribed by law. 

Licensing provides a means for an owner of intellectual property to exploit markets which may not otherwise have been available.   As a contractual agreement, the terms of the agreement can be tailored to recoup part of the expenditure incurred during development while also tailored to maintain a running stream of revenue from future profits. Although there is always uncertainties in the marketplace, a license may have a larger upside than a single assignment of rights. 

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Intellectual Property and Economic Policy: Part II

Posted on August 10, 2010 by Joseph Falcon

 

Monitoring and Identifying Existing and New Intellectual Property

With respect to an economy, intellectual property rights create value in business products and/or services. Furthermore, intellectual property rights allow a business to distinguish their goods and services amongst competitors. An owner may exploit these rights and its value in the marketplace. For instance, a patent owner holds a significant advantage against competitors and a clear advantage in market utilization, since the patent owner can enforce patent rights against those competitors. As a result, any business should evaluate the potential value of their intellectual property, as a potential right to secure, and then enforce against others.

Ignorance or neglect of intellectual property rights can present inherent dangers to any business. For instance, a business may fail to take full advantage of those assets or fully appreciate the actions of their competitors. Unfortunately, many businesses often overlook the real potential of intellectual property. Even worse is the situation where a business fails to monitor and police rights that they already have. Even though the government gives intellectual property owners rights, it is up to the owner to police or enforce these rights. 

A business that is alert and aware of its intellectual property may generate many business opportunities, and in return that business may avoid expensive problems. Implementing an intellectual property protection policy would require the identification and protection of intellectual property rights that the business may already possess, which may include patents, trademarks, copyrights, trade secrets and trade dress. 

Logically, it is desirable to protect every particular piece of intellectual property that a business owns. However, that may not be economically feasible. Rather, a business should perform a cost-benefit analysis to determine whether securing and maintaining intellectual property protection is necessary. Even if a business does not have a marketplace for that intellectual property, secured rights can be sold or rented like real property. 

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Intellectual Property and Economic Policy: Part I

Posted on August 5, 2010 by Joseph Falcon

 

The laws protecting intellectual property rights are tools of economic policy. The United States intellectual property system is a crucial part of our country’s economic infrastructure, since these rights strengthen owner assets, while also advancing technology in common related fields of technology. For instance, an inventor receives an exclusive right to exclude others from making, using, offering or selling a patented invention, as long as the inventor teaches all aspects of his invention within the patent application. As a result, the U.S. patent system fosters innovation by utilizing a quid pro quo, where another inventor can take those teachings and further develop new technology.

Patent Reform

For the past several years, Congress has a revived interest in revising the patent system. This will not be the first change, nor will it be the last. Regardless, any sort of change should have an effect on businesses and industry in the United States, if not the world.

The most notable proposed change is a switch from a first-to-invent priority system to a first-to-file system.   This change would be in harmony with the most of the patent systems employed around the world. Although opponents assert that the change would bring a backlog of applications, proponents feel the change may stimulate technology at a faster pace. 

Other notable changes include, but are not limited to: (1) a failure to fulfill the best mode requirement would no longer be an invalidity defense nor could it serve as a basis for holding a patent unenforceable, (2) a requirement that a court "identify the methodologies and factors that are relevant to the determination of damages, and the court or jury, shall consider only those methodologies and factors relevant to making such determination", and (3) a statutory definition of "willful infringement" clearly affirming that "knowledge alone" is not sufficient for a finding of willful infringement (allowing a court to increase the damages up to three times the amount found or assessed).

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Court Holds that Employees Cannot Immediately Sue for Alleged Wrongful Denial of Stimulus Package's COBRA Premium Subsidy

Posted on May 11, 2010 by David Freedman

 

If you work in the field of human resources or employee benefits, you are doubtlessly familiar with the COBRA premium subsidy provisions of the American Recovery and Reinvestment Act of 2009 (ARRA), which provides a 65% reduction in COBRA premiums for employees involuntarily terminated from their jobs, or who have had their working hours substantially reduced, during the period from September 1, 2008 through May 31, 2010.  Employers are required to notify “assistance eligible employees” of their ARRA rights and, if they submit the required paperwork, reduce their COBRA premium by 65%, the cost of which the employer can recover through a tax credit.  The law also sets up an expedited process for employees to challenge denials of the premium subsidy by filing an appeal with the United States Secretary of Labor, who must issue a decision within 15 business days after receiving the appeal.  The employee can challenge the Secretary of Labor’s decision in court, but the Secretary’s decision is entitled to deference from the court.

On April 27, 2010, in a case of first impression, the United States District Court for the District of Columbia held that employees cannot short-circuit the appeal process by suing in court for denial of the COBRA premium subsidy.  In Dorsey v. Jacobson Holman, PLLC, Ms. Dorsey’s employment ended on September 16, 2007, at which time she elected to continue her health insurance coverage through COBRA.  On April 10, 2009, Ms. Dorsey requested that  Jacobson Holman provide the premium subsidy, claiming that she had been terminated.  Jacobson Holman refused, arguing that Ms. Dorsey she had voluntarily resigned.  Ms. Dorsey  followed up informally with a Department of Labor benefits advisor, but never filed an official appeal with the Secretary of Labor challenging the denial of her request for the COBRA premium subsidy.  Instead, she filed an action against Jacobson Holman in federal district court alleging violation of the ARRA’s COBRA subsidy provisions.

The court, however, dismissed the case, holding that Ms. Dorsey failed to properly exhaust her administrative remedies by filing an appeal with the Secretary of Labor.  The court described the ARRA as emergency legislation designed to get benefits into the hands of assistance eligible individuals quickly and noted that the required 15-day deadline for processing appeals furthered that goal.  On the other hand, “[i]t blunts that purpose to require – or allow – individuals to turn in the first instance to the courts.”    

For employers, this is good news.  They need not face the specter of frequent, and expensive, court challenges to decisions regarding whether separated employees are – or are not – eligible for the ARRA’s COBRA subsidy.  Rather, challenges to those decisions will usually get resolved through the Secretary of Labor’s relatively quick and cheap appeals process.    

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Jail Time for HIPAA "Curiosity" Violation

Posted on May 3, 2010 by Megan Browne

 

HIPAA leads to four months in jail for a former UCLA medical researcher, Huping Zhou.  See the April 27, 2010 press release by the U.S. Attorney’s Office for the Central District of California.  http://www.justice.gov/usao/cac/pressroom/pr2010/079.html.    As the release states, this case made history because the defendant “is the first person in the nation to be convicted and incarcerated for misdemeanor HIPAA offenses for merely accessing confidential records without a valid reason or authorization.”

 

We have seen a number of federal prosecutions and convictions for HIPAA violations, but, until last week, nobody got jail time for merely peeking at others’ confidential person health information without a valid reason or the patients’ authorization.  Also, prior prosecutions typically focused on someone’s use of another’s confidential health information for personal gain.  For example, the day after Mr. Zhou’s sentencing was announced, another U.S. Attorney’s Office announced that a federal grand jury indicted a man for violating HIPAA by conspiring with a hospital employee working in a trauma unit and others to sell patient records and confidential medical information to personal-injury attorneys who would use the information to solicit clients.   http://www.justice.gov/usao/nv/press/april2010/charette04282010.html.

 

Mr. Zhou’s situation is different.  Mr. Zhou, a licensed cardiothoracic surgeon in China, admitted that he accessed and read his direct supervisor’s and coworkers’ medical records without any legitimate reason or authorization.  He did that after he was told that he would lose his job for performance-based reasons unrelated to HIPAA.  Over the next several weeks and continuing beyond the termination of his employment, he kept peeking at records, including those for celebrities, and did some more than 300 times, according to court documents.

 

What is the lesson here?  Healthcare workers and others governed by HIPAA must control their curiosity.  HIPAA demands it and must be respected, at the risk of suffering serious ramifications.  Federal prosecutors have raised the stakes.  So did the HITECH Act of 2009, which was part of the American Recovery and Reinvestment Act of 2009 and amended HIPAA by increasing penalties, among other things.  Expect to see stepped-up enforcement efforts by federal prosecutors, state prosecutors, and the U.S. Department of Health and Human Services’s Office of Civil Rights.  Likewise, employers are increasing monitoring and enforcement in the workplace.  Make no mistake about it:  HIPAA does not demand entity accountability only.  HIPAA holds individuals accountable.

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E-Discovery in Employment Litigation: It's Not Just for Plantiffs Anymore

Posted on December 2, 2009 by David Freedman

In Seybert v. International Group, Inc., Jane Seybert filed suit in the United States District Court for the Eastern District of Pennsylvania claiming that her supervisor, Brett Marchand, subjected her to gender-based harassment. Seybert testified that during a work-sponsored dinner, attended by co-workers and other supervisors, Marchand stated loudly in reference to a chocolate fountain dessert, “I heard it’s really good if you go down deep, into the chocolate, with your berry,” which Seybert contended was a sexual metaphor.

As the matter proceeded to trial, International Group produced several emails that Seybert exchanged using her work email account during working hours. Many of these emails featured stories, jokes, cartoons and photographs employing sexual words, metaphors and double entendres. Seybert’s attorneys filed a motion to prevent International Group from using the emails at trial, citing a federal rule of evidence that limits the use of “sexual disposition” evidence.

The judge, however, rejected the argument, stating that “[b]y exchanging these emails with others during her . . . work hours, and using IGI computers, Mrs. Seybert may have been sanctioning the humor that the emails contained – a humor that may be found similar to the supposed humor underlying Mr. Marchand’s comment at the . . . dinner.” The court also noted that the emails did not comment directly on Seybert’s own sexual history or conduct, but mostly contained jokes and stories about generic topics or made-up characters, like Santa Claus.

The jury apparently found this evidence persuasive. On November 6, it entered judgment in favor of International Group.

Just like for plaintiffs, email evidence can sometimes provide important information for an employer defending an employment discrimination lawsuit. Employers can take advantage of some of these benefits—and limit some of the costs associated with E-Discovery in employment litigation—by adopting policies that require the long term retention of departing employees’ email accounts. Who knows? It might just be your “smoking gun” in the end.
 

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Attorneys Fees for Collecting Judgement Against Owner

Posted on November 19, 2009 by Jim Adams

Section 512 of the Contractors and Subcontractors Payment Act allows for an award of interest, penalties, and attorneys fees to a “substantially prevailing” party. When Owner did not pay him for construction work, Contractor sued Owner, won and obtained an award for the claim, plus interest, penalties and attorneys fees. Owner still didn’t pay. Contractor then filed execution proceedings and, eventually, did recover the amount of the award by attaching Owner’s bank accounts. Contractor then filed to also get interest and penalties from the time of the original award until Contractor eventually was paid, plus contractor’s attorneys fees incurred in the collection and execution process, as well as in the appeals to Superior Court. In a case of first impression, the Superior Court said, “Yup.” The trial court had denied the Contractor’s motion for interest, penalties and fees for the collection effort, but the Superior Court panel unanimously reversed. Zimmerman v. Harrisburg Fudd, PICS No. 09-1762 (Oct. 19, 2009).

The original amount owed by Owner was $10,108.70. After adding the first set of interest, penalties and attorneys fees, that number became $21,673.99. When the execution and appeals were considered, the total of the claim was almost four times the original debt – growing to $41,989.84. As explained by the Superior Court, the statute’s “underlying objective of making an unpaid contractor whole . . . can be gutted, when he is subjected to expensive litigation costs, including those incurred in the collection-of-fees phase.”
 

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Trademark: Retain your Right to Sue

Posted on November 19, 2009 by Joseph Falcon

Even if you are successful in federally registering your mark, misuse of your mark may result in losing your right to enforce the registration. The term misuse is relative and generally does not lead to a removal from the registry. Rather, your use may affect the ability to enforce rights granted by the registration.

The rights established from a federal registration can last indefinitely, as long as the owner continues active use of the mark on or in connection with the goods and/or services in the registration. Therefore, it is important that you actively use your registration.

Furthermore, when used, the trademark mark should be presented as an adjective. Any presentation of your trademark, as a noun or verb, should be avoided. In fact, use as a noun or verb is a common error that an owner uses the mark as a noun or a verb (i.e. correct use = “Drink YOUR MARK Cola”; incorrect use = “Drink YOUR MARK”). You should also avoid any presentation of the mark in plural or modified possessive form (i.e. incorrect use = “YOUR MARK’s Cola”).

A mark should be adequately distinguished in presentation, especially in regards to the surrounding text and symbols. For instance, your mark can be capitalized, underlined, italicized, placed in quotation marks, or even depicted in boldface type; each typography provides an emphasis on the mark, making it more distinguishable. Since trademarks are used to create distinct commercial impressions in regard to the offered goods and services, your trademark should be distinguishable.

Most importantly, your mark should be affixed to the goods and/or services for which the mark is registered. Meaning, if you received a registration of your mark in association with product X, then use of the mark with product Y is not protected under the registration. Rather, use of the mark with product Y only provides common law rights. It would be recommended to register the mark again, but now in association with a new class of goods and/or services. The mark can be placed on the parcel in which the goods are packaged. Tags or labels may be used as well, which are attached to the product, and provide greater identity of the mark.

It is important to know that certain actions must be taken to maintain your registration, especially if in any changes in use have occurred.
 

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