September 2015

The Mystery of the Preliminary Injunction’s Tiny Role in Patent Litigations in China and Some Newest Developments

Sen “Alex” Wang, MJLST Managing Editor

In an unpublished note completed early February this year, I compared the current standards of granting preliminary injunctions in patent litigations in the Chinese People’s courts and the US federal courts. The preliminary injunction, an equitable remedy that has long been available to patent litigants in the US, was not codified in the Chinese Patent Act until 2000 as part of China’s effort to fulfill its obligations after joining the WTO. Since then, China has been consciously strengthening the protection for intellectual property rights within its jurisdiction and has taken great pride in the progress it has made so far. In particular, the numbers of patent applications as well as litigations in China have skyrocketed in China, and the People’s courts have become more confident in handling high profile patent cases and issuing large damage awards. However, the preliminary injunction, even after its inception in the Chinese Patent Act, has only played a mysteriously tiny role in protecting the patentees’ rights during the years. For example, from 2003 to 2009, the People’s courts in Guangdong province, one of the biggest and most developed provinces in China, ruled respectively on 54, 19, 21, 20, 24, 5, and 11 preliminary injunction applications involving intellectual property rights (not just patents) while granting only 17, 6, 12, 8, 5, 2, and 1 of the applications in each corresponding year. By contrast, the number of intellectual property cases considered by the People’s courts in Guangdong during the same time frame was 1465, 3199, 4257, 3644, 3989, 5312, and 7152, respectively.

As a powerful and drastic remedy, the preliminary injunction exists to provide speedy relief from irreparable injury and is “generally granted under the theory that there is an urgent need for speedy action to protect the plaintiff’s rights.” Apple, Inc. v. Samsung Elecs. Co., 678 F.3d 1314, 1334 (Fed. Cir. 2012) (O’Malley, J., concurring-in-part, dissenting-in-part) (internal citation omitted). In the US, the Federal Circuit utilized, for a long time, a balancing—or so called “sliding scale”—test for issuing preliminary injunctions, where the movant must establish a right thereto in light of four factors: (1) a reasonable likelihood of success on the merits; (2) irreparable harm if an injunction is not granted; (3) the balance of hardships tipping in its favor; and (4) the impact of the injunction on the public interest., Inc. v., Inc., 239 F.3d 1343, 1350 (Fed. Cir. 2001) (citing Hybritech, Inc. v. Abbott Laboratories, 849 F.2d 1446, 1451 (Fed. Cir. 1988)). None of the factors, taken individually, is dispositive; rather, the court must “weigh and measure each factor against the other factors and against the form and magnitude of the relief requested.” Id. However, following the Supreme Court’s rulings in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006) and Winter v. NRDC, Inc., 555 U.S. 7 (2008), the Federal Circuit has given up its balancing test to comply with the more rigorous requirements set forth by the Supreme Court. Compare Abbott Labs. v. Sandoz, Inc., 544 F.3d 1341, 1365 (Fed. Cir. 2008), with Titan Tire Corp. v. Case New Holland, Inc., 566 F.3d 1372, 1375–76 (Fed. Cir. 2009). Currently, “a showing on one preliminary injunction factor does not warrant injunctive relief in light of a weak showing on other factors.” Wind Tower Trade Coal. v. United States, 741 F.3d 89, 100 (Fed. Cir. 2014).

Across the Pacific Ocean, the Chinese People’s courts, under a civil law system, rely heavily on statutes, regulations, and other promulgated rules. To comply with the requirements of the TRIPS Agreement, both Article 66 of the Chinese Patent Act and Article 100 of the Chinese Civil Procedure Act now recognize the preliminary injunction as a provisional remedy in patent litigations. While the acts passed by the People’s Congress form the statutory bases for issuing preliminary injunctions, in practice, the more detailed procedural as well as substantive requirements for obtaining such provisional remedy are actually found in in several judicial interpretations and judicial policy documents promulgated by the Supreme People’s Court (SPC). The foundational judicial interpretation in this regard is the Several Provisions of the Supreme People’s Court Concerning the Application of Law to Pre-trial Cessation of Patent Infringement (最高人民法院关于对诉前停止侵犯专利权行为适用法律问题的若干规定) [hereinafter Provisions on Pre-trial Cessation of Patent Infringement] (2001), the Article 11 of which requires the People’s courts to consider four factors when ruling on an application for a preliminary injunction, namely (1) whether the alleged current or imminent conduct infringes the patent; (2) whether the applicant will suffer irreparable harm without an injunction; (3) the guarantee provided by the applicant; and (4) whether the public interest will be disserved. Despite the SPC’s wording of the first factor, it has been treated as inquiring into the applicant’s likelihood of success on the merits. As to the second—irreparable harm—prong of the test, there had been a great amount of confusion among the lower courts until Cao Jianming, vice president of the SPC, pointed out in February 2008 that the core of the irreparable harm analysis is whether the damage can be compensated by monetary award and whether there is a reasonable expectation of collecting such award in light of the alleged infringer’s financial condition.

With the first two factors being the most important in the determination, the standard in China looks very similar to the one currently used in the federal courts in patent cases as the Rule 65 of Federal Rules of Civil Procedure also mandates the applicants to provide security. This similarity between the standards makes one even more curious about why preliminary injunctions have only been utilized at such a low rate in patent cases in China. The answer—also the problem of the current Chinese approach—lies in the restrictions buried in two judicial policy documents from the SPC. Although the four-factor test seems to be applicable to all patent cases, the SPC has confined the issuance of preliminary injunctions to cases where the facts are clear and the infringement is easy to determine. Opinions on Issues Concerning Maximizing the Role of Intellectual Property Trials in Boosting the Great Development and Great Prosperity of Socialist Culture and Promoting the Independent and Coordinated Development of Economy (关于充分发挥知识产权审判职能作用推动社会主义文化大发展大繁荣和促进经济自主协调发展若干问题的意见) [hereinafter Opinions on Maximizing the Role of Intellectual Property Trials], art. 16 (2011). In particular, when there is no literal infringement and the court has to conduct complicated technical comparisons, a preliminary injunction is deemed inappropriate. Opinions on Several Issues Concerning Intellectual Property Trials Serving the Overall Objective Under the Current Economic Situation (关于当前经济形势下知识产权审判服务大局若干问题的意见) [hereinafter Opinions Under the Current Economic Situation], art. 14 (2009). In addition, if the alleged infringer has challenged the validity of the patent(s) in question or has initiated a separate declaratory judgment action, the courts are required to be extremely cautious in granting preliminary injunctions. Id.

This “clear” and “easy” yet rigid approach seems to be contrary to the legislative intent of introducing such a provisional remedy in the first place and only makes sense to some extent when considered in a bigger context. On several different occasions and in various promulgated documents, the SPC has expressed some serious concern that preliminary injunctions or the process by which they are granted may be abused to impede competition, while adding to the concern is the present procedural setup of obtaining a preliminary injunction. In the People’s Courts, there is no similar remedy as a TRO but only a general preliminary injunction. It is general in the sense that the application can be filed before, at the same time with, or after the commencement of an infringement action, and once granted, the injunction will usually remain in force until the final adjudication on the merits take effect. Provisions on Pre-trial Cessation of Patent Infringement art. 14. Furthermore, a preliminary injunction issued before the filing of an infringement action will, so long as the applicant initiates the formal infringement suit within 15 days of getting the injunction, enjoin the alleged infringer all the way until the end of the infringement action. Id. Also, a preliminary injunction can be issued without notice to the enjoined party, although the courts have the obligation to notify the enjoined party no later than 5 days after the issuance of the injunction. Id. art. 9. Moreover, the People’s courts only have 48 hours (96 hours at most) to make a decision in writing after receiving eligible applications. Id. Additionally, though the People’s Courts are authorized to summon one or all parties to clarify factual issues, no hearing of any form is required. Id. One final point, the enjoined party has no right to appeal but may apply, within 10 days of receiving the injunction, for review once, though the injunction will not be suspended during the review period and there will still be no guaranteed hearing opportunity. Id. art. 10. Given the powerful nature of the remedy once granted, the tight time frame for making a decision in writing, and the limited hearing requirement, it is understandable that the fear of mistakes and misuses has prompted the SPC to take a cautious position.

Although the SPC’s current approach is to some extent understandable, it has comprised the preliminary injunctions’ function as an important provisional remedy for patent holders and has likely caused many patent holders to refrain from even considering this option as evidenced by the extremely low application rate in Guangdong. Fortunately, the SPC has finally noticed this alarming trend. On February 26, 2015, the SPC published for public comment a draft SPC Judicial Interpretation on Several Issues in Application of Law in Determination of Action Preservation in Intellectual Property and Competition Controversies ((最高人民法院关于审查知识产权与竞争纠纷行为保全案件适用法律若干问题的解释) (征求意见稿)). This new judicial interpretation purports to supersede prior judicial interpretations involving preliminary injunctions in patent and trademark cases. According to the draft, the time frame for rendering a preliminary injunction decision is a non-emergency matter may be adjusted to 30 days. It also details other procedural as well as substantive aspects of preliminary injunctions such as the jurisdiction of the court, what constitutes “irreparable harm,” hearing and notice requirement, handling of appeals of cases and handling of oppositions to provisional measures, the effect of changed circumstances, civil liability arising from wrongful application, and other matters. Notably, the draft adopts the exact same four-factor test in the US federal courts. However, it only requires the People’s courts to evaluate the four factors as a whole under the circumstances without identifying any single factor as dispositive. This arguably bears a resemblance to the balancing or sliding scale analysis once used in patent cases in the US federal courts, which opens up the possibility of greater use of preliminary injunctions in the People’s courts in the near future.

Cyber Intrusions

Hana Kidaka, MJLST Staffer

On November 24, 2014, hackers stole confidential information from the servers of Sony Pictures Entertainment. The hackers claimed to have stolen 100 terabytes of confidential information, including employee Social Security numbers, e-mail conversations between executives, and unreleased films. This Sony hack and “[t]he dramatic increase in cyber intrusions” led the Obama Administration to issue legislative proposals on January 13, 2015 in hopes of strengthening cybersecurity. The Administration’s proposals attempt to: “(1) enhance cybersecurity threat information sharing within the private sector and with the Federal Government; (2) establish a single standard to protect individuals by requiring businesses to notify them if their personal information is compromised; and (3) strengthen the ability of law enforcement to investigate and prosecute cybercrimes.”

Following the legislative proposals, President Obama signed executive orders that encourage companies to share cybersecurity information with each other and the government and that allow the government to impose penalties on foreign “individuals or entities that engage in significant malicious cyber-enabled activities.” The President has also been in talks with foreign governments to strengthen cybersecurity. For example, on September 25, 2015, President Obama announced that the U.S. and China have agreed to work together to prevent cybercrimes by providing “timely responses . . . to requests for information and assistance concerning malicious cyber activities” and by “identify[ing] and promot[ing] appropriate norms of state behavior in cyberspace within the international community.” While this is a small step in the right direction, it is important that our federal government establish a comprehensive cybersecurity legal framework that will effectively combat against cyber threats, but also take into account the privacy concerns of many individuals and companies. It will be interesting to see if and how Congress will address these conflicting interests in the near future.

Digital Privacy in Autonomous Vehicles

Steven Groschen, MJLST Managing Editor

The introduction of autonomous vehicles is likely to have a widespread effect on laws related to road travel. Theoretically, a well-functioning driverless car will never speed or run a red light. Thus, driverless cars are less likely to be pulled over. But what if an autonomous vehicle is pulled over and the officer wishes to perform a search of the automated system? Clues to how a court might handle this scenario are contained in Riley v. California.

Riley v. California, 134 S.Ct. 2473 (2014), explored the amount of protection digital content residing on an electronic device receives from unreasonable searches and seizures during a lawful arrest. The Supreme Court examined two independent fact patterns involving police officers searching an arrestee’s cellphone without a warrant. In the first fact pattern, an officer seized an individual’s cellphone in the course of an arrest and proceeded to electronically search through the contact list and pictures on the device. This search yielded evidence of gang related activity which was later used to convict the individual. In the second fact pattern, a police officer searched the phone of an individual, whom was also under arrest, and located a contact entry titled “my house.” The police used the phone number in the contact entry to discover the arrestee’s address. This information and a few other pieces of evidence taken from the phone helped the police secure a warrant to search the arrestee’s home.

The Riley decision made two holdings potentially relevant to autonomous cars. First, the court held that during a lawful arrest a warrant is generally required before searching the digital content on a cellphone. Second, the court suggested this protection is for the digital content and not necessarily the cellphone itself. These holdings can be interpreted as providing protection for digital content contained within automated driving systems. As a result, a plausible argument exists that, in the future, an officer will need a warrant before searching the digital content of an autonomous vehicle.

Predicting with any level of certainty how a court will handle digital content on an autonomous vehicle is difficult. Nonetheless, the discussion is important because autonomous vehicles are likely to become ubiquitous on the roadways in the next few decades. These vehicles will contain sensitive information such as route history and a log of the car’s actions. It is important to continue debating what privacy rights owners can and should expect regarding their future cars.

For an in-depth look at Riley and its implications for digital content contained in autonomous vehicles, see Sarah Aue Palodichuk’s article entitled “Driving into the Digital Age: How SDVs Will Change the Law and Its Enforcement.”

It’s Apple Season: Federal Circuit Court Rules for Apple in Patent Dispute, Requiring Samsung to Change Some of Its Technology Features

Emily Harrison, MJLST Editor-in-Chief

This month, the United States Court of Appeals for the Federal Circuit gave Apple its latest victory against its biggest competitor, Samsung. In May 2014, the United States District Court for the Northern District of California denied Apple’s motion for a permanent injunction to bar Samsung from using software or code tending to infringe patented features in Apple’s products. However, on September 17, 2015, the court in Apple Inc. v. Samsung Electronics Co. Ltd., No. 2014-1802, 2015 WL 5449721 (Fed. Cir. Sept. 17, 2015), held that the lower court abused its discretion in failing to grant Apple the permanent injunction, and remanded the case to the lower court for reconsideration of the motion.

The current dispute between the competitors surrounds Apple’s patents covering its slide-to-unlock, autocorrect, and data detection features. The federal circuit notes that Apple has invested billions of dollars in introducing the iPhone. To decrease the risk associated with its large investments, Apple has applied for and received patents for much of the technology it has developed in the iPhone, including the features at issue. Furthermore, Apple filed a motion seeking permanent injunction that would bar Samsung from “making, using, selling, developing, advertising, or importing into the United States software or code capable of implementing the infringing features in its products.” The federal circuit found that Apple established a “causal nexus” between irreparable harm and Samsung’s infringement such that there was “some connection between infringing features and demand for competitor’s products,” Apple suffered irreparable harm, Apple lacked adequate remedy at law, and both the balance of hardships and public interest favored the injunction.

In determining the consequences of this decision, the court emphasizes the narrowness of this injunction: “This is not a case where the public would be deprived of Samsung’s product. Apple does not seek to enjoin the sale of lifesaving drugs, but to prevent Samsung from profiting from the unauthorized use of infringing features in its cellphones and tablets.” The court was also convinced that Samsung could remove the patented features without recalling products or disrupting customer use. Although the injunction is arguably narrow, the court’s decision may have a broad impact on product differentiation requirements with respect to complex technology. The federal circuit’s decision also signals a greater willingness to protect patent rights of inventors in the face of a key market rival.

An Injunction in the Des Moines Water Works Lawsuit Won’t Hurt Farmers, Here’s Why Not

James Meinert, MJLST Lead Managing Editor

Last spring, the public water utility for the Des Moines, Iowa metro area filed suit in federal court alleging that agricultural drainage districts are emitting nitrates to the Raccoon River in violation of the Clean Water Act (CWA). The utility’s remedy under the citizen suit provision of the CWA would be an injunction; and in the alternative, the utility’s associated common law claims could yield injunctive relief and damages (The utility’s private nuisance claim in particular seems likely to survive pre-trial dispositive motions, if not win outright at trial, as Iowa Code § 657.2(4) makes it a nuisance to “render[] unwholesome . . . the water of any river . . . to the injury or prejudice of others.”). Most commentators have focused on the novel CWA claim, that nitrate pollution flowing from tile drain outlets is point source pollution and thus subject to NPDES permitting just like a factory outfall. If successful, the CWA claim would categorize nitrate pollution from tile drains as a third type of flow off agricultural fields that is separate from otherwise exempt “agricultural stormwater” and “return flows from irrigated agriculture” (33 U.S.C. § 1362(14)).

The utility has been criticized by the Governor of Iowa, State senators, and farming associations, for not collaborating with the upstream farming communities, and for not waiting to see if they State’s two year old nutrient reduction strategy will lead to lower pollution over time. Is this a real dichotomy—suing versus working collaboratively?

The CWA has never had a strong regulatory regime for nonpoint source pollution. Section 303 says that “States shall” complete a number of planning activities: first, decide what uses each water should have (wildlife habitat, recreation, drinking water, etc.); then set water quality standards protective of those uses; then maintain lists of waters impaired under these standards; and finally calculate total maximum daily loads (TMDLs) the impaired waters could receive and still be clean enough for their use (33 U.S.C. § 1313(d)). There is no actual implementation or regulatory requirement for nonpoint sources. After the TMDL, there are federal grants to identify best management practices, and more grants for parties who volunteer to implement the identified activities. These are in addition to grant money farmers could receive from USDA to implement similar practices through EQIP or CRP contracts, but all of the implementation measures are voluntary.

Iowa has largely completed the planning steps, the Raccoon River has TMDLs for nitrates, and specifically tailored best management practices for the watershed, but traditionally Iowa has not spent its federal grants directly at pollution on farm fields, but rather on broader projects like a K-12 state-wide education program to foster a “culture of conservation,” or creating wetlands areas upstream of lakes to mitigating silting and nutrient-based algae blooms.

There is an entire sector of Iowa’s economy surrounding the study and development of agricultural practices, however, there has been little governmental urgency in directing resources towards implementation of agricultural conservation practices for water quality improvement. In 2010, Iowa voters approved a constitutional amendment to create a 3/8ths of one percent state sales tax to fund water quality initiatives and to protect natural areas. However, the State legislature has yet to collect any revenue through the tax. Iowa even has its own grant funding program to pay farmers to implement water quality practices under the nutrient reduction strategy. But Governor Branstad has vetoed attempts by the legislature to fund those programs, last year vetoing the $22.4 million the Iowa house and Iowa senate agreed to appropriate for water quality initiatives.

In the world of Clean Water Act regulation of nonpoint source pollution, a lawsuit is the only way to get everyone to the table to get something done. In the 1980s and 1990s, most states completely ignored the impaired waters lists and TMDL requirements until citizens filed lawsuits in 35 states arguing progress was so slow that States and EPA had violated duties under the act. In general, courts held a duty was breeched only if the States and EPA truly did nothing, a low standard to meet, but nonetheless, EPA settled most of the suits and entered court-administered consent decrees to promulgate tens of thousands of TMDLs across the country. In the DMWW suit, the utility asks the court to “frame an injunction that permits sufficient flexibility for the Drainage Districts to comply with the injunction without undertaking an unreasonable burden.” Under such a request, the parties would be negotiating a binding timeline for farmers to take advantage of otherwise voluntary measures. If Governor Branstand doesn’t veto the State legislature’s appropriation for water quality grants this coming year farmers could implement best practices on the taxpayer’s dime, something Iowa voters asked for years ago. The utility could try for specific requirements like that all landowners physically abutting the Raccoon River make every effort to enroll in state and federal grant programs to conserve land and improve water quality. But whether the requirements are buffer strips funded by USDA Conservation Reserve Program contracts, or best practices from Iowa’s nutrient reduction strategy, that’s for the utility and farmers to negotiate in settlement conference.

Fourth Circuit Revives Circuit Split Over Cell Site Data

Mickey Stevens, MJLST Note & Comment Editor

In August, the United States Court of Appeals for the Fourth Circuit revived the dispute over whether the use of historical cell site location data constitutes a “search” under the Fourth Amendment, and whether obtaining that cell site data requires a warrant. That court’s decision in United States v. Graham, Nos. 12-4659, 12-4825, 2015 WL 4637931 (4th Cir. 2015), now conflicts with the Third, Fifth, and Eleventh Circuits on how to treat the use of cell site data in criminal investigations.

A September 2014 MJLST blog post discussed the then-existing circuit split between the Eleventh Circuit holding that a warrant was required to obtain cell site data and the Fifth and Third Circuits holding that a warrant was not necessary to do so. Since the time of that post, the legal landscape regarding cell site data has undergone significant changes.

First, the Eleventh Circuit vacated their initial decision in United States v. Davis, 754 F.3d 1205 (11th Cir. 2014), and granted a rehearing. Upon rehearing, the Eleventh Circuit came to the exact opposite conclusion, holding that the government did not conduct a “search” by obtaining cell site data, and that no warrant was necessary even if that conduct did constitute a search. United States v. Davis, 785 F.3d 498 (11th Cir. 2015). The Eleventh Circuit’s decision upon rehearing agreed with previous decisions from the Third and Fifth Circuits and eliminated the circuit split that was created by the initial decision.

Then, the Fourth Circuit decided Graham. The Graham opinion closely mirrors the Eleventh Circuit’s initial Davis decision, holding that the government conducts a “search” when it obtains and inspects cell site data and that a warrant is necessary to obtain cell site data. The court reasoned that the third-party doctrine, which says that information provided to third-parties such as cell phone service providers is no longer protected by a reasonable expectation of privacy, should not be applied to cell site data because cell phone users do not voluntarily share their location. This is the same approach that the initial Davis court took, thus renewing the debate over how to apply this doctrine to modern cell site data.

In July, a petition for writ of certiorari was filed with the Supreme Court of the United States asking for review of the Eleventh Circuit’s rehearing decision in Davis. The Eleventh Circuit’s own flip-flopping on these issues, combined with Graham’s revival of a circuit split, provides good reason for the Supreme Court to resolve these open questions regarding the gathering and use of cell site data in criminal investigations.

The BPCIA Patent Dance: A Patent Law Cliffhanger

Will Orlady, MJLST Lead Articles Editor

In 2009, Congress enacted the Biologics Price Competition and Innovation Act (“BPCIA”), found at 42 U.S.C. § 262(k) and § 262(l). The BPCIA created an abbreviated pathway to FDA approval for biologic products that the agency found to be sufficiently similar to biologic products already approved for market sale (“biosimilars”). The BPCIA also created mechanisms for resolving patent disputes related to biosimilars. Colloquially known as the “patent dance,” the BPCIA’s patent dispute resolution mechanisms allows participants to go through a series of negotiations and disclosures—all in place to limit the complexity and cost of patent litigation. Parties complying with the “patent dance’s” requirements can enjoy safe harbor from costly patent litigation. The underlying policy of the BPCIA’s “patent dance” is to narrow the scope and reduce the costs associated with patent disputes.

Congress enacted the BPCIA. Time passed, and its “patent dance” flew under the radar—until this year. In 2014, Sandoz became the first company to file a Biologic License Application pursuant to the BPCIA’s abbreviated procedure. Despite availing itself of the BPCIA’s abbreviated approval procedures, Sandoz snubbed the “patent dance.” In its litigation against competitor Amgen, Sandoz argued that the BPCIA’s “patent dance” was not compulsory. The matter made its way to Judge Richard Seeborg in the Northern District of California. In a detailed opinion, Judge Seeborg outlined both Amgen’s and Sandoz’s positions and ultimately sided with Sandoz, ruling that the “patent dance” is optional (the abbreviated statutory biosimilar FDA approval scheme notwithstanding). The parties appealed the matter to the Federal Circuit. The Court heard the matter on June 3, 2015.

On July 21, 2015, the Federal Circuit handed down its decision in Amgen v. Sandoz, answering whether the BPCIA’s “patent dance” is compulsory for those manufacturers availing themselves of the BPCIA’s abbreviated FDA approval scheme. A fractured panel (led by J. Lourie) held that the “patent dance” is optional. Conceding that the statutory provisions involved are immensely complex, the Court stated that the provisions involved must be read in the context of the entire statute. The relevant provisions in light of the entire statute lead Judge Lourie to the conclusion that Congress intended the “patent dance” to be optional.

“We therefore conclude that, even though under paragraph (l)(2)(A), when read in isolation, a subsection (k) applicant would be required to disclose its aBLA and the manufacturing information to the RPS by the statutory deadline, we ultimately conclude that when a subsection (k) applicant fails the disclosure requirement, 42 U.S.C. § 262(l)(9)(C) and 35 U.S.C. § 271(e) expressly provide the only remedies as those being based on a claim of patent infringement. Because Sandoz took a path expressly contemplated by the BPCIA, it did not violate the BPCIA by not disclosing its aBLA and the manufacturing information by the statutory deadline.”

Judge Newman dissented on this point.

Though the Federal Circuit has answered whether the “patent dance” is compulsory for the time being, the parties have petitioned the court to hear the matter en banc. This is not surprising given the divided tone of the deciding panel’s opinion. Practitioners and scholars alike are now waiting to see whether the Court uses this matter to affirm or re-decide the “patent dance” question. Even if the Federal Circuit denies the en banc petition, a petition for certiorari would not be out of the question. The instant issue may just be juicy enough to grab SCOTUS’s attention.

Regulating the Sharing Economy: Fostering Innovation and Safety

Steven Groschen, MJLST Managing Editor

The sharing economy is a marketplace for individuals to exchange goods and services directly with one another. In the past, sharing economy participants, whom wished to lend their property and time directly to others, had the challenge of finding a way to connect with individuals seeking to borrow property and services. The internet and other modern communication systems have provided opportunities for overcoming this barrier. Consequently, the cost of matching a particular individual’s demand with another individual’s supply (i.e. transaction costs) within the sharing economy has been greatly reduced. As a result, sharing is quickly becoming a cost-effective and environmentally friendly option for ordinary consumers.

Not everyone is fond of the sharing economy movement. Long-established institutions and industries are experiencing increased competition by competitors whom are not always required to play by the same rules. For instance, the increasingly popular ride sharing system, Uber, has received scrutiny from players in the current taxi system. They argue that Uber is unfairly competing because it is not subject to the same regulations as traditional taxi drivers.

Regulators are challenged to find the optimal method of regulating the emerging sharing economy. Enacting regulations that are too strict will impede the innovation generated by sharing economy startup companies. On the other hand, regulations that are too lenient may threaten another core value: protecting the safety of consumers. Unregulated and non-centrally controlled systems of transportation run the risk of having a wide variance in outcomes. One Uber taxi driver may be perfectly safe, whereas another creates a hazard on the streets. Some are concerned there should be more government oversight and regulation addressing these risky drivers.

Professor Sofia Ranchordás suggests “establishing, broader, principle-based regulation[s]” is the answer to the legal problems created by the sharing economy. The use of principles rather than specific regulations acknowledges that technology is constantly changing. Broad regulations are designed to be more adaptable to changes in technology. As a result, this method of regulation protects two of the important goals of the sharing economy. First, bottom-up innovation is not stifled by rigid regulations that prohibit experimentation. Startup companies in the sharing economy are free to experiment so long as they stay within the boundaries of the broad principles. Second, there is more flexibility to create regulations addressing concerns for safety and general consumer protection. Regulators are not restricted to a narrow definition of what is “safe,” thus technology changes affecting safety are more easily managed.

Awaiting an Important Decision on the Gulf of New Mexico “Dead Zone” Lawsuit

Allison Kvien, MJLST Managing Editor

In 2013, the U.S. Environmental Protection Agency was ordered to set limits on nitrogen and phosphorous levels in U.S. waterways. These nutrients contribute to the loss of oxygen and cause what is called hypoxia to occur in the water, killing marine life. This year, the “dead zone” in the Gulf is larger than Connecticut and Rhode Island combined. While this is larger than average, it is not a record. The oxygen levels are so low in this zone that it was reported that even starfish are suffocating.

An appeals court recently decided that the district court should determine, based on the Clean Water Act (CWA), whether the EPA gave adequate reasons for its refusal to set limits on the nutrients in U.S. waterways. Environmental groups, such as the NRDC, are optimistic that the original ruling requiring the EPA to set nutrient limits will be reaffirmed by the district court.

This CWA ruling is analogous to the 2007 Supreme Court Clean Air Act (CAA) case, Massachusetts v. EPA, which ruled that the EPA must have good reasons, based on the CAA, for refusing to regulate greenhouse gases (GHGs). The Supreme Court found that the EPA’s rationale for not regulating GHGs was inadequate and required the EPA to come back with a reasonable basis for not regulating GHGs in order to avoid being forced to regulate GHGs.

If the outcome of this CWA lawsuit is that the EPA is required to regulate nutrients causing the enormous hypoxia zone, the EPA will embark on a hugely collaborative journey to set appropriate limits for these nutrients all over the country. For instance, the NRDC reports that Chicago, over one thousand miles away from the Gulf, was found to be the single largest contributor to the “dead zone” in the Gulf.