March 2019

New Year, New Chinese Intellectual Property System

March 31, 2019
Administrative Law, Intellectual Property, Patents

Sherrie Holdman, MJLST Staffer

Since the beginning of the new year, China has implemented various new Intellectual Property (“IP”) changes. Three major changes are particularly critical for promoting an enhanced IP system in China.

The first change is the establishment of a new IP appellate court. On October 26, 2018, China’s National People’s Congress (NPC) Standing Committee issued the Decision on Several Issues Concerning the Litigation Procedures in Patent and Other Intellectual Property Cases. On December 3, 2018, in a plenary session of the Judicial Committee of the Supreme Court chaired by Chief Justice Zhou Qiang, the Committee passed the Supreme Court Guidance Re Intellectual Property Tribunal. The official IP court was finally launched in January 2019. The new body is expected to hear appeals from both civil and administrative matters. According to Chief Justice Zhou Qiang, handing civil and administrative patent appeals to the new IP court will help unify adjudications related to patent validity and infringement, improve the efficiency and quality of court proceedings, and thus improve judicial protection of IP rights. The protection of IP rights has been a key issue of the trade war between the United States and China. China has been criticized for its lax IP protection for many years. The new IP court seems to come as a trade negotiation of the two countries.

Another change is China’s new policy on IP enforcement. On December 4, 2018, the National Development and Reform Commission, along with 37 government departments, released a Chinese interagency Cooperation Memorandum of Understanding. The goal of the Memorandum was to punish entities who seriously violate the patent law, including acts such as repeated patent infringement, non-compliance with the patent law, and serious illegal patent agency conduct. Like the new IP court, this policy seems to be another negotiation between the United States and China. Indeed, the policy was released days after the meeting of United States President Donald Trump and Chinese leader Xi Jinping at a summit in Argentina. The policy took a further step to enhance the IP protection in China.

The third change is the Fourth Amendment of the Chinese Patent Law. On December 5, 2018, the latest Draft of the Chinese Patent Law was presented to China’s State Council in a meeting chaired by Premier Li Keqiang. The new Amendment aimed to strengthen the protection of patent rights holder’s legitimate rights and interests, stimulate innovations, and promulgate legislations to effectively protect patent rights. Specifically, the Draft aimed to increase the penalties for IP infringement, to increase the amount of compensation and fines for willful infringement and counterfeiting patents, and thus increase the infringement cost in order to deter illegal acts. Particularly, the Draft proposed to raise the minimum fine to 100,000 RMB and the maximum fine to 5 million RMB. The Draft also stated that an infringer shall be cooperative in an infringement lawsuit. The Draft further set forth that network service providers shall bear joint liability for not stopping infringement in a timely manner. The Draft provided an incentive mechanism for employee inventors so that they could equitably share profits from inventions invented by the employees in the course of their employment.. Further, the Draft introduced a patent term extension system for innovative drugs, strengthened public information systems, and proposed to make basic patent data available in the China National Intellectual Property Administration (“CNIPA”) website. In order to foster patent dissemination and utilization, the Draft provided national and local authorities to increase public patent services and introduced an open patent license system. In addition, the Draft introduced a domestic priority of six months for design applications, extended patent term for design patents to fifteen years, and extended the time period for priority document submission for patents/utility models applications. The Draft Amendments were released for public comment from January 4, 2019 to February 3, 2019. The final rule is expected to come out soon this year.

It remains to be seen how these changes would improve China’s IP system. Nevertheless, the impact of these changes should not be underestimated. China is known as a big market for technology and business. However, foreign investors have been hesitate to invest in China due to China’s lax patent protection. With these changes aiming to establish an enhanced IP system, China is expected to build a friendly commercial environment to foreign inventors and investors, continue to improve domestic innovations, and encourage collaborations between foreign corporations with local companies. For instance, it has been said that these changes would attract global pharmaceuticals and tech companies to China because an enhanced IP system would enable foreign companies to uphold their IP in specialist courts, which is a great reassurance for foreign investors and inventors.

In 2019, We Will Learn a Lot About the Fossil Fuel Industry’s Climate Change Culpability

March 15, 2019
Climate Change

Sam Duggan, MJLST Staffer

Several lawsuits, filed in 2017 and 2018, are seeking damages from fossil fuel companies for harms caused by climate change. Interestingly, the fossil fuel companies are conceding that climate change is real, it is exacerbated by burning fossil fuels, and it is causing injuries within the United States. For example, during a recent trial where the cities Oakland and San Francisco sued numerous fossil fuel companies for climate-related damages, an attorney representing Chevron said “Chevron accepts the consensus in the scientific communities on climate change. . . There’s no debate about climate science.” Yet, the fossil fuel companies also state that plaintiffs’ claims for nuisance and trespass, among others, must be dismissed because balancing the positive and negative externalities of fossil fuel use is a nonjusticiable political question, and the claims are otherwise displaced by the Clean Air Act. So far, the courts have largely sided with the fossil fuel companies. See City of Oakland v. BP; City of New York v. BP. Other similar cases will likely be decided this year.

Importantly, however, political question abstention and Clean Air Act displacement become less controlling depending on whether the fossil fuel companies knew about the risks of burning fossil fuels (they did), and took affirmative steps to convince the public and regulators there were no risks (they likely did)? If so, these companies may be liable under consumer protection and products liability laws just as tobacco companies were liable for their disinformation campaigns that obscured the hazards of smoking cigarettes. Lawsuits brought by plaintiff in Colorado, Maryland, and others are pursuing these legal theories, and courts will likely reach the merits this year.

Similarly, the states of New York and Massachusetts brought lawsuits against fossil fuel companies for investor fraud. These lawsuits allege, for example, that ExxonMobil perpetrated a “longstanding fraudulent scheme … to deceive investors and the investment community … concerning the company’s management of the risks posed to its business by climate change.” To support their claims, Attorneys General from New York and Massachusetts have vigorously sought discovery of Exxon’s internal communications and research—Exxon aggressively protested and countersued. In January 2019, the U.S. Supreme Court declined to hear a discovery dispute between Massachusetts and Exxon, therefore it allowed discovery of 40-years of Exxon’s climate-related documents. This discovery request promises to color the landscape of fossil fuel industry liability. 2019 may become a watershed year for holding the fossil fuel industry accountable for its contribution to climate change—or not.

Treating Depression With Ketamine? How the Investment Was Made

March 15, 2019
Biotechnology, FDA, Food and Drug Law, Health

Hunter Moss, MJLST Staffer

Depression is a serious mental disorder that afflicts millions of Americans each year. One in three of these individuals struggles to find a treatment method that alleviates their condition, and are aptly said to suffer from treatment-resistant depression. In the most severe cases, treating depression can be a life or death decision—depression is the leading cause of over 41,000 suicides every year. For those dealing with depression, every day is a struggle to persevere and try to regain a sense of normalcy.

A new therapy for treatment-resistant depression was approved by the Food and Drug Administration (FDA) earlier this week, one that could help those that have been unable to find relief elsewhere. The unexpected source of the therapy is esketamine. If the name of this drug sounds familiar, it is because the name is based on, and molecularly similar to, the street drug named ketamine. While originally synthesized in the 1960’s as an anesthetic and first used widely in the Vietnam War, ketamine is now known as a party drug, providing the user with mild hallucinations and a sense of euphoria. Due to its dangerous side-effects and potential for abuse, ketamine was placed on the Schedule III of the United States Controlled Substance Act in August of 1999.

In the early 1990’s, researchers at Yale University first recognized the potential for ketamine to treat the symptoms of depression. Since then, scientists sought to confirm the viability of ketamine as a treatment option for individuals who did not experience relief from other treatment methods. A 2012 study out of Baylor College of Medicine proved just that: 85% of patients with severe depression reported the treatment to be effective. Unlike selective serotonin reuptake inhibitors (SSRIs), which are most commonly prescribed to treat depression and can take weeks to build in a patient’s system before becoming effective, ketamine can provide nearly immediate relief with its full effect being felt in as little as two days.

With the science firmly in place, the next hurdle advocates of ketamine faced was of perception—in the eyes of the FDA and the public alike. Radical clinics began to emerge across the country to provide patients suffering from treatment-resistant depression with a safe, heavily-monitored environment to undergo care. Because ketamine had yet to be recognized as a potential aid for depression by the FDA, clinic physicians would often have to prescribe the drug under the guise of using it as an anesthetic. The “don’t ask, don’t tell” approach to a new treatment for a severe mental disorder created some inevitable quandaries for both doctors and patients, who would be unable to receive insurance coverage for a non-FDA approved treatment program.

While the medical community was well aware of the healing potential of ketamine, pharmaceutical companies were reluctant to make the investment. The average price-tag of a clinical trial for the FDA is $19m. There is certainly a market for the drug with countless Americans suffering from depression. The issue holding pharmaceutical companies back is related to patent law. In order to receive a patent, the proposed invention must be novel—and considering that ketamine has been around for nearly sixty years, that would be an impossible claim to make. Without patent protection, the multi-million dollar investment is bad economics for big pharma, even if the trials could provide relief for millions of Americans.

So why did Janssen Pharmaceuticals, the developer of a treatment method for depression based on ketamine, make the investment and receive FDA approval for its new drug Sprovato? The answer is because Sprovato is esketamine, a sufficiently different molecule from ketamine to be patentable. Certain molecules can be left-handed and have right-handed doppelgangers. While it is beyond the scope of this blog piece (and the ability of its author) to explain the difference between the two, esketamine is the left-handed version of ketamine’s right hand. The deviation between the molecules is a significant enough difference to pass the novelty requirement necessitated by the U.S. Patent and Trademark Office (USPTO). While there is some debate as to whether esketamine is as effective as its counterpart, esketamine passed the FDA’s clinical trials and, for the most part, has been received as a viable alternative to ketamine treatment. This development could help legitimize the countless ketamine clinics that have emerged across the United States over the last few years, yielding a promising new alternative for those struggling with severe depression. At the same time, the story of ketamine raises questions about the roles of several actors in the health care system, specifically pharmaceutical companies, the FDA and the USPTO, in delaying the introduction of life saving medication in order to adhere their respective financial and regulatory requirements.

Controversial Community Solar Garden Program Is a Target of Minnesota’s 2019 Legislative Session

March 8, 2019
Energy Law, Environmental Law, Solar Energy

Hannah Payne, MJLST Staffer

In 2013, Minnesota’s legislature opened the way for certain solar projects with the passage of the Community Solar Garden Program. The program requires Xcel Energy to purchase the energy created by Community Solar Gardens (“CSGs”) that are under a certain generation capacity. CSGs represent a middle ground between residential rooftop solar and large-scale, utility-owned solar. The idea is that medium-sized solar arrays are built in or near communities by developers, local residents buy subscriptions, and then the utility buys the energy from the array and credits the resident subscribers’ accounts. Solar developers sell subscriptions by highlighting the chance to save money and help the environment.

CSGs have been controversial since the inception of the program. Along with the significant growth of CSGs in Minnesota have come concerns about the sales practices of developers, who have been accused of misrepresenting the certainty of profit or stage of project development. The Attorney General warns consumers to “make sure they fully understand a subscription agreement and carefully consider whether they are willing to commit to its terms.” Opponents also decry that the majority of the capacity – 90% – of CSGs is purchased by commercial and other non-residential customers, undercutting the idealistic image of CSGs bringing renewable energy tangibly closer to communities. However, CSG advocates point out that the vast number of subscribers – 92% – are actually residential; they just use less energy than commercial customers.

At the heart of the controversy is the price issue. Opponents of the CSG program, including Xcel, say that it is far cheaper to produce solar energy in a large-scale setting. Xcel recently committed to going 100% carbon-free by 2050, and is likely focused on building renewable capacity efficiently. On the other side, proponents claim that Xcel’s lack of tolerance for competition has resulted in the undervaluation of CSGs because the social benefits and avoided costs have been ignored.

In any case, the CSG program looks poised to undergo change this year; several CSG bills have been introduced in the legislature. Senator Mike Goggin, a nuclear plant manager at Xcel, has proposed total repeal of the CSG program. Another bill would require Public Utilities Commission approval of CSG projects and cap the amount of capacity that may be built within the program annually at 25 Megawatts (there is currently no limit). Other proposals aim to improve developer sales practices, one listing detailed disclosures to be required in promotional materials, another calling for the state’s Clean Energy Resource Team partnership to develop a “disclosure checklist” for developers. Yet another bill would fund a study of “economic benefits to farmers” to investigate if the CSG program may be tweaked to be more farmer-friendly.

Minnesota is a national leader when it comes to CSGs; many will be watching to see how the legislation develops. As Xcel and others get more serious about renewable energy, conversations and controversies around renewables can only be expected to increase. Watching a debate like this unfold is a great way to keep a finger on the pulse of the energy world in this exciting time.

Practical Results of Enforcing the GDPR

March 8, 2019
EU Law, International Law, Privacy

Sooji Lee, MJLST Staffer

After the enforcement of the European Union’s(“EU”) General Data Protection Regulation (“GDPR”), Facebook was sued by one of its shareholders, Fern Helms, because its share price fell more than “20 percent” in July 27, 2018. This fall in stock price occurred because the investors were afraid of the GDPR’s potential negative impact on the company. This case surprised many people around the world and showed us how GDPR is sensational regulation that could result in lawsuits involving tremendous amounts of money. This post will articulate what has occurred after enforcement of this gigantic world-wide impacting regulation.

Under GDPR, regulated entities (data controllers and data processors) must obtain prior “consent” from their users when they request customers’ personal data. Each member country must establish Data Protection Authority (“DPA”) to comply with the GDPR. This regulation has a broad applicable range, from EU corporations to non-EU corporations that deal with EU citizens’ personal data. Therefore, after the announcement of this regulation, many United States based global technology corporations which conduct some of their business in European countries, such as Google and Facebook, commenced processes to comply with the GDPR. For example, Facebook launched its own website which explains its effort to comply with GDPR.

Surprisingly, however, despite the large-scale preparation, Google and Facebook were sued for breach of the GDPR. According to a report authored by IAPP, thousands of claims were filed within one month the GDPR’s enforcement date, May 25, 2018. This fact implies that it is difficult to abide by GDPR for current internet-based service companies. Additionally, some companies that are not big enough to prepare to comply with the GDPR, such as the Chicago Tribune and the LA Times, temporarily blocked EU users from its website and some decided to terminate its service in the EU.

One interesting fact is that no one has been fined under GDPR yet. A spokesperson for the United Kingdom’s Information Commissioner’s Office commented “we are dealing with the first GDPR cases but it’s too early to speculate about fines or processing bans at this stage.” Experts expect that calculating fines and processing bans could take another six months. These experts foresee that once a decision is rendered, it could set a standard for future cases which may be difficult to change.

The GDPR, a new world-wide impacting regulation, just started its journey toward proper consumer data protection. It seems many of the issues involved with the GDPR are yet to be settled. For now, no expert can make an accurate prediction. Some side-effects seem inevitable. So, it is time to assess the results of the regulation, and keep trying to make careful amendments, such as expanding or restricting the scope of its applicable entities, to adjust for arising problems.

Seasteading

March 1, 2019
Environmental Law, Maritime Law

Will Dooling, MJLST Staffer

This February, students at the University of Minnesota fought record snowfalls and low temperatures. A lot of us are dreaming of running away to a tropical island somewhere, or buying one and starting our own country. Today, we explore “seasteading,” the practice of founding a sovereign nation on the high seas, usually on a floating platform, or a remote private island.

Sovereign nations have already claimed every large island, and every part of the ocean even remotely near shore. As such, seasteading requires a would-be nation-builder to either construct a new island on a deep ocean seamount or build a floating platform from scratch. Both are remarkably challenging and costly feats of engineering. Even very generous estimates put the cost of a freestanding deep-sea platform capable of supporting a few residents at $50 million. The other challenge, of course, is supplying the community’s inhabitants with food, water, and electricity. While a seasteader could try imaginative solutions ranging from self-sufficient algae farms to enormous solar-powered desalination systems, the practical startup cost of such an operation is utterly enormous.

The attraction is obvious, though, largely thanks to the persistent myth that once safely in international waters on a floating platform or a private island, no laws will apply. It is certainly true that Article 2 of the 1958 UN Convention on the High Seas prohibits any signatory from claiming sovereignty over the high seas, and Article 57 of the UN Convention on the Laws of the Sea limits the exclusive economic zone of any nation (the region of the sea over which that nation has total sovereign control) to no more than “200 nautical miles from the baselines from which the breadth of the territorial sea is measured.” However, these limitations have never seriously prevented the United States, for example, from carrying out law enforcement activities to prevent “acts done outside a geographic jurisdiction, but which produce detrimental effects within it[.]” United States v. Smith, 680 F.2d 255, 258 (1st Cir. 1982). This means that the most tempting uses of a seastead—an offshore casino, a drug den, or a tax haven—are unworkable. One of the only law review articles to seriously examine seasteading puts it bluntly: “Given the United States’ penchant for exercising jurisdiction thousands of miles from its coastlines, not even the territorial seas of other nations may be sufficient to protect a seastead from American jurisdiction.”

A few innovative souls have tried semi-serious attempts to start a sovereign nation on the high seas, but none have quite succeeded. In the 1970s, real estate tycoon Michael Oliver spent millions of dollars attempting to found a sovereign state on a cluster of reefs in the South Pacific, about 250 miles from the island nation of Tonga. He dubbed his project the “Republic of Minerva.” Oliver created his own currency, flag, and declaration of independence from Tonga, but his project ultimately failed when Tongan king Taufa’ahau Tupou, and a construction crew, arrived and dissembled Oliver’s early construction work on the reefs. Oliver then abandoned the project.

Similarly, from 1976 to 2010, pirate radio broadcaster Paddy Roy Bates made periodic attempts to claim a World War II era anti-aircraft platform situated in the North Sea as a sovereign nation. Sealand, like the Republic of Minerva, has its own currency, constitution, and even its own national anthem. Sealand also sells titles of nobility. British pop star Ed Sheeran, for example, is a Baron of Sealand. Unlike the Republic of Minerva, Sealand is still going strong, and purportedly celebrated its 50th anniversary in 2017, but only two people live there permanently.

Currently, the largest promoter of seasteading is the libertarian-aligned Seasteading institute, an organization that hopes to build utopian communities of artificial islands set in international waters, though critics charge that the project is largely an attempt to bypass regulation (and taxation) that its members find inconvenient. In 2017, the government of French Polynesia briefly flirted with the idea of allowing the Seasteading Institute to establish an experimental economic seazone in their territorial waters, though the deal ultimately seems to have fallen through.

While no one has successfully gotten a self-sufficient seasteading community afloat, the dream is completely understandable. Once we get better at deep-water construction and remote power generation, it may actually be possible. Until then, it remains a dream, though one that is relatable and understandable in the depths of a Minnesota winter, at least until Tonga invades.

Antitrust Violations Against Apple: Is the Tech Giant Operating an Illegal Monopoly?

March 1, 2019
Antitrust

Joe Hallman, MJLST Staffer

Apple Inc. is again under legal fire as allegations of antitrust violations against the tech giant have made it to the Supreme Court. The Court recently heard oral arguments in November of 2018 in Apple Inc. v. Pepper. Plaintiffs in the case are a class of iPhone users, and allege that Apple’s App Store, the only forum for iPhone users to download apps, creates an illegal monopoly. Apple collects 30% of all sales of apps made via its App Store; Plaintiffs argue that this is an overcharge made possible only by the unlawful monopoly. Apple claims in response that its App Store is not an illegal monopoly and that, even if it was, Apple is not a seller of goods but simply facilitates a marketplace.

The question before the Supreme Court is not whether Apple actually did violate antitrust laws, but whether iPhone users would even be able to recover damages from Apple if it did. The Court seeks to answer this question in light of Supreme Court precedent stemming from a 1977 decision in Illinois Brick Co. v. Illinois, in which the Court held that only direct, rather than indirect, purchasers can recover damages for antitrust violations. Here, plaintiffs argue that they directly purchase apps from Apple through its App Store, whereas Apple maintains that iPhone users are actually purchasing apps from the app developers. If the Court were to side with Apple, iPhone users would not be able to recover damages from them. Only app developers, as purchasers of the distribution service the App Store provides, could sue Apple for antitrust violations.

The Supreme Court is expected to decide the case by June of 2019. If the Court decides in favor of the plaintiffs, holding that iPhone users can recover damages from Apple, the case would be remanded to a lower court to determine whether antitrust violations actually occurred. In the future, if Apple is found to be operating an illegal monopoly it could have enormous implications. Large amounts of money are potentially at stake. It is estimated that Apple brought in $11 billion in revenue from its App Store in 2017 alone and antitrust laws permit plaintiffs to potentially recover triple damages. Beyond the dollars at stake, a decision that Apple is operating an illegal monopoly could completely change the industry. A decision of that nature could give rise to many different marketplaces that make apps available for iPhone users to download potentially lowering the price for the end users. The first step, however, is the decision to be handed down by the Supreme Court in Apple Inc. v. Pepper to determine whether iPhone users are able to sue Apple for damages.

March 2019

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