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Recently in Whistleblowers and Qui Tam Category


Vinny Sidhu
Legal Intern, Manhattan Institute's Center for Legal Policy

Recently, the Manhattan Institute decided to take on the challenging issue of patent "trolling," a practice in which so-called Patent Assertion Entities acquire the rights to a patent and then extract licensing fees from those who infringe upon the covered material. I am proud to say that these efforts have culminated in the release of our latest Trial Lawyers Inc. issue, entitled "Patent Trolls."

The Trial Lawyers Inc. series was formulated in order to shed light on some of the more egregious abuses of power by the trial bar and its related associations. The increasingly business-related focus of these associations has wrongly shifted the main purpose of lawsuits from protecting clients to maximizing profits, largely on tenuous legal theories that harm businesses and, by extension, consumers.

Today, The Washington Post's Timothy B. Lee offered a detailed report on the substantive and practical impact of this latest TLI issue:

The paper is less an academic study than a work of advocacy. It tells the now-familiar story of how patent trolls make no useful products themselves but use the courts to extract cash from legitimate businesses. The document is stuffed with insets denouncing people Manhattan regards as patent-trolling villains, complete with unflattering caricatures.

Chicago litigator Raymond Niro is described as the "Original King of the Patent Trolls." A company called MPHJ is accused of operating a "scanner shakedown." And the study describes how federal courts in the Eastern District of Texas adopted patent-friendly rules that have made it the "rocket docket" for patent lawsuits.

Ultimately, the details of the paper are less important than who is publishing it. The Manhattan Institute is a prominent think tank with deep ties to conservative elites and the business community. The study's publication is another sign that the political right is paying attention to the patent system's growing dysfunction. And given that the Obama administration has endorsed a slate of patent reforms similar to those the Manhattan Institute favors, there's a real chance of change actually happening.

It might not be the most glowing endorsement of the Manhattan Institute itself, but it highlights one of the most important facets of political discourse: the growing consensus. The growing consensus over patent reform lends credence to the hope for a stable, efficient patent system in the near future.

Congressional committees have scheduled several hearings and mark-up sessions of interest for this week. ...

Wednesday: House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises, "Legislative Proposals to Address the Negative Consequences of the Dodd-Frank Whistleblower Provisions." The financial services reform bill entitles individuals who alert the Securities and Exchange Commission or the Commodities Futures Trading Commission to violations of security law to rewards -- "bounties" -- of 10 percent to 30 percent of any recovery in excess of $1 million.

Wednesday: Sometimes you can strain too hard for a Lewis Carroll reference. The Senate Committee on the Judiciary, Subcommittee on Antitrust, Competition Policy and Consumer Rights, has scheduled a hearing entitled "The AT&T/T-Mobile Merger: Is Humpty Dumpty Being Put Back Together Again?" for Wednesday, May 11, 2011 at 10:15 a.m. in Room 226 of the Dirksen Senate Office Building. The top CEOs of the involved companies and competitors are scheduled to testify.

Thursday: Senate Judiciary Committee marks up S.623, Sunshine in Litigation Act, legislation to force open sealed consent agreements and judicial orders if there is a potential impact on public safety and health. Major industry groups operating as the ad hoc Coalition to Protect Privacy, Property, Confidentiality, and Efficiency in the Courts sent the committee a letter last week expressing sharp opposition. The letter concludes that the legislation would "undermine theprivacyand property rights of all litigants," and "also have a profoundly damaging impact on the United States civil justice system while burdening and delaying the just disposition of litigation." Earlier POL post here.

Thurday: Also on the mark-up calendar is S.350, the Environmental Crimes Enforcement Act, sponsored by Sen. Patrick Leahy (D-VT) and cosponsored by members of the Alarmism for Litigation Caucus including Sens. Dianne Feinstein (D-CA) and Sheldon Whitehouse (D-CT). The CRS summary: "Environmental Crimes Enforcement Act of 2011 - Directs the United States Sentencing Commission to review and amend the Federal Sentencing Guidelines and policy statements applicable to persons convicted of offenses under the Federal Water Pollution Control Act (commonly known as the Clean Water Act) to reflect the intent of Congress that penalties for such offenses be increased to appropriately account for the actual harm to the public and the environment from such offenses. Amends the federal criminal code to require mandatory restitution to victims of crimes under such Act."

Thursday: The same Senate Judiciary markup is scheduled to include committee votes on Virginia A. Seitz, to be an Assistant Attorney General, Office of Legal Counsel, and Donald B. Verrilli, Jr., to be Solicitor General of the United States. Votes were originally planned for last week, but the committee failed to pull together a quorum. See, "Senate Panel Postpones Votes on Four DOJ Nominees."

Also, on Monday, the Senate is scheduled to resume consideration of the nomination of James Michael Cole, of the District of Columbia, to be Deputy Attorney General, with a cloture vote planned for 5:30 p.m.

At Overlawyered, Walter Olson has been covering the false patent-marking lawsuit wave, exacerbated by a recent Federal Circuit decision. Judge Polster rejected one such lawsuit. "The False Marking statute essentially represents a wholesale delegation of criminal law enforcement power to private entities with no control exercised by the Department of Justice." [Unique Product Solutions, Ltd. v. Hy-Grade Valve, Inc. via Gray on Claims (h/t F.B.)]

The deadline was Friday, Dec. 17, for submitting comments in response to the Securities and Exchange Commission's proposed rules to implement the whistleblower provisions of the Dodd-Frank Act, i.e., the financial regulatory reform legislation [Release No. 34-63237; File No. S7-33-10]. As the Federal Register summarystates:

The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted on July 21, 2010 ("Dodd-Frank"), established a whistleblower program that requires the Commission to pay an award, under regulations prescribed by the Commission and subject to certain limitations, to eligible whistleblowers who voluntarily provide the Commission with original information about a violation of the Federal securities laws that leads to the successful enforcement of a covered judicial or administrative action, or a related action.

In its comment letter, the American Association for Justice objected to the proposal because to qualify, a whistleblower's information would had to have "significantly contributed to the success of the action" and the information "would not otherwise have been obtained and was essential to the success of the action." AAJ writes:

The Federal Circuit's Tuesday ruling in Stauffer v. Brooks Brothers permits qui tam relators to sue over mismarked patents, even when they have not personally been injured; together with an earlier decision that the $500 fine for violating the statute is calculated per mismarked item, rather than per incident, exposes manufacturers to potentially billions of dollars of liability. Naturally, a number of plaintiffs' lawyers are engaging in rent-seeking. [WSJ; Reuters; Bloomberg]

David Walk utterly shreds an appalling piece of agitprop masquerading as science in the New England Journal of Medicine. One hopes Walk doesn't restrict himself to the blog post, but also writes a letter to the editor.

Around the web, April 27

  • Spring issue of Federalist Society's State Court Docket Watch includes articles on Illinois liability reform, California furlough suits, Washington school finance reform, Caperton and recusal;
  • Judge Manuel Real hammers generic product liability complaint re: pain pumps [Beck et al]
  • Sen. Lautenberg's bill would tighten TSCA chemical regulation [Wajert, ShopFloor]
  • Good news for Maryland trial lawyers, state enacts a False Claims Act [Baltimore Sun]
  • "Litigation Funding in Australia" [Vischer, Legal Ethics Forum]
  • "Sentences Get Harsher in White-Collar Cases" [Henning, NYT DealBook via Greenfield]

Around the web, March 31

  • Sotomayor writes first dissent in 7-2 SCOTUS ruling slightly restricting False Claims suits, health care reform bill is going to restore the more liberal standard anyway [AP, BLT]
  • Cosmic rays? "NASA to investigate cause of Toyota problems" [WaPo, Detroit Free Press, L.A. Times]
  • Rejecting Easterbrook view, SCOTUS unanimously adopts Second Circuit/Posner view on standard for challenging mutual fund fees [Jones v. Harris; WSJ Law Blog, Ribstein, NLJ, earlier here, here, etc.]
  • AstraZeneca wins a big Seroquel case [Abnormal Use]
  • Hungarian Holocaust reparations suits continue in Chicago, this time the target is banks [ChicagoNow]
  • Even if you agree law school clinics need more oversight, heavy-handed Maryland effort is likely to backfire [Legal Ethics Blog, Maryland Reporter, Marler Clark Food Safety News, ABA Journal]

As my last installment on Trial Lawyers, Inc.: K Street, I'm scheduled to discuss the trial bar's federal efforts to expand litigation opportunities. Because the K Street report is national in scope, these efforts are extensively covered, and federal legislation comprises two subsections of the report, roughly twice as much material as is devoted to state activities. Thus, I'm breaking my posts into two parts: first, today, I'm going to go into already-passed legislation. Then, over the weekend, I'm going to do a second post with proposed/pending legislation. Finally, I'll add a brief concluding post, with a roadmap back over where we've been.

As we note in our report, the lawyers' aggressive affirmative agenda in Washington is something of a paradigm shift. "Until recently, the main purpose of Trial Lawyers, Inc.'s involvement in federal politics was to block reform legislation that would deny it various lucrative lines of business" -- such as Bill Clinton's veto of product liability reform legislation and securities class action reform legislation in the 1990s (the latter overridden and enacted), or Senate Democrats' stifling of medical-malpractice and asbestos litigation reforms during the Bush administration.

In the last two years, Congress has acted to expand consumer litigation, expand employment litigation, expand qui tam litigation, and limit private arbitration. Many of the pieces of federal legislation will be familiar to our readers, but a brief summary is still in order:

"Dissecting the Investor Protection Act"

Bruce Carton analyzes the provisions of a House-passed bill that would open up aider and abetter liability, establish securities whistleblower bounties, expand extraterritorial jurisdiction, and stimulate litigation in a variety of other ways.


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.