Recovering Attorneys' Fees As an Administrative Expense
In counseling clients on whether to structure a transaction as a lease or a loan, there are several financial considerations. The first is the potential that the client's customer could file for bankruptcy, and its impact upon recovering rent payments as a priority administrative expense. In that case, attorneys' fees are a factor as well. The Bankruptcy Code provisions that govern the rights and remedies of an equipment lessor in comparison to the rights and remedies of a secured lender differ significantly — they may be considered more favorable to an equipment lessor than a secured lender for the reasons discussed later in this article, although certain provisions of the Code that address the remedies of a secured lender are applied to an equipment lessor as well.
CASE NOTES
Highlights of the latest product liability cases from around the country.
Firestone's Trade Secret Remains Safe
A recent state supreme court decision may have nationwide impact on tire litigation. On May 22 the Texas Supreme Court held that plaintiffs seeking trade secret information from a tire manufacturer must show specifically how the lack of the information could derail a case. The court's decision in <i>In Re Bridgestone/Firestone Inc.</i> gives no guidelines. Justice Nathan Hecht wrote for the majority that the test established in 1998 by the court in <i>In Re Continental General Tire Inc.</i> for discovery of trade secret information 'cannot be satisfied merely by general assertions of unfairness,' According to Judge Hecht's opinion, the plaintiffs in about 150 cases alleging Firestone tire-tread separations and Ford Explorer rollover accidents failed to show how access to the skim-stock formulas used by the tire company is necessary for a 'fair adjudication' of their claims.
Practice Tip: Consider Filing a Motion to Bifurcate Medical Causation
In a complex product liability case where medical causation is at issue, defendants may want to consider moving to bifurcate the trial so that medical causation issues are tried before any liability or damages issues. If the plaintiff fails to convince the jury that the product caused the alleged injury, the case will terminate. If the jury does find causation, the trial continues with the same jury and focuses on liability and damages issues.
The Impact of HIPAA Privacy Regulations on Discovery of Plaintiffs' Medical Records
When products liability defense counsel first heard of the new privacy regulations issued by the U.S. Department of Health and Human Services under the Health Insurance Portability and Accountability Act of 1996 (HIPAA Privacy Regulations), most counsel probably thought that only their regulatory healthcare colleagues would be affected by these detailed and complicated laws. How great an impact the HIPAA Privacy Regulations will have on product liability litigation in general is yet to be seen, but it is clear that these regulations will have an immediate effect on discovery of medical records. Under the statutory or common law of most states, when a plaintiff files a suit that puts his/her medical or health condition at issue, the plaintiff waives his/her right to privacy, to at least some extent, in his/her medical records. When the HIPAA Privacy Regulations became enforceable on April 14, 2003, this was no longer the case. Because the HIPAA Privacy Regulations provide strict privacy protection for a patient's medical information, even if the patient filed a lawsuit with his/her health at issue, discovery of the patient's medical records could become more difficult for product liability defense counsel. However, defense counsel still will have several options to obtain discovery of a plaintiff's medical records under the HIPAA Privacy Regulations.
Opinion Casts Doubt on Licensees' Ability to Protect Licenses
Ever since '365(n) was added to the U.S. Bankruptcy Code in 1988, a party with a license to use intellectual property — defined to include patents and copyrights but not trademarks — could rest assured that a bankruptcy filing by the licensor would not divest them of their right to use the property. Section 365(n) expressly provides that the rejection of an intellectual property license allows the licensee to retain its rights under the license, including the right to enforce any exclusivity provision. But a 2003 decision by the Seventh U.S. Circuit Court of Appeals, <i>Precision Industries Inc. v. Qualitech Steel SBQ, LLC</i>, casts serious doubt on the ability of licensees to protect their licenses under '365(n).
The Untapped Potential of IP Finance
Over the past few years, business, legal, and accounting authorities have quite rightly pointed out that corporate IP has far greater potential than its owners usually exploit. The consultancy McKinsey & Company has offered that, as a rule of thumb, a company that owns at least 450 patents and spends $50 million or more a year on R&D should possess enough intellectual property to bring some of it to market. Typically, 10% of the patent portfolio could be put to work in this way. McKinsey also suggests that IP assets could generate 5% to 10% of a company's operating income with little initial capital investment. Thus, effective IP-asset management can be equivalent to the improvement that might be expected from a 20% cut in expenses or from a successful acquisition. See Elton JJ, Shah BR, and Voyzey JN, 'Intellectual Property. Partnering for Profit,' The McKinsey Quarterly, 2002, Number 4 Technology.
Package Patent Licensing After Microsoft
The law governing package licensing of patents is currently undergoing a significant change. Historically, package licenses were subject to a 'per se' liability under the controlling legal doctrines. Using this per se test, a package license could be rendered unenforceable absent any inquiry into the actual market effects of the license. The recent case of <i>United States v. Microsoft</i>, 253 F.3d 34 (D.C. Cir. 2001), marks, however, the emergence of an antitrust doctrine called the 'rule of reason' that is likely to become the dominant legal doctrine for testing package licensing of patents. This is a significant change because the rule of reason is a market-based approach that balances the anticompetitive and pro-competitive benefits of the licensing practice. Thus, a package license may be held to be enforceable even if it would have failed the traditional per se test of the patent misuse doctrine or antitrust laws.
Understanding the Proposed New European Community Patent
Most inventors new to the patent system express a desire for an international patent — a monopoly good across the whole world from a single application. While it is unlikely that their desire will ever be satisfied, the prospect of being able to offer a patent throughout Europe in the form of a Community Patent may soon become reality. Such a Community Patent would be effective across all of the soon to be 25 member states of the European Union (EU).
