{"id":146,"date":"2019-02-07T01:17:23","date_gmt":"2019-02-07T01:17:23","guid":{"rendered":"https:\/\/gayton-law.com\/?p=146"},"modified":"2019-02-07T01:17:23","modified_gmt":"2019-02-07T01:17:23","slug":"whats-happening-in-technology-intellectual-property-contracts-february-2019","status":"publish","type":"post","link":"https:\/\/gayton-law.com\/?p=146","title":{"rendered":"What\u2019s Happening in Technology, Intellectual Property &#038; Contracts \u2013 February 2019"},"content":{"rendered":"<h2>This month:<\/h2>\n<ul>\n<li>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <em>United States v. Stetkiw<\/em><\/li>\n<li><em>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/em><em>Helsinn Healthcare v. TEVA<\/em><\/li>\n<li><em>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/em><em>Goggin v. National Union Fire Insurance Company<\/em><\/li>\n<\/ul>\n<h2>Technology News \u2013 Bitcoin<\/h2>\n<p><a href=\"https:\/\/www.courtlistener.com\/recap\/gov.uscourts.mied.332293\/gov.uscourts.mied.332293.37.0.pdf\"><em>United States v. Stetkiw<\/em>,<\/a> Case No. 18-2057 (E.D. Mich., 2\/1\/19)<\/p>\n<p>The U.S. District Court for the Eastern District of Michigan, Southern Division, was asked to determine whether the defendant, Bradley Stetkiw, was entitled to a decision in his favor on two motions: 1. A motion to dismiss for lack of probable cause and 2. A motion to dismiss his indictment\u2019s the third count alleged in this criminal case under 18 U.S.C. \u00a7 1960, Prohibition of unlicensed money transmitting businesses. These motions were filed in relation to an ongoing criminal case regarding his Bitcoin exchange service and his alleged possession of child pornography.<\/p>\n<p><u>Background<\/u><\/p>\n<p>In an <a href=\"https:\/\/www.courtlistener.com\/docket\/7766374\/1\/united-states-v-stetkiw\/\">indictment<\/a> entered on August 29, 2018, a grand jury charged Bradley A. Stetkiw under the following counts: 1) That Bradley Stetkiw \u201cdid knowingly receive child pornography, as defined in 18 U.S.C. \u00a7 2256(8)(A) and \u201cthat images received were \u201cmailed, shipped and transported using the Internet \u2026 in violation of Title 18, United States Code Section 2252A(a)(2)\u201d 2), that Bradley Stetkiw \u201cdid knowingly possess images that contained an image of child pornography\u201d and 3) that Bradley Stetkiw \u201cdid knowingly conduct, control, manage, supervise, direct, and own all and part of a money transmitting business affecting interstate and foreign commerce, that is, a Bitcoin exchange service, which failed to comply with the money transmitting business registration requirements set forth in Title 31, United States Code, Section 5330, in violation of Title 18, United States Code, Section 1960.\u201d<\/p>\n<p><u>Claims<\/u><\/p>\n<p>In Stetkiw\u2019s motion to dismiss for lack of probable cause, Stetkiw claimed that evidence collected during a search of his home must be suppressed because the search warrant, based on the alleged violation of Section 1960, was not supported by probable cause.<\/p>\n<p>In Stetkiw\u2019s motion to dismiss the third count, he claimed that the count failed to state an offense under Section 1960 and must be dismissed.<\/p>\n<p>In both claims, Stetkiw asserted that bitcoin was not money or funds as required under Section 1960, because it did not \u201cenjoy the protection of a sovereign government\u201d and that the term \u201cmoney transmitting\u201d only applied in situations where a defendant acted \u201cas an intermediary to transfer from one person or entity on behalf of another and does not cover the type of two-party transactions [he] is accused of conducting.\u201d<\/p>\n<p>In the alternative, Stetkiw asked for leniency because the \u201cstatute is ambiguous as applied to buying and selling Bitcoin.\u201d<\/p>\n<p><u>Court Analysis<\/u><\/p>\n<p>The court said that although the applicable section does not \u201cspecify what counts as \u2018money\u2019 for purposes of determining a violation, it is clear that it pertains to the transmission of funds.\u201d The court provided several examples of federal district court decisions where the courts found that \u201cBitcoin constitutes \u2018money\u2019 and \u2018funds\u2019 were within the meaning of 18 U.S.C. \u00a7 1960.\u201d<\/p>\n<p>The court also said that the transactions in which Stetkiw was engaged \u201cfalls within the plain meaning of \u2018transferring funds on behalf of the public <em>by any and all means\u2019 <\/em>(emphasis in original)\u201d under Section 1960. The court goes on to explain that its findings may have been different if Stetkiw was alleged to have engaged in the transmissions for his own benefit as an investment for his own account, but the allegation is that he was engaged in a business related to the exchange of bitcoin for fiat. In addition, it is alleged that Stetkiw charged a per transaction fee.<\/p>\n<p>Finally, the court said that Stetkiw is not entitled to leniency because the statute is unambiguous. It quoted the case <em>Moskal v. United States<\/em>, 498 U.S. 103, 108 (1990) which said leniency is \u201creserved \u2026 for those situations in which a reasonable doubt persists about a statute\u2019s intended scope even after resort to \u2018the language and structure, legislative history, and motivating policies\u2019 of the statute.\u201d The court said that there was no ambiguity regarding the statute\u2019s scope under Section 1960.<\/p>\n<p>The court denied both motions. The case is ongoing.<\/p>\n<h2>Intellectual Property \u2013 Patents<\/h2>\n<p><a href=\"https:\/\/www.supremecourt.gov\/opinions\/18pdf\/17-1229_2co3.pdf\"><em>Helsinn Healthcare v. TEVA Pharmaceuticals <\/em>(<\/a>2019)<\/p>\n<p>This appeal to the Supreme Court from the Federal Circuit which reversed a District Court decision in favor of Helsinn, asked \u201cwhether the sale of an invention to a third party who is obligated to keep the invention confidential places the invention \u2018on sale\u2019 within the meaning of \u00a7102(a)\u201d which says: \u201cA person shall be entitled to a patent unless \u2026 the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the pubic before the effective filing date of the claimed invention.\u201d \u00a0<a href=\"https:\/\/www.law.cornell.edu\/uscode\/text\/35\/102\">\u00a7102(a) Novelty, Prior Art<\/a>.<\/p>\n<p><u>Background<\/u><\/p>\n<p>Helsinn Healthcare makes a chemotherapy-induced nausea treatment product called \u201cpalonosetron.\u201d In about 2011, it entered into two agreements with a company called MGI Pharma that markets and distributes drugs in the United States. One was a licensing agreement and the other was a supply and purchase agreement. Under the license, MGI was granted the right to \u201cdistribute, promote, market and sell\u201d two dosage sizes, 0.25 mg and 0.75 mg in return for upfront payments and future royalties. Under the supply agreement, MGI was required to purchase any FDA-approved palonosetron product exclusively from Helsinn. Both agreements required that MGI maintain as confidential any proprietary information it received. These agreements were announced in Helsinn\u2019s SEC form 8-K filing with attached redacted agreement versions. Close to two years later, in 2003, Helsinn started filing a series of patent applications. The fourth and most recent application, and the one at issue in this case, was filed in May 2013.<\/p>\n<p>TEVA is a generic drug manufacturer that sought FDA approval to market a generic 0.25 mg palonosetron product. Helsinn brought an infringement suit against TEVA under all its palonosetron related patents, including the 2013 patent. The patents filed before 2013 were subject to what is called the \u201con sale\u201d bar in effect before the America Invents Act (AIA) was applicable starting in 2011.<\/p>\n<p><u>Court Analysis<\/u><\/p>\n<p>The federal patent systems is intended to encourage \u201c\u2018the creation and disclosure of new, useful, and nonobvious advances in technology and design\u2019 by granting inventors \u2018the exclusive right to practice the invention for a period of years.\u2019\u201d (Citations omitted.) There are restrictions on the grant of the exclusive right, including the \u201con-sale\u201d bar which \u201creflects Congress\u2019 \u2018reluctance to allow an inventor to remove existing knowledge from public use\u2019 by obtaining a patent covering that knowledge.\u201d Helsinn asked the Court whether the AIA language which includes the phrase \u201cor otherwise available to the public\u201d required that the invention itself be available to the public in order to meet the bar. The Court identified several cases where the term \u201con sale\u201d was interpreted as well as situations where there were \u201csecret sales\u201d that invalidated a patent. The Court goes on to say that it presumed that Congress, when it drafted the AIA, intended to adopt the \u201cearlier judicial construction\u201d of the phrase \u201con-sale\u201d since it had settled meaning and settled body of law.<\/p>\n<p>The Federal Circuit\u2019s determination that the invention was \u201con sale\u201d within the meaning of the patent statute before the AIA was not disputed by Helsinn. Since the Court determined that Congress did not \u201calter the meaning of \u2018on sale\u2019 when it enacted the AIA\u201d it held that \u201can inventor\u2019s sale of an invention to a third party who is obligated the keep the invention confidential can qualify as prior art under <a href=\"https:\/\/www.law.cornell.edu\/uscode\/text\/35\/102\">\u00a7102(a)<\/a>\u201d<\/p>\n<p><em>This case serves as a useful reminder that the on-sale bar is alive and well post America Invents Act. It is also a useful reminder that confidentiality agreements can only be used so far as they related to patent-protection intended products. <\/em><\/p>\n<h2>Contracts \u2013 Directors &amp; Officers Insurance<\/h2>\n<p><em>Goggin v. National Union Fire Insurance Company<\/em>, C.A. No.: N17C-10-083 PRW CCLD (Del Sup. Nov.30, 2018)<\/p>\n<p>Businesses rely on Directors &amp; Officers (D&amp;O) insurance policies to guard a company against the acts of their directors and officers. These policies usually cover attorney costs and indemnification. Insurance companies include exceptions to coverage under specific circumstances, and will generally only cover those acts that arise out of directors and officers actions while performing for the benefit of the covered business. A D&amp;O policy generally does not cover a director\u2019s or officer\u2019s wrongful or illegal acts in the form of acts that constitute a conflict of interest against the covered company. Plaintiffs here asked the court whether U.S. Coal\u2019s D&amp;O policy with National Union required the policy to pay damages and defense costs for claims made against them.<\/p>\n<p><u>Background<\/u><\/p>\n<p>The plaintiffs, Keith Goggin and Michael Goodwin, sought a decision in their favor requiring U.S. Coal Corporation\u2019s insurance company to pay for damages and defense costs for claims made against \u201cU.S. Coal\u2019s past, current, or future directors and officers.\u201d Goggin and Goodwin were initially investors and became directors in 2009 until their resignations. Goodwin resigned in 2012, and Goggin resigned in 2014. National Union Fire Insurance Company issued a D&amp;O policy from 11\/2013\u20135\/2015 that covered U.S. Coal and its officers. The policy said that it \u201cpay[s] the Loss of an Individual Insured \u2026 for any Wrongful Act \u2026 except when and to the extent that the Company has indemnified such Individual Insured.\u201d<\/p>\n<p>Almost from the beginning of their director status, Goggin and Goodwin engaged in activities to allegedly improve U.S. Coal\u2019s prospects via debt purchases and capital restructuring. They used two investment vehicles, East Coast Miner, LLC (EMC), formed in 2009, and East Coast Mine II LLC (EMCII) formed in 2011. Googin was an investor\/manager in both. Goodwin was just an investor in both.<\/p>\n<p>In 2014, U.S. Coal entered into Chapter 7 bankruptcy proceedings brought by their creditors. A trustee was appointed and the Official Committee of Unsecured Creditors brought individual suits against Googin, Goodwin, ECM and ECM II alleging \u201camong other things, that Goggin and Goodwin breached their fiduciary duties and committed other acts in favor of their own personal interests.\u201d Goggin and Goodwin\u2019s counsel requested that National Union assume defense, which it did for some claims, but with regard to the claims against Goggin and Goodwin, it determined that the D&amp;O policy did not cover their actions as found under the policy\u2019s \u201ccapacity\u201d exclusion, which says that the wrongdoing that breached their fiduciary duties was not \u201csolely by reason of their status as [U.S. Coal] Executives.\u201d<\/p>\n<p>The parties entered into unsuccessful mediation which resulted in the action in Delaware\u2019s Superior Court. Goggin and Goodwin wanted the court to declare that National Union had to pay all defense and indemnity costs. After an exchange of pleadings and motion filings, Goggin and Goodwin asked the Superior Court to make a judgment based on the pleadings.<\/p>\n<p><u>Claims<\/u><\/p>\n<p>Goggin and Goodwin claimed that the \u201calleged conflict of interest existed due to their capacities and status as both the directors of U.S. Coal and the member\/managers of ECM and ECM II does not eliminate the coverage via the \u2018capacity\u2019 exclusion if the alleged wrongful action was performed in their capacities as directors of U.S. Coal.\u201d<\/p>\n<p>National Union claimed that the conduct did not arise from the plaintiffs\u2019 capacity as U.S. Coal directors, but rather in their capacity as members\/managers of the ECM entities.<\/p>\n<p><u>Court Analysis<\/u><\/p>\n<p>Under Delaware law, a contract\u2019s language, including those in an insurance policy, should adhere to what \u201cwould be understood by an objective, reasonable third party.\u201d The court determined that the policy\u2019s exclusion language was \u201cclear and unambiguous\u201d so the court considered the contract terms based on their \u201cplain and ordinary meaning.\u201d The court further explained that Delaware law adopted the construction of the term \u201carising out of\u201d as understood to mean \u201cincident to, or having connection with.\u201d In this context, the court considered if the conduct of the underlying claim would have failed \u201cbut for\u201d that conduct. The court therefore concluded that but for the plaintiffs\u2019 actions taken as members\/managers of the ECM entities, there would not have been a claim.<\/p>\n<p>The court found that the creation and use of the ECM entities was to facilitate self-dealing benefiting themselves \u201cat the expense of U.S. Coal\u201d and was the \u201ccore of the Trustee Claims.\u201d It concluded that the exclusionary clause under the D&amp;O Policy applied and that National Union was not obligated to cover the plaintiffs\u2019 actions.<\/p>\n<p>The motion for judgment on the pleadings were denied.<\/p>\n<p><em>This case is instructive regarding directors\u2019 and officers\u2019 behavior and D&amp;O policy coverage. Fortunately, the policy was resolved in favor of the entity that it was designed to benefit \u2013 U.S. Coal. <\/em><\/p>\n<p><strong>Publications<\/strong><\/p>\n<p><strong><em>Legal Aspects of Engineering, Design and Innovation<\/em><\/strong><strong> 10<sup>th<\/sup> edition by Cynthia Gayton, February 2017.<\/strong><\/p>\n<p>This edition is available through the publisher, <a href=\"http:\/\/www.kendallhunt.com\/store-product.aspx?id=26298\">Kendall-Hunt publishers<\/a> and on Amazon.com in paper and e-book form. This book is used in several engineering courses and is a useful reference for anyone interested in contracting, intellectual property, engineering practice, and other general legal issues. This new edition includes separate chapters for each intellectual property type, introduces and explanation of blockchain smart contracts, discusses trends in product liability, and has recent case law to highlight chapter topics. It also expands from a primarily engineering perspective to include design professionals and innovation-specific coverage.<\/p>\n<p><strong><em>Guide to Copyrights &amp; Trademarks for CryptoCreatives<\/em> by Cynthia Gayton, January 2019.<\/strong><\/p>\n<p>This <a href=\"https:\/\/www.amazon.com\/Copyrights-Trademarks-CryptoCreatives-Cynthia-Gayton-ebook\/dp\/B07MMP84NC\/ref=sr_1_1?s=digital-text&amp;ie=UTF8&amp;qid=1547847760&amp;sr=1-1\">guide<\/a> is available as an e-book on Amazon.com and is intended to introduce basic contract, copyright and trademark concepts for the benefit of creatives in the crypto community. It covers the art and music market, provides an introduction to contracts and smart contracts, and briefly explains copyright and trademarks.<\/p>\n<p>Thank you for reading!<\/p>\n<p><em>The information contained in this post is for general guidance on matters of general interest only. The application and impact of laws can vary widely based on specific facts. The information contained in this newsletter should not be construed as a substitute for consultation with professional advisors. Certain links in this newsletter connect to other websites maintained by third parties over whom Gayton Law has no control. Gayton Law makes no representations as to the accuracy or any other aspect of information contained in other websites.<\/em><\/p>\n<p>\u00a9 2019 Gayton Law<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>This month: \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 United States v. Stetkiw \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Helsinn Healthcare v. TEVA \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Goggin v. National Union Fire Insurance Company Technology News \u2013 Bitcoin United States v. Stetkiw, Case No. 18-2057 (E.D. Mich., 2\/1\/19) The U.S. District Court for the Eastern District of Michigan, Southern Division, was asked to determine whether the defendant, Bradley Stetkiw, [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[31,18,30,33],"tags":[46,99,56,98,32,45],"class_list":["post-146","post","type-post","status-publish","format-standard","hentry","category-america-invents-act","category-contracts","category-patents","category-technology","tag-america-invents-act","tag-bitcoin","tag-contracts","tag-insurance","tag-ip","tag-patents"],"_links":{"self":[{"href":"https:\/\/gayton-law.com\/index.php?rest_route=\/wp\/v2\/posts\/146","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/gayton-law.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gayton-law.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gayton-law.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/gayton-law.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=146"}],"version-history":[{"count":5,"href":"https:\/\/gayton-law.com\/index.php?rest_route=\/wp\/v2\/posts\/146\/revisions"}],"predecessor-version":[{"id":151,"href":"https:\/\/gayton-law.com\/index.php?rest_route=\/wp\/v2\/posts\/146\/revisions\/151"}],"wp:attachment":[{"href":"https:\/\/gayton-law.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=146"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gayton-law.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=146"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gayton-law.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=146"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}