2018

Delay of Game: How the MLB’s Baseball Exemption has Stood the Test of Time

Alex Karnopp, MJLST Staffer 

Rushing home after a long day at law school, I eagerly anticipated tuning in to the Milwaukee Brewers match-up with their division rivals, the St. Louis Cardinals. With the two teams vying for a spot in the upcoming playoffs, the game’s broadcast was, expectedly, upgraded to a national broadcast on ESPN. But as I tuned in, I couldn’t find the broadcast. I checked online, and sure enough, my Minneapolis cable provider had blocked the broadcast. They incorrectly determined I was within viewing territory of the local Fox Sports Wisconsin broadcast of the game. On top of that, my MLB.tv internet streaming subscription was blocked because of their policy of not airing national broadcasts. Despite my numerous subscriptions to ensure I could view all Milwaukee Brewers game throughout the season, I was prevented from watching one of their biggest games of the year.

To MLB fans, my situation comes to no surprise – the “black-box” broadcasting policies of the league leaves many viewers without choices, since MLB-determined blackout territories usually outreach local broadcasting territories. Cities like Cedar Rapids, Iowa, or Las Vegas, Nevada, fall outside any local viewing broadcast territories, yet sit between six overlapping MLB blackout areas. Complaining fans have caught the attention of the legal system. A couple recent class action lawsuits seek to challenge the MLB’s policy of entering these lucrative contracts with local broadcasting networks. However, they face difficult legal hurdles, specifically the established Baseball Exemption.  

The Baseball Exemption has been the cornerstone of the MLB’s antitrust defense since its establishment in 1922 by the Supreme Court in Federal Baseball Club of Baltimore v. National League of Professional Baseball Clubs. Courts have routinely upheld the exemption, most recently in Flood v. Kuhn. They noted in this opinion, however, this exemption should be modified by “congressional, and no judicial, action.”

The two lawsuits, Laumann v. NHL and Garber v. Office of the Comm’r of Baseball, were consolidated, and sought to singlehandedly dismantle these television contracts as violations of the Sherman Act. Legal scholars expressed optimism this would end the Baseball Exemption defense as applied to broadcasting. As these scholars expected, the United States District Court for the Southern District of New York, on denying MLB’s motion for Summary Judgment, rejected their argument that the Baseball Exemption applied to televised broadcasting. Sensing danger, the MLB settled with the class minutes before the trial began. While conceding marginally better access to their MLB.tv proprietary internet streaming service, they preserved their blackout policy.

With their deep pockets, the MLB will continue this pattern of deferring judicial adjudication of the blackout policy by settling these class action lawsuits. If classes want to dismantle the MLB’s suspect blackout policies, they need to take the Supreme Court’s advice in Kuhn and resolve the problem via legislation. In 2015, Congress introduced the FANS Act to ensure antitrust laws applied equally among all American professional sports teams. There has been no movement since. Perhaps the lawsuit signals to Congress of the social and legal momentum to end the MLB’s blackout policies. However, these class action lawsuits will likely have no more effect than that. It will be interesting to see if Congress does anything with the introduced bill, as it appears the best route to fix this current problem.


Sulfur-Ore Mining in Minnesota: Are Near-Term Economic Gains Worth Long-Term Losses?

Sam Duggan, MJLST Staffer 

Mining copper and nickel from sulfur-ore in Northern Minnesota is different than mining iron from taconite, and the environmental consequences are orders of magnitude greater. Unfortunately, the public discourse around developing copper and nickel reserves largely fails to consider this. As a result, the public is not armed with information needed to rationally debate whether sulfur-ore mining is a good choice for Minnesota.   

Taconite is a relatively unreactive iron-containing mineral. Although miners exposed to asbestos-like compounds from taconite dust are likely at increased risk of mesothelioma, proper dust mitigation practices and sound environmental planning/reclamation can limit long-term consequences to a scarred landscape. However, as with other types of mining, there are consequences associated with boom-or-bust economics.   

In stark contrast to taconite, sulfur-ore is highly reactive and has a particularly insidious property. A decommissioned mine slowly fills with rain, snowmelt and ground water. Sulfur reacts with water and oxygen to produce sulfuric acid, which dissolves metals contained in the sulfur-ore. Like a liquid miner, this acid liberates geologically sequestered metals into a dissolved, bioavailable and toxic form. As metals dissolve from the mine walls, more sulfur is exposed to oxygen and water. This produces more sulfuric acid which dissolves more metals. Through this chain reaction, the mine “mines” itself for centuries or more after its decommission. Importantly, mining target metals (i.e., copper, nickel) never occur alone. They co-occur with non-targets (i.e., lead, cadmium, manganese, arsenic, sulfate) that also dissolve from mine walls. Over time, concentrations of toxic compounds grow higher. Once the mine fills, acidic and metal-rich water (acid mine drainage) leach down-gradient and poison the watershed. Similar processes also occur in tailings piles stored outside the mine.

Sulfur-ore mines are responsible for numerous Superfund sites, including the infamous Berkley Pit copper mine. In 2016, thousands of snow geese landed in Berkley Pit’s toxic water and died en masse. Consider also the 2015 Gold King mine spill. At Gold King, a mine entrance cap was accidentally ruptured during routine monitoring and 3 million gallons of acidic, metal-rich water poured into the Animas River in Southwest Colorado. Related lawsuits seek many millions in damages. The history of mining in the Western U.S. is replete with other examples of sulfur-ore mines contaminating watersheds.

Methods exist for mitigating sulfur-ore mine pollution including capping, chemical neutralization, and constructing water treatment facilities specifically dedicated to the mine. However, these options cost millions and must be perpetually maintained, as it is nearly impossible to prevent water and oxygen from entering a mine. The chain reaction can linger for millennia, continually dissolving metals from rock and leaching toxins into the watershed.

Notably, the mining corporations who reap the lion’s share of a mine’s economic benefit escape long-term environmental liability because bankruptcy law and parent-subsidiary corporate structure often shield parent corporations from their mining subsidiaries’ environmental liabilities. For precisely this reason, the mine permitting process often requires corporations to offer financial assurances for potential environmental damages. However, financial assurances underestimate damages, and taxpayers are left with the bulk of sulfur-ore mine cleanup costs for generations.

The long-term consequences of sulfur-ore mines were recognized by the Obama Administration, particularly regarding mining in Minnesota’s Boundary Waters watershed. In 2016, the Obama Administration instituted a 2-year moratorium on mining permits near the Boundary Waters to study effects of sulfur-ore mining. That study could have led to a 20-year permitting moratorium. However, in 2018, after only 15 months, the Trump Administration decided that the study did not reveal new information and lifted the moratorium. Now, parent companies such as Chile’s Antofagasta can apply for mining permits within the Boundary Waters watershed via their subsidiary company Twin Metals. The permitting process is already underway for Polymet — an open pit, sulfur-ore copper mine just outside the Boundary Waters watershed. Importantly, Minnesota’s sulfur-ore resources could support dozens of mines.  

Given that sulfur-ore mines are economically viable for a few decades and an environmental scourge for centuries or more, decision makers should consider whether near-term economic gains are worth long-term losses.


“Juuling”: Gen Z’s Alleged Addiction May Mean Major Legal Problems for E-Cigarette Companies

By: Jack Kall, Minnesota Journal of Law, Science & Technology Vol. 20 Staffer

With every new week comes new headlines regarding Gen Z and their latest craze. After years of Millennials being cast as the generation responsible for everything wrong in the world, (Business Insider’s list of 19 things Millennials are killing, including everything from homeownership, banks, football, and oil to beer, napkins, cereal, and bars of soap; NPR describing how Millennials are killing Applebee’s; Forbes claiming Millennials might kill home-cooked meals and kitchens) it seems the media has found a new culprit, Gen Z! Gen Z’s supposed addiction to e-cigarettes, specifically to the JUUL brand, is common among the headlines.

Depending on how you define the generation, Gen Z includes anyone born in the years starting with 1995–2000 and ending between 2014–25. Pew Research has yet to name or define the end date of Gen Z, but it defines the “Post-Millennial generation” as those born 1997 and later.

No matter how you define Gen Z, it includes high school students, many of whom are under the legal tobacco consumption age of 18. High schoolers have been a major reason for both the rise of e-cig popularity and for giving JUUL Labs major market share in the e-cig industry. Browse through social media pages popular within the Gen Z community and you’ll inevitably see numerous posts about “Juuling.” However, Gen Z isn’t alone in its supposed obsession with e-cigs, as Leonardo DiCaprio (a member of Gen X) has long been known to appreciate vaping (e.g., 1, 2, 3).

JUUL Labs, which launched in 2015, has been repeatedly investigated for targeting minors through its advertising and sued for targeting teens with false claims of product safety. In 2017, Consumer Reports found that teens who vape are seven times more likely to turn to regular cigarettes. Additionally, the CDC has declared e-cig use among young people a public health concern.

As further research is published, JUUL should expect be the main target of continued legal action. One current case, a nationwide class action with ten named plaintiffs aged above 13, alleges in part that JUUL’s decision to market through social media was aimed at soliciting those under the legal smoking age. Another case, filed on behalf of a high school sophomore, alleges that JUUL is commonplace among his school, including use “on the school bus, in the bathrooms, outside of school and even in class.”

JUUL Labs will hope to continue to have success while under major legal scrutiny for its marketing practices. JUUL, importantly, hopes it can continue to show growth following its impressive financial valuation (most recently raising $1.2 billion in a financing round that valued the company at over $15 billion).


The CASE Act: Enabling Copyright Trolls

By: Zander Walker, Minnesota Journal of Law, Science & Technology Vol. 20 Staffer

Since 2010, there has been a measurable shift in copyright litigation away from infringement deterrence and towards monetization. As recently as 2001, fictitious defendants (often referred to as “John Doe” defendants) were named in only 4% of cases, according to a recent review of copyright litigation. By 2016, John Doe defendants were named in approximately 40% of all copyright litigation. One single plaintiff, Malibu Media, accounted for approximately 60% of John Doe cases in the 2015­–16 period, totaling more than 2,600 lawsuits. These cases disproportionately resolve by voluntary dismissal and virtually never make it to trial. Because of their tendency to pursue legal action for improper or harassing reasons, these plaintiffs have been called “copyright trolls”

Generally, copyright trolls follow a fairly consistent format. The troll obtains a large number of IP addresses associated with a BitTorrent swarm and names those IP addresses as John Doe defendants in one or more complaints for copyright infringement. The troll then files a subpoena for identifying information (e.g., account holder’s name, billing address, etc.) corresponding to each IP address (a process referred to a “unmasking” an IP address). This identifying information allows the troll to send a settlement letter meant to scare the recipient—they typically state the maximum statutory damages of $150,000 and then offer to settle for a fraction of that value. Normally, the troll offers to settle for only a few thousand dollars, though these settlements can occasionally reach sums in the tens of thousands of dollars. Malibu Media, for example, normally obtains settlements valued between $2,000 and $30,000, according to a New Yorker interview with their attorney.

This format was pioneered by two alumni of the University of Minnesota Law School, John Steele and Paul Hansmeier (class of 2006 and 2007, respectively). Prenda Law acquired rights to a number of pornographic films and produced several of their own as well, engaging in thousands of lawsuits for alleged copyright infringement. They attracted notoriety for their unethical, and sometimes illegal, settlement tactics. Steele and Hansmeier were known for seeding torrents of their content in order to induce copyright infringement, and would name IP addresses from their own BitTorrent swarm as defendants. In addition to threats of legal action, Steele and Hansmeier would use the nature of the allegedly infringed content as a source of social blackmail, threatening to share the allegations with friends, family, or employers unless the settlement offer was accepted. Steele and Hansmeier made roughly $6 million through these coerced settlements before they were indicted on criminal charges of fraud and money laundering. Both have pleaded guilty.

Although Prenda Law is now defunct, other copyright trolls have taken their place. Malibu Media alone has filed more than 1,700 lawsuits in the first half of 2018. European nations have begun to crack down on copyright trolls by limiting the ability of trolls to unmask IP addresses, partly the result of lawsuits filed by several large European internet service providers to keep their customers’ information private. Though some US judges have also begun denying these subpoenas, a proposed law is poised to give copyright trolls an administrative bypass to the traditional judicial process for obtaining a subpoena. In October 2017, Rep. Jeffries (N.Y.) introduced the Copyright Alternative in Small-Claims Enforcement Act of 2017 (“CASE Act”), a bill designed to expediate the copyright dispute system for small-entity copyright holders by creating a “Copyright Claims Board” (“CCB”) within the Copyright Office. The CCB would possess broad adjudicatory powers so that it could take on low-value copyright infringement cases. However, section 1405(z) of the Act would allow the CCB to issue subpoenas capable of unmasking John Doe defendants and would grant it authority to promulgate its own rules governing the issuance of those subpoenas. Thus, a copyright troll could potentially utilize the CCB to identify victims in lieu of a subpoena from a federal court. Proponents of the CASE Act claim that copyright trolls would be deterred from filing claims with the CCB because the Act caps damages on CCB claims at $30,000. However, this statutory cap still far exceeds many settlements reached by copyright trolls, meaning it would likely have a minimal effect, if any, on deterring improper litigation. In effect, the CASE Act lacks sufficient safeguards to prevent the CCB from functioning like a “fast-track” for copyright trolls. The House Judiciary Committee has held several hearings on the CASE Act but has not yet put the Act to a vote. If the Act is enacted in the future, hopefully it is without section 1405(z).


California’s Sport Venue Boom: A Weakening of CEQA?

By: Gabe Branco, Minnesota Journal of Law, Science & Technology Vol. 20 Staffer

The Los Angeles Rams, Sacramento Kings, Golden State Warriors, Los Angeles Clippers, and Oakland A’s are all seeking to build new stadiums in compliance with the California Environmental Quality Act (“CEQA”). CEQA subjects public and private agencies to a process focused on determining any significant environmental impact the proposed project may have and whether any suitable alternatives exist that may mitigate those significant impacts. The process takes some time, as the agency must complete several environmental impact reports (“EIR”), allow for adequate public notice and comment, and provide a period of time for environmental based claims to be litigated.

The Golden State Warriors have been successful in their CEQA process, but have been subjected to high costs in preparing the EIRs and combating lawsuits from environmental groups. The Los Angeles Rams have taken a different approach. CEQA allows for agencies to file for project “statutory exemptions” in order to cut down on the lengthy procedural process. One exemption of CEQA is the voter-sponsored ballot initiatives. In California, it is the right of the people to make changes to the law through these initiatives, which have the same effect as legislation. Land use decisions are subject to these initiatives, and thus projects that are approved through the initiative are not subject to CEQA. The Los Angeles Rams collected signatures from 15% of the population in Inglewood to qualify the development project for special election. The development project was then supposed to be placed on the ballot initiative, but the Inglewood City Council unanimously approved the project. The Los Angeles Rams do not need to complete an EIR, provide time for notice and comment, and are shielded from litigation. The Los Angeles Clippers, Sacramento Kings, and Oakland A’s have received or are in the process of receiving legislative exemptions with varying CEQA procedures somewhere in between the Golden State Warriors’ and the Los Angeles Rams’ processes. While the afore-mentioned franchises must still complete an EIR, they have considerably reduced (or eliminated) litigation and notice and comment periods.

The question becomes whether these exemptions given so willingly to sports teams weaken CEQA’s ability to force agencies to be more considerate of a project’s environmental impacts and alternatives. Sport stadiums do have a significant impact on the environment. Shortening or doing away with judicial review and notice and comment limits the number of alternatives an agency could be made aware of and limits public recourse for legitimate claims, leading to a less than efficient plan for limiting significant environmental impacts.

So far, the courts have held that past projects with CEQA exemptions do not conflict with CEQA’s purpose. Saltonstall v. City of Sacramento, 234 Cal.App.4th 449 (2015). The rationale may well be rooted in the desire for the Courts to limit the amount of environmental litigation on the Court’s docket, and push through stadium projects that may vitalize a California city’s economy. While state legislators have introduced a bill that would prevent future sports teams from gaining the exemption the Los Angeles Rams received, teams may still limit the procedures enforced by CEQA through legislative exemptions. Clearly, that as long as sports have a strong economic foothold in American culture, sports stadiums will continue to be built at the expense of the environment.


Big Houses with Big Energy Demands

Bethany Anderson, MJLST Staffer 

A recent Aspen Times article says Pitkin County, home of the popular Aspen ski resort and numerous mountain mansions, will target larger homes as it heightens energy efficiency requirements and raises energy prices. The proposed change would increase a per-square-foot energy consumption fee from $1 to $45 for homes over 5,750 square feet and to $60 for homes over 8,250 square feet. While some argue changing these requirements is the best way to reduce energy demand on strained resources, others say the consumption fees don’t address key aspects of large home construction: the resources used in construction, the waste of resources in demolition, and the energy demand from pools, hot tubs, and snow-melting driveways

The U.S. isn’t alone in balancing growing (in various senses) housing demands and energy consumption constraints. Similar home size concerns arise in Australia, where housing units have increased in size while the number of residents per unit has decreased. That means energy usage per unit increases.

On the other hand, in an era of innovation and new technologies, smaller doesn’t necessarily mean more efficient. One Virginia man doubled the size of the house on his lot but cut energy bills. He says it’s not about being “eco-friendly” or about building a smaller home; rather, it’s about taking the time and effort – and shouldering the cost – needed to construct a sound, well-insulated home.

All of this poses legal and technological challenges. Technologically, how can (some) people get what they want – a big, “American-dream” house – without overconsuming energy? More investigation into construction techniques and materials – as professed by that Virginia man – could prove fruitful. Legally, can residences be regulated in the manner Pitkin County wants to regulate? Homes have not historically been regulated as products under the EPCA, a 1975 statute concerned primarily with energy supply, demand, and efficiency. Perhaps more comprehensive regulation, or including homes under the EPCA, would solve the energy demand and efficiency problems Pitkin County faces in a more equitable way than slapping on fees for large homes. New Jersey offers a rebate for homes that meet energy efficiency standards – maybe rewards are better than penalties. Australia proposes adding embodied energy, or the energy used in each step of production of a certain thing, to the cost calculus. And, though Pitkin County is considering increased fees, it has thus far not supported square footage limits for snow-melt driveways, pools, hot tubs, or patios. These might be good starting points for striking a balance between big demand for big things against limited energy resources.

 


Printing Pistols: Litigation Continues over the Legality of 3-D Printable Firearms

Holm Belsheim, MJLST Staffer 

3-D printing is the process of creating three dimensional objects by layering very thin layers of plastic into the desired shape. All you need is the printer, raw material, and a good blueprint. From gadgets and toys for home use to replacement organs, there are many things one can make. Some of the possibilities, however, pose significant legal concerns. At the heart of years of litigation is a group behind the designs for a working, 3-D printable firearm.

In 2013 Cody Wilson founded Defense Distributed to distribute and monetize 3-D printable gun designs. Defense Distributed’s first design, the Liberator, could fire a single shot. Plans for the Liberator were downloaded an estimated 100,000 times from the Defense Distributed website alone, and have since been hosted on several other sites. As of 9/25/2018, a search of the Defense Distributed file site DEFCAD turned up nine different designs for printable guns and gun parts. The group ultimately hopes to create a larger community of 3-D gun designers and printers.

Ignoring the national debate over firearms, 3-D printed guns pose a unique security risk. Making a gun is not illegal. Liberators are concerning because, like most 3-D printed objects, they are made of plastic. They aren’t detectable by metal detectors, and furthermore lack serial numbers or other identifying information. Per the Undetectable Firearms Act, undetectable guns have been illegal since 1988. While the Liberator design incorporates two metal pieces, one solely to set off metal detectors, the design doesn’t require them to function. Anyone with a 3-D printer can choose whether to include these pieces. Thus, these ‘ghost guns’ pose a substantial security risk.

The Liberator debuted on May 6th, 2013. Two days later, Defense Distributed took down the designs after the U.S. State Department deemed them a violation of export laws under the Arms Export Control Act. In 2015, citing 1st, 2nd and 5th Amendment arguments, Defense Distributed sued the United States in District Court (Defense Distributed v. U.S. Dept.t of State, 121 F.Supp.3d 680, (W.D.T.X. 2015)) and then, upon appeal, in the Fifth Circuit (838 F.3d 451, (5th Cir.  2016)) before being denied certiorari by the U.S. Supreme Court. Surprising some, the U.S. Government settled with Defense Distributed in 2018, giving the group license to upload the plans again as well as paying some of their legal fees. Only a few days after the plans were reuploaded however, Oregon and several states sued Defense Distributed, the U.S. State Department and others.(State of Washingtonv. U.S. Dept.of State2:18-cv-01115-RSL (W.D.W.A. 2018)). Subsequently U.S. District Judge Robert Lasnik issued a restraining order against Defense Distributed’s hosting of the plans.

So far, the injunction doesn’t seem to have done much. Near the end of the order is this phrase: “Regulation under the AECA means that the files cannot be uploaded to the internet, but they can be emailed, mailed, securely transmitted, or otherwise published within the United States.” Interpreting this literally, Defense Distributed removed the option to directly access digital plans but has continued sales through other means, namely mailing copies on USB sticks. At least 400 orders have been placed. Whether this workaround remains legal will likely be brought up in the future. For now it’s anyone’s guess whether Defense Distributed read it correctly or played a little too loose with the spirit of the injunction. My prediction is that Defense Distributed won’t be penalized: the options laid out in the injunction are too specific to be accidental.

The litigation is expected to continue. As of 9/25/2018, Defense Distributed has raised $342,000 for its legal expenses while receiving assistance from the Second Amendment Foundation and others. Meanwhile, a total of 21 Attorneys General are on the opposing side. They cheered the injunction but aim for more, potentially a complete ban on 3-D printable guns. The arrest of former Defense Distributed director Cody Wilson on unrelated charges has had no effect upon the case so far.


Lime and Bird Have Tough Legal Challenges Ahead

Nick Hankins, MJLST Staffer 

The hottest trend in on-demand transportation is the emergence of electric scooters. Two of the biggest suppliers of on demand scooters, Lime and Bird, have invaded cities across the country. Scooters are a quick, easy, and cheap way to travel short distances; riders can simply find a scooter, sign into the app, and go. They also have the added benefit of servicing gaps within a city’s public transportation system. Despite the benefits that these companies can bring to a community, Lime and Bird have significant legal hurdles to overcome.

Problematically for cities, pedestrians, and probably the scooter companies, is that unlike bike sharing platforms, once a rider is done with a scooter it is simply left discarded. Both Lime and Bird encourage their users to park their scooters close to the curb, away from walkways, driveways, ramps, and fire hydrants. However, in practice, scooters tend to be left strewn across the middle of sidewalks and other undesirable places. Aside from being a public nuisance, unaware pedestrians have been injured after tripping over misplaced scooters.

These features have caused a big headache for cities especially since companies like Bird and Lime generally install their scooters in cities without seeking prior approval. However, the do-first-and-ask-forgiveness-later approach has begun to haunt companies that attempt to cut cities entirely out of the process. For example after Milwaukee tried to ban Bird’s scooters (and Bird’s subsequent refusal to remove its scooters), Milwaukee moved to seek a temporary injunction to immediately have the scooters removed. Additionally, after failing to secure the proper business licensure and vendor permitting, Bird had to settle a dispute with the City of Santa Monica  for $300,000 and an agreement to run a weeklong public safety campaign on public buses. Other cities like Saint Paul, San Francisco, and Indianapolis required scooter companies to temporarily remove their scooters until regulations could be firmly decided upon.

Aside from legal complications stemming from municipal regulation, scooter companies may soon have to defend their products in court. As the electric scooter craze is gaining traction, riders are increasingly ending up in the emergency room in horrific scooter-related accidents. The types of injuries involved in these accidents are varied. Some accidents have to do with the laissez-faire storage practice as pedestrians trip over discarded scooters. Other injuries involve user error. In one case, for example, a rider crashed into a 2 year-old  who was walking out onto a sidewalk. Likely the most problematic injuries for scooter companies, involve technical malfunctions (especially those involving the breaks). Accordingly, it’s unsurprising that personal injury lawyers are beginning to chase scooters in hopes of getting their next big payday.

In short, Lime and Bird offer a unique solution for people who need to travel short distances. However, both companies will soon have to figure out ways to work with cities and how to avoid tort exposure.

As an aside, both companies will also have to deal with whatever fall-out comes from having teens charge their scooters.


Counterfeit Products: A Growing Issue for Online Retailers

Caleb Holtz, MJLST Staffer

Two years ago, my girlfriend gave me an Amazon receipt showing she had ordered a really cool jersey from the German national soccer team. I was very excited. Not only had my girlfriend purchased for me a great jersey, but she had also found a reputable, accessible retailer for buying soccer jerseys in the United States. My excitement soon faded however. The jersey was delayed and delayed, and eventually Amazon cancelled the order and issued a refund. It turned out the jersey was sold by a popular counterfeiter hosting products on Amazon’s site through Amazon’s popular “Fulfilled by Amazon” program. Unaware that this existed prior to this experience, my girlfriend had been lured into a false sense of security that she was purchasing something from the world’s largest retailer, rather than from an obscure counterfeiter.

As it turns out, we were far from the only consumers to fall prey to counterfeit goods being sold on Amazon. Per a recent Engadget article discussing the issue, “the Counterfeit Report, an advocacy group that works with brands to detect fake goods, has found around 58,000 counterfeit products on Amazon since May 2016.” Amazon, recognizing that customers are more likely to trust counterfeits sold on its website, set a goal in 2017 to fight counterfeits.

Amazon is hardly the only retailer dealing with counterfeiting issues. The International Trademark Association said that trade in pirated and counterfeited intellectual property accounted for $461 billion in 2013. The Chinese retail giant Alibaba was at one point put on a U.S. anti-counterfeiting blacklist because of the large quantities of counterfeit goods sold on its website. Ebay, Walmart, Sears, and Newegg have also faced allegations of hosting counterfeited products. Importantly, however, for each of the retailers, there are few legal repercussions for merely hosting counterfeit goods. With the exception of a 2008 case against eBay, the aforementioned retailers have largely avoided being found liable for the counterfeit products they aided in selling.

Amazon provides the best blueprint for avoiding liability. Amazon has avoided liability by arguing that while it may host sellers, it is not a seller itself. Fortunately for Amazon, the Federal Circuit agrees that it is not a seller of the counterfeit goods, and therefore cannot be liable for copyright infringement, even if Amazon stored and shipped the products from its own warehouses. Milo & Gabby LLC v. Amazon.com, Inc., 693 Fed.Appx. 879 (Fed. Cir. 2017). As it is merely a marketplace, Amazon can continue avoiding liability so long as it appropriately responds to complaints of intellectual property infringement.

It will be interesting to see how the parties involved handle this counterfeiting issue going forward, especially as the government anticipates counterfeiting business to continue to grow. Online retailers are taking proactive steps to limit the sale of counterfeits on their websites, although those have been far from effective. Some have suggested artificial intelligence holds the key to solving this problem. Wronged intellectual property owners have not given up on forcing a remedy through the judicial system, as can be seen by the lawsuit filed by Daimler against Amazon recently. Finally, some, such as the judge in the Milo & Gabby case, see a legislative approach such as closing the marketplace loophole that allows online retailers to skate by relatively untouched. Unfortunately for consumers, it does not appear like there is an imminent solution to this problem, so it is best to be aware of how to avoid accidentally purchasing a counterfeit.


Update: Tribal Sovereign Immunity Can’t Protect Allergan from the PTAB

Brenden Hoffman, MJLST Staffer

 

Last September, the pharmaceutical company Allergan entered an agreement with the Saint Regis Mohawk Tribe where the pharmaceutical company sold its patents for the wildly successful drug Restasis to the tribe. The six patents were then licensed back to Allergan.  These moves have been widely criticized as a sham transaction. For more information about this controversy and its role in the ongoing debate over inter partes reviews (IPR’s), see my October 15, 2017 post here.

On February 23, 2018, the PTAB ruled that tribal sovereign immunity does not apply to IPR’s and denied the Saint Regis Mohawk Tribe’s Motion to Terminate the challenges to the Restasis patents made by Mylan Pharmaceuticals Inc., Teva Pharmaceuticals USA Inc. and Akorn Inc.   In this decision, the PTAB dealt a serious blow to the Allergan/Saint Regis Mohawk Tribe deal, finding that tribal sovereign immunity does not apply to IPR proceedings generally and that in this specific instance, that there was no real tra