Justia U.S. Federal Circuit Court of Appeals Opinion SummariesArticles Posted in Business Law
XOTech, LLC v. United States
The Small Business Act requires that many federal agencies set aside contracts to be awarded to certain categories of small businesses, including service-disabled-veteran-owned (SDVO) small businesses, 15 U.S.C. 644(g)(1)(B). For a limited liability company (LLC) to qualify as SDVO, one or more SDVs must directly and unconditionally own at least 51% of each class of member interest. For an LLC to be controlled by SDVs, one or more SDVs must control the company’s long-term decision making, conduct its day-to-day management and administration of business operations, hold the highest officer position, serve as managing members, have “control over all decisions” of the LLC and “meet all supermajority voting requirements,”XOtech LLC, previously organized with Marullo (an SDV) as its only manager, became a multiple-manager company with four “Members” as owners. The Army issued a Request for Proposals seeking an SDVO contractor to provide logistics support for Army Reserve facilities. XOtech was awarded the contract. The Director of the SBA’s Office of Government Contracting determined that XOtech did not qualify for SDVO status and sustained a protest, finding that, although Marullo owned XOtech, he lacked sufficient control over XOtech’s operations because he required the vote of at least one non-SDV to make management decisions. The Claims Court and the Federal Circuit affirmed, finding that service-disabled veterans do not control “all decisions” of XOtech as required by 13 C.F.R. 125.13(d). View "XOTech, LLC v. United States" on Justia Law
BASR Partnership v. United States
Before selling their business, Page Printing, the Pettinatis followed the tax strategy suggested by their attorney and formed BASR, a general partnership. BASR assumed Treasury Note obligations, which increased its cost basis; each of the partners contributed all their Page shares to BASR in 1999. Two months later, BASR sold 100% of its Page stock for $6,898,245. When offset against its overstated cost basis, BASR realized a gain of only $263,934. The Pettinati partners reported their shares on their 1999 individual returns. In 2010, the IRS issued a final partnership administrative adjustment (FPAA), disallowing the tax benefits generated from BASR’s 1999 tax filing. Pettinati challenged the FPAA as untimely under I.R.C. 6501(a)’s three-year statute of limitations. BASR had “zero assets,” and had filed its last partnership return in 1999. BASR offered the government $1.00 to settle; the government refused. In 2013, the Claims Court granted BASR summary judgment. The Federal Circuit affirmed. In 2016, BASR sought litigation costs under 26 U.S.C. 7430(c)(4)(E). The Federal Circuit affirmed an award of $314,710.69, rejecting the government’s arguments: that BASR does not qualify for lcosts under section 7430(a) because a partnership is not a prevailing “party,” that BASR did not pay or incur costs because a partnership has no legal obligation, that the amount of individual tax liability was not “in issue” during the Tax Equity and Fiscal Responsibility Act (TEFRA) partnership-level court proceeding, and that the qualified offer rule did not apply. View "BASR Partnership v. United States" on Justia Law
Maxchief Investments Ltd. v. Wok & Pan, Ind., Inc.
Maxchief has its principal place of business in China and distributes one of the plastic tables it manufactures (UT-18) exclusively through Meco, which is located in Tennessee. Meco sells the UT-18 tables to retailers. Wok competes with Maxchief in the market for plastic folding tables, and also has its principal place of business in China. Wok owns patents directed to folding tables. Wok sued Maxchief’s customer, Staples, in the Central District of California, alleging that Staples’ sale of Maxchief’s UT-18 table infringed the Wok patents. Staples requested that Meco defend and indemnify Staples. Meco requested that Maxchief defend and indemnify Meco and Staples. The Staples action is stayed pending the outcome of this case. Maxchief then sued Wok in the Eastern District of Tennessee, seeking declarations of non-infringement or invalidity of all claims of the Wok patents and alleging tortious interference with business relations under Tennessee state law. The district court dismissed the declaratory judgment claim for lack of personal jurisdiction. With respect to the state law tortious interference claim, the district court concluded it lacked subject matter jurisdiction. The Federal Circuit affirmed. Wok lacked sufficient contacts with the forum state of Tennessee for personal jurisdiction as to both the declaratory judgment claim and the tortious interference claim. View "Maxchief Investments Ltd. v. Wok & Pan, Ind., Inc." on Justia Law
Texas Advanced Optoelectronic Solutions, Inc. v. Renesas Electronics America, Inc.
TAOS and Intersil were both developing ambient light sensors for electronic devices. Ambient light sensors use a silicon- or other semiconductor-based photodiode that absorbs light and conducts a current. The resulting photocurrent is detected by a sensor, and measurements of the current, a function of the ambient light, are used to adjust the brightness of an electronic screen display. One benefit is better visibility; another is improved battery efficiency. In 2004, the parties confidentially shared technical and financial information during negotiations regarding a possible merger that did not occur. Soon after, Intersil released new sensors with the technical design TAOS had disclosed in the confidential negotiations. TAOS sued for infringement of its patent, and for trade secret misappropriation, breach of contract, and tortious interference with prospective business relations under Texas state law. A jury returned a verdict for TAOS and awarded damages on all four claims. The Federal Circuit affirmed liability for trade secret misappropriation, though on a more limited basis than TAOS presented to the jury, and affirmed liability for infringement of the asserted apparatus claims of the patent, but vacated the monetary awards. The court noted that there was no evidence of Intersil’s independent design of the photodiode array structure. View "Texas Advanced Optoelectronic Solutions, Inc. v. Renesas Electronics America, Inc." on Justia Law
In re: Rearden, LLC
MOVA technology can capture an actor’s facial performance for use in motion picture special effects and video games; it is secured by trademarks, copyrights, and patents, and is reflected in hardware, source code, and physical assets. VGHL claims that Perlman, the head of Rearden, declined to acquire the MOVA assets from OL2 and proposed OL2 sell to a Rearden employee, LaSalle. Perlman introduced LaSalle to Rearden’s corporate attorney who helped LaSalle establish his own company, MO2, and negotiated with OL2. Perlman later demanded that LaSalle convey the MOVA assets to Rearden and terminated LaSalle’s employment when LaSalle refused. MO2 sold the MOVA assets to SHST, which hired LaSalle, and began selling the technology. The Rearden parties claimed that SHST never obtained ownership and that LaSalle was simply hired to handle the acquisition on Rearden’s behalf. SHST sued, alleging that Rearden had made “false or misleading representations ... concerning the ownership of the MOVA Assets ... to mislead the public and actual and prospective users and licensees” and had falsely recorded assignments of the MOVA patents. During discovery, SHST moved to compel Rearden to produce documents exchanged between MO2 and Rearden’s corporate attorney. The district court granted the request, concluding that Rearden had not shown entitlement to assert attorney-client privilege on behalf of MO2 and that LaSalle waived privilege when he shared documents. The Federal Circuit denied a petition for mandamus. Rearden's arguments failed to carry the high burden required on mandamus to overturn the court’s discovery determination. View "In re: Rearden, LLC" on Justia Law
Wells Fargo & Co. v. United States
The Internal Revenue Service denied Wells Fargo’s claims for refunds based on interest-netting under 26 U.S.C. 6621(d) between interest on tax underpayments and interest on tax overpayments. Section 6621(d) reads: To the extent that, for any period, interest is payable under subchapter A and allowable under subchapter B on equivalent underpayments and overpayments by the same taxpayer of tax imposed by this title, the net rate of interest under this section on such amounts shall be zero for such period. Absent an interest-netting provision , a taxpayer might make equivalent underpayments and overpayments yet owe the IRS interest because corporate taxpayers pay underpayment interest at a higher rate than the IRS pays overpayment interest. The Claims Court granted Wells Fargo partial summary judgment, finding that it satisfied the “same taxpayer” requirement, although the current embodiment of the company is the result of seven mergers. The companies involved in these mergers made tax underpayments and overpayments. The Federal Circuit identified three merger “situations” and concluded that two qualified for interest netting and one did not. The situations involved consideration of the whether the entities had separate identities at the time of the payments at issue and the amount of change in the entity’s identity as a result of the merger. View "Wells Fargo & Co. v. United States" on Justia Law
Sightsound Techs., LLC v. Apple Inc.
SightSound’s patents disclose methods for sale and distribution of digital audio and video signals, requiring: connection, by telecommunications lines, between a party’s memory and a second party’s memory; selling digital signals to the second party for a fee through telecommunications lines; transmitting the signal from the first memory to the second memory by telecommunications lines; and storing the signal in the second memory. Apple sought covered business method (CBM) review under the America Invents Act, 125 Stat. 284, arguing that claims were invalid as anticipated under 35 U.S.C. 102. The Patent Board determined that the patents are CBM patents because they recite an activity that is “financial in nature,” and do not include novel, non-obvious technological features, then determined that there was a reasonable likelihood that the claims were anticipated or obvious by disclosures relating to a 1980s CompuSonics computer system. The petitions did not specifically allege obviousness over CompuSonics. The Board granted SightSound additional time and authorized sur-replies and new declaration testimony on the issue of obviousness, then rejected SightSound’s contention that the term “second memory” is limited to non-removable media and held seven claims invalid as obvious. The Federal Circuit found that it lacked jurisdiction to review the decision to consider issues not explicitly raised in the petitions, but affirmed that the patents are CBM patents and the final decision with respect to claim construction and obviousness. View "Sightsound Techs., LLC v. Apple Inc." on Justia Law
Sukumar v. Nautilus, Inc.
In 1994, Sukumar began caring for his aging father and noticed that rehabilitation fitness machines used by his father did not adequately suit frail seniors. To learn more about rehabilitation for seniors, he attended trade shows where he met Nautilus representatives. In 1998-1999, Sukumar ordered Nautilus machines and asked for modifications to meet elderly users’ needs. When Nautilus delivered the custom fitness machines, Sukumar was dissatisfied and filed a breach of contract action. In 2004, Sukumar founded Southern California Stroke Rehabilitation Associates (SCSRA) to operate senior rehabilitation facilities in which Sukumar would use modified Nautilus fitness machines. SCSRA has acquired over 100 Nautilus fitness machines and, according to Sukumar, has twice attempted to negotiate a patent license from Nautilus. As of 2010, when Sukumar filed a false marking claim, 35 U.S.C. 292(b), SCSRA had no business plan, no employees, no office space, and no prototype designs. The district court found that many of the patents marked on six Nautilus machines did not cover the machines, but concluded that Sukumar had not suffered “competitive injury” necessary to have standing to assert a claim. The Federal Circuit affirmed. Sukumar had not taken sufficient action to enter the market for fitness machines. View "Sukumar v. Nautilus, Inc." on Justia Law
R.T. Foods, Inc. v. United States
Between October 2007 and August 2008, R.T. foods made 24 entries of “Tempura Vegetables” and “Vegetable Bird’s Nests” (frozen tempura-battered vegetable mixtures) from Thailand, 10 through the port of Boston and 14 through the port of Long Beach. United States Customs and Border Protection classified the 10 Boston entries and three of the Long Beach entries under the Harmonized Tariff Schedule of the United States (HTSUS) subheading 2004.90.85, which carries a duty rate of 11.2%. The remaining 11 entries into Long Beach were liquidated under R.T.’s proposed subheading, HTSUS 2106.90.99, which carries a duty-free preference for products from Thailand. HTSUS 2004.90.85 covers “Other vegetables prepared or preserved otherwise than by vinegar or acetic acid, frozen, other than products of heading 2006: Other vegetables and mixtures of vegetables: Other: Other, including mixtures.” HTSUS 2106.90.99 provides for “Food preparations not elsewhere specified or included: Other: Other: Other: Frozen.” R.T. timely filed and Customs denied protests. The Court of International Trade held it only had jurisdiction over three of the entries, then entered summary judgment in favor of the government. The Federal Circuit affirmed.View "R.T. Foods, Inc. v. United States" on Justia Law
A&D Auto Sales, Inc. v. United States
Former GM and Chrysler dealers, whose franchises were terminated in the 2009 bankruptcies of those companies, sued, alleging that the terminations constituted a taking because the government required them as a condition of its providing financial assistance to the companies. The Bankruptcy Code, 11 U.S.C. 363, 365, authorizes certain sales of a debtor’s assets and provides that a bankruptcy trustee “may assume or reject any executory contract or unexpired lease of the debtor.” Debtors-in-possession in chapter 11 bankruptcies, like GM and Chrysler, generally have a trustee’s powers. The Claims Court denied motions to dismiss. In interlocutory appeals, the Federal Circuit remanded for consideration of the issues of the “regulatory” impact of the government’s “coercion” and of economic impact. While the allegations of economic loss are deficient in not sufficiently alleging that the economic value of the franchises was reduced or eliminated as a result of the government’s actions, the proper remedy is to grant to leave to amend the complaints to include the necessary allegations. View "A&D Auto Sales, Inc. v. United States" on Justia Law