text: Oracle Corporation et al v. SAP AG et al Doc. 834 Att. 15 EXHIBIT O Dockets.Justia.com Page 1 Not Reported in F.Supp.2d, 2005 WL 1459704 (D.D.C.) (Cite as: 2005 WL 1459704 (D.D.C.)) Only the Westlaw citation is currently available. United States District Court, District of Columbia. MINEBEA CO., LTD., et al., Plaintiffs, v. Georg PAPST, et al., Defendants. No. Civ.A. 97-0590(PLF). June 21, 2005. OPINION FRIEDMAN, J. *1 Rule 702 of the Federal Rules of Evidence effectively codifies the Supreme Court's decisions in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), and Kumho Tire Co. v.. Carmichael, 526 U.S. 137 (1999). In Daubert, the Court charged trial judges with the responsibility of acting as "gatekeepers" to shield unreliable or irrelevant expert testimony and evidence from the jury. In Kumho the Court made clear that the gatekeeper function applies to all expert testimony, not just scientifically-based testimony. Rule 702 therefore provides that if the Court finds that scientific, technical or other specialized knowledge "will assist the trier of fact to understand the evidence or to determine a fact in issue," and if the Court finds that the witness is qualified as an expert "by knowledge, skill, experience, training, or education," then the Court may permit the witness to testify-so long as the witness' testimony is based on "sufficient facts or data," the testimony "is the product of reliable principles and methods," and the witness has "applied the principles and methodology reliably to the facts of the case. FED. R. CIV. P. 702. As the D.C. Circuit has explained, the twin requirements for the admissibility of expert testimony are evidentiary reliability and relevance. See Ambrosini v. LaBarraque, 101 F.3d 129, 133 (D .C. Cir.1996); see also McReynolds v. Sodexho, 349 F.Supp.2d 30, 34-35 (D.D.C.2004); Groobert v. Georgetown College, 219 F.Supp.2d 1, 6 (D.D.C.2002). With respect to realiability, the Court's focus must be on the methodology or reasoning employed by application of the factors in Rule 702 and the non-exhaustive lists of factors set forth in Daubert and Kumho . See Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. at 595 (the "focus, of course, must be solely on principles and methodology, not on the conclusions they generate"); Ambrosini v. LaBarraque, 101 F.3d at 140 ("the admissibility inquiry focuses not on conclusions but on approaches"). With respect to relevance, the Court must determine whether the proffered testimony is sufficiently tied to the facts of the case and that it will aid the jury in resolving a factual dispute. Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. at 592-93. In this case, plaintiffs have proffered nine experts and defendants have proffered five. Their areas of expertise vary widely. Some are experts on the technology at issue; others on patent law and licensing; others on damages; others on Japanese culture and negotiations; and still others on legal ethics. The Court has considered the expert reports and supplemental reports of each expert; a written summary of the methodology, opinions and conclusions of each; and briefs (sometimes in the form of objections or motions in limine and oppositions thereto) with respect to why the proponent believes the testimony should be admitted and why the opponent believes it should be excluded. Over the course of three days, the Court heard live testimony from each of the fourteen experts. The Court's rulings follow: A. Legal Ethics Experts *2 Minebea has proffered the testimony of Steven Lubet, a Professor of Law and Director of the Program on Advocacy and Professionalism at the Northwestern University School of Law in Chicago. Professor Lubet, in a lengthy written report, has offered opinions concerning the activities of certain attorneys for Papst including Jerold Schnayer and Richard Smith and has concluded that both lawyers violated Rule 4.2 of the Rules of Professional Conduct by dealing directly with a represented party, namely Minebea, and improperly circumventing that party's lawyers. Professor Lubet pointed to at least seven incidents where Mr. Schnayer or Mr. Smith violated rule 4.2.FN1 FN1. Mr. Schnayer is bound by the Illinois Rule and Mr. Smith by the D.C. Rule. Pro- � 2010 Thomson Reuters. No Claim to Orig. US Gov. Works. Page 2 Not Reported in F.Supp.2d, 2005 WL 1459704 (D.D.C.) (Cite as: 2005 WL 1459704 (D.D.C.)) fessor Lubet testified that the differences were insignificant for these purposes. Although Papst believes Professor Lubet's testimony is irrelevant and should be excluded, in the event the Court admits it Papst proposes to rebut Professor Lubet with the testimony of Geoffrey Hazard, Trustee Professor of Law at the University of Pennsylvania School of Law in Philadelphia. Professor Hazard prepared an expert report and testified that in his opinion there were no violations of Rule 4.2 by Mr. Schnayer or Mr. Smith. Alternatively, if there were violations, they were technical or minor in nature and, in the context of this civil litigation, they are not material because they had no adverse effect on the relationship between Papst and Minebea. There is no question about the knowledge, skill, and experience of Professor Lubet or Professor Hazard. They are pre-eminent in their field and are recognized experts in legal ethics. The Court also has no question about their methodology or reasoning. The Court agrees with Papst, however, that the testimony of neither is relevant to the issues to be tried before the jury in this case. Professor Lubet's testimony seeks to raise collateral ethics issues that are peripheral and irrelevant to the issues to be decided. The jury trial before this Court is not the appropriate venue in which to raise Minebea's ethical concerns about the conduct of Mr. Schnayer or Mr. Smith. The Court, therefore, grants Papst's motion in limine to exclude the testimony of Professor Lubet. Without Professor Lubet's testimony, there is no need for the rebuttal testimony of Professor Hazard and the Court therefore will exclude his testimony as well. B. Japanese Culture and Negotiation Experts Papst has proffered Thomas C. Dodd, the President of IP Options, Inc., an intellectual property consulting company who has extensive experience in negotiating patent licenses with Japanese businesses. He is proffered as an expert on Japanese business practices and negotiations between Japanese parties and Westerners. In his opinion, Minebea's legal expertise and support are greater than that typically found in a Japanese company. Based upon his opinions and observations on these matters and on negotiating patent licenses more generally, and on the documents he reviewed, Mr. Dodd proposes to testify that Minebea did not in fact rely on Papst because Minebea's actions are consistent with a Japanese company conducting an arm's-length patent negotiation with a Western company. *3 To counter Mr. Dodd, Minebea proposes the testimony of Rochelle Kopp, a Managing Principal at Japan Intercultural Consulting, who is a professional business consultant specializing in Japanese culture. She is offered as an expert witness to testify with respect to internal decision-making and interpersonal relations within Japanese companies and the manner in which Japanese executives interact with and negotiate with others in business settings. Based on her knowledge of Japanese business practices and culture and her understanding of the facts of this case. Ms. Kopp is of the opinion that Minebea relied on Papst and that such reliance was reasonable. To avoid impinging on ultimate questions for the jury, however, Minebea proposes to limit Ms. Kopp's testimony to the explanation of the elements of Japanese culture and business practices that would have influenced Minebea's actions and that are evidenced in the testimony of the witnesses and the documents that have been produced in this case. In addition to Ms. Kopp, Minebea offers the testimony of Edward Fiorito (discussed infra) FN2 on negotiating patent license agreements between Japanese and non-Japanese parties. FN2. Mr. Fiorito's background is discussed in full in a later portion of this Opinion. The Court concludes that, while Mr. Dodd has extensive experience in negotiating with Japanese companies and Ms. Kopp is eminently qualified in the area of Japanese culture, their testimony will not assist the jury in understanding the evidence any better than would the testimony of lay witnesses who actively participated in the negotiations at issue. Indeed, because the testimony of both rely on so many materials and experiences not directly related to this case, their testimony likely would tend to confuse rather than edify. Finally, the proffered testimony comes so close to an ultimate issue in the case-namely, reliance-that the Court will exclude it. For similar reasons, Mr. Fiorito's testimony on license negotiations between Japanese and Western parties is likewise excluded. C. Damages Experts Minebea offers four experts on the issue of damages: Edward Fiorito, Thomas Gardner, Jerry Hausman, and � 2010 Thomson Reuters. No Claim to Orig. US Gov. Works. Page 3 Not Reported in F.Supp.2d, 2005 WL 1459704 (D.D.C.) (Cite as: 2005 WL 1459704 (D.D.C.)) James Malackowski. Papst offers two experts on the issue of damages: Bruce Dubinsky and Chera Sayers. 1. Edward Fiorito Edward Fiorito is a patent lawyer with extensive experience in patent disputes and patent licensing. Minebea has offered to provide Mr. Fiorito's testimony on the calculation of a reasonable royalty. His testimony is based on his experience and by applying the fifteen factors set forth in Georgia-Pacific Corp. v. United States Plywood, 318 F.Supp. 1116, 1120 (S.D.N.Y.1970). Despite the fact that Mr. Fiorito is an experienced patent and licensing attorney, the Court will not allow him to testify as to the calculation of a reasonable royalty because it is unclear what facts or data he has relied upon and his methodology is unreliable. Mr. Fiorito's application of the Georgia Pacific factors in order to arrive at the royalty rate of $1 per motor has at least the following flaws in data and methodology: Mr. Fiorito's analysis does not offer any mathematical computations leading to his $1 royalty; he does not compare lump sum license payments to running royalty rates; he does not take into account whether market conditions over the 1990, 1993 and 1995 time periods would (or could) affect the royalty that HDD FN3 manufacturers would be willing to pay to Papst; and he did not do a detailed per patent analysis for each license agreement he considered. As the Court inquired during the Daubert hearing: Where did the $1 figure come from? And why did $3, for example, just "feel too high" to Mr. Fiorito under Georgia Pacific? The Court finds Mr. Fiorito's proposed testimony to be too speculative to satisfy the reliability threshold of Rule 702 since such testimony would invite conjecture and confusion rather than assist the jury in determining a reasonable royalty rate. FN3. HDD stands for hard disk drives. 2. Thomas Gardner *4 Thomas Gardner is a HDD industry consultant familiar with all aspects of the HDD industry including, without limitation, engineering, marketing, and operations. Minebea offers Mr. Gardner to provide testimony on the HDD market, submarkets, products and technologies; the HDD spindle motor market, submarkets and products; Minebea's and Nidec's market share of the worldwide HDD spindle motor market; the significance of the U.S. HDD market; the business implications of Papst's royalty demands on Minebea's customers; supply and demand in the market approach "but for" scenario; and Minebea's production capabilities under "but for" scenarios. Mr. Gardner's methodology includes forecasting techniques whereby he reviewed various market data sources in order to calculate the HDD and HDD spindle motor market. Mr. Gardner has made determinations regarding the U.S. spindle motor market and Minebea's potential share in such market if Papst acknowledged Minebea's patent rights. The Court is not persuaded by Papst's objections to Mr. Gardner's methodology and conclusions. Mr. Gardner's testimony is appropriate for the jury's consideration under Rule 702. Mr. Gardner is a qualified damages expert, he employed reliable methodology, and he used the data properly in order to arrive at reliable conclusions. 3. Jerry Hausman Jerry Hausman is a Professor of Economics at the Massachusetts Institute of Technology. In addition, he has extensive experience in the computer industry and has consulted for numerous computer hardware and software companies. Minebea offers Professor Hausman to provide testimony on (1) Papst's market power and (2) Minebea's lost profits as a result of Papst's alleged actions. With regard to Papst's market power, Professor Hausman employs a two-step methodology. The first step is market definition and the second step is determination of whether Papst possesses market power in the defined markets. For the first step, market definition, Professor Hausman relies on the DOJ's Antitrust Guidelines for the Licensing of Intellectual Property and the hypothetical monopolist test from the Horizontal Merger Guidelines. For the second step, determination of Papst market power in the defined markets, Professor Hausman relies on the expert report of Warren Dalziel.FN4 FN4. Mr. Dalziel is being offered by Minebea as a HDD technology expert. The Court may hear testimony from Professor Hausman regarding market power. The methodology employed by Professor Hausman is reliable, his conclusions are based on sufficient facts and such testimony � 2010 Thomson Reuters. No Claim to Orig. US Gov. Works. Page 4 Not Reported in F.Supp.2d, 2005 WL 1459704 (D.D.C.) (Cite as: 2005 WL 1459704 (D.D.C.)) could, in combination with other testimony, aid the jury in determining the patent misuse issue. A patent misuse analysis involves many factors. Therefore Minebea must present adequate additional testimony to lay the proper foundation for the rest of its patent misuse claim before Professor Hausman's testimony on market power will be admitted. Standing alone it would be incomplete and not helpful to the jury. With regard to Minebea's lost profits as a result of Papst's alleged actions, Professor Hausman provides two alternative calculation approaches. Both approaches employ Mr. Fiorito's (Minebea's excluded damages expert) royalty calculation of $1 per motor. One approach, the price premium approach, assumes Minebea does not adjust its quantity while it increases its price by $1 per motor. For his calculation, Professor Hausman determines lost profits by multiplying the $1 royalty rate by the number of motors Minebea sold during the relevant period. Professor Hausman's second approach, the combined price and quantity approach, assumes that Minebea responds to the royalty by adjusting both its price and quantity. For this approach, Professor Hausman applies the well-known Nash equilibrium concept. He employs data on market shares and prices in order to structure the demand in the spindle motor industry. Then he uses this same demand structure to calculate the equilibrium prices and market shares after the imposition of the royalty. *5 The Court has no doubt about Professor Hausman's qualifications or methodology. Because the Court has already excluded Mr. Fiorito's testimony with respect to a reasonable royalty, however, Professor Hausman's analysis is rendered incomplete because there is no number to which to apply it. Any of Professor Hausman's testimony that is based on Mr. Fiorito's reasonable royalty rate therefore must be excluded as unreliable. In other words, since Mr. Fiorito's proffered testimony has been excluded, Professor Hausman's analysis that employs Mr. Fiorito's $1 royalty likewise must be excluded. Furthermore, Professor Hausman's proffer of testimony on calculations based on royalty rates other than $1 is not reliable because Professor Hausman cannot himself lay a proper factual foundation for any such royalty rates used. In sum, Professor Hausman will not be permitted to testify on lost profits unless Minebea first presents lay witness testimony with respect to royalty rates to which one of Professor Hausman's methodologies may then be applied by the jury in determining a reasonable royalty. In order for Professor Hausman's analyses to generate reliable conclusions, Minebea must first lay a foundation from which the jury can determine a reasonable royalty rate. Otherwise, Professor Hausman's testimony will be excluded. 4. James Malackowski James Malackowski is President and Chief Executive Officer of ICMB Ocean Tomo. He is a Certified Public Accountant with extensive experience as a management consultant and forensic accountant with a specialty in intangible assets. Minebea offers him to testify that Minebea has suffered damages as a result of Papst's alleged actions. More specifically, he is offered to testify about money owed to Minebea by Papst under (1) a restitution theory and (2) two different lost profits damages theories, a Market Approach and an Accounting Approach. In calculating restitution damages, Mr. Malackowski reviewed and analyzed the agreements between the parties and the consideration paid by Minebea to Papst for the patent rights in dispute. For determining lost profits in his Market Approach, Mr. Malackowski determined that it was reasonable in the but-for world to base a market leadership position on Nidec's actual average experience. Mr. Malackowski's Accounting Approach, based on the Panduit FN5 factors, includes an assumption that all unlicensed units would have been sold by Minebea as the only fully licensed manufacturer of spindle motors. Mr. Malackowski calculated lost profits for fiscal years 1991 through 2003. He calculated future lost profits by projecting Minebea's average selling prices using a regression best fit line plot to estimate an annual decrease in selling price. FN5. Panduit Corp. v. Stahlin Bros. Fibre Works, 575 F.2d 1152, 1156 (6th Cir.1978). The Court is persuaded that Mr. Malackowski is highly qualified in the area of damages calculations, he has used sound methodology, and he has properly applied it to the appropriate facts in this case. His testimony will aid the jury. 5. Bruce Dubinsky *6 Bruce Dubinsky is a principal in the firm of � 2010 Thomson Reuters. No Claim to Orig. US Gov. Works. Page 5 Not Reported in F.Supp.2d, 2005 WL 1459704 (D.D.C.) (Cite as: 2005 WL 1459704 (D.D.C.)) Klausner Dubinsky + Associates, P.C. where he holds the position of Director of the Forensic Accounting and Dispute Analysis Department. He holds a Masters degree in tax from Georgetown and is a CPA and a certified valuation analyst. Papst offers Mr. Dubinsky to provide testimony based on a theory of restitution damages to Minebea. Mr. Dubinsky's restitution analysis is based on the return to Minebea of the amount of money it paid under the various agreements between the parties minus the value of intangible benefits received by Minebea from Papst. Mr. Dubinsky also is offered to testify in rebuttal to each of Minebea's four damages witnesses: Mr. Malackowski, Mr. Fiorito, Professor Hausman, and Mr. Gardner. Mr. Dubinsky's rebuttal testimony will be based on his opinion that Minebea's damages experts each use flawed lost profits methodologies and that their lost profits calculations are speculative and cannot be determined with the requisite degree of certainty. Minebea argues that Mr. Dubinsky should not be allowed to rebut Minebea's expert testimony as to lost profits because Mr. Dubinsky was not specifically tasked with performing an independent complete lost profits analysis; rather Mr. Dubinsky's proposed testimony is more in the fashion of "poking holes" at Minebea's experts' methodology. The Court finds this method of rebutting Minebea's expert to be proper since Mr. Dubinsky is simply using his acknowledged expertise, training and knowledge to identify flaws in Minebea's damages theories. His methodologies are reliable and have been properly applied to the facts at issue. His testimony is clearly relevant to Minebea's damages claims, and his testimony would be helpful to aid the jury. The Court will allow Mr. Dubinsky to testify as to the areas specified in his expert reports. Obviously, he will not be permitted to testify in rebuttal to experts whose testimony is excluded or to those portions of their testimony that is excluded. 6. Chera Sayers Chera Sayers is an economist and senior consultant with the Forensic Accounting and Dispute Analysis Department of Klausner Dubinsky + Associates, P.C. Papst offers the testimony of Dr. Sayers as rebuttal to the anticipated expert testimony of Minebea's economist, Professor Hausman. For example, Dr. Sayers will identify areas where Professor Hausman's assumptions are at odds with the real world facts present in this action, identify critical assumptions Professor Hausman made in order to perform his "Combined Price and Quantity Approach" and identify where Professor Hausman has used market data with unknown reliability and failed to provide a degree of error for his empirical estimates. The Court is not persuaded by Minebea's objections to Dr. Sayers' qualifications and methodology. Dr. Sayers is a highly qualified economist, and her opinions are based on reliable methodology. Her testimony would be of assistance to the jury in evaluating Professor Hausman's testimony regarding damages. Since, as discussed, the Court may exclude portions of Professor Hausman's testimony, however, the Court will exclude the corresponding portions of Dr. Sayers' rebuttal testimony. D. Patent Law and Licensing Experts *7 Minebea offers two experts on the issue of patent law and licensing: Martin Adelman and Melvin Jager. Papst offers one expert on these issues, George Gerstman. 1. Martin Adelman Martin Adelman is a professor of intellectual property law at the George Washington University School of Law. Prior to joining the faculty at George Washington University, Professor Adelman taught patent law for 24 years at Wayne State University. He is the author of the patent law treatise series entitled, "Patent Law Perspectives." The Court acknowledges that Professor Adelman is a patent law expert. Minebea offers Professor Adelman to provide testimony regarding: (1) the practices and procedures of the United States Patent and Trademark Office ("USPTO") during patent prosecution; (2) Papst's prosecution of certain patent applications and patents; and (3) the relationship between the German patents enumerated on Exhibit C to the 1990 Intangible Assets Agreement and the United States patents listed on Appendix III in the 1995 agreement and to opine that all of the United States patents listed on Appendix III are corresponding international patents to the German patents on Exhibit C. First, Professor Adelman is offered to testify about the � 2010 Thomson Reuters. No Claim to Orig. US Gov. Works. Page 6 Not Reported in F.Supp.2d, 2005 WL 1459704 (D.D.C.) (Cite as: 2005 WL 1459704 (D.D.C.)) practices and procedures of the USPTO to examine patents prior to their grant. It has been agreed, however, that the jury will be shown a videotape prepared by the Federal Judicial Center on the practices and procedures of the USPTO immediately after the Court's preliminary instructions. The proffered testimony of Professor Adelman therefore is irrelevant or cumulative on this issue and will not be permitted. Second, Professor Adelman is proffered to testify about Papst's prosecution of certain patent applications and patents. More specifically, Professor Adelman concludes that (1) Papst converted motor claims to claims directed to a motor in combination with HDD components, and (2) Papst inserted claims directed to a motor in combination with HDD components into motor patents and patent applications. The Court does not consider this type of testimony relevant to any issues in the case. Specific amendments made to Papst's patent claims during prosecution before the USPTO would only be relevant to claim construction or validity issues, neither of which is being considered in this case. To the extent that Professor Adelman's testimony is limited to generally characterizing or discussing various claimed elements in the Papst Motor Patents or Papst Drive Patents, such testimony may aid the jury in assimilating the patent terminology and schema and will be permitted if so limited. The Court has determined that this type of testimony does not implicate a claim construction; rather, it is simply expert testimony on assimilating or reading claim elements, which is permissible. Third, Professor Adelman is offered as an expert to provide testimony about the relationship between the German patents enumerated on Exhibit C to the 1990 Intangible Assets Agreement and the United States patents listed on Appendix III to the 1995 Agreement. Professor Adelman's opinion is that all of the United States patents listed on Appendix III are corresponding international patents to the German patents on Exhibit C. If they truly are identical ("1 to 1") corresponding patents, that fact normally would be indicated on the face of the patent, which is why, the Court assumes, Papst is willing to stipulate to the "true facts" on this matter. A review of some of Papst's U.S. patents makes it apparent, however, that the situation is more complicated. One U.S. patent, for example, claims foreign priority to one German patent but also to two Swiss patents. If Papst will stipulate and/or the documents speak for themselves, or the U.S. patent applications speak for themselves, the Court invites the parties to enter into a stipulation which would make Professor Adelman's testimony unnecessary. *8 Minebea has repeatedly assured the Court that no claim construction is necessary in connection with this case. Although the Court will provisionally permit Professor Adelman to testify with respect to the relationship between the German patents on Exhibit C and the U.S. patents on Appendix III, should his testimony seek to construe the claims of any of the patents in question-or should such claim construction be necessary to his methodology and conclusions-his testimony shall be stricken from the record. The Court notes that Minebea has filed a motion in limine suggesting that the Court should decide whether the Appendix III patents are "corresponding international patents" as a matter of law.FN6 Any final resolution of the question of Professor Adelman's testimony on the subject of corresponding patents therefore must await resolution of this motion. FN6. In offering Professor Adelman to testify on this point, Minebea seems to have taken a position inconsistent with its motion in limine in which it states that the Court should decide as a matter of law whether the appropriate reference is found on the front of the relevant United States patent applications. Finally, in connection with Appendix III, Papst Drive Patents, neither Mr. Gerstman nor Professor Adelman, in rebuttal, will be allowed to testify regarding the meaning of Jepson type combination claims. "Jepson" terminology or the meaning thereof is irrelevant to any issues in this case because validity of the Papst Drive Patents-that is, prior art-is not at issue. 2. Melvin Jager Melvin Jager is Managing Director of ICMB Ocean Tomo, an intellectual capital merchant bank providing expert intellectual property services. Prior to holding this position, Mr. Jager was a practicing intellectual property lawyer. He has also taught patent law courses at various law schools. Minebea proffers Mr. Jager to provide testimony regarding: (1) the general purpose and objectives for licensing patents and related topics such as negotiating, drafting, reviewing and interpreting technology licenses; (2) interpretation of the � 2010 Thomson Reuters. No Claim to Orig. US Gov. Works. Page 7 Not Reported in F.Supp.2d, 2005 WL 1459704 (D.D.C.) (Cite as: 2005 WL 1459704 (D.D.C.)) key agreements entered into between Minebea and Papst; and (3) rebuttal to Mr. Gerstman and Mr. Dodd's patent exhaustion testimony and rebuttal to Mr. Gerstman and Mr. Dodd's conclusions regarding licensing and patent misuse. First, Mr. Jager is a qualified patent law and licensing expert. The Court therefore will permit his testimony regarding the general purpose and objectives for licensing patents and related topics such as negotiating, drafting, reviewing, and interpreting technology licenses because such testimony is relevant and will aid the jury. On the other hand, Mr. Jager's proffered testimony as to the interpretation of agreements between the parties in this case will be excluded as going to an ultimate factual issue for the jury. If there are ambiguities in contract terms, the testimony of lay witnesses regarding relevant facts and circumstances may be considered by the jury, not the opinions of experts. No expert will be permitted for either side on this issue. Finally, to the extent that Mr. Jager is proffered as a rebuttal witness with regard to Mr. Gerstman and Mr. Dodd's patent exhaustion testimony or to their conclusions regarding licensing and the patent misuse doctrine, Mr. Jager may rebut any portions of their testimony which the Court admits. 3. George Gerstman *9 George Gerstman is a partner in the law firm of Seyfarth Shaw LLP in Chicago. He holds an undergraduate electrical engineering degree and is admitted to practice before the United States Patent and Trademark Office. He has over forty years of experience as a patent attorney. The Court acknowledges that Mr. Gerstman is an experienced patent lawyer. Papst proffers testimony by Mr. Gerstman on (1) general background concerning patents; (2) division of rights in patent licensing; (3) an analysis of the 1995 Settlement Agreement; (4) the presence of both drive and motor claims in the Appendix III patents; (5) the need to compare the patent coverage of the Papst's Motor Patents to Papst's Drive Patents; (6) statements made in patents owned by Minebea and by third parties indicating that spindle motors can be used for purposes other than hard disk drives; (7) correlation between the U.S. patents that Minebea claims to have been converted by Papst and their correlative German applications as included in an exhibit to the 1993 agreement; and (8) errors made in Mr. Jager's analysis of patent exhaustion, Mr. Jager's assertions regarding patents issued after the 1995 Settlement Agreement, errors in Mr. Dalziel's analysis of the inventive features in Papst's Drive Patents, and rebuttal testimony on patent misuse. The first area of proffered testimony by Mr. Gerstman, background on patents, will be excluded as cumulative in light of the videotape prepared by the Federal Judicial Center on the practices and procedures of the USPTO, which the Court plans to play for the jury immediately following the Court's preliminary instructions. Second, the Court will allow Mr. Gerstman's testimony on the division of rights in patent licensing because, based on Mr. Gerstman's experience, he will be able to aid the jury in understanding licenses. As to Mr. Gerstman's proffered testimony on point (3), however, the Court excludes his analysis of the 1995 Settlement Agreement (and any earlier agreements) because such analysis goes to an ultimate issue in this case and is a factual issue for the jury. As to testimony on points (4) and (5), the Court will allow Mr. Gerstman's testimony on the presence of both drive and motor elements in the Appendix III patents and a comparison between the patent coverage of the Papst Motor Patents to the Papst Drive Patents. Such testimony will be admitted for the same reasons the Court is permitting the corresponding testimony by Professor Adelman. As to testimony on point (6), regarding statements made in patents owned by Minebea and by third parties indicating that spindle motors can be used for purposes other than hard disk drives, such testimony is admissible so long as it satisfies Rules 803 and 804 of the Federal Rules of Evidence regarding hearsay. The Court will permit Mr. Gertsman's testimony on point (7) regarding correlating the U.S. patents (that Minebea claims have been converted by Papst) with their correlative German applications as included in an exhibit to the 1993 agreement. The same analysis as discussed in detail supra with regard to Professor Adelman's testimony on this exact issue controls Mr. Gerstman's testimony as well. *10 Finally, as to the proffered testimony on point (8), Mr. Gerstman may rebut Mr. Jager's patent exhaustion testimony and Mr. Jager's assertions regarding patents � 2010 Thomson Reuters. No Claim to Orig. US Gov. Works. Page 8 Not Reported in F.Supp.2d, 2005 WL 1459704 (D.D.C.) (Cite as: 2005 WL 1459704 (D.D.C.)) issued after the 1995 Settlement Agreement, Mr. Dalziel's analysis of the inventive features in Papst's Drive Patents, and any expert testimony Minebea may proffer on patent misuse. E. Technology Experts Minebea offers the testimony of Warren Dalziel and Edward Fiorito, respectively, regarding technological issues in this case. 1. Warren Dalziel Minebea offers the testimony of Warren Dalziel on the HDD industry, the technology at issue in this case. Mr. Dalziel is a registered Professional Engineer. He holds a Masters degree in mechanical engineering and has extensive experience as an electro-mechanical design engineer and as a consultant. Mr. Dalziel is offered to testify regarding: (1) whether any of the Papst Drive Patents concern alleged improvements in a component of the HDD outside of the product delivered by the motor manufacturer; (2) whether the Minebea-supplied HDD motors have any commercially viable use other than in a HDD; (3) whether any of the Papst Drive Patents provide benefits to the functioning of a HDD that are not attributable to alleged improvements in the motor; and (4) whether the Papst patents may be designed around such that any HDD motor or HDD could be manufactured not to infringe at least one of the Papst patents. Papst submitted a memorandum regarding alleged claim interpretation implicated by Mr. Dalziel's testimony. Minebea submitted a memorandum in support of a motion to strike Papst's memorandum regarding claim construction and Papst submitted an opposition thereto. Initially, Papst argues that Mr. Dalziel should not be able to present testimony that relates to what the Papst patents mean. For example, Papst argues that Mr. Dalziel should not be allowed to testify that the non-generic features (improvements) in the Papst Drive Patents really relate to motor elements rather than to HDDs themselves. Papst argues that Mr. Dalziel has to make implicit claim construction determinations in order to opine about whether a HDD could be designed so as to avoid the Papst Drive Patents. The Court will allow certain portions of Mr. Dalziel's proffered testimony and exclude others. The Court notes that the proposed testimony on points (1) and (3) is extremely similar. Mr. Dalziel will be permitted to testify with respect to both. First, the Court will allow Mr. Dalziel to testify regarding whether any of the Papst Drive Patents concern improvements to the product delivered by the motor manufacturer as opposed to the HDD manufacturer and whether any of the Papst Drive Patents provide benefits to the functioning of the drive that are not attributable to alleged improvements in the motor. Such analysis by Mr. Dalziel, contrary to Papst's arguments, does not involve claim construction. Mr. Dalziel is offered simply to give his expert opinion as to what he views as the "improvements" and "functional benefits" described in Papst's Drive Patents over Papst's Motor Patents or motors in general. Mr. Dalziel's opinions as to what is an improvement or benefit do not implicate claim construction but rather simply call on his years of experience in the HDD industry. His proffer of testimony on this point is analogous to that of Professor Adelman and Mr. Gerstman regarding general characterizations of the patent claims. *11 Second, the Court will allow Mr. Dalziel to testify about the availability of other commercially viable uses for HDD motors other than in HDDs. Mr. Dalziel's expertise in the HDD industry qualifies him to testify on alternative uses. While commercial viability may not necessarily be the proper standard for non-infringing uses with regard to patent exhaustion, the availability of alternative commercially viable uses, other than in HDDs, is nonetheless relevant to whether Minebea's motors can reasonably be used other than in HDDs. Finally, the Court will exclude Mr. Dalziel's testimony as to patent design arounds. Specifically, Mr. Dalziel may not testify regarding whether it is possible to design around the Papst Motor Patents or the Papst Drive Patents because such analysis implicitly does entail a claim construction and no proper claim construction concerning the issue of design around has been presented by Mr. Dalziel. Testimony as to whether it is possible to design around the Papst Patents, while it may be relevant to the issue of non-infringing alternatives, patent exhaustion, is inappropriate coming from Mr. Dalziel, a Minebea expert, because Minebea has repeatedly told the Court that claim construction is not necessary and has never requested a Markman ruling.FN7 While Papst argues that certain clearly non-infringing uses are available for Minebea's motors, Minebea argues that its motors � 2010 Thomson Reuters. No Claim to Orig. US Gov. Works. Page 9 Not Reported in F.Supp.2d, 2005 WL 1459704 (D.D.C.) (Cite as: 2005 WL 1459704 (D.D.C.)) can only be used in HDDs (covered by Papst's Drive Patents). Minebea cannot have it both ways. Minebea cannot present expert testimony supporting its patent exhaustion theory by calling expert witnesses to opine that it is impossible to design around Papst's Drive Patents, but then fail to present a proper claim construction or request one from the Court. Mr. Dalziel may testify, however, based on his knowledge in the HDD industry, as to his knowledge of reasonable uses for Minebea's motors. FN8 FN7. Markman v. Westview Instruments, Inc., 52 F.3d 967 (Fed.Cir.1995). FN8. While the Court's rulings with respect to Mr. Dalziel's proffered testimony rejects most, but accepts some, of the arguments in Papst's Statement Regarding What Claim Interpretation the Court Is Required To Perform With Respect to Mr. Dalziel's Testimony, the Court clearly has considered the statement. Minebea's motion to strike it [Docket No. 1020] therefore is denied. 2. Edward Fiorito Minebea has offered the testimony of Mr. Fiorito, discussed supra, about whether Mr. Dalziel has interpreted the claims of patents in a manner fully consistent with the legal principles of claim interpretation. Such rebuttal testimony is not necessary, however, because Mr. Dalziel is not permitted to testify as to claim construction. As discussed in connection with Mr. Dalziel's testimony above, the Court has determined that claim construction testimony is not appropriate in this case. An Order consistent with this Opinion will be issued this same day. SO ORDERED. ORDER For the reasons stated in the Opinion issued this same day, it is hereby ORDERED that Papst's motion to exclude the expert testimony of Melvin F. Jager, Esq.  is GRANTED in part and DENIED in part; it is FURTHER ORDERED that Papst's motion to exclude the expert testimony of James A. Malackowski  is DENIED; it is FURTHER ORDERED that Papst's motion to exclude the expert testimony of Martin J. Adelman, Esq.  is GRANTED in part and DENIED in part; it is *12 FURTHER ORDERED that Papst's motion to exclude the expert testimony of Dr. Jerry A. Hausman  is GRANTED in part and DENIED in part; it is FURTHER ORDERED that Papst's motion to exclude the expert testimony of Rochelle Kopp  is GRANTED; it is FURTHER ORDERED that Papst's motion to exclude the expert testimony of Steven Lubert, Esq.  is GRANTED; it is FURTHER ORDERED that Papst's motion to exclude the testimony of Thomas E. Gardner  is DENIED; it is FURTHER ORDERED that Papst's motion to exclude the expert testimony of Edward G. Fiorito  is GRANTED; it is FURTHER ORDERED that Papst's motion to exclude the expert testimony of Warren Dalziel  is GRANTED in part and DENIED in part; it is FURTHER ORDERED that Minebea's motion to strike the expert testimony of Thomas C. Dodd  is GRANTED; it is FURTHER ORDERED that Minebea's motion to strike the expert testimony of Bruce Dubinsky  is DENIED; it is FURTHER ORDERED that Minebea's motion to strike the expert testimony of George Gerstman  is GRANTED in part and DENIED in part; it is FURTHER ORDERED that Minebea's motion to strike the expert testimony of Chera Sayers  is GRANTED in part and DENIED in part; it is � 2010 Thomson Reuters. No Claim to Orig. US Gov. Works. Page 10 Not Reported in F.Supp.2d, 2005 WL 1459704 (D.D.C.) (Cite as: 2005 WL 1459704 (D.D.C.)) FURTHER ORDERED that Minebea's motion to strike the expert testimony of Geoffrey Hazard is GRANTED; and it is FURTHER ORDERED that Minebea's motion to strike Papst's statement regarding what claim interpretation the Court is to perform with regard to Mr. Dalziel's testimony  is DENIED. SO ORDERED. D.D.C.,2005. Minebea Co., Ltd. v. Papst Not Reported in F.Supp.2d, 2005 WL 1459704 (D.D.C.) END OF DOCUMENT � 2010 Thomson Reuters. No Claim to Orig. US Gov. Works.

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The defendant, Valentine, appeals from a conviction of possession of heroin with intent to distribute. G. L. c. 94C, Section 32(a), as appearing in St. 1980, c. 436, Section 4. The heroin was discovered by a police officer in a bulky packet in Valentine's rear pants pocket. The circumstances of the warrantless search were as follows.
While on patrol, the police officer saw an automobile with Rhode Island plates, a "popped-out" trunk lock, and no rear lights. He followed the vehicle, stopped it, and sought a license and registration from Valentine, the driver. Valentine produced a Hawaii license but no registration. At this point, the officer observed traces of smoke in the automobile and smelled what he thought was marihuana. He then directed Valentine to get out of the vehicle, which had four other occupants. As Valentine got out of the vehicle, the officer smelled the odor of marihuana on Valentine's clothing. In addition, the officer observed on the car floor small seeds, some brown vegetable material, and a small envelope, all of which he thought was consistent with marihuana traces. Following a brief conversation, the officer then frisked Valentine, feeling the packet, which he described as "thick and bulky," in Valentine's rear pants pocket. He asked Valentine what it was, and Valentine said, "Nothing." The officer then took the packet and opened it, finding inside ten envelopes made of a material like wax paper, each containing a fluffy white powder which he thought at the time to be cocaine. (Laboratory tests showed it to be 1.1 percent heroin.) He then arrested Valentine for possession of cocaine.
At the voir dire on the motion to suppress, the officer testified that his initial pat down was for the dual purposes of discovering weapons and marihuana. He acknowledged that, when he removed the packet and opened it, he did not think that it might contain a weapon. The judge ascribed the latter testimony to bravado and ruled that, viewed objectively, the officer would have been justified in thinking that the packet might contain a weapon and that the seizure and opening of the packet were therefore justified under Terry v. Ohio, 392 U.S. 1 (1968). Because we find that the search was justified on other grounds, we do not address the question whether the search could be justified under Terry.
The "popped-out" trunk lock (indicative of stolen cars) and the absence of rear lights provided the officer with sufficient justification to stop the vehicle, request a license and registration from Valentine, and order him out of the automobile. See Commonwealth v. Cavanaugh, 366 Mass. 277 , 281 (1974); Pennsylvania v. Mimms, 434 U.S. 106, 111 (1977) (per curiam); Delaware v. Prouse, 440 U.S. 648, 663 (1979). The officer's "plain view" detection, from outside the vehicle, of the marihuana odor, the seeds, the brown vegetable material, and the small envelope was proper. Commonwealth v. Ortiz, 376 Mass. 349 , 353 (1978). The marihuana odor, the seeds, the brown vegetable material, and the small envelope gave the officer probable cause to believe that other contraband was within the vehicle and on Valentine's person. Commonwealth v. Skea, ante 685, 690 n.8 (1984). Given probable cause to search and exigent circumstances, the officer could lawfully search Valentine's person. Id. at 700. Commonwealth v. Stafford, ante 964, 965 (1984).
Section 4. For the reasons stated in Commonwealth v. Gagnon, 387 Mass. 567 , S.C., 387 Mass. 768 (1982), cert. denied, 461 U.S. 921, and 464 U.S. 815 (1983), the judgment is vacated, and the case is remanded for sentencing on so much of the verdict as found the defendant guilty of possession of heroin.

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This article will discuss the law of copyright, a familiar concept with broad applications for businesses. As the article will explain, copyright law is often less than straightforward; although copyright protections are often wide-ranging, there are several important limits to the scope of these protections. One of these limits involves so-called “useful articles” – creative works that have both creative and functional elements (for instance, an ornately-designed trash can that is displayed as a sculpture in a modern art museum). The concept of useful articles helps to delineate between copyright law – which is intended to protect creative expression – and patent law – which is intended to protect inventions or “functional ideas.” Useful articles contain both creative expression and functional ideas, so these items have an ambiguous status under intellectual property law. Several courts have attempted to clarify this ambiguity, but useful articles doctrine remains a nebulous legal concept. This article will introduce some of the relevant case law in useful articles doctrine, and then discuss the applications of that law on one example of a useful object – a lawyer’s work product.
Copyright protection is the powerful and socially necessary guarantee of exclusive rights to the authors of creative works. An author receives a monopoly over his work the moment it is “fixed in a tangible medium of expression,” and with some exceptions, nobody may copy or distribute that work without permission from the artist. The economic rationale for this legal protection seems obvious enough; few artists would commission works without the protection of copyright, out of fear that free-riders would exploit their efforts. However, if the protections granted to copyright owners are too strong, artists’ incentives to create are reduced. Imagine if a mystery writer penned a bestselling thriller and was therefore entitled to a copyright over the entire mystery genre. Fearing an infringement suit, nobody else would write a mystery, and there would be a chilling effect on future creativity. Copyright law must therefore strike a balance between affording protections to individual artists and preserving the ability of others to create their own works.
Nowhere is this balancing act more nuanced than when dealing with useful articles. According to the federal copyright statute, a useful article is “[a thing] having an intrinsic utilitarian function that is not merely to portray the appearance of the article or to convey information.” This intentionally vague definition encompasses nearly any ‘functional’ object one can imagine, from a belt buckle, as in Kieselstein-Cord v. Accessories By Pearl, Inc. 632 F.2d 989 (2d Cir. 1980), to a lamp, as in Mazer v. Stein 347 U.S. 201 (1954). The definition probably does not include something like a street map, because its sole purpose is to “convey information” about the layout of streets.
The crucial rule in useful articles doctrine is that copyright protection exists only for the elements of creative authorship “that can be identified separately from the utilitarian aspects of an object.” 17 U.S.C. § 101. The intent of this doctrine, known as “conceptual separability doctrine,” is to prevent someone from copyrighting something that is useful and commonplace. Just as a writer should not be allowed to copyright the entire mystery genre, the designer of a particular lamp should not have a copyright over every lamp design, and a jeweler who designs one belt buckle should not be able to copyright the very idea of a belt buckle. However, the definition of “useful articles” and the related doctrine of conceptual separability are highly ambiguous, so a large and growing body of case law has sprung up to help determine how to properly distinguish the copyrightable artistic elements of a work from its uncopyrightable utilitarian elements.
Keiselstein-Cord v. Accessories by Pearl, Inc. held that the expressive aspect of the article is conceptually separable whenever it can be said to be “primary,” and the utilitarian function can be said to be “subsidiary”; Kieselstein-Cord v. Accessories by Pearl, Inc., 632 F.2d 989, 993 (2d Cir. 1980) Brandir International, Inc. v. Cascade Pacific Lumber Co. applied the test articulated by Robert Denicola in his paper Applied Art and Industrial Design: A Suggested Approach to Copyright in Useful Articles, See Brandir Int’l, Inc. v. Cascade Pac. Lumber Co., 834 F.2d 1142, 1146–47 (2d Cir. 1987) holding that copyrightability is dependent on “the extent to which the work reflects artistic expression uninhibited by functional considerations” Robert C. Denicola, Applied Art and Industrial Design: A Suggested Approach to Copyright in Useful Articles, 67 MINN. L. REV. 707, 741 (1983). and Judge Newman’s dissent in Carol Barnhart v. Economy Cover Corp. proposed a finding of copyrightability where a work “stimulate[s] in the mind of the beholder a concept that is separate from the concept evoked by its utilitarian function.” Carol Barnhart Inc. v. Econ. Cover Corp., 773 F.2d 411, 422 (2d Cir. 1985) (Newman, J., dissenting).
A feature incorporated into the design of a useful article is eligible for copyright protection only if the feature (1) can be perceived as a two- or three-dimensional work of art separate from the useful article, and (2) would qualify as a protectable pictorial, graphic, or sculptural work—either on its own or fixed in some other tangible medium of expression—if it were imagined separately from the useful article into which it is incorporated.
Separability doctrine reflects a fundamental precept of intellectual property law; that protection for the creators of utilitarian objects should be the domain of patent law and not of copyright. Patent protection, unlike copyright protection, does not automatically attach to a creative product the second it is created. In order to obtain a patent, an inventor must convince the patent office that his invention is a “new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.” Because intellectual property law does not extend automatic protection to the functional elements of an otherwise creative work, a creator must meet a high threshold in order to monopolize the intellectual property rights in a functional object or process. This helps to preserve the ability of other creators to use functional ideas in their own works.
But what if a written work is the functional idea? Certain written works – legal documents, for example – are primarily intended to serve a particular utilitarian function (i.e. to convey title in a property). But they are also creative works; the lawyers who draft documents must creatively arrange the words on the page, just as fiction authors must be creative when they compose a novel. So the creative aspect and the utilitarian aspect of functional writing are in tension with one another when it comes to determining the protection status of the writing under copyright law. On one hand, the incentive rationale for copyright suggests that protection should apply to the lawyer’s creative expression; the lawyer would have less incentive to provide legal services if the fruits of his labor could simply be appropriated by anyone with physical access to his documents. On the other hand, to the extent that legal documents serve some utilitarian purpose - i.e. structuring a company or arguing to a court - should they not be considered “useful articles,” thereby making their functional elements ineligible for copyright protection? It should be noted that much of the conceptual separability doctrine discussed in this essay has dealt with “pictorial, graphic or sculptural work.” Although this definition appears to preclude application to written expression, the doctrine of conceptual separability has, in fact, been applied to works which do not contain pictorial, graphic or sculptural elements.
Courts have sought to resolve the question of conceptual separability in written works with something called the “idea-expression divide.” The idea-expression divide was articulated with respect to copyright law in Baker v. Selden 101 U.S. 99 (1879). This case involved an infringement suit over a book which described a new accounting system. Selden, the author, obtained a copyright for the book itself. Baker published and sold a book that described a very similar accounting system, and Selden sued for infringement. A unanimous Court held, “whilst no one has a right to print or publish [Selden’s] book, or any material part thereof, as a book intended to convey instruction in the art, any person may practice and use the art itself which he has described and illustrated therein.” In other words, copyright protection extends only to the unique, expressive aspects of a work that describes a practical system - not to the system itself. Applied to the work product of lawyers, the holding of Baker suggests that legal documents are only entitled only to thin copyright protections, since they are more practical than expressive.
The copyright status of written work product has obvious economic implications for businesses like law firms, which derive their revenue from the sale of written works to clients.
Chatterjee, M. (2018). Conceptual Separability as Conceivability: A Philosophical Analysis of the Useful Articles Doctrine. New York University Law Review,93(3), 558-588. Retrieved July 29, 2018.
Last modified on Oct. 23rd, 2018 at 2:30pm by Lisa Marie Patzer.


1. Review by this Court of a judgment of the Court of Claims against the United States in a suit for infringement of a patent, brought under the Act of June 25, 1910, as amended, is limited to questions of law. P. 303 U. S. 28.
2. In a patent case in the Court of Claims under the Act of 1910, the questions of validity and infringement are questions of fact. P. 303 U. S. 29.
3. The duty of the Court of Claims to find the ultimate facts, requires that it resolve conflicting inferences and draw the necessary factual conclusions from the evidence. Id.
4. The Court of Claims made elaborate circumstantial findings preceding its two ultimate findings that the patent sued on was valid and infringed by the United States. Its opinion disclosed that there was contradictory testimony by experts for the claimant and for the United States, but the evidence was not, and could not properly be, incorporated in the record before this Court. Held that, while this Court could inquire whether the ultimate findings were necessarily overborne by the subordinate ones, thus showing that the judgment against the United States was not sustainable in point of law, it could not take up the patents set forth in the findings and, in the absence of the explanatory and construing testimony of the expert witnesses, attempt to pass upon the various questions involved, and upon such a necessarily limited consideration overrule the conclusions of fact reached by the Court of Claims upon the entire record. P. 303 U. S. 30.
Certiorari, 302 U.S. 668, to review a judgment against the United States on a claim of patent infringement. See s.c. 299 U. S. 299 U.S. 201.
Respondent brought this suit to recover compensation for the use and manufacture by and for the United States of a device alleged to be covered by respondent's patent No. 1,115,795 for an invention for the control of the equilibrium of airplanes. On the first hearing, the Court of Claims made special findings of fact and decided as a conclusion of law that respondent's patent was valid and had been infringed by the United States, and that respondent was entitled to compensation. Judgment was entered accordingly. 81 Ct.Cls. 785. On review by writ of certiorari, this Court held that validity and infringement were ultimate facts to be found by the Court of Claims and, as these facts had not been found, the judgment was vacated and the case was remanded to that court with instructions to find specifically whether respondent's patent was valid, and, if so, whether it had been infringed. United States v. Esnault-Pelterie, 299 U. S. 201.
"XLVIII. Claims 2, 5, 6, 7, 8, and 9 of the Esnault-Pelterie patent in suit are valid."
"XLIX. The three alleged infringing airplanes of the defendant all possess the single vertical lever movable in every direction for controlling the lateral or longitudinal equilibrium of the airplane, connected to equivalent controlling surfaces having the same functional effects as those disclosed in the patent."
"Claims 2, 5, 6, 7, 8, and 9 of the Esnault-Pelterie patent in suit are infringed by defendant. "
The court then entered an interlocutory judgment holding respondent entitled to compensation and directing that the court's previous findings, as amended, together with its opinion as theretofore announced, should stand. 84 Ct.Cls. 625. Certiorari was granted.
Without its consent, the United States may not be sued for infringement of a patent. Crozier v. Fried Krupp, 224 U. S. 290. The Congress has determined the conditions upon which the United States consents to be sued. By the applicable statute, Congress has permitted suit to be brought in the Court of Claims for reasonable compensation for the infringing use or manufacture. Act of June 25, 1910, 36 Stat. 851, as amended by Act of July 1, 1918, 40 Stat. 705, 35 U.S.C. § 68. Review by this Court of the judgment in such a suit is thus subject to the rules which have been established for the review of the judgments of the Court of Claims. That review is limited to questions of law.
"The facts so found are to be the ultimate facts or propositions which the evidence shall establish, in the nature of a special verdict, and not the evidence on which the ultimate facts are founded."
the record when made up as the rules direct. Bills of exception are not recognized in either the legislation or the rules; nor is there other provision for bringing the evidence into the record or including therein the various rulings involved in applying to the evidence presented the rules which mark the line between when properly may be considered and what must be rejected. As long ago as Mahan v. United States, 14 Wall. 109, 81 U. S. 111, this Court said of the rules that they could not be examined"
"without seeing that the purpose was to bring nothing here for review but questions of law, leaving the Court of Claims to exercise the functions of a jury in finding facts, equivalent to a special verdict, and with like effect. *"
"are to be treated like the verdict of a jury, and we are not at liberty to refer to the evidence, any more than to the opinion, for the purpose of eking out, controlling, or modifying their scope."
United States v. Omaha Tribe of Indians, 253 U. S. 275, 253 U. S. 281; Stilz v. United States, supra; United States v. Swift & Co., 270 U. S. 124, 270 U. S. 138.
Refrigerator Co. v. Winters, 280 U. S. 30, 280 U. S. 36. But we do not think that rule is applicable where we are unable to examine the testimony which was heard by the court below and we cannot say that it was of no importance or determine its value in the light of the disputes revealed. We should not be justified in taking up the patents set forth in the findings and, in the absence of the explanatory and construing testimony of the expert witnesses with respect to the pertinent fact situations, in attempting to pass upon the various questions, whether of a scientific nature or otherwise, that are involved, and upon such a necessarily limited consideration, in overruling the conclusions of fact reached by the Court of Claims upon the entire record. Compare 76 U. S. Wethered, 9 Wall. 812, 76 U. S. 815-816; Royer v. Schultz Belting Co., 135 U. S. 319, 135 U. S. 325; St. Paul Plow Works v. Starling, 140 U. S. 184, 140 U. S. 196-197; Coupe v. Royer, 155 U. S. 565, 155 U. S. 577-580.
to validity and infringement are necessarily overborne by the subordinate findings.
MR. JUSTICE BLACK is of the opinion that the findings do not show infringement of any valid patent, or that appellee invented either a vertical lever or a universal joint or the combined use of a vertical lever and a universal joint to control airplanes or machinery; he believes the findings show that such means of control were in general use long before appellee -- five years after his original application for a patent -- filed an amendment asserting this claim. For these reasons, he believes the judgment should be reversed.
* See also United States v. Smith, 94 U. S. 214; Stone v. United States, 164 U. S. 380, 164 U. S. 383; Collier v. United States, 173 U. S. 79; Crocker v. United States, 240 U. S. 74; Niles Bement Pond Co. v. United States, 281 U. S. 357, 281 U. S. 358-360.


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Good morning and Happy Tuesday! Today, I am going to be talking about a topic that is quite controversial, especially in today’s society in the church. That topic is women leadership within the church. Although, it is more conservatively known to be wrong for women to lead, it has become a much more common thing with the rise of women rights and equality within the American society. As a young woman who absolutely loves to lead worship for my youth group, there was a part of me that wondered if it would be okay to become a “big church” full time worship leader. So I started asking pastors I trusted and I got different answers. One pastor encouraged me to do my own Bible study and see where it lead me, which is what I did. Today, I am going to take you along my studying journey and how I received my conclusion. So let’s get into it!
As I previously stated, I decided to start with contacting three pastors whom I trusted asking them all the same question, which was, “Would it be biblically ok if I were to become a full time worship leader, or would it be wrong since the Bible mentions women to not preach or have leadership in the church?” One believed it was fine for women to have leadership within the church, because the verse that I was thinking of was taken out of context and it was specific to a church in Corinth (I think). Another pastor said that again, it was taken out of context, but that women are allowed to lead as long as a man ordains it and has the leadership over them. An example of this would be a woman being allowed to lead worship, or a couple songs, because a man had given her the permission to do so. The last pastor said it was not okay to have women be in a place of leadership in a church, because the church and the family are supposed to submit to one another like we are supposed to submit to Christ (women to men as us to Christ, but also in submission to each other).
After taking all of this into account, I jumped into my Bible (+ the internet to help get started). As a starting point, I used this website (click HERE). Using the verses listed, I started going through every position of leadership (Pastors, elders, deacons, ushers, communion leaders, and worship leaders) and this is what I ended up finding (along with the verses in use)….
My Question: Can women, can I, be a worship leader full time (or a worship pastor), but not preach?
Broader Question: Can women hold a place of leadership in the church?
v. 1-7: A man must be in place of an overseer (or pastor), not a women.
v. 8-13: Deacons must be male as well.
v. 6: Must be male (same reason as above).
v. 3: Christ -> Man -> Woman (The church is in submission to Christ, as women are to men).
v. 11: Men and women are dependent, or need to be in submission, to each other.
v. 6: Some were called “apostles”, or messengers.
Abigail directs David to not commit murder with non-directive leadership and authority, but also with submission.
Miriam lead worship among other women.
Deborah lead worship WITH a man.
Women are told they are supposed to stay quiet within the church.
Basically, women have their role in the church, however, speaking, or preaching (roles of leadership) alone are not allowed. Example: Leading worship is fine as long as it is with, or with the ordainment, of a man.
Egalitarian: Men and woman have equal rights in the church, therefore women can hold any place of leadership.
Women went with men to pray about who would replace Judas Iscariot, the apostle.
Women corrected teaching of a man.
Woman as deaconesses, or women deacons.
Complementarian: Focuses on the verses 1 Corinthians 11:3-16 that states that women are supposed to be submitted to men as the church is to Christ, which means women must submit to the leadership of men. Therefore, women cannot be in a place of leadership.
Women are to be silent.
Women are told not to teach.
The pastor who believes that women are allowed to be leaders in the church sent me this article (click HERE) that helped him come to this conclusion.
My thoughts about this article: This article was focused on the women of the early church and it gave a ton of historical evidence and Biblical evidence on women who were active in their faith and played important roles within the church. These roles included being deacons, elders, missionaries, and prophets. However, the thing that concerned me about this is that there was very little biblical scripture to back this up. Yes, much historical evidence was used, but there included none of the verses I had previously used and explained them in a way that would conclude that women could hold a place of leadership over men. Therefore, this article did not change or challenge what I had previously read in the Bible, which were pretty clear.
Conclusion: Women cannot hold leadership (over men) in a church.
Now… you may be thinking, “Maddie, you’re a woman… how do you feel about this or accept this? Is this not offensive to you?” Well, let me be completely honest…. I was quite disappointed when I came to this conclusion, however, I did not want to put myself in a position where God so clearly states as not okay. I would be doing the exact opposite of His will. You may have noticed that it didn’t seem like my study was very intense or that I spent a lot of time at it, and honestly, I didn’t need to. Going into this with an open mind, I knew that I needed to be okay without whatever answer that was given, because it’s God’s answer. A part of me, after my studying, wanted to dig deeper and try to find the answer I wanted, however, that was me just trying to find a way to bend the Bible or maybe find a grey area so that my answer didn’t have to be wrong. Right then, I knew that was a warning flag and I needed to stop or else I would be looking too hard for an answer that I couldn’t find and I would just be making up the answer I wanted, stretching the truth.
Many would just assume that God is sexist… however, He really isn’t when you think about it. God specifically designed men and women to have specific roles and to compliment each other. However, in no way did God design men to dictate over women. Many assume that submission means, in a sense, becoming a slave to that person. However, what it really means, is yes, submitting yourself (or coming under one’s leadership), but it also means a co-dependent relationship. In a marriage, and in the church, the the man is called to love, take care of, and respect his wife and the wife is supposed to submit to him and love him, just as God loves and takes care of the church and the church submits to Him. The man is in no way supposed to harass his wife, to put her down, or subject her as his slave. Again, he is supposed to love her and care for her. They do live together, not alone. They are dependent of each other. Their relationship and their own selves are bettered, because of the other. A women’s role is just as important as a man’s, but they are different and that’s okay. God is in no way being sexist. He established very important roles that need to be filled by each position according to His design. When done in and through His will, marriages and the church succeed and are glorified.
What are your thoughts? If you have studied this at all, let me know where your studies took you on this topic.
Me too!! You as well!
Same here! I always enjoy a good conversation on scripture like this! Have a great day!!
Yes, I definitely agree to this. God will use men or women in the way He has designed. Thank you for the conversation. It’s been great communicating with you on this!
But to your conclusion, I totally agree. Women have their position, men have theirs. And God will use us where we plants us for his glory. Maybe where the line is drawn has some grey areas that we could discuss based upon various passages and get specific direction from the Holy Spirit, but in general God has given women and men their own unique glory in how they manifest the image of his own glory and we reflect him best when we are where he intended us to be.
Of course! Thank you for the response. I love discussing these things! Deborah is a really good example. But how did she get into leadership anyway? I just read that part in Judges 4…I can’t find it saying that no man was willing to be the leader. Just that she became the judge. And she was married too…how come Lappidoth wasnt the judge instead? That would be interesting to find out. I read that passage as saying its ok for a woman to lead men – she was leading Israel spiritually and she told Barak on behalf of God where to go (though I guess that arguably could not be leadership. I’m a big JRR Tolkien fan and I would almost like her role to a Gandalf rather than an Aragorn, to use a nerdy Lord of the Rings analogy) – unless I’m missing something which happens haha!!
It is a difficult subject. I definitely give you props though for willing to be completely open and seeing what God has as his answer regardless of how you feel. That’s great wisdom!! Everyone could use that aporoach more often!
Thank you for your comment! I really appreciate it.(: Something I don’t think I made clear in this passage is that it’s wrong (from what I researched) when a woman is in leadership over a man. HOWEVER, I didn’t mention this, because it came up in later research after this blog post was written, if a man is unwilling to lead, a woman should take leadership. A biblical example of this would be Deborah. I’ve known an amazing children’s pastor who is a woman. She’s incredible, but she’s not in leadership over grown men. I’m / was a worship leader for my youth group. This is kinda iffy because I was a leader over men, however, there were no men willing to step up.
I really wish it was more okay for women to be leaders, because I looooove leading worship. Really, point being, women have their specific place in the church, same with men, but God will use people in whatever was He needs them or sees fit. So yes, I totally understand what you’re saying and agree. Yes, very difficult subject, especially with today’s society and church.
Really good summation of passages on the subject. I can’t disagree with your analysis…honestly deep down I’m kinda rooting for women to be in leadership. But I do have to agree with what you wrote here.
On the flip side…I know a lot of women pastors. I don’t think they are in sin. But they are associate pastors (kids min, small groups, etc). I dont get the vibe from the Spirit that it is wrong, but that’s just me. But I. Not sure I think its right for a woman pastor to be the head pastor? Maybe that’s where the line is drawn in today’s church? Idk.
Btw I am a deeply involved in our kids min and we have several women pastors that are friends and very strong believers. This is a hard subject for sure! Great post!

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by Michelle A. Maratto, Esq.
1. What is a Finder’s Fee?
A “finder” is one employed to bring two or more parties together so that they can meet to do their own negotiating and make their own bargains. Finders act to “find” potential buyers or sellers, stimulate interest, and bring parties together. But they have neither the obligation nor the power to negotiate a transaction. Nevertheless, while they perform some related functions, it is critical to distinguish a broker from a finder.
2. Distinction between a Finder and a Broker.
While they perform some related functions, a broker should nevertheless be distinguished from a finder. This distinction is based on the quality and quantity of the services performed. Thus, unlike a finder, a broker ordinarily must shepherd the parties into consummating the agreement, rather than simply introducing the bargaining parties to one another.
Also, unlike a finder, in New York a broker carries a defined, fiduciary duty to act in the best and more involved interests of the principal. Thus, a court may find that a principal’s relationship with its “broker”, is really a relationship with a finder in instances where the individual has duties limited to only finding business for acquisition in exchange for a finder’s fee absent any contractual obligations of trust and confidence.
3. How Finders Can Get In To Trouble If They Are Doing Unlicensed Real Estate Brokerage.
Here is where things get tricky. As we saw above, a finder and a broker are, generally, different animals. If, however, the acquisition of real property is the dominant feature of the contract at issue, then the court is highly likely to consider a fee in dispute as one for real estate brokerage, not for finding a deal. And New York Courts are clear that only licensed real estate brokers can recover a real estate brokerage fee.
In one case, one of the parties to the transaction sought to avoid paying a finder’s fee to the alleged-finder on a purchase of property, arguing that the finder was not a real estate agent, and thus not entitled to receive the fee. The court held that the plaintiff, who was not a duly licensed real estate broker, was statutorily prohibited from bringing a breach of contract action to recover a finder's fee of 15% of net profit realized from the defendants' purchase and sale of real property.
In such case, it did not matter that the written agreement drafted by the parties to the transaction explicitly referred to the finder being compensated as a “finder”. It did not matter that there was nothing in the agreement, explicit or implied, that the finder was an agent of the parties. It did not matter that the finder had no explicit or implied power to bind the parties to the transaction. Nor did it matter that the finder did not have the power to negotiate the transaction, nor to do anything except find and introduce parties. All that mattered to the court was that the underlying transaction involved the sale of certain real property, and plaintiff was attempting to collect a fee for facilitating the purchase and sale of that property.
Courts have further held that in order for a non-licensed real estate broker to demonstrate his entitlement to a finder’s fee in a transaction that includes a real estate component to the deal, that the acquisition of real property be merely incidental to the underlying transaction, or that the services rendered be for any purpose other than facilitating the acquisition of real property.
In another case, the defendant sought to obtain mortgage financing for a proposed 30–unit condominium to be developed on certain real property that it owned. The defendant subsequently discussed with the plaintiff, “a Finder”, the prospect of its assisting in the procurement of a mortgage loan. The defendant and the plaintiff entered into a Master Fee Agreement, which set forth the fees to be provided to the plaintiff were the plaintiff to secure a loan commitment for the defendant. The defendant established that the negotiation of the loan was the dominant feature of the parties' agreements. Although the plaintiff's principal was a licensed real estate broker, the plaintiff, an unlicensed limited liability corporation, was barred from receiving a commission or fee for services relating to the procurement of the loan.
4. Finder’s Fee must be in Writing in New York.
In New York State, the New York Statute of Frauds requires that an agreement to recover a finder’s fee must be in writing. As such, in order to recover on a breach of contract claim for a finder’s fee, you must demonstrate that the agreement was reduced to writing.
5. An Email May Constitute a Writing Sufficient to Support a Finder’s Fee.
(ii) the defendant assented to these revisions and did not reject, protest or correct any of the provisions in the last version of the agreement, than the agreement complied with the statute of frauds and was enforceable.
6. Lessons for Venture Capital Firms when Bringing Investors together on a Real Estate Deal.
(1) Always have a written agreement between yourself and the investor you are working with.
As lawyers, we are so often surprised to see that sophisticated parties do not have their finder’s agreement reduced to writing. However, people get busy, and they often do not want to sidetrack the momentum of a deal with papering the details. Unfortunately, ignoring the details and not reducing the agreement with the investors to a writing can cost you big-dearly in the end.
Sometimes those trying to get out of paying a finder’s fee will say that the deal completed was not the deal that was originally found, and thus the finder is not entitled to a fee. They will allege that the deal ultimately transacted was too remote in time from the finder’s introduction, or that the terms were so different as to create a different deal. Email is a great way to dispel these kind of attempts at diversion. If the parties continued to talk about a deal, that would tend to prove that it was the same deal.
(3) Get a real estate broker’s license.
A real estate broker’s license is not the hardest thing in the world to procure or maintain, and if doing so can protect large fees, why not have your group licensed for real estate brokerage if that is what you are doing anyway? Be careful – because having an individual broker on your staff will not suffice.
(4) You might also consider becoming a partner with the cash investor.
If you are part of the deal as an equity owner, then your interests might be better protected. You move from an ancillary party to the deal to a primary party.
 Southack v. Lane, 32 Misc. 141 (1st Dept. App. Term 1900).
 Train v. Ardshiel Associates, Inc., 635 F. Supp. 274 (S.D.N.Y. 1986), judgment aff’d, 805 F.2d 391 (2d Cir. 1986) (applying New York law).
 Northeast General Corp. v. Wellington Advertising, Inc., 82 N.Y.2d 158 (1993).
 Train, 635 F. Supp. at 274.
 Northeast General Corp., , 82 N.Y.2d at 158 (finder-seller agreement did not create a relationship of trust between the parties by operation of law so as to produce a fiduciary-like obligation on the finder, and thus the seller could not withhold a fee after the finder failed to reveal to the seller that the prospect which the finder had brought to the seller had a reputation for taking actions in business dealings that could be detrimental to the seller, even though the seller was in fact damaged by the prospect’s actions; the seller failed to bargain for and specify a fiduciary-like relationship in the agreement).
 J.O.P. Consulting Group, LLC v. McCawley Precision Machine Corp., 272 A.D.2d 82 (1st Dept. 2000); Trump v. Corcoran Group, Inc., 240 A.D.2d 159 (1st Dept. 1997). See also, Stiefvater Real Estate, Inc. v. Himbaugh, 42 A.D.3d 525 (2d Dept. 2007) (affirming trial court’s finding that the fee was a finder’s fee, and not a broker’s fee, due to “the plaintiff’s limited role as a finder, rather than as an agent acting in a fiduciary capacity”).
 Futersak v. Perl, 84 A.D.3d 1309 (2d Dept. 2011); leave to appeal denied, 19 N.Y.3d 938 (2012).
“’real estate broker’ means any person, firm, limited liability company or corporation, who, for another and for a fee, commission or other valuable consideration, lists for sale, sells, at auction or otherwise, exchanges, buys or rents, or offers or attempts to negotiate a sale, at auction or otherwise, exchange, purchase or rental of an estate or interest in real estate, or collects or offers or attempts to collect rent for the use of real estate, or negotiates or offers or attempts to negotiate, a loan secured or to be secured by a mortgage, other than a residential mortgage loan, as defined in section five hundred ninety of the banking law, or other incumbrance upon or transfer of real estate, or is engaged in the business of a tenant relocator, or who, notwithstanding any other provision of law, performs any of the above stated functions with respect to the resale of condominium property originally sold pursuant to the provisions of the general business law governing real estate syndication offerings. In the sale of lots pursuant to the provisions of article nine-A of this chapter, the term ’real estate broker’ shall also include any person, partnership, association or corporation employed by or on behalf of the owner or owners of lots or other parcels of real estate, at a stated salary, or upon a commission, or upon a salary and commission, or otherwise, to sell such real estate, or any parts thereof, in lots or other parcels, and who shall sell or exchange, or offer or attempt or agree to negotiate the sale or exchange, of any such lot or parcel of real estate. …. In connection with the sale of a business the term ’real estate broker’ shall not include a person, firm or corporation registered pursuant to the provisions of article twenty-three-A of the general business law or federal securities laws.
 Ling v. Bode, 94 A.D.3d 951 (2d Dept. 2012).
 JCP Properties v. Equity Land, 102 A.D.3d 745 (AD2d, 2013).
 General Obligations Law § 5-701(a) (10) (i.e., the New York Statute of Frauds) states that: [e]very agreement, promise or undertaking is void, unless it or some note or memorandum thereof be in writing, and subscribed by the party to be charged therewith, or by his lawful agent, if such agreement, promise or undertaking:[i]s a contract to pay compensation for services rendered in negotiating a loan, or in negotiating the purchase, sale, exchange, renting or leasing of any real estate or interest therein, or of a business opportunity, business, its good will, inventory, fixtures or an interest therein, including a majority of the voting stock interest in a corporation and including the creating of a partnership interest. “Negotiating” includes procuring an introduction to a party to the transaction or assisting in the negotiation or consummation of the transaction. This provision shall apply to a contract implied in fact or in law to pay reasonable compensation but shall not apply to a contract to pay compensation to an auctioneer, an attorney at law, or a duly licensed real estate broker or real estate salesman.
 The statute of frauds applies to claims for fees by finders. See, e.g., Freedman v. Chemical Const. Corp., 43 N.Y.2d 260 (1977); Intercontinental Planning, Limited v. Daystrom, Inc., 24 N.Y.2d 372 (1969) (decided under predecessor statute to N.Y. Gen. Oblig. Law § 5-701); Hardy-Latham v. Wellons, 415 F.2d 674 (4th Cir. 1968) (applying New York law).
 Stevens v. Publicis, S.A., 50 A.D.3d 253, 254-55 (1st Dept. 2008).
 Newmark v. 2615 East 17 Street Realty LLC, 80 A.D.3d 476 (1st Dept. 2011).
 Simon v. Electrospace, 28 N.Y.2d 136 (1971).

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The next day, on February 22, 2018, the Tenth Circuit Court of Appeals issued its decision in Genberg v. Porter, 882 F.3d 1249 (10th Cir. 2018), which represents a significant victory for whistleblowers generally and a particularly sweet victory for Ogborn Mihm’s client, Carl Genberg. The opinion, available here, strengthens the Sarbanes-Oxley Act’s anti-retaliation protections for whistleblowers in the Tenth Circuit and provides a ray of light for corporate whistleblowers after the Supreme Court’s opinion in Digital Realty v. Somers narrowed the Dodd-Frank Act’s anti-retaliation protections.
Carl Genberg was an executive at a publicly traded medical technology and device company. In late 2009 and early 2010 he began raising concerns with the CEO and CFO regarding the Board of Directors’ continued exercise of a proxy granted to it pursuant to a prior plan for the company to become public, in violation of SEC Rule 14. When his concerns went unaddressed, Mr. Genberg wrote a letter on behalf of an interested shareholder, demanding in part that the Board give up its proxy and noting that the company had failed to hold annual shareholders meetings for several years. In response to this letter, on the next day the Board and the Company’s CEO, Steven Porter, issued a cease and desist letter to Mr. Genberg. The following day, Mr. Genberg also reported his concerns that the CEO was engaging in insider trading and stock price manipulation. Three days later the Board began an investigation of Mr. Genberg. Three weeks later, as a result of the investigation, Mr. Genberg was terminated under a “for cause” provision in his employment agreement, which effectively denied him the severance he was otherwise entitled to. Mr. Genberg subsequently brought claims under, inter alia, the Sarbanes-Oxley Act’s anti-retaliation provision, and represented himself pro se for the majority of the litigation of the case. Clayton Wire and Jim Fogg of Ogborn Mihm LLP were proud to step in just prior to the scheduled trial to represent Mr. Genberg.
SOX prohibits a publicly traded company, or any contractor or agent of such company, from retaliation against an employee who blows-the-whistle on what he reasonably believes to be a violation of statutes prohibiting mail fraud, wire fraud, bank fraud, securities fraud, any rule or regulation of the Securities and Exchange Commission (SEC), or any provision of Federal law relating to fraud against shareholders. Successful whistleblowers are entitled to recover economic damages, non-economic damages, attorneys’ fees and costs. The SOX statute incorporates the burdens and evidentiary procedures of the AIR-21 anti-retaliation statute. Under this paradigm, a whistleblower must first prove that (1) he engaged in protected activity, (2) the defendant was aware of the protected activity, (3) he suffered some adverse action, and (4) that his protected activity was a contributing factor in the adverse action. This “contributing factor” causation standard is viewed as a whistleblower friendly one. Then, once the whistleblower establishes these basic elements, the burden then shifts to the defendant to prove the “same action” affirmative defense, which allows the defendant to escape liability if it can establish by clear and convincing evidence that the same adverse action would have been taken against the whistleblower in the absence of the protected activity.
In its February 22, 2018, opinion, the Tenth Circuit reversed the District Court’s grant of summary judgment in favor of the Defendant. In doing so, the court made several key legal rulings that both benefit Mr. Genberg’s case and all whistleblowers.
First, the court found that the District Court had applied the incorrect test to determine whether Mr. Genberg had engaged in protected activity under SOX. The Tenth Circuit noted that by requiring Mr. Genberg to refer to a specific statute or rule enumerated in SOX, the District Court had applied the “definitive and specific” protected activity standard that the Administrative Review Board (ARB) had rejected in the Sylvester case. The court went on to note that under Lockheed, the Sylvester decision was entitled to Chevron deference, i.e. the court would follow the decision absent proof that it was directly contrary to the statutory language, thus joining four other circuits in adopting the Sylvester standard.
Under the Sylvester standard, a whistleblower is not required to make a “definitive and specific” reference to an enumerated statute or rule under SOX, but is instead only required to have a reasonable belief that such enumerated statutes or rules were or would be violated. “The Sylvester standard contains subjective and objective components. Under the subjective component, the employee ‘must actually believe’ that the conduct raised in the communication is unlawful. Lockheed, 717 F.3d at 1132. Under the objective component, the belief must be reasonable. Id.” Genberg v. Porter, Slip Op. at 11.
Importantly, the Tenth Circuit noted that whistleblowers such as Mr. Genberg have “no obligation to explain the omission of a citation to federal securities law in” their protected activity because Sylvester does not require whistleblowers to “include a citation to the underlying rule.” Genberg, Slip Op. at 12-13 n.3. Importantly, this is even the case when the whistleblower is, like Mr. Genberg, an attorney.
Second, the court reiterated the Tenth Circuit’s previous description of the “contributing factor” causation standard in Lockheed, holding that “[t]his element is broad and forgiving, requiring the plaintiff to point to any factor that tends to affect in any way the outcome of the decision. The contributing factor need not be significant, motivating, substantial, or predominant.” Genberg, Slip Op. at 15 (internal quotations and citations omitted, emphasis in original). The court noted that a close temporal proximity of events could establish causation in SOX retaliation claims.
The court also addressed and rejected the Defendant’s “legitimate intervening event” theory, which was premised on the Fourth Circuit’s opinion in Feldman v. Law Enforcement Assocs. The court held that “[t]o rely on a legitimate intervening event, the adverse action cannot be inextricably intertwined with the protected activity; therefore, [the defendant] need[s] to explain [the adverse action] ‘without reference to [the whistleblower’s] protected activity.’” Genberg, Slip Op. at 17-18. In making this holding and limiting the Feldman court’s opinion, the Tenth Circuit relied on the ARB’s decision in Palmer v. Canadian Nat’l Ry. The court ruled that when an investigation leads to an adverse action against a whistleblower, and in the absence of the whistleblower’s protected activity that investigation would never have occurred, then the protected activity is “inextricably intertwined” with the investigation and adverse action. When protected activity is inextricably intertwined with the investigation that led to the adverse action, the investigation cannot be “independent” of the protected activity, and thus the investigation cannot serve as a “legitimate intervening event” that cuts off causation. Genberg, Slip Op. at 18. In coming to this result, the court cited to Palmer’s holding that if the protected activity led the employer to investigate a possible rule violation and then fire the employee for violating that rule, “the protected activity…would be ‘inextricably intertwined’ with the adverse action.” Id. (quoting Palmer).
Finally, the court found that, for purposes of summary judgment, the Defendant had “forfeited” the “same action defense” by failing to raise the defense in either his Answer or his motion for summary judgment, noting that the Answer actually expressly disavowed the relevance of the defense. Genberg, Slip Op. at 19. The court went on to reject the Defendant’s argument that he had properly preserved the defense by arguing that the protected activity had not contributed to the adverse action. Id.
In Digital Realty the Court was faced with relatively straight forward questions regarding statutory interpretation and deference to agency regulations. Under the language of Section 21F of the Dodd-Frank Act, a “whistleblower” is defined by the Act’s bounty provision, i.e. a “whistleblower” is “any individual who provides … information relating to a violation of the securities laws to the [SEC], in a manner established, by rule or regulation, by the [SEC].” This definition is tied to the Dodd-Frank Act’s whistleblower bounty system, whereby an individual may report violations of securities laws to the SEC and potentially be eligible for a reward or bounty if the SEC is successful in pursuing claims based on the whistleblower’s report. In the same section, the Dodd-Frank Act also provides that “whistleblowers” are protected from retaliation for engaging in activities that fall into three categories, one of which is engaging in activity protected by SOX. However, the SEC promulgated regulations stating that an individual did not need to qualify as a “whistleblower” under the Act’s bounty provision, i.e. report to the SEC, in order to be protected from retaliation, and that the anti-retaliation provision barred retaliation for internal reporting by an individual who had not reported to the SEC. Prior to the Supreme Court’s decision, the majority of courts to have addressed the issue, and indeed the District Court in the Genberg case was one of these, held that the SEC’s regulations were entitled to deference and that the Act’s anti-retaliation protections extended to individuals who reported internally, but did not report to the SEC.
In that case, Mr. Somers had apparently reported potential securities law violations internal, but had not made any report or disclosure to the SEC, and was terminated allegedly in retaliation for such internal reporting. Mr. Somers did not pursue a SOX retaliation claim, possibly because the statute of limitations for such claims is 180 days, as compared to 3 years under the Dodd-Frank Act. The case thus presented the issue of whether Mr. Somers fell within the protections of Section 21F of the Dodd-Frank Act, despite having not reported to the SEC.
The Court took a strict interpretation of Section 21F of the Dodd-Frank Act, finding that the SEC’s regulations were not consistent with the clear language of the statute. Consequently, the Court held that in order to qualify as a “whistleblower” under Section 21F, and thus be entitled to protection from retaliation, the plaintiff must have made a report to the SEC pursuant to the Dodd-Frank Act’s bounty provision. While the Court did not specifically address the issue, it is apparent that this likely means that in order to be covered under Section 21F’s anti-retaliation provision, the plaintiff must have filed with the SEC before suffering retaliatory adverse actions for her otherwise protected activity. This significantly limited the scope of potential claimants under Section 21F.
The Genberg decision has significant beneficial ramifications for whistleblowers in the states covered by the Tenth Circuit, and throughout the nation. In particular, the Tenth Circuit’s adoption of the whistleblower friendly Sylvester standard is a clear statement that whistleblowers need only reasonably believe that a violation is or will occur in order to be protected by SOX. Further, the court’s limitation of the “legitimate intervening event” theory and its recognition that contributing factor causation is satisfied when protected activity leads to an investigation that ultimately results in an adverse action is great for whistleblowers who face systematic attempts to investigate, discredit and terminate them. Finally, the court’s recognition that the “same action defense” may be forfeited if not plead, and that merely challenging causation does not preserve such defense, will allow whistleblowers to succeed by only proving the basic prima facie elements of retaliation.
This expansion of protections for whistleblowers under SOX is more important than ever, given the Supreme Court’s recent opinion in Digital Realty v. Somers narrowing the anti-retaliation protections of the Dodd-Frank Act by requiring reporting to the SEC. In light of the Digital Realty opinion, the SOX anti-retaliation provision is more important now than ever, as it presents a broad and forgiving protection for those that have the courage to report illegal conduct by publicly held companies. Further, SOX is now back to being the primary protection for internal whistleblowers.
Ogborn Mihm is proud to represent Mr. Genberg and whisteblowers of all types. You can learn more about our whistleblower practice here.