Do you or your clients sell goods from a retail location in Virginia?  Do you collect and sell the information you collect about your purchasers?  Do your purchasers know? 

A recent, newsworthy First Amendment case in the 4^th Circuit provides an opportunity to visit these questions.  Incidentally, the case involved a privacy activist who was concerned about being charged under the Virginia Personal Information Privacy Act, VA CODE §§ 59.1-442 - 444 for putting up a website that highlighted public documents bearing social security numbers, including those of certain government officials.  The court found First Amendment protections in that case, as may be seen in the above links. 

But the scope of the Personal Information Privacy Act is not limited to social security numbers.

Some common marketing practices of average retailers may have a bit more difficulty under the Personal Information Privacy Act.  This statute requires merchants to give notice to its purchasers when it sells information about its purchasers:

No merchant, without giving notice to the purchaser, shall sell to any third person information which concerns the purchaser and which is gathered in connection with the sale, rental or exchange of tangible personal property to the purchaser at the merchant's place of business.

Id. § 59.1-442.  Online or ecommerce merchants - who often transact business in multiple jurisdictions - generally expect to face such a requirement, and are well advised to include such notice within their website privacy policies.  However, this statute defines a merchant as “any person or entity engaged in the sale of goods from a fixed retail location in Virginia.”  Id.  A suggested approach for compliance is the posting of a sign (or any other reasonable method of giving notice).  The image inspired is that of a brick and mortar business posting a busy sign detailing a fine print privacy policy.  Of course, financial and certain other regulated institutions may already provide something similar in seeking to comply with the financial privacy notice requirements (e.g., Gramm Leach Bliley Act). 

Under the Virginia Personal Information Privacy Act., an aggrieved person may be entitled to $100 per violation, reasonable attorney’s fees, and court costs.  Id. § 59.1-442.  Violations are also considered a prohibited practice under the Virginia Consumer Protection Act, which offers additional remedies.

Not necessarily, although the Court has considered prior claim construction decisions in arriving at its own conclusion.  In a recent claim construction ruling by Judge Payne in ePlus, Inc. v. Lawson Software, Case No. 3:09cv620 (E.D. Va. 2010), the Court dealt with the issue of construing claims of patents that had been construed in two previous cases in the District.  Judge Brinkema construed certain terms in the context of summary judgment motions in ePlus, Inc. v. Ariba, Inc., Civil No. 1:04cv612 (E.D. Va. 2005).  In addition, Judge Spencer construed some of the claim terms at issue in ePlus, Inc. v. SAP America, Inc., Civil No. 3:05cv281 (E.D. Va. 2006), but that claim construction opinion was later vacated. 

For some of the claim terms construed, the Court noted that the newly adopted construction was consistent with the construction in the prior lawsuits.  The Court also noted that ten of the eleven means-plus-function terms at issue were construed in the 2005 decision, and because they were “based on sound logic and are linked to the specification,” the Court adopted them.  However, the Court also stated in a footnote that while the claim constructions from the 2006 decision were helpful, it was preferable not to rely on them because that claim construction decision was vacated after the case was settled. 

Judge Payne recently denied defendants’ motion to stay a patent infringement suit pending reexamination of the patents-in-suit in ePlus, Inc. v. Lawson Software, Inc., No. 3:09cv620 (E.D.Va. March 31, 2010).  Plaintiff ePlus filed the complaint in May, 2009, against defendants, Perfect Commerce, Inc., Sciquest, Inc., Lawson Software, Inc., and Verian Technologies, Inc. alleging patent infringement claims relating to electronic sourcing systems, which allow prospective buyers to locate items to purchase from multiple electronic catalogs and build a requisition for the items. 

The patents at issue were the subject of a previous lawsuit in 2006 against SAP America, Inc. and SAP AG.  However, after the trial for that case ended in a hung jury, SAP filed for an ex parte reexamination of one of the patents-in-suit.  The PTO granted reexamination and rejected 20 claims of the patent as being anticipated by four independent items of prior art.  ePlus’ appeal of the rejection is still pending.  Lawson also filed an inter partes reexamination request regarding several claims of other patents-in-suit in the current ePlus case.

In ruling on the motion, the Court considered the standard set down by Landis v. N. Am. Co., 299 U.S. 248 (1936), and the factors set out in other patent cases relying on Landis, to determine: (1) whether discovery was complete and a trial date was scheduled; (2) whether a stay would simplify the matters at issue; and (3) whether a stay would unduly prejudice couror clearly disadvantage the non-moving party.

The Court found that because the parties had completed a substantial amount of discovery and trial was already set for September, 2010, the first factor weighed against a stay.  With respect to the second factor, the Court noted that completion of the reexamination would undoubtedly simplify some of the matters at issue, particularly if there were an effective invalidation of a patent requiring dismissal of the suit or encouraging settlement.  Although it would certainly not dispose of all the issues, such as subject matter, indefiniteness, improper inventorship, or inequitable conduct defenses raised in the case, the Court found this factor weighed slightly in favor of a stay.

Finally, the Court found that ePlus made a strong showing of prejudice, because of the time it would have to wait to litigate its claims, and the possibility it could lose its right to injunctive relief, because the patents could expire prior to completion of reexamination.  Although Lawson argued it would be prejudiced at trial because the patents would be presumed valid without a decision on the reexaminations, the Court found that the advanced stage of the case and Markman proceedings undercut Lawson’s arguments.  Moreover, the lengthy process of reexamination outweighed the interest of the parties and efficient administration of justice in moving forward with the action.

To see the opinion for the decision above, click here:

http://www.williamsmullen.com/files/upload/ePlus-V-Lawson.pdf

Berkeley HeartLab, Inc. (BHL) has filed suit in the Eastern District of Virginia against Health Diagnostic Laboratory, Inc. (HDL) and several former BHL employees for theft of trade secrets, breach of contract, and several other causes of action.  The breach of contract claims refer to a Proprietary Information and Invention Agreement between BHL and the former employees, who allegedly left BHL en masse to work for Richmond based HDL.  The Complaint also includes a claim under the Computer Fraud and Abuse Act, 18 USC 1030 (CFAA). 

The CFAA protects against unauthorized access or hacking into to certain computers or information.  For example, the knowing access of a computer without authorization (or exceeding authorized access) for obtaining certain types of information and willfully providing it to someone who is not authorized to receive it is a crime.  Much of the buzz over the CFAA has been with the sensational criminal case United States v. Drew, over cyber-bullying. 

However, the CFAA also provides a civil claim for some types of prohibited conduct:

 (g) Any person who suffers damage or loss by reason of a violation of this section may maintain a civil action against the violator to obtain compensatory damages and injunctive relief or other equitable relief. A civil action for a violation of this section may be brought only if the conduct involves 1 of the factors set forth in clause (i), (ii), (iii), (iv), or (v) of subsection (a)(5)(B). Damages for a violation involving only conduct described in subsection (a)(5)(B)(i) are limited to economic damages. No action may be brought under this subsection unless such action is begun within 2 years of the date of the act complained of or the date of the discovery of the damage. No action may be brought under this subsection for the negligent design or manufacture of computer hardware, computer software, or firmware.

18 U.S.C. § 1030(g).  Some employers have brought CFAA civil claims against employees that have misappropriated information; the CFAA offers a federal remedy that does not involve the burden of proving that the information stolen was a trade secret. 

For example, the BHL Complaint characterizes BHL computers as “protected computers” used in interstate commerce (citing 18 U.S.C. § 1030(e)(2)(B)), and that the former employees “accessed BHL’s computers without authorization and, as a result of such access, made unauthorized copies of computer data.”  Complaint, ¶ 174.   The Complaint spells out a number of factors that BHL might use to argue that it defined and controlled authorized access for

its employees, such as using “key-coded access,” “password protecting patient and sales information,” and controlling sensitive information.  Complaint, ¶¶ 23 - 27.

A brewing conflict in civil CFAA litigation dwells specifically on the meaning of the statutory words: “authorization” and “access.”  There is a split between the seventh and ninth circuits on proving these terms.  A background of the cases defining the split may be found at the blog for the Journal of Intellectual Property Law & Practice.  Without repeating the background provided there, in short, the Seventh Circuit reasons that authorization for access to an employer’s computer terminates at the time an employee breaches the duty of loyalty to the employer.  The Ninth Circuit requires a more specific showing of how the employer defined authorized access for the employee, including its safeguards for sensitive information. 

BHL’s suit now brings the question to Virginia, and may reveal if the Eastern District of Virginia will choose to follow one of the existing standards, or decide to go its own way.  

UPDATE:  This case was settled, and dismissed per order of the Court on April 22, 2010.

On May 19, ePlus, Inc. filed suit in the Rocket Docket against a number of defendants for infringement of patents covering aspects of electronic sourcing and procurement systems.  ePlus, Inc. v. Lawson Software, Inc., Civ. Action No. 2:09-cv-00232 (E.D. Va.).  No stranger to the Rocket Docket, ePlus has attempted to enforce these patents twice before in this Court.  In a case filed in 2004, ePlus received a favorable jury verdict against Ariba in the Alexandria Division before Judge Brinkema, and subsequently, in a case against SAP where the same 79 claims asserted against Lawson were at issue, ePlus was left with a hung jury in the Richmond Division before Judge Spencer.  Both cases settled after the jury returned.  In this case, as with the other two, ePlus filed its complaint in the Alexandria Division, but as with the case against SAP, this case against Lawson was transferred to the Norfolk Division pursuant to the Court's patent rotation procedure.  In Norfolk, the Defendants made a joint motion to transfer the case to Judge Spencer in Richmond, and the Court obliged.

Analyzing the traditional factors under 28 U.S.C. section 1404(a), the Court concluded that the "interests of justice" factor was dispositive in this case.  While giving short shrift to the Defendants' concerns over inconsistent results, the Court was persuaded that the judicial economy concern under this factor should carry the day, relying heavily on the Court's decision in Mullins v. Equifax Info. Servs., LLC., 2006 WL 1214024 (E.D. Va. 2006).  Specifically, because Judge Spencer was already familiar with the patents, had already construed the claims of many of them (despite the fact that his claim construction order was withdrawn at the parties' request after they settled the SAP case), and had presided over a multi-week jury trial on these patents, he was so much more familiar with them so as to enable him to preside over this case at much less cost, in terms of judicial resources.

Since receiving the case, Judge Spencer has reassigned the case to Judge Payne in the Richmond Division, and consistent with the Rocket Docket's typical speed, the case has been set for a jury trial to begin on June 14, 2010.

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