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CLASS ACTIONWestlaw Journal

41917575

VOLUME 23, ISSUE 11 / JANUARY 2017

STANDING3 Credit card class action

tossed, partly under high court’s Spokeo decision

Strubel v. Comenity Bank (2d Cir.)

ALISON FRANKEL’S ON THE CASE4 How Trump DOJ could upend

one of the biggest business cases facing Supreme Court

EMPLOYMENT5 Flight attendant class

certified in wage suit against Virgin America

Bernstein v. Virgin America Inc. (N.D. Cal.)

AUTOMOTIVE7 Goodyear asks SCOTUS

to restrict federal judges’ inherent sanctions power

BANK & LENDER LIABILITY9 U.S. justices could

allow Miami to sue banks over lending bias

Bank of America Corp. v. City of Miami (U.S.)

BANKRUPTCY10 Justices debate creditor

collusion, role of settlements in bankruptcy cases

Czyzewski v. Jevic Holding Corp. (U.S.)

EMPLOYMENT13 Business groups urge

Supreme Court to OK narrower review of EEOC subpoena rulings

McLane Co. v. EEOC (U.S.)

ENVIRONMENTAL15 Landowners’ bid to split

parcel on protected river now before high court

Murr v. Wisconsin (U.S.)

SPECIAL REPORT

U.S. Supreme Court report: A preview of upcoming cases U.S. Supreme Court decisions affect the laws and jurisprudence in many practice areas. In addition to our regular coverage, Westlaw Journals provides subscribers with a comprehensive look at cases pending before the high court in a special year-end report.

Our writers contribute analysis of cases in the myriad fields we cover throughout the year. The court’s rulings in practice areas such as business and finance, class actions, employment, bankruptcy, technology and health frequently influence the law in many other subjects.

In a challenge to the Obama administration, the court will decide if the U.S. Department of Justice overreached by sending public schools a letter telling them to generally treat transgender students consistent with their gender identity.

Some other issues before the court include: whether a city can be an “aggrieved person” under

the Fair Housing Act; which standard appellate courts should apply to a trial court’s decision to quash or enforce an Equal Employment Opportunity Commission subpoena request; and whether creditor settlements can ignore bankruptcy priority.

Westlaw Journals also reports on a case before the court asking if high-ranking federal officials can be sued for the detention of non-citizens after the 9/11 attacks.

We trust readers will find this compendium of groundbreaking legal developments helpful in keeping up with the ever-changing legal landscape.

Westlaw Journals will continue to provide updates on the high court’s actions in the coming months.

Westlaw Journals editorial team

REUTERS/Stephen LamCONTINUED ON PAGE 6

PRISONERS’ RIGHTS

Alabama state prisoners win class certification for mental health claimsA federal judge in Alabama has granted hundreds of state prison inmates class certification on claims that the state “starves” its prison system of resources to treat mental illnesses and medicates the prisoners involuntarily without due process.

Braggs et al. v. Dunn et al., No. 14-cv-601, 2016 WL 6917203 (M.D. Ala. Nov. 25, 2016).

U.S. District Judge Myron H. Thompson of the Middle District of Alabama certified two classes: one for all people with serious mental health disorders incarcerated in Alabama prisons, and one for all people with serious mental health disorders who are subject to the state Department

© 2016 Thomson Reuters2 | WESTLAW JOURNAL n CLASS ACTION

Westlaw Journal Class ActionPublished since April 1994

Director: Mary Ellen Fox

Editors: Michael Scott Leonard Mike.Leonard@thomsonreuters.com

Donna M. Higgins

Managing Desk Editor: Robert W. McSherry

Desk Editors: Alex Horowitz, Jennifer McCreary, Katie Pasek, Sydney Pendleton, Maggie Tacheny

Graphic Designers: Nancy A. Dubin, Ramona Hunter

Westlaw Journal Class Action (ISSN 2155-0697) is published monthly by Thomson Reuters.

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TABLE OF CONTENTS

U.S. SUPREME COURT REPORT

AutomotiveGoodyear asks SCOTUS to restrict federal judges’ inherent sanctions power ................................................ 7

Bank & Lender LiabilityU.S. justices could allow Miami to sue banks over lending bias (U.S.) ............................................................9

BankruptcyJustices debate creditor collusion, role of settlements in bankruptcy cases (U.S.) ...................................... 10Claims for time-barred debt do not violate FDCPA, debt collector argues (U.S.) .........................................12

EmploymentBusiness groups urge Supreme Court to OK narrower review of EEOC subpoena rulings (U.S.) .................13

EnvironmentalLandowners’ bid to split parcel on protected river now before high court (U.S.) ...........................................15

Health LawSupreme Court wades into ‘transgender restroom’ dispute, taking on case from Virginia (U.S.) ................ 17

Intellectual PropertyU.S. top court to hear dispute over trademark for band The Slants (U.S.) .....................................................19Patent exhaustion case added to Supreme Court’s queue (U.S.) ...................................................................19Attorneys weigh in on high court ‘substantial portion’ patent debate (U.S.) .................................................21Justices hear clashing arguments over laches defense to patent suits (U.S.) ...............................................23

White-Collar CrimeSupreme Court to hear qualified immunity case over 9/11 detentions (U.S.) ...............................................24

Expert Analysis: By Elizabeth Kurpis, Esq., Mintz, Levin, Cohn, Ferris, Glovsky & PopeoKnockoffs: To kill or not to kill, that is the copyright question before the Supreme Court ...........................26

Expert Analysis: By Matthew D’Amore, Esq., Morrison & Foerster Supreme Court to consider reach of U.S. patent laws to exported goods ....................................................28

Expert Analysis: By Alexandra Laks, Esq., Morrison & FoersterClass dismissed … But not quite: Supreme Court to review appealability of class certification denials when plaintiffs voluntarily dismiss case .............................................................................................30

AviationAviation company wins support in Supreme Court challenge of FAA rule (U.S.) .........................................32Supreme Court asked to clarify Montreal Convention’s 2-year filing limit (U.S.) .......................................... 33

Bank & Lender LiabilityLawyer wants Supreme Court to review CFPB ratification of enforcement action (U.S.) .............................34

BankruptcyBarclays says high court need not take preemption case in SemGroup Chapter 11 (U.S.) ...........................35

Class ActionCollective-action waivers in employee arbitration clauses arrive at high court (U.S.) ..................................36

DerivativesBig banks ask Supreme Court to review Libor antitrust decision (U.S.) ........................................................ 37

EmploymentEEOC urges Supreme Court not to expand pre-suit conciliation process (U.S.) ..........................................38

InsuranceInsurance group asks Supreme Court to review Michigan tax for ERISA conflict (U.S.) ...............................40

Medical MalpracticeFederal court lacked jurisdiction in VA benefits dispute, government tells justices (U.S.) ............................41

PharmaceuticalCalifornia high court erred on jurisdiction when it let Plavix case proceed, petition says (U.S.) ..................42

Securities Litigation & RegulationSecurities law profs ask justices to hear tolling issue in Deepwater Horizon suit (U.S.) ..............................44Government contractor asks Supreme Court to review ‘failure to disclose’ securities suit (U.S.) ................45

Toxic TortsManufacturers ask high court to hear jurisdiction dispute in toxic exposure case (U.S.) .............................46

Case Index ........................................................................................................................................................ 47

Prisoners’ Rights: Braggs v. DunnAlabama state prisoners win class certification for mental health claims (M.D. Ala.) ....................................1

Standing: Strubel v. Comenity BankCredit card class action tossed, partly under high court’s Spokeo decision (2d Cir.) ...................................... 3

Alison Frankel’s On the CaseHow Trump DOJ could upend one of the biggest business cases facing Supreme Court ..............................4

Employment: Bernstein v. Virgin America Inc.Flight attendant class certified in wage suit against Virgin America (N.D. Cal.) ............................................5

26 | WESTLAW JOURNAL n CLASS ACTION © 2016 Thomson Reuters

EXPERT ANALYSIS

Knockoffs: To kill or not to kill, that is the copyright question before the Supreme CourtBy Elizabeth Kurpis, Esq. Mintz, Levin, Cohn, Ferris, Glovsky & Popeo

On Oct. 31, the U.S. Supreme Court heard oral arguments in Star Athletica LLC v. Varsity

Brands Inc., No. 15-866, a case in which Varsity Brands has alleged that competitor Star Athletica infringed Varsity’s copyrighted stripe, chevron, color block and zigzag designs by applying them to Star Athletica’s cheerleading uniforms.

The issue was not whether each company’s stripes and chevrons were substantially similar. Instead, the issue was whether Varsity’s designs were copyrightable at all — and this is where things get fuzzy.

The case was first heard by the U.S. District Court for the Western District of Tennessee, which held that Varsity’s designs are not separable from the utilitarian function of the cheerleading uniform and therefore are not copyrightable.

The 6th U.S. Circuit Court of Appeals reversed, concluding that the designs could be copyrighted because the combinations of stripes, chevrons, color blocks and zigzags allow the garment to be recognizable as a cheerleading uniform, which conceptually separates it from the basic function of the underlying article of clothing.

Star Athletica then petitioned the Supreme Court to review the case in hopes of getting some clarity.

Because a useful article itself cannot be copyrighted, copyright owners rely on the

Oct. 31Argument held

Because there is no concise and uniform definition of “conceptual separability,” the meaning of this term has become an important

unresolved question in U.S. copyright law.

concept of “conceptual separability” to protect their designs.

Conceptual separability essentially allows for a component of an article that is separate from its utility aspect to be copyrighted.

Because there is no concise and uniform definition of “conceptual separability,” the meaning of this term has become an important unresolved question in U.S. copyright law.

Further compounding the issue, federal courts have applied a variety of tests to determine when, if ever, a design on clothes is conceptually separable. Unfortunately, no clear-cut rule has emerged to settle disputes like the one that exists in the Star Athletica case.

As a result, when Star Athletica’s petition for certiorari was granted, IP professionals and owners expected the Supreme Court to finally address the confusion that has mounted with regard to this concept.

Unfortunately, many were disappointed, as the justices seemingly failed to do so based on their line of questioning.

They neither brought up the issue directly nor showed interest in discussing under what circumstances a useful article can be protected.

Rather, the justices focused overwhelmingly on whether the specific designs in question were utilitarian or not, leading one to believe that we may end up with a far narrower ruling than most interested followers had hoped for.

POTENTIAL OUTCOMES AND THE FASHION INDUSTRY

A Supreme Court ruling in favor of Star Athletica could deal a significant blow to the fashion industry in terms of copyright protection.

Generally speaking, companies and designers have been able to rely on copyrights to protect things such as original fabric prints.

Here, Varsity is arguing that the chevron designs on their cheerleading uniforms fall more in line with a fabric “print” or “design,” rather than a utilitarian and non-copyrightable aspect of the uniform.

Elizabeth Kurpis is an attorney with Mintz, Levin, Cohn, Ferris, Glovsky & Popeo in New York. She advises fashion companies on a variety of legal issues and matters, including trademark, licensing and other intellectual property-related issues, supplier management, manufacturer negotiations, import-export issues, privacy, technology concerns, and corporate structuring and restructuring. She can be reached at EKurpis@mintz.com.

Stripping away legal protection would essentially be saying that stripes, chevrons, color blocks and zigzags as applied to a uniform would not be copyrightable, but would be if they were a printed design — a seemingly lopsided result.

And because these designs were actually copyrighted already, a ruling for Star Athletica would undermine the rights designers assumed they already had, a tough pill to swallow where often their work already straddles numerous IP protections —usually without neatly falling under any.

If the Supreme Court rules for Varsity and establishes a single test for determining whether a design is conceptually separable from its utilitarian function, it would likely provide the fashion industry with more confidence in the ability to protect through copyright certain design elements of apparel and accessories.

JANUARY 2017 n VOLUME 23 n ISSUE 11 | 27© 2016 Thomson Reuters

Question presented

What is the appropriate test to determine when a feature of a useful article is protectable under Section 101 of the Copyright Act?

Designers will have clearer guidance on how best to protect portions of their work that may not have been deemed covered under U.S. copyright law because they were considered to be strictly “useful.”

At present, numerous tests exist for analyzing whether such elements are copyrightable. As a result, at present the outcome depends on the test used in the jurisdiction where the enforcement action is brought or maintained.

Of particular interest to the fashion industry is the effect that the high court’s ruling will have on powerhouse fast-fashion retailers and others currently relying on the lack of protections for designs in U.S. copyright law.

Because so few protections currently exist for such fashion designs, some powerhouse fast-fashion retailers have been able to generate substantial revenue producing near-copycat designs from the runways of luxury brands and selling them at a significantly lower price point.

They are able to do so much faster than the traditional model allows. As a result, such knockoff pieces can become available in stores even before the original designs are produced and delivered to retailers.

Under those circumstances, the merchandise from fast-fashion companies is often posted on a retailer’s website as soon as samples are available, which allows customers to order the pieces as production is being completed.

These fast-fashion companies understand that the protections afforded to ready-to-wear companies and their designs are extremely limited and difficult to enforce.

Because of these limitations, they have created successful business models that are based on exploiting the ambiguity in copyright protection by copying only the uncopyrightable elements of a fashion design, including shapes and visual elements of a garment, while taking care to avoid copying logos or specific custom prints.

If the Supreme Court rules in favor of Varsity, fast-fashion retailers will have to adjust their business models accordingly, as elements of

the designs that may not have been deemed copyrightable may become so.

They will also have to carefully assess how any new judicial standard will affect each copy. They will further need to analyze whether elements that were traditionally considered “useful” may be copyrightable under the new standard.

This will be risky business until the new test is litigated and the fashion industry can see how the courts apply it in practical terms.

Although it is not known if this case will lead to a single test for determining conceptual separability, one thing that is clear from oral arguments is that the justices understand the implications of their decision.

Justice Sonia Sotomayor pointed out that depending on the end result, the knockoff might be eliminated altogether.

This could have a deep impact on fast-fashion retailers in particular because knockoffs are the foundation of their business model.

While the justices understand the broad financial and legal implications of their decision, there is a lot of basic information they need to digest. Justice John Roberts made that clear when he asked whether it would make a difference if the chevrons and stripes were stitched rather than applied.

Other justices struggled with the issue of whether camouflage should receive copyright protection, since it is a distinctive design that also serves a practical purpose.

Considering that the answers to these questions are still uncertain, one would think that a concise test would be the best way to resolve these ambiguities.

MORE THAN JUST FASHION

Although this case mainly focuses on the fashion industry, the Supreme Court’s ruling may also have ramifications for other industries such as that of 3-D printing.

As with any new copying technology — think CD burners and Napster for the music industry — the invention of 3-D printers

creates a host of IP issues, some of which the Supreme Court may touch upon here.

At the most basic level, any objects printed that are strictly nonfunctional or ornamental, such as a unique jewelry design, would be protected by U.S. copyright law.

On the other hand, objects that are designed strictly as utilitarian and functional articles, such as a hanger, would not be.

The issues affecting the 3-D printing industry fall somewhere in between and also involve the doctrine of conceptual separability.

Should the Supreme Court rule in favor of Varsity, the law would allow the utilitarian core of an object to be separated from its creative parts and therefore be eligible for copyright protection.

Such a ruling would change the landscape of the law, as copyrights would then be allowed to apply to certain “useful articles,” protections for which were traditionally not available.

The potential consequences for the 3-D printing industry are enormous, as this expansion can hypothetically apply to any printed object so long as the owners can argue that there are elements that are not strictly utilitarian.

For instance, a 3-D printed pen cap that does anything other than strictly cover the top of a pen can be protected by U.S. copyright law.

With the Star Athletica case, the 3-D printing industry is hoping the Supreme Court will provide some guidance on how to separate creative, copyrightable designs from unprotected utilitarian objects because the survival of the industry may depend on it.

Star Athletica is a case that the copyright world generally, and the fashion world specifically, has anxiously been following in hopes of receiving some clarity in the murky body of copyright law that has developed over the years.

In addition to the fashion industry, the advancement of a test by the Supreme Court for determining when certain elements of a useful article are copyrightable may have significant implications for other industries that produce goods that combine artistic and utilitarian elements.

Depending upon which side the Supreme Court ruling falls, the parameters of copyright protection in the fashion industry may be clarified or even completely redefined. We wait with bated breath, Supreme Court. WJ

A Supreme Court ruling in favor of Star Athletica could

deal a significant blow to the fashion industry in terms

of copyright protection.