Monday, September 28, 2009

Whistleblower: The False Claims Act and The Fraud Enforcement and Recovery Act of 2009 – Part I

In 2003, John Kopchinski was earning $125,000 a year selling the drug Bextra for Pfizer. He had a baby son, and his wife was pregnant with twins. The Gulf War veteran says that, "In the Army, I was expected to protect people at all costs." At Pfizer, though, he was expected to sell Bextra, even though it raised the risk of heart attacks and strokes. After Kopchinski expressed his concerns about Bextra's safety, Pfizer fired him. He eventually got a new job paying $40,000 a year.

Kopchinski hired attorney Erika Kelton of Phillips & Cohen. In 2005, Pfizer withdrew Bextra from the market. Now Pfizer is pleading guilty to felony charges of promoting Bextra for unapproved uses. Pfizer will pay penalties of $2.3 billion, and Kopchinski will get a $51.5 million share for filing the "qui tam" lawsuit under the False Claims Act (FCA) that helped the government collect these penalties. Kopchinski is one of five whistleblowers sharing in the settlement. He says that he does not expect his life to change much now, according to a news account of this settlement available from Reuters.

Crutial court decisions such as the one in the Pfizer case have assisted whistleblowers in coming forward. In 2008, there has been rapid legislative response in the enforcement arena. On May 20, 2009, President Obama signed into law the Fraud Enforcement and Recovery Act of 2009 (FERA). This act authorizes substantial new funding to the Department of Justice and other federal enforcement agencies for the investigation and prosecution of offenses. FERA amends the False Claims Act (FCA) in a manner that may increase the exposure of every company that does business with the federal government and every person or entity that supplies goods or services that are reimbursed by federal government dollars.

The FCA provides for recovery of civil penalties and treble damages from any person who knowingly submits or causes the submission of false or fraudulent claims to the United States for money or property. Under the most commonly-enforced provisions of the statute, a person is liable for “knowingly” (1) presenting or causing the presentment of a claim for payment or approval; (2) making a “false record or statement to get a false or fraudulent claim paid or approved by the Government;” or (3) conspiring to defraud the government “by getting a false or fraudulent claim allowed or paid.” The FCA also penalizes so-called “reverse false claims, “ in which a person “knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid or decrease an obligation to pay or transmit money or property to the Government.” The FCA defines “knowingly” as having “actual knowledge” of falsity or acting in “deliberate ignorance” or “reckless disregard” of the truth or falsity of the information. “No proof of specific intent to defraud is required.” 31 U.S.C. §3729(b).

The FCA’s qui tam provisions empower private individuals to file litigation in federal court on behalf of the government and to share in any subsequent recovery. The FCA’s qui tam provisions provide enormous incentives for qui tam Realtors (whistleblowers) to expose fraud against the government, awarding 15-30% of settlement or judgment proceeds to Realtors, who may also be entitled to reasonable attorney fees’ and costs, which may be substantial.

FCA civil damages and penalties can be severe. Defendants may be held liable for up to three times actual damages plus penalties between $5,500 and $11,000 per claim. Depending on the method in which the “claims” are calculated, civil penalties may far exceed the actual damages the government sustained.

FERA amends the definition of “claim” in a significant way. The new definition of “claim” is:

(A) any request or demand, whether under a contract or otherwise, for money or property and whether or not the United States has title to the money or property, that –(i) is presented to an officer, employee, or agent of the United States; or (ii) is made to a contractor, grantee, or other recipient, if the money or property is to be spent or used on the Government’s behalf or to advance a Government program or interest, and if the United States Government –

(I) provides or has provided any portion of the money or property requested or demanded; or
(II) will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded.

FCA liability may now be triggered by any false claim made to any recipient of federal money so long as the money is used to “advance a Government program or interest.” FCA realtors and the Department of Justice will now be able to push to give this provision the broadest possible interpretation.

The old FCA penalized a person who “knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid or decrease an obligation to pay or transmit money or property to the Government.” 31 U.S.C §3729(a)(7). FERA now defines “obligation” to include the retention of any overpayment, which opens new avenues of exposure against federal contractors or grantees for knowingly retaining government “overpayments.”

In the past, the FCA afforded protection to “any employee who is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment by his or her employer because of lawful acts done by the employee on behalf of the employee.” 31 U.S.C. § 3730(h). FERA extends whistleblower protections beyond “employees” to a “contractor or agent” and no longer requires any prohibited retaliatory action be taken by an employer. The FERA now reads “any employee, contractor, or agent shall be entitled to all relief necessary to make that employee, contractor or agent whole, if that employee, contractor, or agent is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment. 31 U.S.C. § 3730(h).

An FCA action must be brought within six years of the date on which a violation was committed, or within three years of the date on which the government knew or should have known that a violation was committed, and in no event more than 10 years after the date on which the violation was committed.

Wednesday, September 23, 2009

Protect Your Trademark and Service Mark

Protectability of Mark

Equibrand Corporation v. Reinsman Equestrian Products, Inc. and Dale R. Martin, 2007 U.S. Dist. LEXIS 36229 (United States District Court for the Northern District of Texas, Dallas Division). According to Equibrand, to determine whether a mark is protectable, a court must assign the mark into one of five categories, which, arranged in order of increasing distinctiveness, are: (1) generic, (2) descriptive, (3) suggestive, (4) arbitrary, or (5) fanciful.” A surname is generally regarded as “descriptive” by the 5th Circuit, which is distinctive only if it has acquired a secondary meaning. Canon Props, 752 F 2d at 155.

In order for a party to prevail under the Lanham Act, a party must first show that the word or phrase in dispute is registerable or protectable. Zatarians, Inc. v. Oak Grove Smokehouse, Inc., 698 F.2d 786,790 (5th Cir. 1983). March Madness Athletic Ass’n v. Netfire, Inc., 310 F. Supp. 2d 786, 806, (N.D. Tex. 2003). After protectability is established, a Plaintiff must prove the likelihood of confusion. A mark is protectable if it is either (1) inherently distinctive or (2) has acquired distinctiveness through secondary meaning. Two Pesos Inc. v. Taco Cabana, Inc., 505 U.S. 763, 769, 112 S. Ct. 2753, 120 L.Ed.2d 615 (1992).

Secondary Meaning

A trademark has successfully acquired a secondary meaning when “in the minds of the public, the primary significance of a product feature or item is to identify the source of the product rather than the product itself. Secondary meaning is a term of art in trademark law. It refers to the situation which arises when a company has a mark which might ordinarily be ineligible for protection were it not for the fact that the name has come to be closely associated, (in a distinct market), with a particular manufacturer’s product or service.

In order to establish a secondary meaning for a term, a plaintiff must show that the primary significance of the term in the minds of the consuming public is not the product by the producer. The burden of proof to establish secondary meaning rests at all times with the plaintiff; this burden of proof is necessary to establish secondary meaning for a descriptive term. The mark must denote to the consumer “a single thing coming from a single source,” to support a finding of secondary meaning. Both direct and circumstantial evidence may be relevant and persuasive on the issue. Factors such as amount and manner of advertising, volume of sales, and length and manner of use may serve as circumstantial evidence relevant to the issue of secondary meaning. While none of these factors alone will prove secondary meaning, in combination they may establish the necessary link in the minds of the consumers between a product and its source. It must be remembered, however, that the question is not the extent of the promotional efforts, but their effectiveness in altering the meaning of the term to the consuming public. Zatarians, Inc. v. Oak Grove Smoke-House, Inc., 698 F.2d 786; 1983 U.S. App. LEXIS 30159 (Feb. 25, 1983).

Survey evidence is the most preferred and persuasive manner to establish secondary meaning. However, other factors, taken together, may also establish that a mark has achieved secondary meaning, these factors include: (1) length and manner of use of the mark by Plaintiff; (2) nature and extent of advertising and promotion of the mark; (3) efforts made to promote and conscious connection in consumers mind between mark and particular product or service; and (4) Defendant’s intent to copy the mark.


What Constitutes Registered Mark?

Federal registration of a mark “including a surname” creates a presumption that the mark is distinctive. Avery Dennison Corp. v. Sumpton, 189 F.3d 868, 876 (9th Cir. 1999); Lois Sportswear, USA, Inc. v. Levi Straus & Co., 799 F.2d 867, 871 (2nd Cir. 1986). Union National Bank states “the ownership of a trademark is established by use, not by registration. The first one to use the mark is generally held to be the “Senior” user and is entitled to enjoin junior users from using the mark, or one that is deceptively similar to it, subject to limits imposed by senior user’s market and natural area of expansion.” Dawn Donut Co. v. Hart’s Food Stores, Inc., 267 F.2d 358, 364-65 (2nd Cir. 1959) (owner of mark not able to enjoin its use by others in area where owner not likely to expand).

Union National Bank of Texas, Laredo, Texas v. Union National Bank of Texas, Austin, Texas, 909 F.2d. A senior user may not exclude others in areas where he does not currently do business nor is likely to do business in the future. Citing, Dawn Donut Co. v. Hart’s Food Stores, Inc., 267 F. 2d 358, 364-65 (2d Cir. 1959).

Confusion Related to a Mark

The touchstone of infringement inquiry is whether or not Defendant’s use creates confusion as to “source, affiliation, or sponsorship” of Defendant’s goods because of its purported likeness to Plaintiff’s goods. Pebble Beach Co. v. Tour 18 I, Ltd., 155 F. 3d 526, 543 (5th Cir. 1998).

The 5th Circuit has enumerated the following list of non-exhaustive factors, no single one being dispositive, to determine whether likelihood of confusion exists (1) type of mark allegedly infringed; (2) similarity between 2 marks; (3) similarity of products or services; (4) identity of retail outlets and purchasers; (5) identity of advertising media used; (6) the Defendant’s intent; and (7) evidence of actual confusion. Taco Cabana Int’l, Inc. v. Two Pesos, Inc., 932 F. 2d 1113, 1122 n.9 (5th Cir. 1991) aff’d sub nom. See also, Two Pecos.

The first element, type of mark infringed, focuses on the strength of the mark. Strength of a service mark for purposes of analyzing likelihood of confusion is dependent on both placement of mark on spectrum of distinctiveness and the extent to which the consumers in the relevant market place recognize the mark as an indicator of source.

Similarity of the mark is determined by comparing the marks “appearance, sound and meaning.” The relevant inquiry is whether, under the circumstances of the use, the marks are sufficiently similar and that prospective purchasers are likely to believe that the two users are somehow associated. The greater the similarity between products, the greater the likelihood of confusion between marks.

Irreparable Injury

In a trademark case, a plaintiff may show irreparable injury by establishing a substantial likelihood of confusion. When a likelihood of confusion exists, the plaintiff’s lack of control over the quality of the defendant’s goods constitutes immediate and irreparable harm, regardless of the actual quality of the goods. The injury lies in the fact that the plaintiff no longer can control its own reputation and goodwill.

Injunctive Relief

To obtain preliminary injunction, moving party must demonstrate (1) substantial likelihood of success on merit; (2) substantial threat of irreparable injury if injunction not granted; (3) threatened injury to Plaintiff must outweigh threatened injury to Defendant; and (4) granting of preliminary injunction serves public interest. See, Cherokee Pump & Equipment, Inc. v. Aurora Pump, 38 F.3d 246, 249 (5th Cir. 1994). If the moving party cannot prove all four elements then the court must deny injunctive relief since the decision to grant preliminary injunction is the exception rather than the rule. Miss. Power & Light Co. v. United Gas Pipe Line Co., 760 F.2d 618, 621 (5th Cir. 1985).

Union National Bank of Texas, Laredo, Texas v. Union National Bank of Texas, Austin, Texas, 909 F.2d 839 (5th Cir. 1990). The owner of a federally registered mark is only entitled to injunctive relief in the market it actually serves plus its “natural zone of expansion.” He may not enjoin others from using the mark if the likelihood of confusion between his product and the infringer’s is minimal or non-existent, such as where the parties to the action use the mark in totally different markets, or for different products. The “zone of expansion” doctrine represents a conundrum within the conundrum of trademark law. There is no established definition. A party seeking an injunction for trademark infringement must clear several hurdles in order to prevail. First, he must prove that the name he seeks to protect is eligible for protection. He must then prove he is the senior user. Having proven these elements he must then show a likelihood of confusion between his mark and that of the defendant. Finally, because he is asking for the equitable remedy of an injunction, he must show that the likelihood of confusion will actually cause him irreparable injury for which there is no adequate legal remedy.

To succeed in a trademark infringement claim, a party must first show that it has a protectable right in the mark and second, show that there is a likelihood of confusion. The non-exhaustive list of factors, or digits of confusion, includes: (1) the type of trademark allegedly infringed; (2) the similarity between the two marks; (3) the similarity of the products or services; (4) the identity of the retail outlets and purchasers; (5) the identity of the advertising media used; (6) the defendants’ intent; and (7) any evidence of actual confusion. Brennan’s, Inc. v. Bert Clark Brennan; Blake W. Brennan, 289 Fed. Appx. 706; .S. App. LEXIS 16890.

Wednesday, September 16, 2009

Fathers Have Rights – Establishing Paternity

Paternity is defined as the quality or state of being a father. Many issues arise in the face of a father being denied access to his child or wondering if he is truly the child’s father. Where paternity of a child is in question, a mother or alleged father may ask the court to determine paternity of one or several possible fathers.

Most paternity actions involve a child born out of wedlock. However, paternity actions also occur between married persons where someone other than the husband is the father of the child, or where the husband has fathered a child outside of the marriage. There is a presumption that a child born to a married woman is the child of the husband. However, this presumption can be overcome by DNA or other valid evidence.

If you are questioning paternity, think about when the child could have been conceived. Consider when you had relevant or timely intercourse. Understand that paternity is determined by testing DNA from the father and the mother through the use of genetic fingerprinting. DNA testing is done by drawing blood or by taking a buccal swab, when cells are wiped from the inside of the mouth with a cotton swab. These tests can determine the father of a child with up to 99% accuracy. DNA testing is currently the most advanced and accurate technology to determine parentage. Generally paternity testing is paid for by the father.

If you file a paternity suit, you can request the court order DNA testing. A court may order the mother, father and the child to submit to testing. Paternity testing can be done during pregnancy or when the child is as young as one day old.

Paternity proceedings can be filed by the alleged father, mother, child or child support division of a state. A private action for paternity is usually prosecuted to secure child support payments from the father, parenting time with the child, and/or fair rights and privilege allocation.

Some men are confident that they are the biological father and wish to maintain a legal relationship with the child whether or not they are the father and thus either initiate paternity actions or consent to the entry of a paternity order. The paternity order entitles the father to visitation time with the child and creates a legal duty for the father to provide for the support of the child in addition to awarding him rights and privileges regarding the child’s future development.

When you consent to the entry of a paternity order, absent fraud, you consent for life. Most jurisdictions will not allow you to escape the consequences of that order, including the requirement of payment for the support of the child. If there is a chance that you will resent the child, or wish to break off the relationship with the child or, if you ultimately learn that you are not the child’s biological father, make certain you obtain a DNA test before legally admitting and therefore confirming that you are a child’s father.

Custody of a child can either be awarded to the father or the mother in a paternity action depending on the facts. Child support in a paternity action is generally set according to state law standards unless the parties sign an agreement providing for the payment of child support that is approved by the court.

Reasons to establish paternity: to provide the child with a needed identity; to confirm rights, privileges and duties of a parent; to know the health history of both the mother and father for medical care and treatment of a child; establish financial support for the child; establish health insurance coverage, social security eligibility, inheritance and other benefits; and seek public assistance where qualified.