Litigation newsletter >> winter 2008

One month into 2008 … have room for one more resolution? How about: "Avoid litigationthis year"? Here is a brief update of some recent developments in the areas of intellectualproperty, commercial and employment lawand some practical advice as to what youcan do now to avoid litigation in the future. Ifyou are already facing litigation, these tipsmay benefit your litigation strategy or helpfacilitate a cost-effective settlement.
The Way We See ItCopying electronic publications is easy, but so is getting caught. We recommend that our clients take some simple steps to prevent the illicit copying of publications to which they subscribe. The penalty for infringement, as we saw in the Lowry's Reports case, can be very steep.
First, appoint someone to manage subscriptions and channel them tothose employees who need them. The subscription manager must under- stand the uses allowed under those subscriptions, and communicate the Second, develop a clear written policy explaining potential copyright and contractual violations in the context of subscription publications, warning employees against illicit copying, and encouraging them to bring any concerns to the subscription manager's attention. Third, conduct periodic audits to determine the number of subscriptions needed. If multiple subscriptions or an enterprise-wide subscription is tooexpensive, it is best to obtain hard-copy subscriptions that can be circulated via routing lists (making sure that no copies are made in the RISKS OF COPYING SUBSCRIPTION PUBLICATIONS
In Lowry's Reports, Inc. v. Legg Mason, Inc., 302 F. Supp. 2d 455 (D. Md.
Finally, institute some internal monitoring mechanisms (such as searches 2004), a jury awarded $20 million in damages to the publisher of Lowry's of the company's servers) to ensure that electronic publications are not Reports for willful copyright infringement by one of its subscribers, Legg being illicitly copied. These steps should reduce the chances of illicit Mason, Inc. For more than a decade, Legg Mason paid for and received copying and, if any such copying occurs, militate against a finding of willfulness.
a single copy of the daily and weekly editions of the reports, and postedthem on the company's intranet and distributed multiple copies through-out the organization. This was a violation of Lowry's copyright and of thesubscriber agreement between Lowry and Legg Mason. The publisher THE HIDDEN COST OF WORKING WITH BIGPHARMA
learned about the infringement in a phone call with a Legg Mason's On January 14, 2008, Merck/Schering-Plough Pharmaceuticals employee; discovery revealed its full extent.
announced the results of a 2006 clinical trial that will cripple the sales ofits blockbuster drugs Zetia and Vytorin. Zetia, which has been prescribed Once liability is established under the Copyright Act, a publisher is for millions of patients, had been shown in previous trials to reduce entitled to seek damages - which can range from $750 to $30,000 per cholesterol 15-20%. Zetia is a main component of Vytorin, another anti- work infringed - and could add up to a substantial amount depending cholesterol compound from Merck/Schering-Plough. According to the upon the number of issues of the publication involved. Damages may be recently-reported study, Zetia does not reduce fatty plaques in arteries increased to a maximum of $150,000 if the infringement is found to be and, therefore, does not reduce the risk of heart attacks or strokes. willful, such as when there is a systemic pattern of copying, or a signedsubscription agreement in place that prohibits copying. Zetia and Vytorin join a growing list of drugs grabbing unwanted attentionlately. This announcement came within weeks of the unsealing of a Publishers depend on subscribers to pay for content, and they view whistleblower action against Pfizer concerning its marketing of Lipitor, illegal copying and distribution of their publications as a serious problem, and hot on the heels of Merck's multi-billion dollar settlement of 27,000 particularly because it's so easy. Simply hitting "forward" on an email which contains content (and not just a link to an article) can create anddistribute illegal copies. The Lowry's Reports case has encouraged Long after they first hit the market, drugs may come under fire for adversepublishers to enforce their copyrights and subscription agreements by effects (as with Vioxx), or insufficient effects (as with Zetia and Vytorin).
hunting out infringers. Indeed, since the Lowry's Reports decision, a It is too early to predict the fallout for Merck/Schering-Plough - patients growing number of publishers of daily, weekly and monthly publications taking Zetia and Vytorin have been advised to consult their doctors (including several publications targeted to advertising, public relations immediately, and the nearly two-year delay in reporting the results of theclinical trial is being investigated by Congress. We're hardly out on a limb and marketing firms) have installed tracing software into the on-line ver- in expecting that the manufacturer of Zetia, will ultimately be an attractive sion of their publications that tracks each time their electronic publications are copied, forwarded, or printed. Big Brother is watching and this hassharply increased the detection and exposure in the last several months.
Legal actions involving BigPharma come in many shapes, but their sizes tend to start with large. There are investigations and criminal the parties had negotiated most of the terms, Turner sent Jordan prosecutions by U.S. Attorneys, as well as whistleblower actions in which Panel a term sheet. The term sheet provided that Turner would not a current or former employee sues on behalf of the government under the be bound to anything, including any obligation to make payments False Claims Act, alleging, for example, improper promotion of drugs for for work performed, or for anticipated profits, until the parties off-label uses. In addition, generic-drug manufacturers have brought suits alleging improper efforts to extend patents or otherwise hobblesales of generic versions of a drug. There have also been individual or Jordan Panel alleged that after Turner delivered the term sheet, the class actions for personal injuries, alleging that, for example, the risks of parties agreed on the only open issue (price), and with that detail the drug were hidden from patients and that the drug caused injuries.
settled, Turner told Jordan Panel that it had been awarded the job.
Lastly, we have seen third-party payor complaints, in which insurance Turner, according to Jordan, instructed the contractor to start work companies try to recover what they paid out over the years for their on the design phase of the project immediately. Ten days later, insureds' prescriptions for the drug, now alleged to be ineffective or Turner told Jordan Panel that it would not be entering into a contract with Jordan Panel, but instead would go with another firm.
Jordan Panel sued Turner, charging that Turner had entered a binding contract. According to Jordan Panel, Turner waived the What does this mean for the advertising, public relations and term sheet provision requiring execution of a written contract when,medical communications agencies that worked on promotional after reaching agreement on all terms, it told Jordan Panel that it campaigns for the drugs? The short answer is: subpoenas, sub- had been selected for the job, and directed the company to start poenas, subpoenas. Agencies have documents, and investigators and plaintiffs want them. Unfortunately, in many instances, the onlysource of reimbursement for the costs and burden of dealing with The court disagreed. According to the judges, the parties did not these subpoenas will be the agency's client, the pharmaceutical have an enforceable contract because the term sheet provided that company itself. Faced with mounting defense costs, or after the it was not binding prior to entering a written contract. agency-client relationship has come to an end, a pharmaceuticalcompany may not agree to cover an agency's subpoena-related expenses. That's why an indemnification provision in the agency-client agreement is vital, and the time to negotiate it is When negotiating with a vendor on a substantial piece of work, you'd be well advised at the outset of negotiations to note that you do not intend to In calculating the risks of doing business with BigPharma, you be bound to any terms until execution of a contract. On the flip side, should not ignore the potentially high costs of compliance with when you're the vendor, be sure that you execute a contract before you subpoenas. A broad indemnification agreement can protect an start the job if the prospective client has made the negotiations subject to agency's bottom line from taking a hit when regulatory bodies or such a term. Otherwise, you could find yourself in the same position asthe subcontractor in the Jordan case - believing that binding terms had plaintiffs' attorneys start coming after drug manufacturers. An been agreed, and commencing work at the client's request, but with no indemnification agreement may not always be possible, but we'd be pleased to assess your situation, and help in drafting/negotiatingsuch an agreement.
EMPLOYERS CAN OFTEN AVOID COSTLY
"NOT BINDING WITHOUT WRITTEN CONTRACT"
DISCRIMINATION TRIALS THANKS TO WRITTEN
MEANS JUST THAT
EMPLOYEE PERFORMANCE REVIEWS
A recent court decision affirming a grant of summary judgment to an
New York courts traditionally have held that when a party states in employer defending against an employee's race discrimination and writing that it will not be bound to any agreement until a written unlawful retaliation claims highlights the importance of maintaining contract is executed, no contract exists until a formal written written performance reviews for all employees. Such evaluations candocument is signed. This often becomes contentious when parties mean the difference between having to endure a costly, messy and time- agree to conditions set out in a term sheet or other such memo, and consuming trial or having an employee's claims dismissed before trial.
one party starts living up to the understanding - but the parties In Brown v. Illinois Dep't of Natural Resources,499 f.3d 675 (7th Cir.
never execute a written contract. The Appellate Division, First 2007), the employer produced a well-documented record of the Department recently affirmed this long standing rule in Jordan employee's performance problems and client complaints as justification Panel Systems Corp. v. Turner Construction Co., 841 N.Y.S.2d 561 for firing him. The employee relied on his own opinions of his perform- ance to make a case for discrimination. The court concluded that theemployee's documented performance problems provided sufficient Jordan Panel had bid on a contract with Turner Construction. After The Way We See ItThe Brown decision is a vivid reminder of how critical it is for employers DAVIS & GILBERT’S LITIGATION PRACTICE GROUP
to maintain honest and candid employee performance reviews. In Brown, 1740 Broadway, New York, NY 10019 (212) 468-4800 www.dglaw.com the employer avoided having to go to trial on a race discrimination claim,a case that would have put at issue comparisons between the plaintiff's job performance and the performance of the four white employees with Michael C. Lasky /mlasky@dglaw.com/ (212)468-4849 whom he compared himself. Discrimination claims alleging that anemployer treated "similarly-situated" employees more favorably than the Howard J. Rubin /hrubin@dglaw.com/ (212)468-4822 plaintiff often unfairly expose innocent co-workers to public scrutiny attrial. Personnel files of co-workers may be introduced as evidence and supervisors may be compelled to testify about events and salary information that co-workers reasonably expected would remain private. The Brown case shows how simple it can be, in some cases, to shut Guy R. Cohen /gcohen@dglaw.com/ (212)468-4853 down meritless discrimination claims before they ever get to trial.
Documentation of performance issues does not have to be exhausting orelaborate. Straightforward written notes reflecting a supervisor's view of Paul F. Corcoran /pcorcoran@dglaw.com/ (212)468-4825 an employee's performance can be enough. If an employee is givencopies of these evaluations, an employer will be in an even stronger Sara L. Edelman /sedelman@dglaw.com/ (212)468-4897 Martin Garbus /mgarbus@dglaw.com/ (212)468-4883 WHEN SHOW BUSINESS HAD NO BUSINESS…
Bruce M. Ginsberg /bginsberg@dglaw.com/ (212)468-4820 MEDIATION HELPED
Neal H. Klausner /nklausner@dglaw.com/ (212)468-4992 The November 2007 Broadway stagehands strike kept many of the houses on the Great White Way dark for several weeks, resulting in estimated losses to theater owners and producers of $35 million, or more Jennifer Tafet Klausner /jklausner@dglaw.com/ (212)468-4827 than $2 million per day. And the stagehands were out of work and notbeing paid during that time as well. These losses might have been Maureen McLoughlin /mmcloughlin@dglaw.com/ (212)468-4910 averted had the parties used mediation at the start of the strike. But bothsides took a hard line, and did not engage in mediation until the eighth Marc J. Rachman /mrachman@dglaw.com/ (212) 468-4890 day of the strike. By waiting more than a week to start formal negotia-tions, both sides lost the momentum they had created in pre-strike Ina B. Scher /ischer@dglaw.com/ (212) 468-4937 attempts to resolve their dispute. Had their last contract included amandatory mediation provision, they might have had a mechanism to ensure that talks moved more quickly.
Shirin Keen /skeen@dglaw.com/ (212) 468-4934 Cheryl Plambeck /cplambeck@dglaw.com/ (212) 468-4965 There were a lot of losses as the strike wore on, much of which couldhave been avoided. At the end we saw how mediation and arbitration can Scott M. Singer /ssinger@dglaw.com/ (212) 468-4971 play a key role in promoting a settlement. This little drama shows howimportant it is for all businesses to examine all their contracts to see if For a full listing of all Davis & Gilbert litigation attorneys, please they have the best mechanism to preserve their contractual rights. Many companies are taking advantage of the growing array of arbitration andmediation providers to resolve disputes more efficiently and cheaply and These summaries are provided for informational purposes only and are with more goodwill than is typically seen in litigation.
not exhaustive. They should not be considered to be legal advice.
Accordingly, you should consult an attorney with any questions You should view all of your employment, vendor, agency-client, and other regarding any of the issues referenced in this report.
contracts through a "resolution" lens to ensure they have the right methodfor you to resolve any potential disputes - be it litigation, arbitration, or Attorney Advertising. This report may be considered advertising under the rules of some states. Priorresults described in this report cannot and do not guarantee or predict a similar outcome with respect to any future matter that we or any lawyer may be retained to handle.

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