' Commentary | MTTLR

The Reach of Sovereign Immunity in IPRs

How does one balance the rights of sovereigns residing within a greater jurisdiction with fundamental rules of fairness? This question was recently decided by the Federal Circuit in the context of Inter Partes Review (IPR) in the case of St. Regis Mohawk Tribe. The St. Regis Mohawk tribe gained national attention when Allergan sold their patent rights to the tribe in exchange for money and an exclusive license to the drug. The lawyer orchestrating this transaction openly admitted that his purpose was to take advantage of the tribe’s sovereign immunity and avoid the easier-to-file-than-a-regular-lawsuit IPRs. This open attempt to beat the system is perhaps one reason why the Patent Trial and Appeal Board (PTAB) stated that tribal immunity didn’t apply to their proceedings. The Federal Circuit agreed, stating that IPRs are different enough from Article III adjudication to not trigger tribal immunity. At the end of their opinion, the court said that they would “leave for another day the question of whether there is any reason to treat state sovereign immunity differently.” But the court’s analysis in the decision may already answer that question. The test for attachment of sovereign immunity in agency proceedings hinges on the similarity between said proceeding and civil litigation. The question then is, does an IPR look like civil litigation? On the one hand, the Supreme Court has stated that IPRs “mimic[] civil litigation.” However, in Oil States, the case where the Supreme Court declared IPRs not unconstitutional, the Court described the proceedings as being a “reconsideration of the Government’s decision to grant a public franchise.” With these in mind, the Federal Circuit, in...

A Tale of Two-Wheeled Invaders

When I arrived in San Francisco early this summer, I marveled at the tech-forward presence of electric scooters all over the sidewalks. Much to my disappointment, the scooters were quickly banned. Residents had complained heavily about the scooters. Generally these complaints centered on the combination of scooters and the sidewalk: scooters ridden or parked on the sidewalk, zipping between hapless pedestrians or blocking their path. Poorly parked scooters can be especially problematic in that they create obstacles for people with disabilities. In San Francisco, and in other cities, such scooter companies have employed the “ask forgiveness rather than permission” business model. Here in Ann Arbor, Bird scooters appeared suddenly, apparently having taken the city by surprise. At this point, electric scooter services are active in about 65 US cities. Across the country, municipal responses have ranged from suing Bird to tacit acceptance. Ann Arbor responded with a middle-ground reaction, reminding users to operate properly and confiscating scooters left on sidewalks. Did the “ask for forgiveness rather than permission” business model work? Or did it backfire? Furthermore, should this “tech-bro” ask-forgiveness attitude be considered a normatively acceptable business model? Or should it be discouraged? If so, how? After San Francisco banned the scooters, the city allowed scooter companies to apply for permits. Two scooter app companies were granted permits and allowed to operate in the streets. The “early disruptors” were not forgiven. Perhaps it is in the company’s interest to ask permission first, or at least proceed with caution: [C]ities that saw a more gradual rollout have had a much smoother ride. “In San Francisco, you saw a lot of...

FTC Urged to Address Manipulative Ads in Preschool Apps

Children eight years old and under average over two hours of “screen time” (watching videos, playing games, etc.) a day. This includes using apps on tablets, smartphones, and other electronic devices. A recent study by the University of Michigan’s C.S. Mott Children’s Hospital shows that many apps are abusing the developmental vulnerabilities of preschool-aged children to get them to watch advertisements and make in-app purchases. The study notes that the American Academy of Pediatrics recommends elimination of advertising in apps marketed to children 5 and under, while finding that 35 percent of the apps studied (and 54 percent of free apps studied) interrupted play with advertising videos. The study further concludes that in the 135 apps reviewed, there are “high rates of mobile advertising through manipulative and disruptive methods. These results have implications for advertising regulation, parent media choices, and apps’ educational value.” The study found that various applications falsely marketed apps as free, then manipulated the user—the child—to make a purchase later on in order to continue playing the game. Many apps disguised advertisements as gameplay. Often, popular characters from the games themselves urged the child to make purchases. Although apps are known for containing advertisements and trying to persuade users to make purchases, the critical piece here is the targeted age of these users: under 5 years old. The study explains that “when advertisements are combined with rewards, both cognitive and emotional processes respond to persuasion. In the case of the gamified ads we documented—those involving watching ads to collect tokens or gameplay items—children under 6 years may be especially susceptible to this approach because of their responsiveness to positive reinforcers.” In addition...

Hacking Your Heart: The Danger of Cloud-Connected Medical Devices

Connecting everyday devices to the cloud has become commonplace—one can brew coffee, turn on the lights, and heat a room using an app on their smartphone. And now, doctors can update and monitor data collected by medical devices implanted in a patient’s body through a similar connection. The benefit of this advancement is easy to observe: remote updates to the device’s software allow for personalized treatment without surgery. It is convenient for both the patient and the doctor. But with this comes a downside. Hackers can use unsecured wireless connections to hack into implanted devices. These devices can then be individually manipulated—insulin pumps can be programmed to send an excess amount of medication; pacemakers to send an extra shock to the heart. These devices can also be a gateway to infiltrate entire medical systems. Once inside the network, hackers have the ability to install ransomware like WannaCry to a hospital’s database or steal the healthcare data of all patients in the computer system. The medical industry is aware of this problem. The FDA has offered guidance to mitigate it and even offered an Action Plan to medical device companies. White hat hackers make vulnerabilities known and display malfunctions at conferences. Hollywood has even caught on and incorporated a pacemaker assassination hack into an episode of Homeland. Discretion over how to handle potential hacks, however, still falls to medical device companies. This is problematic as companies may choose not to tell patients about bugs or update devices even after hacks are discovered. In 2016, Johnson & Johnson chose to disclose a security vulnerability in its insulin pump system that could...

Mr. “Steal-Your-[Company’s Consumer Data]”: Cyber-Risks and Corporate Governance

Private entities and their directors cannot afford the cost of inaction in addressing cyber-attacks. As SEC Commissioner Luis A. Aguilar stated during a Public Statement on The Commission’s Role in Addressing the Growing Cyber-Threat, cyber-attacks on enterprises such as financial institutions and government agencies are becoming increasingly frequent and more sophisticated. In fact, according to the SEC’s Division of Intelligence’s list of global threats, this particular threat surpasses even terrorism. The cost of inaction can be significant. For example, there is the looming threat of litigation and potential liability for failing to implement adequate steps to comply with fiduciary duties in preventing cyber-attacks. There is the substantial threat of financial and reputational risks for both corporations and government agencies. There is also the risk of harm to an entity’s ability to grow, innovate, and, in turn, gain or maintain customers. Further, cybersecurity threats victimize the national and economic security of the United States by exploiting the connectivity of critical infrastructure systems. Fortunately, there are major steps that companies can take to mitigate cyber-risk. Back in June 2014, Commissioner Aguilar provided recommendations when he spoke at the New York Stock Exchange’s Conference, “Cyber Risks and the Boardroom.” In addition to spending sufficient time and resources to address cybersecurity issues, boards and their directors should be “asking themselves what they can, and should, be doing to effectively oversee cyber-risk management.” Boards should also focus on key oversight activities, such as assigning specific roles and responsibilities for privacy and security and concerning themselves with receiving frequent reports on data breaches and IT risks. In February 2014, the National Institute of Standards and...

Act 2 Enforcement for Antitrust and Algorithms

If algorithms can learn and develop means of achieving business efficiencies beyond the initial parameters set by their programmers, regulators will need to employ creative means of enforcing antitrust violations. The lack of clarity on whether section 1 agreements under the Sherman Antitrust Act have been made—and on what parties were involved in making said agreements—cuts in favor of finding liability under section 2. Pricing algorithms have been used generally to procompetitive ends. With the ability to efficiently process huge quantities of data and respond to consumer almost immediately, more and more businesses are adopting pricing algorithms. The uptick in algorithm adoption and, consequently, data accessibility has created price transparency—this benefits consumers, who generally like to price compare before purchasing. In a world where firms are adopting proprietary price algorithms, anticompetitive effects are not immediately apparent. Of course, things aren’t that simple. The development of artificial intelligence has created a world where algorithms are not solely the product of human creation. Where algorithms were previously limited by the parameters outlined programmers, artificial intelligence and neural networks have opened the door for algorithms to dynamically derive targeted outcomes. This integration of artificial intelligence, neural networks, and traditional algorithmic coding raises risk of potential antitrust liability for well-meaning firms. Pricing algorithms may possibly integrate with competing algorithms and result in price fixing absent human agreement. The development of these types of intelligent algorithms has firms concerned about their exposure to antitrust liability in situations where they are passive participants in cartels formed by their intelligent pricing algorithms. The European Commissioner for Competition, Margethe Vestager, has noted that the onus is on...