Fourth Circuit Rejects Rehearing in ACH Fraud Suit Alleging Violations of KYC Rules and NACHA Operating Standards
On April 22, the Fourth Circuit declined to reconsider a panel ruling that found a credit union could not be held liable for a scam in which fraudsters diverted over $560,000 from a metal fabricator through unauthorized ACH transfers. The denial leaves intact a March 2025 decision overturning the district court’s earlier ruling in favor of the plaintiff.
The dispute stems from a 2018 incident in which the company received a spoof email claiming to be from a supplier and directing the company to reroute payments to a new bank account. Relying on the instructions, the company made four ACH transfers to an account at the credit union, identifying the supplier as the beneficiary. However, the funds were deposited into an account belonging to another individual who had also been unknowingly involved in the fraud.
In its original complaint, the plaintiff alleged that the credit union failed to comply with Know Your Customer (KYC) regulations and anti-money laundering (AML) procedures by not verifying the identity or eligibility of the account holder. The complaint also asserted that the credit union violated the NACHA Operating Rules by accepting commercial ACH transfers—coded for business transactions—into a personal account. These claims were framed as failures to implement basic security protocols and to recognize clear mismatches in the payment data.
The panel held that the credit union lacked actual knowledge that the account was being used for fraudulent purposes and therefore could not be held liable under applicable law. In a concurring opinion, however, one judge noted that the record may contain evidence suggesting the credit union obtained actual knowledge of the misdescription before the final two transfers.
Putting It Into Practice: Even though the credit union ultimately avoided liability, the action is a good example of the lengths plaintiffs’ attorneys are going to hold banks liable for fraud related to spoofing. Unfortunately, Regulation E provides no avenue for relief for consumers where they are tricked into transferring money knowingly to another account. And the CFPB’s lawsuit against major banks related to similar conduct, where claims under the CFPA were alleged, was dropped earlier this year.
Federal Judge Blocks Key DEI Executive Order Provisions
On April 14, 2025, the U.S. District Court for the Northern District of Illinois issued a preliminary injunction preventing the U.S. Department of Labor (“DOL”) from enforcing a certification provision and termination clause included in the executive orders titled Ending Illegal Discrimination and Restoring Merit-Based Opportunity (“EO 14173”) and Ending Radical and Wasteful Government DEI Programs and Preferencing (“EO 14151”).
The ruling prevents the DOL from enforcing the provision in EO 14173 requiring federal contractors and grantees to certify that they do not operate “illegal” DEI programs that violate any federal anti-discrimination laws. The ruling also enjoins the DOL from terminating a federal grant issued to the plaintiff based on language in EO 14151, which requires agencies to terminate all “equity-related” grants.
Background
Plaintiff, Chicago Women in Trades (“CWIT”), provides programming and training to prepare women across the country for jobs in skilled trades such as electric work, plumbing and carpentry. CWIT receives approximately 40% of its annual budget from federal funding and specifically, a Women in Apprenticeship and Nontraditional Occupations (“WANTO”) grant from the DOL Women’s Bureau. On February 26, 2025, CWIT sued President Trump, the DOL, and several other federal agencies and agency heads, claiming the following provisions of EOs 14173 and 14151 violate the First Amendment, Fifth Amendment, constitutional spending powers held by Congress and the separation of powers principle:
The “Certification Provision” (EO 14173 § 3(b)(iv)), which orders each agency to include certifications in every contract or grant award that the contractor or grantee does not operate illegal DEI programs and that compliance with federal anti-discrimination laws is “material to the government’s payment decisions for purposes of” the False Claims Act;
The “Termination Provision” (EO 14151 § 2(b)(i)), which orders each “agency, department, or commission head” to “terminate, to the maximum extent allowed by law, all ‘equity-related’ grants or contracts.”
CWIT sought a declaration that the Certification Provision and Termination Provision are unlawful and unconstitutional, and preliminary and permanent injunctions enjoining the Defendants, other than President Trump, from enforcing those sections of the EOs that are found to be unlawful and unconstitutional.
Court’s Opinion and Reasoning
District Judge Matthew F. Kennelly issued a nationwide injunction enjoining the DOL’s use of the Certification Provision and enjoining the DOL from terminating the WANTO grant based on the Termination Provision in EO 14151.
As to the Certification Provision, the Court found the government’s argument that the certification is permissible because it simply requires the grantee to certify that it is not breaking the law, unavailing. The Court instead found that the language was unclear and left the meaning of illegal DEI programs up “to the grantee’s imagination” by not defining what DEI is or what makes a DEI program “violate Federal anti-discrimination laws.” The Court noted that the Certification Provision applies to all federal grantees and contractors and that there is a critical urgency to protect grantees and contractors from irreparable injury to their free-speech rights.
The ruling therefore held that CWIT is likely to succeed on the merits in showing that the Certification Provision violates First Amendment rights. The Court also found that the nature of the First Amendment right at stake supported a broad preliminary injunction, not only limited to CWIT, as every contract and grant offered by an agency would likely contain the provision. The Court did, however, limit the injunction to the DOL, noting that CWIT had “demonstrated a risk of imminent harm with regards only to DOL,” and “it is hard to see – and CWIT does not suggest – a basis upon which it would seek grants from agencies other than DOL.”
On the issue of the Termination Provision, the Court similarly found that CWIT showed sufficiently imminent injury as CWIT’s grants were directly targeted by the provision. However, the Court found that, unlike the Certification Provision, “there is likely a low risk that other grantees who risk termination or are terminated will not challenge enforcement of this provision against them.” Therefore, the Court declined to extend the injunction and limited its reach to enjoining the DOJ from terminating CWIT’s WANTO grant.
On April 16, 2025, the DOJ filed a Preliminary Injunction Compliance Status Report confirming its compliance with the Court’s preliminary injunction order and attaching an email that was sent to agency heads in the DOJ and other relevant parties including the Court’s order.
Other cases involving challenges to the EOs discussed in this article include: Nat’l Ass’n of Diversity Offs. in Higher Educ. v. Trump, F. Supp. 3d, No. 25 C 333 ABA, 2025 WL 573764 (D. Md. Feb. 21, 2025); Nat’l Urban League v. Trump, No. 25 C 471 (D.D.C.); and S.F. AIDS Found. v. Trump, No. 25 C 1824 (N.D. Cal.). Other Proskauer articles on this topic include: Federal Court Issues Partial Preliminary Injunction Halting Enforcement of DEI-Related EOs, Fourth Circuit Temporarily Allows DEI-Related EOs to Continue, EEOC and DOJ Release Guidance on DEI and Workplace Discrimination, President Trump Issues Sweeping Executive Orders Aimed at DEI.
CFPB Drops Suit Against Credit Card Company Alleging TILA Violations and Deceptive Marketing Practices
On April 23, the CFPB voluntarily dismissed with prejudice its lawsuit, filed in September 2024, against a Pennsylvania-based credit card company that had been accused of unlawfully marketing a high-cost, limited-use membership program to subprime consumers.
The complaint alleged that the company violated the Consumer Financial Protection Act (CFPA) and the Truth in Lending Act (TILA) and its implementing Regulation Z. The Agency asserted the following violations:
Misleading marketing of a “general-purpose” credit card. The company allegedly represented that it offered a standard credit card when the product could only be used at the company’s own online store.
Excessive fees in violation of TILA and Regulation Z. The card carried annual charges amounting to roughly 60% of the card’s credit limit, exceeding the 25% cap permitted during the first year of account opening.
Limited consumer use and value. Despite charging substantial fees, the program offered minimal utility—only 6% of customers used the card and just 1–3% used any ancillary benefits.
Deceptive cancellation and refund process. The company claimed cancellations could be completed in under a minute but instead subjected consumers to extended calls and repeated sales pitches before granting partial refunds.
Unreasonable barriers to exit constituted abusive conduct. The CFPB alleged the company exploited consumers’ inability to easily exit the program or secure refunds, thereby taking unreasonable advantage of financially vulnerable individuals.
Putting It Into Practice: The dismissal is the latest in a series of reversals by the CFPB under its current leadership (previously discussed here and here). While the agency appears to be retreating from certain nonbank UDAAP cases, the statutory obligations under the CFPA and TILA remain unchanged. Companies marketing credit products to subprime consumers should closely review how their offerings are presented, how fees are structured, and how cancellation processes are administered.
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France’s Limagrain Wins Highest Chinese Damages Ever for New Plant Varieties Infringement – Over 53 Million RMB
On April 25, 2025, China’s Intellectual Property Court of the Supreme People’s Court (SPC) announced a verdict favoring Limagrain’s Chinese affiliate Heng XX Seed Industry Co., Ltd. against Henan Jin XX Seed Industry Co., Ltd. The SPC awarded Limagrain’s affiliate over 53 million RMB and an injunction for infringing new corn plant variety “NP01154” overturning the lower court’s decision and applying punitive damages. This is believed to be the highest ever award in China for new plant varieties infringement.
Heng XX Company filed a lawsuit with the first instance court, claiming that the seven approved corn hybrid varieties produced and sold by Jin XX Company, including “Zheng Pinyu 491”, “Jinyuanyu 304”, “Jinyuanyu 171”, “Zheng Pinyu 597”, “Jinyuanyu 181”, “Zhengyuanyu 777” and “Zhengyuanyu 887”, were all produced without permission using the “NP01154” variety as a parent, and requested that it be ordered to stop the infringement, apply punitive damages of 160 million RMB and pay 200,000 RMB for reasonable expenses for rights protection. In the first instance, Heng XX Company submitted four test reports to prove that the number of difference sites between the parents of the alleged infringing variety “YZ320” and “NP01154” was 1, and therefore was infringing; Jin XX Company submitted test report No. 2994 and claimed that there were differences in 4 of the 5 additional test sites, and the two were different varieties, so it did not constitute infringement. The first instance court accepted the test report No. 2994 submitted by Jin XX Company, determined that the parent of the alleged infringing variety “YZ320” and the authorized variety “NP01154” were different varieties, and ruled to dismiss all the claims of Heng XX Company. Heng XX Company appealed.
The focus of the second-instance dispute was whether Jin XX infringed the variety rights of “NP01154” and the determination of infringement liability, which mainly involved whether the parents (paternal parents) of the seven hybrid corn varieties accused of infringement were identical to the authorized variety “NP01154”. In particular, when using molecular markers to determine the identity of the variety, the conditions for expanding the site testing and the probative value of the additional testing results were the key issues in this case.
The Supreme People’s Court held that there was insufficient evidence to prove that the five additional test sites in the No. 2994 test report were generally recognized specific sites that could distinguish different varieties. The report’s initiation of the expanded site testing procedure and the selection of additional test sites did not comply with the provisions of the relevant judicial interpretations and the requirements of the molecular marker testing standards for new plant varieties, and had no probative value. Jin XX’s claim that its allegedly infringing variety was “glutinous” corn and that the authorized variety “NP01154” was “ordinary corn” and that the two were different varieties lacked evidence. The evidence in this case can prove that the parents (father) of the seven hybrid corn varieties accused of infringement are identical to the authorized varieties, and Jin XX’s behavior constitutes infringement of the “NP01154” variety rights; Jin XX’s company intentionally infringed, and the infringing products involve 7 approved hybrid varieties, the infringement period is as long as five years, and the infringing production area is as high as 8243.4 acres. The infringement is serious, and punitive damages should be applied, and the multiple of punitive damages is determined to be 1X, and then the total compensation is determined to be twice the amount of compensatory damages, that is, more than 53.347 million RMB. In view of the complexity of the case and the evidence, Heng XX’s attorney fees, testing fees, travel expenses and other expenses are reasonable, and the reasonable expenses of 200,000 RMB for rights protection are fully supported. The final compensation amount in this case is 53,547,163.1 RMB.
The original text of the announcement is available here (Chinese only).
Court Slams Lawyers for AI-Generated Fake Citations
A federal judge in Colorado has issued a scathing order that should serve as a wake-up call for attorneys who use frontier generative artificial intelligence (Gen AI) models in legal research. On April 23, federal Judge Nina Y. Wang of the District of Colorado issued an Order to Show Cause in Coomer v. Lindell that exposes the dangers of unverified AI use in litigation.
The Case and the Famous Defendant
The defamation lawsuit involves plaintiff Eric Coomer, a former Dominion Voting Systems executive, and defendant Mike Lindell, the well-known CEO of MyPillow. The case has gained significant attention not only for the high-profile parties involved but also for becoming a neon-red-blinking cautionary tale of consequential Gen AI misuse.
“Cases That Simply Do Not Exist”
Judge Wang identified “nearly thirty defective citations” in a brief submitted by Lindell’s attorneys, and they weren’t mere minor errors. The court found:
Citations to cases that “do not exist”
Legal principles attributed to decisions that contain no such language
Cases from one jurisdiction falsely labeled as being from another
Misquotes of actual legal authorities
One particularly egregious example involved a citation to “Perkins v. Fed. Fruit & Produce Co., 945 F.3d 1242, 1251 (10th Cir. 2019)”—a completely fabricated case. The court noted that while a similar-named case exists in a different form, the Gen AI tool had essentially cobbled together a fictional citation by merging elements from entirely different cases.
The Reluctant Admission
When confronted about these errors at a hearing, the defense attorney initially deflected, suggesting it was a “draft pleading” or blaming a colleague for failing to perform citation checking. Only when directly asked by Judge Wang whether AI had generated the content did Kachouroff admit to using Gen AI.
Even more damning, Kachouroff “admitted that he failed to cite check the authority in the Opposition after such use before filing it with the Court—despite understanding his obligations under Rule 11.” The court expressed open skepticism about his claim that he had personally drafted the brief before using AI, noting “the pervasiveness of the errors.”
Lessons for Legal Practice
AI verification isn’t optional—it’s a professional obligation. While AI tools can enhance efficiency, they require human oversight. The ethical foundations of legal practice remain unchanged: attorneys must verify information presented to the court, regardless of its source.
As GenAI continues to integrate into legal practice rapidly, the Coomer case serves as a stark reminder that technology cannot replace professional judgment. Case citations must be verified, quotations must be confirmed, and legal principles must be substantiated against primary sources. While the legal profession has always adapted to new technologies, core professional responsibilities have not changed significantly. In the AI era, these obligations require vigilance more than ever.
Not until this Court asked Mr. Kachouroff directly whether the Opposition was the product of generative artificial intelligence did Mr. Kachouroff admit that he did, in fact, use generative artificial intelligence.
Trump Administration Issues Executive Order Aimed at Eliminating Disparate Impact Liability Under Anti-Discrimination Laws
On April 23, 2025, the White House issued an Executive Order (“EO”) entitled “Restoring Equality of Opportunity and Meritocracy,” which aims to “eliminate the use of disparate-impact liability in all contexts to the maximum degree possible.”
First recognized under Title VII of the Civil Rights Act of 1964 (“Title VII”) by the U.S. Supreme Court in Griggs v. Duke Power Co. (1971), disparate impact liability provides that a policy or practice that is facially neutral and applied without discriminatory intent may nevertheless give rise to a claim of discrimination if it has an adverse effect on a protected class, such as a particular race or gender. Disparate impact liability has also been recognized under fair housing laws and in other contexts.
The EO characterizes disparate impact liability as creating “a near insurmountable presumption of unlawful discrimination . . . where there are any differences in outcomes in certain circumstances among different races, sexes, or similar groups, even if there is no facially discriminatory policy or practice or discriminatory intent involved, and even if everyone has an equal opportunity to succeed.” The EO further states that disparate impact liability “all but requires individuals and businesses to consider race and engage in racial balancing to avoid potentially crippling legal liability” and “is wholly inconsistent with the Constitution.”
To that end, the EO, among other things:
directs all executive departments and agencies to “deprioritize enforcement of all statutes and regulations to the extent they include disparate-impact liability,” including but not limited to Title VII;
orders the Attorney General, within 30 days of the EO, to report to the President “(i) all existing regulations, guidance, rules, or orders that impose disparate-impact liability or similar requirements, and detail agency steps for their amendment or repeal, as appropriate under applicable law; and (ii) other laws or decisions, including at the State level, that impose disparate-impact liability and any appropriate measures to address any constitutional or other legal infirmities”;
orders the Attorney General and the Chair of the EEOC, within 45 days, to “assess all pending investigations, civil suits, or positions taken in ongoing matters under every Federal civil rights law within their respective jurisdictions . . . that rely on a theory of disparate-impact liability, and [] take appropriate action” consistent with the EO;
orders all agencies, within 90 days, to “evaluate existing consent judgments and permanent injunctions that rely on theories of disparate-impact liability and take appropriate action” consistent with the EO;
orders the Attorney General, in coordination with other agencies, to “determine whether any Federal authorities preempt State laws, regulations, policies, or practices that impose disparate-impact liability based on a federally protected characteristic such as race, sex, or age, or whether such laws, regulations, policies, or practices have constitutional infirmities that warrant Federal action, and [] take appropriate measures” consistent with the EO; and
orders the Attorney General to initiate action to repeal or amend regulations contemplating disparate impact liability under Title VI of the Civil Rights Act of 1964, which prohibits race, color, and national origin discrimination in programs and activities receiving federal financial assistance.
The EO also orders the Attorney General and the Chair of the EEOC to “jointly formulate and issue guidance or technical assistance to employers regarding appropriate methods to promote equal access to employment regardless of whether an applicant has a college education, where appropriate.”
Takeaways
This EO is the latest evidence of shifting enforcement priorities by the federal agencies tasked with enforcing civil rights laws, including the EEOC. The ultimate scope of the EO’s impact remains to be seen, particularly as it relates to the potential for preemption of disparate impact liability under state or local anti-discrimination laws. Congress has the authority to amend any federal statutes to specifically address a disparate impact theory of liability, and the courts will continue to have the ultimate say on whether and to what extent such a theory is cognizable under particular statutes. We anticipate further updates in this area and will continue to monitor and report on these updates.
Ohio AG Sues Mortgage Lender for Illegal Broker Steering Scheme
On April 17, Ohio Attorney General Dave Yost announced that the state has filed a lawsuit against a wholesale mortgage lender, alleging that the company engaged in a statewide scheme to mislead borrowers and inflate mortgage costs through deceptive broker steering practices. The AG’s office is seeking a jury trial on all claims.
The complaint alleges that the lender violated the Ohio Consumer Sales Practices Act, the Ohio Residential Mortgage Lending Act, and the Ohio Corrupt Practices Act. The lawsuit accuses the lender of conspiring with brokers to funnel borrowers into high-cost loans under the guise of independent shopping, despite internal agreements that allegedly prohibited brokers from presenting more affordable alternatives.
Specifically, the allegations include:
Restricting broker competition. The lender contractually prohibited referrals to two major competitors, even when cheaper options were available.
Marketing misrepresented broker independence. Brokers used lender-supplied marketing materials that described them as “independent” despite contractual restrictions limiting their ability to shop around.
Rewarding loyalty with exclusive perks. Brokers who funneled loans to the lender received increased exposure on borrower search engines, faster underwriting times, and access to promotional products, all tied to volume metrics.
Charging borrowers significantly higher costs. The AG asserts that borrowers working with high-funneling brokers paid hundreds more per loan than those using brokers who independently shopped the market.
Putting It Into Practice: Ohio’s lawsuit continues a trend of increased state-level enforcement targeting financial services practices, particularly in the mortgage space (previously discussed here). Lenders and brokers who operate in this space should ensure their compliance procedures align with best practices, especially when it comes to referrals.
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Deregulatory Push by Trump Administration Picks Up Speed
It’s no secret that President Trump, his Cabinet, and other executive branch leaders are prioritizing deregulatory activities over more historical federal governance approaches. Indeed, one of President Trump’s earliest executive orders – issued on January 31, 2025 – is entitled “Unleashing Prosperity Through Deregulation” and states that for each new regulation issued, at least ten prior regulations must be identified for repeal (and it defines the term “regulation” broadly to include memoranda, guidance documents, and policy statements, among others). In addition to this new 10-for-1 directive, on February 19, 2025, President Trump issued executive order 14219, “Ensuring Lawful Governance and Implementing the President’s ‘Department of Government Efficiency’ Deregulatory Initiative” (EO 14219). The president’s order directs all executive agency heads, in coordination with the Director of the Office of Management and Budget (OMB) and its Department of Government Efficiency (DOGE) Team Lead, to review all existing regulations for “consistency with law and Administration policy” and, within 60 days, to identify regulations that fall under the following categories:
regulations that are unconstitutional and those that raise serious constitutional difficulties, such as exceeding the scope of power vested in the federal government by the Constitution;
regulations based on unlawful delegations of legislative power;
regulations based on anything other than the best reading of the underlying statutory authority or prohibition;
regulations that implicate matters of social, political, or economic significance that are not authorized by clear statutory authority;
regulations that impose significant costs upon private parties that are not outweighed by public benefits;
regulations that harm the national interest by significantly and unjustifiably impeding technological innovation, infrastructure development, disaster response, inflation reduction, research and development, economic development, energy production, land use, and foreign policy objectives; and
regulations that impose undue burdens on small businesses and impede private enterprise and entrepreneurship.
The 60-day period granted to agency heads under EO 14219 ended on April 19, 2025. Just prior to the deadline for responsive agency submissions to the White House, on April 11, 2025, OMB also published a notice styled as “Request for Information: Deregulation,” which seeks comments from the broader public on “regulations that are unnecessary, unlawful, unduly burdensome, or unsound.” This brief public Request for Information (RFI) from OMB asks commentators specifically to identify “regulations that stifle American businesses and American ingenuity.” The open-ended RFI could reasonably garner comments on regulations across a multitude of industries, including the health care, clinical research, and life sciences sectors. Comments are due to OMB no later than May 12, 2025, and should be submitted via Regulations.gov (Docket ID OMB-2025-0003) with information on the rule’s background and the submitter’s rationale for proposing its rescission.
Also on April 11, the Centers for Medicare & Medicaid Services (CMS) published its own request for information pursuant to its deregulatory activities under EO 14219. CMS is asking “healthcare providers, researchers, stakeholders, health and drug plans, and other members of the public” to submit feedback on a diverse array of topics. Topics of interest include how to streamline regulatory requirements; whether there are opportunities to reduce the administrative burden of reporting and documentation; and whether duplicative requirements can be identified and reduced. CMS also requests that responsive public comments include, where practical “data, examples, narrative anecdotes, and recommended actions.”
In parallel to the ongoing and wide-ranging processes of identifying federal rules and regulations that may be ripe for revocation, the Trump Administration has signaled in multiple forums that it intends to bypass procedural requirements created by Congress with the Administrative Procedure Act (APA). Most conspicuously, on April 9, 2025, President Trump issued a Memorandum to the Heads of Executive Departments and Agencies on the subject of “Directing the Repeal of Unlawful Regulations.” The memo directs executive branch leaders to identify categories of unlawful and potentially unlawful regulations following their completion of the 60-day review period ordered in February via EO 14219 and to immediately repeal any regulation that “clearly exceeds the agency’s statutory authority or is otherwise unlawful.”
In directing his administration regarding what regulations may be unlawful, President Trump cites a slew of recent Supreme Court decisions that he characterizes as having “recognized appropriate constitutional boundaries on the power of unelected bureaucrats and that restore checks on unlawful agency actions,” such as last year’s Loper Bright v. Raimondo. The memo continues to state that: “In effectuating repeals of facially unlawful regulations, agency heads shall finalize rules without notice and comment, where doing so is consistent with the ‘good cause’ exception in the [APA]…that allows agencies to dispense with notice-and-comment rulemaking” in certain situations.
Whether such regulatory changes can be implemented without following the typical rulemaking process is very likely to be subject to litigation initiated by stakeholders who prefer the regulations in question stay in place, as the APA’s “good cause” exception has not been used to support widespread deregulatory activities such as this one, and existing case law does not appear to support the President’s expansive view of the exception’s applicability. It’s also worth noting that the Department of Health and Human Services (HHS) separately published a notice on March 3, 2025 rescinding a long-standing departmental policy that directed HHS to use the APA’s good cause exception “sparingly.” This HHS policy shift makes it more likely that the department may seek to make significant regulatory changes – whether promulgating new rules or revoking existing rules – without engaging in public notice-and-comment processes. Stakeholders should continue to closely monitor HHS and agencies within its purview (e.g., CMS) for actions that would affect their rights and that may not comply with the statutory mandates of the APA.
Artificial Intelligence and Our Continuing Journeys in Alice’s Wonderland: Practice Points from Recentive Analytics, Inc. v. Fox Corp.
If you’re a patent practitioner who works with innovation related to artificial intelligence, you’ll want to consider the Federal Circuit’s recent decision in Recentive Analytics, Inc. v. Fox. Corp. This decision is the first to explicitly consider patent eligibility in the context of the use of artificial intelligence.
The Federal Circuit affirmed the district court’s dismissal of Recentive’s complaint, holding that the claims were not eligible under Section 101. “This case presents a question of first impression: whether claims that do no more than apply established methods of machine learning to a new data environment are patent eligible. We hold that they do not.”
This case involved patents that addressed the scheduling of live events and optimizing network maps—in particular, what programs or content are displayed by a broadcaster’s channels in different geographic markets at a particular time. The district court dismissed the patent owner’s complaint for infringement because it found the patent claims were directed to ineligible subject matter under 35 U.S.C. § 101.
In analyzing the patent claims directed to event-scheduling, the Federal Circuit noted that the claims involved collecting data, an iterative training step, and an output step in which an optimized schedule is output, and an updating step in which the schedule is updated based on new data inputs.
The extent to which the specification discussed machine learning was fairly general: that a model can be trained using a set of training data that includes historical data from previous live events, that the machine learning model can be instructed to optimize a target feature such as event attendance, revenue, or ticket sales, and that “any suitable machine learning technique” can be used.
In analyzing the patent claims directed to network map optimization, the Federal Circuit noted that the claims involved collecting data, analysis of the data to create a network map, an updating step, and a using step. The specification included some information about the training data used to train the models and also noted that any suitable machine learning technique could be used.
Notably, under Step 2A, Prong 1 of the Alice test, the Federal Circuit found that the use of generic machine learning technology in carrying out the claimed methods was a conventional technique that does not represent a technical improvement. In discussing Prong 1, the Federal Circuit noted that neither the claims nor specification described any improvement to technology but instead only disclosed that machine learning is used in a new environment. In addition, nothing in the claims discussed a transformation of machine learning techniques applied within the context of network scheduling to something significantly more than generating event schedules and network maps.
This case established two important new guideposts: (1) applying machine learning techniques to a task, in and of itself, is likely not eligible under Section 101, and (2) detail in the specification and claims about a technical problem and detail about an improvement an invention provides to address this technical problem is important. More generally, this case suggests that machine learning techniques are just another tool to perform a task, and that using machine learning is (now) a bit like using a computer to perform a task —that is, not enough to get over the 101 hurdle.
In many respects, this case follows the intellectual underpinnings of Alice Corp. v. CLS Bank Int’l, in which the recitation of a generic computer was insufficient to transform a patent-ineligible abstract idea into eligible subject matter, particularly in view of the ubiquity of computer technology in our lives. With artificial intelligence becoming more ubiquitous, it is perhaps unsurprising to see the courts suggesting that the mere use of artificial intelligence is also insufficient to transform a patent-ineligible abstract idea into eligible subject matter.
In view of Recentive Analytics, innovators and practitioners who are pursuing patents that involve the use of machine learning models to perform a task may want to focus on the underlying technical problem under the existing techniques—whether it’s computational efficiency, resource utilization, poor results, some combination of all of that, or something else—and how the invention addresses these technical problems. It may also be helpful to avoid stating in the patent application that “any suitable machine learning technique can be used.”
For applications that relate to fundamental changes to the way machine learning models work, this decision should not impact strategies for obtaining patent protection.
Michael Lew also contributed to this article.
One-Two Punch Delivered to Department of Education on DEI
Separate District Courts Take Divergent Routes to Temporarily Bar Enforcement of the Dear Colleague Letter on DEI in Education
On April 24, 2025, the U.S. District Courts for the District of New Hampshire and the District of Maryland issued separate orders blocking enforcement of all, or large portions of, the Dear Colleague Letter (“DCL”) issued by the Department of Education (“DOE”) on February 14, 2025. The DCL related to the viability of various “DEI” programs in the wake of last year’s Supreme Court decision in Students for Fair Admissions v. Harvard.
After the DCL, the DOE also issued a February 28, 2025, Frequently Asked Questions document About Racial Preferences and Stereotypes under Title VI of the Civil Rights Act (the “FAQ”) and later created the End DEI Portal pursuant to the DCL. Further, on April 3, 2025, the DOE issued a compliance certification requirement (the “Certification Requirement”), mandating state and local education agencies certify adherence to Title VI of the Civil Rights Act of 1964 and the 2023 Supreme Court ruling in Students for Fair Admissions v. Harvard. Certification is reportedly an imposed condition for receiving federal financial assistance.
In the New Hampshire case, NEA, et al v. U.S. Dept. of Education, the court preliminarily enjoined the enforcement or implementation of the DCL, the February 28 FAQ, the End DEI Portal, and the Certification Requirement. The Court found that the plaintiffs had a high likelihood of establishing that the DCL, FAQs, and Portal are facially unconstitutional due to their vagueness, and thus enjoined enforcement of these documents and the Certification Requirement until further action of the court. The injunction, however, only limits enforcement as to the plaintiffs in the case, the NEA, NEA New Hampshire and the Center for Black Educator Development as well their respective affiliates. Thus, the order is not a nationwide injunction.
In the second case, AFT v. U.S. Department of Labor, the Maryland federal court took a different path to a similar end. The court preliminarily held that in issuing the DCL, DOE failed to comply with the federal Administrative Procedure Act, and as a result, the DCL was presumptively invalid. Rather than enjoin enforcement, as the New Hampshire court had done, the Maryland court held that a nationwide stay of the DCL was the appropriate remedy under the APA. The court declined to stay the FAQs or the Portal, however, finding neither to be a final agency action. Similarly, the court did not stay the Certification Requirement, holding it was not identified or raised in the Amended Complaint, but cryptically ruled “Insofar as the Court considers the Certification Requirement as an implementation of the Letter, it would of course be improper for the government to initiate enforcement based on a stayed policy, through certification or otherwise.” The stay, nevertheless, effectively precludes enforcement of the DCL nationally against any party.
Significantly, the court explained that only those aspects of the DCL that represented a change from pre-existing law were stayed, and that the stay would also preclude enforcement based on the FAQs to the extent they were based on changes made in the DCL. This will leave room for argument about which portions of the DCL are “new” law and which are merely declarative of prior law.
As a practical matter, the two decisions give educational institutions (particularly those who employ or contract or work with members or affiliates of the NEA) some breathing room to assess how to respond to the administration’s focus on DEI efforts in educational programming. While the issue is unlikely to go away entirely, enforcement of the penalties and the Certification Requirement have been kicked down the road for now.
PBMs Score a Win in Federal Court Against State Regulation
A recent federal court decision has the potential to tip the balance in an ongoing series of skirmishes over state regulation of pharmacy benefit managers (PBMs).
In McKee Foods Corp. v. BFP Inc. d/b/a/ Thrifty Med Plus Pharmacy, the US District Court for the Eastern District of Tennessee declared that an “any willing pharmacy” requirement in Tennessee was preempted by the federal Employee Retirement Income Security Act of 1974 (ERISA), as amended. On one side, self-funded group health plans argue that ERISA allows them to comply with a single set of rules nationwide, rather than having to navigate a patchwork of different, overlapping, and sometimes conflicting state laws. On the other side are the states, which have a legitimate interest in ensuring prescription drug reimbursements are fair and reasonable and their citizens are protected from fraudulent, abusive, or misleading PBM practices. However, states have routinely misread a 2020 Supreme Court decision, Rutledge v. Pharmaceutical Care Management Association, to support extensive interference with the design and operation of employer-sponsored group health plans in a manner that may be preempted by ERISA.
In Depth
Enacted in 1974, ERISA made the regulation of employee benefit plans principally a matter of federal concern. The law broadly and generally preempts – or renders inoperative – state laws that “relate to” employee benefit plans. According to the Supreme Court’s Rutledge decision, ERISA preempts “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan covered by ERISA.” To “relate to” an ERISA plan, a law must either have a “connection with” or “reference to” such a plan.
“Connection with” preemption arises when either a law requires providers to structure benefit plans in particular ways, or acute (albeit indirect) economic effects of the state law force an ERISA plan to adopt a certain scheme of substantive coverage.
“Reference to” preemption arises in a different set of circumstances, namely where a state’s law acts immediately and exclusively upon ERISA plans or where the existence of ERISA plans is essential to the law’s operation.
Citing Kentucky Association of Health Plans, Inc. v. Nichols, the McKee court held that Tennessee’s “any willing pharmacy” law had an impermissible connection with ERISA plans and was therefore preempted. In so holding, the court rejected the state of Tennessee’s reliance on Rutledge. Critically, Rutledge involved a form of cost regulation, not plan structure. By contrast, pharmacy networks – at issue in McKee – are plan structures.
McKee is consistent with the Tenth Circuit Court of Appeals decision in PCMA v. Mulready (now pending before the Supreme Court), which invalided an Oklahoma law compelling PBMs to comply with certain pharmacy network standards. The Tenth Circuit held that ERISA superseded the Oklahoma law because it generally compelled ERISA plans to structure benefits in certain ways. In reaching its decision, the Mulready court reviewed, summarized, and applied more than 20 years of Supreme Court jurisprudence, which can be summed up as follows: States have wide berth to regulate PBM pharmacy reimbursement rates and acquisition costs, but they may not interfere with plan operation and administration, including the design and structure of pharmacy networks.
Currently, fiduciaries and plan sponsors of self-funded group health plans with multistate operations are confronted with myriad conflicting and burdensome state PBM laws, as well as increased private plaintiff activity. Texas, Florida, and Arkansas are posing particular challenges at the moment; other states will likely follow. While MeKee is encouraging, it is of little help in the short run. To break the logjam, action is required, either by the Supreme Court or Congress.
TCPA CLASS ACTIONS MORE THAN DOUBLE!!: The Pace of TCPA Filings in 2025 Continues to Skyrocket
So I was talking to a very well known TCPA Plaintiff’s attorney yesterday who told me his filing pace of TCPA class cases was “higher than ever.”
Spoke to another Plaintiff’s lawyer last week who said he had hired two attorneys recently and was looking to hire two more.
There is no question the Plaintiff’s bar is scaling their TCPA operations and there is no end in sight to it. But the results are astounding.
2024 was the peak year for TCPA class actions– with more class actions filed last year than any other year in the TCPA’s history.
2025, however, is set to blow 2024 away.
In the first three months of 2024 there were 239 TCPA class actions filed.
In 2025?
507.
That’s more than double the filings from 2024 so far YTD.
That’s means TCPA class litigation is up over 112% year over year and April’s numbers look to be catastrophically high again.
Indeed, nearly 80% of all TCPA cases are now being filed as class actions. This is compared to 2-5% of other consumer cases that are filed as class cases. (Thanks to WebRecon for the data sets, btw.)
There is no question, therefore, that the TCPA is the single biggest litigation to American businesses out there right now and it continues to be the biggest cash cow in history for the Plaintiff’s bar.
And with other law firms flat giving false advise with respect to the FCC’s new revocation rules–my goodness– it looks like TCPA class actions will continue to spike.
PROTECT YOURSELF FOLKS.