Big Appellate Win For Qui Tam Whistleblowers in Customs Duty Evasion Case
An important decision was issued Monday, June 23, 2025, out of the U.S. Court of Appeals for the Ninth Circuit, in a customs duty evasion case brought under the False Claims Act. In the case of Island Industries v. Sigma Corporation, the plaintiff, a competitor of the defendant who brought the case as a qui tam relator, alleged that the defendant had evaded antidumping duties on certain pipe fittings that the defendant imported into the United States. At trial, the jury found against the defendant, and that the defendant owed approximately $8 million in unpaid duties (which would be automatically tripled under the False Claims Act). On appeal, the Court of Appeals held:
1. Qui tam cases under the False Claims Act that allege evasion of customs duties are properly brought in federal district courts, and not in the Court of International Trade.
2. That the government may seek penalties against an importer that evades duties under 19 U.S.C. § 1592 does not preclude the government, or a private qui tam plaintiff, from also seeking damages and penalties under the False Claims Act, 31 U.S.C. § 3729. An importer that evades duties is subject to potential liability under both laws.
3. Liability under the “reverse false claims” provision of the False Claims Act requires that the defendant have had an “obligation” to pay money to the government. Defendant argued that it had no “obligation” to pay the antidumping duties at issue because the amount of duties owed was not fixed until the end of the liquidation process. The court rejected that argument, holding that an importer has an obligation, within the meaning of the False Claims Act, to pay antidumping duties at time of importation, even if the amount owed is not fixed until later.
4. On the issue of scienter (i.e., the importer’s “knowledge”), the defendant argued that it could not be held liable because it did not know about the relevant antidumping order at the time it imported the products. The court rejected that argument, holding that the evidence was sufficient to show that the defendant had acted “with either deliberate indifference or reckless disregard for the truth when it declared on customs forms that it did not owe antidumping duties on [the imported products].” The court reasoned that an importer has an obligation to make reasonable inquiry as to what duties are owed and cannot evade False Claims Act liability by failing to make those inquiries. In the customs context this means that, in a False Claims Act case, an importer is presumed to know about existing antidumping orders or other customs obligations. Ignorance will not be a defense, even to treble damages and penalties.
The Ninth Circuit covers the West Coast states, and thus some of the busiest ports in the country. This decision is a significant win for customs enforcement, and for whistleblowers who bring qui tam cases under the False Claims Act.
Court Reversed Summary Judgment And Held That There Was A Fact Question On Whether A Trust Was Void Due To Forgery Or Fraud
In In re Est. of Prieto, the contestant’s mother executed a will in 2008 leaving her property to a trust. No. 04-22-00038-CV, 2024 Tex. App. LEXIS 6336 (Tex. App.—San Antonio August 28, 2024, no pet.). After she passed, the trial court admitted her will to probate and appointed the contestant’s brother as the independent executor. More than six years later, in 2014, the contestant filed suit, contesting the validity of the trust, sought declaratory relief related to his mother’s estate, and brought claims against the executor for breach of fiduciary duty and conversion. The executor filed a summary judgment motion on the statute of limitations. The trial court granted the motion, and the contestant appealed.
The executor’s summary judgment motion challenged the trust contest claim on the ground that it was barred by the two-year limitations period provided in section 256.204(a) of the Texas Estates Code, which states:
After a will is admitted to probate, an interested person may commence a suit to contest the validity thereof not later than the second anniversary of the date the will was admitted to probate, except that an interested person may commence a suit to cancel a will for forgery or other fraud not later than the second anniversary of the date the forgery or fraud was discovered.
Id. (citing Tex. Est. Code § 256.204(a)). The court of appeals noted that this provision may not apply to a trust contest claim, but that the parties did not argue that and seemed to agree that it did apply. So, for the purpose of the case, the court implied that it did apply without deciding as such.
The court first discussed the legal standards for the statute of limitations for challenging wills:
Generally, Texas courts do not apply the discovery rule to claims arising out of probate proceedings, even in the face of allegations of fraud. However, section 256.204(a) creates an exception to the general rule, providing that “an interested person may commence a suit to cancel a will for forgery or other fraud not later than the second anniversary of the date the forgery or fraud was discovered.” Thus, section 256.204(a)’s discovery rule applies to suits to cancel wills “for forgery or other fraud.” However, for the discovery rule in section 256.204(a) to apply, the fraud in question must be “extrinsic fraud.” “Fraud is considered ‘intrinsic’ when the fraudulent acts pertain to an issue that was, or could have been, litigated in the original suit.” “Intrinsic fraud . . . relates to the merits of the issues that were presented and presumably were or should have been settled in the former action.” A contest based on contentions that the decedent lacked testamentary capacity or was the product of undue influence are characterized as “intrinsic” fraud because they could have been litigated in the proceeding admitting the will to probate. “On the other hand, fraud is extrinsic when the fraudulent acts prevent a party from either having a trial or prevent him from having a fair opportunity to present his case.” “Extrinsic fraud is fraud that denied a party the opportunity to fully litigate at trial all the rights or defenses that could have been asserted.”
Id. The court then held that the contestant had sufficient evidence to create a fact question on extrinsic fraud:
In his affidavit, Eduardo testified that Victor “overpowered” his mother’s mind and “forced” her to sign a will and a trust she never would have signed without Victor’s influence. These actions constitute intrinsic fraud, which does not trigger section 256.204(a)’s limitations exception. However, Eduardo also testified that he repeatedly asked Victor for copies of their mother’s will and all supporting documents. Instead of providing him the documents, Victor told Eduardo that “everyone is equal and will get an equal share.” Eduardo claimed he “had no way of finding out the truth because Victor kept the documents in his safe and refused to give him a copy.” And, according to Eduardo’s testimony, until late 2013, Victor had made payments to him, which Victor characterized as distributions from their mother’s estate. Eduardo added: “Up until 2014, my brother Victor had told me that I was a beneficiary and that I would be receiving an equal amount. October 2014 was the first time I realized that was a lie.” Finally, Eduardo testified that Victor’s “fraudulent misrepresentations and concealment of critical documents induced me to delay the filing of this lawsuit.” These actions, if true, prevented Eduardo from having a fair opportunity to present his case and qualify as extrinsic fraud, which triggers the exception contained in section 256.204(a). See Because Victor complains of extrinsic fraud, we conclude the discovery rule contained in 256.204(a) applies to this case.
…
[T]he trust document and its amendment, which were not filed in the probate records, disclose the beneficiaries. Therefore, in this case, Eduardo could not have learned of his non-beneficiary status by examining the probate records, and Victor could not rely on constructive notice to conclusively prove his limitations defense
Id. The court reversed the summary judgment.
Court Affirmed Order Denying Probate Of A Will Due To The Absence Of A Record
In In re Estate of Earnest E. Clifton, an applicant offered a copy of a lost will, and the trial court denied the application via a zoom hearing without a court reporter. No. 05-24-00079-CV, 2024 Tex. App. LEXIS 7071 (Tex. App.—Dallas October 1, 2024, no pet.). The applicant appealed on multiple evidentiary complaints. The court of appeals affirmed the order due to the absence of a reporter’s record:
“It is the appellant’s burden to bring forward an appellate record showing reversible error by the trial court.” Without a complete reporter’s record, we cannot review all of the evidence presented to the factfinder or apply the sufficiency standards of review. Thus, when the appellant fails to bring a complete reporter’s record forward on appeal, the reviewing court must presume that the evidence was legally and factually sufficient to support the challenged order or judgment. The absence of a reporter’s record requires us to overrule Pearson’s first, second, and fourth issues, each of which is essentially a sufficiency-of-the-evidence issue.
Id. (internal citations omitted). The court then reviewed a complaint about the trial court conducting its own research and relying on same, but the court held that the applicant waived this complaint by failing to adequately brief it. The court affirmed the order.
Building a Sustainable Future: Understanding Permissible Repair Vs Impermissible Reconstruction In Support Of A Circular Economy
The circular economy invites us to fundamentally reconsider our relationship with resources and products. By moving away from the outdated “take-make-dispose” model, companies are embracing a more sustainable approach that prioritizes longevity, repairability, and eventual recycling. This thoughtful design philosophy creates and preserves value throughout a product’s entire lifecycle. Effective management of intellectual property (IP) rights serves as a cornerstone of this forward-thinking vision. Companies that skillfully balance robust IP protection with accessible repair rights position themselves to foster continued innovation while advancing sustainability goals. These businesses develop products with extended useful lifespans that significantly reduce unnecessary waste and conserve valuable resources for future generations.
Businesses stands to gain numerous advantages by embracing repair as part of their product lifecycle. Customers increasingly recognize and reward brands that demonstrate genuine environmental responsibility, building stronger loyalty and trust in the products. Products designed with repair in mind naturally create more resilient supply chains that can better withstand parts shortages or other disruptions. This approach also contributes to vibrant local repair economies, reducing transportation-related environmental impacts while creating jobs and economic opportunities in communities where customers live and work.
The legal landscape governing repair rights varies significantly between regions like the United States and European Union. A clear understanding of these different frameworks empowers businesses to make informed decisions about how customers can legally interact with products after purchase.
Here, we highlight significant court decisions, relevant statutes, and practical implications for businesses and consumers, specifically for authorized purchasers of an IP-protected product and the holder of those same IP right. This knowledge allows a company to develop strategies that protect their valuable intellectual property while simultaneously supporting broader sustainability objectives. By thoughtfully balancing potential revenue from repair services against the needs and expectations of the customers, a company can position its business for long-term success.
U.S. Legal Framework
The doctrine of patent exhaustion plays a central role in understanding the right to repair. Under this doctrine in U.S. law, once a patented product is sold, the IP Holder’s rights over that specific item are exhausted. This means the Product Owner is free to use, repair, or resell the item without infringing the patent. The Supreme Court’s ruling in Impression Products v. Lexmark International (2017) reaffirmed this principle, rejecting attempts by IP Holders to enforce post-sale restrictions through patent infringement lawsuits. Repair is an affirmative defense to a patent infringement claim; however, where the line between a permissible repair ends and impermissible reconstruction begins is not always clear.
Permissible Repair
Permissible repair in the US refers to actions taken to preserve the utility and operability of an IP-protected product, typically a patented product. This includes replacing individual unpatented parts, one at a time, whether of the same part repeatedly or different parts successively. The Supreme Court’s decision in Aro Mfg. Co. v. Convertible Top Replacement Co. (1961), Impression Products both established (and most recently reaffirmed in (2023)) that such repairs are lawful and do not constitute patent infringement under U.S. law.
Impermissible Reconstruction
Impermissible reconstruction involves actions that effectively create a new article from the IP-protected product or embodiment after it has become spent. Typically, the product is protected by patents and thus, reconstruction generally relates to patent infringement. The key distinction lies in whether the activity amounts to making a new article, rather than merely preserving the existing one.
Distinguishing Repairs from Reconstruction
While there is no definitive rule, courts assess multiple factors to determine whether a Product Owner has created a new article, thereby reconstructing the patented product. These factors include:
Extent of Replacement – Courts look at how much of the patented product has been replaced at one time. If the replacement involves a substantial portion of the product at the same time, it is more likely to be considered reconstruction. However, even if the Product Owner sequentially replaces all the worn-out parts of a patented combination, courts have found this sequential replacement does not constitute reconstruction.
Nature of the Parts Replaced – Replacing minor, unpatented parts is generally considered repair, while replacing essential, patented components can be seen as reconstruction.
Purpose of the Replacement – The intent behind the activity is considered. If the replacement is intended to extend the life of the product or restore it to its original condition, it is more likely to be considered repair. However, if the replacement effectively creates a new product, it is more likely to be reconstruction.
A pertinent example provided by the court in the Karl Storz case illustrates the application of many of the factors listed above. The court held that if a patent is granted for an automobile, the replacement of a spark plug constitutes permissible repair. Conversely, retaining the spark plug while replacing the entirety of the car in one action is more likely deemed reconstruction.
Right to Repair at the Federal Level
Recent national developments have significantly impacted the landscape of the right to repair in the U.S. Major players such as Apple Inc. have endorsed federal legislation, while the Federal Trade Commission (FTC) has intensified its enforcement against restrictive repair practices.
Apple Inc. has publicly supported federal right to repair legislation, marking a significant shift in the company’s stance on repairability. On October 24, 2023, Apple announced its backing of a federal right-to-repair bill, committing to provide access to tools and parts for customers nationwide.
The Federal Trade Commission (FTC) has taken significant steps to combat illegal repair restrictions and restore the right to repair for consumers, small businesses, and government entities. In July 2021, the FTC adopted a policy statement prioritizing investigations into unlawful repair practices under relevant statutes, including the Magnuson-Moss Warranty Act and Section 5 of the FTC Act. Targeting practices that raise repair costs, stifle innovation, and limit business opportunities for independent repair shops, the FTC aims to address antitrust and consumer protection violations.
Right to Repair at the State Level
As of 2025, right to repair legislation has been introduced in all 50 states. These bills generally aim to guarantee consumers’ rights to access replacement parts, repair manuals, diagnostic data, and appropriate tools necessary for maintenance. States such as New York, Minnesota, Colorado, California, and Oregon have already passed right to repair laws, setting a precedent for other states to follow. These laws empower consumers by providing tools and information for self-repair, reducing dependency on manufacturers. They support independent repair shops by ensuring access to parts and tools, fostering competition and innovation.
The most notable example is Oregon’s 2024 right to repair law, which requires manufacturers to provide parts, tools, and information for repairing consumer electronics. It also bans software that prevents technicians from fully installing spare parts, known as “parts pairing.”
EU LEGAL FRAMEWORK
In the EU, the principle of exhaustion of IP rights also plays a central role in understanding the right to repair. once a product has been placed on the market by the IP Holder or with their consent, the exclusive rights to that specific product are typically considered exhausted. This means consumers can use the product as intended, including repairing it. However, there are no specific guidelines that apply uniformly across all EU member states or the UK for distinguishing repair from reconstruction. Article 64(3) of the European Patent Convention (EPC), which also applies to the UK despite it not being an EU member, requires national courts to handle disputes about European patents using their own laws. The following is an analysis of the general principles and themes that countries under the EPC apply when differentiating between repair and reconstruction.
Permissible Repair
Permissible repair in the EU involves actions that maintain the functionality of a product without infringing on the patent. The Supreme Court in the UK provided guidance in Schütz v Werit (2013), outlining factors to consider when determining whether an activity constitutes repair or reconstruction. These factors include:
Subsidiary Nature of the Replaced Component – Courts assess whether the replaced component is a relatively minor part of the product. If the component is subsidiary and does not embody the inventive concept of the patent, its replacement is likely considered repair.
Life Expectancy – The life expectancy of the replaced component compared to other parts of the product is evaluated. If the component has a significantly shorter lifespan and is expected to be replaced periodically, its replacement is generally deemed repair.
Ease of Replacement – The physical ease of replacing the component and its practical perishability is considered. Components that are designed to be easily replaceable and are relatively perishable in practice are typically associated with repair.
Inventive Concept – Whether the replaced component includes any aspect of the inventive concept of the patent is a critical factor. If the component does not embody the inventive concept, its replacement is more likely to be seen as repair.
Independent Identity – Courts examine whether the replaced part has any independent identity from the product. If the part is integral to the product’s identity, its replacement may lean towards reconstruction.
Impermissible Reconstruction
Impermissible reconstruction in the EU is defined similarly to the U.S., where actions that effectively create a new product from the patented entity are considered patent infringement. Key factors held by countries applying the EPC that indicate impermissible reconstruction include:
Extent of Replacement – Replacing all claimed elements of a patented invention without reusing any parts is likely considered reconstruction. Extensive replacement that transforms the product into a new article falls under reconstruction.b. Creation of a New Article – Activities that result in the creation of a new article from the patented entity are deemed reconstruction. This includes refurbishing a totally worn or spent product to make it operable again.c. Impact on Patent Rights – Reconstruction activities that infringe on the patent rights by creating a new product are impermissible. This includes using patented replacement parts or refurbishment methods without authorization.
Distinguishing Repairs from Reconstruction
Differentiating between permissible repair and impermissible reconstruction requires a careful analysis of the factors outlined above. Courts subject to the EPC assess the nature, extent, and purpose of the activity to determine whether it constitutes repair or reconstruction. The EU’s Right to Repair Directive further clarifies these distinctions by mandating that manufacturers provide access to spare parts, repair manuals, and diagnostic tools for certain products.
EU Directive on Promoting Repair
The European Union has introduced a new directive aimed at promoting the repair of goods, amending existing regulations to enhance sustainable consumption and reduce waste. The directive, officially titled “Directive (EU) 2024/1799 of the European Parliament and of the Council on Common Rules Promoting the Repair of Goods,” was adopted on June 13, 2024, and entered into force on July 30, 20241. Member States are required to transpose it into national law by July 31, 2026.
Key aspects of the directive include:
Obligation to Repair – Manufacturers of products subject to reparability requirements in EU law must repair those products within a reasonable time and at a reasonable price. This obligation applies to products listed in Annex II of the directive, which includes items such as fridges, smartphones, and washing machines.
Prohibition of Repair Impediments – Manufacturers are prohibited from using contractual clauses, hardware, or software techniques that impede the repair of goods listed in Annex II, unless justified by legitimate and objective factors.
Access to Spare Parts and Repair Information – Manufacturers must provide access to spare parts at reasonable prices and make repair information available to consumers in an easily accessible manner. This includes publishing indicative prices for typical repairs on their websites.
Consumer Awareness – The directive mandates that manufacturers inform consumers about the availability of repair services and spare parts, enhancing transparency and encouraging repair over replacement.
CONCLUSION
For companies in the repair business, distinguishing between permissible repair and impermissible reconstruction is crucial. In the U.S., the doctrine of patent exhaustion and key court rulings support the rights of product owners to repair their IP-protected products. Similarly, the EU emphasizes the principle of exhaustion of IP rights, allowing consumers to repair products as intended. However, companies must ensure their repair activities do not cross into reconstruction, which could lead to legal challenges.
Recent legislation in both regions supports consumer rights and independent repair shops, offering significant opportunities for growth. Federal and state laws in the U.S., along with the EU’s directive promoting repair, aim to empower consumers and support independent repair shops by ensuring access to necessary parts, tools, and information.
Finding this equilibrium between IP protection and repair accessibility enables a company to flourish in the emerging circular economy while making a meaningful contribution to environmental sustainability
This Week in 340B: June 17 – 23, 2025
Find this week’s updates on 340B litigation to help you stay in the know on how 340B cases are developing across the country. Each week we comb through the dockets of more than 50 340B cases to provide you with a quick summary of relevant updates from the prior week in this industry-shaping body of litigation.
Issues at Stake: Contract Pharmacy; Rebate Model; HRSA Audit Process
In five cases challenging Tennessee, Hawaii and Utah state laws governing contract pharmacy arrangements:
Tennessee: In one case, amici filed an amicus curiae brief in opposition to plaintiff’s motion for preliminary injunction and in a second case, the plaintiff filed a motion for preliminary injunctive relief and the defendant filed a motion to dismiss.
Hawaii: In one case, the plaintiff filed a motion for preliminary injunction.
Utah: In three cases, the plaintiffs filed oppositions to the defendants’ motion to dismiss and replies in support of plaintiffs’ motions for preliminary injunctive relief.
In two appealed cases against the government related to rebate models, the court granted appellant’s motion to consolidate the cases with other similarly situated cases, and consolidated two additional cases as cross-appeals.
In three appealed cases against the government related to rebate models, the appellants filed opening briefs.
In two cases related to the HRSA audit process, the court granted defendants’ motion to dismiss.
In a case by a covered entity challenging the government’s decision to allow a manufacturer’s audit, the covered entity filed a memorandum in opposition to the drug manufacturer’s motion for leave to file an amicus brief in support of the government’s motion to dismiss.
Beyond Sackett: California’s Expanding Role in Wetlands Permitting and the Future of “Waters of the State”
California’s regulatory authority over “waters of the state” continues to grow even as the federal definition of “Waters of the United States” (WOTUS) narrows under shifting legal and regulatory frameworks. In Sackett v. EPA (598 U.S. 651 (2023)), the U.S. Supreme Court significantly restricted the scope of federal authority over waters and wetlands under the Clean Water Act (CWA), rejecting the “significant nexus” test from Rapanos v. United States (547 U.S. 715 (2006)). The Court held that only “relatively permanent, standing or continuously flowing” waters with a “continuous surface connection” to navigable, interstate waters qualify as federally jurisdictional WOTUS.
While the full impact of Sackett remains in flux, it is clear that many aquatic features previously protected under federal law are no longer considered jurisdictional WOTUS. This includes non-wetland features such as isolated waters and ephemeral streams, as well as wetlands that do not physically adjoin a jurisdictional waterbody.
In California, the practical result of Sackett is that the state is now poised to take on an expanded role in wetlands protection. Although California has not yet adopted comprehensive regulatory reforms to address the jurisdictional gap left by Sackett, recently proposed Senate Bill 601 (SB 601) signals the state’s intention to assert regulatory authority over formerly federally protected waters. This shift could have significant implications for developers, local governments, and permitting agencies.
FEDERAL DEVELOPMENTS
Building on Sackett, recent federal agency actions signal a further narrowing of federal jurisdiction. In March 2025, the U.S. Environmental Protection Agency (EPA) and U.S. Army Corps of Engineers (Corps) issued a joint memorandum to field staff, clarifying implementation of Sackett’s “continuous surface connection” test. Around the same time, these agencies also published a notice in the Federal Register — colloquially dubbed the “WOTUS Notice: The Final Response to SCOTUS” — announcing a forthcoming public process to solicit stakeholder input on future rulemaking related to WOTUS and wetlands. Both documents reflect an intent to further restrict the federal reach of the CWA.
As a result, more land development activities that involve wetlands or aquatic features may proceed without triggering the need for federal permits under CWA §§ 402 (National Pollutant Discharge Elimination System (NPDES) permitting) or 404 (dredge and fill).
CALIFORNIA’S WETLAND DEFINITION AND POLICY LANDSCAPE
Wetlands no longer regulated under the CWA remain protected in California under the Porter-Cologne Water Quality Control Act (Porter-Cologne), which governs discharges to “waters of the state.” In 2024, Assembly Bill 2875 established a state policy to achieve both no net loss and long-term net gain of California’s wetlands, reinforcing this broader regulatory mandate.
Historically, California collaborated closely with the Corps in the review and permitting of projects impacting wetlands, particularly through the CWA Section 401 water quality certification process. With federal jurisdiction curtailed post-Sackett, this collaboration has diminished, and California agencies — especially the State Water Resources Control Board (State Water Board) and the nine Regional Water Quality Control Boards (Regional Water Boards) — are expected to fill the regulatory void.
Although the State Water Board adopted a wetlands definition and state dredge-and-fill procedures in 2021, these rules predate Sackett. In 2023, the State Water Board issued a set of frequently asked questions (FAQs) acknowledging the Sackett Court’s decision and previewing several of the regulatory issues that have since materialized.
With fewer projects eligible for 401 certification, the Regional Water Boards have shifted toward processing more state-only Waste Discharge Requirements (WDRs). Unlike the streamlined, administrative CWA § 401 process, WDRs typically involve a minimum three-month public process. While General Orders and Programmatic WDRs offer expedited pathways, the most efficient option remains structuring a project to maintain a federal hook, thereby preserving access to the 401 certification route. Post-Sackett, however, this is increasingly difficult for many projects.
PROPOSED SENATE BILL 601
State legislators are seeking to reaffirm California’s commitment to filling any regulatory gaps left by Sackett through SB 601, which would expressly extend protections to “nexus waters”— a newly defined term intended to encompass waters no longer covered by federal law. While many of the bill’s provisions are largely duplicative of existing state authority under Porter-Cologne, several provisions of SB 601 would expand enforcement tools and compliance obligations, raising potential concerns within the development community.
Among its current provisions, SB 601 would:
Define “nexus waters” broadly to include all waters of the state that are also not navigable waters, with limited exceptions.
Add a citizen suit provision, allowing an action to be brought in the public interest in superior court, by any “person who has suffered an injury in fact,” to enforce either state water quality standards or federal standards in effect as of January 19, 2025.
Eliminate the requirement that Regional Water Boards consider factors such as economic impacts and housing needs when establishing water quality objectives for nexus waters.
Authorize the State Water Board to adopt water quality control plans for all nexus waters.
Make a failure to file a required report of waste discharge under WDRs subject to civil liability and criminal penalties under California law and incorporate analogous provisions of the CWA.
Require the State Water Board’s executive director to increase civil monetary penalties for certain violations of WDRs to account for inflation, but not to exceed 150% each year other than the first year.
LOOKING AHEAD
Taken together, the narrowing of the federal CWA’s reach and proposed SB 601 may impose additional burdens on project proponents, including regulatory uncertainty, permitting delays, and higher compliance costs associated with wetlands and water quality regulation. As SB 601 advances through the legislative process, stakeholders should monitor its progress closely and prepare for continued evolution in California’s approach to wetlands permitting.
Apple’s Second Bite Is Successful: Federal Circuit Nixes Optis Verdict Involving Standard Essential Patents Due to Jury Instruction Error
Apple has escaped a $300 million patent infringement verdict after a three-judge panel of the United States Court of Appeals for the Federal Circuit vacated both the infringement and damages judgment because of faulty jury instructions and an improper verdict form underscoring how a seemingly small procedural error can upend a half-billion-dollar outcome. [1]
In 2020, a Texas jury found that Apple had infringed at least some of the Standard Essential Patents Otis alleged. A Standard Essential Patent (SEP) is a type of patent for which the rights would be licensed to anyone wanting to comply with the related standard. In exchange for a patent being included in a standard, the owner of a SEP makes the commitment to license it on the basis of “fair, reasonable and non-discriminatory” (FRAND) royalties, or royalty-free. The jury awarded just over $506 million as a reasonable royalty for past sales.
Apple sought a new trial arguing that the jury did not hear evidence of Optis’s obligation to license the patents FRAND terms. The district court granted a new trial only on damages. In the subsequent damages retrial, the jury awarded Optis the now overturned $300 million as a lump sum.
The Federal Circuit overturned the award and remanded the case for a new trial on both infringement and damages. The precedential opinion agreed with Apple’s argument that the verdict form was overly broad, improperly combining all asserted patents into a single infringement question and permitting the jury to find Apple liable for infringement regardless of whether all jurors agreed that Apple was infringing the same patent.
The appellate court found that the question asked deprived Apple of its Seventh Amendment right to a unanimous verdict on each legal claim against it related to infringement. Because all the patents were lumped into a single question, the Federal Circuit also found that the lump sum damages award was improper given that the scope of infringement was unknown.
Along with taking issue with the jury instructions, the panel also found that one of the patents in question was too abstract to be litigated as Optis proposed and that the district court erred in not properly analyzing a second patent to determine whether Optis’s claims were too indefinite to meet a “means-plus-function” claim.
[1] The case is Optis Cellular Tech. LLC v. Apple Inc, U.S. Court of Appeals for the Federal Circuit, No. 22-1925.
Termination Button–Also Required for Agreements With Automatic Expiry and One-Time Payment
In a recent ruling (I ZR 161/24, 22 May 2025), the German Federal Court of Justice (BGH) clarified the scope of § 312k German Civil Code (BGB) regarding the obligation to provide a ‘cancellation button’ on websites if traders enable consumers to conclude continuing performance contracts (Dauerschuldverhältnis) via their website.
The case involved a loyalty program offering consumers benefits in exchange for a one-time payment and ending automatically after twelve months. The online-shop operator did not provide such a cancellation button arguing that these agreements cannot be considered a contract of continuing performance.
However, the BGH found that the contractual relationship constitutes a contract of continuing performance due to the ongoing performance obligations of the trader throughout the loyalty program term (awarding bonus points, free shipping). The form of the consumers’ payment–whether lump sum or recuring–was on the other hand considered not relevant for this assessment. Therefore, traders enabling consumers to conclude contracts of continuing performance have to provide a cancellation button, even in case of fixed term contracts and one-time payments.
This ruling clarifies the scope of § 312k BGB and establishes more stringent compliance obligations for online traders offering consumers to conclude contracts of continuing performance, including those of fixed term and payable by a one-time payment.
Apart from the obligation to provide a cancellation button, from 19 June 2026, traders will be obliged to ensure that also a withdrawal button is permanently available during the statutory withdrawal period for distance consumer contracts.
Supreme Court Empowers District Courts to Challenge FCC TCPA Interpretations
The Supreme Court issued a decision on June 20, 2025, in McLaughlin Chiropractic Associates, Inc. v. McKesson Corporation, which may fundamentally alter the landscape for businesses subject to the Telephone Consumer Protection Act (“TCPA”). In a 6–3 ruling, the Court held that district courts are not required to follow the Federal Communications Commission’s (“FCC”) interpretations of the TCPA in enforcement proceedings, unless Congress has expressly stated otherwise. This marks a significant departure from the longstanding practice in many jurisdictions, where district courts treated FCC orders as binding in TCPA litigation.
Background: The TCPA, the FCC, and the Hobbs Act
The TCPA is a federal statute that restricts certain telemarketing practices, including calls, texts, and faxes, and provides for statutory damages and class actions. Over the years, the FCC has issued a series of orders interpreting the TCPA’s provisions. Under the Hobbs Act, challenges to these FCC orders had to be brought in federal appellate courts within a short window after the order was issued. For years, this framework led many courts to conclude that district courts were bound by the FCC’s interpretations in subsequent enforcement actions, effectively preventing businesses from challenging the FCC’s reading of the law when sued for alleged TCPA violations.
The Supreme Court’s Reasoning
In its decision, the Supreme Court clarified that, absent an express statutory preclusion of judicial review, district courts in enforcement proceedings are not bound by an agency’s pre-enforcement statutory interpretation. Instead, courts must independently interpret the statute, giving appropriate respect to the agency’s views but not treating them as controlling. The Court emphasized that unless Congress has clearly stated that judicial review is precluded in enforcement proceedings, the default rule is that courts may review agency interpretations. The Hobbs Act, the Court found, does not contain such a preclusion.
The Court’s opinion explained that the Hobbs Act’s grant of “exclusive jurisdiction” to the courts of appeals to “determine the validity” of agency orders refers to pre-enforcement declaratory judgments, not to the process of determining liability in enforcement actions. When a district court disagrees with an agency’s statutory interpretation in an enforcement proceeding, it is not issuing a declaratory judgment on the validity of the agency’s order, but rather determining the correct interpretation of the statute for the case at hand.
Implications and Strategic Considerations Going Forward
For businesses that make calls or send text messages, this decision opens new avenues for defending against TCPA claims. Parties are no longer locked into the FCC’s interpretation of the statute and can now argue in district court that the agency’s reading is incorrect, even if they did not challenge the FCC’s order within the Hobbs Act’s 60-day window. This change means that businesses have expanded defenses in TCPA litigation, as they can advocate for their own interpretation of the law rather than being bound by potentially unfavorable FCC guidance.
However, this new flexibility comes with increased uncertainty. With district courts now free to reach their own conclusions about the meaning of the TCPA, there is a greater likelihood of inconsistent rulings across different jurisdictions. This could lead to forum shopping, as plaintiffs and defendants seek out courts perceived as more favorable to their interpretation of the statute. Over time, divergent district court decisions may result in circuit splits, which could prompt further Supreme Court review and prolong uncertainty until key issues are resolved at the highest level.
The decision also suggests that compliance with FCC guidance is no longer a shield in court, and companies should not assume that following agency interpretations will be dispositive in litigation. Instead, businesses must be prepared for the possibility that courts will interpret the TCPA differently from the FCC, and should adjust their compliance and litigation strategies accordingly.
In light of this decision, businesses should continue to monitor both FCC guidance and judicial developments in the TCPA space. Compliance programs may need to be revisited to account for the possibility that courts will not defer to the FCC’s interpretations. In litigation, companies should be prepared to challenge FCC interpretations and defend their own reading of the statute. The legal landscape is now more fluid, and what was once settled by FCC order may now be open to judicial debate.
Conclusion
The Supreme Court’s ruling in McLaughlin Chiropractic Associates, Inc. v. McKesson Corporation represents a potentially significant shift in TCPA enforcement and litigation. Businesses that make calls or send text messages should review their compliance strategies and be prepared for a more dynamic and potentially unpredictable legal environment. It is advisable to consult with counsel to assess how this decision may affect your risk profile and defense options in current or future TCPA litigation.
California’s New Climate-Related Disclosure Laws: Requirements, Compliance Costs, and Deadlines for Impacted Businesses
California is often the vanguard of climate-related policies and programs. From legislation requiring the state to reduce overall greenhouse gas (GHG) emissions and procure electricity from renewable and carbon-free sources to the Cap-and-Trade Program and Low Carbon Fuel Standard, businesses operating in California must constantly stay informed of the shifting regulatory landscape.
In 2023, California enacted two laws continuing this trend. Senate Bill (SB) 253, known as the Climate Corporate Data Accountability Act, is the first law in the United States to require businesses to disclose their GHG emissions in an annual report submitted to the California Air Resources Board (CARB). SB 261, known as the Climate-Related Financial Risk Act, requires businesses to assess and report every two years to CARB on how climate-related financial risks may impact their market position, operations, and supply chains. In 2024, SB 219 amended both SB 253 and SB 261 to clarify reporting requirements and extend certain deadlines.
SB 253 requires businesses to begin reporting emissions data in 2026, while SB 261’s climate-related financial risk reports are due on January 1, 2026. If they haven’t already, covered businesses should begin preparing now. This article summarizes SB 253’s and SB 261’s reporting requirements, processes, and penalties for noncompliance. It also provides an update on litigation challenging both laws in federal court and steps taken by CARB to implement SB 253 and SB 261.
SB 253: CLIMATE CORPORATE DATA ACCOUNTABILITY ACT
SB 253, as amended by SB 219, directs CARB to adopt regulations by July 1, 2025, requiring “reporting entities” — businesses with total annual revenues over $1 billion that are formed under state or federal law and do business in California — to annually disclose their Scope 1, Scope 2, and Scope 3 emissions. SB 253 defines each scope as follows:
Scope 1 emissions are “all direct greenhouse gas emissions that stem from sources that a reporting entity owns or directly controls, regardless of location, including, but not limited to, fuel combustion activities.”
Scope 2 emissions are “indirect greenhouse gas emissions from consumed electricity, steam, heating, or cooling purchased or acquired by a reporting entity, regardless of location.”
Scope 3 emissions are “indirect upstream and downstream greenhouse gas emissions, other than Scope 2 emissions, from sources that the reporting entity does not own or directly control. These may include, but are not limited to, purchased goods and services, business travel, employee commutes, and processing and use of sold products.”
Examples of Scope 1 emissions (direct emissions) include company-owned vehicles or heavy machinery; on-site fuel combustion (e.g., diesel backup generators or natural gas boilers); and process emissions (e.g., from cement production or refining operations). Scope 2 emissions (indirect) are associated with the generation of purchased energy.
Scope 3 emissions, typically the largest share of a company’s GHG footprint, are the most complex and resource-intensive to measure. These emissions result indirectly from a company’s operations and are not directly emitted by the company. Upstream examples include employee travel, waste disposal, capital goods, and inbound transportation. Downstream examples include delivery, use, and disposal of sold products, franchises, and investments. SB 219’s amendments to SB 253 delayed Scope 3 reporting requirements until 2027.
To accurately measure emissions, reporting entities will likely need legal counsel, environmental consultants, and accounting/auditing support. The California Chamber of Commerce estimates initial compliance costs exceed $1 million per company, with ongoing annual costs between $300,000 and $900,000, plus additional costs for supply chain data collection and verification. SB 253 allows penalties up to $500,000 for misreporting but includes a safe harbor provision for good-faith Scope 3 emissions reporting through 2030. The law also requires third-party assurance of emissions reports, with specific requirements to be defined by CARB.
SB 261: CLIMATE-RELATED FINANCIAL RISK ACT
SB 261 applies to any “covered entity” with total annual revenues over $500 million that is formed under state or federal law and does business in California. Beginning January 1, 2026, covered entities must biennially disclose on their website a report covering two categories of climate-related financial risk information, defined as information related to the “material risk of harm to immediate and long-term financial outcomes due to physical and transition risks.” This report must also be submitted to CARB.
The two required categories are:
The covered entity’s climate-related financial risk, following the framework and disclosures recommended in the Final Report of Recommendations of the Task Force on Climate-related Financial Disclosures (June 2017); and
The covered entity’s measures adopted to reduce and adapt to the disclosed risks.
Unlike SB 253, SB 261 is self-executing and does not depend on CARB regulations, although the law directs CARB to adopt rules specifying administrative penalties — capped at $50,000 — for failure to publish a report or for inaccuracies. Business groups estimate initial compliance costs to range from $300,000 to $750,000, with recurring biennial costs between $150,000 and $500,000.
CARB’S IMPLEMENTATION OF SB 253 AND SB 261
On December 5, 2024, CARB issued an Enforcement Notice stating that it would “exercise its enforcement discretion” for the first reporting cycle, provided that reporting entities demonstrate good-faith efforts to comply. CARB explained that it understood businesses “may need some lead time to implement new data collection processes” and that, for the first reporting year, businesses may rely on information already in the businesses’ possession to determine their scope 1 and scope 2 emissions.
This prompted criticism from SB 253 and SB 261 authors, California State Senators Scott Wiener and Henry Stern, in a December 11, 2024 letter. They stated they were “beyond frustrated” with CARB’s lack of progress and warned that, unless CARB acts swiftly, they would consider calling leadership before the Legislature for oversight hearings in 2025.
On December 16, 2024, CARB issued an Information Solicitation requesting stakeholder input on the implementation of SB 253 and SB 261 (as amended by SB 219). Though the comment deadline (February 14, later extended to March 21) has passed, the questions and stakeholder feedback offer valuable insight for affected businesses who will have another opportunity to comment during CARB’s formal rulemaking process.
As of this publication, CARB has not yet issued its notice of proposed rulemaking in the California Regulatory Notice Register, which would initiate the formal rulemaking process and a 45-day public comment period. CARB conducted a widely attended virtual workshop on May 29, 2025, to further discuss the rulemaking efforts and its current views of potential regulatory approaches. Rulemaking proceedings, especially for proposed regulations that generate substantial public interest often require close to the full year allowed by statute to promulgate the regulations.
LEGAL CHALLENGES TO SB 253 AND SB 261
After the enactment of SB 253 and SB 261 in October 2023, the U.S. Chamber of Commerce and various other business groups filed suit in January 2024 in the U.S. District Court for the Central District of California. The motion for preliminary injunction is currently scheduled to be heard on July 1, 2025, though a ruling may not issue until later this summer.
NEXT STEPS
Amid active litigation and delayed regulatory implementation, significant uncertainty remains around SB 253’s reporting requirements and general compliance timelines. However, consistent with CARB’s Enforcement Notice, reporting entities and covered entities should begin good-faith efforts to comply with both SB 253 and SB 261 by 2026. Companies subject to California’s new climate disclosure laws should take immediate steps to engage consultants and establish internal systems to collect the required data.
DHS Sending Termination Notices to CHNV Foreign Nationals
On June 12, 2025, the Department of Homeland Security (DHS) began sending termination notices to foreign nationals paroled into the United States under a parole program for Cubans, Haitians, Nicaraguans and Venezuelans (CHNV).
The terminations are legally allowed under a May 30, 2025, decision by the US Supreme Court lifting a federal district court injunction that had temporarily barred the federal government from implementing the revocations.
The termination notices inform the foreign nationals that both their parole is terminated, and their parole-based employment authorization is revoked – effective immediately.
Employer Obligations
The Immigration law provides that it is unlawful to continue to employ a foreign national in the U.S. knowing the foreign national is (or has become) an unauthorized alien with respect to such employment.
How will an employer know if an employee has lost work authorization?
For E-Verify users, E-Verify is in the process of notifying employers and employer agents that they need to log in to E-Verify and review the Case Alerts on the revocation of Employment Authorization Documents (EADs). The employer is then on notice that an employee has lost work authorization.
However, many employers are not enrolled in E-Verify. Those employers may learn of a revocation when an employee presents the termination notice to the employer. Also, as the CHNV revocation is in the news, DHS may consider employers on notice, with an obligation to review the status of its employees to determine whether workers have lost authorization to work.
At this point, DHS has not provided guidance to employers on their obligations, but we recommend employers act cautiously and take reasonable steps to determine whether company employees are impacted. We encourage taking these steps:
Employers should review their I-9 records and supporting documents to determine if employees have employment authorization cards with the code C11, and that the country of citizenship on the card lists Cuba, Haiti, Nicaragua or Venezuela.
When an employer is notified or discovers that an employee’s C11 work authorization has been revoked, the employer should not immediately terminate the employee. Certain individuals, even from the impacted countries, may have C11 work authorization separate and apart from the CHNV program. These work authorizations remain valid.
When an employer is reasonably certain the employee’s C11 employment authorization has been terminated, the employer should ask the employee if they have other valid work authorization (which is common). If yes, the employer should then reverify the employee’s Form I-9 in Supplement B, with the employee presenting new employment authorization documentation.
If an employee is unable to provide new employment authorization documentation, the employer should consider terminating employment. In the event of an Immigration & Customs Enforcement investigation, knowingly to continue to employ a foreign national who is not authorized to work in the U.S. can result in a potential charge.
When an employer is uncertain regarding the correct course of action, we recommend speaking to Immigration counsel to review and determine the appropriate steps.
TEMPORARY WIN?: Liberty Mutual Escapes TCPA Class Action On Jurisdictional Grounds (For Now)
Liberty Mutual appeared to be trapped in an absolute nightmare of a TCPA class action in Indiana.
It had allegedly purchased a lead from a website called InsuredNation and made prerecorded calls to a woman named Yevonne Powers.
The problem?
Liberty Mutual allegedly wasn’t on the lead form or any associated partner pages.
Eesh.
In the old days (like, last week) Liberty Mutual would have been in a world of hurt. It allegedly made thousands of robocalls to consumers like Plaintiff who had not provided valid consent to receive calls. And if those facts are true Liberty Mutual would have been facing massive exposure.
I use the past tense here because with the new McKesson case coming down from the Supreme Court on Friday the application of the FCC’s CFR concerning express written consent is now very much in doubt. Whereas that CFR provision likely required LiMu’s name to be on the form, the TCPA’s express consent requirement stripped of the regulatory provision likely does not.
In Powers v. Liberty Mutual Insurance Company, 2025 WL 1744225 (N.D. Ind. June 23, 2025) LiMu was sued in Indiana over calls made to a Virginia resident. LiMu moved to dismiss the claim on jurisdictional grounds contending it had not purposely availed itself of Indiana jurisdiction.
The Court agreed with LiMu noting that Plaintiff was in Virginia at the time of the calls and LiMu had not directed any conduct into Indiana for the court to exercise jurisdiction over it.
Interestingly one of LiMu’s employees involved with the campaign actually did reside in Indiana but the Court held that mere coincidence was not sufficient to convey jurisdiction.
So the case was dismissed. That’s great for LiMu but it is also only temporary. The case can be re-filed in Virginia or wherever LiMu is subject to general jurisdiction. So… yay, but not really.