Alice Patent Eligibility Analysis Divergance before USPTO and District Court: Federal Circuit Clarifies Limits on Relying on USPTO Findings in § 101 Eligibility Disputes
In our prior article, we discussed instances in which the U.S. Patent and Trademark Office (USPTO) and the district courts made different findings with regard to patent eligibility under 35 U.S.C. § 101. A recent nonprecedential Federal Circuit decision, Aviation Capital Partners, LLC v. SH Advisors, LLC, No. 24-1099 (Fed. Cir. May 6, 2025), highlights a critical procedural point: District courts are not required to accept findings made by the USPTO as true at the pleading stage — unless those findings are specifically alleged in the complaint.
This issue came to the forefront on appeal after the Delaware District Court dismissed Aviation Capital’s patent infringement complaint under Rule 12(b)(6), finding the asserted patent claims ineligible under § 101. The plaintiff-appellant, Aviation Capital Partners (doing business as Specialized Tax Recovery (“STR”)), argued on appeal that the district court erred by failing to accept the USPTO’s prior eligibility analysis, which favored patent eligibility, as a factual finding at the motion to dismiss stage.
Specifically, STR contended that the USPTO’s conclusion — made during prosecution — that the claims were “integrated into a practical application” and “contained significantly more than an abstract idea” should have been accepted as a true factual finding by the District Court as part of deciding the motion to dismiss. But the Federal Circuit rejected that argument outright, stating:
STR additionally argues that, in deciding the motion to dismiss, the district court was required to assume as true the Patent Office’s “factual finding that the claims were integrated into a practical application and contained significantly more than an abstract idea.” Appellant’s Br. 23–25. We disagree. “[F]or the purposes of a motion to dismiss we must take all of the factual allegations in the complaint as true . . . .” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (emphasis added). Here, the complaint included no factual findings made by the Patent Office. J.A. 16–32; Oral Arg. at 4:38–5:45 (complaint alleged the Patent Office made two legal determinations but alleged no factual findings). Accordingly, the district court did not err by declining to accept as true any unalleged factual findings that the Patent Office may have made in its § 101 eligibility analysis.[1]
This passage underscores the procedural rigor applied to motions to dismiss: The court is bound only to the facts actually pled in the complaint. While STR tried to import the examiner’s analysis into the record, the Federal Circuit made clear that any “factual findings” by the USPTO must be explicitly alleged for a district court to credit them at the motion to dismiss stage.
Implications for Litigants and Drafting Complaints Where Examiner Made Comments Regarding § 101 Eligibility
This ruling serves as a practical guidepost for practitioners navigating § 101 disputes post-Alice. Litigants cannot assume that favorable examiner conclusions — such as an “integration into a practical application” — will be treated as facts unless those determinations are squarely and specifically alleged in the complaint.
The USPTO’s current guidance instructs examiners to evaluate whether a claim is “integrated into a practical application” and whether it includes “significantly more” than an abstract idea — criteria that may allow applications to clear the § 101 hurdle during prosecution. Yet, as Aviation Capital confirms, the deference afforded to such examiner determinations may vary, and on a Rule 12(b)(6) motion, only factual allegations specifically made in the complaint must be taken as true. This begs the question — if a patent owner explicitly alleges factual findings made by an examiner during prosecution regarding § 101, is that sufficient to defeat a motion to dismiss? Though nonprecedential, Aviation Capital suggests as much.
Takeaway
The Aviation Capital decision is a sharp reminder that litigators must be deliberate in pleading factual support for eligibility. To preserve arguments based on examiner findings, those examiner findings must be more than background — they must be alleged facts in the complaint, not just cited conclusions.
Otherwise, courts remain free to assess eligibility from a clean slate. And as this decision reaffirms, that assessment may diverge from what the USPTO previously concluded.
[1] Aviation Capital Partners, LLC v. SH Advisors, LLC, No. 24-1099 at 7 (Fed. Cir. May 6, 2025).
California Court Turns Up the Heat: PG&E Case Requires Employees Claiming Defamation to Prove Damages Beyond Their Termination
Employees may believe they can premise a defamation case on their employment termination. However, Hearn v. Pac. Gas & Elec. Co., 108 Cal. App. 5th 301 (2025), holds otherwise.
Background
On Jan. 24, 2025, California’s First District Court of Appeal reversed a $2.1 million jury verdict against PG&E for a defamation claim brought by a former employee. In doing so, the court clarified the applicable legal standard for the recovery of tort remedies in the employment context. The court held that employees cannot bring tort claims against employers premised upon the same conduct giving rise to a termination where the damages are solely related to the loss of employment.
The plaintiff in this case was a former lineman at a PG&E facility in Napa, California. The plaintiff was investigated for misuse of company time and falsified timecards, and he was terminated thereafter. He disputed the investigation findings and claimed he was targeted in retaliation for safety concerns he previously reported to management. The employee brought claims against PG&E for retaliation, wrongful termination, and defamation. The defamation claim concerned the alleged false accusations forming the basis of his termination. At trial, the jury rejected his retaliation claim but ruled in his favor on the defamation claim, awarding $2.1 million in damages. PG&E appealed on the grounds that the defamation claim was precluded because it was based on the same conduct giving rise to his termination.
The court agreed with PG&E and reversed the $2.1 million jury verdict on the defamation claim. Reviewing California Supreme Court precedent on the issue of tort liability in the employment context, the court held that tort claims related to employment terminations are only actionable where (1) the tort is based on conduct other than that giving rise to the employment termination; and (2) the damages sought do not exclusively result from the termination itself.
The court found that neither requirement was met here. First, the defamation claim concerned allegedly false accusations and statements made in an investigation report that formed the basis of the plaintiff’s termination. The court stated that the alleged harm was indistinguishable from an ordinary wrongful termination claim. Second, the plaintiff did not seek any damages separate from his loss of employment, such as distinct reputational damages or damages arising from republication to third parties. Accordingly, the plaintiff could not recover on his claim for defamation.
Takeaway
Hearn serves as another reminder that when an employee’s defamation claim is a recast of his or her wrongful termination claim, an employer may avoid liability when the alleged defamation arises “from the same conduct giving rise to his termination and the only result is the loss of his [or her] employment.” While a positive decision for California employers, we note that this case may be teed up for review by the California Supreme Court in light of a strong dissenting opinion from Presiding Justice Alison M. Tucher.
A Bothersome Amphibology
Jargon Divergence: Liability Management Transactions & Liability Management Exercises, and Why & How LMEs/LTEs Should be Performed Early & Often
According to Merriam-Webster, an amphiboly [i] is a sentence or phrase (such as ‘nothing is good enough for you’) that can be interpreted in more than one way.
In the corporate restructuring world, the phrase ‘Liability Management Transaction’ (also known as a ‘Liability Management Exercise’) has become a trendy term in the last few years. But what does it mean? And does it describe something new?
The bottom line is that while some people in the industry say it’s a new concept, it’s not. However, the term can be used to differentiate certain related strategies used in the corporate restructuring industry. More on that below.
In Search of a Progenitor [ii]
Taking a step back, I’ve been a corporate restructuring professional since 1994. I taught a corporate restructuring MBA class at Chicago Booth, and as a visiting professor at the University of Tennessee College of Law, and I’ve authored a couple of books about business bankruptcy and its alternatives. In all these travels, I never heard anyone use the term ‘Liability Management Transaction’ or ‘Liability Management Exercise’ before around 2017, and I didn’t hear it used more than once in a blue moon even then, until sometime last year.
I was curious, so I looked back. The earliest reference to either term that I could find was in connection with the J.Crew Chapter 11. It was used there to describe that debtor’s shuffling of some of its intellectual property assets into an unrestricted subsidiary, enabling it to issue fresh debt secured against that IP. King & Spalding’s J Crew & The Original Trap Door is a great summary of what happened.
The J.Crew restructuring got a lot of press, and that move created quite a stir. But it’s anything but clear that that’s where the term was born. In fact, best I can tell, the term was a simultaneous invention (like calculus, being developed independently by both Newton and Leibniz or, more precisely, a cumulative innovation, in that it seems to have been developed by many folks.
LMTs & LMEs Defined
So, what does it mean? My definition is that Liability Management Transaction (LMT) and Liability Management Exercise (LME) are synonymous, catch-all phrases encompassing various personal (through the use of estate planning and asset protection planning) and corporate (through the use of front-end corporate structuring and back-end restructuring techniques like debt exchanges, maturity extensions, tender offers, covenant modifications, and asset transfers) strategies aimed at limiting the pool of assets from which creditors can collect.
But it’s also an annoying amphiboly. More on that below.
New or a Re-Brand?
If you were in the industry before 2017, you would likely be familiar with these various techniques, even if you had never heard of the umbrella term before.
But hey, if you think restructuring professionals coming up with clever names for debt-shuffling maneuvers is novel, remember Wall Street has been repackaging the same ideas under fancier names since before Gordon Gekko proclaimed, “Greed is good.”
Examples:
‘High-yield debt’ was once simply ‘junk bonds”
Today’s ‘independent sponsor’ was yesterday’s ‘fundless sponsor’
Investing in ’emerging markets’ sounds a lot better than investing in ‘third-world countries’
And I’d rather invest in a ‘growth stock’ than a ‘speculative stock’
‘Rightsizing’ sounds better than ‘downsizing’
You’d rather your company make a ‘facilitation payment’ instead of a ‘bribe’
What’s that expression about putting lipstick on a pig? Anyway…
For those who crave precise taxonomy, I define corporate restructuring as activities that involve reorganizing a company’s financial, operational, and/or legal structures. This includes but is not limited to debt restructurings, operational turnarounds, mergers, divestitures, bankruptcy proceedings, etc.
The term LMT/LME, in contrast, refers to “various corporate restructuring techniques like debt exchanges, maturity extensions, transferring assets to unrestricted subsidiaries (the J.Crew trapdoor), tender offers, covenant modifications aimed at optimizing a company’s capital structure, or otherwise negotiating directly with select creditor groups to improve a company’s debt profile, liquidity, or strategic flexibility.” (See what I did there? I quoted myself.) These techniques are typically considered aggressive and sometimes considered controversial.
So, I say the term, when used by corporate restructuring attorneys, is mostly a rebranding of certain techniques that they have long used.
So, How’s This an Amphibology?
If I were to stop here, then I’d have not made a good case that the term is amphiboly. But here’s the thing: I can’t stop. I won’t stop. And now I’ll raise the ante: not only are the dual terms LMT/LME amphibologies, but so is ‘corporate restructuring.’ [iii]
Take a step back: you know that expression, ‘when you’re a hammer, everything looks like a nail?’ Well, consider the following terms of art that mean one thing in one context and something quite different in another.
For example:
‘Equity’ means, in-
Finance: Ownership value in an asset or company.
Law: A system of rules that supplements strict legal rules and aims for fairness.
Real Estate: The value of an owner’s interest in a property.
‘Discharge’ means, in-
Medicine: The release of a patient from care.
Law: The release from a legal obligation or debt (e.g., bankruptcy discharge).
Military: A person leaving service, often honorably or dishonorably.
‘Draft’ means, in-
Sports: A system for assigning new players to teams.
Banking/Finance: A written, signed, and dated order for payment.
Writing: A preliminary version of a document.
‘Attachment’ means, in-
Law: Seizing a defendant’s property through court order.
Psychology: The emotional bond between a child and caregiver.
Email/Tech: A file sent along with an email.
See where I’m going?
The Duality of the Term ‘Corporate Restructuring’
The term is often used as a euphemism for layoffs. But if you spend all day, every day, dealing with financially distressed companies, then you know the term has a broader meaning, something like ‘efforts to reorganize a company’s obligations, typically because it is in financial distress.’
However, other professionals use the term more broadly to refer to any change in a company’s financial structure. Yet other professionals use the term even more broadly, including reorganizing a company’s operations.
So, what’s my point?
Liability Management Exercises Should be Performed Early & Often
Aside from noting a couple of obvious truisms, like that words matter and context matters, my point is that an ounce of prevention is worth a pound of cure.
Terms like ‘corporate restructuring,’ ‘liability management transactions,’ and ‘liability management exercises’ seldom are used in the literature to include engaging in longer-term strategic planning by a company when it is at its strongest (i.e., not only not distressed, but not even stressed) to restructure the legal organization/relationships among the various legal entities that comprise the corporate family (and/or their respective operations), to provide maximum protection to each of the legal entities in the event one of them comes under attack.
Quite to the contrary, corporate restructuring attorneys use LMEs/LTEs reactively to clean up messes. But wouldn’t it be better to engage in preventive medicine?
In other words, I’m advocating an ounce of protection (several ounces, really, performed regularly).
More specifically:
LMEs should begin before you start a company. These take the form of perfectly legal/ethical personal estate planning and asset protection actions that founders can take before they amass wealth, which, if taken after wealth has been accumulated, would be problematic if not forbidden.
LME’s should continue as a company’s operations grow. Examples include using separate legal entities (i.e., subsidiaries) to perform various functions and setting them up and running them in a manner that can isolate problems at one entity from impacting other members of the corporate family. In other words, if one’s toe gets infected beyond repair, one should not wait and let the infection spread to infect the rest of the body if there is a way to amputate it.
When a company borrows money, the lender commonly seeks intercompany guarantees, pledges of assets by affiliates, and even equity pledges. But none of these things are pre-ordained, and the specifics of each are undoubtedly subject to negotiations. After all, if they were not, many of the techniques commonly referred to as LMEs/LTEs could not be done, as many rely on negotiated holes in the legal documents for their very existence.
Further, not all financial crises are brought on by voluntarily incurred financial debt. Tort liability and unforeseen litigation, for example, can take down an otherwise healthy company. But the damage can be contained if that liability infects just a toe that can be amputated.
Insurance is another helpful tool that commonly does not get enough attention. Note, I didn’t say “does not get used.” Most companies have insurance, but most do not utilize the right professionals to review, advise, or negotiate it regularly. [iv]
Insurance coverage is the quintessential LME, yet it is like buying a pig in a poke if not properly scoped and tailored. [v] So much so that I all but insist that the companies for whom I serve as general counsel have my firm review their policies in toto every few years.
Engaging in proactive, front-end LMEs can reduce the need for reactive, emergency LMEs. Excluding the former from the definition is wrong because failing to engage in them is irresponsible.
Additional Reading About LMEs/LTEs
If you want a deeper dive into the sort of LMEs/LTEs represented by cases like AMC, Audax Credit Opportunities Offshore, Boardriders, Bombardier, Golden Nugget, J Crew, Murray Energy, Neiman Marcus, Mitel, PetSmart, Revlon, Serta, TPC Group, TriMark, and Wesco Aircraft, I commend the following:
“Drafting Tips to Address Liability Management Transactions” by King & Spalding (2020)
“Liability Management Exercises: A Transatlantic Perspective” by Akin (2023)
“Spotlight: Liability Management Exercises” by Kirkland & Ellis (2023)
“Uptier Transactions and Other Lender-on-Lender Violence: The Potential for More Litigation and Disputes on the Horizon” by Laura Davis Jones and Jonathan Kim (2023)
“Liability Management Exercises: What They Are and What They Mean for Market Participants by Quinn Emanuel” by Rajat Prakash (2025)
“Corporate Restructuring — Liability Management Transactions, Private Credit, and the Road Ahead” by Rajat Prakash (2025)
Editors’ Note: This article is based on a similar one published in the LinkedIn Newsletter, “Opportunity Amidst Crisis,” on 5/1/25. This article is subject to the disclaimers found here.
Footnotes
[i] A few other fun ones: (1) You can’t get too much sun, (2) Flying planes can be dangerous, (3) They are hunting dogs, (4) The chicken is ready to eat.
[ii] Did you know that Leonard Nimoy hosted a TV documentary series from 1976 to 1982 called “In Search of…?” It explored mysterious phenomena like extraterrestrials, myths, lost civilizations, and strange phenomena. And get this, Rod Serling was the original choice to host but he passed away before the show began production. And get this: Zachary Quinto, who, like Nimoy, stars as Spock in the rebooted Star Trek films, hosted a reboot of the series.
[iii] I know, you think I’m bold. Sort of like the James Dean of restructuring, or dare I say, even more like this guy.
[iv] This is a mistake. For whatever reason, these tasks typically go to insurance brokers who are not usually attorneys and who, I think, are conflicted because the insurer often pays them for their work. Moreover, not all brokers are equally skilled at complex policy negotiations, endorsements, or claims advocacy. Specialized coverage lawyers or risk management consultants might sometimes be better suited for negotiating bespoke coverage terms.
[v] In case you like phraseology, this one comes from medieval times, when unscrupulous market sellers might try to trick buyers by selling them a ‘poke’ (a bag) that was supposed to contain a valuable pig, but actually contained something worthless, like a cat or a less valuable animal. If the buyer didn’t look inside the bag before buying, they’d get cheated.
Compliance with Meet and Confer Obligations Under the Federal Rules
In Wilbert v. Pyramid Healthcare, Inc., d/b/a Silvermist Recovery Center, et al., the plaintiff filed suit alleging pregnancy-based discrimination and harassment, culminating in her termination. According to the court, the parties never agreed on how to handle the discovery of electronically stored information (ESI) in connection with the litigation. For purposes of this blog post, the parties were before the court on a motion to compel filed by the plaintiff.
In this decision, the district judge provided an in-depth discussion of parties’ meet-and-confer obligations prior to filing a motion.
First, the court cited Rule 26’s requirements of relevance and proportionality: “Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case.”[1] The court then referred to Federal Rule of Evidence 401 on relevance, explaining that information is relevant if “it has any tendency to make a fact more or less probable than it would be without the evidence” and “the fact is of consequence in determining the action.” The court also noted that Rule 37 provides the procedural mechanism for adjudicating discovery disputes and returned to Rule 26’s limitations on accessibility and duplicative discovery before addressing the requirement that parties meet and confer in planning for discovery.
As part of this planning discussion, the court emphasized the topics the parties “must discuss,” which include:
preserving discoverable information;
developing a joint proposed discovery plan, where counsel must engage in good faith to agree on the plan; and
submitting to the court a written report outlining the plan.
The discovery plan, according to the court, must state the parties’ views and proposals on several topics listed in Rule 26(f), including issues related to the disclosure, discovery, or preservation of ESI, as well as the forms in which ESI should be produced. The court highlighted that the Federal Rules empower it to order parties to meet and confer in person and permit it to require a party or its attorney to pay the other party’s reasonable expenses if they fail to participate in the process in good faith.
Case Analysis
After detailing the applicable rules, the court analyzed whether the plaintiff complied with those rules. As a preliminary matter the court noted that “[f]rom the inception of this action, Counsel for the parties could not agree on the scope and methodology of ESI discovery.” While counsel participated in a Rule 26(f) conference, plaintiff’s counsel proposed a 30-page “mandatory” discovery plan that imposed extensive ESI protocol requirements far exceeding the district court’s checklist for meet-and-confer sessions. The court observed that plaintiff’s counsel framed elements of the proposed ESI plan in an argumentative and non-negotiable manner, suggesting an unwillingness to cooperate during the required conferral process.
These issues—including the overbreadth of the requests, the scope of custodians, and search report requirements—were discussed during a case management conference. The court issued an order requiring counsel to confer meaningfully on the issues. However, the parties failed to resolve the issues and, months later, submitted a joint letter to the court. Subsequently, the court granted plaintiff’s counsel leave to file the motion to compel (“Motion”) but required counsel to include a certification of conferral and specify the factual basis for each claim and discovery issue, supported by affidavits or declarations.
Although plaintiff’s counsel filed the motion, he failed to comply with the court’s order by omitting the required factual support and specificity for each discovery issue.
Court Findings
As a preliminary matter, the Court noted the plaintiff’s Motion failed to satisfy its order in “certain material respects.” Notably absent from the Motion were affidavits or unsworn declarations substantiating each factual assertion. The court further determined that the Motion failed on the merits for several reasons.
Overbreadth of Requests and Custodians: The court found the plaintiff’s requests overly broad and criticized plaintiff’s counsel for failing to explain the relevance of the proposed custodians. Defense counsel had attempted to confer, but plaintiff’s counsel either ignored their overtures or imposed “egregious barriers to doing so.” As such, the Motion failed to meet the burden of demonstrating relevance and was denied.
Hit Reports: Plaintiff’s counsel insisted defendants generate “hit reports” on all search terms before determining their relevance. The court rejected this approach, calling it “backwards and inappropriate” in a straightforward, non-document-intensive employment discrimination case. The court noted that counsel had chosen to ignore its observations and persisted in demanding that defendants expend significant time, effort, and resources to search the computers and phones of a wide swath of custodians (whether relevant or not) for an extensive list of search terms (whether relevant or not) overly an overly broad time period (whether relevant or not). Counsel relied on the apparent authority of his own ESI Plan, which emphatically but erroneously stated: “Without a hit report, generated by software, there is no accepted methodology to certify that a competent search was done. Furthermore, there is no possibility to reasonably meet and confer on any objections that defense counsel may have, i.e., if defense counsel objects that a search term would generate overly broad results, then we must refer to a hit report.”
The court further found that the proposed temporal search period and search terms had not been established as relevant and offered no credible explanation for why emails and texts sent or received prior to plaintiff’s pregnancy should be included in the search or ESI. In essence, the court determined that counsel had failed to identify an appropriate time period and scope of discovery that aligned with the allegations in the complaint. Plaintiff’s counsel had also defied the court’s order regarding the scope of the matter. As a result, the court found that the unsupported Motion did not satisfy that burden under Rule 37[2] and, in denying the motion, stated:
“The Court is also of the view that [counsel’s] self-proclaimed “mandatory” approach to ESI discovery in employment cases not only contravenes several provisions of the Federal Rules of Civil Procedure and this District’s Local Rules, but [his] unilateral imposition of such ESI protocols in all such cases also defies the requirement that even relevant discovery must be:… proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the party’s resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.”
The court emphasized that, in this case, plaintiff’s counsel has ignored his duty to refrain from discovery efforts that were unreasonable, unduly burdensome, or expensive in light of the proportionality factors.
The court also took issue with plaintiff’s counsel’s (Attorney Ward’s) behavior, noting:
The conferral obligation is not a bargaining chip to be offered in exchange for a concession on a disputed discovery process or requested item. Conferral is expected for all discovery planning and dispute resolution and is a precondition to seeking court intervention. A party may also not impose unreasonable conditions or barriers on their willingness to meet and confer. Here, Defense Counsel contends that Attorney Ward insisted that he would only meet in person to confer if Defense Counsel acquiesced to his demand that such meeting be recorded. Such obdurate behavior in this case lacks justification, defies the bounds of expected professional behavior, and was seemingly deployed to harass Defense Counsel and thwart any meaningful and constructive attempts at resolving the parties’ disputes.”
As a result of Ward’s behavior, defense counsel refused to meet in person under the proposed conditions and continued conferral efforts in writing. Despite this, Attorney Ward affixed a certificate of meet and confer to his motion, as required by Rule 37(a).[3] The court found that Attorney Ward did not satisfy his obligation to confer in good faith and ordered him to show cause why he and his law firm should not be sanctioned for (1) failing to participate in good faith in developing and submitting a proposed discovery plan as required by Rule 26(f) and all related court rules, and (2) misrepresenting to the court that he had satisfied his conferral obligations in good faith before filing the motion to compel as required by Rule 37.
Conclusion This decision by Judge Hardy serves as a strong reminder of the standard of cooperation and good faith expected of every party and counsel to facilitate discovery. Parties have an obligation to participate in the meet-and-confer process and to be cooperative and collaborative during the process. Adversaries—and courts alike—have little patience for delay tactics, failures to disclose timely information relevant to discovery, and misstatements of fact.
[1] For determining proportionality, courts consider “the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.” Id. “The parties and the court have the collective responsibility to consider the proportionality of all discovery and consider it in resolving discovery disputes.” Fed. R. Civ. P. 26(b)(1).
[2] Rule 37 governs motions to compel discovery. According to the court, the moving party bears the initial burden to prove that the requested discovery falls within the scope of discovery as defined by Rule 26(b)(1). If the moving party meets this initial burden, the burden then shifts to the opposing party to demonstrate that the requested discovery (i) does not fall within the scope of discovery contemplated by Rule 26(b)(1), or (ii) is not sufficiently relevant to justify the burden of producing the information.
[3] In addition to citing a number of local rules relevant to discovery issues, District Judge Hardy pointed to the presiding judicial officer’s published practices and procedures for the proposition that no discovery motions are to be filed until after the parties jointly contact chambers to request an informal conference, except in the cases of emergency, as certified by counsel. Counsel is also required, under the presiding judicial officer’s practices and procedures, to file a certification “that the movant has discussed the matter with all other parties and to expressly indicate whether the opposing party consents to or opposes the motion and whether such party intends to file a response.”
Recentive v. Fox: Machine-Learning Claims Fail to Make the Grade
The patent eligibility of claims involving the use of machine learning (ML) was recently considered by the US Court of Appeals for the Federal Circuit (CAFC) in Recentive Analytics, Inc. v. Fox Corp., Case No. 2023-2437 (Fed. Cir. Apr. 18, 2025). In its opinion, the CAFC affirmed the grant of Fox’s motion to dismiss on the ground that the four patents at issue — US Patent Nos. 10,911,811, 10,958,957, 11,386,367 and 11,537,960 — are ineligible under 35 U.S.C. § 101. The panel held that claims that merely recite the application of generic machine learning techniques to a new data environment without a technological improvement are patent ineligible under 35 U.S.C. § 101. Takeaways from the opinion include:
ML claims are not made patent eligible under 35 U.S.C. § 101 simply because they perform human tasks with greater speed and efficiency.
A general use of ML in new data environments does not integrate the judicial exception into a practical application under Prong Two of Step 2A of the United States Patent and Trademark Office’s (USPTO) subject matter eligibility analysis. See M.P.E.P. 2106.05(h).
Iteratively training or dynamically adjusting an ML model is itself insufficient to show a technological improvement.
If a patentee argues a technological improvement, the claims and specification should describe how the improvement was accomplished; in the case of ML, this may be the steps by which ML achieves the improvement.
This decision highlights the importance of patent drafting and strategic prosecution in creating robust patent claims that survive inevitable § 101 challenges in machine-learning applications. Although the Recentive ruling is not a drastic shift from patent-eligibility at the USPTO and in the courts, it provides an additional basis for examiners and judges to attack ML claims. Practitioners must be careful not to characterize and claim the ML aspects of an invention like the claims invalidated in the Recentive patents. The court stated that the Recentive claims “do not delineate steps through which the machine learning technology achieves an improvement.”
Indeed, the M.P.E.P. counsels applicants to describe an improvement in technology in the specification and requires that the claim itself must reflect the disclosed improvement. See M.P.E.P. §§ 2106.04(d)(1) and 2106.05(a). This ruling suggests that when discussing and claiming technical details in patent applications, it’s crucial to demonstrate a genuine technological improvement beyond the mere application of known techniques. Simply detailing the use of existing methods in a new context without showing how they advance the technology will likely be insufficient for patent eligibility. Recentive teaches that applicants should avoid characterizing an ML model as generic or suggesting any model is “suitable.” Instead, emphasis should be placed on the modifications to the ML model for operability in the invention.
Moreover, although training and adjusting an ML model is necessary for implementation, these activities alone will not provide the necessary technological improvement for patent eligibility.
Finally, applicants should keep in mind that the Recentive ruling does not address other routes to patent eligibility, such as improvements to the functioning of a computer, use with a particular machine or manufacture that is integral to claim, and other strategies described in M.P.E.P. § 2106.
TALK IS CHEAP: Summary Judgment Isn’t Interested in Rumors
Greetings TCPAWorld!
I’m back with the latest. Let’s talk about a name-dropper’s worst nightmare. The Southern District of Ohio has ruled a significant win for TCPA defendants in a recent decision emphasizing the importance of admissible evidence in telemarketing litigation. In Schwartz v. Bamz Enters., L.L.C., No. Case No: 1:23-cv-608, 2025 U.S. Dist. LEXIS 89794 (S.D. Ohio May 12, 2025), Magistrate Judge Stephanie K. Bowman recommended granting summary judgment to the defendant in a matter where callers falsely claimed to represent a legitimate business. Just saying you’re someone doesn’t make it so. This wasn’t just a procedural ruling…but a resounding endorsement of evidentiary standards that protect legitimate businesses from being dragged into litigation based solely on hearsay.
At TCPAWorld, we don’t just track trends, but we spotlight the rulings that matter. This is a significant case to add to the growing body of case law protecting companies from liability when scammers or unauthorized third parties appropriate their business names during telemarketing calls—and it’s precisely the kind of misdirected claim Troutman Amin is built to defeat!
So what’s the scoop? Plaintiff received six telemarketing calls between January and March 2023 from individuals claiming to represent “Living Well Screening.” The calls pitched various medical testing services, including cancer genetic testing and free COVID test kits through Medicare. Plaintiff, who had registered his number on the DNC list in May 2021, recorded these calls and filed suit against Bamz Enterprises, LLC (“Bamz”), which legitimately does business under the trade name “Living Well Screening.” At first glance, this appeared to be a straightforward TCPA violation. However, as the Court’s analysis reveals, appearances can be deceiving regarding caller identity. For instance, it’s like blaming the bank for a phishing scam just because the scammer said, ‘This is Wells Fargo.’ Caller ID might tell one story, but admissible evidence reveals the truth.
Judge Bowman zeroed in on the most critical element of any TCPA claim: proving who made the calls at issue. Here, the only evidence connecting Bamz to the calls was the callers’ own statements that they represented “Living Well Screening.” The Court’s analysis was unequivocal: “Those recorded statements are clearly hearsay, insofar as they are out-of-court statements offered for the truth of the matter asserted. Pursuant to Rule 56(c)(1)(B), a party is entitled to summary judgment if it can show that an adverse party cannot produce admissible evidence to support the fact. Id. at *6.
Let’s think about this for a moment. This reasoning aligns perfectly with Fed. R. Civ. P. 56, which requires admissible evidence to survive summary judgment. Hearsay statements from unidentified callers don’t meet this threshold. While the Plaintiff’s theory may appear convincing at first glance, it is crucial to recognize that courts must rely on credible evidence rather than anonymous assertions.
In contrast to Plaintiff’s inadmissible evidence, Bamz presented substantial sworn testimony that none of the six calls originated from Bamz facilities, Bamz has never owned or used an automatic telephone dialing system (“ATDS”), none of the named callers (Ron Williams, Marsha, David, Ann, and Maria) were ever employed by or affiliated with Bamz, and Bamz never authorized any third party to make telemarketing calls on its behalf. As such, Bamz clearly demonstrated that its business model focused solely on providing customer service for at-home medical testing kits—referred to as “kit chasing”—rather than selling these products through telemarketing.
In turn, Plaintiff attempted to salvage his case by pointing to Bamz’s marketing materials describing itself as a “call center” and referencing “sales” activities. See Schwartz, 2025 U.S. Dist. LEXIS 89794, at *11. However, the Court dismantled this argument by asserting: “Plaintiff’s evidence is even more tangential and speculative.” Id. Bamz’s unrebutted sworn testimony clarified that while it briefly considered expanding its call center operations into sales, that effort never materialized. See Schwartz, 2025 U.S. Dist. LEXIS 89794, at *12-13. The mere capability or aspiration to conduct telemarketing is not evidence that a company engaged in such activities.
Judge Bowman’s recommendation aligns with a growing trend across federal courts. In Lindenbaum v. Realgy, L.L.C., 606 F. Supp. 3d 732 (N.D. Ohio 2022), the Court granted summary judgment because the plaintiff could only offer hearsay statements from callers claiming to represent the defendant. Moverover, the Court in Worsham v. TSS Consulting Grp., L.L.C., No. Case No: 6:18-cv-1692-LHP, 2023 WL 5016558, at *2 (M.D. Fla. Aug. 7, 2023), was equally direct, holding that a plaintiff’s hearsay statement that callers claimed to work for the defendant was “simply insufficient” to overcome summary judgment.
Does this case ring any alarm bells? We see companies whose names have been misappropriated by unauthorized callers all the time. A successful defense strategy includes presenting sworn testimony from company officers denying authorization of the calls, providing comprehensive employee records showing none of the identified callers work for your company, documenting your business model and demonstrating how it differs from the activities described in the calls, and challenging the admissibility of the plaintiff’s evidence under the hearsay rule. As Judge Bowman notes, in today’s telemarketing environment, “unscrupulous telemarketers or scammers employ a variety of deceptive practices – including misrepresenting that they are affiliated with a government agency or a legitimate company or charity – in order to manipulate the person that they are calling.” Schwartz, 2025 U.S. Dist. LEXIS 89794, at *6.
The decision recognizes that the technological landscape has changed dramatically since the law’s enactment in 1991. Today, spoofing technology and international call centers make it easier than ever for unscrupulous operators to impersonate legitimate businesses. The Court acknowledged this evolving landscape, noting that legitimate telemarketers abide by TCPA rules. But illegitimate ones…do not. Id. at *5.
Perhaps most compelling was Plaintiff’s admission during deposition that he had no admissible evidence to refute [Bamz’s] claim that someone is using Living Well Screening without their permission, and that [Bamz] is not responsible for the six calls. See Schwartz, 2025 U.S. Dist. LEXIS 89794, at *7-8. This acknowledgment underscores the fundamental weakness in many similar TCPA claims in which the only evidence connecting a defendant to allegedly illegal calls is the caller’s unverified statement.
Here we have a significant victory for TCPA defense litigation. It recognizes that company names can be easily misappropriated by bad actors, and it places the evidentiary burden squarely on plaintiffs to prove caller identity through admissible evidence. Judge Bowman aptly concluded: “To deny summary judgment on the record presented would be to ignore the shifting burdens built into Rule 56 and allow a plaintiff to proceed to trial who lacks admissible evidence on the most critical element of his claim – here, the caller’s identity.” Id. at *9.
So here’s a critical takeaway for TCPAWorld: as litigation around spoofing and impersonation continues to rise, courts are signaling that if your only link is a voice on the line, it better come with more than a name drop. Courts are willing to protect legitimate businesses from liability for the unauthorized actions of third parties who appropriate their names or brand identities. In an era of spoofing and shadow dialing, proof beats presumption.
As always,
Keep it legal, keep it smart, and stay ahead of the game.
Talk soon!
The Hidden Liability: Why Expert Witness Due Diligence Is No Longer Optional
In modern litigation, the strength of your expert witness can be a determining factor in the trajectory of your case. An expert’s credibility, background, and litigation history often come under intense scrutiny—both in and out of court. For attorneys, the failure to thoroughly vet an expert witness, whether retained or opposing, carries serious professional and strategic risks.
Expert Witnesses Under the Microscope
Expert testimony serves as a cornerstone in complex litigation—shaping liability, influencing damages, and framing technical issues for judges and juries alike. But with that influence comes a heightened burden: the need to ensure that an expert’s qualifications and history can withstand rigorous cross-examination and judicial scrutiny.
A growing number of cases have demonstrated how overlooked details—such as undisclosed board sanctions, prior litigation conduct, or inconsistent statements—can be leveraged by opposing counsel to impeach an expert’s credibility. Even experienced attorneys can find themselves blindsided if their expert’s record hasn’t been fully vetted. Worse, if the lapse is egregious enough, it could expose the firm to malpractice claims.
Common Pitfalls in the Vetting Process
Attorneys frequently rely on publicly available sources such as state licensing boards or disciplinary records to evaluate expert witnesses. While these are important starting points, they can be incomplete or difficult to access. Sanctions may not be updated in real-time, and some jurisdictions maintain opaque or fragmented reporting systems.
Further, expert witnesses often have extensive litigation histories, academic publications, or industry affiliations that may contain contradictory or problematic material. An expert who testifies inconsistently across cases, for example, opens the door to impeachment. Similarly, undisclosed financial relationships or conflicts of interest can call an expert’s neutrality into question.
When Expert Vetting Fails: High-Stakes Lessons from Recent Litigation
Recent high-profile cases underscore the critical importance of thoroughly vetting expert witnesses, as lapses in credibility have led to significant legal repercussions.
In the Paraquat Products Liability Litigation, (MDL No. 3004, Case No. 3:21-md-3004-NJR), thousands of plaintiffs allege that exposure to the herbicide Paraquat caused Parkinson’s disease. The plaintiffs’ sole general causation expert, a biostatistics professor, was excluded by both federal and state courts due to concerns over his methodology. This exclusion has significantly undermined the plaintiffs’ position, highlighting how even a single expert’s shortcomings can jeopardize large-scale litigation.
Meanwhile, the Karen Read trial, (Commonwealth v. Karen Read, Norfolk Superior Court, Massachusetts) has received national attention. Read is accused of murdering her boyfriend, Boston police officer John O’Keefe. The case has been marked by intense scrutiny over expert testimony and evidence handling. Notably, the defense’s use of two expert witnesses raised serious ethical and procedural concerns, leading a Massachusetts judge to suspend the retrial after discovering undisclosed payments exceeding $23,000 to experts from ARCCA LLC. The judge expressed “grave concern” over these payments and their potential to influence testimony, illustrating how non-transparent expert arrangements can threaten the integrity of a defense strategy.
These cases serve as stark reminders that expert witness credibility hinges not only on academic qualifications but also on transparency, methodology, and litigation history—all of which demand thorough and ongoing vetting.
Vetting the Opposition: A Strategic Imperative
While it’s standard practice to assess your own expert’s background, applying the same level of scrutiny to opposing experts can create valuable strategic advantages. Identifying prior credibility issues, financial incentives, or testimony that contradicts their current opinions can equip attorneys with powerful tools for cross-examination or motion practice.
This kind of intelligence gathering often goes beyond traditional research. Attorneys increasingly rely on technology-assisted review and monitoring tools that provide ongoing insight into an expert’s involvement in litigation, public commentary, and professional conduct.
How Legal Tech and AI Are Transforming Expert Witness Due Diligence
Advancements in legal technology are fundamentally reshaping how attorneys approach expert witness vetting. AI-powered tools can now aggregate and analyze vast amounts of data—spanning court filings, publications, deposition transcripts, disciplinary records, media coverage, and online content—that would take an individual attorney dozens of hours to review manually, if accessible at all.
By synthesizing this information, these technologies help attorneys identify potential red flags in both retained and opposing experts, such as inconsistent testimony, undisclosed affiliations, financial conflicts, or patterns of bias. This kind of analysis allows for a more complete and proactive assessment of an expert’s litigation history and professional conduct.
Whether leveraging sophisticated platforms or conducting manual investigations, attorneys must treat expert vetting as a critical component of case strategy. A well-documented, thoroughly scrutinized expert can offer a strategic advantage—not only at trial, but during early case evaluation, expert selection, and pre-trial motion practice.
Checklist: Key Areas to Evaluate When Vetting Expert Witnesses
To ensure credibility and minimize risk, attorneys should review the following:
Litigation HistorySearch past testimony and involvement in prior cases for inconsistencies, frequency of retention, or potential bias.
Publications & Academic WorkExamine peer-reviewed articles, books, or public statements for positions that may contradict current opinions.
Deposition & Trial TranscriptsIdentify patterns in how the expert performs under examination or how their testimony has been challenged.
Licensing & Disciplinary RecordsConfirm active licensure and check for sanctions or disciplinary actions through relevant state or professional boards.
Professional AffiliationsInvestigate organizational memberships or consulting roles that may pose conflicts of interest.
Media Coverage & Online PresenceReview interviews, social media activity, and public commentary for any material that could affect credibility.
Financial RelationshipsDisclose and evaluate payments received from parties with vested interests in the litigation.
A Heightened Standard of Care
In an era where expert testimony is increasingly under attack, courts and clients alike expect attorneys to meet a higher standard when it comes to expert witness due diligence. The ability to identify red flags—before opposing counsel does—can mean the difference between advancing your case and defending against an avoidable credibility crisis.
By leveraging the latest legal tech tools, attorneys are positioned to meet that heightened standard. These platforms do not replace legal judgment—but they elevate the investigative foundation on which sound decisions are made.
In high-stakes litigation, there is simply no substitute for knowing exactly who your expert is—and who the other side’s expert claims to be.
Income Not Recognized on Jail Funds Invested in Ponzi Scheme
A former Sheriff of Morgan County, Alabama, purchased an 18-wheeler truck full of corn dogs for $500 and fed the corn dogs to inmates at each meal. He did so because in Alabama, the State provided each county sheriff with a monthly food allowance for each of their prisoners. The sheriff could keep any surplus but was responsible for any shortfall in feeding the prisoners.
The inmates filed a class action lawsuit alleging inhumane treatment. In 2008, the Court ordered the county to provide a nutritionally adequate diet to inmates and directed the Sheriff to maintain a separate account for jail food money.
When Ana Franklin was elected Sheriff of Morgan County, Alabama, in November 2011, she gained authority over the jail food money bank account. In 2015, the jail population doubled due to an increase in methamphetamine arrests, changes in Alabama sentencing law and the closure of municipal jails. Sheriff Franklin was concerned that because of the increase in the jail population, she would lack adequate funds to feed the inmates.
Sheriff Franklin’s boyfriend and county police officer, Steve Ziaja, told the her that she could lend $150,000 to Priceville Partners, LLC for 30 days and earn 17% interest. Mr. Ziaja offered to serve as guarantor for the loan. In June 2015, the Sheriff withdrew $155,000 from the jail food money bank account. She delivered $150,000 to Priceville Partners, LLC as a loan and retained $5,000 in the office safe as petty cash.
The loan to Priceville turned out to be part of a Ponzi scheme. Priceville Partners, LLC closed in November 2015 and filed bankruptcy in March 2016. In December 2016, Mr. Ziaja made good on his guarantee and repaid the $150,000 to the Sheriff who then returned the money to the jail food money bank account.
In January 2017, after learning that the Sheriff removed money from the jail food account, the class action members filed a motion for contempt. The Court found the Sheriff to be in civil contempt and sanctioned her $1,000. In December 2018, the Department of Justice filed charges against the Sheriff for willful failure to file her personal income tax return. The Sheriff pleaded guilty and was sentenced to 24 months’ probation. The IRS then issued a Notice of Deficiency asserting that the $155,000 removed from the jail food money bank account constituted taxable income as proceeds from embezzlement.
In Franklin v. Commissioner, T.C. Memo 2025-8, the Court ruled that the $155,000 was not taxable income. The Court reasoned that the withdrawal was an unauthorized loan since there was a consensual recognition of an obligation to repay the funds and not embezzlement. The Court relied on the facts that the loan was actually repaid; that the Sheriff was never charged criminally with embezzlement; that the Sheriff was only held in civil contempt and fined $1,000; and that the Sheriff was motivated to increase the jail food money bank account to properly feed the inmates. The Court declared that the Sheriff received no accession of wealth because she had a corresponding obligation to repay the funds back to the jail food money bank account.
The Importance of Indemnification Clauses in Managing Post-Completion Project Risk
Claims against design professionals often pose unique challenges when such claims are dually rooted in both tort and contract theories, and therefore subject to competing time limitations. In order to reconcile these differences, Massachusetts courts have historically looked to the “gist” of a given claim, rather than the label, to assess the appropriate limitations. A determination that the “gist” of a claim lies in tort will subject that claim to a shorter statute of limitations, as well as the statute of repose, which bars tort claims arising out of construction projects brought more than six years after the project is either completed or open for use.
The Massachusetts Supreme Judicial Court (SJC) recently addressed the statute of repose in this context in the matter of Trustees of Boston University v. Clough Harbour & Associates LLP. Docket No. SJC-13685 (Mass. Apr. 16, 2025). There, the SJC held that the six-year time limitation set forth in the tort statute of repose, Mass. Gen. Laws c. 260, § 2B, did not apply to bar a contractual indemnification claims for damages allegedly caused by an architect’s negligence. The decision arose out of a dispute concerning alleged defects in the design and construction of a brand-new synthetic turf athletic field on Boston University’s campus. In 2012, the university entered into a contract with the architect for design and construction administration services, which included an indemnification provision, providing that the architect would indemnify the university for any and all expenses caused by the architect’s negligence. The work was completed, and the field opened for use in the summer of 2013.
After experiencing numerous problems with the field after opening, the university demanded indemnification from the architect for costs spent remedying the issues pursuant to the parties’ contract. The architect refused, and well over six years after the field opened, the university sued for contractual indemnification. The architect was ultimately granted summary judgment by the Superior Court, which reasoned that because the indemnification obligation was contingent on the architect’s negligence, the gist of the claim was actually rooted in tort and therefore time barred by the statute of repose. The university appealed, arguing that its indemnification claim was based on distinct, express contractual obligations specifically negotiated and agreed to by the parties, and therefore did not fall under the ambit of the statute of repose.
The SJC agreed with the university. In resolving the question, the SJC noted that a key distinction between actions of contract versus those of tort is that contract actions are based on express promises set by the parties, as opposed to tort standards imposed by law. Thus, notwithstanding the parties’ decision to incorporate the negligence standard into the indemnity provision, the indemnification obligation still represented a distinct contractual promise, the breach of which requires a different showing than for negligence. With its findings, the SJC reversed the lower court and restored the contractual indemnification claim thus underscoring the importance of contractual indemnification clauses in managing project risk.
Although the SJC’s decision is generally consistent with a “gist of the claim” evaluation, it nevertheless suggests a departure from prior applications that may pose far-reaching effects for the construction industry moving forward. Though the Court found that the university’s indemnification claim was not barred by the statute of repose, it also confirmed that, for an owner to prevail on its claim, it must show, amongst other things, the occurrence of an event triggering the duty to indemnify. Assuming that a finding of negligence against the architect is the necessary trigger for purposes of the university’s claim, it seems that a paradoxical procedure has been created, wherein the university, to prove an element of its viable indemnification claim, will first need to prove a time-barred negligence claim. The impact of such a paradox remains to be seen.
2nd Circuit Holds Arbitration Treaty Trumps State Insurance Law
On May 8, the Second Circuit held that the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards trumps a Louisiana state law barring arbitration of insurance disputes in a pair of cases, Certain Underwriters at Lloyds, London et al. v. 3131 Veterans Blvd. LLC and Certain Underwriters at Lloyds, London et al. v. Mpire Properties LLC. In doing so the Second Circuit joined the First and Ninth circuits in ruling that the New York Convention’s provision on the enforcement of arbitration agreements is “self-executing” and, thus, preempts state law consistent with the Supreme Court’s decision in Medellín v. Texas.
The underlying dispute involved damage to commercial properties in Louisiana after Hurricane Ida hit the state in 2021. The insurance policies at issue provided for arbitration seated in New York applying New York law. After settlement discussions failed, the insureds filed suit in Louisiana, while the insurers moved to compel arbitration in the Southern District of New York.
Louisiana’s Insurance Code and subsequent jurisprudence bars enforcement of arbitration clauses in insurance policies. The Federal McCarran-Ferguson Act says that state insurance law controls over conflicting “acts of Congress.” Prior to Medellín, the Second Circuit treated federal treaty law, such as the New York Convention, as “acts of Congress” only if it required legislative action to be enforced, i.e., it is not self-executing. Applying these pre-Medellín rules, the district court found that the New York Convention was not self-executing and that Louisiana’s bar on enforcement of arbitration in insurance disputes reverse-preempted the New York Convention and the Federal Arbitration Act, preventing arbitration of the underlying dispute.
However, in Medellín, the Supreme Court established a different test for determining whether a treaty provision should be considered self-executing. “The Supreme Court did not confine its analysis to the narrow question of whether Congress enacted legislation purporting to implement the treaty at issue[.]” Rather the Court implemented a multi-factor test applying to individual provisions of the treaty to determine whether that provision was intended to take immediate effect in domestic courts.
Applying the Medellín factors to the relevant New York Convention provision, the Second Circuit found that Article II, Section 3 of the Convention – the provision related to the enforcement of arbitration agreements – is self-executing and not subject to statutory preemption rules like that in the McCarran-Ferguson Act.
This Court’s holding does not extend to purely domestic arbitrations, but parties to arbitration agreements with a foreign element can no longer escape arbitration of commercial disputes on statutory preemption grounds.
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Businesses Get a Break: DOL Won’t Enforce 2024 Independent Contractor Rule
Takeaways
When analyzing employment status under the FLSA, DOL investigators will apply previous subregulatory guidance, instead of the 2024 independent contractor final rule, including a 2019 opinion letter addressing independent contractor status and a 2008 fact sheet.
Several lawsuits challenging the 2024 final rule are pending but the litigation is on hold as the DOL considers whether to rescind the rule.
For now, the 2024 final rule remains in effect “for purposes of private litigation.”
The U.S. Department of Labor (DOL) will no longer apply the 2024 independent contractor final rule when analyzing whether a worker is an employee or independent contractor under the Fair Labor Standards Act (FLSA).
The 2024 final rule revised the standard for determining whether a worker is an employee or independent contractor under the FLSA. (See Labor Department Releases Independent Contractor Final Rule, Revising Standard.) Several lawsuits over the 2024 final rule are still pending, but the DOL has recently sought to put the litigation on hold while it reconsiders whether to defend or rescind the rule. (See Employers Still Need to Abide 2024 Independent Contractor Rule Despite DOL Hints of Dropping It.) In the meantime, the DOL has paused enforcement of the final rule, directing its field staff not to apply the rule in agency investigations.
Field Assistance Bulletin
The DOL’s directive came in a Field Assistance Bulletin issued May 1, 2025, by Acting Administrator of the Wage and Hour Division (WHD) Donald M. Harrison, III. The bulletin, “FLSA Independent Contractor Misclassification Enforcement Guidance,” instructs WHD field staff that instead of applying the standard set forth in the 2024 final rule, investigators must analyze employment status under the longstanding framework set forth in Fact Sheet #13 and Opinion Letter FLSA2019-6, which addresses independent contractor status in the gig economy.
A return to prior guidance “provides greater clarity for businesses and workers navigating modern work arrangements while legal and regulatory questions are resolved,” the DOL announced in a press statement.
The enforcement guidance applies “with respect to any matters for which no payment has been made, directly to individuals or to DOL, for back wages and/or civil money penalties as of May 1, 2025.”
Fact Sheet #13
Issued in 2008, Fact Sheet #13 cites numerous factors courts historically have considered when determining whether an individual “is engaged in a business of his or her own” as a matter of economic reality or is dependent on the entity for which they are performing work. These factors include:
The extent to which the services rendered are an integral part of the principal’s business.
The permanency of the relationship.
The amount of the alleged contractor’s investment in facilities and equipment.
The nature and degree of control by the principal.
The alleged contractor’s opportunities for profit and loss.
The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor.
The degree of independent business organization and operation.
In 2024, the DOL revised Fact Sheet #13 to conform to the new final rule. The DOL on May 1 restored the 2008 version to conform to its current enforcement position.
The 2024 final rule adopts and details six similar “economic reality” factors. The 2024 final rule does not include “degree of independent business organization and operation” among the delineated factors. It allows for consideration of other factors beyond this non-exclusive list, although allowing for greater flexibility in evaluating the “totality of the circumstances” of the relationship. This flexibility, however, has made it more challenging for businesses seeking clear criteria for ensuring their intended independent contractors are not classified as employees under the DOL standard.
Opinion Letter
Opinion Letter FLSA2019-6 is referenced in the Field Assistance Bulletin as additional guidance informing the independent contractor analysis. The opinion letter addresses the employment status of gig workers who contract with customers through a virtual marketplace company’s (VMC) platform.
Applying the traditional six factors, the wage and hour administrator determined that the workers in question did not fit “any traditional paradigm” covered by the FLSA. The VMC is merely a “referral service,” and the platform users do not have a working relationship with the company. Rather, they work for the consumers with whom they match on the platform.
The DOL withdraw the opinion letter during the Biden Administration. The acting wage and hour administrator recently reinstated the guidance and redesignated it as Opinion Letter FLSA2025-2 (May 2, 2025).
Takeaway
The Field Assistance Bulletin indicates that WHD will not enforce the 2024 final rule while it develops the “appropriate” independent contractor standard. It also states, however, that DOL may exercise its enforcement authority in specific cases as explicitly directed by the wage and hour administrator.
The DOL did not attempt, in the meantime, to restore a streamlined independent contractor final rule published by the first Trump Administration. The Trump rule focused on two “core” factors that DOL considered most probative of independent contractor status. That final rule, issued in early 2021, was rescinded by the Biden DOL before it took effect. To resurrect the Trump final rule would require the DOL to undertake formal notice-and-comment rulemaking.
The 2024 final rule remains in effect “for purposes of private litigation” relating to independent contractor status under the FLSA, the WHD noted. Businesses also need to comply with the more restrictive state laws defining independent contractor status in the jurisdictions where they operate.
Estoppel Estopped?
The Federal Circuit recently resolved a split among the district courts whether patent infringement defendants who bring inter partes review (IPR) challenges are estopped from raising new prior art challenges in a co-pending district court litigation. While some district courts had earlier found estoppel to have broad effect, and thus prevent challenges based on products on sale or public use, the Federal Circuit’s decision means that estoppel is limited only to challenges based on patents or printed publications, opening the door to use patents and publications to provide evidence of what subject matter was “on sale” or “in public use.”
The Court’s precedential decision focused on the interpretation of 35 U.S.C. § 315(e)(2), which governs IPR estoppel. The statute prevents a petitioner from asserting in district court that a patent claim is invalid on any ground that the petitioner raised or reasonably could have raised during the IPR. The court clarified that “grounds” refer to the theories of invalidity available under sections 102 and 103, specifically those based on prior art consisting of patents or printed publications.
In this case, the defendant challenged the validity of the asserted patent by arguing that a product, the DiskOnKey System, was “known or used by others, on sale, or in public use”—grounds that statutorily could not have been raised during the IPR because they do not rely solely on patents or printed publications. The court held that IPR estoppel does not preclude a petitioner from asserting these “statutory grounds” of invalidity in district court, as they are distinct from those “statutory grounds” that could be raised in an IPR even if they are based on the same prior art references. In other words, the factual basis for the “statutory grounds” raised in district court can include the same factual basis that was used in the IPR proceeding if used to show the structure and operation of prior art systems and devices that were “in use.”
The Court’s interpretation aligns with previous decisions that emphasized Congress’s intent to limit IPR proceedings to challenges based on patents and printed publications. This decision reinforces the understanding that estoppel applies only to grounds that could have been raised in an IPR, not to the evidence used to support those grounds.
This decision has important implications for patent litigation strategy and the use of IPRs to streamline invalidity issues. It underscores the limitations of IPR estoppel, allowing parties to introduce evidence of public use, sales, or knowledge and use by others in district court even if the same evidence formed the basis of the challenge in the IPR proceeding. This distinction provides a broader opportunity for challenging patent validity.