Litigation / Trial Practice – Page 9

Breaking Down the New No Surprises Act FAQs Post-TMA III

On January 14, 2025, the US Departments of Labor, Health and Human Services (HHS), and the Treasury (collectively, the Departments), along with the Office of Personnel Management (OPM), jointly issued Part 69 of a series of frequently asked questions (FAQs) designed to help stakeholders understand and adhere to the federal No Surprises Act (NSA). This installment of the FAQs discusses how health plans and issuers should calculate the qualifying payment amount (QPA) and provides updates to disclosure and patient cost-sharing requirements following rulings by the US District Court for the Eastern District of Texas and the US Court of Appeals for the Fifth Circuit in Texas Medical Association, et al. v. United States Department of Health and Human Services, et al. (together, the TMA III decisions).

In Depth

BACKGROUND: THE LONG HISTORY OF THE NSA
The NSA was enacted under the first Trump administration as part of the Consolidated Appropriations Act, 2021 (Public Law No: 116-260). The Departments and OPM jointly implemented provisions of the NSA through the issuance of two interim final rules (IFRs) in July 2021 and October 2021.
The NSA prohibits out-of-network (OON) providers from balance billing patients for certain services furnished at an OON facility (in the case of emergency services) or in-network facility (in the case of non-emergency services provided by OON providers). The NSA protects patients from receiving these “surprise” bills, effectively limiting patient responsibility for some services to no more than the patients’ in-network cost-sharing amounts. (The NSA includes separate considerations related to air ambulance providers, which we do not address in this article.)
Per the NSA and as further implemented in the October 2021 IFR, plans and issuers are required to determine whether claims for items or services submitted by an OON provider or facility and subject to the NSA are covered under the plan or coverage and must send an initial payment or notice of denial of payment to the OON provider or facility no later than 30 calendar days after the provider or facility submitted the claim to the plan or issuer.
To the extent the claim is covered, the NSA also sets forth a methodology by which plans or issuers must calculate the OON rate for OON providers or facilities that rendered items or services subject to the NSA. Plans and issuers must pay the provider or facility an amount determined by an applicable All-Payer Model Agreement, and if none exists, an amount determined by applicable state law. If state law does not set forth a mechanism by which the OON rate should be determined, the plan or issuer may negotiate the rate with the provider or facility through an “open negotiation” process, which lasts 30 days.
If the parties are unable to agree to an OON rate by the expiration of the open negotiation period, either party may initiate a dispute under the federal independent dispute resolution (IDR) process established by the NSA. The IDR process involves several steps:

The disputing parties must agree on and select a third-party entity (referred to as a certified IDR entity) to oversee the process.
Each party must then submit payment offers to the IDR entity.
The IDR entity evaluates the payment offers and determines each party’s payment responsibility. The NSA requires that the IDR entity consider, among other factors, the QPA, defined as the median of the contracted rates that a plan or issuer recognizes for the same or similar service by a provider in the same or similar specialty in the same geographic area as the service at issue.
Once the IDR entity makes a payment determination, the plan or issuer must make the payment to the OON provider or facility within 30 calendar days.

In August 2022, the Departments issued final rules implementing provisions regarding certain disclosure requirements for plans and issuers (discussed further below) and modifying certain requirements pertaining to how IDR entities can take into account the QPA in determining the OON rate through the IDR process.
In theory, the IDR process is straightforward. However, the NSA and the IDR process, including the significance of the QPA in determining the OON rate, have been the subject of consistent litigation and operational issues, suggesting that in practice, providers and health plans continue to encounter implementation challenges.
HISTORY OF TMA LITIGATION
A string of litigation continues to shape the NSA and the related IDR process, which originated with a suit filed by the Texas Medical Association (TMA) against HHS in October 2021. In Texas Medical Association v. United States Department of Health and Human Services, et al. (TMA I), the district court vacated the Departments’ IFR requiring IDR entities to use a rebuttable presumption in favor of the QPA. The court held that the presumption conflicted with the NSA’s plain meaning, which lists a set of factors for consideration when determining the appropriate OON rate, only one of which is the QPA.
After the TMA I decision, the Departments issued the August 2022 final rules, which specified elements that IDR entities must consider in resolving OON payment disputes, including the extent to which the QPA should be taken into account. The August 2022 rules required that IDR entities:

First consider the QPA for the same or similar service.
Limit factors to information provided by the disputing party.
Document non-QPA factors relied upon in making a payment determination.

However, TMA challenged this rule in Texas Medical Association v. United States Department of Health and Human Services, et al. (TMA II), which the Fifth Circuit eventually vacated in TMA III. The Fifth Circuit stated that the Departments exceeded their authority by instructing IDR entities to prioritize one factor over others.
In August 2023, the district court issued a decision in TMA III, overturning key parts of the method set forth by the Departments to calculate the QPA. Following this ruling, the Departments have exercised their discretion in enforcing how QPAs are calculated, leading to uncertainty for plans and issuers as well as providers and facilities. The federal government appealed part of this decision, and on October 30, 2024, the Fifth Circuit issued a ruling on the TMA III case, partially reversing the district court’s decision, while upholding other parts.
The district court’s TMA III opinion found that the Departments’ methodology for calculating the QPA did not comply with the NSA. This noncompliance was due to:

The inclusion of “ghost rates” (i.e., contacted rates for services not actually provided by the contracting provider during the contract period).
The exclusion of risk-based incentive payments.
The allowance for self-insured plans administered by a third-party administrator to use other plans administered by the third-party administrator to calculate QPAs.

The district court also found that rules related to the timing and deadline for payment of OON claims subject to the NSA did not comply with the statute, because they started the 30-day payment clock on the date the plan or issuer received sufficient information to determine whether the submitted claim was a “clean claim,” rather than the date the provider or facility transmitted a “claim.”
Reversing the district court’s decision in part, the Fifth Circuit held that single-case arrangements will no longer be included in QPA calculations. The Fifth Circuit also reversed the district court’s decision that non-fee payments, such as quality bonuses and other incentives, must be included in QPA calculations. Regarding the timing of OON payments subject to the NSA, the Fifth Circuit affirmed the district court’s decision that starting the 30-day payment clock upon receipt of a “clean claim” conflicts with the text of the NSA. As decided by the district court, the 30-day prompt payment clock for NSA-eligible claims will begin on the date the provider transmits the bill, not when the plan or issuer receives the information necessary to determine whether the claim is a “clean claim.”
Regarding the QPA calculation, the Fifth Circuit reversed the district court’s decision to exclude from QPA calculations any contracts for items or services that contracting providers did not actually furnish under said contract during the designated plan year. Contracted rates can now be included in QPA calculations regardless of whether the provider actually furnished those services. However, the Fifth Circuit reiterated the statutory requirement that QPAs be calculated using contracts for the “same or similar item or service that is provided in the same or similar specialty.” This implies that “ghost rates” (e.g., anesthesia rates included in a primary care physician’s contract) must be excluded from QPA calculations.[1]
Following the TMA III decisions, the Departments stated on the Centers for Medicare and Medicaid Services’ NSA webpage in October 2024 that they were reviewing the Fifth Circuit’s decision and intended to “issue further enforcement guidance in the near future.”
NEW GUIDANCE ISSUED FOR QPA CALCULATIONS POST-TMA III DECISIONS
In the wake of the TMA III decisions, the Departments issued the FAQs addressing implementation of certain provisions of the NSA and responding to questions from stakeholders. Under the FAQs, the Departments and OPM will require health plans and issuers to calculate QPAs using a “good faith, reasonable interpretation of the applicable statutes and regulations that remain in effect following the decisions of both the Fifth Circuit and the district court in TMA III (the 2024 methodology)” once the Fifth Circuit issues its final order. Under Federal Rule of Appellate Procedure 41, a court of appeals’ mandate usually issues seven days after the deadline for rehearing petitions, unless a petition is filed. In this case, the Fifth Circuit withheld the mandate after the plaintiffs in TMA III filed a petition for rehearing en banc. Until the mandate is issued, the district court’s judgment continues to bind the Departments.
The Departments and OPM acknowledged the challenges of recalculating QPAs because of the Fifth Circuit’s decision and recognized the time and resources required for this task. Therefore, the Departments opted to prolong the existing period of “enforcement discretion” for any health plan or issuer that calculates a QPA using either the 2021 methodology (based on the IFRs and guidance issued in July 2021) or the 2023 methodology (based on the statutes and regulations that remained in effect after the district court’s decision in TMA III). Both methodologies can be used for items and services furnished before August 1, 2025, as long as they are based on a good faith, reasonable interpretation.
Once the mandate is issued, the Departments and OPM will also use their discretion to enforce the NSA for any health plan, issuer, or party involved in a payment dispute that uses a QPA calculated with the 2023 methodology for services provided before August 1, 2025. This enforcement discretion applies to patient cost-sharing, required disclosures with initial payments or notices of denials, and submissions under the IDR process. Similarly, HHS will exercise enforcement discretion for providers and facilities that bill patients based on a QPA calculated with the 2021 or 2023 methodology for services provided before August 1, 2025. Thus, the FAQs clarify that the enforcement discretion extends to providers in addition to health plans.
The FAQs encourage states, which primarily enforce the NSA, to adopt a similar approach, including that states will be considered compliant if they follow this approach. The Departments and OPM will reassess whether additional enforcement relief time is needed as health plans and issuers work to comply with the applicable laws and regulations following the TMA III decisions.
The new FAQs essentially preserve the existing circumstances, as the enforcement discretion has been operative since fall 2023 after the district court’s TMA III decision. Alongside the enforcement guidance, the Departments and OPM offer further clarifications regarding the existing QPA disclosure requirements and patient cost-sharing obligations.
DISCLOSURE REQUIREMENTS
In line with previous guidance, which remains unaffected by the TMA III decisions, health plans and issuers must continue to disclose information about the QPA. The QPA is used to determine the “recognized amount” for cost-sharing under the NSA. This recognized amount is calculated using the All-Payer Model Agreement, specified state law, or the lesser of the billed charge or QPA. A health plan or issuer may certify that a QPA was determined in compliance with applicable rules by using a good faith, reasonable interpretation of the statutes and regulations that remain in effect following the TMA III decisions.
The FAQs address questions regarding the 30-day notice and IDR process discussed earlier, and how the timing is affected when a plan sends the initial payment or denial notice electronically but provides the required disclosures in paper form. This can result in the provider receiving the payment or denial notice earlier than the disclosures. The Departments and OPM clarify that a plan must transmit the required disclosures on or near the date that it sends the initial payment or notice of denial of payment, and must ensure that both the initial payment or notice of denial of payment and the required disclosures are sent no later than 30 calendar days after the plan receives the information necessary to decide a claim for payment for the services billed by the provider.
The Departments and OPM also state in the FAQs that they recognize that sometimes providers and facilities receive required disclosures days after receiving the initial payment or denial notice. Since the 30-business-day period to start open negotiation begins when the payment or denial notice is received, this delay can shorten the time available to review the disclosures. If the disclosures are sent in paper form and arrive later than the electronic payment or denial notice, the 30-business-day period to start negotiations will be considered to begin once both the payment or denial notice and the disclosures are received. Providers can still choose to start negotiations after receiving the payment or denial notice but before receiving the disclosures.
PATIENT COST-SHARING
The Departments and OPM reiterate in the FAQs that patient cost-sharing rules under the NSA and the July 2021 IFR for OON emergency services and certain non-emergency services are based on the “recognized amount.” According to the Departments and OPM, some health plans have been found to increase cost-sharing amounts after an IDR payment determination, which is not allowed. Once an IDR entity makes a payment determination, plans cannot recalculate or increase the cost-sharing amount if it exceeds the permitted amount. The rules ensure that disputes between providers and payers do not affect the cost-sharing amount for individuals. Nonparticipating providers cannot bill individuals more than the allowed cost-sharing amount. Any payment owed to nonparticipating providers after an IDR determination must be paid in full without reducing the amount based on prohibited cost-sharing increases.
CONCLUSION/KEY TAKEAWAYS
As stated earlier, Part 69 of the FAQs extends the status quo of enforcement discretion around the calculation of the QPA. Any new regulations related to the QPA calculation will need to be drafted under the Trump administration, although the timing for issuing such regulations is unclear. If the Trump administration decides to draft new QPA regulations, it could make additional changes to the QPA methodology beyond those that have been the subject of litigation. While the courts have provided direction on what is permissible under the NSA and what aspects of previous regulations can and cannot stand, the rulings do not prevent the Trump administration from making other permissible regulatory changes as it deems appropriate, especially as stakeholders have challenged implementation of the law under the previous administration.
Beyond issuing this new set of regulations, the Trump administration also may need to deal with open operational questions and issues, including proposed regulations from the Biden administration that have yet to be finalized and whole provisions of the NSA that are yet to be implemented.[2] All of this means that, if it chooses to act, the Trump administration could decide to make its own imprint on the current NSA operations and policy.

No Ifs or Buts: Supreme Court Holds the Line on Unauthorized Profits

In Rukhadze and others v Recovery Partners GP Ltd and another [2025] UKSC 10, the Supreme Court had the task of deciding whether a change was needed to the law on equitable obligations and liabilities of fiduciaries.
The duty under the microscope was the so-called “profit rule”, i.e. that a fiduciary must account to his principal for any profit derived from or made out of the fiduciary relationship, save where the principal has provided his informed consent to the fiduciary retaining that profit. Such profit has long been treated in equity as held on constructive trust for the principal from the moment it is made.
In Rukhadze, the Court re-examined whether it needed to apply a common law “but for” causation test before granting an account of profits in such circumstances. Was the Court required to ask whether the fiduciary would have made the profit but for its breach, for example because the principal would have consented to it or because the fiduciary could have terminated the relationship before he gained the opportunity and would have made the same profit anyway?
To state the relevant facts briefly, the case centred around asset recovery services provided to the family of deceased Georgian businessman Arkadi Patarkatsishvili (“Badri”). Those services were initially carried out by “SCPI”, a company in which the individual appellants held senior roles and were fiduciaries. When the appellants left SCPI, they continued to provide the services to Badri’s family and received fees for doing so. The respondents (SCPI’s successors) claimed that the appellants were in breach of duty by, inter alia, taking for themselves SCPI’s business opportunity, and sued the appellants for an account of profits represented by the payments made to the appellants by the family. At first instance, the appellants were held to be in breach of fiduciary duty and ordered to make an account of profits, in the amount of the payments made by the family less 25% as an equitable allowance for the appellants’ work and skill in providing the services. The Court of Appeal dismissed the appellants’ appeal.
Before the Supreme Court, the appellants argued that applying “what if” counterfactuals with a “but for” common law causation test would provide more clarity, predictability, common sense and justice to this area of equity and avoid harsh results.
However, in a majority verdict, the Court declined to allow the appeal, holding that there is no requirement for a “but for” causation test, with Lord Briggs summarising at [36]:
The question is not, would the profit have been made even if there had been no antecedent breach of fiduciary duty, but did the profit owe its existence to a significant extent to the application by the fiduciary of property, information or some other advantage which he enjoyed as a result of his fiduciary position, or from some activity undertaken while he remained a fiduciary which the conflict duty required him to avoid altogether. For that purpose the court looks closely at the facts, i.e. what actually did happen, but does not concern itself with what might have happened in a hypothetical “but for” situation which did not in fact occur.

Therefore, the duty to account to a principal applies to all fiduciaries and is not merely a remedy; rather it is a duty that arises at the moment the profit is gained.
In its reasoning, the Court considered that there are in-built limitations to the application of the profit rule, namely that there must be a sufficient link between the fiduciary relationship and the profit gained. While the duty to account does not depend on any prior breach, where the profit follows on from a breach of the conflict duty, the sufficient link required will usually be established and “the accountability for the resulting profit will usually follow”. [42] Further, the Court was content that any possible injustices or harsh results would be better alleviated by its discretion to grant an equitable allowance, as the trial judge had ordered in this case, rather than an application of a broad “but-for” test.
Arguments put forward by the appellants that the increasing number of fiduciary relationships in the business world supports a relaxation of the deterrent role of the current law were not persuasive and in fact tended to underline that the duty of single-minded loyalty owed by a fiduciary should be very carefully protected.
Application to Sport
As in the wider business world, there are an ever-increasing number of fiduciaries in sport, including sports agents, whether the traditional “on-field” agents or those working in “off-field” commercial settings; directors and partners in sports clubs, governing bodies and other entities; and trustees in charitable trusts, foundations and investment structures.
Rukhadze will serve as a reminder from the highest court in the land to all sports fiduciaries of the significant obligations and liabilities they owe to their principal in that role. The consequences of breach are severe.
Sports agents have long recognised this fact. In the landmark Court of Appeal case in Imageview Management Ltd v Jack [2009] EWCA Civ 63, which considered a secret profit of £3,000 made by a football agent in assisting his football player principal’s club to obtain a work permit for him, the Court ordered both an account of the profit made and forfeiture of all remuneration received by the agent from the player. While forfeiture of remuneration was not considered on the facts in Rukhadze, until we have a Supreme Court judgment offering further clarity in this area, all fiduciaries remain mindful that this draconian remedy will be ordered by courts and tribunals in appropriate cases.
As Rukhadze confirms, it is prudent for fiduciaries to seek and obtain the informed consent of their principal if they wish to retain profits earned. Likewise, when fiduciaries wish to act for both sides in a transaction (as is common with on-field sports agents), informed consent should be obtained from each principal to avoid a breach of the fiduciary’s duty to avoid conflicts of interest. If not, fiduciaries may find that only a quantum meruit allowance remains on the table where it is held to be fair and equitable to recompense the skill and effort used in the transaction. As per Rukhadze, such an equitable allowance may only represent a fraction of the profit gained.

Litigation Minute: Emerging Contaminants: Minimizing and Insuring Litigation Risk

WHAT YOU NEED TO KNOW IN A MINUTE OR LESS
As the scientific and regulatory landscape surrounding various emerging contaminants shifts, so too do the options that companies can consider taking to minimize and insure against the risk of emerging-contaminant litigation.
The second edition in this three-part series explores considerations for companies to minimize that risk and provides consideration for potential insurance coverage for claims arising from alleged exposure to emerging contaminants.
In a minute or less, here is what you need to know about minimizing and insuring emerging-contaminant litigation risk.
Minimizing Litigation Risk
As we discussed in our first edition of this series, regulation of emerging contaminants often drives emerging-contaminant litigation. For example, in emerging-contaminant litigation that alleges an airborne exposure pathway, plaintiffs’ complaints often prominently feature information from the US Environmental Protection Agency’s (EPA’s) National Air Toxics Assessment (NATA) screening tool and its predecessor, the Air Toxics Screening Assessment (AirToxScreen). AirToxScreen, and NATA before it, is a public mapping tool that can be queried by location, specific air emissions, and specific facilities to identify census tracts with potentially elevated cancer risks associated with various air emissions. Despite these tools’ many limitations, their simplicity and the information they provide have served as a foundation for many civil tort claims.
The takeaway: Since NATA and AirToxScreen use the EPA’s National Emission Inventory (NEI) as a starting point, companies with facilities that have emissions tied into NEI should carefully consider the implications of their reported emissions. For example, in some situations for some companies, it could be appropriate to consider whether to examine reported emissions and control technologies to determine whether adjustments can be made to reduce reported emissions to better reflect reality on a going-forward basis. In addition, requests for emerging contaminants sampling and reporting by regulatory agencies may be made publicly available.
Regulatory compliance is not always an absolute defense in tort litigation, but in most situations, compliance with existing regulations will be relevant to whether a company facing emerging-contaminant litigation met the applicable standard of care. Companies should examine applicable regulations against established compliance efforts and, as appropriate and applicable to any given company, consider whether it may be appropriate to closer examine compliance programs for continued improvements or audit established protocols to substantiate safety.
Insurance Coverage Considerations
Policyholders facing potential liability for claims arising out of alleged exposure to emerging contaminants should consider whether they have insurance coverage for such claims.
Commercial general liability insurance policies typically provide defense and indemnity coverage for claims alleging “bodily injury” or “property damage” arising out of an accident or occurrence during the policy period. While some insurers are now introducing exclusions for certain emerging contaminants (and most policies today have pollution exclusions), the underlying claim(s) may trigger coverage under occurrence-based policies issued years or decades earlier, depending on the alleged date of first exposure to the contaminant and the alleged injury process.
These older insurance policies are less likely to have exclusions relevant to emerging contaminants, and policies issued before 1986 are more likely to have a pollution exclusion with an important exception for “sudden and accidental” injuries, or no exclusions at all. In addition, some courts have ruled that pollution exclusions do not apply to product-related exposures or permitted releases of certain emerging contaminants.
In deciding whether there is potential insurance coverage for claims alleging exposure to emerging contaminants, policyholders should also consider whether they have potential coverage for such claims under insurance policies issued to predecessor companies. If insurance records are lost or incomplete, counsel can often coordinate an investigation, potentially with the assistance of an insurance archaeologist, and may be able to locate and potentially reconstruct historical insurance policies or programs.
The takeaway: Do not overlook the possibility of insurance coverage for potential liability regarding claims arising out of alleged emerging contaminant exposure. To maximize access to potential coverage, policyholders should act promptly to provide notice under all potentially responsive policies in the event of emerging-contaminant claims. Our experienced Insurance Recovery and Counseling lawyers can help guide policyholders through this process.
Our final edition will touch on considerations for companies defending litigation involving emerging contaminants. For more insight, visit our Emerging Contaminants webpage.

Texas Legislature Proposes Amendments to Texas Business Organizations Code

On February 27, 2025, a significant bill affecting entities organized under Texas law was filed in the Texas Legislature as Senate Bill 29 by Senator Bryan Hughes and as House Bill 15 by Representative Morgan Meyer. The Senate and House bills are currently identical and are referred to herein as the “Bill.” The Bill proposes a series of amendments to the Texas Business Organizations Code (“TBOC”) that apply to domestic Texas entities. Most of the amendments are applicable to Texas corporations, including in particular Texas corporations having shares listed on a national securities exchange. The authors of the Bill believe the amendments would reinforce corporate governance protections in Texas and reduce the risk of opportunistic shareholder litigation.
These reforms follow the commencement of operation of specialized Business Courts in Texas last fall and coincide with ongoing efforts to develop a new Texas-based stock exchange in Dallas. Together, these initiatives signal an ongoing commitment in Texas to providing a business-friendly jurisdiction that offers a stable legal environment for corporate governance and investment.
Many of the provisions of the Bill are tailored for publicly traded companies listed on a national securities exchange. The Bill would expand the definition of “national securities exchange” to include exchanges registered with the Securities and Exchange Commission as well as any stock exchange with its principal office in Texas that has received approval to operate by the Texas Securities Commissioner. [Bill Section 1; Amending TBOC Section 1.002(55-a).]
We discuss other key provisions of the Bill below.
Other states’ laws governing internal affairs and governance
The Bill provides that although a Texas entity’s managerial officials, in exercising their powers, may consider the laws and judicial decisions of other states and the practices observed by entities formed in other states, the failure to do so does not constitute or imply a breach of the TBOC or of any duty arising under Texas law. In fact, the Bill is clear that the plain meaning of the text of the TBOC “may not be supplanted, contravened, or modified by the laws or judicial decisions of any other state.” [Bill Section 2; Adding TBOC Section 1.056.]
Choice of forum and waiver of jury trial
The Bill would amend the TBOC to clarify that a domestic entity’s governing documents may require that one or more courts in Texas having jurisdiction shall serve as the exclusive forum and venue for any internal entity claims. [Bill Section 3; Amending TBOC Section 2.115(b).] For purposes of the TBOC, an “internal entity claim” means a claim of any nature, including a derivative claim in the right of an entity, that is based on, arises from or relates to the internal affairs of the entity [TBOC Sec. 2.115(a)].
The Bill would also add a new section to the TBOC to permit the governing documents of a Texas entity to contain an enforceable waiver of the right to jury trial if specified conditions are satisfied. Some commentators have questioned whether such a provision would be found to be constitutional because the Texas Constitution provides that the right to jury trial “shall remain inviolate.” In an attempt to satisfy the standards established in prior Texas case law for enforceable jury trial waivers, the Bill affirmatively states that a person’s waiver of jury trial is knowing and informed if the person (1) voted for or affirmatively ratified the governing document containing the waiver, (2) acquired an equity security in the entity when the waiver was included in the governing documents, or (3) is shown by evidence in a court proceeding to have knowingly and informedly consented or acquiesced to the waiver. [Bill Section 4; Adding TBOC Section 2.116.]
Codification of the business judgment rule
The Bill seeks to codify the business judgment rule in Texas by stating that, in the case of a Texas for-profit corporation having shares listed on a national securities exchange or affirmatively electing in its governing documents to be governed by this new provision, directors are presumed to act (1) in good faith, (2) on an informed basis, (3) in furtherance of the interests of the corporation, and (4) in a manner consistent with the law and the corporation’s governing documents. Neither the corporation nor its shareholders would have a cause of action against the corporation’s officers and directors unless one or more of the four preceding presumptions are rebutted by the claimant and the claimant proves both a breach of duty and that the breach involved fraud, intentional misconduct, an ultra vires act or a knowing violation of law. In any legal proceeding, the claimant must state with particularity the circumstances constituting the fraud, intentional misconduct, ultra vires act or knowing violation of law. The provision expressly states that it is not intended to affect any exculpation of monetary liability included in the corporation’s certificate of formation pursuant to TBOC Section 7.001. The Bill would also apply the same standards to any claims against directors or officers for breach of duty as a result of their authorization or performance of any conflict-of-interest contract or transaction with an interested director or officer under the TBOC’s interested person statute, if the corporation has shares listed on a national securities exchange or elects to be governed by the new business judgment rule provision. [Bill Sections 9 and 10; Adding TBOC Sections 21.418(f) and 21.419.]
Inspection of books and records
The Bill would amend the shareholder inspection rights provisions of the TBOC to clarify that a shareholder making a demand to inspect a Texas for-profit corporation’s books and records is not entitled to review emails, text messages or similar electronic communications, or information from social media accounts, unless the information affects an action by the corporation. Further, building on the existing statutory principle that a shareholder is not permitted to make a books and records demand for an improper purpose, the Bill would provide that, in the case of a corporation having shares listed on a national securities exchange or electing in its governing documents to be governed by the business judgment rule provisions, a written inspection demand will not be for a proper purpose if the corporation reasonably determines that the demand is in connection with a derivative proceeding that has been instituted or is expected to be instituted by the demanding holder or the holder’s affiliate, or if the demand is in connection with an active or pending civil lawsuit in which the demanding holder or the holder’s affiliate is or is expected to be an adversarial named party. [Bill Section 4, Amending TBOC Section 21.218.]
Advance determinations of independent and disinterested directors
The Bill would permit the board of directors of a Texas for-profit corporation having shares listed on a national securities exchange to adopt resolutions that authorize the formation of a committee of independent and disinterested directors to review and approve transactions, whether or not contemplated at the time of the committee’s formation, involving the corporation or any of its subsidiaries and a controlling shareholder, director or officer. In a novel new provision, the corporation adopting such a resolution would be able to petition a court of appropriate jurisdiction to hold an evidentiary hearing to validate the status of committee members as independent and disinterested.
There are various procedural provisions regarding this process that are beyond the scope of this alert. However, importantly, the new provision states that the court’s determination that the directors are independent and disinterested is dispositive in the absence of facts, not presented to the court, constituting evidence sufficient to prove that one or more of the directors is not independent and disinterested with respect to a particular transaction. Accordingly, the corporation may be able to avoid in subsequent litigation issues of whether directors are independent and disinterested. [Bill Sections 7 and 8; Adding TBOC Sections 21.416(g) and 21.4161.] The Bill also adds to the TBOC provisions governing shareholder derivative proceedings similar provisions that would authorize a court to make an advance dispositive determination as to whether the directors who are involved in making a decision whether to pursue a derivative action claim on behalf of the corporation are disinterested and independent. [Bill Section 13; Amending TBOC Section 21.554.]
Derivative litigation
The Bill would amend the TBOC to provide, for a Texas for-profit corporation having common shares listed on a national securities exchange or electing to be governed by the new business judgment rule provision, that a shareholder may not institute or maintain a derivative proceeding on behalf of the corporation unless the shareholder beneficially owns, at the time of instituting the derivative proceeding, a number of common shares to meet the required ownership threshold to institute a derivative proceeding in the right of the corporation as specified in the corporation’s certificate of formation or bylaws. However, that required ownership threshold may not exceed 3 percent of the corporation’s outstanding shares. [Bill Section 12; Adding TBOC Section 21.552(a)(3).] For these purposes, a “shareholder” can be a holder of record, a beneficial owner, or under a proposed amendment, two or more shareholders acting in concert. [Bill Section 11, Amending Section 21.551(2)(c).]
Disclosure-only settlements
Section 21.561 of the TBOC specifies certain circumstances in which a plaintiff’s attorneys may be awarded fees and expenses in a derivative proceeding, including the condition that the court finds the proceeding has resulted in a substantial benefit to the corporation. The Bill would amend this section of the TBOC to provide that a substantial benefit does not include “additional or amended disclosures made to shareholders, regardless of materiality.” [Bill Section 14; Adding TBOC Section 21.561(c).]
Status of Bill
The full text of SB 29 is available here. HB 15 is an identical companion bill. During the week of March 10, 2025, the Bill was heard in the Senate State Affairs Committee, which is chaired by Senator Hughes, and in the House Judiciary & Civil Jurisprudence Committee. The Bill was left pending in both Committees, and there was no significant testimony at the hearings in opposition to the Bill. Accordingly, the prospects for passage of the Bill by the Texas Legislature appear to be positive. However, the Bill has attracted a negative fiscal note from the Office of Texas Secretary of State, which estimates that the cost of implementing the amendments to TBOC Section 4.051 would be $1,752,965 for fiscal year 2026 and $513,040 annually for each fiscal year thereafter. If passed, the Bill would take effect on September 1, 2025, unless adopted by a two-thirds vote in both the Senate and House, in which case it would become immediately effective. In any case, any existing derivative proceedings would be grandfathered under pre-existing laws after the Bill’s amendments take effect.

Trump Revokes Biden Federal Contractor Minimum Wage Mandate: What to Expect Next

Takeaways

President Trump has rescinded President Biden’s 2021 executive order increasing the minimum wage for employees of federal contractors.
The minimum wage is now $13.30 per hour for federal contractors covered by President Obama’s 2014 executive order, which remains in effect.
Trump’s action does not formally revoke a Department of Labor rule implementing Biden’s wage mandate. However, there is no longer a basis for enforcing the rule.

EEOC Enforcement Activities Take Shape Under Second Trump Administration

The Equal Employment Opportunity Commission (EEOC) has been a regular topic of the flurry of executive orders issued by President Trump since his inauguration. Even before his return to the Oval Office, there was speculation about how the EEOC’s enforcement activities and priorities might change during a second Trump administration, as well as how the composition of the EEOC’s leadership would likely transform. In the weeks following the inauguration, the EEOC’s goals began to take shape, with its leadership seeing significant rearrangement. Manufacturers should stay current on these modifications as they signal substantial changes in the agency’s policies and anticipated future enforcement priorities and initiatives.
On January 24, 2025, President Trump dismissed two of the EEOC’s Democratic Commissioners and appointed Andrea Lucas as Acting Chair, leaving one Democratic Commissioner and one vacancy. The EEOC’s current leadership composition means it lacks a quorum and cannot issue regulations or guidance, or rescind or replace regulations or guidance issued by the previous administration. Importantly, these changes do not affect the EEOC’s ability to engage in enforcement activities.
Prior to President Trump’s second term, it was anticipated that the EEOC was preparing to scale back protections for LGBTQ+ workers. This shift came to fruition beginning in February, when the EEOC moved to voluntarily dismiss six lawsuits that it had filed during the Biden administration on behalf of aggrieved plaintiffs, alleging discrimination based on transgender status in violation of Title VII of the Civil Rights Act of 1964. In withdrawing from its representation, the EEOC noted in filings that continued litigation is untenable “in light of recent [a]dministration policy changes.” The EEOC’s voluntary dismissal of the lawsuits represents a major departure from its prior interpretation of the protections afforded under Title VII and its guidance issued during the Biden administration, in which the EEOC took the position that the intentional misuse of an employee’s preferred pronouns constituted discrimination and harassment.
Although the EEOC has chosen to step back from its representation of the plaintiffs in these lawsuits, the same federal law that authorizes the EEOC to sue on their behalf also provides the plaintiffs with a right to intervene in and pursue the litigation on their own behalf.
In light of these developments, manufacturers should remain aware of the following when making decisions related to the recruitment, hiring, and termination, as well as other terms and conditions of employment:

Although the EEOC may change its enforcement priorities, an executive order cannot override federal laws and constitutional rights. This includes the federal law authorizing individuals to intervene in litigation brought by the EEOC and pursue litigation on their own behalf as well as the Supreme Court’s holding in Bostock v. Clayton County, 590 U.S. 644 (2020), that discrimination based on sexual orientation or gender identity constitutes “sex discrimination” in violation of Title VII.
The federal government’s labor and employment law enforcement activities and policies are separate from those of state and local governments, which may continue or even increase their efforts in reaction to changes at the federal level.
It is possible that the EEOC’s enforcement activities will continue to change, so it is crucial for manufacturers to stay current on executive orders, guidance, and enforcement initiatives at the federal level.

Manufacturers should consult competent employment counsel for assistance with regard to the EEOC’s enforcement initiatives, guidance, and other communications.

Top Five Labor Law Developments for February 2025

A federal judge for the District of Columbia held President Donald Trump’s termination of National Labor Relations Board Member Gwynne Wilcox violated the National Labor Relations Act; Wilcox’s reinstatement restores Board quorum. Wilcox v. Trump and Kaplan, No. 1:25-cv-00334 (D.D.C Mar. 6, 2025). The decision stems from President Trump’s removal of Wilcox as a Board member prior to the expiration of her term. In her lawsuit, Wilcox argued her unprecedented removal violated the Act, which allows the president to remove Board members only in cases of “neglect of duty or malfeasance in office, but for no other cause,” and only after “notice and hearing.” Wilcox cited for support the U.S. Supreme Court’s 1935 decision in Humphrey’s Executor, in which the Court upheld the constitutionality of for-cause removal protections for federal agency leaders. The Trump Administration filed a Notice of Appeal with the D.C. District Court shortly after the judge’s decision. In the meantime, Wilcox’s return restores the Board’s three-member quorum, and it can resume issuing decisions.
Acting Board General Counsel (GC) William Cowen issued a memorandum rescinding dozens of former GC Jennifer Abruzzo’s enforcement initiatives. GC Memo 25-05. The memo signals Cowen’s intention to undo many of Abruzzo’s policies, including those related to protected concerted activities, settlement agreements, and employment agreement provisions like “stay-or-pay” provisions. While GC memos do not reverse Board decisions, the memo indicates the GC will interpret the law and act in a manner more favorable to employers’ interests. The memo also aims to address the Board’s unsustainable case backlog, largely due to the prior administration’s expansive enforcement priorities. Overall, GC Memo 25-05 impacts 31 GC memos issued between 2021 and 2025. It is likely the Board’s regional offices will no longer prosecute cases seeking to overturn longstanding Board law in favor of more employee-friendly standards.
The U.S. Senate confirmed Trump’s nominee for the U.S. Department of Labor (DOL) Secretary — former U.S. Representative Lori Chavez-DeRemer — by a 67-32 vote. Chavez-DeRemer’s nomination faced criticism from business groups and Republican lawmakers due to her previous support for the Protecting the Right to Organize (PRO) Act, which would significantly expand union organizing rights if passed. However, Chavez-DeRemer backtracked on her support for the PRO Act during the Senate Health, Education, Labor, and Pensions Committee hearing. Chavez-DeRemer has since committed to preserving states’ right-to-work laws and protecting independent contractor and franchise models.
The International Longshoremen’s Association (ILA) ratified a six-year contract with the U.S. Maritime Alliance (USMX), with almost 99 percent of members voting in favor of the agreement. The contract provides job guarantees amid concerns that automated technology would replace many union jobs. It also provides a 62 percent pay raise that was agreed to prior to a three-day strike in October 2024. Both parties previously praised President Trump for his assistance in helping the parties reach an agreement. The contract, which covers approximately 45,000 workers, will be effective through Sept. 30, 2030. Ratification also prevents another port strike that would have disrupted the nation’s supply chain.
The Board issued a “Return to Office Policy” requiring workers to return to the office full-time by March 31, 2025, according to a letter obtained by Law360. The Board cited guidance from the Office of Personnel Management and a recent Trump memorandum as the basis for the decision. Exceptions to the policy include accommodations under the Rehabilitation Act and temporary medical conditions. The policy has sparked backlash from the unions representing Board workers, including the NLRB Professional Association, which argue the policy violates their collective bargaining agreements. Acting GC Cowen recently stated that, while he will do what he can to prevent a reduction in the Board’s staff, the Agency is not immune from layoffs.

The Headless PAGA Saga Continues

On February 26, 2025, in Parra Rodriguez v. Packers Sanitation, Inc., the California Court of Appeal (Fourth Appellate District) issued the latest published decision addressing the practice of filing so-called “headless” Private Attorneys General Act (PAGA) claims. In such cases, the plaintiff seeks civil penalties for all allegedly aggrieved employees except themself. In the wake of Viking River Cruises, Inc. v. Moriana, 596 U.S. 639 (2022), this tactic has become increasingly common among plaintiffs seeking to circumvent contractual obligations to submit “individual” PAGA claims to arbitration.
The Parra Rodriguez decision added some fuel to the headless PAGA debate by upholding a Superior Court order denying a motion to compel a headless PAGA claim to arbitration, concluding that because only an individual PAGA claim can be compelled to arbitration, there is nothing to arbitrate when no individual PAGA claim is pled.
In doing so, Parra Rodriguez created a split of authority with Leeper v. Shipt, Inc., decided December 30, 2024, by the Second Appellate District. In Leeper, the court held that a PAGA claim cannot be headless, because “the unambiguous language in section 2699, subdivision (a), [states that] any PAGA action necessarily includes both an individual PAGA claim and a representative PAGA claim” (emphasis added). Under the reasoning of Leeper, where a defendant moves to compel arbitration of a headless PAGA claim, the individual PAGA claim is implicitly pled, and may be compelled to arbitration.
While a split unquestionably exists between Parra Rodriguez and Leeper regarding what courts should do when a defendant moves to compel arbitration of a headless PAGA claim, practitioners and courts should not overread these decisions as differing on whether it is procedurally proper to plead a headless PAGA claim in the first place. By concluding that a PAGA claim necessarily includes an individual component, Leeper clearly answers this question in the negative. By contrast, Parra Rodriguez expressly avoided that question, leaving open the possibility that a complaint pleading a headless PAGA claim “fails to comply” with PAGA’s pleading requirements, exposing it to “an appropriate pleading challenge.”
Nor does Balderas v. Fresh Start Harvesting, Inc., 101 Cal. App. 5th 533 (2024) contradict Leeper. In Balderas, the Second Appellate District held that a plaintiff had standing to pursue a representative PAGA action on behalf of other employees despite not filing an individual action seeking PAGA relief for herself. But the issue of standing merely concerns who may pursue a claim, not whether the statute permits a claim to be pled in headless fashion.
Parra Rodriguez may very well incentivize plaintiffs to continue the practice of pleading headless PAGA claims. Its disagreement with Leeper on how to handle motions to compel arbitration in this context injects new uncertainty into this issue and increases the likelihood that the California Supreme Court will take up the issue. But for the moment, the only published appellate authority coming to a holding regarding whether a plaintiff may properly plead a headless PAGA claim is Leeper, which holds that a plaintiff may not.
We will continue to monitor developments in this space and provide updates.

Federal Circuit Decision Could Encourage More Reissue Patents

The Patent Term Extension (PTE) provisions of 35 U.S.C. § 156 compensate pharmaceutical patent owners for time they are not able to enjoy commercial market exclusivity because their products are not yet approved by the U.S. Food and Drug Administration (FDA). The length of a PTE award depends on how much time was spent under FDA review after the patent was issued. But which issue date is used for a reissued patent? In Merck Sharp & Dohme B.V. v. Aurobindo Pharma USA, Inc., the Federal Circuit decided that the earlier issue date of the original patent should be used to calculate PTE. By essentially preserving PTE awarded to original patents, this decision could encourage pharmaceutical companies to pursue reissue, especially if there are any concerns that broad original claims may not comply with the court’s recent Orange Book listing guidance.
The BRIDION® Patent And Regulatory Review Period at Issue
The patent at issue is listed in the Orange Book for Merck’s BRIDION® (sugammadex) product, which is indicated for the reversal of neuromuscular blockade induced by rocuronium bromide and vecuronium bromide in adult and pediatric patients undergoing surgery. The patent was first issued December 30, 2003, as U.S. Patent No. 6,670,340, and then reissued on January 28, 2014, as U.S. Patent No. RE44,733. The reissued patent amended a dependent claim to expressly recite the active ingredient of BRIDION®.
Merck applied for FDA approval of sugammadex on April 13, 2004 (four months after the ’340 patent issued), and it was approved on December 15, 2015. Thereafter, Merck sought, and the USPTO granted, the maximum five years of PTE available under § 156, using the issue date of the original ’340 patent for the PTE calculation. (If the issue date of U.S. Patent No. RE44,733 had been used, the PTE award would have been only 686 days.)
The challenge to the PTE award arose in the context of ANDA litigation brought by several companies seeking FDA approval to sell generic versions of BRIDION®. The district court agreed with the USPTO’s calculation, and on appeal the Federal Circuit did too.
The Federal Circuit Opinion
The Federal Circuit opinion was authored by Judge Dyk and joined by Judges Mayer and Reyna. As framed in the opinion, the issue on appeal was one of statutory construction—the meaning of “the patent” in §156(c):
The term of a patent eligible for extension under subsection (a) shall be extended by the time equal to the regulatory review period for the approved product which period occurs after the date the patent is issued …

The Federal Circuit agreed with the USPTO that the language of §156(c) itself was ambiguous in that it is “unclear whether ‘the patent’ refers to the original or reissued patent.” Thus, the Federal Circuit considered “the broader context of the statute as a whole,” stating:
[T]he purpose of [§ 156] is clear: to compensate pharmaceutical companies for the effective truncation of their patent terms while waiting for regulatory approval of new drug applications.

With this purpose in mind, the opinion reasons:
That purpose applies in this case, since construing “the patent” in subsection 156(c) as the original patent compensates Merck for the period of exclusivity lost due to regulatory delay. On the other hand, Aurobindo’s construction denies Merck compensation for all but a small period of the delay. There is no reason why the Hatch-Waxman Act’s purpose would be served by disabling extensions of the unexpired term solely based on a patent holder’s decision to seek reissue …

The opinion concludes:
We thus conclude that, in the context of reissued patents, “the patent” in subsection 156(c) refers to the original patent. A reissued patent is entitled to PTE based on the original patent’s issue date where, as here, the original patent included the same claims directed to a drug product subject to FDA review.

Reissue Patents and Orange Book Listings
As discussed in this article, the Federal Circuit decision in Teva v. Amneal may have patent owners taking a second look at their Orange Book-listed patents, to assess whether they “particularly point out and distinctly claim” the specific drug approved by the FDA. For patents that disclose but do not expressly claim the approved active ingredient, seeking a reissue patent could allay Orange Book listability concerns. The PTE decision in Merck indicates that obtaining a reissued patent would not lessen PTE, providing further reason to consider the reissue process as an opportunity to strengthen a patent portfolio.

BIG LAW LOSS: TCPA Defendant Loses Bifurcation Effort After Terrible Discovery Objections– Is #BigLaw Inexperience to Blame?

Looks like #biglaw inexperience has cost another TCPA defendant big time.
But let’s try to stay positive.
First, I’m fairly certain I invented the concept of seeking bifurcated discovery in TCPA class litigation.
I know I invented seeking “trifurcted” discovery in TCPA class litigation.
Been doing it since 2011.
For a long time no other defense counsel even attempted the maneuver. Recently we have seen quite a bit of it. But like so much else in litigation, its one thing to make the right move– its another thing to win the move. Especially when #biglaw is involved. These guys can’t seem to win anything in TCPAWorld.
So what does bi/trifurcated discovery even mean and why does it matter?
The primary vehicle Plaintiff’s lawyers have to extract large dollar TCPA settlements in class discovery. They serve massively overly broad demands–stuff like, produce records of every call you’ve ever made and every consent record supporting the right to make those calls and every account record for every costumer that signed up as a result of those calls– in an effort to turn a company inside out and drive them to the settlement table.
For smaller companies these sorts of demands are irritating and invasive, but perhaps not crippling. But for large enterprises the idea of extracting millions of confidential/private client files to hand over to a plaintiff’s lawyer is downright insane.
Now the rules typically do not allow for this type of discovery but if defense counsel isn’t VERY careful with objections they may end up waiving critical protections and the court may end up issuing an order compelling production of these materials.
But one way to cut off this entire issue is by asking the court to prevent invasive “merits” discovery into class claims until after class issues are decided. (Type 1 bifurcation.) Or to stay all class discovery pending the outcome of a dispositive motion challenge to the named plaintiff’s claim. (Type 2 bifurcation.) Either one of these is a form of “bifurcation” of discovery.
In Bond v. Folsom Insurance Agency, 2025 WL 863469 (N.D. Tex. March 19, 2025) the Defendant–represented by a #biglaw firm that did NOT make my list of top best TCPA lawyers–attempted Type 2 bifurcation (i.e. they sought to stay class discovery until the Plaintiff’s individual claims were resolved.) Unfortunately the defendant had already lost a discovery battle earlier in the case and the court was not going to allow the belated effort to seek bifurcation bail the defendant out. So it denied the motion.
Get it?
The defense failed to seek bifurcation at the right time. Then the failed to assert proper objections/arguments to prevent the production of class wide information. Instead it asserted ” boilerplate objections” that were rejected by the court.
What a disaster. Shouldn’t have happened.

Wisconsin Court of Appeals Finds Taxpayer-Funded College Grant Program to Be Unconstitutional

On February 26, 2025, the Wisconsin Court of Appeals, District II, determined that a program that provided taxpayer-funded educational grants to financially needy students of specific racial, national origin, and ancestry groups was unconstitutional.

Quick Hits

On February 26, 2025, a Wisconsin appellate court ruled that a taxpayer-funded educational grant program for minority students is unconstitutional, citing the U.S. Supreme Court’s decision in Students for Fair Admissions, Inc. v. President and Fellows of Harvard College (SFFA).
The court’s decision to halt the Minority Undergraduate Retention Program underscores the broader implications of the SFFA ruling, suggesting that race-based considerations in state-funded educational assistance programs may also violate the Equal Protection Clause of the U.S. Constitution.
Legal scholars and post-secondary institutions are closely monitoring the impact of the court’s decision and the federal government’s recent guidance, which indicates that the SFFA ruling could extend beyond university admissions to other areas, including employment-related decision-making.

Background
In April 2021, five Wisconsin taxpayers filed a lawsuit against the Higher Educational Aids Board (HEAB) and its executive secretary, Connie Hutchinson. HEAB and Hutchinson administer the Minority Undergraduate Retention Program, which was created by the Wisconsin legislature in 1985 to offer grants to certain undergraduate minority students. To be eligible for the grants, the students must be Black American, American Indian, Hispanic, or have ancestors who were formerly citizens of Laos, Vietnam, or Cambodia. In the case, Rabiebna v. Higher Educational Aids Board, the taxpayers claimed that the eligibility criteria (i.e., limiting eligibility to students of these specific racial or ethnic backgrounds) violated both the Equal Protection Clause of the U.S. Constitution and Article I of the Wisconsin Constitution.
The circuit court granted summary judgment in favor of the HEAB and Hutchinson. The taxpayers then appealed the decision. After the parties’ appellate briefs were filed, the Supreme Court of the United States issued its decision in Students for Fair Admissions, Inc. v. President and Fellows of Harvard College, 600 U.S. 181 (2023). In SFFA, the Supreme Court ruled that two universities violated the Equal Protection Clause of the U.S. Constitution by considering an applicant’s race as part of the applicant’s admissions processes. Therefore, both parties in the HEAB case submitted additional briefing to the appeals court articulating the impact of the SFFA case on its review of the Minority Undergraduate Retention Program in Wisconsin.
The Decision
After evaluating the Wisconsin statutory language and considering the parties’ arguments, the appeals court reversed the circuit court’s ruling, finding instead that the Minority Undergraduate Retention Program violates the law. Notably, the court relied heavily on the SFFA opinion to support its conclusion, citing to it more than one hundred times in its fifty-three-page decision. The court’s analysis also closely tracked the overarching legal framework provided by SFFA. As a result of this decision, the HEAB and Hutchinson are currently enjoined from further administering the grant program and distributing any funds from it.
Implications of the Decision
Some legal scholars initially interpreted the Supreme Court’s SFFA decision narrowly, arguing that it was limited to university admissions policies. However, the HEAB opinion signals that some courts are willing to utilize SFFA’s Equal Protection analysis in other contexts where race is a consideration, including state-funded educational assistance programs. Indeed, the Wisconsin appeals court, citing to SFFA, emphasized that no state has the authority under the Equal Protection Clause to use race as a factor in offering “educational opportunities.” (Emphasis in original.)
The HEAB decision also appears to align with the U.S. Department of Education’s “Dear Colleague” letter dated February 14, 2025, which explicitly states that the SFFA decision “applies more broadly” than just to university admissions decisions. Given this letter and the recent confirmation of Linda McMahon as the new secretary of education, post-secondary institutions may want to consider closely monitoring developments in the federal government’s interpretations of the law post-SFFA, and its subsequent enforcement actions.
Finally, it appears that the SFFA decision will have impacts beyond the realm of education. For example, there are already cases pending in various jurisdictions around the country that cite to the SFFA case to challenge an employer’s consideration of race in hiring or other employment decisions. Therefore, employers may also want to consider following these cases, along with litigation over the Trump administration’s executive orders regarding diversity, equity, and inclusion, to see whether and how the SFFA decision is implicated and whether courts will extend SFFA’s reasoning to cover employment-related decision-making.

China’s Supreme People’s Court Releases Fifth Batch of Typical Cases of Seed Industry Intellectual Property Protection

On March 19, 2025, China’s Supreme People’s Court (SPC) released the Fifth Batch of Typical Cases of Seed Industry Intellectual Property Protection By People’s Courts (人民法院种业知识产权司法保护典型案例 (第五批)). The Fifth Batch includes 15 typical cases of judicial protection of seed industry IP concluded in 2024 including 13 civil cases, 1 administrative case and 1 criminal case. While not a common law system, China uses typical cases to “guide” the lower courts and public.
The SPC provided brief explanations of the cases and relevance as follows. The original text with links to the full decisions is available here (Chinese only).

Case 1. “Gangyou 188” new rice plant variety infringement case

[Dispute over infringement of new plant variety rights between Gan XX Industrial Company and Chongqing Non XX Industrial Company and Lei XX]
Second instance: 最高人民法院（2023）最高法知民终3165号

[Basic Facts of the Case]
Gan XX Industrial Company is the exclusive licensee of the new rice plant variety “Gangyou 188”. It filed an infringement lawsuit, claiming that the “Gangyou 88” seeds produced and sold by Chongqing Non XX Industrial Company and sold by Lei XX infringed its variety rights, and requested that the two companies be ordered to stop the infringement, Chongqing Non XX Industrial Company compensate for losses and reasonable expenses totaling more than 15.14 million RMB, and Lei XX bear joint and several liability for reasonable expenses. Chongqing Non XX Industrial Company argued that it had obtained the production and operation rights of the approved variety “Gangyou 88” through legal transfer, and at the time of transfer, it had conducted authenticity appraisal of the “Gangyou 88” it used and had fulfilled its reasonable review obligations, so it should not bear compensation liability. After the administrative agency and the first instance court commissioned appraisals respectively, the alleged infringing seeds “Gangyou 88” produced and sold by Chongqing Non XX Industrial Company and sold by Lei XX were identical to the standard sample of the approved variety, and were similar to the authorized variety “Gangyou 188”. The court of first instance determined that Chongqing Non XX Industrial Company and Lei XX did not infringe the law based on the fact that the alleged infringing seed “Gangyou 88” was identical to its approved standard sample. Gan XX Industrial Company filed an appeal.
[Judgment Result]
The Supreme People’s Court held in the second instance that there are differences between variety approval and variety authorization in terms of application procedures and system purposes. Whether the alleged infringing seeds are identical to the standard samples of the approved varieties has no relevance to whether they are identical to the characteristics and properties of the authorized varieties for protection. Unless otherwise provided by laws and administrative regulations, the production, reproduction, and sale of authorized variety propagation materials without the permission of the variety right holder constitutes infringement of variety rights. If the alleged infringing seeds belong to the approved varieties, he can claim the corresponding contractual liability from the transferor based on the contractual relationship, but cannot use this to counter the infringement claim of the variety right holder. If there are multiple license transfers of the infringing approved varieties, unless there is evidence that the alleged infringer has not used the seeds, the infringement time can be calculated from the date on which he acquired the variety in principle. Based on this, the second instance changed the judgment ordering Chongqing Non XX Industrial Company and Lei XX to stop the infringement, Chongqing Non XX. Industrial Company must compensate for losses and reasonable expenses for rights protection totaling more than 5.96 million RMB, and Lei XX was responsible for reasonable expenses for rights protection of 6,288 RMB.
【Typical significance】
This case clearly stipulates that the transferee of the approved variety shall bear legal responsibility for any act that constitutes infringement of the variety rights in the production and operation of the approved variety, which not only provides strong protection for the variety rights holder, but also effectively regulates the seed industry market. This case serves as a warning to seed operators to standardize their operations throughout the entire process of variety authorization, variety approval, and variety production promotion, in order to promote awareness of variety rights protection. The second instance judgment has reference significance in clarifying the legal nature of the approved variety, clarifying the method of infringement judgment, and reasonably determining compensation.

Case 2. “Sailete” apple new plant variety temporary protection period royalties and infringement case

[Dispute between Yin XX company and You XX company regarding temporary protection period royalties and infringement of new plant variety rights]
First instance: 甘肃省兰州市中级人民法院（2023）甘01知民初9号
Second instance: 最高人民法院（2023）最高法知民终3113号

[Basic Facts of the Case]
The “Sailete” apple variety was selected and bred by a research institute company in New Zealand and obtained the plant variety rights in China. Ying XX International Company is an interested party in the variety rights of “Sailete”. They have filed a lawsuit claiming that You XX Agricultural Company has been producing, breeding, and selling “Sailete” breeding materials without permission since 2018, and has sold a large amount of apple fruits harvested from them, which constitutes infringement. They request an order to stop the infringement, to inactivate the infringing materials, and to apply punitive damages of 5 million RMB. The You XX Agricultural Company believes that its planting of fruit trees does not constitute production or reproduction, and that planting fruit trees only for the purpose of obtaining apple fruits rather than specifically cultivating seedlings and does not constitute infringement. Even if it is determined to constitute infringement, it should not be ordered to inactivate the fruit trees, let alone determine the compensation amount based on the sales volume of apple fruits. After appraisal, it was found that the branches of the “Aifei” fruit tree purchased by Yin XX company from You XX agricultural company through notarization are identical to the “Sailete” variety. You XX agricultural company did not provide evidence that its fruit trees have a legal source.
[Judgment Result]
The Lanzhou Intermediate People’s Court of Gansu Province ruled at first instance that You XX Agricultural Company should inactivate all infringing propagation materials (plants, branches, etc.), and at the same time applied double punitive damages, and ordered You XX Agricultural Company to compensate for losses, temporary protection period usage fees and reasonable expenses totaling 3.3 million RMB. You XX Agricultural Company appealed.
The Supreme People’s Court held in the second instance that in the process of planting and obtaining “Sailete” apples by You XX Agricultural Company, a large number of saplings and branches must have been propagated. Based on the evidence in this case, it can be reasonably inferred that it has been engaged in the continuous production and propagation of authorized variety propagation materials. You XX agricultural company plants saplings of the “Sailete” variety for profit, sells a large number of apple fruits, and engages in propagation behavior. Its planting behavior should be recognized as production and reproduction behavior. It not only produces and reproduces apple seedlings, but also sells apple fruits. The act of selling harvested materials is a natural extension of the production and propagation of authorized varieties of breeding materials in the chain of time and obtaining illegal benefits, and should be considered as a whole. When determining the amount of compensation, the principle of comprehensive compensation should be followed, and the profits obtained from selling harvested materials should be used as a reference for infringement profits. Inactivating the breeding materials of infringing varieties is an effective measure and a natural means to stop infringement. When determining the specific responsibility for ceasing infringement, based on the characteristics of the accused infringing variety’s long-term growth and asexual reproduction, if the infringing propagation materials are not inactivated, the infringing plants may survive for a long time and have the risk of spreading. Compared to the method of removing seedlings and replanting them, the right holder’s claim to stop infringement by inactivating the scion and grafting non infringing varieties of scions can better balance the interests of all parties and should be supported. The appeal was dismissed and the original verdict was upheld.
【Typical significance】
The holder of the variety right in this case is a New Zealand company, and the judgment shows that the People’s Court insists on equal protection in accordance with the law. This case regards the act of selling harvested materials as a natural extension of the production and reproduction of propagation materials, and when the infringer mainly obtains illegal profits by selling harvested materials, the sales profit of the harvested materials is used as the basis for determining the amount of compensation, which provides an important reference for the calculation of compensation in subsequent similar cases and further strengthens the comprehensive protection of variety right holders. The method of stopping infringement supported by this case, which is to cut off the scion of infringing propagation material and graft other non-infringing variety scions, fully considers the characteristics of perennial asexually propagated crops, fully protects the interests of variety right holders, and reasonably takes into account the recovery of agricultural production and avoidance of resource waste, and makes useful explorations for refining the forms of stopping infringement of variety rights.

Case 3. Infringement of the new variety of rose plant “Tianshan Xiangyun”

[Dispute between Xinjiang Hua XX Technology Company and a Xinjiang seedling farm regarding infringement of new plant variety rights]
Second instance: 最高人民法院（2024）最高法知民终665号

[Basic Facts of the Case]
Xinjiang Hua Technology Co., Ltd. is the owner of the variety right of the new variety of Rosaceae, “Tianshan Xiangyun”. In 2022, Xinjiang Hua Technology Co., Ltd. notarized the purchase of seedlings that infringed the variety right of “Tianshan Xiangyun” from a certain seedling farm in Xinjiang. On May 28, 2023, a certain seedling farm in Xinjiang signed a “Seedling Ordering Agreement” with a certain cultivation base in Changji, agreeing to sell 8,000 “Tianshan Xiangyun Seedlings.” Xinjiang Hua Technology Co., Ltd. filed an infringement lawsuit, claiming that the Xinjiang seedling farm had continued to infringe from 2014 to 2023, and requested that Xinjiang farm to stop the infringement and compensate for losses and reasonable expenses totaling 5 million RMB. Xinjiang Hua Technology Co., Ltd. sells “Tianshan Xiangyun” at a price of 320-360 RMB per plant, while the Xinjiang seedling farm sells it at a price of 120-160 RMB per plant. Xinjiang Hua Technology Co., Ltd. claims that the average of the difference between its sales price of “Tianshan Xiangyun” and the sales price of the Xinjiang seedling farm in is its sales profit. The Xinjiang seedling farm argued that it was a public welfare institution. Since 2014, it has been cutting branches of rose varieties such as “Tianshan Xiangyun” from municipal parks for breeding. In 2021, the 36 rose varieties cultivated will be uniformly named “Tianshan Rose.” “Tianshan Xiangyun” is only one of them. Its behavior is scientific research and development, and the seedlings it obtained were cut from municipal parks or introduced from other places. According to the principle of exhaustion of rights, it does not constitute infringement. The 2021 work summary submitted by it shows that 10,500 “Tianshan Xiangyun” cuttings were taken in 2021, and 4,000 survived. The “Origin Quarantine Certificate” of the Xinjiang seedling farm in 2022 and 2023 recorded that the number of “Tianshan Rose” including “Tianshan Xiangyun” was 20,000 and 50,000 respectively. The first instance court determined that the production, breeding and sales behavior of the Xinjiang seedling farm exceeded the scope of scientific research and had a profit-making purpose. The infringement was established and ordered it to stop the infringement and pay 200,000 RMB in compensation. Xinjiang Hua Technology Company appealed.
[Judgment Result]
The Supreme People’s Court held in the second instance that the application of the principle of exhaustion of variety rights is based on the premise that the authorized variety propagation materials are sold by the variety right holder or the entity or individual authorized by the variety right holder, and only applies to the subsequent production, propagation, and sales of the legally sold authorized variety propagation materials themselves, and does not apply to the re-propagation and sale of the sold propagation materials. The Xinjiang seedling farm failed to prove that its propagation behavior was to use the authorized variety to cultivate new varieties, and its large-scale propagation was inconsistent with the scale required for scientific research. At the same time, it engaged in sales for profit, which constituted infringement. The Xinjiang seedling farm admitted that it had cut and propagated “Tianshan Xiangyun” seedlings at the end of 2014 and is still producing and propagating it. Combined with the notarial certificates involved in the case, relevant agreements, work summaries and other evidence, it can be determined that it has continued to infringe since at least 2014 to 2023. Considering that the price of goods sold to the outside world is bound to be higher than the production cost and the Xinjiang seedling farm refused to provide relevant account books and other information, the average value of the difference between the price of “Tianshan Xiangyun” sold by Xinjiang Hua Technology Company and the sales price of Xinjiang seedling farm, that is, 200 RMB/plant, was used as the basis for determining the losses suffered by the right holder due to infringement. Based on the evidence in the case, the number of alleged infringing seedlings produced and bred by the Xinjiang seedling farm in 2021 was not less than 4,000, and in 2023 it was not less than 8,000. Based on this, selecting the average number of these two years, it can be determined that the number of alleged infringing seedlings produced and bred by the Xinjiang seedling farm from 2021 to 2023 was 6,000 plants/year. The amount of damages calculated based on these three years alone has exceeded the 3 million RMB requested by Xinjiang Hua Technology Company in appeal. Therefore, the second instance changed the judgment to fully support the amount of compensation requested by Xinjiang Hua Technology Company on appeal.
【Typical significance】
This case clearly states that the principle of exhaustion of rights does not apply to the act of re-breeding and selling the propagation materials that have been sold. The second-instance judgment supported the relevant claims of the variety right holder when the infringer refused to submit financial books and other evidence, calculated the infringement damages based on the difference between the variety right holder’s selling price and the infringer’s selling price, and significantly increased the amount of compensation, effectively protecting the rights and interests of breeding innovation entities, and has precedential significance for breaking through the difficulties of evidence and accurately determining the amount of compensation in similar infringement cases.

Case 4. “Jinjing 818” new rice plant variety infringement case

[Dispute over infringement of new plant variety rights between Jiangsu Jin XX Industrial Company and Xuzhou Agricultural Materials Company, Zhao XX and Zhao YY]
First instance: 江苏省南京市中级人民法院（2022）苏01民初2019号
Second instance: 最高人民法院（2023）最高法知民终2896号

[Basic Facts of the Case]
Jiangsu Jin XX Industrial Company is the licensee of the exclusive implementation license for the new rice plant variety “Jinjing 818”. In May 2020, a certain agricultural material company in Xuzhou was ordered to stop infringement and bear punitive compensation liability for using white bags and irregular packaging to sell infringing seeds without the permission of the “Jinjing 818” variety right holder. The company failed to comply with the above judgment, and Jiangsu Jin XX Industrial Company applied for compulsory execution. During the execution process, the court added Zhao XX, the sole shareholder and legal representative of a certain agricultural material company in Xuzhou, as the liable person. Since January 2021, Zhao XX has successively released seed supply information, contact numbers of the heads of various sales areas of a certain agricultural material company in Xuzhou, and accountant Zhao YY in WeChat group chats, and organized offline ordering activities. Starting from November 29, 2021, a farmer communicated with the sales staff of the agricultural material company in Xuzhou about the purchase of the alleged infringing seeds, and paid the deposit and the remaining amount to Zhao YY’s account. Jiangsu Jin XX Industrial Company filed a lawsuit, requesting that Xuzhou XX Agricultural Materials Company, Zhao XX, and Zhao YY stop infringing and jointly compensate for losses and reasonable expenses for rights protection totaling 3 million RMB. During the first instance trial, it was determined that the alleged infringing seeds were very similar or identical to “Jinjing 818”.
[Judgment Result]
The Nanjing Intermediate People’s Court of Jiangsu Province held at first instance that after being ordered to stop infringement in the previous case, the Xuzhou Agricultural Materials Company once again organized seed transactions through WeChat groups and committed infringement. Zhao XX, the legal representative and sole shareholder of Xuzhou Agricultural Materials Company, used WeChat groups to publish seed supply information and organized offline ordering activities, playing a key and core organizational role in seed transactions, and jointly infringed with Xuzhou Agricultural Materials Company. Zhao YY, who participated in seed sampling, collected transaction funds with his personal account after Xuzhou Agricultural Materials Company was found liable, and he, Xuzhou Agricultural Materials Company, and Zhao XX jointly infringed. The three defendants were ordered to stop the infringement, and Xuzhou Agricultural Materials Company and Zhao XX jointly compensated Jiangsu Jin XX Industrial Company for economic losses and reasonable expenses totaling 1.8 million RMB, and Zhao YY was jointly liable for 350,000 RMB of it. The three defendants appealed. The Supreme People’s Court rejected the appeal in the second instance and upheld the original judgment.
【Typical significance】
This case is a typical example of severely cracking down on hidden infringements and the persons directly responsible. In response to hidden infringements such as organizing seed transactions on online platforms, the actual controller of the company who played an organizing and decision-making role in the occurrence of the infringement and other persons who received the company’s infringement proceeds with their personal accounts and directly participated in the infringement were found to have committed joint infringements with the company, and were ordered to bear joint and several liability based on the circumstances of their infringement and the extent of their role, effectively raising the cost of infringement.

Case 5. Infringement of the new variety of the genus “Hongyunlai”

[Dispute over infringement of new plant variety rights between a Shanghai plant company and a Guangzhou agricultural science company]
Second instance: 最高人民法院（2022）最高法知民终1362号

[Basic Facts of the Case]
A plant company in Shanghai and a non-party company in Shanghai are the variety rights holders of the new fruit vine variety “Hongyunlai.” In January 2020, the plant company in Shanghai obtained “Xinhongxing” seedlings sold by the Guangzhou agricultural science company and has them notarized and stored at the Plant New Variety Testing (Shanghai) Branch Center, and sent the above two samples to a technology company in Ningbo for testing. On April 13, 2020, the technology company in Ningbo issued a “Technical Appraisal Opinion”, and the appraisal result was that the AFLP fingerprints of the two varieties were 95.08% similar, and the two varieties were highly similar. The plant company in Shanghai filed a lawsuit, requesting that the Guangzhou agricultural science company be ordered to stop infringement and compensate for losses. The first-instance judgment did not adopt the technical appraisal opinion on the grounds that the varieties involved had no national standards or industry standards for molecular marker detection, and rejected all the claims of the plant company in Shanghai. The plant company in Shanghai appealed. In the second instance, the Supreme People’s Court approved the appraisal application of the plant company in Shanghai, and with the consent of both parties, designated a testing agency to conduct the appraisal. The testing agency used the MNP labeling method to conduct testing and issued a test report stating that the genetic similarity between the tested sample and the control sample was 99.91%, and the identification results were extremely similar or the same variety.
[Judgment Result]
The Supreme People’s Court held in the second instance that the people’s courts should review whether the molecular marker detection method for plant variety identity identification is scientific and reliable. If the molecular marker detection method for a specific plant variety has not yet established a national standard or industry standard, the identification results made by qualified identification institutions and appraisers with reference to other relevant standards, if the identification method can scientifically and accurately distinguish different varieties and has sufficient scientific basis and repeatability, can be used as evidence to determine whether the alleged infringing object is identical to the authorized variety. The “MNP Marking Method for Plant Variety Identification” has been established as a national standard and can be applied to the identification of original varieties, substantially derived varieties and variety authenticity identification of rice, corn, soybeans, etc. The identity identification of pineapple varieties of the genus Pyrifera can be carried out in accordance with the “MNP Marking Method for Plant Variety Identification.” After identification, the alleged infringing seedlings “Xinhongxing” and the authorized variety “Hongyunlai” are very similar or identical varieties. The Guangzhou agricultural science company did not submit rebuttal evidence, so it can be determined that the alleged infringing seedlings are identical to the authorized variety “Hongyunlai”. The court then changed the judgment to require the Guangzhou agricultural science company to stop infringing and compensate for the losses and reasonable expenses totaling 1.075 million RMB.
【Typical significance】
This case is a typical case of exploring the use of MNP labeling for identification of specific crops for which national or industry standards for molecular marker detection have not yet been established. The second-instance judgment conducted a strict review of the identification methods and institutions of specific crops, and based on the scientific nature and repeatability of the identification methods, determined that the identification opinions can be used as evidence to determine that the alleged infringing seedlings are identical to the authorized varieties, avoiding the lack of identification standards for specific crop variety rights affecting judicial protection and relief. This case provides a precedential example for the use and judicial review of the MNP labeling method in the identification of the identity of new plant varieties.

Case 6. Infringement of the new corn plant variety “Jingnuo 6”

[Dispute over infringement of new plant variety rights between a breeding company in Beijing and a certain industrial company in Guangxi, a certain subsidiary in Shenzhen, and a certain seed store]
First instance: 广东省深圳市中级人民法院（2022）粤03民初4649号
Second instance: 最高人民法院（2023）最高法知民终1790号

[Basic Facts of the Case]
A certain scientific academy in Beijing is the owner of the variety right of the new corn plant variety “Jingnuo 6”, and a certain breeding company in Beijing is its exclusive licensee. “Jingkenuo 2000” is a hybrid corn variety produced with “Jingnuo 6” and “Bai Nuo 6” as parents. The breeding company in Beijing filed a lawsuit, requesting that a certain industrial company in Guangxi, a certain subsidiary in Shenzhen, and a certain seed store stop using “Jingnuo 6” to produce the alleged infringing seed “Shenkenuo 8” and compensate for the losses. The first instance court conducted an authenticity appraisal of the alleged infringing seeds “Shenkenuo 8” and “Jingkenuo 2000” in accordance with the law, and conducted a parent-child relationship appraisal of the alleged infringing seeds “Shenkenuo 8” and “Jingnuo 6”. The appraisal result is that the alleged infringing seeds “Shenkenuo 8” and “Jingkenuo 2000” are similar varieties, and are suspected to have a parent-child relationship with “Jingnuo 6”.
[Judgment Result]
In the first instance, the Shenzhen Intermediate People’s Court of Guangdong Province determined that the alleged infringing seed “Shenkenuo No. 8” was produced by reusing the authorized variety “Jingnuo 6” as the parent, based on the results of the authenticity identification and parent-child relationship identification in the case, and ordered the industrial company in Guangxi, the subsidiary in Shenzhen, and the seed store to stop the infringement, and ordered the industrial company in Guangxi to compensate for losses of 300,000 RMB and reasonable expenses of 50,000 RMB, the subsidiary in Shenzhen to compensate for losses of 100,000 RMB , and the seed store to compensate for losses of 20,000 RMB. The industrial company in Guangxi and a subsidiary in Shenzhen appealled.
The Supreme People’s Court held in the second instance that, when judging whether a specific hybrid is produced and propagated by repeatedly using the authorized variety as a parent, given that there is currently a lack of national standards or industry standards for the identification of the parent-offspring relationship of plant varieties, the parent-offspring relationship identification opinion made by the identification agency in reference to the variety authenticity identification standard can be used as the basis for determining the facts. The identification report in this case can serve as preliminary evidence to determine that the alleged infringing seed “Shenkenuo No. 8” repeatedly used the authorized variety “Jingnuo 6” breeding materials in the production process. At the same time, combined with the identification opinion that the hybrid “Jingkenuo 2000” produced with “Jingnuo 6” as the mother parent and the alleged infringing hybrid “Shenkenuo No. 8” are similar varieties, it can be determined that the fact that “Shenkenuo No. 8” was produced using the “Jingnuo 6” breeding materials as the parent is highly likely. The Guangxi industrial company and a subsidiary in Shenzhen failed to provide evidence to prove that the alleged infringing seeds have a legitimate parental source, so their claim of non-infringement is not supported. The court therefore ruled to dismiss the appeal and uphold the original judgment.
【Typical significance】
With the deepening of intellectual property protection in the seed industry, the protection of crop parents has become one of the key concerns of variety right holders. At present, there is no universal standard for the identification of the parent-offspring relationship of plant varieties. How to prove that the hybrid variety in question is produced using the authorized variety is a difficult problem in judicial practice. This case reasonably considers the laws of crop breeding, comprehensively analyzes the results of the parent-offspring relationship identification between the parent variety and the hybrid variety, and the authenticity identification results of the hybrid variety, and reasonably allocates the burden of proof, thereby achieving effective protection of the legitimate rights and interests of the parent variety right holders, and providing a reference for handling similar cases in judicial practice.

Case 7. Infringement of the new corn plant variety “Xianyu 508”

[Dispute over infringement of new plant variety rights between a certain industrial company in Shandong and a certain agricultural company in Shanxi and a certain distribution department in Qi County]
Second instance: 最高人民法院（2024）最高法知民终819号

[Basic Facts of the Case]
A certain industrial company in Shandong, authorized by the variety right holder, has the right to file a civil lawsuit in its own name for infringement of the variety right of “Xianyu 508”. After testing, the allegedly infringing seeds “Chenqiang 808”, “Jinongyu 885” and “Jinke 757” are very similar or identical to the authorized variety of “Xianyu 508”. The Shandong industrial company filed an infringement lawsuit, requesting that a certain agricultural company in Shanxi and a certain distribution department in Qi County stop the infringement and compensate for losses and reasonable expenses totaling 550,000 RMB. The Shandong industrial company requested to determine the amount of compensation based on the profit of the infringement of the Shanxi company, and submitted the sales data of corn seeds of “Chenqiang 808”, “Jinongyu 885” and “Jinke 757” filed on the seed industry big data platform from 2018 to 2021; and claimed to determine the production and sales quantity of infringing seeds based on the production numbers of the Shanxi company in the above-mentioned filing data. The court of first instance ordered the Shanxi agricultural company and the Qi county distribution department to stop the infringement, and ordered the Shanxi agricultural company to compensate for losses of 30,000 RMB and reasonable expenses of 16,000 RMB, and the Qi county distribution department to pay reasonable expenses of 4,000 RMB. Both the Shandong agricultural company and the Shanxi agricultural company appealed.
[Judgment Result]
The Supreme People’s Court held in the second instance that the alleged infringer registered production and operation on the seed industry big data platform as a producer, and the name of the alleged infringing seed was the same as the name of the registered variety, and the production time of the alleged infringing seed was close to the registration time of the seed industry big data platform. In principle, it can be presumed that the registered sales quantity is the production and sales quantity of the infringing seeds. Combined with the facts of this case, the names of the alleged infringing seeds “Chenqiang 808”, “Jinongyu 885” and “Jinke 757” obtained through notarization are the same as the names of the registered varieties, and the production time of the alleged infringing seeds is close to the registration time of the seed industry big data platform in 2021. It can be presumed that the seeds with the same name registered by the Shanxi agricultural company in 2021 are all “Xianyu 508” corn seeds, and the registered sales quantity can be determined as the production and sales quantity of the alleged infringing seeds, and the infringement damages can be calculated accordingly. Therefore, the Shanxi agricultural company was sentenced to compensate for losses of 370,000 RMB and reasonable expenses of 30,000 RMB.
【Typical significance】
The information system of the seed administration department stores data and information related to seed production, sales and other links. Through the reasonable use of relevant data and information, effective tracking of the infringing subject and the scale of infringement can be formed. This case clarifies the use of the registered data of the seed industry big data platform in the calculation of damages for variety rights infringement. Through comprehensive consideration of the registered data of the seed industry big data platform and the infringement involved in the case, the sales volume of infringing seeds is reasonably estimated, and the amount of infringement compensation is calculated accordingly, which effectively solves the problem of difficulty in providing evidence for variety rights holders and effectively increases the intensity of infringement compensation.

Case 8. Infringement case of new wheat plant variety “Bainong 207”

[Dispute over infringement of new plant variety rights between Hua XX Industrial Company, Feng XX Industrial Company and Tang XX Sales Department]
Second instance: 最高人民法院（2023）最高法知民终113号

[Basic Facts of the Case]
Hua XX Industrial Company is the exclusive licensee of the new plant variety “Bainong 207”. The alleged infringing seeds were purchased from Tang’s store. The packaging bag and the QR code scan screenshot show that the variety name is “Sunshine 818”, and the producer is “Feng XX Industrial Company”. The query of the QR code traceability website shows that the queried product is genuine, and the production unit also points to Feng Industrial Company. Hua Industrial Company filed a lawsuit, requesting that Feng Industrial Company and Tang’s store stop infringing and compensate for losses of 300,000 RMB. In the first instance, Hua Industrial Company submitted a “Test Report” made by a unilateral commission, intending to prove that the alleged infringing seeds are the same variety as the authorized variety “Bainong 207”. The first instance court determined that the control sample “Bainong 207” had no sample number, the source was questionable, and the test conclusion was insufficient. The production date and test date shown on the scanned QR code of the packaging bag were two years earlier than the sales date, which was inconsistent with common sense and could not prove that the alleged infringing seeds were produced by Feng Industrial Company. Therefore, the first instance judgment dismissed all the claims of Hua Industrial Company. Hua Industrial Company appealed. In the second instance, the court initiated the appraisal according to law, as the alleged infringing seeds were sealed in good condition and met the conditions for appraisal. The appraisal agency conducted an identity test on the alleged infringing seeds and the “Bainong 207” standard sample in the national standard sample library, and the test results showed that the two were the same variety.
[Judgment Result]
The Supreme People’s Court held in the second instance that the information marked on the seed packaging and label, the license or the information pointed to by the number of the “Origin Quarantine Certificate” is an important basis for identifying the production and sales entity of the alleged infringing seeds. Unless there is evidence to the contrary, the seed producer and operator information clearly marked on the packaging bag can be used to determine the identity of the production and sales entity. Therefore, in the absence of evidence to the contrary, Feng Industrial Company can be identified as the producer and seller of the alleged infringing seeds. The probative force of the inspection report issued by the appraisal agency should be reviewed from the aspects of the source of the sample, the identification method, the identification procedure and the identification qualification. The appraisal agency entrusted by the court conducted a germination test on the sample to be tested. After the successful germination determined that the seed vitality was normal, it used the molecular marker identification method for detection and issued an inspection report in accordance with the national standard, which can prove that the alleged infringing seeds are identical to the “Bai Nong 207” wheat variety. Tang’s sales department knew that it was infringing seeds but still sold them, and should bear joint and several liability. Based on this, the second instance court changed the judgment to require Feng Industrial Company and Tang Store to stop the infringement, and Feng Industrial Company to compensate for the losses and reasonable expenses for rights protection totaling 300,000 RMB, and Tang Store to bear joint and several liability within 50,000 RMB of this amount.
【Typical significance】
Accurately identifying the infringing subject is a key link in maintaining the order of the seed market and protecting the legitimate rights and interests of the variety rights holders. This case clarified the basis for identifying the producers and sellers in the variety rights infringement disputes, and highlighted the importance of making good use of the management information involved in seed supervision to achieve coordinated protection. At the same time, the second-instance judgment provided guidance on the evidence and duty of care of the appraisal applicant. According to the second-instance appraisal opinion, the infringement facts were confirmed, and the legitimate rights and interests of the variety rights holders were fully protected.

Case 9. Infringement of the new soybean plant variety “Qihuang 34”

[Dispute over infringement of new plant variety rights between Shandong Sheng XX Industrial Co., Ltd. and Qingdao Li XX Professional Cooperative and Geng XX]
First instance: 山东省青岛市中级人民法院（2024）鲁02知民初34号

[Basic Facts of the Case]
Shandong Sheng XX Industrial Company is the exclusive licensee of the new soybean plant variety “Qihuang 34”. Qingdao Li XX Professional Cooperative and its operator Geng promised to sell “Qihuang 34” soybean seeds through Douyin [TikTok] video accounts and WeChat video accounts. According to statistics, the videos released on different dates advertised that the amount of seeds produced and sold by them reached 310 tons. Shandong Sheng XX Industrial Company filed a lawsuit, requesting that Qingdao Li XX Professional Cooperative and Geng stop the infringement and jointly compensate for the loss of 300,000 RMBand reasonable expenses of 12,596 RMB.
[Judgment Result]
The Intermediate People’s Court of Qingdao City, Shandong Province held at first instance that the Qingdao Li XX Professional Cooperative and Geng XX produced and sold seeds that infringed the “Qihuang 34” soybean plant new variety rights without permission, which constituted infringement and they should bear civil liabilities such as stopping the infringement and compensating for losses. The Qingdao Li XX Professional Cooperative and Geng sold 310 tons of infringing soybean seeds through the Internet. According to the notarized purchase price of 3.5 RMB per catty by Shandong Sheng XX Industrial Company, the infringing sales amounted to 2.17 million RMB. Based on this, the first instance judgment fully supported the economic losses of 300,000 RMB claimed by Shandong Sheng XX Industrial Company, and supported the reasonable expenses of 10,000 RMB for rights protection. After the first instance judgment, neither party appealed.
【Typical significance】
This case embodies the effective use of online evidence in seed industry infringement cases. At the same time, it fully supports the rights holder’s claim for compensation based on the evidence in the case, reflecting the judicial orientation of the People’s Court to effectively strengthen the protection of seed industry intellectual property rights and increase the intensity of compensation for damages.

Case 10. Infringement of the new soybean plant variety “You6019”

[Dispute over infringement of new plant variety rights between Henan Xu XX Industrial Company and Henan Hua XX Industrial Company, Xin XX Agricultural Materials Business Department and Ming XX Agricultural Materials Business Department]
First instance: 河南省郑州市中级人民法院（2023）豫01知民初1907号
Second instance: 最高人民法院（2024）最高法知民终713号

[Basic Facts of the Case]
Henan Xu Industrial Company is the exclusive licensee of the new soybean plant variety “You 6019”. This variety passed the national variety approval in 2018 and is suitable for summer planting in Hubei, Chongqing, southern Anhui, northern Jiangxi, and southern Shaanxi. The “Zhongdou 40” soybean seeds produced by Henan Hua Industrial Company were commissioned by Xin Agricultural Materials Business Department and sold by Ming Agricultural Materials Business Department in Anxiang County, Changde City, Hunan Province, and were seized by local agricultural law enforcement departments. After testing, “Zhongdou 40” and “You 6019” are suspected to be the same variety. Henan Xu Industrial Company filed a lawsuit, requesting that Henan Hua Industrial Company, Xin Agricultural Materials Business Department, and Ming Agricultural Materials Business Department stop infringement and compensate for losses and reasonable expenses of 300,000 RMB. Henan Hua Industrial Company, Xin Agricultural Materials Business Department, and Ming Agricultural Materials Business Department argued that their sales activities occurred outside the suitable planting area for the “You 6019” variety, and Henan Xu Industrial Company had no right to claim rights and should not receive economic compensation.
[Judgment Result]
The Zhengzhou Intermediate People’s Court of Henan Province ruled at first instance that Henan Hua XX Industrial Company, Xin XX Agricultural Materials Business Department, and Ming XX Agricultural Materials Business Department should stop infringing the law and compensate for losses and reasonable expenses of RMB 150,000, RMB 10,000, and RMB 5,000 respectively. Henan Hua XX Industrial Company appealed.
The Supreme People’s Court held in the second instance that if the variety right is legal and within the effective protection period, it should be protected by law. The scope of the prohibition power of the variety right is not limited by the authorized variety suitable planting area or the approved area, and the establishment of the variety right infringement is not conditional on whether the alleged infringement is carried out in the authorized variety suitable planting area or the approved area. The production and sale of authorized variety propagation materials in non-approved areas without the permission of the variety right holder still constitutes infringement according to law. At the same time, damages, as a basic legal remedy for the right holder, should not be adversely affected by the infringement occurring in non-approved areas. On the contrary, infringement in non-approved areas not only damages the rights and interests of the variety right holder, but also may damage the interests of growers, which can be used as a factor to aggravate the infringement. Hua XX Industrial Company produced and sold the alleged infringing seeds in non-approved suitable planting areas, which constituted infringement and should bear compensation liability. At the same time, based on the same authorized variety, the same infringement and the infringing subject, the reasonable expenses incurred by the variety right holder in the administrative law enforcement procedure to maintain its variety rights can be determined as reasonable expenses in the case of infringement of new plant variety rights disputes, and they shall be supported when determining compensation liability. The court then ruled to dismiss the appeal and upheld the original judgment.
【Typical significance】
This case clarified the nature of the infringement of the production and sale of authorized varieties in non-approved areas, emphasized that the protection of variety rights is not limited by the planting area, and that the infringement may also affect the legitimate rights and interests of growers, which can be used as a factor in the aggravation of the infringement. At the same time, this case also clarified that the reasonable expenses spent by the variety right holder in the administrative law enforcement procedure to maintain its variety rights under certain circumstances can be supported as reasonable expenses in the case of infringement of new plant variety rights. The judgment in this case further strengthened the comprehensive protection of the legitimate rights and interests of variety right holders.

Case 11. Infringement of new varieties of rose plants such as “LEXTEEWS”

[Dispute over infringement of new plant variety rights between a Dutch group company, an Ai agricultural company and a Lanzhou agricultural technology company]
First instance: 甘肃省兰州市中级人民法院（2023）甘01知民初42、43、44号

[Basic Facts of the Case]
A Dutch group company is the owner of the variety rights of three new rose plant varieties, including “LEXTEEWS”. Ai Agricultural Company is an affiliated company of a Dutch group company, authorized to produce, promote and sell a series of rose varieties including “LEXTEEWS” in China, and has the right to sue for related infringements. An agricultural company in Lanzhou bred, promised to sell and sold “LEXTEEWS” and other rose varieties on a large scale in the flower industry base. The Dutch group company and Ai Agricultural Company filed three infringement lawsuits, requesting that the agricultural company in Lanzhou stop the infringement and compensate for losses and reasonable expenses totaling more than 10 million RMB.
[Judgment Result]
After the first instance of the case was filed at the Intermediate People’s Court of Lanzhou City, Gansu Province, Ai Agricultural Company immediately applied for property preservation of more than 8 million RMB in the account funds of the Lanzhou Agricultural Company. Rose planting by the Lanzhou Agricultural Company has reached a certain scale. The first instance court organized mediation between the two parties many times, promoting win-win cooperation between the two parties, and finally signed an authorization statement and cooperation framework agreement, transforming the infringement into authorized cooperation.
【Typical significance】
The People’s Court adheres to the purpose of justice for the people and the principle of equal protection, actively explores diversified dispute resolution, and ultimately mediates the case. It not only equally protects the rights of foreign variety right holders in accordance with the law, but also lays a solid foundation for future cooperation between the two parties, prompting both parties to integrate resources, give play to their respective advantages, drive industrial development, and achieve good results of win-win, multi-win and win-win results.

Case 12. Case involving a “shousi pineapple” planting contract

[Planting contract dispute between Hainan Feng Fruit Company and Ye Ding]
Second instance: 海南自由贸易港知识产权法院（2023）琼73民终328号

[Basic Facts of the Case]
On October 11, 2020, Hainan Feng Fruit Company and Ye Ding signed the “Pineapple Planting Agreement”, which stipulated that the two parties would cooperate in planting “shousi pineapples”. Ye Ding would provide pineapple seedlings and planting fertilizers for a fee, provide planting technology free of charge, and guarantee that the pineapple fruit yield would not be less than 3,000 kilograms per mu, and the cultivated pineapple seedling yield would not be less than 12,000 plants per mu; after the pineapple fruits matured, Ye Ding would repurchase all the pineapple fruits at a price not less than 3 RMB per kilogram. During the cooperation process, Hainan Feng Fruit Company filed a lawsuit on the grounds that the pineapple production and sales price did not conform to the contract agreement, requesting that Ye Ding pay a penalty of 505,008 RMB, compensate for losses of 288,985 RMB, and repurchase pineapple seedlings at market prices. Ye Ding counterclaimed and requested Hainan Feng Fruit Company to pay 115,396 RMB for seedlings and compensate for losses due to overdue payments. The court of first instance ruled that Ye Ding should compensate Hainan Feng Mou Fruit Company for the losses, and Hainan Feng Fruit Company should pay the remaining amount of seedlings to Ye Ding. Hainan Feng Fruit Company appealed to the Hainan Free Trade Port Intellectual Property Court.
[Judgment Result]
After the Hainan Free Trade Port Intellectual Property Court accepted the case, it handled the case prudently and sought diversified solutions, considering that seeds and seedlings are important raw materials for agricultural production and their quality and safety are related to farmers’ income and agricultural development. Considering that the subject matter of the case, “shousi pineapple” seedlings, is a non-major crop variety with high economic value, in order to substantially resolve the disputes and contradictions between the two parties, the court communicated with the two parties many times before and after the court, and facilitated the mediation of the two parties from multiple angles of “emotion”, “reason” and “law”. The two parties signed the mediation agreement and immediately implemented the contents of the mediation agreement on the day they received it, and the case was successfully resolved.
【Typical significance】
This case is a typical example of settling disputes in the seed industry. Based on the contract agreement and legal provisions, the trial court balanced the interests of seed users and seed suppliers, advocated that the parties eliminate differences, show mutual understanding and compromise, and achieve win-win results, thus facilitating the settlement of the case and effectively implementing the concept of justice for the people in specific cases, ensuring the safety of seed use and maintaining the healthy development of the seed industry.

Case 13. Unfair competition case involving the name of a well-known breeder

[Unfair competition dispute between a certain agricultural high-tech company and Wan Group Company and Jiangxi Wan Industrial Company]
First instance: 江西省上饶市中级人民法院（2024）赣11民初10号
Second instance: 江西省高级人民法院（2024）赣民终288号

[Basic Facts of the Case]
Before his death, Academician Yuan Longping signed the “Yuan Longping Brand Rights License Agreement” with a certain agricultural high-tech company, authorizing the company to exclusively use his name in its business activities. Wan Group Company and Jiangxi Wan Industrial Company have overlapping business scopes with a certain agricultural high-tech company. They use the words “Guo Mi Wannian Gong Yuan Longping” in the outer packaging of rice and other products and in online publicity for promotion and sales. The agricultural high-tech company filed a lawsuit, requesting that the two defendants immediately stop unfair competition and compensate the agricultural high-tech company for economic losses of 1 million RMB and reasonable expenses of 100,000 RMB for rights protection.
[Judgment Result]
The Shangrao Intermediate People’s Court of Jiangxi Province ruled at first instance that Wan Group and Jiangxi Wan Industrial Company should immediately stop the unfair competition of producing and selling packaging products with “Yuan Longping’s” name and signature, and immediately delete the promotional content that improperly uses “Yuan Longping’s” name and signature; Wan Group and Jiangxi Wan Industrial Company should compensate for the losses and reasonable expenses of rights protection totaling 50,000 RMB. Wan Group and Jiangxi Wan Industrial Company appealed.
The Jiangxi Provincial High People’s Court held in the second instance that the use of the words “Yuan Longping” in the form of inscriptions and signatures on the allegedly infringing goods was commercial use. Academician Yuan Longping’s name has a high degree of popularity and influence, and is a name with a certain influence. The agricultural high-tech company enjoys the relevant commercial use rights of the name “Yuan Longping”. Wan Group Company and Jiangxi Wan Industrial Company used the name “Yuan Longping” for product promotion and sales without obtaining legal authorization, which easily misled people into believing that their products had a specific connection with Academician Yuan Longping or the agricultural high-tech company, constituting commercial confusion. This behavior violated the principle of good faith and recognized business ethics, damaged the legitimate rights and interests of the agricultural high-tech company, and constituted unfair competition. Based on this, the second instance court ruled to dismiss the appeal and uphold the original judgment.
【Typical significance】
Academician Yuan Longping is a hybrid rice breeding expert in my country and the father of hybrid rice in the world. His name has extremely high social influence and commercial value. The judgment in this case clarifies the legal standard for the commercial use of the names of well-known breeders to constitute unfair competition, and provides guidance for adjudication of similar disputes. The judgment in this case effectively implements the principles of honesty and trustworthiness and business ethics, effectively safeguards the commercial rights and interests of the names of well-known breeders, regulates the market competition order, and helps to create a healthy and fair market environment.

Case 14. Invalidation of the new corn plant variety “FL218”

[Administrative dispute over invalidity of new plant variety rights between Guizhou Hui XX Industrial Co., Ltd. and the Plant Variety Review Committee of the Ministry of Agriculture and Rural Affairs and Hubei Kang XX Industrial Co., Ltd.]
First instance: 北京知识产权法院（2022）京73行初4665号
Second instance: 最高人民法院（2024）最高法知行终627号

[Basic Facts of the Case]
Hubei Kang XX Industrial Company is the owner of the variety right of the new corn plant variety “FL218”. Guizhou Hui XX Industrial Company filed a request for invalidation with the Plant Variety Review Committee of the Ministry of Agriculture and Rural Affairs, claiming that the variety had been mass-produced and sold before the application date, and other varieties approved for breeding with it as a parent had also been mass-produced and sold, so the variety in question did not have novelty. The Plant Variety Review Committee made an invalidation review decision, believing that the evidence in the case was insufficient to prove that the variety in question lacked novelty and specificity, and maintained the validity of the variety right in question. Guizhou Hui XX Industrial Company was dissatisfied and filed an administrative lawsuit with the Beijing Intellectual Property Court.
[Judgment Result]
The Beijing Intellectual Property Court held at first instance that “FL218” possessed novelty and specificity, and rejected the lawsuit filed by Guizhou Hui XX Industrial Co., Ltd. Guizhou Hui XX Industrial Co., Ltd. appealed.
The Supreme People’s Court held in the second instance that Guizhou Hui XX Industrial Company only requested the declaration of invalidity of the variety right on the grounds that “FL218” did not have novelty, and did not explicitly claim specificity. However, considering that Hubei Kang XX Industrial Company also agreed to review whether “FL218” had specificity during the invalidation review procedure and administrative litigation, the invalidation review decision protected the rights and interests of the variety right holder to defend, listened to the opinions of the variety right holder, and did not constitute a procedural violation. The specificity of a new plant variety refers to the obvious difference in characteristics between the propagation materials of the variety and the known varieties before the application date. The invalidation applicant needs to clarify the known varieties of the authorized variety and prove that the authorized variety is not obviously different from the known variety through evidence such as DNA identification results or field test results. The burden of proof shall be borne by the invalidation applicant. Guizhou Hui XX Industrial Company did not submit evidence to prove that the three parent varieties involved in the case were known varieties of “FL218”, nor did it have preliminary evidence to prove that “FL218” was the same variety as the three parent varieties involved in the case, and did not fulfill the burden of proof. Because it failed to prove that “FL218” did not have novelty and specificity, the appeal was dismissed and the original judgment was upheld.
【Typical significance】
This case focuses on the legality of the procedure, clarifies the scope of the procedure for invalidation of variety rights initiated upon application, the specific identification standards and the distribution of the burden of proof in the procedure for confirmation of variety rights, and provides guidance for the review and proof in the procedure for invalidation of variety rights. This case helps to standardize the procedure for reviewing the invalidation of variety rights and promote the high-quality development of the seed industry.

Case 15. Crime of infringing trade secrets involving the new rice plant variety “Tsuen U 822”

First instance: 安徽省合肥高新技术产业开发区人民法院（2023）皖0191刑初611号

[Basic Facts of the Case]
A certain high-tech company in Anhui is the owner of the new plant variety rights of “Quanyou 9311A”, “YR0822” and “Quanyou 822”. Among them, the “Quanyou 822” rice seed was developed by the company’s scientific research team. The cultivation technology and genetic information of its mother “Quan 9311A” are the company’s core secrets and have not been disclosed to the public. Strict confidentiality measures have been taken. After the trial planting of “Quanyou 822” achieved mass production, the Anhui high-tech company transferred the relevant technology to its wholly-owned subsidiary, an Anhui industrial company, which obtained the exclusive domestic production and operation rights, and the transfer contract stipulated strict confidentiality obligations for all personnel involved in the production and management of the seeds. In 2019 and 2020, a certain industrial company in Anhui signed a “Hybrid Rice Seed Production Contract” with Deng XX, the legal representative of a certain seed professional cooperative, entrusting the cooperative to produce “Tsuenyou 822” rice seeds. It clearly stipulated that the contractor should ensure that the parents will not be lost, not be bred privately, and not be used for other purposes privately, and that the seeds produced by the contract will not be lost. The contractor will bear legal responsibility for the loss of parents or private breeding. In addition, the number of mother rice parents will be issued each year based on the number of acres planted by farmers, and technicians will be stationed at the planting base to provide long-term guidance on planting, supervise production, and prevent rice seed loss. Since 2019, Deng XX, Wang XX and Huang X of a certain seed company have conspired to arrange for Huang, an employee of their cooperative, to apply for more parent “Quan 9311A” from a certain seed company in Anhui by applying more per mu, and privately bred “Quanyou 822” rice seeds outside the supervision of a certain seed company in Anhui, and handed them over to a certain seed company to sell 113,840 kilograms under a fake brand, causing a loss of 1,090,360 RMB to the certain high-tech company in Anhui. On October 11, 2023, the People’s Procuratorate of Hefei High-tech Industrial Development Zone, Anhui Province, filed a public prosecution, accusing Deng, Wang , Huang 1 and Huang 2 of obtaining the right holder’s business secrets through improper means of false reporting and fraud, violating the confidentiality obligation to use the business secrets they obtained, causing major losses to the business secret right holder, and the circumstances are serious, and they should be held criminally responsible for the crime of infringing on business secrets.
[Judgment Result]
The People’s Court of Hefei High-tech Industrial Development Zone, Anhui Province, held at first instance that Deng and Huang violated the agreement with the right holder on keeping trade secrets, privately bred rice seeds, and Wang and Huang were responsible for selling them, making illegal profits, causing major losses to the right holder of the trade secrets, and the circumstances were serious, constituting the crime of infringing trade secrets. The defendants Deng Jin, Huang , Wang Yong, and Huang were sentenced to fixed-term imprisonment ranging from ten months to one year and two months , and fined between 20,000 RMB and 200,000 RMB.
【Typical significance】
The judgment in this case uses criminal means to crack down on infringements, demonstrating the judicial system’s severe punishment of seed-related crimes. By exerting the legal deterrent power of criminal sanctions, we can effectively punish and prevent seed-related crimes, improve the protection of breeding innovation, purify the seed market, and create a good innovation environment for seed companies.