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Discrimination Protections are Reduced After Missouri Signs Bill to Protect Businesses

Missouri is rolling back employment discrimination protections to protect businesses from frivolous lawsuits. At least, that’s the rationale Governor Eric Greitens would have everyone believe. The new law, SB 43, will go into effect beginning April 28 of next year. Previously, employees in Missouri only had to show that discrimination was one factor in their demotion or dismissal to bring a suit. Under the new law, employees must show that discrimination was “the motivating factor” or primary cause of their demotion or termination. Additionally, the bill would cap the amount of damages that an employee could receive and would restrict such suits to businesses. Employees would not be able to sue individuals, such as their supervisors, for discrimination. The bill applies the same restrictions to housing and public accommodations.

discrimination protectionsThe bill is extremely controversial in Missouri, in part because the sponsor of the bill, State Senator Gary Romine, owns a business that is being sued for alleged discrimination.  The employee in Romine’s case alleges that his supervisor calls him “nigger” and that there is a map in the back of the store circling a black neighborhood with the words “do not rent” underneath. Romine denies any wrongdoing in the case and insists that his bill was aimed at frivolous lawsuits without any consideration for the case pending against his company. Nevertheless, the NAACP and other critics accuse Romine of self-dealing while sponsoring and passing the bill.

The Downfall of Mixed-Motive Cases?

As promised, these restrictions will doom many employment discrimination suits. In an at-will employment position, an employer can fire a worker for any reason except for reasons that are prohibited by law. However, it’s rare today for employers to admit to terminating an employee purely for illegal reasons. Instead, the suits often involve cases where the employer dismisses an employee for a mix of legal and illegal reasons. For instance, if a woman is denied a promotion because her performance review says “she berates the staff” and that she “overcompensates for being a woman,” she might have an actionable suit based on the latter comment. However, the former comment would be a justifiable reason for the business to deny her a promotion.

Under federal law, an employer that has both legitimate reasons and illegitimate reasons will be liable for discrimination. If the employer can prove that it would have treated the employee the same without the illegitimate reasons though, reinstatement, back pay, and future pay will be denied to the employee. States have taken different positions on mixed motive discrimination. Many states have adopted the federal model. Other states permit the employee to prevail even he or she can show that an illegal reason exists, regardless of whether there were other legitimate reasons.

The Future of Missouri Businesses

Missouri has changed from a “no impressible motive whatsoever” position to a legal regime where discrimination must be the “dominating factor.” In other words, for Missouri employees to prevail now, it is not enough to show that the employer was discriminatory. If the employer might have had other reasons for dismissing or denying a promotion, the employee must show that discrimination was the most significant reason for loss of employment or promotion. Previously, the woman who sued for losing her promotion to comments that she “berates the staff” and that she “overcompensates for being a woman,” would have won because the second comment was proof of discrimination. Under the new Missouri law, it is not enough that the second comment exists. Instead, the second comment must be the #1 reason the woman lost her promotion.

Although this structure will undoubtedly force many employees out of the Missouri courthouse, the dominate motive structure is not an unusual one. Even states as liberal as California use the dominate motive instead of the mix motive framework to balance the fight between employers and employees. Instead, the most egregious aspect of SB 43 is that it caps damages. If a state forces a plaintiff to jump through hoops, like establishing dominate motive, it seems overly cruel to limit the damages that a plaintiff can obtain if the plaintiff wins. Employment lawsuits can be long and draining as they are. Missouri has doubled the time, expense, and difficulty for employees to collect a judgment, but it has reduced the amount of money that the employee gets even if the employee does everything correctly. It adds insult to injury if an employee can claim she was discriminated, but gets less for it.

Trademark Lawsuit for Juicy Fruit e-Cigarette

Juicy Fruit may not be the gum with the longest lasting flavor but, say what you will, their yellow packaging is immediately recognizable. The same is true of the green packaging on Doublemint, it’s just as easy to pick out in the checkout line in the grocery store. This is the product of around 100 years of marketing on the part of Wrigley Gum. Thus, when Chi-Town Vapors (a company dedicated to creating flavored e-cigarette fluid) decided to make e-cigarette flavors titled “Juicy Fruit” and “Doublemint” Wrigley decided to slap them with a lawsuit that Chi-Town is going to have a heck of a time wriggling out of.

Just last week, Wrigley brought a lawsuit alleging federal claims of trademark infringement, trademark dilution, and unfair competition, as well as an Illinois state law claim of deceptive trade practices, and a common law claim of unfair competition. Wrigley’s claims are strong in this case, mostly because of how Chi-Town Vapors has conducted their marketing and the nature of Chi-Town Vapor’s business. Especially strong are the claims of trademark infringement and trademark dilution. Chi-Town’s missteps are a good lesson for burgeoning businesses, especially when your product can-like Chi-Town’s-be especially vulnerable to dilution claims. In order to help keep your business’ safe, let’s take a look at this case, how it’s likely to shake out, and how trademark infringement and trademark dilution work.

trademark lawsuitChewing Over the Facts of the Case

Wrigley is an old company. A very old company. They’ve been selling Doublemint and Juicy Fruit gum for over a century. They’ve had a number of trademarks on “Juicy Fruit” and its associated logos for ages. Some registered as long ago as 1915, others issued a mere 60 years ago in 1953. It has similar trademark and trade dress (protection on the appearance of the packaging or building design consistently used by a company) on their Doublemint gum.

With all these age old registrations, you have to know it was a bad idea for Chi-Town Vapors to outright name the flavored e-cigarette liquid they sell “Juicy Fruit” and “Doublemint.” Chi-Town didn’t stop there, and their legal problems may not stop with Wrigley. They named flavors “Skittles,” “Hawaiian Punch”, “Kahlua,” “Mountain Dew,” “Red Bull,” and “Nutella.” All of these are registered marks and, no, Chi-Town didn’t get permission to use any of them. In a prime example of digging your own legal grave, Chi-Town Vapors’ marketing materials even included pictures of the products the flavors are based on or have their own name on incredibly close approximations of  the packaging of products such as Doublemint gum.

They must have caught wise to the fact that this wasn’t the best idea because, in January 2017, they took down these pictures and changed the names to things like “Joosy Froot;” still using the recognizable packaging of the candy as part of their marketing materials. Unfortunately for them, this is still extremely unlikely to be enough to get them off the hook.

Bursting Chi-Town’s Bubble: Trademark Infringement and Dilution

Trademark infringement mostly deals with the likelihood that the use of your registered trademark by another may confuse consumers as to the source or sponsorship of goods or services. For instance, if you have a trademark on Widget brand milk, and the guy across the street starts selling Widget brand almond milk, that would be a pretty clear-cut case of trademark infringement. This is especially true due to how close the other store is and how similar their product is.

Chi-Town used the exact name and packaging of both Juicy Fruit and Doublemint on a product designed to taste as identical to each respective gum as possible. There is serious potential that a customer would look at those flavors and think they were sponsored by Wrigley-thus why Chi-Town is in so much trouble.

However, as rough as the case may be for trademark infringement. Chi-Town Vapors has it worse when it comes to dilution. Dilution doesn’t need to show any confusion from consumers or even competition between the owner of the famous mark and the accused party’s product. Instead the owner simply needs to show blurring (that there is a likelihood of dilution in the consumer’s mind between the mark and their product) or tarnishment (a likelihood that association with the accused person’s use of the mark would damage the reputation of the owner’s mark). In order to receive this incredibly powerful protection, you need to be especially famous. However, with factors including how well known and how long the mark has been used as part of that analysis the 100-year-old and near universally recognizable Wrigley brands should qualify fairly easily.

It is the second half of dilution-tarnishment-which is the real trouble for an e-cigarette fluid distributor. Even in Wrigley’s complaint, it’s clear that they are leaning heavily on this argument to establish their dilution case. Not surprisingly, Wrigley has something to say about the practice of selling candy-flavored cigarettes. They point to studies out of the FDA, the Senate, and more which argue that flavoring e-cigarette materials like candy “harmfully targets children under 18 years of age.” To say that selling cigarettes to children has the potential to tarnish Wrigley’s brand is an understatement.

What Can You do to Avoid Chi-Town Vapor’s Sticky Situation?

As bad as the situation is for Chi-Town Vapors, and it does look bad, no case is a guaranteed slam-dunk. However, the best litigation strategy a company can take is to never face litigation at all. This isn’t always possible, but you can take steps in your branding to avoid Chi-Town Vapor’s situation.

First and foremost, don’t use famous brand names on your products without permission. This is obvious, but it bears repeating. If your business deals with something that might harm the reputation of a brand, liquor or tobacco for example, you have to be especially careful. This goes double when a famous brand targets children as customers. Another important step to take is to hire an attorney to do a trademark search for any logos or marketing slogans you want to use. This is generally fairly cheap and goes a long way towards avoiding a trademark infringement lawsuit. Your business is too important to risk a lawsuit or the expense of having to entirely change your branding after working to build it up-take the steps to make sure you don’t end up in Chi-Town Vapor’s situation.

Title VII Claim: Court Rules Intentional Segregation is Not Enough

The car repair chain AutoZone has been in legal trouble for transferring an African-American man from a store with primarily Latin-American clientele to one with primarily African-American clientele. To make things worse, the evidence showed that it was part of a concerted plan on the part of AutoZone to, over time, match the ethnicity of their store employees to the ethnicity of the majority of the clientele of a given store. The man who was to be transferred, one Kevin Stuckey, was fired after he refused the transfer.

If separating stores by race sounds like segregation to you, that’s because it’s basically the textbook definition of it. The Equal Employment Opportunity Commission (EEOC) certainly thought so, and brought a Title VII claim against AutoZone over their practice of intentional segregation. However, in a recent ruling, the EEOC was handed a shocker of a loss. Let’s take a look at the EEOC’s claim and why the court chose to rule the way they did.

Title VII Segregation Claims

The lawsuit brought by the EEOC made a claim under a less common source of liability for employers under Title VII– section 2000e(a)(2). Section 2000e(a)(2) makes it illegal for employers to “limit, segregate, or classify…employees or applicants … in any way that would deprive or tend to deprive [them] of employment opportunities or otherwise adversely affect [their] status as an employee [based on a protected characteristic such as gender or race].” This is a lower requirement than the usual Title VII claims alleging adverse employment action based on a protected characteristic. As we’ve discussed in the past, adverse employment action includes things such as firing, refusal to hire, demotions, refusing promotions or pay raises, and transfers to a generally less desirable position.  The EEOC’s claim, on the other hand, needed only to establish that AutoZone had acted in a way that tended to deprive Mr. Stuckey of an employment opportunity.

title viiThe first part of the EEOC’s claim was to simply prove that there had been segregation based on race. AutoZone obviously contested this, saying that Mr. Stuckey’s transfer was due to a combination of his inability to understand Spanish and failure to get along with the manager at his location.

The EEOC’s case, however, was quite strong. They produced evidence, and even testimony from the manager of Mr. Stuckey’s location, that AutoZone was engaged in intentional segregation based on majority clientele for a given store. AutoZone had an establish practice during the time of only hiring Latin-American employees for the location-regardless of their ability to speak Spanish.

The Court’s Ruling

Unfortunately for Mr. Stuckey and the EEOC, the court didn’t feel they needed to consider whether segregation took place–intentional or otherwise. They instead focused their ruling on whether or not Mr. Stuckey’s required transfer would have had a negative impact on his employment situation.

As mentioned before, segregation cases are fairly rare these days, so perhaps due to the lack of case law on the issue the court decided to examine the potential for negative impact on employment in a very similar manner to the higher standard of an adverse employment action. They focused on the fact that the transfer was a lateral one, no difference in duties, pay, or hours, in determining that Mr. Stuckey’s transfer would not tend to deprive him of an employment opportunity.

The EEOC argued that if the segregation element of Title VII does not cover intentional segregation, it’s a particular odd choice to have a separate rule for it. They further argued that the humiliation and embarrassment of being subjected to racial discrimination was by itself enough to give rise to a cause of action under Section 2000e(a)(2). They reasoned that it doesn’t make sense that the law allows intentional racial segregation of employees so long as the situations are equal–the very definition of separate but equal. Unfortunately, the court did not agree and ruled that without a situation that sufficiently damaged Mr. Stuckey to create a claim it did not need to bother considering whether AutoZone had actually segregated its employees.

What Does This Case Mean?

Unfortunately, this Seventh Circuit Court of Appeals ruling does mean what the EEOC feared in its arguments-employers seem to be able to legally intentionally segregate their employees so long as they don’t do so in a way that damages their economic situation. This seems almost too ridiculous to be the case. However, the next step of appeals from the Seventh Circuit Appeals Court would be up to the highest court in the land-the U.S. Supreme Court. The Supreme Court reviews only a very small portion of cases and, given its current conservative make-up, it is hard to predict the result of such an appeal. For now, this is the final word on this topic-regardless of if it seems to fly in the face of the law itself.

Justice Gorsuch’s First Opinion, Creditors are Not Debt Collectors

The Fair Debt Collections Practices Act, or FBCPA, forbids debt collectors from harassing debtors, including using abusive language, make threats, call the debtor late at night or at work, or make misleading statements. The FBCPA applies to collection agencies and other third parties creditors may hire to chase debt. The FBCPA usually does not apply to creditors themselves, with a few exceptions. It is important that creditors and debtors alike know whether the FBCPA applies to their case, as the FBCPA allows the debtor to countersue if the debt collector violates the FBCPA.

Justice Gorsuch’s first opinion deals with whether creditors who purchase debt from other creditors and pursue their newly purchased debts are debt collectors under the FBCPA. In Henson v. Santander, Citi Financial Auto financed a chain of car loans, which were purchased by Santander, a Spanish bank. Santander attempted to collect the loans and the plaintiffs sued, alleging that Santander had violated FBCPA by harassing and intimidating them. The Supreme Court ruled 9-0 in favor of Santander, declaring that creditors who purchase debt and then attempt to collect the debt themselves without a debt collector are not themselves debt collectors under FBCPA.

Neil GorsuchWhat Was His Focus?

Justice Gorsuch focused primarily on the text of the Fair Debt Collections Act, which defines a debt collector as a person or business whose principal purpose is collecting “debts owed by another.” In other words, under FBCPA, a debt collector can only be a debt collector if the person is collecting debt on behalf of another person. If a person attempts to collect the debt on behalf of him or herself, that person is not a debt collector. Since that person is legally not a debt collector, FBCPA would not apply. Therefore, this person could use collection tactics that the FBCPA would normally prohibit, such as calling late at night or threatening the debtor.

Gorsuch’s opinion and the ruling of the Court are perfectly in line with the role of the judiciary in the Constitution’s checks and balances. Congress has chosen to write a law designed to protect debtors with a built in exemption for certain creditors. It is not the Court’s role to rewrite the law; if people have a problem with the FBCPA, they can ask Congress to change the law or vote in candidates who will change the FBCPA. With that said, the logic behind the law and the outcome of this case is disturbing. The FBCPA essentially states that debt collectors cannot harass debtors, but the owners of those debts can. If a bank like Santander wishes to use unsavory tactics to pressure people into paying their bills, those banks can save money and have greater options in pressuring debtors by cutting out the middle man.

So What Does this Mean for Us?

Arguably, this makes those banks more accountable if they forgo the debt collection agencies, but with the enormous market buying and selling debts, it actually makes it more difficult for debtors to figure out who owns and owes what. If I take out a mortgage with Bank of America, and Bank of America sells my mortgage to Wells Fargo, which sells my mortgage to Santander, I would have no way of knowing these purchases are happening. The resulting confusion on a mass scale could trigger a financial collapse, as it did in 2008 when the housing market tanked. The Court’s ruling and Gorsuch’s written opinion will encourage those same types of debt sales, as buying debt becomes not only more profitable, but easier to enforce legally as well. Congress must change the FBCPA to discourage these types of sales if we are to prevent another housing and financial crisis.

Supreme Court Limits Patent Rights

One of the hallmarks of a successful business is protections on an invention which provide a barrier to competition beyond just money–a patent. Whether you’re an inventor or an entrepreneur, intellectual property protection is close to the heart of your livelihood. Keeping track of what these protections offer is crucial, and these last couple weeks has been enormous for patent law rulings out of the US Supreme Court. First, they limited jurisdictions for patent infringement cases substantially-making patent law much more defendant friendly. Even more recently, and more importantly for patent rights, they limited patent’s exclusive rights by applying the first sale doctrine to patent law at home and abroad with more force than ever before.

What is the First Sale Doctrine?

The first sale doctrine is a concept, also known as exhaustion, that is found as part of the statutory law behind copyright law. The rule is fairly simple but requires a bit of an understanding of the rights intellectual property grants you. Owning a copyright in a work gives you the exclusive right to sell (or really distribute in any way), display, make copies of, or make directive works from that work. Out of all of these, the first sale doctrine exclusively impacts the distribution rights. Once you’ve sold something, or even intentionally given it away, you have “exhausted your distribution rights in that particular work. This means that whoever owns the object or work now is free to sell it, put it on display, blow it up with dynamite-basically distribute or dispose of it as they wish. They can’t make copies, you keep that right, but the distribution right is gone after first sale-thus the first sale doctrine. In Impression Products v. Lexmark, the Supreme Court took this concept from copyright law and decided how it should apply in patent.

Laser Printer Losers-The Case Itself

Lexmark makes laser printers and, more importantly for this case, toner cartridges for those printers. These cartridges, once used up, can be much more cheaply refilled than replaced. This left Lexmark with a bit of a problem-an entire market dedicated to underselling their products by refilling and reselling cartridges. These businesses buy up used cartridges from US purchasers and purchasers abroad to resell them after a refill. With these competitors in mind Lexmark offered their product in two ways, at full price with no stipulations or at a lower price along with a promise to return the cartridges to Lexmark. In order to enforce this, Lexmark included microchips in their cartridges to prevent reuse-a measure the refillers promptly learned how to circumvent.

After failing to curb the businesses of these competitors, Lexmark decided to sue all the companies refilling and selling their used cartridges. They had a big problem though, the contract to not resell the cartridges wasn’t with the refillers it was with the clients who sold to the refillers. Thus, with no contract to assert, Lexmark said that these refillers were infringing on their patent rights.

A patent gives its owners the right to exclude others from making, using, selling, or importing the invention. Lexmark said that because they prohibited reuse and resale in their contracts, the refillers were violating their distribution rights. By the time the case reached the Supreme  Court, there were two serious questions to be addressed. First, whether the contract term could be enforced against the refillers through a patent infringement lawsuit. Second, whethand for patent rights abroad, the answers were no and yes respectively.

What the Decision Does

Case law has long established that exhaustion can apply in patent similar to how it does in copyright law. With this and some recent Supreme Court rulings in mind, the outlook was never particularly good for Lexmark.

As enforceable as their no sale agreements were under contract law, the Supreme Court wasn’t buying it under patent law. The argument, and Lexmark’s hope, was that by selling something with a restriction against further sale they had preserved their first sale rights. This isn’t the case according to the Supreme Court, you can’t contract around the first sale doctrine. Once you sell something

Exhaustion abroad is something the Supreme Court has already addressed for copyright law-and they didn’t go the way Lexmark would want in that case. So it’s no surprise that they followed their own previous ruling in applying exhaustion to patent. From now on selling something outside the US officially counts as a sale under the first sale doctrine and exhausts your distribution right.

These rulings mean that patent rights have been limited, more strictly applying the first sale doctrine to your patents than ever before. However, for those following intellectual property law, this ruling has been more a matter of when than if. The Supreme Court was simply consistent with how it’s handled copyright law in the past.

It’s worth noting that a license is not a sale and that exhaustion applies only to the item actually sold.  This will limit this ruling for many common items such as software or iTunes songs as you more often license these products than actually purchase them.

What’s more, the ruling skirts around the edges of a few other areas of law. Anti-circumvention makes it illegal to, as the name implies, circumvent effective security measures such as the microchips Lexmark installed in their cartridges. Repair and reconstruction is a distinction within patent law. You are allowed to repair an object with a patent on it, but full reconstruction can cross into the territory of patent infringement. While both of these might have applied in this case, neither were considered by the Supreme Court whatsoever.

This ruling will mean that you and your business need to be more careful about how you handle sales if you want to protect your distribution rights in something. There are ways to maintain your rights, depending on how you distribute your product. After this ruling, it’s more important than ever to consider how you’re going to handle your rights and your product.