Tag Archive for 'lawsuit'Page 2 of 26

Tesla Motors Will Release Its Patents – Should Other Companies Do the Same?

Elon Musk, Chief Executive Officer and Chief Product Officer of electric car producer Tesla Motors, recently announced that Tesla will release its patented technology to the public. Accompanying the announcement, Musk had harsh words for the patent system:

“When I started out with my first company, Zip2, I thought patents were a good thing and worked hard to obtain them. And maybe they were good long ago, but too often these days they serve merely to stifle progress, entrench the positions of giant corporations and enrich those in the legal profession, rather than the actual inventors.”

tesla motors elon muskMusk further commented,

“After Zip2, when I realized that receiving a patent really just meant that you bought a lottery ticket to a lawsuit, I avoided them whenever possible.”

The patent system was created to encourage innovation by granting inventors the exclusive right to sell or practice a product, design, or process. But Tesla recognizes that certain companies can benefit from non-exclusivity. Musk said,

“We believe that Tesla, other companies making electric cars, and the world would all benefit from a common, rapidly-evolving technology platform.”

Tesla already enjoys a competitive advantage in the electric car space because of its pool of engineers and manufacturing facilities. Tesla needs a mainstream marketplace for its cars more than it needs exclusivity. Enter Ford, BMW, and Toyota. If the major car companies start mass-producing electric cars, Tesla will have more potential customers, and it will encourage companies to build charging stations and other infrastructure necessary for electric cars to flourish. If Tesla’s technology platform becomes the industry standard, Tesla can also sell its batteries and other components to other electric car manufacturers.

But while an open-source model may work for Tesla, inventors and start-ups trying to break into a market should continue to pursue patents for their innovations. Exclusivity can give a fledging company the competitive advantage its needs to grow, where it would otherwise be crushed by the entrenched heavyweights.

Patents have other benefits beyond exclusivity. A patent may be necessary if you intend to license your invention. If you are seeking investment, a patent may make your company more attractive to investors or venture capital firms. Patents can also be sold or used as collateral for loans or other financing. Musk admits that Tesla used its patents to obtain financing in the early days of Tesla.

Other innovative companies, like Apple, have aggressively defended their intellectual property, most notably through its recent high-profile lawsuits against Samsung over mobile phone technology. It remains to be seen whether other tech giants will follow Tesla’s lead. But for the majority of inventors and start-ups, a patent continues to be the tried and true way to bring new ideas to the market.

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Sriracha Hot Sauce Lawsuit Cools Off

Sriracha is an iconic red hot sauce with a green cap that is—according to its label—good on pretty much everything. According to recent legal troubles, however, it appears that it may not be good everywhere. Several months ago, the city of Irwindale, California, where the plant is based, threatened the company with a possible shutdown. However, as the suit progressed, the city looked like the one that could wind up getting burned. Last week, the city chose to drop the suit altogether.

SrirachaThe Public Nuisance Legal Dispute

The legal dispute began when residents of Irwindale started complaining about headaches, burning eyes, and various respiratory problems, all of which they believed were associated with fumes from the Sriracha factory.

In an effort to protect the health and safety of their residents, the city filed suit, alleging the plant was a public nuisance. Put simply, public nuisance requires an unreasonable interference with a common right available to the general public. By polluting air quality and interfering with some residents to breathe peacefully, Sriracha found themselves in hot water.

More dramatically, the city was asking for a temporary restraining order to essentially shut down the plant. A restraining order of that caliber is incredibly difficult to obtain, and unsurprisingly, it was denied, but with a catch – Sriracha had to either stop conducting activity that could have been making Irwindale residents sick, or attempt to mitigate them.

To the city, this meant the plant must install a $600,000 filtration system to reduce fumes. That order was too hot for Sriracha to handle, the lawsuit pressed forward, and negotiations with the city began.

On May 28th, 2014, Mayor Mark Breceda and David Tran, the CEO of Huy Fung Foods, the company behind Sriracha, along two of the Governor’s representatives, came to a verbal agreement that the mayor would encourage the city council not to continue with the lawsuit. The next day, city council dropped the lawsuit. Ultimately, Sriracha brass modified their ventilation system, and agreed to follow up with complaining residents.

Was This Lawsuit Frivolous?

While settlement is good news for both parties, it still amounts to about 6 months of Irwindale attorney’s time, a bill that is footed by taxpayers. The quick settlement gives off a sensation that this suit was for little to no purpose. After all, encouraging a higher-level filtration system or the like could have been accomplished without any court intervention.

Although the suit was certainly not frivolous, the city’s actions could expose them to liability. The most tangible type of damage to the company occurred when Tran felt compelled to take out a new loan to pay off a loan the city of Irwindale gave the company. The terms of this new loan are not as favorable as the loan from the city of Irwindale, costing the company money. Tran felt that due to how the city had been acting towards his company, he had to do this to protect the brand. While it is unlikely Sriracha will stir up any trouble, this type of exposure would not have occurred without such aggressive moves by the city.

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NBA Will Likely Slam Dunk Sterling in Upcoming Lawsuits

In the aftermath of his famous racist comments, billionaire Donald Sterling has hired a posse of lawyers. Apparently he is not willing to go down without a fight. In fact, as of May 16, Sterling’s lawyers wrote the NBA, stating Sterling is refusing to pay the $2.5 million in fines, and has threatened to sue the league. The letter claims Sterling is not in violation of any rules of the NBA constitution, and the NBA is violating Sterling’s due process rights by banning him and slapping him with such a huge fine.

donald sterling lawsuitA lot has been said about this case already, from violating California’s wiretapping laws, to free speech, to antitrust suits. The problem with evaluating those issues is that they all miss the point. This isn’t a case about privacy, free speech, or corporate regulation. It’s a case about a contract, and whether Sterling has lived up to the terms of that agreement. Quite simply, it doesn’t look like he has.

What about Free Speech and Due Process?

Any concerns about free speed or due process can be dismissed immediately, because the NBA is a private organization and not the government. There is a small exemption for private organizations that receive government support, but it’s tangential to this matter. Plain and simple, Sterling does not have free speech protection shielding him from recourse from being slam dunked by the NBA. Nor is he entitled to due process; it’s a unique argument to make, but as far as legal doctrine goes, it’s a foul.

What about Privacy?

How this communication was disseminated to the public is irrelevant. Therefore, wiretapping and privacy concerns are likely not material. The only remotely relevant argument Sterling can make is that under Article 13(a) of the NBA constitution, which requires violations to be “willful.” He can argue his acts were not willful violations because they were surreptitiously and secretly documented. The weakness with that argument is that the ‘willful’ standard is not only vague, thus open to the Board’s discretion, but it is widely reported and there is ample evidence to support that Sterling knew he was being recorded, yet continued to say the things he did. This fact diminishes an argument that his actions were not “willful,” and eliminates any expectation of confidentiality, a requirement under the wiretapping statute, and along with it any wiretapping claim he may have against anyone.

What Is This Case Really About?

At the heart of the issue is “the contract”—i.e. the terms of the NBA constitution. It’s being called a contract because Sterling signed onto certain terms that go along with owning an NBA team. Specifically, Article 13(d) bars NBA owners from violating contractual obligations, and in particular the owner’s obligation not to engage in unethical conduct, or to act in a way that is adverse to the NBA. Sterling’s conduct certain appears to fit this bill, considering his remarks caused sponsors to reconsider backing the Clippers and nearly lead to a boycott by the players.

Moreover, filing a suit could be more disastrous than Sterling realizes. Over an issue such as this, California’s discovery laws and depositions could leave what little is left of his private life exposed to public view and scrutiny.

Looking at the looming legal battle between a lone billionaire and a league of basketball superstars, the outcome seems clear, and even before the start of the game. Sterling, standing down court, with the clock shot winding down, is tossing the ball from across the court, hoping to score. But as the buzzer sounds, he isn’t even close.

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Twibel: How to Avoid Committing Libel on Twitter

Social media has completely changed the way we communicate. Perhaps the most profound novelty of social media is that it facilitates random arguments between complete strangers. You don’t have to spend much time on social media before you start to see the occasional snarky or even vicious comment. Consider this recent incident: during a series of discussions involving the sale of a horse, a random horse dealer inserted herself into the discussion by calling the horse’s previous owner, Mara Feld, “f***ing crazy” on Twitter. Offended, Mara filed a libel lawsuit.

TwibelLibel occurs when someone prints a false and malicious statement of fact about you that harms your reputation. Twibel occurs when someone commits libel on Twitter.

Feld sued the horse dealer for libel, claiming that her reputation was damaged by the dealer’s statement on Twitter as the whole world saw that comment.

The court ruled that since online discussions are often heated, one has to look at the context in which the comments are made. Looking at the transcript of the Twitter conversation, the court ruled that a reasonable person would not have thought that the tweet stated an actual fact, but instead, they would have taken it as an opinion or criticism. Libel only applies when someone says false and damaging statements of fact about you. Thus, the court ruled that libel did not occur in this case.

When Can You Be Held Liable for Twibel?

When dealing with a libel case, the court has to decide whether someone has made a malicious statement of fact. For example, in Cox v. Obsidian Finance, Cox called someone at Obsidian a “tax delinquent” and accused him of fraud and corruption on a blog. The court found Cox liable for the specific factual accusations, but declared that the rest and the majority of his accusations were simple hyperbole/figurative language. This was because Cox wrote in a stream of consciousness format and used “extreme language.” The fact that Cox was venting rather than making specific factual statements protected him from being held liable for all the statements. However, the court did hold Cox liable for certain malicious statements of facts that he made because those statements injured Obsidian’s reputation.

So, before getting into a particularly heated Twitter exchange, just remember to avoid damaging statements of facts and just stick to insults that can’t be proven.

How to Punish Donald Sterling without Censoring Free Speech

In the context of the Donald Sterling’s racist remarks, it is important to remember that all people have rights—even those who are bigoted and offensive. If we silence bigots, we would also be silencing political dissenters – and destroying free speech.

donald sterlingLos Angeles Clipper owner Donald Sterling made racist comments about African Americans to Stiviano, his alleged girlfriend (Sterling is married to another woman). Sterling told Stiviano he didn’t want her taking pictures with Magic Johnson or see African Americans at his games. Sterling’s comments have drawn criticism, even from his own wife. The NBA have announced they are fining Sterling $2.5 million for his comments, banning him from any NBA games, and forcing him to sell the team.

There is precedent for rich people losing their property rights if they express views which are perceived as bigoted. Sports leagues have suspended owners from management for making racist comments before, like former Cincinnati Reds owner Marge Scott. Powerful figures outside sports have also lost positions of privilege because of their views. Former Mozilla CEO Brendan Eich was essentially forced to resign after the public discovered he had donated money to support California’s Proposition Eight, the initiative which would have restricted marriage in California to a man and a woman.

Public Censorship

Donald Sterling is a relic of the past—which is to say, he is an easy target to mark as bigoted. Sterling is a rich white man who allegedly discriminated against black children by denying them housing, but who is willing to profit from black labor on basketball courts. Sterling is a cranky old man who doesn’t want to be associated with black people, but who is perfectly fine with rumors that he is having an affair with a partly black woman.

But that doesn’t mean the NBA should try to discipline him. Sterling still has the right to express himself, especially in a private conversation. Sterling would hire a wall of lawyers if the NBA took any action, and that would force the courts to intervene. Let me be clear: judges cannot approve suspension of Sterling’s property rights merely because of offensive and ignorant things he said privately to his mistress.

Yes, Sterling is a noxious racist who was accused of violating the Fair Housing Act by denying black children housing. During that case though, Sterling had violated a federal statute and there was no free speech defense. In this week’s scandal, Sterling was making private comments. We cannot take away people’s rights merely because we don’t like what they say. Those comments may end up hurting the Clippers and the NBA, but a lifetime ban and a $2.5 million fine will have to suffice.

On the other hand, if the economic consequences hurt the NBA, doesn’t the NBA have the power to boot Sterling since Sterling’s behavior will in turn hurt the NBA? The same applies to Brendan Eich. If people boycotted Firefox because of Eich’s support for Proposition 8, wouldn’t Mozilla be justified in terminating a CEO who was causing them to lose business?

The difference is that the government cannot be involved in anyway. The Mozilla firing is partly justified because the board of directors could take action without any government oversight. The forced Clippers sale will result in eventual court oversight. No part of the government, including the courts, can strip Sterling of his free speech rights, no matter how repulsive he is. The NBA needs to find a way to address the scandal without the power of the government.

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