Consumer Protection

FTC Issues Final Order in First Application of FTC Act to Alleged Deceptive Patent Assertion

  • The Federal Trade Commission (FTC) approved a final order, following the period for public comments, in a matter in which the FTC accused MPHJ Technology Investments, LLC of violating the FTC Act by deceptively asserting rights under patents in an attempt to generate revenue by coercing small businesses to purchase licenses to the patented technology. This order marks the first time the FTC has addressed the issue of deceptive patent assertion. We have covered actions by State AGs involving MPHJ in prior posts.
  • In its administrative complaint, the FTC alleged that MPHJ purchased a group of broad patents related to network computer scanning technology and then sent letters to thousands of businesses claiming they were violating the patents, demanding that they pay for a license to continue, and falsely indicating that numerous other businesses had already purchased a license. The FTC also alleged that when businesses failed to pay, MPHJ's law firm, Farney Daniels, P.C., sent letters threatening the recipients with patent infringement lawsuits.
  • The final order bars MPHJ and Farney Daniels from making deceptive representations when asserting patent rights, including unsubstantiated representations that a patent has been licensed to a significant number of entities or for specific prices. The order also prohibits MPHJ and Farney Daniels from claiming that they will bring a lawsuit if they do not have "competent and reliable evidence sufficient to substantiate that they are prepared to and able to take the action necessary..." at the time such claim is made.
  • In addition, the order requires MPHJ to keep records for five years, including copies of all patent assertion letters, subpoenas and other communication with law enforcement personnel, as well as business records demonstrating compliance with the terms of the order.

Massachusetts Attorney General Proposes E-Cigarette Regulations

  • Massachusetts AG Maura Healey proposed regulations to limit the sale of e-cigarettes to minors, and to provide protections that will help prevent children from inadvertently ingesting nicotine in liquid or gel form. The AG's office will accept public comments on the proposed regulations until April 24, after which it expects to finalize the regulations in the spring.
  • The proposed regulations would subject manufacturers, importers, distributors, and vendors of electronic smoking devices and nicotine in liquid or gel form to already-existing regulations on regular cigarettes and smokeless tobacco. Those regulations prohibit sales of cigarettes to persons under age 18, require retailers to keep cigarettes in a location accessible only to store employees, prohibit promotional giveaways of cigarettes, and require only face-to-face sales methods, among other requirements.
  • In addition, the proposed regulations would make it illegal to sell or distribute nicotine liquid or gel in packaging that is not child-resistant.

Data Privacy

Indiana Bill to Bolster Data Privacy and Security Passes Senate With Unanimous Vote

  • The Indiana Senate voted unanimously in favor of legislation proposed by AG Greg Zoeller, designed to increase data privacy and security for Indiana residents.
  • Similar recent legislative efforts in other states, Indiana Senate Bill 413 seeks to broaden the scope of data privacy obligations to apply to all data users (defined as both data collectors and data owners), and would increase, and more precisely identify, the types of data to be protected.
  • SB 413 would require data users to delete data that is not required for a legitimate business, government, or educational purpose, and to avoid selling data in a manner inconsistent with consumer authorization or applicable law. The bill would also require data users to conspicuously disclose relevant privacy policies on their website, and would require data collectors to disclose what data they are collecting and how it will be used. Finally, the bill identifies civil penalties for certain types of knowing violations, establishes data breach notification protocols, and delineates AG enforcement procedures.

False Claims Act

Fifty Attorneys General Settle Kickback Lawsuit With Pharmaceutical Company

  • Led by New York AG Eric Schneiderman, 50 AGs and the U.S. Department of Justice settled with Daiichi Sankyo, Inc., resolving claims that the pharmaceutical company violated the False Claims Act by allegedly offering physicians inducements in return for prescribing its drugs.
  • The AGs argued that Daiichi provided improper kickbacks in the form of speaker fees and "lavish" meals as part of a "Physician Organization and Discussion" program, from 2005 to 2011. The physicians were allegedly paid even if the speaking event was canceled or given only to the physician's staff within the confines of her office.
  • Under the agreement, Daiichi agreed to pay $39 million to the plaintiffs, with $10 million being divided among state Medicaid programs. The complaint was originally filed under qui tam provisions by a former Daiichi sales representative. who will receive $6.1 million of the federal recovery. The settlement resolves the case filed in the District of Massachusetts in 2010.

Missouri Settles With Medicaid Administrative Services Provider

  • Missouri AG Chris Koster settled claims against APS Healthcare, Inc., APS Healthcare Bethesda, Inc., and Innovative Resource Group, LLC d/b/a APS Healthcare Midwest (APS), for alleged violations of the U.S. and Missouri False Claims Acts.
  • AG Koster alleged that APS submitted false claims to Medicaid by failing to comply with material contractual terms regarding the reduction of administrative costs associated with coordinating preventative and chronic care for state Medicaid beneficiaries.
  • Under the agreement, APS will reimburse Missouri and the federal government a total of $5 million, of which Missouri will receive $2.43 million. In addition, Missouri and the federal government could receive up to an additional $10 million if APS's Owner, Universal American Corp., sells APS or recovers money in a pending lawsuit regarding the purchase of APS in 2012.

States v. Federal Government

Fifteen Attorneys General File Amici Brief, Ask for Stay of Injunction in Immigration Case

  • Washington AG Bob Ferguson and 14 additional AGs submitted an amici brief to the Fifth Circuit Court of Appeals in support of the United States' motion to stay the preliminary injunction issued against President Obama's executive action on immigration by the Southern District of Texas last month.
  • The amici AGs argue that the Fifth Circuit should lift the injunction because the plaintiff states did not identify a legitimate "irreparable" injury, and the injunction is overbroad as it applies nationwide even though amici and non-plaintiff states do not allege any harm and plaintiff states, with the exception of Texas, did not present any evidence of harm at all. The AGs also argued that the court erroneously considered Texas' alleged costs of drivers and other licenses even though federal law does not compel a state to incur those costs.
  • In the government's Emergency Motion for Stay Pending Appeal, the U.S. argues, among other things, that the district court "invented a novel theory of Article III standing that purports to confer standing on States without any actual injury," or allowed the plaintiffs to claim injury from "indirect economic costs that ... federal law does not obligate Texas to bear and in disregard of the expected economic benefits" related to the immigration action. Plaintiffs have until March 23 to respond.

Attorneys General Write Letter to Oppose ATF Ban on Certain 5.56mm Ammo

  • Led by Montana AG Tim Fox, 23 AGs voiced opposition to the U.S. Bureau of Alcohol Tobacco, Firearms and Explosives' (ATF) proposed action that would have removed an exemption to a ban on the sale of steel bullets under the 1968 Gun Control Act. ATF has since withdrawn the proposal. Similar bullets made of copper or lead would not have been affected.
  • The ATF proposal involved a specific type of 5.56mm round, which is frequently used in popular AR-15 rifles (a civilian version of the M16 or M4 military rifle). Because the round is able to pierce body armor and now increasingly chambered in multi-shot handguns on the market, the ATF argued that the 1986 exemption is no longer proper. However, after much public criticism, ATF withdrew its proposal.
  • In a brief letter the AGs applaud ATF's decision to not lift the exemption, and argue that the justification for the ban on the 5.56mm round would be arbitrary: many other rounds typically only chambered in rifles also penetrate soft body armor, and there are only few models of handgun in 5.56mm format. The letter also highlights the popular use of the round for legitimate purposes, including target practice and varmint control. Members of Congress have responded to ATF's withdrawal by offering proposed legislation to enact the ban.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.