Business Law Journal

Seventeen years ago, in 2004, the California Legislature enacted the Labor Code Private Attorneys General Act of 2004 (“PAGA”).  Appropriately dubbed a “bounty hunter” law, PAGA authorizes any current or former “aggrieved” employee of a California employer to file suit to seek statutory penalties for essentially any violation of the California Labor Code together with attorney’s fees, hence the incentive for plaintiff attorneys to bring such cases.  Specifically, under PAGA a current or former employee who is “aggrieved” by a violation of the California Labor Code can seek in addition to damages and liquidated damages, civil penalties on the employee’s behalf and on behalf of all other similarly “aggrieved” (i.e., affected) current and former employees.  The recoverable civil penalties are up to $100 per employee per pay period for an initial violation and $200 per employee per pay period for each subsequent violation, plus attorney’s fees and litigation costs.  When such penalties are awarded, the plaintiff current or former employee along with all other similar “aggrieved” employee will receive 25% of the penalties together with their attorney’s fees as a “bounty,” with the balance of the penalties payable to a State agency known as the California Labor and Workforce Development Agency. 

Following the Supreme Court’s recent ruling narrowing the patent assignor estoppel doctrine, employers may have more difficulty shielding their patents from challenges by former employee-inventors and their new employer-competitors.

On April 5, 2021, the Supreme Court put an end to the decade-long copyright dispute between tech giants Google and Oracle America.  In a 6-2 decision authored by Justice Breyer, the Supreme Court held in Google LLC v. Oracle America, Inc., 593 U.S. ___ (2021), that Google’s copying of approximately 11,500 lines of code from Oracle’s Java SE Application Programming Interface (“API”) was “fair use” and, therefore, did not constitute copyright infringement.  The Court’s decision will undoubtedly have ramifications for decades to come on the “fair use” doctrine in commercial works, and in particular in the use of computer code in commercial software.

The two questions before the Court were:  (1) whether the Java SE code that Google copied was entitled to copyright protection in light of the Copyright Act’s inclusion of computer programs as copyrightable material and its prohibition on protection for “processes” and “methods of operation,” and (2) assuming the code was copyrightable, whether Google’s use qualified as “fair use.”  Recognizing that “a holding for Google on either question presented would dispense with Oracle’s copyright claims,” the Court only answered the fair use inquiry.  In view of “the rapidly changing technological, economic, and business-related circumstances,” the Court exercised judicial restraint by stating it would “not answer more than is necessary to resolve the parties’ dispute.”  Although Google could have prevailed had the Court found that the API was not copyrightable, the Court saved that question for another day and assumed for the sake of argument that it was.

Justice Breyer, joined by Chief Justice Roberts and Justices Sotomayor, Kagan, Gorsuch, and Kavanaugh, focused on the fair use defense by analyzing each of the four statutory factors enumerated in 17 U.S.C. § 107:  (1) the purpose and character of the use; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work.  The Court found that each factor weighed in Google’s favor, thereby reversing the Federal Circuit’s decision to the contrary.

Justice Thomas, joined by Justice Alito, dissented, stating that the majority erred by not answering the question of copyrightability and that the fair use factors actually favored Oracle.  The dissent criticized the majority’s approach of sidestepping the question of whether the API was copyrightable, arguing that the majority’s failure to address the issue distorted its fair use analysis and ultimately rendered the code as “less worthy of protection.”

The Court’s decision sets an important precedent as it has the potential to significantly expand the fair use doctrine, even in non-computer software contexts.  If you are an author, musician, programmer, or other content creator, or have been accused of copyright infringement, it is important to consult with experienced intellectual property counsel to determine how the decision impacts you.

AALRR has a dedicated group of attorneys on its Intellectual Property Team with the experience and expertise to vigorously enforce your copyrights and defend you against claims of copyright infringement.  Attorneys on the Firm’s Intellectual Property Team can also assist you with registration of your copyrights with the United States Copyright Office.  Contact the authors for assistance with your copyright and other intellectual property needs.

This AALRR post is intended for informational purposes only and should not be relied upon in reaching a conclusion in a particular area of law. Applicability of the legal principles discussed may differ substantially in individual situations. Receipt of this or any other AALRR publication does not create an attorney-client relationship. The Firm is not responsible for inadvertent errors that may occur in the publishing process. 

© 2021 Atkinson, Andelson, Loya, Ruud & Romo

The California homestead exemption has been amended effective January 1, 2021.  Under the new law, the homestead exemption now protects home equity equal to the median home price in the county where the debtor resides, not to exceed $600,000, or $300,000, whichever is greater.  The exemption adjusts annually for inflation.  The homestead exemption should be taken into consideration when the defendant may be personally liable for the judgment.

A California appeals court recently determined that debtors who attempt to avoid debt collection by moving their assets out of state and into a different legal form may be liable for fraudulent transfer under California law.  On January 7, 2021, the California Court of Appeals issued a decision in Nagel v. Western (2021) 59 Cal.App.5th 740.  In Nagel the court held that under California’s Uniform Voidable Transactions Act (the “UVTA”), “physically relocating personal property and transmitting or transporting sale proceeds out of state, then transmuting them into a different legal form, may constitute a direct or indirect mode of parting with assets or one’s interests in those assets.”  This means that such transfers would fall under the fraudulent transfer prohibitions of the UVTA.  In short, debtors can no longer feel safe trying to shield their assets from creditors by moving them out of state and changing their form.  And Creditors have a new mechanism at their disposal to try to access those assets despite such maneuverings on the part of the debtors.

In a recent letter to members of the U.S. Senate Finance Committee, dated February 18, 2021, the United States Treasury Inspector General for Tax Administration (the “Inspector General”) outlined a potential disagreement with the Criminal Investigations Division of the Internal Revenue Service (“Criminal Investigations”) regarding the need for a search warrant to utilize databases containing cell phone users’ GPS data.  On one hand, the Inspector General indicated that courts may use “similar logic” to expand a 2018 Supreme Court decision requiring a search warrant to access cell-site location information to likewise apply to GPS data provided to applications operated by third parties.  On the other hand, the letter provides the stated position of Criminal Investigations, which asserts that “Cell Site Location Information [] is distinct from [] opt-in app data,” in apparent reference to the division’s prior claim that GPS data collected by cell phone applications does not require a search warrant because it has been “voluntarily” provided to a third-party.

On January 6, 2021, the Department of Labor (“DOL”) announced the new final rule for worker classifications called the “economic reality” test. The new DOL final rule provided that two core factors were to be examined to determine whether a worker is properly classified as an independent contractor under federal law: (1) the nature and degree of control over the work; and (2) the worker’s opportunity for profit or loss based on initiative and/or investment. As previously discussed here, these requirements are much less stringent than the “ABC” test adopted by California, which requires that the worker perform work outside the usual course of the hiring entity’s business and that the worker is customarily engaged in an independently established business of the same nature.

According to a recent unanimous decision by the California Court of Appeal’s First District, an action alleging violations of California’s Private Attorneys General Act (“PAGA”) may be filed in any county where any allegedly aggrieved employee worked or alleges to have suffered violations of the Labor Code.  It does not matter where the employee suing the company worked or where the employer-company is located. 

The California Supreme Court has rejected an emergency constitutional challenge filed by drivers for Uber, Lyft and other app-based companies and various unions requesting that the Court declare the voter-approved Proposition 22 unconstitutional.  Proposition 22 (“Prop 22”) permits some app-based gig ride-hailing and delivery companies to continue to classify workers as independent contractors despite California’s adoption of the stringent ABC test for worker classification (discussed here).  The union-backed challenge to Prop 22 was not decided on the merits and continued legal activity challenging Prop 22 is expected.  The lawsuit is entitled Hector Castellanos, et al. v. State of California, et al., Case Number S266551.

In order to resolve a COVID-era class action lawsuit concerning its retail stores, Nike has agreed to provide all retail store employees with transparent, see-through face coverings to accommodate its customers who are deaf or hard of hearing and rely on lip reading. Nike’s new policy is part of a proposed settlement following a class action suit against the shoe company’s retail operations.