Cases of Note in U.S. Supreme Court
Three cases scheduled for oral arguments this session will have lasting impact in arbitration, liability in the Alien Tort Statute and tech copyright

by Avery Martinez

The U.S. Supreme Court has begun hearing oral arguments scheduled for its October session using the same format used for May teleconference arguments, where the justices and counsel participate remotely.

For the session lasting through December, the Supreme Court will hear several cases with lasting effects on technology copyright, liability under the Alien Tort Statute and arbitration.

 

Google LLC v. Oracle America Inc.

Oral arguments Oct. 7

In 2007, Google tried to launch an Android phone using parts of Oracle’s Java software code. In the process, developers created apps without using new code, according to C-Span. Code application programming interfaces, or APIs, allow software of different types to communicate. In response, Oracle sued Google for copyright infringement, and Google argued that parts of the code used aren’t protected by copyright.

Kent Fischmann, an intellectual property, trademarks and copyright and patent prosecution partner at Davis Graham & Stubbs, believes there is sympathy at the Supreme Court for Oracle’s position and could view Google as a big company with the resources to develop code independently and not copy it. He also wonders if the court believes this case should be commercial use and not fair use.

“But they’re extremely discerned, because they’ve been told by Google and others in the industry that if someone says this sort of code is entitled to copyright protection for APIs that that’s going to cause a complete change in how software manufacturers do things,” Fischmann said, adding there are also concerns that the industry would develop distinct programs causing challenges to interoperability across software.

He added that one comment from the Oct. 7 arguments pointed out that the decisions in favor of Oracle have been out for some time, and the industry has not yet fallen into chaos, and thus perhaps the impact of the case is not as large as Google has painted it to be.

Google implemented the Android Operating System and created its own programming language based on Java, according to the website Oyez, a free law project working with Cornell, Justia and the Chicago-Kent College of Law. In order to facilitate developers writing their own programs, Google’s option used the same organization, names and functionality as Java’s APIs.

Google claimed the APIs copied had to be copied practically verbatim for them to work properly with interoperability, and that no other parts were copied, he said. Thus, Google claims that the parts copied are functional and there is only one way to make the process to work, and therefore no sufficient originality exists for the APIs to be subject to copyright protection.

Fischmann said he isn’t convinced by Google’s argument that it was necessary to copy the code, and he believes that corresponding, not copied, code could have been created by Google.

Over the past decade, the case has been cycling through the lower and Federal District court. A federal district judge held that the APIs are not subject to copyright because permitting a private entity to own the copyright on programming language “would stifle innovation and collaboration, contrary to the goals of copyright,” according to Oyez.

However, the Court of Appeals for the Federal Circuit reversed the lower court’s decision and found Java APIs copyrightable, but left open the possibility of Google using a fair use defense, according to the Electronic Frontier Foundation, a nonprofit digital civil liberties group.

A jury found that Google’s use of the Java API was fair use, when the case was remanded to the district court — but, Oracle appealed, and the Federal Circuit again reversed the lower court, according to Oyez. The Federal Circuit held that Google’s use wasn’t fair as a matter of law.

From Fischmann’s view, the question is really whether the parts of the API code that Google copied nearly verbatim are subject to copyright protection.

He said he’s not thrilled with the case because of his work in patents. To him, he feels the kind of protection that Oracle could be given, is protection traditionally available via the patent process, providing narrow coverage of what it does and doesn’t cover and eventually expires.

Earlier in the case, Oracle’s patents were found not to cover what Google had done, he said. Patents provide a relatively easy way to establish whether coverage is given by the patent or not — with copyright it’s much trickier.

In a sense, Oracle could receive a very broad protection, beyond the exact code to the high-level organization in the code, which could prove a dangerous road, Fischmann said. This type of situation could give a group protection that is hard to understand and could theoretically last for decades.

“And in the computer field, I’m not sure that’s a good thing,” he said.

 

Henry Schein Inc. v. Archer and White Sales Inc.

Scheduled for hearing on Dec. 8.

This case arises from a previous case before the court, in which Archer & White Sales, Inc. sued petitioner Henry Schein Inc. alleging violations of federal and state antitrust law and seeking both money damages and injunctive relief. The contract between the parties provided arbitration options in dispute arising under the agreement, except for several things — including injunctive relief, the court opinion states.

It is common in commercial agreements for parties to call for arbitration and have a carve-out if any party can go to a court of competent jurisdiction to seek injunctive relief, Paul Swanson, antitrust attorney and counsel with Holland & Hart, said. Commercial parties want that clause where they can say that if there’s an injunction at stake, they can go to court to receive quick relief.

When the Federal Arbitration Act was invoked in the case, Schein asked the district court to refer the matter to arbitration, but Archer & White argued the dispute wasn’t subject to arbitration, at least because of the injunctive relief. Schein contended that since the contract provided “arbitrators have the power to resolve arbitrability questions, an arbitrator — not the court — should decide” if the arbitration agreement applied.

Archer & White said the argument for arbitration was “wholly groundless” so the district court could resolve the threshold question, to which, the district court agreed with Archer & White and the Fifth Circuit affirmed.

In January of 2019, the court held that this case fell under the Federal Arbitration Act, and under the act, arbitration is a matter of contract and courts must enforce those contracts according to their terms, according to the court’s opinion on the case.

The opinion suggested that the question whether the contract at issue was delegated the arbitrability question to an arbitrator, among other arguments, on remand.

However, on remand, the Court of Appeals refused to compel arbitration and found that the parties had delegated “at least some” questions of arbitrability to the arbitrator, according to Oyez. The 5th Circuit also held that since the agreement included a provision exempting some claims from arbitration and didn’t “clearly and unmistakably” delegate the question of arbitrability to an arbitrator.

In the current case, there is a different legal principle coming into focus — that parties should be able to define the scope of their agreement, and what they want to and don’t want to go to arbitration about, Swanson explained. When the case was in the court previously, the court looked at the plain language of the agreement and if parties wanted arbitration.

“But the Supreme Court declined to weigh in on that arbitration agreement, and we’re going to look at that now, and even though the parties wanted arbitration, it’s really clear they didn’t want it for cases where an injunction is sought,” he said.

The main question before the court is whether or not an arbitration agreement exempting certain claims from arbitration negates an otherwise clear delegation of questions of arbitrability to an arbitrator?’

Swanson said the Supreme Court previously held if there’s an arbitration agreement that said arbitrability needs to be decided by the arbitrator then that has to go to the arbitrator. But the court didn’t address the exception in the contract language issue, and since it was not raised in the 5th Circuit, they would not reach it either.

“If the Supreme Court overrules and reverses the 5th Circuit here — I think that will have major consequences on commercial agreements and arbitration practices generally,” Swanson said.

When there’s a question about whether a case should go to arbitration, ties are usually going to head to arbitration, and the courts will usually err on the side of arbitration, Swanson said. He believes the last Supreme Court decision held that if a delegation of arbitration power is given to an arbitrator, they would not permit a “wholly groundless” exception to that delegation.

“The Supreme Court is not going to let the courts decide that decision about arbitrability, if potentially the parties want an arbitrator to make that decision — even if the question of arbitrability is not really in doubt, the court can’t make that call,” Swanson said.

And if the Supreme Court says that parties cannot carve out injunctive relief from an arbitration agreement could lead to companies asking whether they want to take the risk of committing to arbitration at the cost of emergency relief if something goes wrong. This would be “dramatic change in the status quo if the court will not let parties have those carve outs, he said.

 

Nestlé USA, Inc. v. Doe I

Oral arguments scheduled for Dec. 1

This case arose from a putative class action suit filed over 14 years previous on behalf of several unnamed Malian citizens.

The plaintiffs alleged that “unidentified foreigners” had made them slaves and were forced to work on “Ivorian-owned cocoa farms in West Africa.” The plaintiffs allege that these companies aided and abetted forced labor via their involvement with the West African cocoa industry.

Nestlé U.S.A, Inc.; Archer-Daniels-Midland Company; and Cargill, Inc. are named as defendants, and the respondents do not allege the petitioners committed any of the labor abuses or other wrongs or any economic relationship with any farm where the respondents allegedly were subject to abuse, according to the petition.

Particularly, the respondents assert that the contractual relationships with the farmers and co-ops enabled them to control cocoa production on the Ivory Coast, with the “unilateral goal of finding the cheapest sources of cocoa,” according to the petition.

Nestle, the petitioner, was one of the large purchasers, processors, manufacturers and retail sellers of cocoa beans and “effectively control” cocoa production in the Ivory Coast, according to Oyez. Respondents allege the petitioners aided and abetted the abuses by buying cocoa beans from farmers and farmer co-ops and providing them crop-related assistance, according to the petition.

Filed in California district court, the 9th Circuit panel reversed the district court’s dismissal of claims alleging aiding and abetting slave labor in the U.S. under the Alien Tort Statute, according to the summary. The panel held that aiding and abetting comes within the ATS’s focus on torts committed in violation of the law of nations.

On remand, the district court dismissed the claim alleging aiding and abetting slave labor under ATS, finding that the complaint sought an impermissible extraterritorial application of the ATS, according to Oyez.

In particular, the case concerns the Alien Tort Statute. According to the Congressional Research Service, the ATS was part of the Judiciary Act of 1789, and is described as a provision which, unlike any other law. The current form, the statute provides that district courts shall have original jurisdiction on any civil action by an alien for a tort solely, which were committed in violation of law of nations or a treaty of the United States.

Further, though it has been of interest in recent decades, it evolved from an obscure provision to a major pathway for foreign nationals to seek redress in American courts.

In the petition, one reason given for granting the petition was from the 9th Circuit’s ruling creating a conflict regarding the mens rea standard for aiding and abetting liability. This decision created a “clean and clear split” regarding the proper mens rea standard liability under the ATS “as the panel dissent and the eight other judges dissenting from denial of rehearing en banc recognized.”

Aiding and abetting liability attaches only when a defendant acts with the purpose of aiding the violation of international law in the 2nd and 4th Circuit, according to the petition. This in turn could expand liability far beyond principles accepted by international law, directly against the Supreme Court’s decisions in some cases.

“The 9th Circuit, while nominally genuflecting towards the purpose standard, in fact gutted it,” the petition states. “The panel majority held that the purpose standard is satisfied whenever a defendant acts with the purpose of maximizing profit — here, seeking to purchase inexpensive cocoa — coupled with the knowledge that third parties may be engaged in human-rights violations that might contribute to achieving the profit-maximizing goal.”

The case has two main questions: one, whether an aiding and abetting claim against a domestic corporation under the ATS overcome the extraterritorial bar, where the claim is based on allegations of corporate activity in the United States, where the plaintiffs can’t trace the alleged harms to that activity? And does the judiciary have authority under the ATS to impose liability on domestic corporations?

 

This article appeared in the Oct. 5 issue of Law Week Colorado. To read other articles from that issue, order a copy online. Subscribers can request a digital PDF of the issue.