Here’s a great opinion, out of the United States District Court for the District of Rhode Island, on QDROs, their statutory basis, their purpose, and how they should be structured. Notably, the court weighs in in a very sensible manner on the never ending question of whether, under ERISA, the divorce decree at issue must comply exactly with the requirements imposed by ERISA to qualify as a QDRO or whether instead, as in horse shoes, close enough counts. In this circuit, close enough is usually good enough, and courts tend to enforce the divorce decree so long as the court is convinced it can accurately ascertain the intent and purpose of the agreement from the decree, regardless of whether the exact detailed requirements that ERISA imposes to qualify as a QDRO have been met. This opinion comes closer than those to requiring close compliance with the specific requirements of the statute, but allows variance from them subject to a certain principled guidance – namely, whether the variance does not affect the plan administrator’s ability to determine to whom and in what amount to pay plan proceeds. If so, then the requirements should be considered to have been met in substance and the order in question deemed a QDRO for these purposes.

Beyond this aspect of the opinion, one of its most notable features is simply its nice exposition of exactly what a QDRO needs to contain. Exactly what needs to be contained in a divorce document to qualify as a QDRO seems to be a constant source of confusion for people who are not ERISA lawyers but who have to work out family/divorce agreements; this opinion just lays it out in clear fashion.

The opinion is Metropolitan Life Ins. Co. v. Drainville. It doesn’t appear to have been posted yet on the court’s website, but once it is, you should be able to find it here.  For now, here’s a Lexis site for it: 2009 U.S. Dist. LEXIS 63613.

I have to admit I have found the Workplace Prof blog tough sledding since the site’s founding blogger, Paul Secunda, took retirement from the site, apparently to spend more time in the snow in Wisconsin. Without Paul, the blog has trended heavily towards labor law and lacks the type of frequent, insightful commentary about ERISA that was a hallmark of the Secunda regime.

I mention this today because the blog has a guest/drop in post from Paul, commenting on a Wall Street Journal law blog story about the decline in securities class action litigation. Paul comments that one reason for this that was overlooked in the story may well be the discovery of the class action plaintiffs’ bar over the past few years of ERISA as a better tool for prosecuting such claims and as an excellent stand-in in many cases for securities suits. This is something I have discussed frequently over the years on this blog, but I have to admit, until Paul, the law professor formerly known as the Workplace Prof, mentioned it in his post, it had not jumped out at me as something relevant to the Wall Street Journal piece. But there you have it – more anecdotal evidence for the idea that ERISA is displacing securities actions in many circumstances.

It has become a given in any talk on 401(k) plans and fiduciary liability that I give these days – my comment that, when the market was always going up, up, up, no one cared that they might have made 15% instead of 14% but for some unresolved problem with a plan’s structure, but with the market going down, down, down, anything and everything even allegedly wrong with a plan is going to get sued over. The point is always the same: it is doubly important now to always dot all the eyes and cross all the tees, which translates into watch your investment selection mix, watch your fees, watch your level of disclosure, watch the process by which you select your vendors, and so on. It all adds up to the idea that in this market, someone is going to come after you if you are a fiduciary or a plan vendor, so be prepared to defend everything you do.

That is why I liked this post here, from the folks at the Float, about excessive fee litigation trickling down to the level where suits based on fees are being filed against plans with as little as $2 million is assets, and their advisors. There’s nowhere to hide anymore, folks. Get it right in the first place, and then defend yourself; being the small fish isn’t going to keep you out of the churn.

So, so, so very far behind. Its even creeped onto the blog, and in particular into our serialization of The Genie In the Machine. Oh, well, better late than never. Here is the last and final installment of our semi-serialization of Robert Plotkin’s book on automated inventing, and its impact on patent law. Meanwhile, you can find the first three installments here, here and here.

Automated Inventing: Should Computer-Generated Inventions be Patentable?

In my previous entries I have discussed how "artificial invention technology" is being used to invent new products automatically. In this entry I will argue that such computer-generated inventions should be patentable, but that the legal requirements for patentability will need to be recalibrated in light of artificial invention technology.

For an invention to be patentable, it must (among other things) be "nonobvious." Imagine, for example, that you design a new pencil. Assume that all previous pencils have been constructed from pine wood and that your pencil is constructed from oak, but in all other respects is the same as an existing pencil. Should you be entitled to a patent on your pencil? It satisfies patent law’s "novelty" requirement because it differs in some way from previously-existing pencils. Yet it most likely does not satisfy patent law’s "nonobviousness" requirement. A product is considered "obvious," and therefore not patentable, if the product design would have been obvious to a "person having ordinary skill in the art" of the product at the time the product was designed.

Patent law’s "person having ordinary skill in the art" (PHOSITA), like tort law’s "reasonable person," is a legal fiction, intended to represent the current level of skill of people currently practicing in a particular technological field (art). If a court were to determine whether your oak pencil is obvious, it would first ask, "what was the ordinary level of skill of pencil designers at the time you designed your pencil"? The court would answer this question by looking at factors such as the educational degrees typically held by pencil designers and the number of years of experience they have. A typical statement by a court is that "pencil designers of ordinary skill as of January 1, 2009 had a Bachelor’s Degree in Mechanical Engineering and 6 years of work experience designing pencils." Based on this finding, the court attempts to determine whether such a hypothetical person would have found it obvious, on January 1, 2009, to construct pencils out of oak rather than pine.

If all pencil designers were to go back to school and obtain Ph.D.’s in Mechanical Engineering tomorrow, courts would recognize the resulting increased skill of the "person having ordinary skill in the art" in subsequent patent cases. The basic effect would be to raise the bar for nonobviousness, thereby making it more difficult for people to obtain patents on pencils.

Creation and adoption of artificial invention technology by pencil designers could have a similar real-world effect on the ability of pencil designers to create new pencils. One person who I interviewed for The Genie in the Machine said that he considers an engineer with a Bachelor’s Degree, but equipped with artificial invention technology, to be as effective at solving problems as an unaided engineer with a Ph.D. If pencil designers worldwide were to adopt, and become skilled at using, artificial invention technology, the law of nonobviousness should take this increase in "effective inventive skill" into account. As a result, it should generally become more difficult to obtain patents on new pencils. Intuitively, someone should not be able to obtain a patent on a pencil that could have been created by any pencil designer merely by applying ordinary skill to widely-available invention automation technology.

Yet it is at best unclear whether this is how the nonobviousness standard will adapt to artificial invention technology. The caselaw on nonobviousness pays very little attention to the technologies that inventors use to assist them in the inventive process, focusing instead primarily on inventors’ education and training. Even the U.S. Supreme Court’s most recent pronouncement on obviousness in KSR v. Teleflex, 550 U.S. 398 (2007), declined to address this issue as directly as it could have. As a result, we are left with incomplete guidance regarding whether the level of skill of those having ordinary skill in an art in a particular patent case will be interpreted in light of the skill that those in the art have at using extant invention automation technology to solve problems. If invention automation technology is not taken into account when calibrating the level of skill of PHOSITA in particular cases, we run the risk of allowing inventions which could be produced using only ordinary skill to be patented. This would run counter to the very purpose of the nonobviousness requirement and of patent law itself.

As with the other topics addressed in my previous blog entry, I discuss the relationship between nonobviousness and invention automation technology in much more detail in The Genie in the Machine. I hope you have enjoyed this overview of the promise of invention automation technology, and of the challenges that such technology rises for patent law. I look forward to your comments and questions and to an ongoing dialogue.

Little time to blog today – plus I still have to get up the latest chapter of our on-going serialization of Robert Plotkin’s book, The Genie in the Machine – but I did want to pass along, with a couple of brief comments, this excellent article on the question of whether there is coverage for governmental investigations under directors and officer or professional liability insurance. The article focuses really on two points. First of all, that there may be such coverage, but the time to determine that is not after a claim is made; the time to do so is in advance, when you are negotiating for the policy. This is a basic point I frequently make in seminars – a company needs to survey its potential exposures in advance, and structure the insurance it is purchasing to make sure that, to the extent the market will allow it, coverage is acquired in advance for those potential exposures. This is work your insurance broker and/or your outside coverage lawyers can help with, and it will cost a lot less than fighting later over whether or not there is coverage for an exposure that, with foresight, could have been anticipated and explicitly insured against. Second, the article discusses in depth the question of whether the investigation notice constitutes a claim that would trigger insurance coverage. This is a very interesting and subtle point, and the outcome can vary depending both on the jurisdiction involved and the particular language used to define the word claim in the particular policy at issue. On a more philosophical level, this point is interesting to me because it references back to something I have discussed elsewhere on this blog, namely the idea that all modern insurance coverage law harkens back to the doctrinal shifts that occurred as part of the large dollar insurance battles over coverage for asbestos and environmental exposures a quarter century ago; in this particular instance, the question of when notice from a government agency qualifies as a claim – which is discussed in this article with regard to an investigation into financial behavior – was first really developed in case law considering whether environmental clean up demand letters and notices constituted a claim that could trigger insurance coverage.

I have written, in various blog posts, highly detailed, rational and analytical explanations of why parties to an insurance coverage dispute should retain experienced coverage counsel to represent them; I have given long, detailed, argumentative explanations of the same point in a number of seminars. Often the analysis revolves around the fact that, if the other side has an expert in this area but you don’t, you are committing the legal equivalent of bringing a knife to a gunfight. No matter what anyone tries to tell you, you can’t make do with a generalist when you are engaged in a significant dispute over insurance coverage.

Thus, I chuckled when I came across this article here, by an insurance professional, in which he presented a humorous list of what he has learned in 19 years in the insurance industry. If you combine several items in his list, you end up with what may be the most perfect short answer to the question of “should I hire a coverage lawyer and if so, why” that I have ever seen. The answer, in short, is that:

There is nearly ALWAYS more than one possible answer to a coverage question. One is just more correct than the others based on the particular situation. . . . .Fifty states, hundreds of courts, thousands of differing opinions and interpretations. You can be right in some states and wrong in others. . . . It’s NEVER ok to guess at the answer to a coverage question.

Here’s an interesting case for you. Here in the First Circuit, we have plenty of case law making clear that theories of liability that serve as alternative enforcement mechanisms to those set forth in ERISA itself are preempted. What about the circumstance where the cause of action is not necessarily an alternative enforcement method but would nonetheless require the fact finder to reference the terms of an ERISA governed employee benefit plan to determine whether or not the plaintiff’s state law cause of action is viable? Is there a point at which the state law claim becomes too remote from the existence of the ERISA governed employee benefit plan for it to be preempted? Well sure, but it is only at a great remove from the employee benefit plan itself. The standard for determining this is a simple test – does determining the cause of action require considering or interpreting the terms of the plan? If so, the state law cause of action is preempted.

This principle is nicely illustrated by a new decision, out of the United States District Court for the District of New Hampshire, in which the plaintiff sought to recover emotional distress for tortious mishandling of her claim for benefits, by arguing that “resolution of her emotional distress claim would not require an analysis of ERISA plan documents” and therefore the state law claim could proceed. The District Court rejected the argument because, as a factual matter, deciding the plaintiff’s claim would require the court “to determine, among other things, any deadlines or other time frames set out in the plan documents. It would also be necessary, it would seem, to know the scope of the plan’s coverage, in order to determine whether [plaintiff’s] claims were mainstream or borderline or meritless, which, presumably, would have a bearing on the time reasonably necessary for [the defendant] to approve or reject them.” The case, Polley v. Harvard Pilgrim Health Care, does a nice job of illuminating this aspect of preemption analysis – namely, the implications for preemption of any need under a state law cause of action to interpret the terms of an ERISA governed plan. I pass it along as useful reading on that point, and a handy, dandy case to cite to quickly for the principle.

Here at this blog, we are all about being a modern media company, as you can tell from all the pop-ups and the banner ads you encounter when you come here to read the latest posts. Synergy, and book serialization and cross-marketing and all those other business page buzzwords – that’s what we’re about here.

Now I will take a minute and pull my tongue out of my cheek, and move onto one cross-marketing opportunity that I have agreed to, because it benefits the readers of this blog and involves what promises to be an outstanding educational opportunity. The American Conference Institute is hosting what looks to be a very broad and in-depth examination of current hot topics in ERISA litigation next October in New York, and this blog has signed on as a media sponsor. As per our continuing non-commercial status, no money in it for us, but it gives readers of this blog an opportunity for a substantial discount if they register in the next couple of weeks for the seminar. Just use my name and tell them I sent you. Just kidding – the actual information and manner of laying claim to the discount is right here.

The brochure for the conference itself can be found here. I signed on as a media sponsor for the same reason I think readers may be interested in the seminar, which is that the list of topics reads like a table of contents for the blog; thus, light dawned over Marblehead here and I realized if you read this blog regularly, you would probably be interested in the subjects being addressed at the conference. Beyond that, you will see the speaker list (here comes the pun) speaks for itself.

File this, I suppose, in the department of inevitable events – lawyers representing the restaurant industry have filed to have the Supreme Court review the Ninth Circuit ruling finding that the San Francisco pay or play ordinance is not preempted by ERISA. This is one of those instances where you can bet how the case will come out the same day the Court announces whether it will hear the case; if it does, the statute is going to be found preempted and the Ninth Circuit overruled, for reasons I referenced in passing here.

I do have a reason for posting on this, beyond wanting to get on board early with a prediction for the outcome (even Paul Secunda, back in his days as the Workplace Prof, would never have called a case before it was even accepted for hearing!), and that is this quote from the restaurant group’s lawyer, courtesy of the National Law Journal:

"One of the most important issues that we are debating in the country today is how health care is to be provided," said Jeff Tanenbaum, chairman of the labor and employment group in the San Francisco office of Nixon Peabody, who represents the Golden Gate Restaurant Association, which filed the petition on June 5. Golden Gate Restaurant Association v. City and County of San Francisco, No. 08-1515.

"This case comes down at a time when that debate is the focus of tremendous attention at the federal level. It is an issue that needs to be addressed at the federal level," he said.
 

I have said it time and time again on this blog, that ERISA preemption serves the admirable, even if perhaps inadvertent, role of forcing health care to be tackled at the only level it can be adequately addressed, the federal one, and not at the level of state governments, which simply don’t have the resources to pull it off, as this article here reminds us yet again (and this one too). I am happy to hear someone else say it as well.

Last week, we commenced our (quasi-) serialization of Robert Plotkin’s book, The Genie in the Machine: How Computer-Automated Inventing is Revolutionizing Law and Business.  Here, as promised, is part 2 in the series.

Automated Inventing: The Challenge for Patent Law

As I explained in my previous entry, increasingly powerful computer software is being used to automate the process of inventing. Since such software takes a wide variety of forms, I use the term "artificial invention technology" to refer to all of it. Patent law was originally developed in a time when all inventing was performed manually. Now, however, patent law must be ready to deal with attempts to patent artificial invention technology and the inventions it produces.

In my book, The Genie in the Machine, I explain how patent law can be updated to face this challenge. To give a flavor of how patent law needs to be reformed, let me start by explaining the meaning of the book’s title. You can view a computer that is equipped with artificial invention software as a kind of artificial genie. A human inventor can provide such a computer with an abstract description of a problem that he or she wants to solve — such as creating a toothbrush that can whiten teeth more efficiently than previous toothbrushes. This description, which must be written in a language that the artificial genie can understand, is like a wish for a better toothbrush. The artificial invention software (i.e., the genie) uses this artificial wish to create a computer model of an improved toothbrush — the wish come true. In some cases, the product itself can be manufactured automatically based on the digital design.

In short, the basic pattern described above can be represented by the following simple diagram:

Human Inventor –> Wish –> Artificial Invention Technology –> Wish Come True (Product Design)

This exposes very clearly the questions that patent law must be prepared to answer, namely whether — and under which circumstances — each of the following should be patentable:

– Artificial "wishes" (the input that a human inventor provides to artificial invention technology to create a new product design)
– Artificial invention technology (the computer hardware and software that can create new product designs automatically)
– Wishes come true (product designs created using artificial invention technology)

In my next blog entry I will give a flavor for how patent law can be updated to answer these questions.