In a stunning turn of events on what could be one of the largest Qui Tam cases in US history, the First Circuit Federal Appeals Court released it's opinion today reinstating a part of the whistleblower claim against Ortho Biotech, the Johnson & Johnson subsidiary, regarding the alleged kick back scheme for it's drug Procrit.
This case was spearheaded by Attorney Jan Schlichtmann on behalf of the relators Duxbury and MacClellan and when the trial court dismissed the claim, the appeal was filed and argued in mid 2008 and today's decision affirmed part of the decision but cleared the way for the Duxbury claim on kick backs and rebating tied to the off label marketing and use of Procrit in oncology clinics and hospitals.
In this exclusive interview, Duxbury and McClellan's attorney Jan Schlichtmann discusses the courts ruling, shares his thoughts on the elements that were affirmed as well as the next steps in this long dormant but now front page Whistle Blower case regarding Procrit and the marketing of it's off label use. As long time readers of this page will recall this was also featured in a Wall Street Journal profile on the case at about the time of the original trial in 2007 and while many had given the case up for dead, the Appeals Court has done a comprehensive analysis of what the bar is to filing a Whistle Blower claim and brought in a real stunner on what could be a massive potential claim against Ortho Biotech.
BOSTON - A jury in a high-profile federal copyright infringement trial here ordered a Boston University graduate student to pay $675,000 to several record companies for illegally downloading and distributing 30 of their songs.
Joel Tenenbaum appeared stoic as the jury announced that each of the 30 counts of willful infringement would cost him $22,500. The tab— while steep — is far less than the $4.5 million that the companies could have received had the jury imposed the maximum per-song damages allowed under law. Copyright law allows for damages of $750 to $30,000 for each copyright infringement and up to $150,000 for each willful infringement.
Tenenbaum said he was happy the verdict wasn’t in the millions and “not displeased with the jury given how the trial went.”
Tenenbaum’s attorney, Harvard Law School professor Charles Nesson, whose case has faced several setbacks in recent weeks, closed his eyes just before the jury read the verdict. Nesson said he expects to appeal the judgment – and contends that U.S. District Judge Nancy Gertner’s ruling that Tenenbaum couldn't cite fair use, or the legal use of copyrighted works under certain circumstances, is “vulnerable.” That ruling was issued the morning jury selection began.
“It’s not a fair verdict because the jury never got to consider the fairness issue,” Nesson said. “We had a pretty darn good argument.”
Nesson himself tangled with plaintiffs lawyers after the jury left the room Friday. The lawyers — Matthew Oppenheim of the Oppenheim Group in Potomac, Md. and Timothy Reynolds of Denver-based Holme Roberts & Owen — sought sanctions against Nesson for posting deposition excerpts on the Internet.
Nesson said the plaintiffs’ side offered to drop the sanctions motion if he destroyed the materials at issue. But he said he wanted to use at least some of the materials for teaching purposes. Oppenheim told Gertner that he and Reynolds didn’t want to be a part of Nesson’s classroom materials or to be a party to any Internet distribution of the information. Gertner asked Nesson to send her a letter by Aug. 10 outlining his plans for the material.
Throughout closing arguments on Friday, Nesson, tried to convince the jury to keep damages low. He argued that Tenenbaum was “addicted” to downloading music, and that the college student was only taking advantage of available technology. He was not, Nesson said, attempting to deprive the record companies of profits. Declining profits at record companies, Nesson said, was caused by their inability to keep up with technological change.
“Progress happens, it’s not Joel who is responsible,” Nesson said. “There’s no reason for [the industry] to put their calamity off on kids.”
Near the end of three hours of testimony on July 30, Tenebaum admitted liability for downloading and distributing the songs at issue in the case. After Tenenbaum’s testimony, Gertner ruled that the jury had only to decide whether infringement was willful and how much Tenenbaum should pay in damages.
In a statement for the plaintiffs’ side, the RIAA said the organization “appreciates that Mr. Tenenbaum finally acknowledged that artists and music companies deserve to be paid for their work...We only wish he had done so sooner rather than lie about his illegal behavior.”
The District of Massachusetts case, Capitol Records Inc. v. Alaujan, is one of many that record companies and the Recording Industry Association of America have filed against college students for making illegal Internet music downloads. (The companies involved in the case at this point are: Arista Records LLC, Sony BMG Music Entertainment, Warner Bros. Records Inc., and UMG Recordings Inc.)
Most have settled, but Vivendi-owned The Universal Music Group took home a $1.92 million verdict in June when a Minnesota jury decided Jammie Thomas-Rasset should pay $80,000 for each of 24 songs she posted on a Web site for others to download.
The final day of trial focused on damages after an earlier order by Gertner ruling for the plaintiffs on the issues of copyright ownership and liability.
On Friday, Nesson called ethnomusicologist Wayne Marshall, a Mellon Fellow at the Massachusetts Institute of Technology, as his sole witness to demonstrate the current ease of buying an MP3, or digital song, from Amazon.com for 99 cents.
Gertner directed Nesson to do a trial run of Marshall’s testimony without the jury because the plaintiff’s team expressed concerns about the late addition of Marshall as a witness.
Later, during his closing argument, Nesson said Tenenbaum “didn’t have the option of getting an MP3 song in a sleek and easy way” as late as August 2004, when the record companies captured images of 800 songs Tenenbaum infringed.
Gertner sustained a few of the numerous objections the plaintiffs lobbed at Nesson during his closing, including his advice that the jury had “the power not to fill in the boxes” on the jury form, which asks jurors to list damages for copyright infringement of each of the 30 songs.
Nesson said the form looks like “a kind of school exam,” but he said, “justice is in the bottom line, the total number.”
“If that bottom line is just and appropriate, then you’re doing your job,” Nesson said. Nesson also said that because Tenenbaum was distributing music downloaded from others as opposed to posting the first copy, he wasn’t responsible for the companies’ lost revenue. “[As for the] value of the copyright to Joel, I submit it’s 99 cents [for each song],” Nesson said. “That’s what he has to pay for it if he purchases it from Amazon.”
The plaintiffs' attorney, Reynolds, painted Tenenbaum as a “hard-core, habitual, long-term infringer.”
Reynolds also disputed Nesson’s arguments that Tenenbaum’s sharing simply passed along other people’s downloads. He said Tenenbaum downloaded 600 to 5,000 songs onto a Goucher College shared network while he was an undergraduate and before the Baltimore-based school shut down online song sharing.
He also noted that Tenenbaum continued making illegal downloads for at least a year-and-a-half after the record companies notified him he’d been caught. Illegal downloading has caused lost sales, significant layoffs and harmed the record companies’ ability to develop new products, he said.
“The need for deterrence here is great,” said Reynolds.
Scott Drake Interviews Harvard Law professor Charles Nesson.
Scott Drake speaks with RIAA plaintiff lawyer Matthew Oppenheim
Sales rose to an annual rate of 384,000 in June, the Commerce Department reported, up 11 percent from May. * Housing inventory fell to 8.8 months of supply, compared with 9.6 months a year ago. * The rise in sales and the declining inventory is another indication the housing sector, which led the United States into the current recession, may have hit bottom and is starting to rebound. * Despite the encouraging data, the median sale price for a newhome fell to $206,200, down 5.8 percent of the previous month, and down 12 percent from a year ago.
Real Estate and Financial expert James Ponte in Scottsdale is interviewd by LBN host Scott Drake. They discuss the current state of the housing market which Ponte says probably won't start recovering until mid 2011.
The NHL, repped by Skadden, Arps, Slate, Meagher & Flom (one of two go-to firms for the NHL along with Proskauer Rose), objected to the sale, saying the Coyotes never gave the league a heads-up and were violating league rules that required teams to get permission from other owners to relocate.
So, for the first time, a federal judge had to answer the question: Could a sports team use the asset sale procedures of bankruptcy court to sidestep league rules about franchise relocation?
On one side stood Basillie, the Coyotes current owners and the committee of unsecured creditors, which backed the Balsillie deal because of its immediacy and its hefty $212.5 million price tag. They argued that league rules limiting franchise relocation violated antitrust law.
On the other stood the NHL, the other three major U.S. sports leagues and the city of Glendale, Az., which said it stood to lose more than $700 million if the team backed out of its 30-year lease to play in its stadium.
Objections in an amicus brief filed by the NHL and the other leagues were especially strenuous. The leagues argued a sale to Balsillie would "wreak havoc" on sports leagues and kick start a cascade of unhappy owners filing for bankruptcy and selling their teams to prospective owners with intentions to relocate the franchise.
(The National Basketball Association and Major League Baseball used in-house counsel, while the National Football League retained their regular counsel at Covington & Burling for the brief. Dale Schian of Schian Walker in Phoenix also represented the leagues in the brief.)
The court record doesn't show a case that matches the issues in this one, according to Judge Redfield T. Baum, the bankruptcy judge overseeing the case in Arizona.
In the 1980s, Oakland Raiders owner Al Davis moved the team to Los Angeles over the NFL's objections, leading to more moves like the Colts' transfer from Baltimore to Indianapolis and basketball's Clippers from San Diego to L.A. in 1984. In those cases, the courts essentially upheld the moves, ruling that league limits on franchise movement didn't automatically violate antitrust rules.
But at that time, the leagues didn't have detailed bylaws governing franchise relocation to fall back on. They've since written them, including a requirement that the league and three-fourths of team owners approve any move. In blocking the Balsillie deal Monday, Baum sent a clear signal that such rules do not violate antitrust laws, according to outside experts and lawyers on the case.
A ruling in favor of Balsillie would have "opened the door for team owners and prospective buyers to use the bankruptcy process to circumvent league rules," says Michael McCann an associate professor at Vermont Law School and a frequent contributor to the popular Sports Law Blog.
Judge Baum has ordered that an auction be held in September for bidders to make new offers, as long as they agree to keep it in Glendale, according to court records and this write-up in the New York Times. If that auction fails to produce a suitable bidder, the leagues have proposed that the judge order a second auction so owners wishing to relocate the team could bid.
(Balsillie says he plans to bid again, and his spokesman has argued that Baum's ruling was not a complete refutation of his bid. The court, for instance, rejected the bid in part because its closing date of June 29 did not give parties enough time to review it.)
As for Proskauer, the law firm where NHL commissioner Gary Bettman used to practice, sources familiar with the matter say the firm has been involved behind the scenes even though they haven't made an official appearance in the case.
LBn host Scott Drake talks with Michael McCann. McCann is Sports Illustrated's legal analyst.
Last month a court upheld Chicago’s ban on most handguns, while in April a California court completely disagreed on the constitutional issue. The differing opinions mean that the whole issue of city and state gun laws will probably head back to the Supreme Court for clarification, leading many legal experts to predict a further expansion of gun rights. Scott Drake interviews Eugene Volokh, a law professor at the University of California, Los Angeles on the issue of gun ownership rights and gun control, as well as the recent legal history and court decisions on the second ammendment.
Dr. Volokh is well known for his widely read blog, "The Volokh Conspiracy" and is a frequent guest on various talk radio shows nationally as a result of his expertise on both first and second ammendment issues. A noted liberatarian/conservative thinker, he clerked under Alex Kozinski and Supreme Court Justice Sandra Day O'Connor.
This review by a noted national law professor, writer and commentator is a special edition of Speaking of Justice for the 4th of July holiday as we celebrate our independence and reflect on the documents and traditions that allow us to remain a free society. Enjoy your holiday, enjoy your freedoms, enjoy having the right to disagree and argue without fear or reprisal and keep coming back to The Legal Broadcast Network for more of this same kind of thoughtful analysis from both sides of the political spectrum.
Monday, August 17, 2009 at 4:40PM 
Circuit Federal Appeals Court released it's opinion today reinstating a part of the whistleblower claim against Ortho Biotech, the Johnson & Johnson subsidiary, regarding the alleged kick back scheme for it's drug Procrit. 
