Sen. Durbin proposes to make student loans dischargeable in bankruptcy

SAN DIEGO. Today, Senate Majority Whip Richard J. Durbin (D-Ill.) convened a judiciary subcommittee hearing to alleviate the next potential “debt bomb” — student loans. Americans currently owe more in student loans ($870 billion) than they owe in credit card debt or auto loans.

Currently, it is almost impossible to discharge student loans in bankruptcy. To qualify, a debtor’s peril must be comparable to an unemployed, homeless Ivy League graduate on food stamps for many years, mentally retarded art education grad unable to communicate in English, or a single mother of five young children, including autistic twins. Read more on those cases and on how to qualify here.

A homeless, penniless Ivy League grad unemployed for many years might be eligible to discharge student loans under the current bankruptcy law

Sen. Durbin maintains that private student loans should be treated similarly to other private debt in bankruptcy to ensure students are not stuck with their loans for life, unlike credit card debtors.

Unlike private student loans, federal student loans have fixed, affordable interest rates, offer forbearance in times of economic hardship and manageable repayment options such as the income based repayment plan.

SEC: Insider trading from AA tip

On Tuesday, the Securities and Exchange Commission (SEC) charged five individuals with insider trading for more than $1.8 million in illicit profits based on confidential merger information learned in an Alcoholics Anonymous (AA) meeting.

The SEC alleges that Timothy J. McGee met a senior executive of a Philadelphia-based insurance holding company in an AA meeting. Their shared interest in triathlons brought them closer together, and the senior executive told Mr. McGee that pressure from merger negotiations with a Japanese firm drove him to drink. Mr. McGee expressed interest in the details of the impending deal and found out that Tokio Marine would be the acquirer, the sale was getting close, and that the price would be approximately three times the book value of the company.

Mr. McGee then bought company’s stock and tipped his co-worker Michael Zirinsky to the merger. Mr. Zirinsky also bought stock through his own account as well as those of his wife, sister, mother and 89-year old grandmother. He allegedly tipped off his father and a friend in Hong Kong, who, in turn, passed the tip along to others.

The SEC charged the actors with trading on the basis of material nonpublic information misappropriated from an insider. SEC Rule 10b-5. Nonpublic information does not mean there has to be a confidentiality agreement or some sort of security clearance involved. Since confidentiality is emphasized at AA meetings, what is said at AA should stay at AA.

Yahoo sues Facebook for advertising patents infringement

SAN DIEGO. Yesterday, Yahoo filed a lawsuit against Facebook in a federal court in San Jose, California. The lawsuit alleges that Facebook was "one of the worst performing sites for advertising" prior to infringing over 10 of Yahoo’s patents for Internet advertising methods, such as:


- Yahoo claims that Facebook infringed the method of optimizing what advertisements are shown to what users in what spots depending on the click history and on how much the advertisers are willing to pay per click.


- Click validation: “Pay-per-click” advertising format means that an advertiser pays to Yahoo or Facebook each time a user clicks on the ad. To target the most relevant users, advertisers pay more if their ads come up during most relevant searches. For example, a law firm can decide to pay $10 if the user that just searched for a “San Diego bankruptcy lawyer” clicks on the ad but only 50 cents per click for users that just searched for a “law blog.”

This can get very expensive. Top ad placement for keywords related to personal injury law, for example, can cost as much as $50 per click. When there is a hot class action brewing, keywords like “asbestos law firm” and “methothelioma lawyer” can sell for as much as $150 PER CLICK. Many small and mid-size law firms budget $100,000 per year on a successful pay-per-click ad campaign.

So, to prevent click fraud, where competitors click on each other’s ads to run up costs, Yahoo patented a method to analyze clicking patterns in order to determine whether a click comes from a legitimate user or not. Yahoo now claims that Facebook infringed this patent by using similar statistical methods for click validation.


- Privacy Settings: Yahoo alleges that Facebook infringed two patents for a method which allows users to share different sets of information with different users with similar interests or activities.


- Yahoo also alleges that Facebook pages and Facebook groups infringe Yahoo’s social networking patent and Facebook messages infringe Yahoo’s instant messaging to email patent. News Feed and Wall allegedly violate this and this patent.

Yahoo strategically surprised its longtime business partner, Facebook, with this lawsuit after the latter announced plans for an initial public offering that could value the company at about $100 billion. Companies are more vulnerable to patent infringement lawsuits and are more likely to settle when they are trying to raise money in an IPO process. Yahoo has used similar strategic timing in 2004, when Google agreed to issue shares to Yahoo nine days before Google went public in exchange for a license to Yahoo's patents.

The usual defense for a defendant in a patent infringement lawsuit is to file a countersuit for infringement of own patents. However, this might not be an option for Facebook because it does not own that many patents. Currently, Yahoo possesses over 3,300 patents and published patent applications, while Facebook only has 160.

Dutch model wins a “fat ass” lawsuit

Ananda Marchildon posing for an underwear ad after winning her lawsuit

On Wednesday, the Amsterdam District Court ordered Elite Models to pay €65,000 to Dutch fashion model Ananda Marchildon, 25, most notable as the winner of Holland's Next Top Model in 2008. Prize for winning was a three-year modeling contract worth €75,000 (about $100,000) with Modelmasters the Agency (MTA). Then, the MTA ceased to exist and Elite picked up its models but soon dismissed Ms. Marchildon because her 92 centimeters (36¼ inches) hips were two centimeters (3/4 inch) too broad. Elite spokesman allegedly said that her “fat ass” made her unfit for modeling.

                                     Ananda Marchildon

Before seeking solace in a pint of ice cream, Ms. Marchildon went to the courthouse and demanded the balance of her contract. The judge ruled that Elite is bound by the original contracting agency’s obligations and cannot require the model to slim down from the shape she had when she got the contract.

So Cal federal judges - some of the most consistent drug sentencing patterns in US

After analyzing 370,000 court cases, the Transactional Records Access Clearinghouse (TRAC) compiled a unique judge-by-judge and district-by-district comparison of federal sentences imposed for drugs, white collar and other kinds of crimes from FY 2007 to FY 2011. The interactive tool compares the typical sentences handed down for similar cases by other judges within same district. To smooth out the disparities, only judges who have sentenced 40 or more cases of a particular type were included in the statistics.

California Eastern ranks #17 in white collar sentencing difference

The database is vulnerable to criticism in that it does not take into account many of the factors within each individual case. Nevertheless, some interesting patterns have emerged.  For example, in the Eastern District of California (Bakersfield, Fresno, Sacramento, Redding) the most lenient judge’s median white collar sentence was 3.4 months, whereas the highest judge’s median sentence was 22 months. Lowest median drug sentence in the Southern District of California (San Diego) was 18 months, with the highest judge sentencing to 30 months median. This makes Southern District rank among the lowest in drug sentencing disparities in the nation.

California Southern among the lowest in the nation for drug sentencing disparities

Trademark Board denies parody defense in BLACKBERRY v. CRACKBERRY

SAN DIEGO. The Trademark Trial and Appeal Board (TTAB) recently issued a precedential decision in BLACKBERRY trademark holder’s opposition to registration of the mark CRACKBERRY for various marketing services, computer services, electronic bulletin boards, chat rooms, and apparel items. The TTAB refused to register the CRACKBERRY mark for all of its goods and services except apparel because of the likelihood of confusion and for all of CRACKBERRY’s goods and services based on dilution. The TTAB rejected a parody defense to both the likelihood of confusion and dilution claims.

Likelihood of Confusion

The TTAB found, under the In re E.I. DuPont DeNemours & Co. (1973) test, that a likelihood of confusion between CRACKBERRY and BLACKBERRY exists for all of the parties’ goods and services due to the fame of the BLACKBERRY mark; the similarities between the marks; the relatedness of the respective goods and services; and the overlap in the parties' channels of trade.

Bad Parody

Parody could sometimes be a valid defense to both the likelihood of confusion and dilution claims, but in this case the TTAB rejected the parody defense in both contexts.

The TTAB noted that First Amendment considerations are not as strong in the proceedings to register a trademark as they are in the right to merely use a trademark. The Board noted that “[t]he center of balance changes even further when the risk of confusion of source, affiliation, approval, or endorsement by the source of the known expression outweighs the newcomer's claim to the right to adopt and register a humorous moniker.” Therefore, likelihood of consumer confusion was held to be a dominant factor over the First Amendment rights, similar to STARBUCKS v LESSBUCKS for coffee and CLOSE ENCOUNTERS OF THE THIRD KIND (T-shirts) v CLOTHES ENCOUNTERS (clothing).

Russia’s top commercial court holds corporate disputes are non-arbitrable

The Supreme Commercial Court of Russia 

On 30 January 2012, the Supreme Commercial Court of the Russian Federation upheld the decisions of the lower courts in Novolipetsk Steel v Maximov (case No. A40-35844/2011-69-311) that corporate disputes are not arbitrable in Russia.

Trial court set aside the arbitration award in the US$300 million sale of shares case because of defects in the composition of the arbitral tribunal and because the defendant claimed that corporate disputes are not arbitrable. All lower courts have agreed with these conclusions and now Russia’s top commercial court has upheld those findings.

In reaching the non-arbitrability conclusion, the courts have taken an exceptionally narrow approach to Sections 33 and 225.1 of the Russian Code of Commercial Procedure. These sections put corporate disputes within the “specific jurisdiction” of commercial courts. Russia’s commercial courts are set up separately from the system of the courts of general jurisdiction, so the “specific jurisdiction” clauses basically outline the types of cases that commercial courts can handle. Prior to the Novolipetsk case, specific corporate jurisdiction was not understood to be exclusive to the commercial courts. In other words, both commercial courts and arbitrators heard corporate disputes.

The Supreme Commercial Court did not provide much analysis on the non-arbitrability issue. The Court’s docket currently has some similar cases that deal with arbitrability of corporate disputes. After those cases are decided, it will become more clear whether Novolipetsk has strong precedential value or the Court simply wanted to “send a message” to the many corrupt arbitral panels to clean up their act or be out of business soon.