Minimum Competence - Daily Legal News Podcast
Minimum Competence
Legal News for Tues 1/9 - Volatile 2024 for Law Firms, Google's AI Patent Trial, New 'Gig' Work Rule, J&J $700m Talc Settlement and I Argue for a Water Tax

Legal News for Tues 1/9 - Volatile 2024 for Law Firms, Google's AI Patent Trial, New 'Gig' Work Rule, J&J $700m Talc Settlement and I Argue for a Water Tax

Today we have Law firms' volatile 2024, Google's AI patent trial, new 'gig' work rule, J&J's $700M talc settlement and Column Tuesday on taxing water.

A lake that is nearly dry, pencil sketch.

This Day in Legal History: Great Britain Introduces an Income Tax

On January 9, 1799, a significant milestone was marked in the history of taxation with the introduction of Great Britain's first income tax. Initiated by British Prime Minister William Pitt, this tax was a revolutionary step in the country's fiscal policy. The context of its introduction was deeply rooted in the exigencies of war. In December 1798, Pitt announced the tax as a means to amass funds for the escalating war efforts against Napoleon Bonaparte, a critical juncture in European history.

Pitt's income tax was not merely a financial mechanism but also a strategic tool, reflecting the gravity of the geopolitical situation at the time. It was a progressive tax, a concept relatively novel for its era, aiming to levy heavier taxes on the wealthier segments of society. This progressive nature marked a departure from the flat taxes commonly used, signifying an evolution in the understanding of equitable taxation.

The tax, however, was short-lived in its initial form. In 1802, Henry Addington, Pitt's successor, repealed the tax. This repeal was a response to the temporary subsidence in hostilities. The peace was fleeting, and the return of conflict in the following year prompted Addington to reinstate the income tax. This on-and-off nature of the tax during these years mirrored the tumultuous period of the Napoleonic Wars.

Significantly, the model of taxation that Addington implemented laid the groundwork for what would become the modern British income tax system. It set a precedent in tax structure and collection that has had a lasting impact. The evolution of this tax model reflects the interplay between fiscal policy and social priorities, a theme that has persisted through centuries of tax law development.

Today, as we reflect on the introduction of Great Britain's first income tax, it serves as a reminder of the dynamic nature of tax law and its deep entwinement with the broader socio-political landscape. The story of this tax is not just a tale of revenue collection; it's a narrative about war, peace, and the ever-evolving understanding of economic justice.

In a 2024 report by Georgetown Law's Center on Ethics and the Legal Profession and the Thomson Reuters Institute, law firms are facing a challenging year due to various factors including client demand, staffing, and the rise of artificial intelligence. The report, analyzing trends since 2009, indicates a shift in the legal market towards a buyer's market for legal services. Despite a marginal increase in the overall average demand for legal services in the previous year, transactional work has seen a decline. This is significant as many firms relied on transactional practices, particularly in mergers and acquisitions, to boost revenue in the past decade.

The report highlights that midsize law firms performed better than top-grossing firms in terms of demand growth. However, the legal sector can no longer depend solely on transactional work due to reduced client spending and evolving market conditions. Interestingly, counter-cyclical practices like litigation and bankruptcy experienced growth in demand, contrasting the slowdown in transactional demand.

The survey revealed a 6% increase in billing rates on paper, but actual charges to clients and collection rates have decreased. Law firms are also grappling with rising overhead and direct expenses, not yet accounting for recent associate salary increases. In response to these financial pressures, law firms are adjusting their staffing strategies, with midsized firms increasing their associate numbers more than larger firms.

Clients are increasingly seeking more affordable legal services, opting for lower-priced firms, reflecting a cost-conscious attitude. Additionally, the emergence of generative AI poses uncertainties for the legal industry. Its impact on staffing, efficiency, and profitability is still unclear, but it could lead to clients handling more legal work in-house or enhance the efficiency of legal services.

The report's authors expect 2024 to be volatile, particularly as election years often bring unpredictability. This projection suggests that the legal industry may not experience stability for some time, indicating a period of significant change and adaptation for law firms.

Law firms face 'volatile' 2024 amid demand, staffing and AI risks - report | Reuters

Google is facing a significant patent infringement lawsuit brought by Singular Computing, which could potentially cost the tech giant up to $7 billion in damages. The lawsuit, set to be tried in a federal court in Boston, accuses Google of infringing patents held by computer scientist Joseph Bates, the founder of Singular Computing. Bates alleges that Google used his patented technology in its processors to enhance AI features in various services such as Google Search, Gmail, and Google Translate.

Google has responded by questioning the validity of Singular's patents and asserting that its processors were independently developed over many years. The company has also argued that its technology operates differently from the patented technology of Singular. In parallel, a separate legal proceeding is underway, where a U.S. appeals court in Washington will hear arguments on whether Singular's patents should be invalidated, a case that Google appealed from the U.S. Patent and Trademark Office.

The trial, expected to last two to three weeks, centers around Google's Tensor Processing Units introduced in 2016 and subsequent versions in 2017 and 2018. These units are crucial for Google's AI capabilities, including speech recognition and content generation. The outcome of this trial could have significant financial and technological implications for Google.

Google faces multibillion-dollar US patent trial over AI technology | Reuters

The Biden administration, through the U.S. Department of Labor, has issued a new rule that aims to redefine the classification of workers as employees instead of independent contractors. This move, set to affect industries reliant on contract labor, including trucking, manufacturing, healthcare, and app-based gig services, is anticipated to increase labor costs significantly. Under the new rule, workers will be considered employees if they are "economically dependent" on a company, a shift from the previous Trump administration's regulation which allowed more flexibility in classifying workers as contractors.

The rule, which takes effect on March 11, has sparked concern among business groups and is expected to face legal challenges. It is designed to combat the misclassification of workers, a common issue in industries such as construction and healthcare, but its impact on gig economy companies like Uber and Lyft has attracted the most attention. These companies have expressed concerns but also believe the rule won't necessarily lead to their drivers being classified as employees.

Acting U.S. Labor Secretary Julie Su emphasized the importance of this rule for low-income workers who would benefit from employee legal protections such as minimum wage and unemployment insurance. However, some business groups argue that the rule goes too far, potentially depriving millions of workers of flexibility and opportunity. Marc Freedman of the U.S. Chamber of Commerce criticized the rule for its potential to create confusion and inconsistency in worker classification, potentially leading to costly legal battles. Despite these concerns, the Labor Department will evaluate factors like a worker's chance for profit or loss, the level of control a company has over a worker, and the relevance of the work to the company's business to determine employee or contractor status.

Biden administration issues rule that could curb 'gig' work, contracting | Reuters

Johnson & Johnson (J&J) has tentatively agreed to pay approximately $700 million to settle an investigation by over 40 U.S. states into claims that it improperly marketed its talc-based baby powder without adequately warning about potential health risks. This settlement aims to prevent potential lawsuits that allege J&J concealed links between its talc powder and various cancers. The agreement, still in finalization, follows J&J's failed attempts to use bankruptcy courts to settle numerous lawsuits accusing it of hiding the health risks of its baby powder.

The litigation, which has been ongoing for a decade, has had a noticeable impact on J&J's stock price and overall market performance. Initially, J&J had proposed a $9 billion settlement for all current and future baby powder claims through a bankruptcy filing of one of its units. The company had previously set aside $400 million to resolve U.S. states’ consumer protection claims, which was increased following mediation.

However, the proposed settlement does not include suits by Mississippi and New Mexico, which are seeking higher settlements due to their ongoing litigation efforts. These states argue for significant damages based on the extensive sale of baby powder without cancer warnings over several decades.

J&J faces broader legal challenges beyond this settlement, with over 50,000 lawsuits alleging that its talc-based products, contaminated with asbestos, pose a cancer risk. Despite maintaining that its products do not cause cancer and appropriately marketing its baby powder for over a century, J&J has faced numerous court losses and large damage awards. In response to declining sales and ongoing litigation, J&J discontinued its talc-based powders in the U.S. and Canada in 2020 and pledged to replace talc with cornstarch in its products globally by the end of the previous year.

J&J to Pay $700 Million to Settle States’ Talc Investigation (2)

In my latest column, I explore the potential of tax policy as a solution to address the critical issue of water depletion. Water, our most finite resource, has been overexploited for decades, leading to alarming groundwater depletion in the United States since 1900. As climate change disrupts the distribution of freshwater resources, tax policy emerges as a possible remedy.

Drawing inspiration from the success of the Pajaro Valley's water tax, which effectively curbed water usage while mitigating saltwater infiltration and crop destruction in the California desert, I delve into the implications of such a tax on a broader scale. Overuse of aquifers goes beyond water depletion; it can result in aquifer failure, which is often difficult and expensive to repair.

Tax policy, a tool for making resource users bear the true cost of their actions, is especially pertinent to address the tragedy of the commons observed in groundwater use. By internalizing the cost of water extraction and its associated damages, a water tax can incentivize responsible water use.

However, the effectiveness of a water tax not only lies in its implementation but also in wise investment of the revenue generated. I propose allocating funds toward promising technologies like hydropanels that generate clean drinking water from the air, as well as improving existing water transport, storage, and recapture systems.

Investments in desalination, water recycling, and more durable water storage and transport methods can further mitigate water loss. Research grants and public-private partnerships can accelerate technology development and infrastructure improvement.

In conclusion, the Pajaro Valley's success with a water tax demonstrates the potential of tax policy to manage our vital water resources effectively. By deterring overuse, internalizing costs, and directing revenue toward innovative solutions, we can shift from water consumption to responsible stewardship, ensuring the sustainable management of this essential resource.

Taxing Water Is the Only Way to Limit Use and Reduce Depletion

Minimum Competence - Daily Legal News Podcast
Minimum Competence
The idea is that this podcast can accompany you on your commute home and will render you minimally competent on the major legal news stories of the day. The transcript is available in the form of a newsletter at