Minimum Competence - Daily Legal News Podcast
Minimum Competence
Legal News for Weds 5/1 - PTO New Rule on Pharma Patent Settlements, Jones Day SCOTUS Presence, J&J Seeks $11b Settlement in Talc Suit and Biden's FY2025 Unrealized Gain Tax Proposal

Legal News for Weds 5/1 - PTO New Rule on Pharma Patent Settlements, Jones Day SCOTUS Presence, J&J Seeks $11b Settlement in Talc Suit and Biden's FY2025 Unrealized Gain Tax Proposal

PTO's new rule on patent settlements, Jones Day's Supreme Court arguments, J&J's $11 billion settlement proposal, and Biden's FY2025 budget plan to tax unrealized gains.
Union Laborers in Philadelphia, pencil sketch.

This Day in Legal History: First Union Formed

On May 1, 1794, a pivotal development in labor rights history occurred in Philadelphia with the formation of the Federal Society of Journeymen Cordwainers. This organization, consisting of skilled shoemakers, marks the establishment of the first trade union in the United States. The union was created as a response to the increasingly difficult economic conditions that tradesmen faced, including low wages and long working hours.

The Cordwainers, recognizing the strength in numbers, aimed to leverage their collective bargaining power to negotiate better wages and working conditions. This was a significant step forward in the labor movement, as it introduced the concept of organized labor in America. The formation of this union was not just about improving pay; it was also about dignifying the labor force and providing workers a platform to voice their concerns.

Philadelphia, being a hub of commerce and trade in the late 18th century, provided the perfect setting for such an organization. The city's workshops and bustling markets meant that there was a significant demand for skilled labor, which the Cordwainers could supply. However, with industrialization beginning to take root, these skilled workers found themselves under threat from cheaper, mass-produced goods.

The Federal Society of Journeymen Cordwainers set a precedent that would be followed by other trades across the country. Their actions led to the establishment of similar societies and unions, which eventually contributed to the broader national labor movement. The Cordwainers themselves faced legal challenges, particularly in 1806, when they were involved in a landmark legal case concerning the rights of workers to organize, known as Commonwealth v. Pullis. In this case, the court ruled against the union, marking one of the first legal battles over the legitimacy of trade union activities in the United States.

Despite the legal setbacks, the resilience and pioneering spirit of the Federal Society of Journeymen Cordwainers inspired subsequent generations of workers to fight for their rights. Their legacy is a testament to the enduring struggle for fair labor practices and workers' rights. This day in legal history not only marks the formation of America's first trade union but also celebrates the long journey towards justice and equity in the workplace.

The US Patent and Trademark Office (PTO) recently proposed a rule that would require pharmaceutical companies to submit unredacted settlement agreements involving patent challenges to a new repository. This rule is aimed to assist the Federal Trade Commission (FTC) and the Department of Justice (DOJ) in detecting antitrust violations. The proposal arose from concerns that these settlements, often reached in administrative tribunals like the Patent Trial and Appeal Board (PTAB), could be used to delay cheaper biosimilar drugs from entering the market.

Evan Diamond, special counsel, noted that the PTO has not clearly defined "good cause" for accessing these agreements, which might increase third-party access and create confidentiality concerns. The fear is that the database could enable federal agencies to easily assess the frequency of potentially anticompetitive pay-for-delay settlements—a practice scrutinized under the Supreme Court’s 2013 decision in FTC v. Actavis, which ruled such deals could be illegal.

The proposal aligns with an executive order from President Joe Biden encouraging interagency cooperation to prevent practices that unjustifiably delay generic and biosimilar competition. This move has heightened the pharmaceutical industry's fears of increased antitrust enforcement, particularly as the FTC has been actively challenging questionable patent listings that could hinder the approval of generic drugs.

Agencies like the FTC and DOJ already have certain reporting requirements under the Medicare Modernization Act for pharmaceutical companies, but the PTO's rule could capture additional agreements that do not meet existing criteria. This has sparked debate over the necessity and potential overlap of the new rule.

The pharmaceutical industry, represented by major lobbyist groups like Pharmaceutical Research and Manufacturers of America and the Biotechnology Innovation Organization, has expressed strong opposition, citing concerns over the scope of PTO's authority and the ambiguity around the "good cause" criterion.

This development highlights a broader regulatory push against anti-competitive practices not only in pharmaceuticals but also in other sectors like technology, where companies like Apple and Google are frequently involved in patent litigation.

In summary, the PTO's proposed rule could significantly impact how pharmaceutical settlements are handled, potentially exposing companies to greater antitrust scrutiny. This measure reflects a governmental shift towards stricter oversight of patent practices to foster competition and reduce drug prices.

Drug Makers Exposed to Antitrust Probes if Patent Cache Adopted

This term, Jones Day had the highest number of attorneys—five in total—arguing cases at the U.S. Supreme Court, more than any other firm. Among them, John Gore and C. Kevin Marshall presented for the first time at the high court. Other experienced attorneys like former U.S. Solicitor General Noel Francisco, and partners Hashim Mooppan and Traci Lovitt also argued cases, contributing to the firm's visibility.

In comparison, other leading law firms such as Gibson Dunn, Hogan Lovells, and Williams & Connolly had slightly fewer representatives. Gibson Dunn introduced three new attorneys to the Supreme Court lectern, including Theane Evangelis, D. Nick Harper, and Eugene Scalia, who is a son of the late Justice Antonin Scalia. Hogan Lovells' Jessica Ellsworth argued for the first time, including in a significant case regarding the abortion drug mifepristone. Williams & Connolly had Lisa Blatt argue all four of their cases, marking her 50th Supreme Court appearance.

Overall, the season saw a mix of seasoned veterans and newcomers. Of the total 152 arguments made, over half were by attorneys who had appeared at least five times before, while a quarter were by first-time arguers. This highlights both the depth of experience and the ongoing introduction of new talent in the legal field's highest echelons.

Jones Day Leads in Supreme Court Arguments With New Faces

Johnson & Johnson (J&J) is currently seeking approval for an $11 billion settlement to resolve ongoing litigation concerning its talc-based baby powder, which has been alleged to cause ovarian cancer. This amount is a significant increase from a previous offer of $8.9 billion. J&J's strategy involves a third attempt at a bankruptcy filing, specifically a pre-packaged bankruptcy, which allows for faster processing if they secure enough creditor support—in this case, needing the approval of 75% of the talc plaintiffs.

The company proposes to pay $6.48 billion over 25 years to settle ovarian cancer claims, but it has not specified how funds will be divided between existing and future claims. Additionally, J&J has nearly settled all claims regarding mesothelioma believed to be caused by asbestos in the powder. This settlement approach follows multiple failed attempts to use Chapter 11 to manage these lawsuits, which now number almost 60,000.

These lawsuits have been a significant factor depressing J&J’s stock price, according to analysts. Despite the legal challenges, J&J maintains that its talc products do not cause cancer and asserts that it has marketed its baby powder responsibly for over a century. A recent verdict, however, led to a $45 million payout to a family, implicating J&J and its spinoff Kenvue in the ongoing litigation.

The company’s persistence in seeking a bankruptcy-based settlement reflects its strategic approach to managing a complex legal challenge that impacts thousands of plaintiffs and could potentially set a precedent in how large corporations handle mass tort liabilities through bankruptcy court.

J&J Seeks Backing for $11 Billion Baby Powder Cancer Settlement

In President Joe Biden's Fiscal Year 2025 Budget Proposal, a notable change is the suggestion to tax unrealized gains—value increases in assets not yet converted into cash through a sale. This marks a significant shift from traditional tax frameworks, which typically avoid taxing unrealized gains due to their complexity, potential liquidity issues, and difficulties in implementation.

The rationale behind this proposal is to ensure tax fairness by capturing increases in wealth that currently escape taxation. For example, if a billionaire's stock appreciates significantly without being sold, they realize no taxable gain. However, if they borrow against these increased values, they effectively use this appreciation as a means to generate wealth without incurring tax liabilities. This situation presents a loophole where wealth can grow and be leveraged without contributing to the tax base.

The FY2025 budget aims to address these disparities by proposing a tax on unrealized gains for very high-net-worth individuals and entities that have not been subject to a tax event in the last 90 years. This approach seeks to broaden the tax base without raising rates, aiming to increase tax revenue from the wealthy without additional burdens on middle and lower-income individuals.

This policy shift acknowledges the need to adapt tax strategies to a changing economic environment where traditional taxation methods no longer capture all forms of wealth accumulation. The proposal suggests that a more equitable tax system requires taxing wealth as it grows, even if it is not realized through a sale. By proposing to tax unrealized gains, the administration intends to correct imbalances allowing substantial wealth to accumulate tax-free, signaling a significant potential change in how wealth is taxed in the U.S.

Unrealized Gain Tax—A Coming Sea Change in FY2025 Budget Proposal?

Minimum Competence - Daily Legal News Podcast
Minimum Competence
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