The Occupational Safety and Health Administration (“OSHA”) published a Request for Information (“RFI”)  on December 9, 2013 concerning possible changes to the Process Safety Management (“PSM”) program codified at 29 C.F.R. 1910.119.  See 78 Fed. Reg. 73756 (Dec. 9, 2013).  Likewise, the Environmental Protection Agency (“EPA”) published an RFI on July 31, 2014 relating to possible changes to the similar Risk Management Program (“RMP”) rules codified at 40 C.F.R. Part 68.  See 79 Fed. Reg. 44604 (July 31, 2014).  At the time of this writing, the respective comment periods have closed and we are waiting to see new proposed regulations.

OSHA requested information concerning the wisdom of updating the rule as it relates to application of recommended and generally acceptable good engineering practices (“RAGAGEP”).  Both PSM and RMP rules require use of RAGAGEP in relationship to equipment construction, inspection, and testing.  See 29 C.F.R 1910.119(d)(3)(ii) and (j)(4)(ii) and 40 C.F.R 68.65(d)(2) and 68.73(d)(2).  However, neither the PSM nor the RMP programs define RAGAGEP. Specifically, OSHA and the EPA requested comment as to whether RAGAGEP should be defined and whether the facility should be compelled to consider new codes and standards (when applied to existing equipment).  Although many comments addressed adding clarity by defining RAGAGEP, comments from three organizations make for an interesting comparative exercise:  the United Steelworkers, the American Petroleum Institute (“API”), and the Mary Kay O’Conner Process Safety Center (“MKOPSC”) at the Texas A&M Engineering Experimental Station.

The crux of OSHA’s concern is whether it is appropriate for RAGAGEP to include “appropriate internal standards.”  In the RFI, OSHA stated that it has always believed that reliance on internal standards should be limited to situations where “published codes and standards were unavailable or outdated, or that they were more stringent than published standards.” 78 Fed. Reg. at 73761.  This position was rejected by an administrative judge in Secretary of Labor v. BP Products North America & BP-Husky Refining, LLC. (2013) (OSHRC Docket No. 10-0637).  In the RFI (and elsewhere), OSHA references a definition developed by the Center for Chemical Process Safety (“CCPS”) for RAGAGEP.   This definition includes the concept that RAGAGEPs are “based on established codes, standards, publish technical reports or recommended practices (RP) or similar documents.”  78 Fed. Reg. at 73761.  Not explicitly included in this definition is that RAGAGEPs could be based on internal standards. By inference, it is assumed that the agencies’ intent in defining RAGAGEP is to clarify that internal standards cannot be RAGAGEP if a comparable standard or code exists, unless the internal standard is stricter than available codes and standards.  Comments received by OSHA and the EPA requests were similar in nature.

Most comments supporting the elimination of internal standards were unsupported by any rationale and merely formulaically agreed that internal standards should not be considered RAGAGEP.  The United Steelworkers provided support for their opinion based on parsing the words in the term RAGAGEP:

A practice that is “recognized,” “generally accepted,” and a “good engineering practice” should give that practice some definition.  For a standard to meet this definition, it would be recognized or practiced outside of a single or even handful of facilities.  Generally accepted would imply at least a majority of facilities follow the practice.  A recognized practice is typically one set in place by a recognized authority or leader in the industry; a recognized practice setter or trade association.  A good engineering practice defined by good engineering (having an engineering study qualifying a practice).

United Steelworkers comments to OSHA, March 31, 2014, pp. 3-4.

The MKOPSC disagreed with the carte blanche elimination of internal standards, stating that situations exist where internal standards are needed:

There may be circumstances where a facility may not fit well within the scope of intent of a published RAGAGEP and therefore an internal standard that sets some requirements that may or may not be more stringent than the published standard, but that well address the hazard of the facility should be considered acceptable internal standards.

MKOPSC comments, March 31, 2014, p. 32.

The API is the type of organization that the Steelworkers would consider to be a recognized authority or practice setter.    Although the API produces a large number of Standards and Recommended Practices, according to the API, “RAGAGEPs should remain a flexible concept that allows employers to tailor PSM activities to the hazard and complexity of their particular facilities.”  Further, API’s comments stated:

API believes that the company/site can determine its own RAGAGEPs based on its assessment of factors including:

  •  Type of specific hazard
  • Complexity
  • Local circumstances
  • Industry documents or site development documents based on operating experience and engineering judgment.

API comments, March 31, 2014, p. 10

RAGAGEP has always been a performance-oriented standard.  See 57 Fed. Reg. at 6390.  Interestingly the Chemical Safety Board (“CSB”) did not directly comment on the RAGAGEP definition question and instead just commented on the question of using updated RAGAGEPs.   The CSB argues that RAGAGEPs should be updated because they are performance based standards. CSB comment to OSHA, p. 18 and CSB comment to EPA, p.22-23.  That said, if RAGAGEP is a performance-oriented standard, it may be inconsistent to argue that the definition of RAGAGEP should be prescriptive.

Although OSHA may ultimately use the CCPS definition to exclude some (or all) internal standards from the definition of RAGAGEP, adding the CCPS definition by itself does not eliminate problems associated defining RAGAGEP.  The concept of RAGAGEP may be too amorphous to define precisely; it is far easier to opine what it is not.  In addition, confusion could be an issue as multiple codes and standards may apply to specific pieces of equipment.  Commenters to the original rule stated that there would be difficulty to “decide which standard the agency intended for them to use” and “that some of the standards may conflict with each other.”  57 Fed. Reg. 6356, 6390 (Feb. 24, 1992).  Adoption of the CCPS definition by itself would not address these original concerns.

If OSHA defines RAGAGEP as being specific codes, standards, or recommended practices, the question will always remain, as to whether it is appropriate to apply a code in a specific circumstance.  For example API Recommended Practice 553 applies to “Refinery Valves and Accessories for Control and Safety Instrumented Systems.”  Is such RAGAGEP applicable to gas plants and compressor stations?  Further, some portions of codes and standards are non-mandatory.  Considering the mandatory nature of the PSM rule,[1] if OSHA specifically defines a code or standard as RAGAGEP, is compliance with non-mandatory language required?

In conclusion, comments from the API’s and MKOPSC state that facilities need flexibility to develop programs to meet their specific circumstances: one size does not fit all.  Conversely, the United Steelworkers parse the phrase “RAGAGEP” to conclude that one size must fit all. OSHA and EPA should soon propose regulations that will address these widely divergent viewpoints.

_____________________________________

[1] For example, the “owner shall document that equipment complies with recognized and generally acceptable good engineering practices.”  29 C.F.R. 1910.119(d)(3)(ii).  The CSB raised this as in issue in their response to EPA’s RFI, however the CSB’s comment did not explain how this concern should be addressed.  CSB Comments to EPA, Oct. 29, 2014, p.23.

The general outlay of this guide is to present some of the who, what, where, when, and why of the patent system in order to be able to explain the all-important how to obtain a patent. This guide aims to acquaint the reader with various aspects of the patent process, laying a proper foundation that will help the reader make informed decisions regarding patents. It should be stressed that the patent system is very complex – this guide will only touch on some of the many rules, nuances and exceptions contained in the United States patent system. Therefore, you should not rely solely on this guide and should consult an attorney.

The patent process is a long and expensive process, and the result of obtaining a patent cannot be guaranteed. However, what awaits a truly novel, non-obvious, and useful (1) invention at the end of the process is one of the most powerful intangible property rights available in the United States.

Disclaimer: This guide does not constitute legal advice and is not intended to supplement the advice that would be obtained from retaining a patent attorney or agent to aid in the patent process. This guide stands as a cursory review of the United States patent system as it relates to utility patents. This primer does not encompass on international patent protection. It is being provided in an effort to better acquaint the reader with some of the major aspects associated with the patent process. It is imperative for those considering or currently undertaking the patent process to understand what to expect when they choose to seek patent protection for an invention.

Why – the Great Incentive for Disclosure

The patent system aims to foster innovation. From single inventors to corporations, the great lure, the carrot of the patent system is the powerful, exclusive rights afforded by a patent. An issued patent grants an inventor the exclusive rights to exclude others from making, using, and selling the patented invention throughout the United States for a period of up to twenty years from the date of filing. In exchange for this right to exclude (2), an inventor must fully disclose to the United States Patent and Trademark Office (“USPTO”) how to make and use the claimed invention. The tradeoff for the public is twofold. First, the information contained in the patent is published at least by the date of issuance. Therefore, the information itself becomes public knowledge, available as information in research and development. Second, the invention becomes part of the public domain once the patent’s term ends, free for all to exploit and use.

It may seem counterintuitive that eliminating some competition would actually foster innovation, but it does. Remember, the public or its elected government generally cannot walk into a business, laboratory, home, or garage and force an inventor to disclose his invention to the public. Companies and inventors are free to hide their innovations as trade secrets, which are not subject to term limits. Trade secret rights vary from state to state; however, the gist is that by keeping an invention as a trade secret, an inventor can remain the sole beneficiary of his invention as long as the information does not become public knowledge (3). The power of a trade secret lies in its potential longevity, but is limited to information that remains secret and cannot be discovered through ordinary use or reverse engineering, i.e., taking apart an object to see how it works in order to duplicate or enhance the object. Technological advancements in the modern marketplace hinder the use of trade secrets. Simply put, it is continuously becoming easier to reverse engineer products and discover the process or machine the inventor attempts to hide through trade secrets. This shift has led many companies and inventors to seek patent protection instead of attempting to keep their innovations as trade secrets.

What – Patentability and Components

Patentable subject matter

There are three types of patents: utility patents, design patents, and plant patents. Utility patents are by far the most common of the three types. Both plant and design patents adhere to their own sets of rules and attributes (4); however, this guide solely addresses the process of prosecuting a utility patent. Patentable subject matter for a utility patent comprises any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof (5). In addition to fitting into one of these five enumerated categories or “improvements thereof,” an invention must also be useful, novel, and non-obvious as determined by the USPTO and/or a court.

Utility – is the innovation useful?

Courts have generally whittled the “utility requirement” into a de minimus (minimal) threshold. Under this viewpoint, an invention with any conceivable use or function generally satisfies the utility requirement. The purpose of the utility requirement is to prevent rights which arguably lie under other forms of intellectual property from gaining patent protection. For example, purely aesthetic functionality such as that of a painting would not qualify for patent protection; rather, it may eligible for copyright protection. However, it should be noted that the ornamental look of an otherwise functional item may qualify for a design patent.

Novelty – is the innovation “new”?

The question of novelty asks whether or not the invention is truly inventive; i.e., are the elements of the invention anticipated by the prior art (i.e., already known in the industry). In other words, the question of novelty asks whether or not any single prior art reference exists in the pertinent industry which already discloses the invention at the time of effective filing (i.e, the priority date).

Any public disclosure, regardless of how the disclosure was made, constitutes prior art as of the date it is made publically available. This includes any subject matter that was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention. One notable exception exists to the public disclosure requirement in that the inventor’s own disclosures will not count as valid prior art so long as the subject matter is described in a patent application applied for within one year of the public disclosure. Therefore, once the inventor makes any public disclosure, a time clock starts ticking by which the inventor has one year to file an application with the patent office or the subject matter is barred by statute (a “statutory bar”) from being novel.

Moreover, as of March 2013, the United States patent system was reformed by the America Invents Act, switching the patent system from the long standing ‘first to invent’ system to a ‘first to file’ system. The present system renders any U.S. patent, patent application publication, or a World Intellectual Property Organization (WIPO) published international patent application (Patent Cooperation Treaty – PCT) as prior art as of the date the subject matter was effectively filed in the respective patent office, whether in the U.S. or abroad.

Non-obviousness

Not only must innovations be deemed novel in light of the prior art, but they must also not be found to be obvious improvements of the prior art. Whereas novelty inquires as to whether or not the claimed invention is anticipated by a single prior art reference, obviousness asks whether or not it would have been obvious to a “person having ordinary skill in the art” (“PHOSITA”) to combine the elements of multiple prior art references to develop the proposed innovation.

The same prior art relevant to novelty is applicable for obviousness. However, more so than with novelty, the test for obviousness is to be viewed in light of the supposed “person having ordinary skill in the art” or the particular field relevant to the subject matter. For example, a typical organic chemist or electrical engineer would be the relevant PHOSITA for patent applications concerning an organic chemical process or an electrical apparatus, respectively.

Patent Applications

As will be explained in greater detail below, two types of utility patent applications exist– provisional and non-provisional applications. The provisional acts as a place holder while a non-provisional is a full application; however, they can be used in concert to maximize protection.

Provisional Applications: The provisional application is essentially an initial disclosure made to demonstrate that an invention was created. Provisional applications are filed to attempt to to prevent others from later claiming prior invention. The provisional application can be thought of as a place holder or a stake in the ground to claim and lock in a priority date for a claimed invention. However, no substantive rights will be granted from a provisional application. The provisional application will not be reviewed by an Examiner to determine if a patent should be granted; therefore, a provisional application need not meet all of the formal requirements that a non-provisional must meet. Rather, it needs to disclose enough of the invention so that when a full (non-provisional) application is filed, the applicant can point back to the provisional disclosure to show that the invention was disclosed and that the priority claim is accurate.

Provisional applications are optional. The priority claim of a provisional application lasts one year from its filing date. Essentially, it grants the applicant one year from the filing date of the provisional application to finalize and/or market its invention with patent pending status before the applicant must file a non-provisional application to keep the priority date and patent pending status alive. It should also be noted that the one year pendency between the provisional and non-provisional filing does not count against the potential twenty-year term of the patent, which commences on the date the non-provisional is filed.

Non Provisional Application: The non-provisional application is the full application for a patent that will be reviewed and prosecuted by the Examiners at the USPTO. A non-provisional application must meet the formal requirements set forth by patent laws and the USPTO. Therefore, it must comport with formal drawings (i.e., tagged drawings and figures which are capable of being reproduced by the UPSTO Printing department), a specification which discloses the invention to a degree that allows a person having ordinary skill in the art to make and use the invention, an abstract, and claims.

Specification: The specification, or disclosure, is a written description of the invention. Patent applications are subject to a written requirement whereby the application must disclose the invention with enough specificity in order for the disclosure to enable a “PHOSITA” to make and use the invention without undue experimentation. These requirements are often satisfied through a background section, a short summary, and a detailed disclosure of the invention in light of the drawings.

The specification also defines the scope of the patent claims. The claims and all potential amendments thereto must find descriptive basis in the disclosure as filed. No new matter can be added to a non-provisional application once it is filed. If the applicant wishes or needs to add new matter, it can be done through a continuation-in part application; however, the new matter would have a new filing date and would not be able to claim priority to the original application.

Claims: By statute, the application must claim a “definite” invention. The definiteness requirement mandates that each patent must “conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the applicant regards as [the] invention.” (6) Courts have mandated that definiteness is to be evaluated in light of the specification (the written description of the invention) and prosecution history from the perspective of a person skilled in the relative art at the time the patent was filed.

The claims section is the heart of the patent. As the name designates, this is the section wherein the applicant tells the USPTO and thus the public what is the intended invention. The claims of an issued patent define the scope of protection afforded by the issued patent. Claim drafting can be viewed as a strategy. An ideal claim walks a fine line. The goal is to draft the claim as broadly as possible so as to not unnecessarily limit the scope of protection while keeping the claim within the boundaries set forth by the prior art and the enabling disclosure. Remember, only novel, non-obvious, and useful inventions are capable of being patented. Therefore, while an ideal claim is drafted to provide broad protection, the claim cannot be too broad such that it is rendered either not-novel or obvious in light of the prior art in order to be accepted. It is typical for claims to be amended and limited during prosecution to obtain protection.

Drawings: Applicants are required to submit drawings when they are useful for the understanding of the invention. The USPTO has determined that applications for methods, processes or compositions of matter may not require drawings. Other applications, particularly applications for apparatuses or widgets, which incorporate component parts, are generally deemed to require drawings for a proper disclosure. The USPTO imposes requirements and formal restrictions on drawings; therefore, it is suggested that trained patent draft-persons be used to draft drawings.

Abstract: the abstract is a formal requirement which the USPTO requires that each and every non-provisional application contain. The abstract is a brief summary of the technical disclosure in the specification in fewer than 150 words.

Where – the United States Patent and Trademark Office

The physical “where” of patent applications is becoming less important in the modern world because most filings for patent applications are conducted online via the patent electronic filing system (“EFS – Web”). That said, the United States Patent and Trademark Office is the federal bureaucratic agency in charge of prosecuting all United States patent applications. The main office itself is located in Virginia; however, satellite offices have been opening around the country in select cities, each housing specialized art units designed to decrease the pendency for applications involving key hotspots of innovation. The URL for the USPTO is www.uspto.gov.

Who – Inventors, Applicants and Examiners

Applicant(s): Generally, the applicant for patent rights is the inventor. Patent rights initially inure to the inventor and remain with the inventor unless he assigns or licenses his rights. Such assignments typically occur via sales or through contractual relationships, such as when an employee develops the innovation as part of his employment with a company. The provisions of the American Invents Act allow a company, to which an invention is assigned, or to which the inventor has a duty to assign, to apply for patent rights to the invention in the name of the company. Therefore, it is possible and rather common for a company to file a patent application.

When two or more inventors contribute to the conception of the invention they are termed joint inventors. It is important to determine the inventive contributions of each person involved in the creation of the invention. For example, as patent prosecution proceeds, it is possible and even likely that certain claims sought for patenting will be rejected. It is, after all, the USPTO’s job to be the gatekeeper ensuring that the monopoly of patent rights is not handed out lightly. Therefore, as claims are removed through prosecution, it is possible for a listed inventor, whose contributions only applied to cancelled or rejected claims, to no longer qualify as an inventor. If that happens, the affected inventor needs to be removed from the application.

Examiners: The USPTO employs examiners separated into art units, each specializing in a particular field. Many of the examiners have specialized degrees in the sciences (chemistry, biology, physics, engineering etc.), and a juris doctor degree, or other practical experience pertinent to their art units. For example, an application for a computer related invention will likely be assigned to a computer related art group wherein an examiner with a background in computer science will prosecute the application.

When to File

The inventive process commences at conception. Interestingly, all that is required to file a patent application is that the invention be fully conceived. The inventor or applicant must have enough of the invention conceptualized so that he can disclose the invention, in writing, to enable others in the field of the invention to make or use the invention.

The current patent system behooves potential applicants to “file early, file often.” As previously discussed, the United States patent system was reformed by the America Invents Act, switching the patent system to a ‘first to file’ system from the long standing ‘first to invent’ system. Admittedly, some exceptions to “first to file” exist under the current governing laws; however, the gist of the system is that the first applicant to file an application for a particular invention with the USPTO is deemed the inventor under the patent laws, preventing a later filing applicant from obtaining a patent. The “file early, file often,” strategy has been adopted by many corporations. The strategy is to file provisional applications as soon as a potentially marketable invention is conceived and follow up with additional provisional applications as notable improvements are made. This system allows for inventors to claim the earliest possible priority date for the invention while fleshing out the details to determine if a full non-provisional application is warranted.

In addition to the other considerations, the patent laws impose certain time limits or constraints on the filing. As discussed previously, the United States patent system imposes statutory bars that govern the novelty of a proposed invention. If the invention is disclosed to the public such as by use, sale, offer for sale, publication or otherwise, the statutory bar period is triggered. Any of the actions grouped as public disclosures of the invention trigger a one year countdown by which an application must be filed with the USPTO or no patent protection can be obtained.

How- the Patent Process

The typical patent process described herein involves the use and assistance of a registered patent attorney or patent agent. This process generally commences with an initial consultation in which the attorney explains the patent process to the potential-applicant and the potential-applicant discloses the invention to the attorney. After the initial consultation, a patentability study is often performed to determine the potential likelihood that a patent could be obtained. After a promising patentability study, or otherwise skipping the study entirely, a formal patent application is prepared and filed with the USPTO. In due time, the application will be assigned to an examiner who will review the innovation for patentability. If deemed patentable, the patent process concludes with the receipt of an issued patent. If not, the applicant has opportunity to submit arguments in favor of patentability.

Patentability Study

Patents are often a costly endeavor. Therefore, many applicants elect to “do their homework” before embarking in the process. In other words, before spending considerable sums on the patent process, many applicants order a patentability study to gauge the viability of their proposed patent application. A typical patentability search seeks relevant prior art which may be used by an Examiner to reject an application based on either novelty or obviousness grounds. These searches are usually conducted through a patent attorney, a patent agent or third party companies which specialize in prior art searches.

In the patentability opinion, a qualified person, typically the patent attorney or agent, uses the relevant prior art from the patentability study and compares it to the applicant’s disclosed invention in order to determine the potential for obtaining a patent. It should be noted that knowledge of the prior art can help to determine the breadth of a potential patent’s scope, and thus its overall granted protection. Also, as with most legal matters, issues of patent law require subjective determinations which are many times unpredictable. Therefore, even with a favorable patentability opinion, the applicant may not receive an issued patent.

While extremely useful, patentability searches are inherently limited and it can never be guaranteed that every potential prior art matter will be discovered. By law, the USPTO must keep any application in confidence for eighteen (18) months after the application’s earliest priority date (i.e., the date the application was first filed). Applicants can further delay the publication of patent applications by payment of non-publication fees. Furthermore, it should be noted that a majority of searches are conducted via “term searches.” Because a patent applicant is allowed to act as his own lexicographer, it is possible that the terms used in the search may be different from those used in patent applications and issued patents; therefore, it is possible that applications and patents exist which did not turn up in the search. Finally, many searches do not include the extensive listings of foreign patents, magazines, trade or technical journals, or other publications that may contain articles that will impact the patentability. Overall, the search acts to exemplify and bring to light the available pieces of prior art that are the most similar to the invention as described by the applicant. However, it is typical that at least a few patents from the preliminary search will turn up and be cited during prosecution of an application.

Draft and File Application

If the patentability search and opinion comes back favorable, the typical next step is to file an application. As previously discussed, there are two general types of utility applications for patent protection in the United States: provisional applications, which act more as place holders than anything, and non-provisional applications which are full-fledged applications for patent rights that are examined by the USPTO. Depending on his or her circumstances, an applicant has the choice to either (1) file a provisional application and then to come back within a year and file a non-provisional application or (2) file a non-provisional application and commence patent prosecution.

International Patent Rights

An applicant may have the ability to file for international patent rights. However, the scope of this guide is to discuss the United States patent system. It is highly suggested that any reader considering foreign or international patent rights seek qualified patent counsel to discuss options for doing so either under the Patent Cooperation Treaty or otherwise inform themselves of international patent rights. Note that a public disclosure is often a bar for most foreign patents.

Patent Pending Status

There is no such thing as a “provisional patent.” Once a patent application is filed with the USPTO, the invention covered and claimed by the patent application is deemed to have “patent pending” status. It is important to note that patent pending status does not grant the holder any substantive rights under the law. Indeed, no patent exists during prosecution for others to infringe, let alone be sued upon. The applicant can, however, alert others to the fact that it has claimed priority to an invention and that the applicant will bring an infringement action if necessary, if and when the patent issues.

Patent Prosecution

Expected Delays: As previously noted, the patent process is long. Typical applications can take anywhere between 2-4 years for the process to be resolved, with many applications taking even longer. The pendency period generally depends on the art class to which the invention is assigned and the backlog that art unit is facing at the time. Often a patent application may sit in a given art unit for one or more years before being assigned to an examiner for prosecution. It has been our experience that the art units for software, business method, and electrical engineering patents have generally experienced a heightened workload compared to many other units, and therefore have longer prosecution period.

It is possible to expedite a patent application under certain circumstances. Applications can be expedited at the USPTO under one of three categories: (1) payment of an additional fee, (2) by statute if the invention involves a certain, recognized class of subject matter, and (3) by statute based on the status (usually health or age) of the inventor. It should be noted that some expedited applications require a great deal of additional work on the part of the applicant.

Office Actions: During prosecution, the USPTO generally communicates with the applicant via one or more office actions which set forth a period of time for the applicant’s response. Examiners often object to certain aspects of the application in these office actions based on issues with formality (such as issues with the drawings) or substantive issues which concern the patentability of the claimed invention. If the examiner opines that the application is formally deficient or that the claimed innovation is not novel or is obvious, the examiner will first issue a non-final rejection in an office action. The applicant is allowed to submit an argument to rebut the examiner’s position. Depending on the circumstances, applicants may be able to employ several avenues for rebutting the Examiner including arguments rooted in law or fact, amending or cancelling claims in light of objections, or amending the specification to eliminate the formality issues raised by the examiner. In response to the applicant’s arguments, the examiner may grant the patent, object to the patent based on new grounds through another non-final rejection, or issue a final rejection. It is typical for an application to be met with one or more office actions before a final determination is made by the examiner. In the event that a final rejection is issued, the applicant may still be able to continue prosecution through the filing of an appeal with the Patent Trials and Appeals Board (PTAB), filing a continuation or a request for continued examination (RCE) to further seek protection.

Maintenance Fees: Although patent terms can last up to twenty years from the effective filing date, the USPTO requires the payment of periodic maintenance fees to keep the patent alive and enforceable. The window periods for the three payments are (a) 3 years to 3 1/2 years after the date of issue for the first maintenance fee payment, (b) 7 years to 7 1/2 years after the date of issue for the second maintenance fee payment, and (c) 11 years to 11 1/2 years after the date of issue for the third and final maintenance fee payment. These payments can be made up to six months after the above mentioned time periods (4, 8, and 12 years) with the payment of a surcharge fee.

_______________________________________________________________

[1] There are three types of patents: utility, design, and plant patents. The focus of this guide is to acquaint the reader with utility patents because they are the most common and sought after of the three.
[2] In exchange for these exclusive rights, the patent holder must fully disseminate the invention to the public. Although others are prohibited from exploiting the patented invention during its term, the innovation enters the public domain upon expiration or abandonment, rendering the invention free for all to use.
[3] Trade secrets exhibit great benefits and drawbacks; however, this guide is limited to patent issues so a foray into the pro’s and con’s of trade secrets will not be discussed.
[4] For example, only asexually reproduced plants may be patented, and design patents can be obtained for any new, original, and ornamental design for an article of manufacture.
[5] See. 35 U.S.C. 101; Please note that the United States Supreme Court has recently heard a multitude of cases which impact patentable subject matter. The holdings of these cases are too numerous to detail in this guide; however, it is strongly recommended that the reader consult with a knowledgeable person, such as a registered patent attorney or patent agent, to discuss the various implications these cases may have on patentable subject matter.
[6] See. 35 U.S.C. 112, Paragraph 2
_____________________________________________________________________________________

About the Author:

Devin Ricci is an associate in the Baton Rouge office of Kean Miller. He joined the firm in 2012 and practices in the intellectual property group. Devin has experience in the four areas of intellectual property rights: patents, trademarks, copyrights, and trade secrets.

He represents a variety of clients including single inventors as well as companies of all sizes seeking a patent, artists and software engineers seeking copyright protection, and startup companies seeking to protect their intellectual property rights. He also has experience resolving intellectual property issues in the energy, refining, textile, marketing, advertising, manufacturing, and industrial sectors. Devin frequently drafts and files federal and state trademark applications for companies of all sizes as well as federal copyright registrations. He is a registered patent attorney and is licensed to practice before the United States Patent and Trademark Office.

As a registered patent attorney, Devin also drafts, files, and prosecutes process patents such as refining and chemical processes, apparatus patents such as consumer and industrial products, and systems patents such as plant designs. In addition to the experience in filing and prosecuting applications to obtain various intellectual property rights, he also has experience in drafting licensing and acquisition agreements concerning the various intellectual property rights.

Devin earned his B.S. in Biochemistry in 2009 from Louisiana State University. While earning his degree, Devin worked as a student researcher under a professor in the Biological Chemistry Department. He earned his J.D., magna cum laude, in 2012 from the LSU Law Center, where he was a member of the Order of the Coif. He also earned an additional diploma in Civil Law while attending the LSU Law Center.

Devin may be reached at 225.389.3713 or devin.ricci@keanmiller.com

SupremeCourt

On Monday, March 9, 2015, the U.S. Supreme Court ruled that federal agencies do not have to follow notice-and-comment rulemaking procedures when changing interpretations of rules. This decision gives federal agencies, including the Equal Employment Opportunity Commission and the National Labor Relations Board, wide latitude to change interpretive rules without first notifying the public of the proposed change and providing an opportunity to comment on the new rule.

The suit, Perez v. Mortgage Bankers Association, stemmed from the Labor Department’s change to its longstanding interpretation of a rule regarding whether mortgage-loan officers qualify for the administrative exemption to overtime pay requirements under the Fair Labor Standards Act (“FLSA”).

In 2006, the Labor Department issued an opinion letter finding that mortgage-loan officers fell within FLSA’s the administrative exemption. In 2010, without public notice or providing an opportunity for comment, the Department withdrew the 2006 opinion letter and issued a new interpretation finding that mortgage-loan officers do not qualify for the administrative exemption.

The Mortgage Bankers Association argued that the Labor Department’s change of position violated the Administrative Procedures Act (“APA”) and the D.C. Circuit’s Paralyzed Veterans doctrine because it did not follow the notice-and-comment rulemaking process. The Paralyzed Veterans doctrine held that an agency must use notice-and-comment rulemaking when it wishes to issue a new interpretation of a regulation that deviates significantly from a previously adopted interpretation.

The Supreme Court overruled the Paralyzed Veterans doctrine and held that the plain language of the APA specifically exempts interpretive rules from notice-and-comment requirements. The Supreme Court held that because an agency is not required to use notice-and-comment rulemaking to issue an initial interpretive rule, it cannot be required to use this process to amend or repeal an interpretive rule.

This ruling endorses the ability of federal agencies to freely reinterpret their statutes and regulations, even if such interpretations are contrary to prior agency positions.

storage_tank_1

The Occupational Safety and Health Administration (“OSHA”) published a Request for Information (“RFI”)  on December 9, 2013 concerning possible changes to the Process Safety Management (“PSM”) program codified at 29 C.F.R. 1910.119.  See 78 Fed. Reg. 73756 (Dec. 9, 2013).  Likewise, the Environmental Protection Agency (“EPA”) published an RFI on July 31, 2014 relating to possible changes to the similar Risk Management Program (“RMP”) rules codified at 40 C.F.R. Part 68.  See 79 Fed. Reg. 44604 (July 31, 2014).  At the time of this writing, the respective comment periods have closed and we are waiting to see new proposed regulations.

Perhaps one of the more interesting issues is the atmospheric storage tank exemption from the PSM rules.  In a prior administrative decision, Secretary of Labor v. Meer Corporation (1997) (OSHRC Docket No. 95–0341), an administrative law judge ruled that PSM coverage does not extend to flammables stored in atmospheric tanks, even if the tanks are connected to a process.  OSHA, in its RFI, requested information to support a decision to clarify the rule to include atmospheric storage tanks connected to a process.  Although many comments concerning the subject were submitted to OSHA, comments from two organizations were particularly interesting and make for an interesting contrasting exercise:  the Chemical Safety Board (“CSB”) and the National Fire Protection Association (“NFPA”).

The RMP rule does not have the same atmospheric storage tank exemption, per se.  Applicability of RMP is based on having a threshold quantity of a specific substance (e.g., butane and pentane)[1] or a mixture of materials of regulated substances, if that mixture has a NFPA rating of 4.  See 40 CFR 68.115(b)(2).  An NFPA 4 rating is given to any liquid or gaseous material that is liquid while under pressure and a flash point below 73 °F and a boiling point below 100 °F.[2]  RMP also excludes naturally occurring hydrocarbons which includes condensates and crude oil.  40 C.F.R. 68.115(b)(2)(iii).  Thus many materials that are exempt under OSHA based on the atmospheric storage tank exemption are also exempt under RMP, albeit on a different basis.  Generally, flammable liquids that are stored in atmospheric storage tanks are not regulated substances under RMP.

In developing its comments, the CSB provided three brief examples of incidents involving atmospheric storage tanks: one involved an incident during maintenance of the vessel, a second involved an incident at a tank attached to a process, and the third involved an incident involving a tank connected to a ship.  Taking the “facts” as presented, the first incident appears to have involved poor maintenance practices of an out-of-service tank (disconnected from the process).  As such, neither the first or third examples involve tanks connected to or in the proximity of a process.

The second incident, as described, involved the overpressure of a tank that was connected to a process.  According to the CSB, the petroleum refinery made changes in the process without going through management of change (and therefore failed to consider the impact of the change).  Indeed, OSHA issued four “serious” citations for the PSM violations, including one concerning management of change.  Unfortunately, CSB does not explain why the addition of atmospheric tanks would have created a greater duty to comply than regulations that already existed.

When its comments are viewed in total, it is apparent that the Chemical Safety Board (“CSB”) advocates a position that goes well beyond the removal of the exemption. The crux of the CSB comments is that atmospheric storage tanks need greater regulation whether or not they are connected to or in close proximity to a process.  This conclusion can be gleaned from their examples, two of which appear to be unrelated to processes and a third in which the incident occurred in violation of existing regulations.  To wit, the CSB suggest the regulation of atmospheric tanks that are not connected to processes, such as those found in terminals and tank farms.  To emphasize this opinion, the CSB offers an alternative to the elimination of the atmospheric storage tank exemption at §1910.119(a)(1)(ii)(B): revision of the Flammable Liquids standard (§1910.106) to include PSM type elements.[3]

The CSB cites the preamble of the 1992 rule as suggesting “that the rationale for exempting [atmospheric storage tanks] described in paragraph (a)(1)(ii)(B) was that they were already regulated by OSHA’s Flammable Liquids standards (at 29 CFR §1910.106).”  CSB Comments, Docket No. OSHA-2013-0020, Mar. 31, 2014, page 1.  Although the CSB noted that the OSHA Flammable Liquid Standard was based on NFPA 30, they also state that it has been significantly revised since used as a basis for the OSHA standard.  Perhaps foremost, the CSB states that the standard was never intended to prevent or minimize consequences of catastrophic release.

The NFPA offered an interesting contrast to the comments from the CSB.  The NFPA is a nonprofit organization committed to the development of consensus standards recognized by CSB, OSHA, EPA and others.  These standards are considered recognized and generally accepted good engineering practices (“RAGAGEP”).  According to the NFPA, “the provisions for atmospheric aboveground storage tanks in NFPA 30 have not changed appreciably since the standard was issued in 1969.”  NFPA Comments, Docket No. OSHA-2013-0020, page 2.  The NFPA further concludes “that an atmospheric above ground storage tank that complies with NFPA 30 presents minimal risk of fire exposure to adjacent process, regardless of absence or presence of interconnection” and that there is no value to eliminating the atmospheric storage exemption for tanks that comply with NFPA 30.  Id. at 3.

This creates an interesting question: what compels a facility to comply with NFPA 30?  This interesting question relates to another request posed by OSHA in the RFI: should OSHA clarify the PSM standard by adding a definition of RAGAGEP? If acted upon, OSHA may end up defining NFPA 30 as a RAGAGEP.  Either way, OSHA could sustain or eliminate the above ground storage tank exemption; narrow it, as suggested by the NFPA, by exempting tanks complying with NFPA 30; or update the Flammable Liquids standard to reflect the current NFPA 30, coupled with additional PSM type analysis.

There is one final consideration not brought up in these two comments.  OSHA PSM applicability is based on having a threshold of a flammable gas or a flammable liquid in a quantity of 10,000 pounds or more at any time within a process.  See 29 C.F.R. 1910.119(a)(ii).  Although the language in the rule could be clearer, subsequent OSHA guidance clarifies that one does not aggregate the weight of flammable liquid to flammable gas to make a PSM applicability determination.[4]  Many facilities exist where the only flammable liquids on site are contained in atmospheric storage tanks.  These facilities may process a lot of flammable gas, but never have a significant inventory (i.e., 10,000 pounds of flammable gas).  If the atmospheric storage exemption is removed, many facilities will become subject to PSM, not because the risk associated with a process, but because there is an atmospheric storage tank attached to the process.  If the OSHA Flammable Liquids standard and NFPA 30 address the risk associated with such storage, some, including the NFPA, would question the added benefit of removing the exemption (as the otherwise “attached” process does not constitute a risk per OSHA’s criteria for applicability).

In conclusion, whereas some commenters believed that regulation of atmospheric tanks should be expanded and updated, most believe that an update of NFPA 30 would be beneficial.  Disagreement exists as to whether atmospheric storage tanks should be regulated under OSHA Flammable Liquid standard or PSM.  Given that atmospheric storage tanks are already regulated (under OSHA’s Flammable Liquids standard), the primary effect of removing the exemption would be to capture connected processes that would otherwise not be covered.

______________________________________

[1] It should be noted that hexane (C6H14) is not a RMP regulated material as a flammable liquid.  Whereas pentane has a vapor pressure of 15.57 psia (i.e., above atmospheric pressure), hexane has a vapor pressure of 4.956 psia (i.e., below atmospheric pressure) and is otherwise liquid at atmospheric pressure. Normal-hexane has a boiling point of 155.7 °F and a flash of -7 °F.  Whereas normal hexane is not a flammable mixture under RMP, it is a flammable liquid under OSHA PSM (due to the flash point being less than 100 °F).

[2] NFPA 704, Chapter 6, Table 6.2, found at https://law.resource.org/pub/us/cfr/ibr/004/nfpa.704.2007.pdf (last visited March 10, 2015).

[3] Interestingly, the American Petroleum Institute (“API”) agrees with updating 29 C.F.R 1910.106 to be consistent with NFPA 30, so long as “proposed changes undergo the typical notice and comment rulemaking process.”  See API comments, March 31, 2015, p. 13.

[4] OSHA Standard Interpretation; letter from H. Berrien Zettler, Deputy Director, Directorate of Compliance Programs, to John Anicello, Airco Gases, Interpretation number 21406, dated Feb. 15, 1994, found at https://www.osha.gov/pls/oshaweb/owadisp.show_document?p_table=INTERPRETATIONS&p_id=21406 (last visited Mar. 2, 2015).

The OIG issued Advisory Opinion 15-3 to address an arrangement proposed by a licensed offeror of Medicare Supplemental Health Insurance (“Medigap”) policies (the “Requestor”), in which the Requestor would indirectly contract with a preferred hospital organization (“PPO”) having contracts with a national network of hospitals (the “Network Hospitals”) for discounts on otherwise-applicable Medicare inpatient deductibles for its policyholders.  Under the proposed arrangement, the Network Hospitals would provide 100% discounts on Medicare inpatient deductibles incurred by the Requestor’s Medigap policyholders that would otherwise be covered by the Requestor.  The discounts would apply only to Medicare Part A inpatient hospital deductibles covered by the Medigap plans and not to any other cost-sharing amounts.  The Network Hospitals would provide no other benefit to the Requestor or the Medigap policyholders.  The Requestor would pay the PPO a fee for administrative services each time the Requestor received the discount from a Network Hospital. If the policyholder was admitted to a hospital other than a Network Hospital, the Requestor would pay the full Part A hospital deductible under the applicable Medigap plan.  The Medigap policyholders would receive information biannually about the participation of Network Hospitals, would retain freedom of choice to use any hospital, and would not be penalized in any way for the use of a non-network hospital.

The PPO’s hospital network would be open to any accredited, Medicare-certified hospital that meets the requirements of applicable state laws and that contractually agreed to the PPO discount of the Part A hospital deductible for the Medigap policyholders.  If the policyholder used a Network Hospital, the Requestor would provide the policyholder with a $100 credit toward the next renewal premium. The savings realized by the Requestor under the proposed arrangement would be reflected in the documents filed with the various state insurance departments that regulate the premium rates charged by the Medigap insurers.

The OIG considered the discount of the Medicare deductible to be prohibited remuneration under the anti-kickback statute because it involved the waiver of Medicare cost-sharing amounts and the relief of a financial obligation.  The policyholder would be provided a premium credit, which would implicate the anti-kickback statute as remuneration for selecting a Network Hospital.  The proposed arrangement did not meet an anti-kickback safe harbor for waiver of beneficiary coinsurance and deductible amounts, since the safe harbor specifically excluded such waivers when they were part of an agreement with an insurer, such as the Requestor.  Furthermore, the safe harbor for reduced premium amounts offered by health plans could not be met, because the same reduced cost-sharing or premium amounts would not be offered to all enrollees—it would be offered only to those enrollees who choose a Network Hospital.

Nevertheless, the OIG found the proposed arrangement presented a sufficiently low risk of fraud and abuse under the anti-kickback statute because:  1) the discounts and premium credits would not increase or affect per-service Medicare payments, as Part A payments for inpatient services are fixed and unaffected by beneficiary cost-sharing; 2) the arrangement would be unlikely to increase utilization because the discounts would be “invisible” to beneficiaries and would apply only to the portion of the beneficiary’s cost-sharing obligations that the Medigap policy would cover; 3) the arrangement would not unfairly affect competition among hospitals because membership in the PPO’s hospital network would be open to any accredited, Medicare-certified hospital that meets the requirements of applicable state laws; 4) the arrangement would be unlikely to affect professional medical judgment as the physicians and surgeons would receive no remuneration and the policyholders would be free to go to any hospital without incurring any additional out-of-pocket expense; and 5) the policyholders would maintain freedom to choose any hospital without incurring a penalty for additional liability.

The proposed arrangement would also implicate the prohibition on inducements to beneficiaries because the premium credits would be offered to induce policyholders to select a particular provider (the Network Hospital).  The OIG noted the definition of remuneration included an exception for differentials in coinsurance and deductible amounts as part of a benefit plan design whereby an enrollee may pay a different cost-sharing amount depending on whether he used a network or non-network provider.  The OIG found the premium waiver was analogous to this type of differential and presented a sufficiently low risk of fraud or abuse under the prohibition on inducements to beneficiaries.

The OIG noted that the proposed arrangement had the potential to lower Medigap costs to all policyholders who selected the Network Hospitals, without increasing costs to those who did not.  Because the savings realized from the proposed arrangement would be reported to state insurance rate-setting regulators, the proposed arrangement had the potential to lower costs for all policyholders.

The OIG concluded that it would not impose administrative sanctions on the Requestor under the anti-kickback statute or the prohibition on inducements to beneficiaries in relation to the proposed arrangement.  The OIG’s opinion did not extend to analysis of the proposed arrangement under any other Federal laws and regulations, including the Stark law, or with any state laws, including state insurance laws.

Although the Advisory Opinion is limited to the specific facts presented in arrangement proposed by the identified parties, the opinion provides guidance on how the OIG might view other similar arrangements involving a targeted waiver of Medicare beneficiary deductibles.

A federal judge dismissed the lawsuit that the New York Times referred to as “The Most Ambitious Environmental Lawsuit Ever” on February 13, 2015, with a finding that the plaintiffs did not state a viable claim for relief.

The Board of Commissioners of the Southeast Louisiana Flood Protection Authority-East (“SLFPA-E” or “Authority”) filed a lawsuit in the Civil District Court in Orleans Parish, Louisiana, against more than 90 oil and gas and pipeline companies on July 24, 2013.  The SLFPA-E filed the suit individually and as the Board governing the Orleans Levee District, the Lake Borgne Basin Levee District, and the East Jefferson Levee District, contending that it manages and is responsible for more than 150 miles of levees, 50 miles of floodwalls, and numerous drainage structures, pump stations, and floodgates in an area it described as the “Buffer Zone,” which includes coastal wetlands in eastern New Orleans, the Breton Sound Basin, and the Biloxi Marsh.  The SLFPA-E alleged that historical and current oil and gas and pipeline activities in the Buffer Zone, including the construction and use of oil and gas canals and pipeline canals, caused “direct land loss and increased erosion and submergence in the Buffer Zone, resulting in increased storm surge risk, attendant increased flood protection costs, and, thus, damages” to the Authority.

With this lawsuit, the SLFPA-E sought damages and injunctive relief “in the form of abatement and restoration of the coastal land loss” including backfilling and revegetating all canals, “wetlands creation, reef creation, land bridge construction, hydrologic restoration, shoreline protection, structural protection, bank stabilization, and ridge restoration.”

On August 13, 2013, the oil and gas defendants removed this case from state court to the United States District Court for the Eastern District of Louisiana.  On September 10, 2013, the SLFPA-E filed a motion to remand the matter to state court.  On June 27, 2014, the federal court denied the SLFPA-E’s motion to remand.  As a result, this matter continued in federal court, and the court considered a number of dispositive motions.

On February 13, 2015, the federal judge dismissed the wetlands damage lawsuit against 88 remaining oil and gas defendants.  At issue before the court was the defendants’ motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure.  Rule 12(b)(6) provides that an action may be dismissed “for failure to state a claim upon which relief can be granted.”  Therefore, for the Authority’s action to survive, its petition needed to contain sufficient factual matter to state a claim for relief that is plausible on its face.  A claim is considered facially plausible when the pleaded facts allow the court to draw a reasonable inference that the defendants are liable for the alleged misconduct.  All parties extensively briefed the issues, and the court heard oral argument.  The court then applied this legal standard to each of the causes of action brought by the SLFPA-E in its petition—(1) negligence, (2) strict liability, (3) natural servitude of drain, (4) public nuisance, (5) private nuisance, and (6) breach of contract as a third party beneficiary.

To state a claim for negligence, a plaintiff must establish five elements:  duty, breach, cause-in-fact, scope of liability, and damages.  The Authority failed to show the threshold element of a legal duty owed by defendants.  Finding no legal duty under state law, the court reiterated its prior finding that oil and gas companies do not have a duty under Louisiana law to protect members of the public from the results of coastal erosion allegedly caused by operators that were physically and proximately remote from the Authority or its property.  The court also found that the federal statutes on which the SLFPA-E relied to establish the requisite standard of care—namely the Rivers and Harbors Act, the Clean Water Act, and the Coastal Zone Management Act—were not intended to protect the Authority.  Because the Authority failed to demonstrate that defendants owe a specific duty to protect it from the results of coastal erosion allegedly caused by defendants’ oil and gas activities, the court concluded that the Authority did not state a viable claim for negligence.

A claim for strict liability also requires a showing of a legal duty owed to the plaintiff.  Because the court already determined that defendants do not owe a legal duty to the SLFPA-E to protect it from the results of coastal erosion, the court found that the Authority did not state a viable claim for strict liability.

A claim for natural servitude of drain involves the interference with the natural drainage of surface waters over property—i.e., from an estate situated above (dominant estate) to an estate situated below (servient estate).  The owner of the lower estate may not do anything to prevent the flow of the water, and the owner of the higher estate may not do anything to render the flow more burdensome.  The SLFPA-E alleged that defendants possessed temporary rights of ownership in the lands they dredged to create the canal network and that those lands constituted a dominant estate from which water flowed onto its servient estate.  However, the Authority failed to show that a natural servitude of drain may exist between nonadjacent estates with respect to coastal storm surge.  As such, the court concluded that the Authority did not state a viable claim for natural servitude of drain.

The parties and the court addressed the Authority’s public and private nuisance claims together.  The obligations of neighborhood are the source of nuisance actions in Louisiana.  Generally, the owner of immovable property has the right to use the property as he pleases, but the owner’s right may be limited if the use causes damage to neighbors.  A claim for nuisance requires a showing of (1) a landowner (2) who conducts work on his property (3) that causes damage to his neighbor.  The court determined that the Authority failed to show sufficiently that it is a “neighbor,” within any conventional sense of the word, to any property of defendants.  To recover, the SLFPA-E must have some interest in an immovable “near” the defendant landowners’ immovable property; yet, it did not allege physical proximity of the servient and dominant estates whatsoever.  Moreover, nuisance claims after 1996 require the additional showing of negligence, except for damages resulting from pile driving or blasting with explosives.  Because the Authority did not allege that defendants engaged in pile driving or blasting with explosives, and it failed to state a claim for negligence upon which relief may be granted, the court dismissed the Authority’s claims for public and private nuisance.

For its breach of contract claim, the SLFPA-E characterized some of the dredging permits at issue as “contracts” between defendants and the US Army Corps of Engineers to maintain and restore.  The Authority contended that it is a third party beneficiary of those contracts; however, the Authority failed to present any authority suggesting that a dredging permit issued by the federal government is a contract.  The court noted that neither a permit nor a license is a contract.  Therefore, the court concluded that because the dredging permits do not constitute contracts, the third party beneficiary doctrine is not applicable.  The court additionally found that even if the permits were construed as contracts, the Authority did not establish that it is an intended beneficiary under the terms of the permits.  To be a third party beneficiary to a government contract, a third party must be an intended, rather than an incidental, beneficiary.  As such, the court found that the Authority failed to state a claim upon which relief may be granted for breach of contract as a third party beneficiary.

Because the SLFPA-E did not state a viable claim for relief, the court granted defendants’ motion to dismiss and dismissed the Authority’s claims against all remaining defendants with prejudice.  The SLFPA-E filed an appeal from this ruling, and the court’s prior remand ruling, with the Fifth Circuit on February 20, 2015.

The dismissal of this lawsuit by the federal court may not be the final word on coastal erosion lawsuits in Louisiana.  As noted, the SLFPA-E has appealed the court’s dismissal to the U.S. Court of Appeals for the Fifth Circuit.  Further, local governmental bodies and private landowners have filed over 30 additional lawsuits against various oil and gas and pipeline entities for related claims.

The Louisiana Fourth Circuit Court of Appeal held that an insurer must provide a complete defense to its insured in long-latency disease cases and that the duty to defend is not subject to proration.  See Arceneaux v. Amstar Corp., 2014-0271 (La. App. 4 Cir. 2/25/15), 2015 WL 798980.

In Arceneaux, American Sugar sued its insurer, Continental, for a defense against claims filed by a number of American Sugar’s former employees, who alleged they suffered occupational hearing loss from their exposure to industrial noise while working for American Sugar from 1941 to 2006.  Continental offered to pay, and began paying, 25% of American Sugar’s defense costs under a reservation of rights, arguing that it did not owe a complete defense because its policies covered only 26 months of the approximately 60–year time span during which the former employees alleged the exposure occurred.  American Sugar rejected Continental’s offer and filed a motion for partial summary judgment seeking, in part, a declaration that Continental owed American Sugar a full defense going forward.  The trial court held, with the appellate court affirming, that Continental must provide American Sugar with a full (100%) defense going forward.  Both courts rejected the insurers’ efforts to treat the insurers’ duty to defend like its indemnity obligations in long-latency damage cases.

Arceneaux reinforces long-standing Louisiana jurisprudence that an insurer who owes a duty to defend must provide its insured a complete defense, and cannot simply prorate the defense based on its time on the risk or on covered versus “uncovered” claims.  See American Home Assurance Company v. Czarniecki, 230 So. 2d 253 (1969) (insurer must accept defense of the entire lawsuit, even though there was ultimately no coverage); Treadway v. Vaughn, 633 So. 2d 626, 628 (La. App. 1 Cir. 1993) (“Once a complaint states one claim within the policy’ s coverage, the insurer has a duty to accept defense of the entire lawsuit, even though other claims in the complaint fall outside the policy’s coverage.”); Vaughn v. Franklin, 2000-0291 (La. App. 1 Cir. 3/28/01); 785 So.2d 79, 89 (though two insurers were entitled to seek contribution from each other, they were solidarily bound to provide a complete defense to their insured); Riley Stoker Corp. v. Fid. & Guar. Ins. Underwriters, Inc., 26 F.3d 581, 589 (5th Cir. 1994) (“Under Louisiana law, when an insurer has a duty to defend any claim asserted, the insurer must defend the entire action brought against its insured.”); Liberty Mut. Fire Ins. Co. v. Fluor Enterprises, Inc., 2012 WL 255763 (E.D. La. 2012) (insurers were solidary liable with respect to their obligation to defend their common insured); Jensen v. Snellings, 1991 WL 28988 (E.D. La. 1991) (same).

227efcfa-a4e6-411e-8500-f246f8697c95

Spoliation of evidence is the evidentiary doctrine that refers to destruction or significant alteration of evidence, or the failure to preserve evidence, for another’s use as evidence in pending or future litigation.  While there can be a statutory duty, a contract, a special relationship between the parties, or an affirmative agreement or undertaking to preserve the evidence, such as the duty to preserve medical records for a particular number of years, the duty to preserve evidence can also arise once a party has a “reasonable expectation” of litigation.

The general rule is if a party intentionally disposes of evidence, it can become subject to sanctions.  Before imposing sanctions, though, courts consider whether the party having control over the evidence had an obligation to preserve it at the time it was destroyed and, once satisfied that there was an obligation, the court considers whether the evidence was intentionally destroyed.  Importantly, an obligation to preserve evidence can arise when the party has notice that the evidence is relevant to litigation, or when a party should have known that the evidence may be relevant to future litigation.

If spoliation is proven, then generally an adverse presumption that the evidence was detrimental to his cause is allowed against the party that destroyed or disposed of the evidence.  But, Louisiana law provides that the inference is unwarranted where there is a reasonable excuse for the destruction of evidence.  For example, when a suit has not been filed and there is no evidence that the party knew litigation would ensue when he discarded the evidence, the adverse presumption may be avoided.  It may also be avoided if the party accused of destroying or not producing the evidence comes forth with a reasonable and adequate explanation.  If not adequately explained, however, the aggrieved party may be entitled to the jury instruction for the presumption that the destroyed evidence contained information detrimental to the party who destroyed the evidence.

Prior to 1997, the only remedy Louisiana courts had granted for spoliation of evidence claims was the application of the adverse presumption.  Several Louisiana jurisdictions, however, have set the stage to recognize a distinct and separate tort for spoliation of evidence, sometimes called “impairment of a civil claim.”

For example, in Pham v. Contico International, Inc., 759 So.2d 880 (La. App. 5th Cir. 2000), the court considered whether a worker’s compensation claimant had a separate cause of action in tort against his employer for spoliation of evidence to be used against a third party in a tort suit.  In this case, the employee was injured during the scope of his employment when he leaned against a crate that gave way, and the employer returned the crate to the warehouse without marking its identity.  When the employee sued the manufacturer of the crate, he also sued his employer for spoliation of evidence, alleging that his claim against the manufacturer would be impossible, or at least more difficult, to prove without the “destroyed evidence.”  The employer claimed it was immune from the tort suit by virtue of the Workers Compensation Act, and, while the court ultimately dismissed the tort suit for spoliation against the employer, it did not do so on the grounds of immunity under the Workers Compensation Act.  The court recognized that the employer could be sued in tort for destroying evidence but, because the employee’s suit did not claim that the evidence had been intentionally destroyed, the petition did not meet certain threshold requirements.  Other Louisiana courts have also recognized that a well-pled petition stating a claim for intentional spoliation could stand as a separate and distinct cause of action, and that the employer cannot shield itself from tort immunity provided in the state Worker’s Compensation Act.  See Carter v. Exide, 27,358 (La. App. 2 Cir. 9/29/95), 661 So.2d 698, and Bethea v. Modern Biomedical Services, Inc., 97-332 (La. App. 3 Cir. 11/19/97), 704 So.2d 1227.

Generally, the duty to preserve evidence begins when a party is on notice that the evidence may be needed in court.  Once suit is filed, evidence must be presumed or run the risk of sanctions or penalties.  This is also true prior to actual filing of litigation: if litigation is reasonably foreseeable, the prudent course is to preserve all that evidence which could foreseeably be of relevance.  While there is no definite answer from the Supreme Court as to whether a separate tort of spoliation exists and requires either negligent or intentional conduct, in 2011 a federal district court interpreting Louisiana law stated that because the tort of spoliation is derived from the evidentiary theory of adverse presumption, the tort should require the same motive as the evidentiary theory.  Bertrand v. Fischer, 2011 WL 6254091 (W.D. La. 2011).  Therefore, the court reasoned that because the adverse presumption theory of spoliation requires intent, “it would be inconsistent to require intentional conduct for one, but not the other.”  Subsequently, the First Circuit, in Clavier v. Our Lady of the Lake Hosp. Inc., 12-0560 (La. App. 1 Cir. 12/28/12), 112 So.3d 881, agreed that the theory of spoliation of evidence referred to an intentional destruction of evidence, and allegations of negligent conduct were insufficient to state a cause of action.

The lesson to be learned is that if there is a reasonable expectation of litigation, a person or business should take all reasonable precautions to preserve the evidence in order to avoid a lawsuit for spoliation of evidence, and avoid the jury being instructed that an adverse presumption against you is allowed.

In the past, Minor Source Air Permits issued by LDEQ typically did not have an expiration date. That has changed. Per Louisiana Revised Statute 30:2023(A), all environmental permits issued by the Louisiana Department of Environmental Quality (“LDEQ”) “shall have, as a matter of law, a term of not more than ten years.” Louisiana’s air quality regulations had been silent, however, with respect to the term of minor source permits. On February 20, 2015, LDEQ filled this gap by adopting a rule setting forth maximum terms and renewal procedures for minor source permits (“the Rule”). La. Reg. 41:346. The new minor source permit term requirements and permit renewal procedures are established at revised LAC 33:III.503.C and 519.

While the Rule provides that the maximum permit term is 10 years, the Department can specify a shorter term in the permit. Id. § 503.C.1.a.  The term runs from the last date that the permit was issued or modified. A permit application to renew an existing permit that expires after January 1, 2016 must be submitted in accordance Section 503.C.3.a and must be submitted at least 6 months prior to the date of permit expiration. Thus, if a minor source permit was last issued or modified on January 10, 2008, it would expire January 10, 2018.  Renewal applications for minor source permits issued on January 2, 2006 will be due July 2, 2015, and so on. However, an exception to this deadline for renewal is provided for the renewal of existing minor source permits that would otherwise expire due to the new provisions on or before December 31, 2015.

The Rule states that a schedule will be published in the Louisiana Register for the submittal dates for applications to renew existing permits that expire on or before December 31, 2015. At a February 12, 2015, public meeting, Department representatives anticipated that such schedule would be published in either March or April. At that public meeting, LDEQ presented the following tentative schedule:

  • October 1, 2015, for permits that were issued or last modified prior to January 1, 1999;
  • October 1, 2016, for permits that were issued or last modified after January 1, 1999, but prior to January 1, 2003; and
  • October 1, 2017, for permits that were issued or last modified after January 1, 2003, but prior to January 1, 2006.

As the first permit renewal applications will be due on July 2, 2015, and others may be phased in shortly thereafter, it is suggested that facilities with minor source permits begin reviewing their current operations to determine whether any changes have occurred since their permits were originally issued or last modified which must be accounted for in their permit renewal applications. For instance, Environmental Protection Agency (“EPA”) Air Pollution Emission Factors (AP-42) and Department-accepted estimation methods may have been promulgated or revised since their permits were originally issued or last modified, which could require changes in calculated emissions. Pursuant to LAC 33:III.501.C.12, changes in reported emission levels due solely to revised AP-42 emission factors or Department-accepted estimation methods do not constitute violations of an air permit; however, the Department may evaluate such changes on a case-by-case basis, including but not limited to, assessing compliance with other applicable Louisiana air quality regulations. This is just one of several reasons to start the permit review process as soon as possible.

Note that the Rule applies only to sources that have some form of a minor permit, including Small Source Permits and Minor Permits. It does not apply to sources that have been granted an exemption under LAC 33:III.501.B.4 due to having a maximum potential to emit less than 5 tons per year of any criteria permit and that otherwise meet the criteria set forth at Section 501.B.4. See id. § 503.B.1.

For more information on the LDEQ air permitting program and links to air permit application forms click here.

th

The latest OIG Advisory Opinion, issued February 9, 2015, addresses the issue of sharing federal health care program payments with an excluded practitioner.   While federal statutes prohibit payment by any federal health care program, including Medicare or Medicaid, for items or services furnished by an excluded person or furnished at the medical direction or on the prescription of an excluded person, OIG Advisory Opinion 15-02 analyzed whether an excluded individual could receive federal program payments for services performed prior to the effective date of exclusion.

The requestor in the latest opinion was a practitioner who was excluded from Federal health care program participation for 20 years following a criminal plea and civil False Claims Act settlement. Prior to the effective date of exclusion, the practitioner and his/her practice had performed services and submitted claims for such services to Federal health care programs (“Services”). The question posed by the requestor was whether the payments for the Services that were made after the exclusion date could be remitted to the excluded practitioner.

The OIG began its analysis with a review of the federal statutes that prohibit Federal health care program payments to excluded individual. Acknowledging that the payment prohibition applies only to items and services that are rendered on or after the effective date of exclusion, the OIG concluded that the payment from a Federal health care program for the Services would not be in violation of the Federal prohibition and would not serve a grounds for the imposition of administrative sanctions under the civil monetary penalties statute.

As with all advisory opinions, the OIG noted that the opinion was limited to the specific facts set forth by the requestor. The opinion does not alter the fact that excluded individuals would be subject to civil monetary penalty liability for any claim the excluded individual submits, or causes to be submitted, during the period of exclusion.