Terroir and the curious path to geographic indication. 

This week I was honored and pleased to participate in the “Sub-regional workshop on geographical indications/ origin-linked products in Kingston, Jamaica. The event was coordinated by various governmental and international trade organizations including: WIPO, CEDA, EU-Caricom, IDB and JIPO.

A geographic indicator (GI) is a specific product name that has trademark-like protection and exclusivity as long as the product characteristics, or reputation is due to its place of origin. This idea of place has great importance and is referred to as “terroir” in Europe. A clear and scientific connection between product and place of origin and its connection to culture, tradition, heritage and processes are all linked to this interesting concept in international trade and IP law.

This legal issue has great commercial relevance since the market for GIs is estimated at more than $50 billion. Some of the most popular GIs include Champagne, Port (the oldest GI), Roquefort, Tequila, and Darjeeling.

The aim of the workshop was to build capacities in the Caribbean for the registration of GIs in the area, connect stakeholders and raise awareness.

Registering a GI is a three step process:

1. Form a producer group/ association, e.g. Co-op farmers from Belize were present to discuss efforts to develop a GI for cocoa from the Toledo region (terroir) in that country.

2. Develop a scientific product specification with verified protocols and standards. Elements may include: production methods, livestock regimes, plant varieties, traditional practices. The terroir must be described in detail. Boundaries and unique territorial aspects should be included, e.g some coffee must be grown at certain elevations and with certain soil conditions. The link between product and terroir must be scientifically established to establish uniqueness and source origin.

3.  Control production to guarantee customers of origin and authenticity.

Once these are all established a producer group may reap the benefits of a GI system and enjoy market exclusivity and higher margins for their unique products. Consumers can enjoy consuming the product knowing that the product is sustainably sourced from a legitimate producer group with strong historical and cultural connections to the terroir.

What is legal bullying?

My latest research project involves the topic of legal bullying, which I define in the corporate context as one firm exploiting their resource position to threaten a smaller party with a weak or non-existent legal claim, benefitting from the high transaction costs characterized by our very expensive, lengthy and uncertain litigation system. 

I pull several examples from the intellectual property realm (trademark bullies, patent/copyright trolls and efficient infringers), employment (wage theft, and worker misclassification involving independent contractor status and oppressive non-competes in low wage industries), and business regulation (using the regulatory system to impose uncertainty on another’s business). From a strategic standpoint, these tactics often work. From an ethical and fairness perspective, not at all. 

I recently presented this research at a symposium on proactive law at the Ross School of Business at the U. Of Michigan sponsored by the Business Law area at that school. The greatest interest was devoted to the second half of the article related to various examples that show how smaller parties have used social media and legal crowdsourcing to fight back against legal bullying. One discussant equated it to guerrilla marketing. Another saw parallels between this work and research related to private politics, or how private parties engage in advocacy to enact social and legal changes in business. What I have found is that the use of social media to fight legal bullying is getting more sophisticated as parties build coalitions with activists and tie-in the mainstream media to shame legal bullies.

In the end, my recommendation to large companies is to stop and wait before engaging in a knee jerk reaction to file claim against a much smaller opponent. The best course of action is to consult the matter with in-house attorneys to determine if the threat is real (external counsel may have different motivations and incentives), and to review the matter with internal corporate social responsibility officers and marketing personnel to gauge any negative fallout that might arise. In today’s transparent and interconnected world, an internal risk assessment should always be made before pursuing a weak claim against a smaller opponent. 

Legal Crowdsourcing Research Update

I just posted a revised version of my article on legal crowdsourcing on SSRN here : http://bit.ly/1MUUAxK

This article (forthcoming in the American Business Law Journal) discusses the emergence of legal crowdsourcing, the various forms it can take, and its implications for the legal profession. Overall, I think this model has great promise to promote greater access to the legal system, improve the quality of legal advice and the rate of legal innovation. Entrepreneurs are already starting to use this technique to fend of larger competitors who use the legal system to bully smaller enterprises. The legal profession is starting to embrace this model and I think we’ve reached a turning point in the profession, technology and society to the point where we’ll see legal legal crowdsourcing become a mainstream practice. Take a look at the paper and let me know your thoughts. 

Product design gets no legal respect

I just re-read Kurt Eichenwald’s wonderfully researched and written Vanity Fair article The Great Smartphone War. It’s getting harder to find such high quality journalism that is both meticulously researched and enjoyable to read. Eichenwald’s account, like all great works of journalism, puts you in the time and place of the described happenings, in this case the all-out legal and strategic battle between Samsung and Apple. The article goes into marvelous detail about the legal aspects of the case, but what motivated me to blog about it were two things: 1. The cunning nature of Samsung’s bare-knuckled and wildly successful legal strategy; 2. How the U.S. legal system upholds such ruthless legal maneuvrings, much to the detriment of pioneering designers and innovators.

As the article points out, Samsung mastered a pattern of strategic legal maneuvering that consists of: “when caught red-handed [infringing patents], countersue, claiming Samsung actually owned the patent or another one that the plaintiff company had used. Then, as litigation dragged on, snap up a greater share of the market and settle when Samsung imports were to be barred.” As I point out in my recent MIT Sloan Management Review article, this amounts to a higher-order legal strategy that few companies are able to execute with as much success.

The article also points out how Apple’s designers spent nearly two years toiling in secret, at great expense and risk, iterating to achieve a pioneering design. So much effort went into the design of the device’s single button that 50 iterations were made for that single design aspect of the iPhone. According to the article, when one of the Apple designers saw Samsung’s competing offering (the Galaxy S), he could not help but exclaim: “We’ve been ripped off.”

The article points out many great details of the case, and understandably it does not dwell on the legal issues of product design and trademark infringement. In the end, Samsung was ordered to pay nearly a billion dollars in damages, but that may have been part of its legal strategy calculus as it grew market share during litigation. The infringement award would be a fairly trivial amount taking into account all that was to be gained.

As someone who researches and writes in the area of trademarks and product design, it amazes me how little product design gets respected in the courts. So much effort can go into the design and marketing process and the property rights that are obtained often do little to vindicate the designers and risk takers. The appropriate remedy to deter such strategic legal maneuvering at the expense of pioneering designers is to recognize that irreparable harm will arise from the infringement, and that court ordered injunctions to prevent copying need to be the legal standard for pioneering design, such as shape trademarks. Otherwise, strategic copycat followers will always consider the path of least resistance and will consider engaging in strategic infringement.

A Treasure Trove of Business Law Research

My retired FSU colleague, office neighbor and erstwhile lunch companion Professor Emeritus Vinny Stauber was starting to clean out his office upon retirement several months ago. I had been in his office many times and always noticed the large compendium of American Business Law Journal (ABLJ) volumes stacked neatly on his shelves. Some issues went as far back as 1969. Being the total research geek that I am, I gazed upon them with admiration and asked him if he had plans to keep them. Noting my interest, he kindly offered to grant them to me. I gladly accepted the offer. The reason why is because many of these older ABLJ issues are not digitized and can only be referenced and accessed in print. Having published three articles in this journal and served as a staff editor I have an affinity for the journal’s mission, which is to publish leading research articles for those of us who teach legal studies courses in business schools. Over the years, the ABLJ has been able to, through its able editorial leadership, reviewers and authors, establish itself as a one of top double-blind, peer-reviewed business law journals. Today it is widely respected among practitioners, academics and policy makers.

On Vinny’s last day I took the box full of ABLJ issues, unpacked them and stacked them on my shelves in order, and noticed that Vinny’s collection dated back to Volume 7, Issue 1 Spring 1969. As I perused some of article titles I was inspired to think about how the journal and its authors have steadfastly advanced our knowledge of business law over the years. As educators and researchers, we owe a lot to our predecessors who helped advance, shape and position our academic field.

Today, as I peruse Volume 7 Issue 1, I noticed that the research articles back then were mainly devoted to exposing the readership about current and evolving legal issues. For example, Ohio State University Professor Frank F. Gibson’s article “Strict Liability in Tort: Recovery for Non-Accidental losses” discusses strict product liability as a new theory of liability. It blows my mind to think that strict product liability was a new theory of liability, but such was the case in 1969. These articles, in a pre-Internet/Google era, had the important function of communicating the latest legal developments to the educators in our field tasked with teaching these developments to future business professionals.

I now display my greatly expanded collection of ABLJ volumes prominently in my office with great joy and pride. I will continue to read through these old issues, and when something of interest and relevance stands out, I’ll make sure to add a post and comment on this blog.

ABLJ IssuesABLJ Cover

Epilogue: Dukes v. Wal-Mart

The dust is still settling after the U.S. Supreme Court handed down its decision in the Dukes v. Wal-Mart case. In its decision, the Court held that 1.5 million women could not be certified as a class against the retailer.

Federal Civil Procedure Rule 23(a) requires  that any party seeking class action certification must demonstrate that:

“(1) the class is so numerous that joinder of all members is impracticable,“(2) there are questions of law or fact common to the class, “(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and “(4) the representative parties will fairly and adequately protect the interests of the class”

In the Dukes case, the lower district (trial) and appellate courts found that the evidence marshaled by the plaintiffs were indeed sufficient to allow certifying the 1.5 million female Wal-Mart employees as a class under the rules.

The evidence used to persuade the lower courts included statistical data that suggested differences in pay between men and women, anecdotal testimony from witnesses who alleged gender-based discrimination, and the social framework analysis of the plaintiff’s expert sociology witness. The social framework analysis was discussed in greater depth in a prior post on this blog.

The U.S. Supreme Court, however, held that this evidence was insufficient to meet the commonality requirement of Federal Rule 23(a). Under the Court’s analysis of relevant precedent, the Court required evidence of a systematic practice, or corporate policy that would trigger a legal issue common to all  1.5 million women in the class. The only evidence that the Court found addressed this requirement was the social framework analysis offered by the plaintiff’s expert, Dr. William Bielby. The Supreme Court, however, found the use of a social framework analysis was insufficient to demonstrate typicality. The Court said:

“Relying on “social framework” analysis, Bielby testified that Wal-Mart has a “strong corporate culture,” that makes it “‘vulnerable’” to “gender bias.” He could not, however, “determine with any specificity how regularly stereotypes play a meaningful role in employment decisions at Wal-Mart.” …

“The only corporate policy that the plaintiffs’ evidence convincingly establishes is Wal-Mart’s “policy” of allowing discretion by local supervisors over employment matters. On its face, of course, that is just the opposite of a uniform employment practice that would provide the commonality needed for a class action; it is a policy against having uniform employment practices.”

The Court then discussed that the typicality requirement is a threshold issue that can impact the results of statistics that suggest gender based discrimination.

As a practical matter, it is unlikely that any plaintiffs will be able to certify a nationwide class against a major corporation in discrimination cases unless the plaintiffs can show with sufficient evidence that typicality of harm or injury arises from pervasive managerial behavior, such as an identifiable corporate policy, or from observable and uniform practice.

On the other hand, broad and unidentifiable factors, such as tacit managerially sanctioned social norms, are not likely to satisfy the typicality requirement. In the Dukes case, the Supreme Court disregarded the theory that something as real, yet broadly conceived, as corporate culture can be used to legally establish typicality.

As discussed in the Court opinion’s syllabus:

“Respondents’ only evidence of a general discrimination policy was a sociologist’s analysis asserting that Wal-Mart’s corporate culture made it vulnerable to gender bias. But because he could not estimate what percent of Wal-Mart employment decisions might be determined by stereotypical thinking, his testimony was worlds away from “significant proof” that Wal-Mart “operated under a general policy of discrimination.”

So, even if there is some indication of a corporate culture and statistical evidence pointing to a gender-based pay gap, the courts are likely to require  direct evidence of an actual company practice that fosters the discrimination.

FL-GA Legal Studies Research Conference

Welcome to the informational site for the upcoming FL-GA Legal Studies Research Conference.

This inaugural conference will be hosted by The College of Business at Florida State University in October, 2011. After that, the conference  will rotate among the three other founding and participating institutions: The University of Georgia, The University of Florida and The Georgia Institute of Technology.

The event will bring together prolific and renowned legal studies in business scholars. These scholars routinely examine legal issues that confront managers who make decisions at the nexus of business and the law.

Please click on the Invitation to Register and the Conference Agenda to learn more about this exciting event.

The following list of presenters and attendees will be updated periodically, so please make sure to check back to learn more about the program.

Confirmed Presenters:

The Florida State University:

Chad Marzen, presenting: “OCIPs in the Future of the Insurance Industry: Legal and Regulatory Considerations”

Darren Prum, presenting “High Speed Rail in America:  An Evaluation of the Regulatory, Real Property, and Environmental Obstacles a Project will Encounter” (with Sarah L. Catz, University of California, Irvine)

University of Florida:

Robert W. Emerson, presenting: “Franchise Terminations: “Good Cause” Decoded”

Larry A. DiMatteo, presenting “An ‘All of the Above’ Theory of Legal Development”

The University of Georgia:

Alex Reed, presenting: “Subsidizing Hate: A Proposal to Reform the Internal Revenue Service’s Methodology Test”

Nathaniel Grow, presenting: “In Defense of Baseball’s Antitrust Exemption”

The Georgia Institute of Technology:

Seletha R. Butler, presenting: “All on Board! Strategies for Constructing Diverse Boards of Directors and Creating a Future Pipeline in a Borderless Global Marketplace”

Confirmed Attendants:

Stephen Bailey, The Florida State University

Seletha R. Butler, The Georgia Institute of Technology

Karie Davis-Nozemack, The Georgia Institute of Technology

Lucien J. Dhooge, The Georgia Institute of Technology

Larry A. DiMatteo, University of Florida

Robert W. Emerson, University of Florida

Nathaniel Grow, The University of Georgia

Chad Marzen, The Florida State University

Darren Prum, The Florida State University

Lee Reed, The University of Georgia

Alex Reed, The University of Georgia

David Orozco, The Florida State University

Bill Woodyard, The Florida State University

A perspective on contract terms

After teaching contracts for several years, I’m fairly convinced that the following axiom applies whenever anyone enters into a contract:

Any agreed upon and legally binding contract terms will either work in your favor, or against you.

Contrary to popular belief, contract terms are never neutral. Instead, they will either further your goals and interests, or they will not. In ideal situations, the contract terms benefit everyone. In the worst situations, they detriment you and benefit the person or entity sitting across the negotiating table. In the vast majority of cases, some clauses further your interests and others do not, yet the bargain as a whole is worth entering into for both parties.

Each particular word, or clause, however, will have a variable impact on the outcome or value of the bargain. That value, however, as deduced from the contract axiom will always either be positive or negative. The sign (positive or negative) and the size of the quantified outcome will largely depend on things like: information, bargaining power, experience, legal knowledge and negotiating prowess.

Starting this term, I’ll start using the contract axiom whenever I introduce the subject of contracts to business students.