Recent Supreme Court Cases That May Affect Your Business

As the U.S. Supreme Court adjourns for its summer recess, the landmark cases about same-sex marriage and the Affordable Care Act premium tax credits have garnered most of the publicity. However, you should also know about these three lesser-known Supreme Court decisions that may significantly affect your business.

Kimble v. Marvel Enterprises (S. Ct. No. 13-270, June 22, 2015)

An inventor created a toy that simulated the web-shooting powers of Spiderman. The invention consisted of a glove with a valve and a canister of pressurized foam, allowing users to shoot webs from the palms of their hands.

In 1991, the inventor obtained a patent on the device. Subsequently, he met with representatives from an affiliate of Marvel Enterprises (Marvel) that markets Spiderman products, but the company didn’t enter into any agreement with him. Soon afterward, Marvel began selling a similar toy.

The inventor sued Marvel in 1997 and the two sides settled in 2001. Under the terms of the agreement, Marvel agreed to pay an ongoing 3% royalty rate on sales of the toy. The patent expired in 2010, but the settlement had no “sunset date.” The parties went to court after they disagreed about the royalty calculation.

In a 6-3 decision, the Supreme Court preserved its holding from a controversial 1964 case — Brulotte v. Thys Co. — that effectively punishes parties who sign away their patent rights. Citing Brulotte, the Court ruled that royalty agreements weren’t enforceable after a patent expires.

This case reinforces the controversial notion, based on Brulotte, that royalty payments may be limited to the patent term. In practice, many royalty agreements don’t include a “sunset date,” or they otherwise imply that payments will occur indefinitely.

In the United States, the term of a new patent is generally 20 years from the date on which the application for the patent was filed in the United States or, in special cases, from the date an earlier related application was filed, subject to the payment of maintenance fees. Although 20 years may seem like a long time, it often takes several years from the application date for a patent to be approved by the U.S. Patent and Trademark Office and for a product to go to market.

As the dissenting opinion points out, entities that own patents — such as inventors, high-tech start-ups, research hospitals and universities — may be adversely impacted by this decision. On the other hand, businesses that pay royalties may be able to reduce their royalty expenses by keeping track of patent expiration dates.

Equal Employment Opportunity Commission v. Abercrombie & Fitch Stores, Inc. (S. Ct. 14-86, June 1, 2015)

Abercrombie & Fitch Stores (Abercrombie), a national chain of clothing stores, requires employees to meet a “look policy” reflecting its style. The policy prohibits black clothing and caps, although it doesn’t expressly define the term “cap.” If a question concerning the policy arises during a job interview, the policy specifies that the job applicant should contact the company’s human resources department.

In 2008, a practicing Muslim applied for a position at an Abercrombie store. The job applicant wore a hijab, a kind of headscarf, every day, including on the day of her interview. There was no discussion of the hijab during the interview, but it did result in a lower rating in the “appearance” section of the application.

The Equal Employment Opportunity Commission (EEOC) sued Abercrombie on behalf of the job applicant. It claimed that the company had violated Title VII of the Civil Rights Act of 1964 (“Title VII”) by refusing to hire the applicant because of the hijab.

Abercrombie argued that the applicant had failed to meet her duty to inform the interviewer that she required a special accommodation from the appearance policy. The Tenth Circuit Court of Appeals reversed a lower court ruling, deciding that the trial court should have granted summary judgment in favor of Abercrombie because the job applicant hadn’t expressed any potential conflict.

The Supreme Court held that the job applicant didn’t have to make a specific request to wear a headscarf to accommodate her religious beliefs, even if such a request was dictated by company policy. According to the opinion, proof of “actual knowledge” of the job applicant’s religious need isn’t required for an accommodation.

Title VII prohibits certain motives regardless of the employer’s knowledge of the applicant. So, the job applicant had to show only that her need for an accommodation was a motivating factor in the employer’s decision not to hire her. Thus, the Supreme Court ruled in favor of the EEOC.

Young v. United Parcel Service, Inc. (S. Ct. No. 12-1226, April 27, 2015)

A delivery driver for United Parcel Service (UPS) requested a leave of absence in 2006 to undergo in vitro fertilization. The procedure was successful, and she became pregnant.

During her pregnancy, medical personnel advised the driver that she shouldn’t lift more than 20 pounds while working. But company policy at UPS requires drivers to be able to lift up to 70 pounds. Because the pregnant driver couldn’t meet this work requirement — and because she had used up all of her available family and medical leave — UPS forced her to take an extended unpaid leave of absence.

While the driver was out on leave, she lost her medical coverage. After giving birth in 2007, she resumed her duties at UPS. In her lawsuit, she claimed that she was the victim of gender and disability-based discrimination under the Americans with Disabilities Act (ADA) and Pregnancy Discrimination Act (PDA).

UPS countered that the driver couldn’t prove that its decision was based on her pregnancy or that she was treated differently from any other worker in similar circumstances. Also, UPS argued that pregnancy didn’t qualify as a “disability” under the ADA. The U.S. Court of Appeals for the Fourth Circuit affirmed the lower court’s dismissal of the claim.

Although the ADA didn’t come into play, the Supreme Court advised courts to evaluate 1) the extent to which an employer’s policy treats pregnant workers less favorably than nonpregnant workers with similar inabilities to work and 2) any legitimate reasons for such differences. The top court’s interpretation of the PDA is that employers must offer the same accommodations to pregnant workers as others with comparable physical limitations, regardless of other factors.

The majority opinion concluded that a pregnant worker can “create a genuine issue of material fact as to whether a significant burden exists by providing evidence that the employer accommodates a large percentage of nonpregnant workers while failing to accommodate a large percentage of pregnant workers.” The Court remanded the case to the Fourth Circuit for additional analysis.