Category Archives for "Syndicated"

The FTC Weighs In on Big Data

Federal Trade Commission Doorway Sign

The United States Federal Trade Commission (FTC) has issued a new Report on Big Data, entitled “Big Data:  A Tool for Inclusion or Exclusion? Understanding the Issues,” to provide guidance to companies about their Big Data practices. While acknowledging the numerous issues associated with the use of Big Data, the FTC explicitly limited its focus to the commercial use of Big Data consisting of consumer information, and its impact on low-income and underserved populations.

The Commission explained:

[This Report] discusses the benefits and risks created by the use of big data analytics; the consumer protection and equal opportunity laws that currently apply to big data; research in the field of big data; and lessons that companies should take from the research. Ultimately, this report is intended to educate businesses on important laws and research that are relevant to big data analysis and provide suggestions aimed at maximizing the benefits and minimizing its risks.

The Benefits and Risks of Big Data

The FTC noted that Big Data analytics can benefit low-income and underserved populations by helping to target educational, credit, healthcare, and employment opportunities. Potential inaccuracies and biases, however, might lead to detrimental effects for those same people. Specifically, companies could use Big Data to exclude low-income and underserved communities from credit and employment opportunities.

Applicable Laws

The FTC urged companies to ensure that they have an understanding of consumer protection laws that might apply to their Big Data practices. The following laws were specifically highlighted and addressed in the Report:

– The Fair Credit Reporting Act (FRCA);

– Equal opportunity laws such as the Equal Credit Opportunity Action (ECOA), Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Fair Housing Act, and the Genetic Information Nondiscrimination Act; and

– The Federal Trade Commission Act.

Big Data Research

The commission noted research demonstrating the potential for “incorporating errors and biases at every stage — from choosing the data set used to make predictions, to defining the problem to be addressed through big data, to making decisions based on the results of big data analysis — which could lead to discriminatory harms.” In order to minimize the risk of harm and maximize the value of Big Data, the FTC encouraged companies to consider the following questions in connection with their use of Big Data:

– How representative was your data set?

– Does your data model account for biases?

– How accurate are your predictions based on Big Data?

– Does your reliance on big data raise ethical or fairness concerns.

Final Thoughts

The FTC urged companies to apply Big Data analytics in ways to provide benefits and opportunities to consumers, while “avoiding pitfalls that may violate consumer protection or equal opportunity laws, or detract from core values of inclusion and fairness.” The commission vowed to monitor for violations of law and to bring enforcement actions “where appropriate.”

The full FTC Report can be found here.

Do Cyber Insurers Care about Information Governance?

Software protection blocking a binary code stream. Digital illustration.

As we welcome in 2016, awareness of the variety of information-related risks confronting today’s enterprises, and the availability of insurance covering those risks, is at an all-time high.  High-profile data breaches caused by hackers and negligent or non-compliant employees, ransomware attacks, and social engineering scams have motivated many companies to transfer some of their cyber risks with cyber insurance.  But companies that also take steps to better manage their information assets not only improve their cyber risk profile; they also put themselves in a better position to secure more favorable cyber insurance coverage terms and rates. 

What Is Cyber Insurance?

Cyber insurance is a relatively new and still evolving form of coverage designed to address the emerging information-related risks facing today’s companies. These risks include breach of privacy, failed network security, and media liability.  Unlike more traditional forms of coverage, there are no standard cyber insurance policy forms, provisions, definitions, or exclusions.

First-party coverage under a cyber policy can be triggered by a variety of events that have become far too familiar to modern enterprises, including the malicious destruction of data, accidental damage to data, power surges, IT system failure, cyber extortion, viruses, and malware.  Typical first-party coverages include legal and forensic services to determine whether a breach occurred and, if it has, to assist with regulatory compliance, costs to notify affected employees and/or third parties, network and business interruption costs, damage to digital data, repair of the insured’s reputation, and payment of ransom costs.  Third-party coverage is available for legal defense costs, settlements, regulatory fines, and damages incurred after a cyber incident.

Cyber insurance typically provides for the retention of an attorney – a “breach coach” – to coordinate the insured’s response to a cyber incident.  An experienced coach can build an effective team of specialists – basically, a cyber swat team – and efficiently guide the company through the forensic, regulatory, public relations, and legal issues that arise from a security incident.  Given the complexities of the various laws pertaining to data breach notification, as well as the focus paid by regulators, the media, and the plaintiffs’ bar to data breaches, coverage for the retention of a skilled breach coach is perhaps the greatest benefit of cyber insurance.


Relying on a coach who has “been there and done that,” who knows the law and regulations, and who has relationships and credibility with the relevant regulators and law enforcement officials can help an enterprise successfully emerge from a cyber incident and avoid potentially catastrophic financial and reputational damage.


What Do Cyber Insurers Want to Know about Prospective Insureds?

Although there are no standard cyber insurance applications, cyber insurers generally, and rightly, focus on a prospective insured’s Information Governance policies and practices in the application process in order to decide whether or not to offer coverage, in what amount, and at what premium.  Cyber insurers typically inquire into the following areas:

  • The volume and types of data (e.g., credit card data, banking records, protected health information) handled or maintained by the company;
  • The existence of written, attorney-approved, and updated policies and procedures concerning the handling of information;
  • The company’s compliance with security standards and regulations, and the frequency of assessments;
  • Any existing network security programs, including the use of firewalls, antivirus software, and network intrusion testing;
  • Whether or not the company employs a chief information officer, chief privacy officer, or chief technology officer;
  • The company’s history of security incidents and breaches, including how long it took to detect any prior breach (particularly relevant if business interruption coverage is desired);
  • Whether or not there have been prior threats to disable the company’s network or website;
  • If the prospective insured is aware of any facts or circumstances that reasonably could give rise to a claim under a prospective cyber policy;
  • Whether or not another cyber insurer cancelled or refused to renew a cyber policy;
  • The company’s security budget (is it part of the IT budget and, if so, what percentage?);
  • The company’s existing practices concerning data encryption, passwords, patching, and system access control;
  • The company’s policies and practices around employee hiring, training and awareness programs, and procedures at termination;
  • The physical security controls (e.g., access cards) utilized by the prospective insured;
  • Whether or not the company conducts audits of third-party service providers;
  • The company’s practices with regard to vendor contracts and policies;
  • Whether or not the company has and enforces policies governing mobile devices and social media; and
  • The prospective insured’s data backup procedures.


Many cyber insurance applications read like an Information Governance checklist and require companies to take a close look at how they’re managing their information assets throughout their entire lifecycle.  



Good Information Governance policies and practices fit hand in glove with obtaining optimal cyber insurance coverage. Companies that get their information house in order and protect themselves with cyber insurance are in the best position to maximize the value of their data while mitigating their information-related risks.

Artist Richard Prince Sued for Use of Photo from Instagram

ART neon sign bigstockphoto_Art_312547It is not the first time artist Richard Prince has made headlines for appropriating others’ artwork into his own without attribution or license. But this time, he has done so in a way that may have implications on the use of photographs posted on social media. He is being sued on one of the 37 pieces he displayed during a 2014 installation, described as essentially enlarged screenshots of posts by others to Instagram. They were part of an exhibition entitled “New Portraits” at the Gagosian Gallery in New York City. The pieces appear to be taken wholesale from Instagram accounts with Instagram names, likes, and comments visible. The complaint and its exhibits A and B provide a comparison of the works at issue: artist Donald Graham’s original photograph, “Rastafarian Smoking a Joint,” and the Prince piece (resized for comparison, below).

pic 1 pic 2

Left, “Rastafarian Smoking a Joint” by Donald Graham; right, the allegedly infringing work from Richard Prince, “New Portraits” exhibition.

According to the complaint, the Instagram account from which the screenshot derives is not that of the plaintiff, Donald Graham, but of an Instagram user who posted it without authorization. The only addition by Prince is a comment to the post. The complaint says Prince referred to his comments as, among other things, “‘non sequitur,’ ‘gobbledygook,’ ‘jokes,’ ‘oxymorons,’ [and] ‘psychic jiu jitsu.’” It also quotes Prince as saying “‘[c]opyright has never interested me’” and cites his history as an “appropriation” artist.

Appropriation art, for which Prince is known, in concept raises questions about the scope of copyright protection and the use of preexisting works afresh by other artists. Prince’s earlier collection, “Canal Zone,” incorporated photographs of Rastafarians by Patrick Cariou from Cariou’s book “Yes, Rasta.” The legal battle that ensued became famous in both art and legal circles. It placed these questions squarely before the Second Circuit. In its 2013 decision, the Second Circuit overturned a lower court ruling to find that the majority of those photos qualified as fair use because they were “transformative.” See our blog post analyzing the ruling here. All 30 pieces of artwork at issue in the 2013 decision contained some degree of overlay of uncopyrighted elements. The Second Circuit remanded five pieces—those that seemed to alter the original photos the least—back to the district court for a determination whether they are transformative and qualify for protection under the “fair use” doctrine of 17 U.S.C. §107. That determination was never made on account of a later settlement among the parties.

Graham’s complaint argues that Prince went even further in the “New Portraits” exhibit, with virtually no alteration of the original photograph save for the fact that it is taken from social media and therefore contains elements from Instagram’s graphic user interface and some cropping. As a result, the lawsuit is set up to test the bounds of the fair use doctrine in the Second Circuit yet again based on the standards laid out in the 2013 decision involving Prince as well as more recent decisions on the scope of fair use, such as the 2015 decision finding the Google Books digitization project covered by fair use, discussed here. It seems the legal and art communities will be watching again, this time joined by social media gurus.

Patent Trial and Appeal Board Denies Inter Partes Review of Patent Claiming the Deuterated Form of a Known Compound

Pharmacy concept

In Neptune Generics, LLC v. Auspex Pharmaceuticals, Inc., IPR2015-01313, Paper No. 25 (PTAB Dec. 9, 2015) (“Neptune”), the Patent Trial and Appeal Board (“the Board”) issued an opinion denying institution of inter partes review of U.S. Patent No. 7,456,317 B2 (“the ’317 patent”). The ’317 patent claims an analog of venlafaxine (Effexor®) in which nine carbon-hydrogen (C-H) bonds are replaced with carbon-deuterium (C-D) bonds. (’317 patent, col. 5:61-67) Claim 1 is representative:

1. A compound having the structural formula:

1. a compound having the structural formula

or a pharmaceutically acceptable salt, solvate, or prodrug thereof.

Venlafaxine’s mechanism of action and metabolism have been studied extensively (id. at col. 4:6-19), and both venlafaxine and its active metabolite have half-lives that are much shorter than that “regarded as ideal for this class of compounds by most clinicians.” (Id. at col. 4:41-50) Venlafaxine is a serotonin and norepinephrine reuptake inhibitor approved for the treatment of depression, generalized anxiety disorder, panic disorder, and social anxiety disorder. As the ’317 patent acknowledges, “[d]euteration of pharmaceuticals to improve pharmacokinetics (PK), pharmacodynamics (PD), and toxicity profiles has been demonstrated previously with some classes of drugs.” (Id. at col. 3:47-49)[1]

The ’317 patent describes nearly 100 deuterated venlafaxine analogs, including the claimed one (id. at col. 10:51–col. 26:45), and states that enriching for deuterium alters the ratio of active venlafaxine metabolites, reduces unwanted metabolites, and increases the half-life of the parent drug and its metabolites. (Id. at col. 6:27-33)

The Petitioner challenged claim 1 of the ’317 patent as being obvious over Fogelman[2] in view of Miwa.[3],[4] The Petitioner primarily relied on Fogelman’s disclosure that the major metabolites of venlafaxine are O-desmethylvenlafaxine (“ODV”), N-desmethylvenlafaxine (“NDV”), and N,O-didesmethylvenlafaxine (“N,O-DV”), depicted below.


(Neptune, Paper 25 at 9.) Fogelman states that “ODV has a receptor affinity profile similar to its parent compound [venlafaxine], while the latter two metabolites have little if any affinity for the . . . receptor sites.” (Id. at 6) Fogelman further states that “approximately 90% of total intrinsic clearance was accounted for by the O-demethylation pathway,” in which the venlafaxine methoxy group is converted to a hydroxy. (Id. at 7, 11)

The Petitioner relied on Miwa for the “teaching that for some drugs, isotope substitution (i.e., from hydrogen to deuterium) may reduce the rate of drug metabolism, and, therefore, may reduce the rate of clearance of the drug from the body.” (Id. at 8) According to the Petitioner’s expert, one of ordinary skill in the art would have been motivated to “deuterate the methyl groups involved in the primary metabolic pathways. . . . in order to reduce the rate of venlafaxine metabolism, reduce the clearance of venlafaxine from the body, and improve the duration of action and peak plasma levels of venlafaxine.” (Neptune, Ex. 1002 at 10)

In its Preliminary Response,[5] the Patent Owner relied on several references to support its argument that the ’317 patent’s claims are nonobvious over the cited prior art because it is not possible to predict whether any given isotope effect will provide a beneficial change in metabolism without extensive testing. (Neptune, Paper 25 at 10)

In particular, the Patent Owner presented evidence that a primary deuterium kinetic isotope effect “will only be observed if the breaking of the carbon-hydrogen bond is the rate-limiting step.”[6] (Id.) The Patent Owner also provided evidence that even if the breaking of the carbon-hydrogen bond is the rate-limiting step, the ordinary artisan would not have been able to predict the magnitude of the deuterium substitution effect.[7] The Patent Owner pointed to Miwa – cited by the Petitioner – for teaching that “isotope substitution may not give rise to significant isotope effects in metabolism or clearance.” (Id. at 11)

The Patent Owner also submitted evidence establishing that deuteration of three different drugs does not result in a beneficial change in metabolism. In paroxetine[8] – another serotonin reuptake inhibitor – deuteration resulted in increased metabolism rather than decreased metabolism. (Id. at 11-12) In phentermine,[9] no deuterium effect was observed with an N-di-(tri-deuteromethyl) group – one of the same types of groups found in the claimed analog. (Id. at 12) And tramadol[10] (which, like venlafaxine, is metabolized via O- and N-demethylation) “exhibited reduced in vitro metabolism, [and] none of the prepared deuterated versions were superior to tramadol in terms of potency or duration of effect, clearance was not reduced and half-life was not increased.” (Id.)

In denying institution of the inter partes review, the Board agreed with the Patent Owner, finding that the Petitioner had not demonstrated that the ordinary artisan would have combined Fogelman with Miwa with a reasonable expectation of arriving at the invention claimed in the ’317 patent. (Id. at 13)

The Board was persuaded by the Patent Owner’s evidence that a deuteration “strategy will usually not result in significant alterations in overall metabolic clearance of the substrate” and that it “is difficult to predict a priori which effect deuterium may have on a drug’s metabolism.” (Id. at 14) The Board also found that the Petitioner did not adequately explain why a skilled artisan would seek to prevent metabolism of venlafaxine into ODV, venlafaxine’s longer-lived, active metabolite, rather than focus on one of venlafaxine’s nonactive metabolites. (Id.) Therefore, the Board concluded that “the ordinary artisan would not have had a reasonable expectation that substitution of all of the nine hydrogens at those sites for deuterium would result in a deuterated [venlafaxine] derivative having enhanced bioavailability and which maintains its activity for a longer period of time.” (Id. at 15)

The Board also rejected the Petitioner’s allegation that it would have been “obvious to try” to deuterate venlafaxine at the claimed positions, relying upon In re O’Farrell, 853 F.2d 894, 903 (Fed. Cir. 1988). (Id. at 19-20[11]) Here, the Board noted that there are approximately 124,217,727 possible deuterated forms of venlafaxine. And even though Fogelman suggests that metabolism occurs at two main sites, one skilled in the art “would not have had a reasonable expectation that deuteration of those sites would result in enhanced bioavailability” and a maintenance of biological activity for a longer period of time. (Id. at 20-21) The Board noted that the ordinary artisan “would be left with trying the over 100,000,000 possible deuterated forms of [venlafaxine] until possibly arriving at a successful result.”

[1] “Since deuterium (D) is two-fold more massive than hydrogen (H), it follows that a C-D bond is stronger than the corresponding C-H bond. . . . If a C-H bond is broken during a rate determining step in a chemical reaction . . . then substituting a deuterium for that hydrogen will cause a decrease in the reaction rate, and the process will slow down. This phenomenon is known as the Deuterium Kinetic Isotope Effect (DKIE).” (’317 patent at col. 2:45-58)

[2] Fogelman et al. (“Fogelman”), O- and N-demethylation of Venlafaxine In Vitro by Human Liver Microsomes and by Microsomes from cDNA-Transfected Cells: Effect of Metabolic Inhibitors and SSRI Antidepressants, 20 Neuropsychopharmacology 480-490 (1999).

[3] Gerald T. Miwa and Anthony Y. H. Lu (“Miwa”), Kinetic Isotope Effects and ‘Metabolic Switching’ in Cytochrome P450-Catalyzed Reactions, 7 BioEssays 215-19 (1987).

[4] The Petitioner also challenged claims 2 and 8 as being obvious over Fogelman, Miwa, and U.S. Application No. 2003/0190351 to Platteeuw and claims 3-7, 9, and 10 as being obvious over Fogelman, Miwa, Platteeuw, and U.S. Patent No. 6,197,828.

[5] The Patent Owner did not submit an expert declaration.

[6] Citing to Fisher et al., The Complexities Inherent in Attempts to Decrease Drug Clearance by Blocking Sites of CYP-Mediated Metabolism, 9 Current Opinion in Drug Discovery & Development 101-109 (2006).

[7] Scott L. Harbeson and Roger D. Tung, Deuterium in Drug Discovery and Development, 46 Annual Reports in Medicinal Chemistry 403-417 (John E. Macor, Ed., 2011).

[8] Citing Harbeson and Tung at 413-414.

[9] Citing Allan B. Foster, Deuterium Isotope Effects in the Metabolism of Drugs and Xenobiotics: Implications for Drug Design, 14 Advances in Drug Research 1-40 (1985).

[10] Citing Shao et al., Derivative of Tramadol for Increased Duration of Effect, 16 Bioorganic & Medicinal Chemistry Letters 691-94 (2006).

[11] According to In re O’Farrell, there are two situations in which an “obvious to try” rationale is improper. (Neptune, Paper 25 at 20) The first situation is where one must “vary all parameters or try each of numerous possible choices until one possibly arrived at a successful result where the prior art gave either no indication of which parameters are critical or no direction as to which of many possible choices is likely to be successful.” (Id.) The second situation is where one must “explore a new technology or general approach that seemed to be a promising field of experimentation, where the prior art gave only general guidance as to the particular form of the claimed invention or how to achieve it.” (Id.)