The Supreme Court's Five Most Interesting Business Rulings

 

Takeaway

  • The Comcast v. Behrend ruling makes it more difficult to form class-action lawsuits, which will help companies nip expensive legal fights in the bud
  • Apple, Facebook, Microsoft, and hundreds of other companies lobbied the Court to declare DOMA unconstitutional

This week marks the end of the Supreme Court’s 2012–2013 term, closing the book on a memorable year for social justice and business issues alike. Whether or not you agree with the stance that this term’s decisions have been “friendlier to business than those of any court since at least World War II,” several of these rulings will change the way things are done in the corporate world — at least until the next round of cases comes in this fall.


Patenting Human Genes

The Case: Association for Molecular Pathology v. Myriad Genetics

The Facts: Myriad Genetics, a molecular diagnostics firm, developed a test based on a pair of genes it isolated and patented in the 1990s. The test detects mutations that signal a higher risk of breast and ovarian cancers, and because Myriad owned the patents to the genes, it claimed ownership of the DNA sequences as trade secrets. This means other biotech companies and cancer researchers could not develop similar screenings incorporating those two genes.

The Decision: The Court ruled that human genes cannot be patented because they are products of nature rather than inventions. Because Myriad “did not create anything” by simply isolating the genes, its patents are invalid.

Business Implications: The ruling is a setback for biotech and pharmaceutical companies that have profited from offering exclusive diagnostic tests using patent-protected DNA segments. It is good news, however, for competing firms and medical researchers who will be able to use the genes in less expensive cancer screening tests.


Genetically Engineered Seeds

The Case: Bowman v. Monsanto

The Facts: The biotech giant Monsanto owns patents for a line of genetically engineered seeds that grow into pesticide-resistant crops. It sells those seeds to farmers each growing season. The company argues that because its seeds are patented, they cannot be copied or resold without permission — meaning farmers must buy new seeds from them every year rather than simply planting ones they harvest from the previous year’s crop. This case arose from the company’s infringement lawsuit against Vernon Hugh Bowman, a farmer who planted seeds that had been produced by crops grown with Monsanto seeds.

The Decision: While the justices barred the patenting of human genes, in this case, they unanimously upheld the right to enforce patents on genetically engineered seeds. If growers were free to replant the same line of seeds year after year, the majority wrote, “the patent would effectively protect the invention for just a single sale.”

Business Implications: The decision is a victory for biotechnology companies like Monsanto that manufacture genetically modified products for agriculture and other industries. The outcome also gives seed manufacturers added protection from competitors who might otherwise be able to reproduce and resell a rival’s product after the initial harvest.

 

Class-Action Lawsuits

The Case: Comcast v. Behrend

The Facts: Two million Comcast cable subscribers in Philadelphia sued the broadcast giant for $875 million, accusing it of cornering the regional market and unfairly raising prices.

The Decision: By a 5-4 majority, the Court dismissed the lawsuit, arguing that the plaintiffs did not have enough evidence to qualify as a class (a group in which all members can prove they were harmed in the same way). Justice Antonin Scalia’s opinion directs lower-court judges to act as gatekeepers by reviewing — and potentially dismissing — class-action suits early in the legal process, before evidence goes in front of a jury. (This echoed the Court’s decision in the 2011 Wal-Mart v. Dukes gender discrimination case, in which it tossed out a class-action suit by 1.6 million female employees.)

Business Implications: By making it more difficult for people to join in class-action lawsuits, the ruling makes it easier for big companies to dodge expensive lawsuits even before they start.


Human Rights

The Case: Kiobel v. Royal Dutch Petroleum

The Facts: A group of Nigerian refugees now living in the U.S. sued Royal Dutch Petroleum for allegedly using military forces to commit violence while exploring for oil in their home nation. The plaintiffs invoked the Alien Tort Statute, a policy that gives American federal courts the authority to rule on violations of international law.

According to NPR, “In recent decades, human-rights victims have used the statute to hold their abusers accountable in court for torture and other international law violations that occurred outside the United States.” That includes international corporations accused of being complicit in overseas atrocities.

The Decision: The Court threw out the lawsuit, arguing that even though Royal Dutch Petroleum does business in the United States, it is not based here and did not commit the alleged offenses here, and is thus outside the realm covered by the ATS. “Corporations are often present in many countries,” wrote Chief Justice John Roberts, “and it would reach too far to say that mere corporate presence suffices.”

Business Implications: With this decision, the justices significantly narrowed American courts’ jurisdiction over foreign companies accused of human-rights abuses that take place outside the U.S.


Marriage Equality

The Case: United States v. Windsor

The Decision: The Court deemed the federal Defense of Marriage Act unconstitutional on equality grounds.

Business Implications: While advocates are hailing the decision as a win for gay rights, the outcome could also be a boon to businesses. In February, 278 companies — including Apple, Facebook, Microsoft, Citigroup, Starbucks, and Disney — filed an amicus brief with the Supreme Court supporting the repeal of DOMA.

“DOMA, a federal law withholding marital benefits from some lawful marriages but not others, requires that employers treat one employee differently from another,” they wrote.

The 1996 law had created several logistical headaches for companies, which had to reconcile contradictions in state and federal marriage laws when setting up benefits packages and other administrative policies.

The companies that filed the brief noted that DOMA forced them to “administer dual systems of benefits and payroll, and imposes on them the cost of the workarounds necessary to protect married colleagues.”

The policy also created uneven tax benefits — the filing estimates that employees with same-sex spouses pay $1,069 more than an employee in a heterosexual marriage.

 

About The Author

Rob Heidrick

Writer, McCombs School of Business

Born and raised in Austin, writer Rob Heidrick has spent several years as a contributor and editor at local magazines and community newspapers. He...

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