Archive for August, 2012

Bert J. Harris Act – Part 1

Thursday, 30 August, 2012 06:00 Written by Tyler Hampy 0 Comments
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In 1995, Florida enacted The Bert J. Harris Private Property Rights Protection Act (the “Act”) and along with it came the companion legislation, the Florida Land Use Dispute Resolution Act. This post will primarily focus on the substantive law encompassed in the Act while my next post will center on the procedural aspects of the Act.

To begin, the Act was formulated as an attempt to provide greater protection to private property owners in response to the government’s excessive rulemaking and over-regulation.

The Legislature recognized that some rules, regulations, and laws of the state restrict or limit private property rights without amounting to a taking under the laws of Florida or the United States Constitution. Therefore, the Legislature decided to create a separate and distinct cause of action from the law of takings.

The new cause of action provides for payment of compensation when a new law, rule, regulation, or ordinance of the state or political entity in the state, as applied, unfairly affects real property.

So, of course, property owners wanted to know to what extent does the regulation have to affect the property to obtain relief? The Legislature determined that relief would be available if the law or regulation “inordinately burdens” private property rights.

So the next question became, well, what is considered an inordinate burden? It’s defined in Fla. Stat. 70.001(3)(e) as an action of one or more governmental entities that has directly restricted or limited the use of real property such that the property owner is permanently unable to attain the reasonable, investment-backed expectation for the existing use of the real property or a vested right to a specific use of the real property with respect to the real property as a whole, or that the property owner is left with existing or vested uses that are unreasonable such that the property owner bears a disproportionate share of a burden imposed for the good of the public, which in fairness should be borne by the public at large.

With that said, all was well with the Act until 2006, when Brevard County questioned its constitutionality. In Brevard County v. Stack, property owners brought an action under the Act arising out of a county ordinance that restricted their ability to use wetland portions of property. They asserted that they suffered a significant diminution in value because of the ordinance that, as applied, denied them the ability to develop their land and allow offsite mitigation for wetland impacts. The Circuit Court held in favor of Stack, and the County appealed, claiming that the Act was unconstitutional for three reasons.

1. County’s Claim: The Act authorizes local governments to contract away inherent sovereign police powers and requires the government to buy back the ability to exercise those powers, violating due process.

Court’s Ruling: When the government inordinately burdens property through regulation, the Act provides relief for property owners. If an inordinate burden is found, the government can waive, modify, or change the regulation or financially compensate the property owner. The Act does not affect the inherent power of the government, but requires that the government fairly provide relief to the property owner.

2. County’s Claim: The Act violates the separation of powers doctrine and changes the judicial interpretation of a taking under the Florida Constitution.

Court’s Ruling: The Act establishes a new and distinct cause of action separate from a taking.

3. County’s Claim: The Act delegates legislative power to the courts because there are no standards, conditions, or criteria to guide interpretation of the Act.

Court’s Ruling: The Act contains definitions, time periods, settlement options, and other guidelines for determinations to be made by the judicial system, pursuant to statute.

In sum, the Court held that the Act did not violate due process, did not violate the separation of powers doctrine, and did not unconstitutionally delegate legislative power to the courts. Therefore, the Act was upheld as constitutional.

Since that time, landowners have achieved success with claims brought under the Act, and as a result, local governments are becoming more willing to settle with property owners.

 

And the Verdict Is In – Apple v. Samsung

Wednesday, 29 August, 2012 08:00 Written by Dan Pierron 0 Comments
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With a mighty crescendo, the jury has returned a verdict in the Apple v. Samsung suit.  And the verdict is… guilty!  Well, at least lots and lots of infringement, and even more damages.  At first, it was $1,051,855,000 in damages.  However, that later became $1,049,343,540.  But hey, what’s $2.5 million between, well, enemies?  However, this difference in damages might belie a more troubling and uncomfortable possibility about this verdict, that it was based on something other than the law.

An excellent summary of the goings-on after the verdict is available at Groklaw.  To start, there is the small matter of the $2.5 million.  It turns out that the jury made a slight mistake in awarding Apple damages for some Samsung device that the jury decided did not infringe Apple’s patents.  It appears the connection between infringement and the awarding of damages wasn’t fully formed in the minds of the jurors.

This is where the sausage is made

As unsettling as that is, it’s merely the first in a chain of apparent missteps by the jury.  As reported by Groklaw, the jury foreman stated “the jurors had reached a decision without needing the [jury] instructions.”  Given the complexities of patent law, it is unfathomable that a lay jury can arrive at a logical, legally maintainable decision without reading the damn instructions.  On top of this, there’s the fact that the jury returned their verdict in three days.  Three days to carefully analyze each allegedly infringement of each device against each claim.  Given the amounts in controversy, in addition to simply performing their sworn duties, three days seems grossly inadequate for every count to be given its due consideration.

Comments from another juror seems to support the contention that the jury failed in its task.  A CNET interview with juror Manuel Ilagan quotes Ilagan as saying “After we debated that first patent — what was prior art –because we had a hard time believing there was no prior art.  In fact we skipped that one, so we could go on faster. It was bogging us down.”  When jurors skip analyzing prior art to determine the validity of a claim, they unequivocally shirk their responsibilities.  The audacity to simply omit this analysis because it is difficult to perform makes me irate and does little to bolster the concept of jurors as suitable triers of fact in difficult patent cases.

In my last post I discussed a variety of theories that are commonly used in   calculating damages.  I have to apologize, for I omitted a crucial one, where the jury makes it up.  If not making it up, the jury in this case certainly used something other than actual economic damages suffered by Apple in awarding damages.  Again quoting the jury foreman, “we wanted to make sure the message we sent was not just a slap on the wrist. We wanted to make sure it was sufficiently high to be painful, but not unreasonable.”  Never mind that damages awarded by the jury are not punitive, but compensatory.  Of course, had the jurors bothered to read the instructions, this is something they likely would have been informed of.

 

A growing chorus of experts and journalists anticipate some degree of reversal of this verdict, and I am in agreement.  The multitude of errors committed by this jury, and the serious consequences, monetary and otherwise, are too severe to go ignored an unaddressed.  Let’s hope the courts can sort out this mess.

 

Foreclosure Defense and Short Sales: Tax Consequences

Monday, 27 August, 2012 06:00 Written by Aaron B. Thalwitzer 0 Comments
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Question: Do I have to pay taxes on the amount the bank forgave when they foreclosed on my house?

Answer: Sometimes. It depends on a lot of factors, but for many residential homeowners, the answer may be No.

Many homeowners default on their mortgage and note. Often, these homeowners (or their attorneys) will negotiate with the bank to receive a principal reduction on the amount of the loan, or give the bank a deed in lieu of foreclosure, or do a short sale.

This will help you how to find out whether you have to pay taxes on the amount of the loan that was forgiven.

First, an example. Let’s say that in 2007 you took out a $200,000 loan to buy your home. You’ve paid down $20,000, and still owe $180,000.  The payments have increased, your paychecks decreased (or stopped coming altogether) and despite your best efforts, you ended up missing several payments and defaulted on the loan.

Under the Mortgage Forgiveness Debt Relief Act of 2007 (“MFDRA”), the homeowner may be eligible for an exclusion if:

  1. the property is residential, and
  2. the balance on the loan is $2 million or less, and
  3. the mortgage or mortgages was/were used to buy or improve the property, and
  4. the owner lived there for at least 2 out of the last 5 years, and
  5. the debt was non-recourse (i.e., foreclosure was the bank’s only remedy after homeowner default), and
  6. the discharge is related to a decline in value or the homeowner’s financial condition, and
  7. the discharge is not related to services performed for the lender.

The MFDRA expires at the end of 2012 (though President Obama has included an extension to 2015 in his 2013 budget proposal). The exclusion limit is $1 million for a married person filing separately. Equity used for other purposes (e.g. paying off credit cards, other loans) may not be excluded. The MFDRA applies to foreclosures and modifications which qualify as above.

After the reduction, the lender is required to send the homeowner a 1099-C, Cancellation of Debt form. The homeowner must fill out IRS Form 982 when filing taxes that year.

If the MFDRA doesn’t apply, the homeowner may also exclude if he or she is insolvent (total debts exceed the total fair market value of all assets), at which point bankruptcy may be worth considering.

The IRS has some useful information on their web site which goes into much more detail. If you decide to take advantage of the income exclusion, I strongly recommend that you consult with an attorney. Whatever you decide, the government has provided an excellent tool to save you money.

ZIES WIDERMAN & MALEK is a law firm practicing civil litigation, real estate, and intellectual property law in Melbourne, Florida. To contact Mr. Thalwitzer, call (321) 255-2332 or email him at Aaron@LegalTeamUSA.com.

Skip The Math

Friday, 24 August, 2012 16:46 Written by Bill Harding 0 Comments
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I commend those of you who read my last post, yet returned despite my talk of “probabilities” and “cost estimation.”  The reward for your courage is this:  NO math!

Plus, a bonus:  Because the World Intellectual Property Organization (WIPO) website does a good job summarizing the application of risk management techniques to the prioritization of intellectual assets (IA) for management attention, I will keep my discussion of the topic brief.

Predicting The Future

Let’s face it:  No one has a crystal ball that’s any better than the next guy’s.  So, when a group of IA auditors try to predict, for example, the chances that a competitor will infringe on a company’s patent, their arguing over setting the probability of that event at a hard number of, say, 78% versus 72% is folly.   For decision making purposes, a coarse measure based on a scale of simply High, Medium, and Low may suffice.  The prioritization discussion could sound something like this:

Auditor 1 says, “We have three formidable competitors in this particular area of technology, and one of them has a history of reengineering others’ products.  So, we should consider the probability that we will be infringed upon by at least one of these competitors to be HIGH.”

Auditor 2 responds, “True, but our company’s development of the next generation product line for this technology is on target for general availability in 10 months.  We literally plan to drive our current technology to end of life with this new release.  Therefore, the cost to the company if a competitor infringes upon our current technology for a lifespan of nor more than 10 months is relatively LOW.”

Auditor 1, “I hear you.  But because infringement unchecked, even for that short period, may result in conversion of some of our customers who may not come back for our new release, let’s agree the likely cost to the company is MEDIUM.”

Everything’s Important

After a few crisp brainstorming sessions, an IA audit team should be able to present executive management with a list of intellectual asset challenges prioritized by risk.  Hopefully management will find the number of assets at risk with HIGH probability and HIGH cost to be a manageable subset of the full list of IA challenges.

(I suspect you know what is coming next:)  What if all of the IA challenges identified by the audit come back prioritized as HIGH probability and HIGH cost?  That could mean many things:

1) Maybe the audit team did not fully understand the events and or the costs they were asked to analyze; therefore, it’s not the occurrence of an event nor the cost of occurrence that is of HIGH probability, but instead it is their fear of the unknown that is HIGH.  Recommendation:  Don’t manage to fear.

2) Maybe the audit team delegated their duty of analysis to other stakeholders in the company who, predictably (no pun intended), consider their individual parochial interests to be of high priority.  Recommendation:  Don’t manage to competing parochial interests.

3)  Maybe all of the IA challenges in the company really are HIGH priority and HIGH cost.  Recommendation:  Don’t react to being “hopelessly surrounded” by attacking simultaneously in all directions.

In any (or even none) of these eventualities, consider further prioritization of IA actions by the cost (e.g., time, effort, money) and/or by the likelihood of success (“low hanging fruit”) of proposed remedies to the various risks.

Hey, any plan is better than no plan at all.

 

 

Squatters on the Rise

Thursday, 23 August, 2012 06:00 Written by Tyler Hampy 0 Comments
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It’s hard to believe you could walk into a luxury home abandoned by the owner, file a simple piece of paper with the county, stay put in the extravagance, and claim you are the rightful possessor?  A little over six months ago, Robert George Harris III tried to do just that. However, things didn’t work out quite like he had hoped.

Harris found an abandoned home in Okaloosa County, which he later realized was owned by the Bank of America, and because it was unlocked, he entered. Harris paid to have the locks changed and lived in the house for two months. After being confronted by police, Harris claimed ownership of the home under Florida’s adverse possession laws.

The problem for Harris was that adverse possession is more complicated than just showing up and saying “mine,” just as saying the word “bankruptcy” does not constitute declaring bankruptcy.

Harris would’ve done himself a favor by taking a look at the adverse possession law in Florida or calling an attorney before making himself comfortable in the Okaloosa home.

In Florida, adverse possession is acquired by actual, continuous, and uninterrupted use by the claimant (i.e. the squatter) of the lands of another, for seven years. In addition, the use must be adverse to that of the owner and must either be with the knowledge of the owner or so open, notorious, and visible that the claimant’s use is imputed to the owner.

Moreover, the claimant’s use or possession must be inconsistent with the owner’s enjoyment of the property and must not be a permissive use. Therefore, the use must be such that the owner has a right to stop it, such as an action for trespass or eviction.

When claiming adverse possession, the use or possession is presumed to be in subordination to the true owner and with his permission, so the burden is on the claimant to prove that the use or possession is adverse. This essential element as well as all others must be proven by clear and positive proof and can’t be established by loose or uncertain testimony. Any doubt as to the creation of the right must be resolved in favor of the owner.

Additionally, the Florida courts have said that a mere “mental enclosure” of property is not enough for actual possession. To have actual possession, there must be continued acts of occupying, clearing, cultivating, pasturing, building fences, or other improvements on the property, in addition to paying taxes on the property.

To prove that the use is open and notorious, the claimant’s occupancy must be conspicuous, widely recognized, and commonly known, which can be shown by visible acts of ownership.

In cases where the squatter has met all of the elements of adverse possession, police officers are typically powerless to remove the resident. However, in Harris’ case, he had no proof of ownership, (which is sometimes shown in the form of utilities in the new owner’s name), no proof that he paid taxes on the property, and no proof that his use was continuous. Purchasing new locks was not enough for Harris to take the home by adverse possession.

Harris was subsequently charged with burglary, larceny, and fraud. People across the country are following in Harris’ footsteps in hopes of walking into an abandoned mansion and becoming the rightful owner. Unfortunately, without really understanding the law on adverse possession, many of these folks may find themselves facing criminal charges.

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