• TAX LAWS

United States Fourth Circuit

Donnelley Corporation Vs. United States (Decided on 31.03.2011)

Time-barred tax liability to a refund - Section 6501(a), 904(a) and 38(a) of I.R.C. - Appellant claimed refunds of tax credits which was denied by Internal Revenue Service (IRS) - Just two days before the statute of limitations barred the Internal Revenue Service from assessing additional taxes for 1994, Appellant claimed refunds for 1991 and 1992 based on tax credits carried back from 1994 - After expiry of limitation, an investigation revealed that taxpayer had so underreported its 1994 income that there was sufficient tax liability to use up all of the credits in that year - Therefore IRS denied the refund claim - Appellant filed suit on its refund claims in the Eastern District of North Carolina - District Court subsequently granted the United States's motion for summary judgment and dismissed refund claim - Hence this appeal 

HELD, Court found claim untenable in light of the Supreme Court's longstanding recognition that the IRS may recompute tax liabilities in response to a refund claim - Court relied on Lewis v. Reynolds, 284 U.S. 281 (1932) - Ultimate question "in a refund case" was whether taxpayer had overpaid his tax - This involved a redetermination of entire tax liability - Court noted that while no new assessment could be made, after bar of statute of limitations had fallen, taxpayer, nevertheless, was not entitled to a refund unless he had overpaid his tax - Thus even when IRS might not collect a deficiency, it might "retain payments already received when they did not exceed amount which might had been properly assessed and demanded - Contention of Appellant that agency could not reexamine excess credits in 1994 to be carried back to 1991 and 1992 was denied as tax years were not insular units, and Code often allowed taxpayers to shift tax items to other years - Overpayment must appear before refund was authorized - Lewis v. Reynolds must permit IRS to recalculate tax items from other years when those items were necessary to determine correct tax in year of claimed refund - Any other result would allow a taxpayer to benefit twice from its underpayment - Supreme Court's clear holding in Lewis, "it is irrelevant whether this is a tax refund case or a tax collection case." - In this case, the IRS was using Lewis properly as a "shield" rather than a "sword - 904(a) and 38(a) of I.R.C. operated such that the greater a taxpayer's tax liability in any given year, the higher its credit limitation might be, and the more of its credits might be used up in that year - Lewis made clear that just because a tax could not be assessed and collected did not mean that it ceased to play any role - Affirmed judgment of District Court - Appeal dismissed

• INTELLECTUAL PROPERTY LAWS

United States Court of Appeals, Federal Circuit

In Re: Yasuhito Tanaka (Decided on 15.04.2011)

Patent Rights - Rejection of Reissue Application - Section 251 of 35 U.S.C. - Board of Patent Appeals and Interferences (Board) disallowed reissue applications that simply added narrow claims to reissue patent when no assertion of inoperativeness or invalidity for reasons set forth in § 251 could be made by Patentee - Patentee argued that Board's conclusion was contrary to binding precedent of this court and was a direct departure from long-established practices of United States Patent and Trademark Office (PTO) - Hence this Appeal -

HELD - Court concluded that Board's determination was contrary to longstanding precedent of this court and flied counter to principles of stare decisis - Reissue statute imposed two requirements for properly invoking reissue process - First, original patent must be wholly or partly inoperative or invalid and Second, defective, inoperative, or invalid patent must have arisen through error without deceptive intent - It was accompanied by an oath asserting that failure to present narrower claims was through error without any deceptive intent - Court also rejected PTO's assertion that omission of a narrower claim from an original patent did not constitute an error under § 251 because omission of a dependent claim did not render patent inoperative - Court recognized that reissue statute was not enacted as a panacea for all patent prosecution problems, nor as a grant to Patentee of a second opportunity to prosecute de novo his original application - To deviate from that longstanding interpretation would be contrary to doctrine of stare decisis and was unwarranted - For foregoing reasons, court reversed judgment of Board and remanded for further proceedings consistent with this opinion - Appeal allowed

• CONTRACT LAWS

United States Court of Appeals, Ninth Circuit

Facebook Inc Vs. Pacific Northwest software Inc (Decided on 11.04.2011)

Validity of Settlement Agreement - Section 29(b) and Section 29(a) of Securities Exchange Act of 1934 - District Court ordered Facebook and Winklevosses (ConnectU) to mediate their dispute - Before mediation began, participants signed a Confidentiality Agreement stipulating that all statements made during mediation were privileged, non-discoverable and inadmissible in any arbitral, judicial, or other proceeding - Winklevosses agreed to give up ConnectU in exchange for cash and a piece of Facebook - Parties stipulated that Settlement Agreement was confidential, binding and may be submitted into evidence to enforce it - Settlement Agreement also purported to end all disputes between parties - Facebook filed a motion with District Court seeking to enforce it - District Court found Settlement Agreement enforceable and ordered Winklevosses to transfer all ConnectU shares to Facebook - Hence this Appeal by Winklevosses -

HELD- No doubt that Winklevosses and Facebook meant to bind themselves and each other, even though everyone understood that some material aspects of deal would be papered later - Winklevosses' contractual delegation was valid because Settlement Agreement obligated Facebook to draw up documents consistent with a stock and cash for stock acquisition - If Facebook should draft terms that were unfair or oppressive, or that deprived Winklevosses of benefit of their bargain, District Court could reject them as a breach of implied covenant of good faith and fair dealing - When adversaries in a roughly equivalent bargaining position and with ready access to counsel signed an agreement to establish a general peace, Court enforced clear terms of agreement - Settlement Agreement granted all parties mutual releases as broad as possible; Winklevosses represented and warranted that they had no further right to assert against Facebook and no further claims against Facebook & its related parties - District Court correctly concluded that Settlement Agreement meant to release claims arising out of settlement negotiations, and that release was valid under section 29(a) of Securities Exchange Act of 1934 - Winklevosses could not show that Facebook misled them about value of its shares or that disclosure of tax valuation would have significantly altered mix of information available to them during settlement negotiations - Appeal Dismissed