Cancellation of Real Estate Contract By Email Finally OK

The New Jersey Supreme Court ruled on April 3, 2017 in Conley v. Guerrero, that residential real estate contracts can properly be cancelled by email or fax.  The central issue in the case was whether the Defendant-Seller of a residence effectively terminated the Contract for Sale with Plaintiffs-Buyers during the “three day” attorney review period set forth in the Contract for Sale.

None of the parties disputed the facts of the case.  The Buyer and Seller signed a Contract For Sale that included the standard attorney review clause, mandated by the Court in New Jersey State Bar Ass’n v. New Jersey Ass’n of Realtor Boards, 93 N.J. 470, 476-77 (1983), modified, 94 N.J. 449 (1983), and N.J.A.C. 11:5-6.2(g)(2), which gave the parties’ respective attorneys three business days to review the contract before it became legally binding.  Specifically, the “three day attorney review” clause, provided:
The Buyer or the Seller may choose to have an attorney study this Contract. If any attorney is consulted, the attorney must complete his or her review of the Contract within the three-day period. This Contract will be legally binding at the end of this three-day period unless an attorney for the Buyer or the Seller reviews and disapproves of the Contract . . . If an attorney for the Buyer or the Seller reviews and disapproves of the Contract, the attorney must notify the REALTOR(S) and the other party named in this Contract within the three-day period. Otherwise this Contract will be legally binding as written. The attorney must send the notice of disapproval to the REALTOR(S) by certified mail, by telegram or by delivering it personally. The telegram or certified letter will be effective upon sending. The personal delivery will be effective upon delivery to the REALTOR’s office. The attorney may also, but need not, inform the REALTOR(S) of any suggested revision(s) in the Contract that would make it satisfactory.
After the Contract For Sale was executed, Seller received a competing offer and entered into a Contract with a third party.  The Seller’s attorney sent a letter via email and fax advising Plaintiffs’ attorney that the agreement was terminated, stating, “This will confirm that the above referenced contract has been terminated by the seller and the realtors are hereby authorized to release the initial deposit monies to the buyers.”  It was undisputed that Plaintiffs’ attorney and the agent received the letter within the three-day period.

Despite having received the letter terminating the Contract, Plaintiffs’ attorney faxed a letter to Defendant’s attorney asserting that the original contract was in “full force and effect.” because “the 3 days within which an attorney may terminate this contract has expired.” The Buyers argued that the Sellers were required to strictly adhere to the contractual provision specifying the methods of delivery as certified mail, by telegram or by delivering it personally, even though the Buyers’ attorney admitted that the Buyers received the cancellation notice.

The Court found that strict enforcement of the contractually identified methods of delivery would frustrate the contract’s overarching purpose and elevate form over the protective reasons for the attorney-review provision.  Therefore, the Court held, “notice of disapproval of a real estate contract may be transmitted by fax, e-mail, personal delivery, or overnight mail with proof of delivery. Notice by overnight mail will be effective upon mailing. The attorney-review period within which this notice must be sent remains three business days.”  This case finally brings New Jersey residential real estate contracts into the digital age.

The attorneys at Bathgate, Wegener & Wolf, P.C. are well versed in all aspects of residential real estate contracts.  If you have questions about your real estate contract, please contact us at 732-363-0666.

The Iconic Building That Is Home To Bathgate, Wegener & Wolf

Many people leaving the Garden State Parkway at Exit 89 or driving on Cedar Bridge Road wonder what activities occur under the steeply pitched roofs of the unique building known as One Airport Road, Lakewood, New Jersey.  That iconic building is the home of the Bathgate Wegener & Wolf law firm.  Our law firm employs 45 people and we occupy the entire building.  Our unique building has been named in an architectural guide book as one of 150 Best Buildings in New Jersey.   
This truly unique building was designed by Noboru Kobayashi.  The architectural guide book describes the building as having a “spare and elegant design … made up of pure geometric forms that recall both Shinto temples and the Louis Khan Bath House in Ewing Township.  The complex consists of nine square pavilions of ascending dimension offset from each other on diagonal axes.  The pavilions are capped with steeply pitched pyramidal roofs covered by wood shingles”.

From the unique roofline it might seem there are several buildings.  Actually, there is only one building that has a roofline consisting of nine pyramids.  Although it appears that the pavilions are separate structures, the building has a unified floor plan consisting of several intersecting ovals.
​Beginning with its stone entry terraces, the building has many unique features. Our main entrance is framed by fountains, a moat and a waterfall.  The fountains are not only visually dramatic but also generate a pleasing sound as the water cascades down the waterfall and is propelled high into the air before splashing into the largest of the reflecting pools.

​The interior of the building is graced by two gardens that provide a very pleasing internal landscape of shrubbery and flowers. One of those gardens has its own pool. The internal gardens, open to the sky, provide light and air that enlivens the interior of several of the pavilions.​The reception area has a soaring ceiling capped by a glass peak and brick walls that are accented by the soft glow of wall mounted lights.  From that vantage point our clients and visitors are able to view the interior gardens. 

​A truly attractive feature of one of the pavilions is a library constructed as a room within a room.  This pleasing architectural dimension permits access to our bound book collection without the stacks of shelves typically associated with traditional libraries.  In our modern law firm, each of our 45 individual computer terminals has direct access to the latest version of computerized legal research software.

​Anyone who is interested in touring the public areas of the Bathgate Wegener & Wolf, P.C. office will have that opportunity in conjunction with the upcoming immigration seminar that we will host.

What Is Guardianship In New Jersey and How Does It Work – Part 3 of 3

In Part 1 of this series, we looked at four different scenarios when a Power of Attorney or Guardianship might be appropriate.  We also looked at the basic requirements to begin a Guardianship application to the Court.  In Part 2 of this 3 part series, we discussed the court hearing process, the possibility of the appointment of a Temporary Guardian, and the bonding requirements for a Guardian.  In Part 3 of this 3 part series, we discuss some of the tasks that must be performed by the Guardian, the reports which must be filed by the Guardian, and the compensation that a Guardian may receive for performing his or her duties.C.  AFTER THE JUDGEMENT OF INCAPACITY AND APPOINTMENT OF GUARDIAN
Congratulations! You’ve been appointed as Guardian of your loved one.  Just when you thought your involvement with the Court is over, now the Court oversight begins.  Being appointed as Guardian imposes significant responsibility and record-keeping.  Further, once the Court appoints you as Guardian of your loved one, you do not have unfettered rights to your loved one’s assets, income and health care decisions.  If the Guardian wishes to sell any of the incompetent person’s property, the Guardian must make an application to the Court to do so.  Similarly, Court approval is necessary if the Guardian seeks to gift assets for the purpose of estate or Medicaid planning. (NJSA 3B:12-49,  3B:12-58 and 3B:12-59).


  1. Filing of Reports

The Guardian must complete several reports each year, beginning with an initial Inventory of Assets.  This initial inventory is usually due within seven (7) to thirty (30) days of the appointment.  Further, each year, the Guardian must complete a Report of Well Being of the incompetent person and must also complete an Accounting of all funds that the Guardian has handled during the year, all income received, and all expenses that the Guardian has paid.  Both of these annual reports are submitted to the Surrogate Court of the County that decided the Guardianship Application.  If the Court has any questions regarding the reports, the Guardian may have to provide supplemental information.
 2.    Commission
A Guardian may receive monetary compensation for his or her work as Guardian.    The commission amounts are set forth in NJSA 3B:18-24 and 3B:18-25.  Presuming the incompetent person has assets and income, the Guardian is entitled to the following commissions on an annual basis without prior court approval:

  1. Six percent (6%) on the income received on behalf of the incompetent person, and
  2.  $5.00 for each $1,000.00 of principal corpus for the first $400,000.00, and $3.00 for each $1,000.00 of principal corpus on amounts exceeding $400,000.00.

Therefore, by way of example only, if the incompetent person has assets totaling $1,000,000.00, and receives $100,000.00 worth of income in a year, the Guardian is statutorily entitled to $3,800.00 on the principal and $6,000.00 on the income for a total annual commission of $9,800.00.

​The Guardian may also receive a termination/distribution commission.  The amount of the termination/distribution commission is based, in part, not only upon the value of the assets, but also upon the length of time the Guardian has acted as Guardian when the termination or distribution occurs.  These termination commission amounts are set forth in NJSA 3B:18-28.

Being appointed a Guardian for your loved one imposes certain record-keeping and report filing requirements.  Once you are appointed Guardian, the court involvement in your loved one’s estate does not end.  While the Guardianship application process is concluded, the Court oversight begins.  This Court oversight continues until the Guardianship is terminated.

The best way to reduce the expenses associated with a Guardianship is to discuss and finalize your estate plans, long term care plans and Power of Attorney preferences with a knowledgeable attorney while you are still mentally competent and can make those decisions on your own.  As our society ages and as the law continues to recognize the independent legal rights of “children” once they reach eighteen (18) years of age, the need for Powers of Attorney and Guardianships is becoming increasingly important.  Having a Power of Attorney or estate plan is no longer limited to the rich and famous or elderly; even college-aged children should consider having Powers of Attorney in place. If there are questions regarding your or a loved one’s mental competency to sign a Power of Attorney, ask your family physician or neurologist to perform a competency exam such as the mini mental status exam.

If your loved one does not have the mental capacity to sign a Power of Attorney, all is not lost.  An alternative to the Power of Attorney is a Guardianship for your loved one.  A Guardianship requires an action in court and physician/psychologist certifications. Navigating the maze of Guardianship applications on your own can be both confusing and overwhelming.  Because the Guardianship process requires a Complaint being filed with the Court,  a copy of the Complaint will be provided to your loved one over whom you seek Guardianship.  This may cause tension and misunderstandings between you and your loved one if you make the application on your own.  Having an attorney to prepare the Guardianship application and to guide you through the Guardianship process can help reduce the confusion, sense of overwhelming, tension and misunderstandings.

If you wish to have a Power of Attorney or other estate planning documents drafted, or if you are concerned about your loved one’s ability to manage his or her financial affairs, medical treatment, health care decisions and overall well-being, or if you just received a copy of a  guardianship application made by someone for your loved one, contact Bathgate, Wegener & Wolf, P.C. at 732-363-0666 to discuss your and your loved one’s legal options.

Photo by Luwadlin Bosman on Unsplash

What Is Guardianship In New Jersey and How Does It Work – Part 2 of 3

In Part 1 of this series, we looked at four different scenarios when a Power of Attorney or Guardianship might be appropriate.  We also looked at the basic requirements to begin a Guardianship application to the Court.  In Part 2 of this 3 part series What Is Guardianship In New Jersey and How Does It Work, we discuss what will happen at the court hearing.

 A.        Notice of Hearing Date
Approximately 2 weeks after the application to have your loved one declared incompetent is submitted, the Court will set a date for the initial hearing. Once the initial hearing is scheduled, the person who seeks to be appointed as the Guardian must notify the alleged incompetent, his or her next of kin and anyone else who has a degree of relationship superior to that of the applicant of the date and time of the hearing, and the person’s ability to challenge the application.  In certain circumstances, the Office of Public Guardian must also be notified of the application and given an opportunity to review and respond to it.  The next of kin or other interested party may hire an attorney to represent their interests in the application or they may represent themselves, pro se.  The next of kin or interested party is permitted to challenge both  the requested declaration that your loved one is  mentally incompetent and your appointment as Guardian.  Because your loved one will receive a copy of the filed papers, your loved one will be advised not only that there is a request to have him or her  declared mentally incompetent, but also of the name(s) of the person(s) seeking Guardianship. 

B.        Appointment of Temporary Guardian
On occasion, the Court will appoint a Temporary Guardian for your loved one while the Guardianship application is pending.  The Temporary Guardian serves until the Court makes its final determination regarding a permanent Guardian.  The Temporary Guardian can be the person(s) submitting the application for Guardianship, or it can be someone else selected by the Court.  If the Court does not appoint the applicant as the Temporary Guardian, the Court may appoint an attorney (separate from the court appointed attorney who will represent your loved one in the Guardianship application process) or an accountant or other professional as the Temporary Guardian. The fees charged by the Temporary Guardian are usually paid from your loved one’s assets.

C.        Court Appointed Attorney For Alleged Incompetent Person
The Court will appoint an attorney to represent your loved one.  The Court appointed attorney is not free.  He or she is usually paid from the assets of the alleged incompetent.  This attorney will not only present your loved one with a copy of the papers submitted to the court, but will also spend some time with your loved one, interview him or her, will likely interview the guardian applicant, and will research whether your loved one previously signed a Power of Attorney or a Last Will and Testament.  Once the Court appointed attorney’s research and interviews are complete, she will submit a report of recommendations to the Judge.  Although the court appointed attorney represents your loved one, your loved one may hire his or her own private attorney at your loved one’s own expense to represent his interests and challenge a Guardianship application.

D.        Conduct of the Hearing
If the Guardianship Application is not contested and the Court appointed attorney agrees with the Application, then the Court may not require anyone to be present at the hearing and the Judge  will make his decision based upon the papers presented to him.  However, if the Guardianship Application is contested, during the initial hearing the Judge will consider:  (a) the written papers submitted to it that support and oppose the Guardianship, and (b) oral arguments (but not witness testimony) regarding the Guardianship Application.  Usually, live witness testimony is not presented to the Court during the initial hearing.  In both contested and uncontested Guardianship Applications, the Court will review and consider the observations and recommendations of the court appointed attorney.  Sometimes, the Court decides that it does not have enough information to make an immediate determination on the Guardianship application.  If that is the case, the Court will schedule another hearing and may request that additional information be submitted to the Court.  At the second hearing, the Court may hear sworn testimony from (a) the person alleged to be incompetent, (b) the person applying to be the Guardian of the alleged incompetent, (c) the physicians, psychologist or psychiatrist who conducted examinations of the alleged incompetent, and (d) any other persons with an interest in the application or who have information regarding the alleged incompetent.  Only after receiving all the information, evidence and testimony that the Court deems necessary and appropriate, will the Judge decide whether your loved one needs to have a Guardian appointed, and if so, who will be appointed the Guardian.

E.        Bond Amount
In addition to deciding whether your loved one is mentally incapacitated and who should serve as Guardian, the Court will also decide the amount of the bond, i.e.,  insurance policy, that must be obtained by the person appointed as Guardian.  The amount of the bond is generally based upon the value of the assets of your loved one.  The bond is obtained by the potential Guardian, usually after a general background check, credit check and payment of a bond premium.  The bond premium must be paid every year, and usually can be paid from the incompetent person’s assets.

F.        Conclusion
If your loved one does not have the mental capacity to sign a Power of Attorney, all is not lost.  An alternative to the Power of Attorney is a Guardianship for your loved one.  A Guardianship requires an action in court and physician/psychologist certifications. Because the Guardianship process requires a Complaint being filed with the Court,  a copy of the Complaint will be provided to your loved one over whom you seek Guardianship.  Additionally, the next of kin of the alleged incapacitated person, along with those person(s) who have a degree of relationship superior to the applicant requesting to be appointed as Guardian must receive notice of the application.  This may cause tension and misunderstandings between you and your loved ones if you make the application on your own.  Only after a Judge is confident that he or she has received and reviewed all of the evidence and testimony necessary to make a determination regarding your loved one’s mental competency and appropriateness of a Guardianship will a judge make his or her ruling. If a Guardianship is granted, that ruling will include a Judgment of Legal Incapacity, the name of the person appointed as Guardian and the amount of bond that will need to be secured before the appointment of the Guardian can be finalized.   Having an attorney prepare the Guardianship application and guide you through the Guardianship process can help reduce the confusion, sense of overwhelming, tension and misunderstandings that can accompany a Guardianship application.  In Part 3 of this 3 part series, we will discuss a Guardian’s duties after being appointed by the Court.

If you wish to have a Power of Attorney or other estate planning documents drafted, or if you are concerned about your loved one’s ability to manage his or her financial affairs, medical treatment, health care decisions and overall well-being, or if you just received a copy of a  guardianship application made by someone for your loved one, contact the law firm of Bathgate, Wegener & Wolf, P.C.  to discuss your and your loved one’s legal options at 732-363-0666.

Photo by Luwadlin Bosman on Unsplash

Moving Children Out Of New Jersey By The Custodial Parent

​Are you seeking to move out of New Jersey with the children, but your ex-spouse will not allow the move?  Or, are you seeking to prohibit your ex-spouse from moving out of New Jersey with the children?  In New Jersey, if the non-custodial parent does not consent to the move, the custodial parent must obtain a Court Order allowing the move.

The current prevailing case on this matter when the parties do not have a shared parenting arrangement is Baures v. Lewis, 167 N.J. 91 (2001).   The custodial parent seeking to move must first make a prima facie showing that the move is in good faith and will not be detrimental to the child.  After the moving party has produced sufficient evidence to make this prima facie showing, the non-custodial parent contesting the move has the burden of showing that the move is not in good faith or is detrimental to the child.

The Supreme Court listed the following factors relevant to the analysis of whether the move is in good faith and will not be inimical to the child:

The reasons given for the move;

  • The reasons given for the opposition to the move
  • The past history of dealings between the parties insofar as it bears on the reasons advanced by both parties for supporting or opposing the move
  • Whether the child will receive education, health, and leisure opportunities at least equal to what is available here
  • Any special needs or talents of the child that require accommodation and whether such accommodation or its equivalent is available in the new location
  • Whether a visitation and communication schedule can be developed that will allow the noncustodial parent to maintain a full and continuous relationship with the child
  • The likelihood that the custodial parent will continue to foster the child’s relationship with the noncustodial parent if the move is allowed
  • The effect of the move on extended family relationships here and in the new location
  • If the child is of age, his or her preference
  • Whether the child is entering his or her senior year in high school at which point he or she should generally not be moved without his or her consent until graduation
  • Whether the noncustodial parent has the ability to relocate
  • Any other factor bearing on the child’s interest.
This standard does not apply to true shared residential parenting arrangements.  When the parties have a shared parenting arrangement, the standard that applies, which will be posted in a future blog on this website, is changed circumstances and best interest of the child.

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Foreclosure Laws In NJ: Residential vs Non-Residential Mortgages

The purpose for your mortgage can determine whether it can still be enforced years after its due date.  Foreclosure laws in NJ treat residential mortgages and non-residential mortgages differently. A residential mortgage can become unenforceable if the lender does not move to foreclose within six years of the maturity date of the mortgage.  To render a commercial mortgage unenforceable there must be more than twenty years of non-payment and inaction by the lender.The Fair Foreclosure Act was enacted in 1995 to protect residential mortgage debtors. N.J.S.A. 2A:50-53 et seq.    In 2009, the New Jersey Legislature amended the Fair Foreclosure Act to provide clarity and address problems caused by residential mortgages which have been paid or which are otherwise unenforceable.  See Statement to Senate Number 250, NJ Assembly Financial institutions and Insurance Committee October 6, 2008.  Such unenforceable mortgages “cloud the title” for a property, casting doubt on the title as a result of the encumbrance. This cloud can reduce the value and marketability of the property because any prospective buyer will perceive that they are buying property for which good title may not be conveyed.

The 2009 amendment to the Fair Foreclosure Act sought, in part, to codify an earlier New Jersey Appellate Division holding in Security National Partners v. Mahler, 336 N.J. Super. 101, 104(App. Div. 2000), that a 20 year limitations period limits a mortgagee’s (i.e., mortgage lender) right to commence a foreclosure action, running from the date of the debtor’s default.  Prior to the enactment of this amendment, New Jersey did not have a statute of limitations addressing mortgage foreclosure actions, and courts applied a 20 year limitations period based on the common law adverse possession period.  Anim Investment v. Shaloub, F-30508-15, (N.J. Super. Ch. Div. June 30, 2016) (Slip Op. at *4).  However the 2009 amendment only addressed residential mortgages.
The statute provides:  
“An action to foreclose a residential mortgage shall not be commenced following the earliest of:

a. Six years from the date fixed for the making of the last payment or the maturity date set forth in the mortgage or the note, bond, or other obligation secured by the mortgage;
b. Thirty-six years from the date of recording of the mortgage, or, if the mortgage is not recorded, 36 years from the date of execution, so long as the mortgage itself does not provide for a period of repayment in excess of 30 years; or

c. Twenty years from the date on which the debtor defaulted, which default has not been cured, as to any of the obligations or covenants contained in the mortgage or in the note, bond, or other obligation secured by the mortgage.”
N.J.S.A. 2A:50-56.1 (Emphasis added).

Therefore under this statute, for residential mortgages “there are three triggering events which commence the running of the statute of limitations period, after which a mortgage foreclosure action cannot be brought.” First is the maturity date for the mortgage.  Second is the date of recording of the mortgage. And third is the date that the debtor defaulted.  Each of those triggering events has a different applicable term for its statute of limitations to run.  The statute commands that the “earliest” date for expiration of a statute of limitations be applied.  

In a recent unpublished Chancery Division case, Judge Edward A. Jerejian (Bergen County) found that a residential mortgage with a maturity date of October 1, 1995 became unenforceable six years later on October 1, 2001. Anim, supra, slip op.  at *9.​​  1   The court found that the statute required the use of the earliest applicable statute of limitations date under N.J.S.A. 2A:50-56.1.  In addition, a 2011 unpublished Appellate Division case found that the statute of limitations elapsed in 2000 on a mortgage with a maturity date in 1994 because the six year statute of limitation under N.J.S.A. 2A:50-56.1(a) was applicable.  Garruto v. Cannici, 2011 N.J. Super. Unpub. LEXIS 1436, 2011 WL 2409912 at *1 (App. Div. June 6, 2011).

​The first question to ask when determining if a long unenforced mortgage is enforceable is whether at issue is a residential mortgage.  If yes, the mortgage is subject to the Fair Foreclosure Act.  The Fair Foreclosure Act (as well as its 2009 statute of limitations amendment) only applies to “residential mortgages”.  See  N.J.S.A. 2A:50-62.  “Residential mortgage” is defined as:

“mortgage, security interest or the like, in which the security is a residential property such as a house, real property or condominium, which is occupied, or is to be occupied, by the debtor, who is a natural person, or a member of the debtor’s immediate family, as that person’s residence. This act shall apply to all residential mortgages wherever made, which have as their security such a residence in the State of New Jersey, provided that the real property which is the subject of the mortgage shall not have more than four dwelling units, one of which shall be, or is planned to be, occupied by the debtor or a member of the debtor’s immediate family as the debtor’s or member’s residence at the time the loan is originated.”  ​N.J.S.A. 2A:5-55 (emphasis added).  

Therefore, two fundamental conditions must be met to have a residential mortgage: The mortgaged premises consists of not more than four dwelling units; and “the requisite occupation or intention to occupy exists by the debtor (or the debtor’s immediate family member) at the time the loan is originated.” 30 New Jersey Practice, Law of Mortgages, §24.9 at 254(Myron C. Weinstein)(2nd Ed. 2000).

If a mortgage does not qualify as “residential,” there are still judicially created limitations on foreclosing.  New Jersey courts have enforced a “twenty year limitation period to foreclose a mortgage” by “borrowing and applying the twenty year limitation period in certain adverse possession statutes.”  Security National Partners, 336 N.J.Super. at 106.   The Appellate Division in Security National clarified this issue by stating “a twenty year period of non-payment on a mortgage constitutes a running of the statute of limitations” Ibid.  In Security National, there is no distinction between residential mortgages and non-residential mortgages and thus the holding is applicable to all mortgages.  A later statute modified this judicially created limitation on foreclosing residential mortgages, but the twenty year limitation period adopted in Security National has not been modified and appears to still be applicable to non-residential mortgages.

Key Takeaways:

  • The statutes of limitations for enforcing residential and non-residential mortgages are different.
  • Residential mortgages may become unenforceable six years after their final maturity date.
  • Both residential and non-residential mortgages become unenforceable after 20 years of consistent non-payment, when the lender does not attempt to foreclose within that 20 years.

 1 Unpublished court opinions, such as this one, are not precedent and not binding on any court.  R. 1:36-3. However, an unpublished opinion may be persuasive secondary authority.  Ibid. In other words, unpublished opinions are instructive but not mandatory. 

Patent Infringement And The Push And Pull of Patent Litigation

Patents support an estimated five trillion dollars ($5,000,000,000,000.00) of the US economy and close to forty million jobs. It is, therefore, understandable for Congress to nurture and cultivate this industry.  Similarly mindful of the importance of this industry, the United States Supreme Court decides cases that clarify rules and regulations to provide guidance in this vital area. 

Recent patent legislation and litigation have resulted in changes in the law that appear haphazard and somewhat conflicting.  The professed overall goal of congressional statutory revisions is to maintain the competitive advantage of the United States in the global economy with a “system that will support and reward all innovators with high quality patents.”1  However, Congress actually enhanced the weapons used to destroy issued patents.  The Supreme Court decides each case on the facts at hand, but recent cases have uniformly increased the potential damages that can be assessed against an infringer.  At the same time, the Court has severely limited the inventions that can be protected by a patent.While the actions above appear inconsistent, taken together these changes will enhance the U.S.’s flourishing intellectual property industry.  While not every patent will survive these changes, those that do will be much more valuable.

Congressional Change
In 2012 Congress passed the most significant change to patent law in more than half a century, the America Invents Act (“AIA”).  The headline change in the AIA brought America in line with the rest of the world by awarding patents to the “first inventor to file” instead of the “first to invent”.  More important for patent litigators, AIA revised and expanded post patent grant challenge procedures.

For patent litigators, the AIA strengthened and streamlined the post patent grant challenge procedure known as the Inter Partes Review (“IPR”). The IPR allows any party to challenge an issued patent alleging that the Patent Office should not have allowed the patent because it is not novel (i.e. invalid).  A typical IPR is filed when someone is accused of infringing a patent.  The accused infringer defensively files an IPR to challenge the validity of the patent it is accused of infringing.  After the accused infringer files its IPR allegation, it is common for the district court patent infringement action to be stayed pending the outcome of the IPR.  If the IPR finds that the patent is not novel (i.e. the patent is invalid), the law suit becomes moot and is dismissed because one cannot infringe an invalid patent.  If the patent is not invalidated at the IPR, the patent proceeds through traditional patent litigation.  In that action, the patent owner receives the benefit of the IPR determination that forbids the accused infringer from raising any invalidity defense that was raised or reasonably could have been raised at the IPR.

Used effectively, the IPR can prevent years of costly patent litigation by cutting straight to one of the three most important issues in a patent litigation; that is, whether the patent is valid.2  The AIA limits the length of an IPR to no more than eighteen months, which is a comparatively short amount of time in the often years long slog of patent litigation.  Furthermore, as long as the underlying infringement trial is stayed, no time or money is expended in discovery and motion practice.

Finally assuming a patent is upheld in the IPR, having a decision in hand on the validity of the patent removes uncertainty as to one of the three central fights in typical patent litigation. (1)Validity, 2)infringement, 3)damages).  Each side can better assess and value settlement when a third of the variability/uncertainty surrounding the litigation has already been decided.

Supreme Court Opinions
Recent U.S. Supreme Court rulings increase the likelihood of extraordinary damages being assessed for patent infringement.  In Octane Fitness v. ICON Health & Fitness, 572 US _ (2014), the Supreme Court broadened the circumstances in which attorney fees could be assessed against a losing party in a patent infringement suit.  Because patent litigation can be quite expensive, any easing of proof needed to shift attorney fees to the loser can have a huge effect. Similarly, the Court in Halo Electronics, Inc. v. Pulse Electronics, Inc., 579 U.S. ___ (2016) lessened the patent owner’s burdens to receive “enhanced damages” such as treble damages (actual damages multiplied by 3).  These two decisions increase the chances of a patent infringement litigation resulting in significantly large damage awards.

The Supreme Court has also severely narrowed the possible inventions that can be patented.  In 2010, the Court narrowed the subject that could be patented in Bilski v. Kappos, 561 U.S. 593 (2010).  The Court later reinforced this patentable subject matter narrowing in Alice Corp. v. CLS Bank International, 573 U.S. __ (2014), finding abstract ideas are still unpatentable even if implemented using computers. In effect, Alice severely limited the patentability of so-called “software patents”.

Taken in isolation, the changes implemented by Congress and the Supreme Court seem contradictory and at cross-purposes:  increasing the power of a patent owner by augmenting damages while enhancing power of accused infringer through expanding patent validity defenses.

However, the overall goal of the U.S. patent system is to encourage innovation.  Congress  simplified the process and shortened the time to determine whether a patent is valid through the IPR.  A patent that survives such an IPR challenge will be regarded as stronger and more valuable to the patent owner.  Patents that do not survive IPR challenge are worthless.  Similarly, by narrowing the subject matter that can be patented the Supreme Court has provided greater clarity and eliminated some uncertainty regarding the viability of patentable inventions.  Removing uncertainty as to the validity of a patent can only enhance its worth.  Finally, facilitating the award of attorney fees and other enhanced damages for patent infringement increases the value of the patent at verdict and in negotiating a settlement.  While not every patent will survive the gauntlet of obstacles put forward by Congress and the Supreme Court, the patents that do survive will be much more valuable to their owner.  By rewarding the inventor in this fashion, the U.S. strives towards its goal of encouraging innovation.

1. H.R. Rep. No. 112-98, pt.1, at 40 (2011)
2. The other two important issues in patent litigations are: 1) does the accused product infringe the patent; 2) if so, what are damages.  However if patent is invalid, there can be no infringement and no damages.

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Why are the Bay Head Ocean Front Property Owners Opposed to the Dune/Berm Project Proposed By the State of New Jersey?

Bathgate, Wegener & Wolf represents many of the Bay Head Ocean Front Property Owners (“BHOFPO”). Cumulatively, the BHOFPOs represented by the Firm own approximately one half of the oceanfront property in Bay Head. In furtherance of protection of their property and the property of others, the BHOFPOs are willing to give the State of New Jersey a license to erect a dune and berm on their properties (“the Project”). The State, however, does not want a license. Instead, the State is demanding that the BHOFPOs provide a perpetual easement over the properties, but has assured the BHOFPOs that it will not do anything that will change the “overall character” of the properties. So, what’s the problem? Why are the BHOFPOs unwilling to grant the perpetual easement? As is often the case in property rights disputes, the “devil is in the details” regarding how the “overall character” of the affected properties may change because of the Project and the easements that the State is demanding to complete the Project.

There are many issues that affect individual property owners in different ways. Access to the beach and ocean without the ability of the owners to go straight from their houses or directly from their decks to the beach and ocean is a major concern for many property owners. For others, the loss of the view from the dune deck of the beach and ocean is a major detriment. The loss of privacy for some is a significant problem. The concern most often expressed by the BHOFPOs, however, is centered on the essence of private property rights: the BHOFPOs are fearful that they will be deprived of the right to protect their homes and property. Once the State of New Jersey and the Army Corps of Engineers (“ACOE”) is granted or takes the easement over the property, the State and the ACOE has perpetual and exclusive control to construct and maintain a public beach and protective dune. But there is no obligation on the Government’s part to do any replenishment of the beach, though all sides agree that the dune will erode away. Hence, the property owners will no longer have the right to spend their own money, either singularly or in a cooperative effort, to protect their homes and property.

For many years, at their expense, the BHOFPOs have maintained a rock revetment constructed at +16 feet NAVD (historically, parts of the revetment date back to the 1880s). As proven by Superstorm Sandy, the original revetment works to protect property. During Sandy, houses behind the revetment were spared from substantial damage. Subsequent to Sandy, newer extensions were added to both the north and south ends of the original revetment. The revetment now stretches from Lyman Street in Mantoloking to the southernmost two properties in Point Pleasant Beach. The newest sections of the revetment are constructed at +18 feet in vertical orthometric height (NAVD) with large four foot granite quarry stones which weigh approximately 8,000 pounds each.

Property owners not only rely on the revetment for protection, but also affirmatively maintain and create an active dune system to further protect their homes and property.  Each spring, the BHOFPOs, once again, at their own expense, push sand up from the beach recreating dunes which have eroded from the previous winter’s storms. The ocean replenishes the “pushed sand” virtually overnight. This protective activity is enhanced by nature during the summer because the summer winds and tide tend to add reliction to the beach. The State’s proposed easement, which makes the entire lot outside of the building envelope public, prohibits the owners from performing their annual dune replenishment “sand push”. There is no requirement for the ACOE to provide any subsequent replenishment, although the ACOE has recited that replenishment of the dunes, which all parties agree will erode away every 3-5 years, is contemplated. The partnership agreement between the ACOE and the BHOFPO conditions any ACOE involvement in dune replenishment upon the following:

(1) appropriation of funds for that purpose by Congress, though no such funds are yet appropriated;

(2) 50% share of funds to be provided by the State, though no such funding has been authorized; and

(3) the potential replenishment project must satisfy a new cost benefit analysis (CBA). The original CBA supporting the Government’s dune replenishment project did not take into consideration either the steel revetment wall to the south in Mantoloking or the original revetment in Bay Head. Some experts say that these factors if analyzed as part of the new CBA would have made it impossible for the Project to satisfy the cost benefit analysis. The engineering analysis by the ACOE has not been updated to account for the hard structures erected post Sandy, which would substantially change the Benefit-to-Cost ratio (BCR) and would likely not support the expenditure of public funds currently expected for the Project. The State’s own studies confirm that the Corps’ BCR would be materially impacted.

Faced with a total lack of assurance from the Government that they will be able to protect their homes, which is the most fundamental tenet of private property rights, the BHOFPOs, not surprisingly, are unwilling to provide the State and the ACOE with a perpetual easement over their properties. Historically, the BHOFPOs have achieved remarkable success in protecting their property and in turn, the property located west of their property. The Government is unable to point to a similar success story. In sum, “that’s the problem” with which the BHOFPOs are confronted.

Court Agrees Electricity is a Product 

​In its recent decision in Zeck v.Atlantic City Electric (Docket No. A-5506-13T4), the Superior Court of New Jersey, Appellate Division addressed claims derived from electricity distributed by Atlantic City Electric (“ACE”).  Although the plaintiffs in Zeck did not specifically set forth a claim for product liability in their complaint, the appellate court concluded that the trial court was not in error when it refused the motion made by ACE to dismiss the complaint.  Plaintiffs’ claim was submitted to the jury under the theory that the damage plaintiffs sustained was the result of a manufacturing defect associated with ACE’s electrical service.  Of significance is the conclusion that electricity was a product and that its generation and distribution are subject to New Jersey’s Product Liability Act (“PLA”).William J. Wolf of Bathgate, Wegener & Wolf, P.C. successfully sued an electrical utility in a case involving electro-magnetic fields (EMF) and in another case involving stray current.  Concluding that electricity is a product, as the court did in Zeck, may enhance the probability of success in suits with electrical companies.Mr. Wolf is a Senior Fellow of the Litigation Counsel of America, he has been designated as a Super Lawyer and AV Preeminent® for many years and he was selected to be listed in the Best Attorneys of America.  Mr. Wolf has been certified, by the American Institute of Appellate Practice, as an appellate specialist.

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Quick Resolution of Alleged Patent Quota Whistleblower Case against L’Oreal

Judge Susan Wigenton of the Unites States District Court for New Jersey quickly dismissed a whistleblower wrongful retaliatory firing claim against L’Oreal. L’Oreal successfully moved for dismissal at the earliest stage in the litigation, before even answering the Plaintiff’s complaint.  Judge Wigenton found that even assuming all the allegations alleged by the Plaintiff were true, there would not be a viable cause of action for wrongful retaliatory firing.The Plaintiff, Steven J. Trzaska, was a patent attorney employed by L’Oreal in its Clark New Jersey facility until December 2014.  Mr. Trzaska was employed by L’Oreal for 10 years and oversaw the Clark facility’s patent application process.  Trzaska’s complaint alleged that L’Oreal had a yearly quota of 500 patent applications and failures to meet quotas would negatively affect “careers and/or continued employment.”  Trzaska’s group filed only half of its quota of patent applications in 2014.  Trzaska informed his superiors that “neither he nor the patent attorneys who reported to him were willing to file patent applications that the attorneys believed were not patentable . . . solely for the purpose of meeting” quotas.   The complaint alleged that Trzaska believed that he would “run afoul of ethical and legal mandates governing their practice as patent attorneys” by filing certain applications


The New Jersey Legislature enacted the whistleblower statute, formerly known as the Conscientious Employee Protection Act (“CEPA”), to “protect and encourage employees to report illegal or unethical workplace activities and to discourage public and private sector employers from engaging in such conduct.” Abbamont v. Piscataway Twp. Bd. of Educ., 138 N.J. 405, 431 (1994).  Judge Wigenton found that the New Jersey Rules of Professional Conduct for attorneys do not forbid L’Oreal from adopting metrics or measurable goals for its cosmetic business or define how L’Oreal may go about securing or maintaining intellectual property rights. Furthermore, the Court found that CEPA protections come into effect when “a reasonable lay person would conclude that illegal activity was going on or at the very least, is imminent”  and it “is not enough to claim that a policy may, possibly, at some time in the future, violate a rule or law.”  Judge Wigenton held that pressure from management to meet a quota is not equivalent to instructions to violate rules of attorney conduct, or other laws or regulations.  Therefore, no CEPA violation occurred and the complaint was dismissed.

The Intellectual Property Department and the Employment Law Department at Bathgate, Wegener & Wolf counsels employers and employees regarding IP issues and their effect on the employment relationship. Please contact us at 732-363-0666 with any questions that you may have.

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Legislative Update – New Expungement Law

Governor Chris Christie recently signed into law a measure designed to ease the path toward expungement of certain criminal records.  The new law shortens the waiting periods for expungement of criminal records and makes various changes to other expungement procedures and requirements.Under the new law, a person convicted of a crime is permitted to file an expungement petition, which may include additional, separate petitions seeking to expunge up to two other convictions for disorderly persons or petty disorderly persons offenses.  The application can be filed after the expiration of 5 years from the date of the person’s most recent conviction, payment of fine, satisfactory completion of probation or parole, or release from incarceration.  Previously the waiting period to file an expungement petition with respect to a crime was 10 years.A person convicted of a disorderly persons or petty disorderly persons offense, but not convicted of a crime, may apply for expungement after the expiration of 3 years from the date of the person’s most recent conviction, payment of fine, satisfactory completion of probation or parole, or release from incarceration.  Previously the waiting period to file an expungement petition with respect to disorderly persons and petty disorderly persons offense was 5 years.

A person arrested or charged with a crime, disorderly persons offense or petty disorderly persons offense but not convicted may have all records and information relating to the arrest or charge expunged immediately by the Superior Court.  A person seeking expungement of Municipal Court charges is not required to pay a fee for the expungement application.

A person who is, or was prior to the effective date of this new law, sentenced to the State’s Drug Court Probation Program and who successfully completes the Program may have all records and information relating to prior arrests, detentions, convictions, and proceedings for any offense set forth in the Criminal Code, Title 2C of the New Jersey Statutes expunged.

This legislative update is only meant to summarize this new law.  There are many nuances and details within the new law that are not identified or described within this update.  If you have ever been convicted of a crime, disorderly persons or petty disorderly persons offense, if you’ve been successfully discharged from the State’s Drug Court Probation Program, or if you have ever been arrested or charged with an offense that did not result in a conviction or finding of guilt, contact this office for a free consultation regarding the expungement of your records.

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Contract Trumps Patent

​The New Jersey Appellate Division concluded that a settlement agreement and concurrent covenant not to sue precluded a patent owner from asserting additional independent patent infringement claims. (Grayzel v. Boston Scientific Corp, A-0991-14T2 (App. Div. Jan. 11, 2016))  Dr. Joseph Grayzel invented a balloon catheter used prominently in cardiac surgery.   Dr. Grayzel received a patent for his innovation (Patent No. 4,796,629), which he then successfully asserted against Boston Scientific Corp.  In 2003, Dr. Grayzel and Boston Scientific settled their patent litigation, resulting in payment of royalties to Dr. Grayzel. 


The settlement, however, was not the end, but merely the end of the beginning of the dispute between patent holder (Dr. Grayzel) and the infringer (Boston Scientific).  Dr. Grayzel obtained a second patent for improvements to his balloon catheter in 2010 (Patent No. 7,662,163).  Boston Scientific also developed a new product in the intervening years, which Dr. Grayzel asserted infringed on his latest patent.  Absent additional facts, Dr. Grayzel would be well within his rights to assert a second patent infringement action against Boston Scientific.  Either a new patent or a new product can lead to new patent infringement action unless there is an agreement otherwise providing.
But here there was an “agreement otherwise”.  In the “covenant not to sue” between the patent holder and infringer, Dr. Grayzel gave up any right to sue “for infringement by any Cutting Balloon Product sold by” Boston Scientific.  The agreement went on to define “Cutting Balloon Product” very broadly and did not limit it to products in existence at the time of the agreement.  Nor was the agreement limited to infringement under the first patent.  According to the Appellate Division, Dr. Grayzel signed an open ended covenant not to sue that precluded him from bringing any future patent infringement actions against Boston Scientific.
Because Dr. Grayzel contracted away his rights in the 2003 settlement, he was unable to assert his rights when a new infringement began.  Absent his agreement, the patent infringement action could have proceeded.  Boston Scientific saved the expense of a long patent infringement action as well as large potential damages by drafting a smart, forward-thinking settlement agreement. 
The Intellectual Property team at Bathgate, Wegener, & Wolf P.C. emphasizes similar long term strategy and thought in the representation of our clients. Contact us today at 732-363-0666